Fitch Downgrades Banistmo's IDRs to 'BBB'/'F2'; Outlook Stable
NEW YORK -- November 4, 2013
Following the closing of the acquisition of Banistmo by Bancolombia, Fitch
Ratings has downgraded Banistmo's Long- and Short-Term Issuer Default Ratings
(IDRs) to 'BBB'/'F2' from 'A'/'F1'. Banistmo's long-term national rating was
also downgraded, to 'AA+(pan)' from 'AAA(pan)'. The ratings were removed from
Rating Watch Negative and assigned a Stable Outlook. A complete list of rating
actions follows at the end of this press release.
KEY RATING DRIVERS
The rating actions follow the completion of the Colombian Bancolombia, S.A.
(Bancolombia) acquisition of HSBC's operations in Panama. The acquisition
agreement was announced early this year (see to 'Fitch Places HSBC's
Panamanian Subsidiaries on Rating Watch Negative', Feb. 26, 2013, available at
Banistmo's current ratings are driven by the support it would receive from
Bancolombia, should it be required. Bancolombia's current Long-Term Foreign
Currency IDR of 'BBB' with a Stable Outlook, is lower than that of HSBC
Holdings plc ('AA-', Stable Outlook), the former source of expected support
for Banistmo. Hence, the downgrade of Banistmo's support rating to '2' from
'1' and the downgrade of the IDRs.
Bancolombia's current ratings were not reviewed in this rating action but were
reviewed and affirmed on Sept. 19, 2013 after the impact of the transaction on
its creditworthiness was assessed by Fitch.
The recently acquired entity is considered by Fitch as 'Core' to Bancolombia,
according to Fitch's Criteria: 'Rating FI Subsidiaries and Holding Companies'
listed below. Such classification is based on Fitch's view on the role of
Banistmo in Bancolombia's expansion and diversification in Central America,
its expected contribution in terms of revenues and assets, and the significant
reputational risk that a default from this new subsidiary would pose to
Bancolombia. Fitch expects that Banistmo will provide a recurring and
meaningful stream of revenues to the consolidated entity over the medium term.
Bancolombia is the largest bank in Colombia, a universal bank with operations
in seven countries and substantial market share in its core markets, Colombia
(21% by assets and 23% by net loans at December 2012) and El Salvador (29% by
assets and 30% by loans at December 2012). After the completion of the
aforementioned transaction, Bancolombia's operations in Central America will
represent around 18% of its consolidated assets. The subsidiaries in El
Salvador and Panama are locally self-funded, with large participation of
retail deposits, and sufficient capital according to the regulatory guidelines
in each country.
The acquisition is well in line with Bancolombia's international growth
strategy and the company's policy of acquiring banks with significant market
share, consistent performance, and adequate management. After this operation
and once it acquires full control of Banco Agromercantil in Guatemala,
Bancolombia will have a strong footprint in three of the leading markets of
Central America. In Fitch's opinion, the acquisition will consolidate
Bancolombia's competitive position in Panama, a very dynamic market in Central
America, and has the potential to contribute substantially to its growth and
performance in the coming years.
RATING SENSITIVITIES - IDRs AND NATIONAL RATINGS
The Stable Outlook reflects Fitch's expectation of no substantial changes in
Banistmo's key rating drivers. However, Banistmo's IDRs and National ratings
are sensitive to a change in Fitch's opinion on the parent's capacity and/or
propensity to support its subsidiaries. They could be upgraded if
Bancolombia's IDRs are upgraded.
Fitch has taken the following rating actions as indicated:
--Long-term IDR downgraded to 'BBB' from 'A'; Outlook Stable; removed from
Rating Watch Negative;
--Short-term IDR downgraded to 'F2' from 'F1'; removed from Rating Watch
--Support downgraded to '2' from '1'; removed from Rating Watch Negative;
--Long-term National Rating downgraded to 'AA+(pan)' from 'AAA(pan)'; Outlook
Stable; removed from Rating Watch Negative;
--Short-term National Rating affirmed at 'F1+(pan)'; removed from Rating Watch
--Viability Rating: unaffected at 'bbb'.
Additional information is available on www.fitchratings.com.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'National Scale Ratings Criteria' (Oct. 30, 2013);
--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012).
Applicable Criteria and Related Research:
Rating FI Subsidiaries and Holding Companies
Global Financial Institutions Rating Criteria
National Scale Ratings Criteria
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Diego Alcazar, +1-212-908-0396
Fitch Ratings Inc.
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New York, NY 10004
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