Fitch Takes Rating Actions on Private-Sector Venezuelan Banks

  Fitch Takes Rating Actions on Private-Sector Venezuelan Banks

Business Wire

NEW YORK -- April 1, 2014

Fitch Ratings has taken rating actions on the following six private-sector
Venezuelan banks following the downgrade of the sovereign's Issuer Default
Ratings (IDRs):

--Banesco, Banco Universal, CA (BBU);

--Banco Provincial, S.A., Banco Universal (Provincial);

--Mercantil, C.A. Banco Universal (Mercantil);

--Banco Occidental de Descuento (BOD);

--Banco del Caribe, C.A. Banco Universal (Bancaribe);

--Banco Exterior, C.A. Banco Universal (Exterior).

A full list of rating actions follows at the end of this press release.

These rating actions follow the downgrade of Venezuela's IDRs to 'B' from
'B+'. The Rating Outlooks on the sovereign's IDRs remain Negative. The banks'
ratings are constrained by the sovereign due to the negative effects of
government control over the financial sector and the broader economy
(reflected in Venezuela's 'B'/Negative Outlook) and high exposure to the
public sector.

KEY RATING DRIVERS - IDRS, VRS AND NATIONAL RATINGS

These entities are the six largest private sector universal commercial banks
in Venezuela, with operations primarily in the country. All of these banks'
Viability Ratings (VRs), or standalone intrinsic financial strengths, drive
their IDRs and do not take into account either institutional or state support.
High inflation, which reached 53% at year-end 2013 (metropolitan Caracas),
distorts financial ratios compared with other emerging market
universal/commercial banks with a VR in the 'b' category.

BBU

BBU's ratings balance its solid profitability (even when adjusting for
inflation) and asset quality indicators, as well as its adequate liquidity and
capitalization relative to domestic and international peers. BBU is the main
subsidiary of Banesco Holding, S.A.

PROVINCIAL

Provincial's ratings reflect its strong franchise and financial profile
compared with both domestic and international peers. The ratings also
incorporate the bank's conservative risk management and operational support
from Spain's Banco Bilbao Vizcaya Argentaria (BBVA). Provincial's majority
shareholder is BBVA, which has a 55% stake in the bank.

MERCANTIL

Mercantil's ratings reflect its strong performance (even when adjusting for
inflation), manageable liquidity risk and resilient credit risk profile. The
strength of its balance sheet, management's experience in dealing with the
inherently volatile operating environment in Venezuela, and its ample market
share and strong franchise allow the bank to maintain a relatively stable
deposit base. Mercantil is the largest subsidiary of Mercantil Servicios
Financieros.

BOD

BOD's ratings incorporate a history of volatile profitability, capitalization,
and asset quality indicators relative to both domestic and international
peers. With the exception of liquidity, the bank's financial metrics are
weaker than other large universal commercial banks in Venezuela. The bank is
controlled by Cartera de Inversiones Venezuela (CIV), a diversified holding
company with interests in financial and nonfinancial companies.

CARIBE

Bancaribe's ratings reflect its resilient performance, stable asset quality
indicators and adequate liquidity risk. It also incorporates a strengthening
of capital ratios in 2013, following pressures related to high nominal asset
growth in recent years. Scotiabank has a minority stake of 27% in Bancaribe.

EXTERIOR

Exterior's ratings reflect its solid asset quality and profitability ratios
(even when adjusting for inflation). Liquidity and capitalization remain
adequate, though weaker than some of its larger domestic peers. Grupo Bancario
Ignacio Fierro has an 84% stake in Exterior.

RATING SENSITIVITIES - IDRS, VRS AND NATIONAL RATINGS

Government intervention that pressures financial performance of these banks
could negatively affect the banks' IDRs, VRs and National ratings. A sustained
deterioration in profitability or asset quality that pressures capitalization
ratios could also be negative for their ratings.

Additionally, a downgrade of the sovereign's IDRs would result in a similar
action on the IDRs and VRs of these banks, which are currently capped at the
sovereign. There is no upside potential to any of the banks' international
ratings in the near term as the sovereign currently has a Negative Rating
Outlook.

KEY RATING DRIVERS AND SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR

The banks' Support Rating (SR) of '5' and Support Rating Floor (SRF) of 'NF'
reflect Fitch's expectation of no support. Despite these banks' systemic
importance, support cannot be relied upon given Venezuela's speculative-grade
rating and lack of a consistent policy on bank support. Government
interference in the banking system could also negatively influence shareholder
support if these banks were to require financial assistance.

Venezuela's propensity or ability to provide timely support to these banks is
not likely to change given the sovereign's low speculative-grade ratings. As
such, the SR and SRF have no upgrade potential, particularly as the sovereign
has a Negative Outlook.

Fitch has taken the following rating actions:

BBU

--Long-term foreign and local currency IDRs affirmed at 'B'; Outlook revised
to Negative from Stable;

--Short-term foreign and local currency ratings affirmed at 'B';

--Viability affirmed at 'b';

--Support affirmed at 5;

--Support Floor affirmed at NF;

--Long-term national-scale rating affirmed at 'A+(ven)';

--Short-term national-scale rating affirmed at 'F1(ven)'.

Provincial

--Long-term foreign and local currency IDRs downgraded to 'B' from 'B+';
Outlook Negative;

--Short-term foreign and local currency ratings affirmed at 'B';

--Viability downgraded to 'b' from 'b+';

--Support affirmed at 5;

--Support Floor affirmed at NF;

--Long-term national-scale rating affirmed at 'AA+(ven)';

--Short-term national-scale rating affirmed at 'F1+(ven)'.

Mercantil

--Long-term foreign and local currency IDRs downgraded to 'B' from 'B+';
Outlook Negative;

--Short-term foreign and local currency ratings affirmed at 'B';

--Viability downgraded to 'b' from 'b+'

--Support affirmed at 5;

--Support Floor affirmed at NF;

--Long-term national-scale rating affirmed at 'AA+(ven)';

--Short-term national-scale rating affirmed at 'F1+(ven)'.

BOD

--Long-term foreign and local currency IDRs affirmed at 'B'; Outlook revised
to Negative from Stable;

--Short-term foreign and local currency ratings affirmed at 'B';

--Viability affirmed at 'b';

--Support affirmed at 5;

--Support Floor affirmed at NF;

--Long-term national-scale rating affirmed at 'BBB(ven)';

--Short-term national-scale rating affirmed at 'F3(ven)'.

Caribe

--Long-term foreign and local currency IDRs affirmed at 'B'; Outlook revised
to Negative from Stable;

--Short-term foreign and local currency ratings affirmed at 'B';

--Viability affirmed at 'b';

--Support affirmed at 5;

--Support Floor affirmed at NF;

--Long-term national-scale rating affirmed at 'A+(ven)';

--Short-term national-scale rating affirmed at 'F1(ven)'.

Exterior

--Long-term foreign and local currency IDRs downgraded to 'B' from 'B+';
Outlook Negative;

--Short-term foreign and local currency ratings affirmed at 'B';

--Viability downgraded to 'b' from 'b+'

--Support affirmed at 5;

--Support Floor affirmed at NF;

--Long-term national-scale rating affirmed at 'AA(ven)';

--Short-term national-scale rating affirmed at 'F1+(ven)'.

Additional information is available on www.fitchratings.com

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Jan. 31, 2014);

--'National Scale Rating Criteria' (Oct. 30, 2013);

--'Peer Review: Private Sector Venezuela Banks' (Feb. 6, 2014)

--'2014 Outlook: Andean Banks' (Dec. 16, 2013).

Applicable Criteria and Related Research:

2014 Outlook. Andean Banks (Colombia, Ecuador, Peru and Venezuela)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=726275

Peer Review: Private Sector Venezuelan Banks (Facing Macroeconomic Imbalances)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=733216

National Scale Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=825810

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.

Contact:

Fitch Ratings
Primary Analyst - BBU, Provincial, BOD, Mercantil, Caribe
Theresa Paiz Fredel, +1-212-908-0534
Senior Director
Fitch Ratings, Inc.
One State St. Plaza
New York, NY 10004
or
Primary Analyst - Exterior
Mark Narron, +1-212-612-7898
Director
or
Secondary Analyst - Mercantil, Bancaribe
Andres Marquez, +571 326 9999, Ext. 1220
Director
or
Secondary Analyst - BOD
Larisa Arteaga, +1-809-563-2481
Director
or
Committee Chairperson
Rita Goncalvez, +55 21 4503 2621
Senior Director
or
Media Relations
Elizabeth Fogerty, +1-212-908-0526 (New York)
elizabeth.fogerty@fitchratings.com
 
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