Fitch Downgrades Argentine Financial Institutions after Sovereign Default

  Fitch Downgrades Argentine Financial Institutions after Sovereign Default

Business Wire

MONTERREY, Mexico -- August 7, 2014

Fitch Ratings has downgraded the international ratings of the Argentine
financial institutions that it currently rates, following the recent sovereign
restrictive default, and the associated downgrade of the country's sovereign
long-term local currency (LC) Issuer Default Rating (IDR) and Country Ceiling
to 'CCC' from 'B-'/Negative Outlook.

This rating action affects the Viability Ratings (VRs) and/or IDRs of Banco
Macro (Macro), Banco Santander Rio (SAN Rio), BBVA Banco Frances (BBVA
Frances), Banco Supervielle, S.A. (Supervielle), Tarjeta Naranja, S.A. (TN),
and Tarjetas Cuyanas S.A. (TC). The downgrade also affected the senior debt
issued by Macro and TN, as well as the subordinated debt of Macro and
Supervielle. The ratings of TC have been withdrawn following the downgrade. A
full list of rating actions follows at the end of this press release.

KEY RATING DRIVERS - VRs, IDRs and Senior Debt

The IDRs and VRs of these entities have been downgraded to 'CCC' from
'B-'/Negative Outlook, and to 'ccc' from 'b-', respectively. This action
follows the recent restrictive default of the Argentine sovereign, which also
triggered a downgrade of the country's sovereign long-term LC IDR and Country
Ceiling to 'CCC' from 'B-' (see Rating Action Commentary 'Fitch Downgrades
Argentina's FC IDR to 'RD'', dated July 31, 2014, available on
www.fitchratings.com).

In Fitch's view, regardless of their overall reasonable financial condition,
these bank's ratings are currently capped by the LC sovereign rating, due to
the weak and worsening operating environment, and the challenges posed by the
sovereign's delicate position with foreign creditors. The local environment in
Argentina is characterized by ample economic imbalances and the risk of
increasing political or regulatory intervention into the banking system.

These financial institutions have maintained sound financial profiles, but the
potential of increased sovereign risk cannot be underestimated. Funding and
liquidity profiles are comfortable, with no material refinancing risk over the
short term.

Macro's and TN's senior unsecured debt ratings are aligned to the respective
issuer's long-term IDR, given Fitch's perception that these notes would have
average recoveries in the event of liquidation, which in turn explains these
notes' Recovery Ratings of 'RR4'.

KEY RATING DRIVERS - Subordinated debt

The 'CC/RR6' rating of Macro's subordinated notes due 2036 reflects that these
notes are subordinate to all of Macro's senior debt and therefore carry low
recovery prospects. However, the rating of the notes also considers the high
compression arising from the low VR of the issuer, and Fitch's opinion that
non-performance risk is low despite the non-cumulative coupon deferrable
feature, considering Macro's ample capital cushion relative to regulatory
minimums and its current and expected earnings generation.

The 'CC/RR5' rating of Supervielle's subordinated debt reflects that these
securities are plain-vanilla subordinated liabilities, without any deferral
feature on coupons and/or principal. Therefore, these are notched only once to
reflect the below-average expected recoveries for these bonds in case of bank
liquidation.

KEY RATING DRIVERS - Support Ratings (SRs) and Support Rating Floors (SRFs)

The SRs of '5' (Macro, BBVA Frances, SAN Rio, and Supervielle), and the SRFs
of 'NF' (Macro and Supervielle) reflect that, although possible, external
support for these banks cannot be relied upon, given the high political
interference risk and ample economic imbalances. Fitch considers that SAN Rio
and BBVA Frances are subsidiaries of limited importance to their respective
parents, Spain's Banco Santander, S.A. (SAN) and Banco Bilbao Vizcaya
Argentaria (BBVA), both rated 'A-' with a Stable Outlook by Fitch. In turn,
the sovereign ability and willingness to support locally owned banks (Macro,
and Supervielle) is highly uncertain.

RATING SENSITIVITIES - VRs, IDRs and Senior Debt

The ratings of these entities could be affected if the recent sovereign
default materially affects their financial profiles, and/or significantly
exacerbates the already adverse operating environment. These ratings could be
affected if the worsening operating environment drives material deterioration
in these institutions' asset quality, earnings, and/or loss absorption
capacity. Material increases in liquidity and/or refinancing risk could also
put downward pressure on these ratings. Fitch considers that downside risk for
these ratings is heavily associated with the potential contagion effect of the
recent sovereign default on the country's already weak economic outlook.

Upside potential in the banks' ratings is heavily contingent upon positive
developments in the sovereign rating dynamics.

RATING SENSITIVITIES - Subordinated Debt

Due to the current compression in the rating of its subordinated notes, a
potential upgrade of Macro's VR will not necessarily result in a similar
action on the 'CC/RR6' rating of these notes. Supervielle's subordinated notes
will typically be rated one notch below the bank's VR.

RATING SENSITIVITIES - SRs and SRFs

Changes in the SRs and SRFs of these banks are highly unlikely in the
foreseeable future.

Fitch has downgraded the following ratings:

Macro

--FC and LC long-term IDRs to 'CCC' from 'B-';

--FC and LC short-term IDRs to 'C' from 'B';

--Viability Rating to 'ccc' from 'b-';

--USD150 million Senior bonds Class 2 due 2017 to 'CCC/RR4' from 'B-/RR4';

--USD150 million subordinated debt due 2036 to 'CC/RR6' from 'CCC/RR6'.

SAN Rio

--Viability Rating to 'ccc' from 'b-';

--LT LC IDR to 'CCC' from 'B-'.

BBVA Frances

--Viability Rating to 'ccc' from 'b-';

--LT LC IDR to 'CCC' from 'B-'.

Supervielle:

--FC and LC long-term IDRs to 'CCC' from 'B-';

--FC and LC short-term IDRs to 'C' from 'B';

--Viability Rating to 'ccc' from 'b-';

--USD50 million subordinated debt due 2017 to 'CC/RR5' from 'CCC/RR5'.

TN:

--FC and LC long-term IDRs to 'CCC' from 'B-';

--FC and LC short-term IDRs to 'C' from 'B';

--USD200 million senior unsecured bonds to 'CCC/RR4' from 'B-/RR4'.

Fitch has affirmed the following ratings:

Macro

--Support Rating at '5';

--Support Rating Floor at 'NF'.

SAN Rio

--Support Rating at '5'.

BBVA Frances

--Support Rating at '5'.

Supervielle:

--Support Rating at '5';

--Support Rating Floor at 'NF'.

In addition, Fitch has downgraded and withdrawn the following ratings:

TC:

--LC long-term IDR to 'CCC' from 'B-' and withdrawn;

--LC short-term IDR to 'C' from 'B' and withdrawn.

Additional information is available on www.fitchratings.com

Applicable Criteria and Related Research:

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

--'Rating FI Subsidiaries and Holding Companies', Aug. 10, 2012

--'Assessing and Rating Bank Subordinated and Hybrid Securities Criteria',
Jan. 31, 2014.

Applicable Criteria and Related Research:

Assessing and Rating Bank Subordinated and Hybrid Securities Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732137

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=846854

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Contact:

Fitch Ratings
Primary Analyst
Alejandro Garcia, CFA
Senior Director
+52 81 8399 9146
Fitch Mexico SA de CV
Prol. Alfonso Reyes 2612, Edificio Connexity Piso 8
Col. Del Paseo Residencial
64920 Monterrey, N.L., Mexico
or
Secondary Analyst
Monica Ibarra
Director
+52 81 8399 9150
or
Committee Chairperson
Franklin Santarelli
Managing Director
+1-212-908-0739
or
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Elizabeth Fogerty, New York, Tel: +1 212-908-0526
elizabeth.fogerty@fitchratings.com
 
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