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 The ratings of TC have been withdrawn following the downgrade.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  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 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 Media Relations Elizabeth Fogerty, New York, Tel: +1 212-908-0526 elizabeth.fogerty@fitchratings.com  
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