Fitch Affirms Banco de la Produccion's IDR at 'B-'; Outlook Negative.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch has affirmed Banco de la Produccion's (Produbanco) long-term and short-term Issuer Default Ratings (IDRs) as follows: --Foreign currency long-term IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. at 'B-'; --Foreign currency short-term rating at 'B'; --Support rating at '5'. The Rating Outlook is Negative. The affirmations reflect Produbanco's good franchise in the corporate market, revenue diversification, strong liquidity, quality and depth of its management, sound financial performance and adequate capitalization. The bank's small exposure to government debt and strong liquidity backed by high quality assets warrant higher ratings than that of the sovereign. The ratings are constrained by Ecuador's (long-term IDR 'CCC' on a Negative Watch by Fitch) country ceiling of 'B-' and by the prevailing uncertainty in Produbanco's operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. . Produbanco's ratings have a Negative Outlook in line with the Outlook on Ecuador's sovereign ratings, downgraded on Jan. 23, 2007, reflecting the still troubled political environment there. Government's intervention in the bank's ability to manage liquidity and its balance sheet would result in a downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. of Produbanco's ratings. Despite the favorable global context, the Ecuadorian economy has not performed at its full potential as it is hindered by political strife that discourages investment. The new government has sent mixed signals that point towards higher intervention in the economy, greater political grip over the Central Bank and possible restrictions on bank activities. Produbanco's loan portfolio grew 9.7% (year to date at September 2006) shifting towards higher retail participation. Interest revenues grew 22% year-over-year (YOY YOY Year Over Year YOY Year On Year YOY Young of the Year YOY Yield on Year )at September 2006 while non-interest revenues (stable but shifting towards service fees) contributed a solid 45% of total revenues, reflecting the bank's targeted growth and cross-sell strategies. A tight cost control and stable loan loss provisions completed a sound performance that saw net income grow 36% YOY at September 2006. The outlook ahead is clouded by the uncertain operating environment. Asset quality improved, Produbanco boasts PDLs of 0.84% vs. an average of 1.85% for the industry. Loan loss reserves cover 112% of CDE (1) (Computer Desktop Encyclopedia) What you are reading at this very moment. See About this product. (2) (Common Desktop Environment) A user interface for desktop computing from The Open Group. loans at September 2006 up from 95% a year earlier. Loan portfolio concentration remains a challenge but diversification efforts continue. Produbanco's deposits grew 11% YOY at September 2006 and deposit mix improved. Liquidity is very high with over 45% liquid assets Cash, or property immediately convertible to cash, such as Securities, notes, life insurance policies with cash surrender values, U.S. savings bonds, or an account receivable. at September 2006; these are mainly short term investments in low risk investment grade securities in the USA. Liquidity ahead may be threatened by potential restrictions on assets held abroad. Capital adequacy ratios Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR)[], is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss. improved slightly during 2006 reaching 14.96% at September 2006, the highest ratio among top Ecuadorian banks. Future growth and the eventual redemption of convertible bonds (about US$23 million included in the regulatory capital) should be covered by the bank's strong profitability and capital generation. Produbanco's support rating of '5' is indicative of Fitch's belief that in spite of important retail deposit market share, the bank would not be able to rely on government support, if it were necessary, given Ecuador's weak fiscal standing, the lack of a lender of last resort Lender of Last Resort An institution, usually a country's central bank, that offers loans to banks or other eligible institutions that are experiencing financial difficulty or are considered highly risky or near collapse. In the U.S. and apparent political ill-will towards banks. Incorporated in 1978, Produbanco is Ecuador's fourth largest bank and holds about 10% of deposits and loans at September 2006. Historically focused on corporate banking, it expanded into retail banking in the past few years. It is controlled by its main executives and is also active in fund management and securities brokerage. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, 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 Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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