Fitch Affirms Panama's Grupo Financiero Continental Ratings on Acquisition Announcement.

MONTERREY, Mexico -- Fitch Ratings has affirmed the ratings of Grupo Financiero Continental (GFC) and Banco Continental de Panama and Subsidiaries (BCP). This follows the announcement that GFC has reached an agreement to acquire the medium-sized Panamanian Banco Atlantico (Atlantico) from Spain's Banco Sabadell for US$96 million. The acquisition will be completed by BCP.

This transaction is pending regulatory approval, and is expected to be completed before year-end. Upon receiving regulatory approval, BCP will make a cash payment to Sabadell to complete the transaction. The integration of Atlantico's assets into BCP will expand GFC's consolidated assets by roughly 16%, and will make GFC the second largest financial group in Panama. Atlantico has a corporate focus and its activities are prominently concentrated in the domestic market.

The acquisition will somewhat pressure GFC's capital adequacy, given the absorbed assets and goodwill created in this transaction (roughly US$40 million). However, this will be partially offset with the issuance of preference shares or similar securities by BCP for up to US$50 million, which will help to offset pressure from the acquisition on its core capital adequacy (end-2005: 10.4%). While we expect core capital to slightly decline when the acquisition is completed, we believe that GFC will gradually re-build its capital ratios to pre-acquisition levels, given its relatively strong internal capital generation.

While we also expect that the acquisition will result in some weakening of GFC's consolidated financial indicators in the short term, particularly asset quality and profitability, we believe GFC has an adequate ability to reverse this trend in a relatively short period.

The affirmation of GFC and BCP's ratings and the Stable Outlook reflect our belief that based on information currently in hand, their financial profile is likely to remain unchanged with this acquisition of Atlantico. Should the funding of the transaction have a smaller equity-like component, or if the impact of the integration is worse than currently expected, the ratings could be pressured.

GFC is a Panama-based holding company, whose principal subsidiary is Banco Continental de Panama S.A. and Subsidiaries, Panama's third-largest privately held general license bank (domestic deposit market share: 8.7% at the end of 2005), which represented 99% of consolidated assets and net income. Historically focused on the corporate market, GFC has expanded into new segments over the years through acqusitions and today boasts a diversified business mix providing corporate, middle market, consumer and private banking services.

The following ratings have been affirmed by Fitch:

Grupo Financiero Continental (GFC):

-- Long-term Issuer Default Rating (IDR) 'BBB-';

-- Short-term 'F3';

-- Individual 'C';

-- Support '5'.

-- Outlook Stable.

Banco Continental de Panama S.A. and Subsidiaries (BCP):

-- Long-term IDR 'BBB-';

-- Short-term 'F3'.

-- Outlook Stable.

Fitch's rating definitions and the terms of use 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 are also available from the 'Code of Conduct' section of this site.