Fitch Takes Various Rating Actions on Guatemala's Banco Industrial.

NEW YORK -- Fitch Ratings has today upgraded Guatemala's Banco Industrial's (BI) long-term local and foreign currency Issuer Default Ratings (IDRs) to 'BB' from 'BB-' and its Support Rating to '3' from '4'. At the same time, Banco Industrial's national-scale long-term rating was upgraded to 'AA-(gtm)' from 'A+(gtm)'. BI's Individual and other ratings have also been affirmed and the Rating Outlook remains Stable.

The upgrade of BI's Support rating reflects Fitch's view that there is a higher probability of government support for the bank, should it be required, in light of the recent assignment of a 'BB+' long-term IDR to the Republic of Guatemala. In the case of BI running into difficulties, Fitch believes the Guatemalan government would have a vested interest in supporting the bank, given its position as the largest entity in the Guatemalan banking sector. In light of the country's economic conditions and the sub-investment-grade sovereign rating, Fitch believes there is a moderate probability of support for the bank. The upgrade on BI's long-term IDR reflects the higher probability of potential support implied in the '3' Support rating.

BI recently announced an agreement with the controlling shareholders of Banco de Occidente (Occidente) to acquire a majority stake in Occidente, the sixth largest bank in the system, and eventually merge it into BI. The integration of Occidente would provide BI with a market share of roughly 25% of the system's assets (10% higher than its closest competitor), an enhanced leadership in corporate lending and retail deposits, as well as a nationwide branch network. Nevertheless, Fitch expects that the acquisition will result in some weakening of BI's financial indicators, at least in the short term, particularly capital adequacy and liquidity given the goodwill and cash outflows arising from the acquisition. Moreover, potentially higher credit concentrations and nonrecurring expenses might also somewhat pressure asset quality and profitability ratios in the short term.

Positively, the bank plans to fund a majority portion of the acquisition with capital increases. Furthermore, BI has set up short-term strategies to boost liquidity, expand free capital, and achieve cost savings, aiming to maintain its indicators at pre-acquisition levels. In Fitch's opinion, BI's financial profile will remain consistent with the 'D' Individual rating during the acquisition and integration stages, and therefore BI's Individual rating has been affirmed. However, the Individual rating could come under pressure should the bank face significant difficulties in the integration process, incur higher than expected non-recurring expenses, or finance a greater proportion of the acquisition with debt than planned.

BI is the largest Guatemalan bank, with an asset market share of 20% at end-2005. Established in 1968, the bank has primarily focused on serving the corporate sector and high-income individuals, although it also provides a wide range of banking services to its broad client base. Occidente was the country's sixth largest bank in terms of assets at end-2005 with a market share of 5%, although it remains the third largest bank in terms of corporate loans.

The following summarizes Fitch's rating actions:

Banco Industrial

--Long-term foreign currency IDR upgraded to 'BB' from 'BB-';

--Short-term foreign currency IDR affirmed at 'B';

--Long-term local currency IDR upgraded to 'BB' from 'BB-';

--Short-term local currency IDR affirmed at 'B';

--Individual affirmed at 'D';

--Support upgraded to '3' from '4';

--National-scale Long term rating upgraded to 'AA-(gtm)' from 'A+(gtm)';

--National-scale short-term rating affirmed at 'F1(gtm)';

Outlook remains 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.