Fitch Upgrades Banco Salvadoreno's Support Rating to '3'; Affirms Banistmo & Other Salvadoreno Debt.

MONTERREY, Mexico -- Fitch Ratings has upgraded Banco Salvadoreno's (Salvadoreno) support rating to '3' from '5' and removed the Rating Watch Positive. This follows the completion of Panamanian Grupo Banistmo's acquisition of a majority stake in Inversiones Financieras Bancosal, S.A. (IFB), Salvadoreno's holding company. All other ratings assigned to Salvadoreno, as well as those of Primer Banco del Istmo (Banistmo), were affirmed as indicated at the end of this commentary.

In October 2005, Salvadoreno's '5' support rating was placed on Rating Watch Positive after the announcement that Banistmo had reached an agreement with the controlling shareholders of IFB to acquire an equity stake of 51% to 60% in IFB. A tender offer was announced in November 2005, which was closed on Feb. 4, 2006. Grupo Banistmo acquired 53.6% of IFB's shares for US$131 million. Given the strategic importance of Salvadoreno to Banistmo's regional franchise, Fitch believes there is a moderate probability that Grupo Banistmo would support Salvadoreno, if it were required, taking into account Banistmo's financial capacity (rated 'BB+' by Fitch).

Fitch expects that the acquisition will result in some weakening of Grupo Banistmo's consolidated financial indicators, at least in the short term. In the medium term, however, the group expects that the merger will not affect its current financial targets for asset quality and profitability (previous acquisitions in Costa Rica and Honduras have been successfully accomplished). Moreover, capital ratios after the acquisition are expected to be in line with its recently achieved target of 15%. As a result, Banitmo's ratings were affirmed.

Salvadoreno, El Salvador's third largest bank by assets with a market share of 16% at September 2005, has been historically focused on the local corporate market, yet has begun to expand into the consumer and middle market segments over the past few years. Salvadoreno accounts for over 97% of IFB's consolidated assets, with the remainder comprised of an insurance company, Internacional de Seguros, as well as a factoring company, Factoraje Salvadoreno. At September 2005, IFB's consolidated assets amounted to US$1.77 billion.

Banistmo operates as a universal bank in Panama and its main foreign markets. Banistmo's regional franchise currently includes Corporacion Banex (Costa Rica), Banco Grupo el Ahorro Hondureno (BGA) and Compania de Seguros El Ahorro Hondureno (CSA) (Honduras), Banistmo Colombia (Colombia), and Banistmo Nicaragua (Nicaragua). At September 2005, Banistmo reported consolidated assets and equity of US$6.6 billion and US$661 million, respectively, and was the largest financial conglomerate in Central America in terms of assets.

Fitch takes action on the following ratings:

Banco Salvadoreno

-- Long-term rating affirmed at 'BB';

-- short-term rating affirmed at 'B';

-- Individual affirmed at 'D';

-- Support upgraded to '3' from '5' (removed from Rating Watch Positive).

The Outlook is Stable

Primer Banco del Istmo

-- Long-term rating affirmed at 'BB+';

-- short-term rating affirmed at 'B';

-- Individual affirmed at 'C/D';

-- Support affirmed at '5'.

The Rating Outlook is Stable.

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