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Fitch Assigns Int'l Local Currency IDR of 'BBB-' to Chile's Banco del Desarrollo; Outlook Stable.

NEW YORK & BUENOS AIRES -- Fitch has assigned Banco del Desarrollo a local currency long-term Issuer Default Rating (IDR) of 'BBB-' and Support rating of '4'. At the same time, Fitch has affirmed Banco del Desarrollo's long and short-term national ratings of 'A(chl)' and 'N1(chl)', respectively. The Rating Outlook is Stable.

Banco del Desarrollo's ratings reflect its stable performance, acceptable profitability levels and asset quality ratios, as well as its adequate funding and capitalization.

As a result of strong growth, the bank's net income rose by almost 33% in H106 year on year. Its significant expansion has led to higher operating revenues, which more than offset the moderate growth in administrative expenses and led to an improvement in the cost/income ratio to 48.4%, from 53.9% at end-2005.

Lending to core segments: low income individuals, small and micro companies and real estate developments, grew by around 17% in the twelve months finished in June 2006. The loan book is well diversified and asset quality ratios have improved in line with the healthy economic environment and better risk management procedures. However, the bank's past-due loans are somewhat higher than the sector average, reflecting the riskier market segments it targets. At end-June 2006, the ratio of past-due loans, under the local definition (i.e. past-due installments over 90 days), was 1.52%, with a loan loss reserve coverage ratio of 241%.

The bank's main source of funds is its deposit base, which accounted for roughly 51% of end-H106 total liabilities. However, to finance the strong loan growth the bank has issued senior and subordinated debt and has also relied on deposits from institutional investors.

Banco Del Desarrollo's capitalization is adequate. It has compensated with subordinated debt issuance for the pressure on its capital adequacy ratios from strong loan growth. At end-June 2006, its total capital to risk weighted assets was 11.7%; this ratio declined to around 11% when adjusted for the equity credit of the subordinated debt. The latter accounted for 24% of eligible capital, which is close to the 30% limit considered acceptable by Fitch

Banco Del Desarrollo is controlled by Sociedad de Inversiones Norte Sur, a holding company owned by Chilean investors, which holds a 39.4% stake. Other significant stakes are held by Credit Agricole (23.6%), Sanpaolo IMI (15.7%), Corporacion Interamericana de Inversiones (related to the Inter-American Development Bank, 5.2%) and Dutch based micro-finance institution Oikocredit (3.8%). At end-June 2006, the bank had 73 branches and nine subsidiaries involved in various financial services. It held a 3.8% share of the loan market.

Fitch's National Ratings provide a relative measure of creditworthiness for rated entities in countries where the sovereign's foreign and local currency ratings are below 'AAA'. National ratings are not internationally comparable since the best relative risk within a country is rated 'AAA' and other credits are rated only relative to this risk. They are signified by the addition of an identifier, for the country concerned, such as 'AAA(chl)' for national ratings in Chile.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
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Publication:Business Wire
Date:Jan 23, 2007
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