Fitch Affirms Banco General's Ratings; Outlook Stable
NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed Banco General's (Panama) ratings as follows:
--Foreign Currency Long Term Issuer Default Rating (IDR) at 'BBB';
--Foreign Currency Short Term IDR at 'F3';
--Individual Rating at 'C';
--Support Rating at '5';
--Support Floor at 'NF'.
The Rating Outlook is Stable.
The rating of Banco General's US$150 million issue maturing in 2010, formerly obligations of Banco Continental, is affirmed at 'BBB'.
Banco General's (BG) ratings reflect its strong local franchise, market share, strengthened competitive position, consistent strategy, dependable performance, good portfolio quality and sufficient capital. They also factor in the worsening economic scenario and the increasingly competitive landscape.
A long-standing dollarized economy, Panama lacks a central bank or lender of last resort. Banco Nacional de Panama, the largest state controlled bank, could only provide temporary liquidity loans - if needed. In Fitch's opinion, external support for BG, although possible, cannot be relied upon.
Near-term potential for upside rating movement is limited given the worsening economic scenario. Should portfolio quality or capitalization deteriorate, they could put downward pressure on the ratings; however, Fitch considers these events unlikely in the short run.
BG successfully merged with Banco Continental (BC), integrating its customers, employees and products in less than nine months. BG's management focused its resources on the merger, providing clear direction to the enlarged franchise while achieving most financial goals. The bank emerges well positioned to compete with local and regional players.
BG showed a strong performance in 2007 and into 2008 with resilient margins underpinning interest revenues in spite of only modest loan portfolio growth; non-interest revenues increased their contribution to operative revenues. Costs remained well under control while credit cost stabilized, resulting in improving efficiency and sustained performance in terms of profitability.
The loan portfolio improved its diversification, concentration and asset quality with Past Due Loans (PDLs) reaching what could be their lowest point and reserves comfortably covering the troubled portfolio. The level of related party lending has declined but remains somewhat high when compared to its peers; some additional improvement is expected. Deposits are broad-based, well diversified and show a healthy growth that contributes to lower funding cost. After the natural decline due to the merger, capital improved largely thanks to retained earnings; the BIS capital ratio stood at 17.1% at September 2008.
Going forward, margins are expected to remain under pressure while profitability should come more from cross-sell and efficiency than from asset growth. Costs should stabilize and portfolio quality is expected to decline (i.e. provisions should increase) but remain within reasonable levels. Overall, in Fitch's view, the bank should remain profitable.
Banco General is Panama's second largest private bank. After a consistent growth strategy that involved strong organic growth and strategic acquisitions, BG further cemented its position by merging with BC in September 2007. BG holds about 12.7% of the system's assets and is controlled by BG Financial Group Inc., which is in turn controlled by Empresa General de Inversiones (61%) and 490 independent shareholders registered at the Bolsa de Valores de Panama, S.A. (39%).