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    BBAR   ARP125991090

BANCO BBVA ARGENTINA S.A.

(BBAR)
  Report
End-of-day quote Buenos Aires Stock Exchange  -  2022-11-27
353.00 ARS   +2.89%
11/23Transcript : Banco BBVA Argentina S.A., Q3 2022 Earnings Call, Nov 23, 2022
CI
11/22Banco Bbva : Q3 Earnings Snapshot
AQ
11/18Banco BBVA Argentina S.A. Announces Dividend, Payable on December 6, 2022
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Fitch Affirms Banco BBVA Argentina S.A.'s IDR at 'CCC'

08/11/2022 | 07:14am EST

Fitch Ratings has affirmed Banco BBVA Argentina S.A.'s (BBVA Arg) Foreign- and Local-Currency Long-Term Issuer Default Ratings (IDR) at 'CCC'.

Fitch has also withdrawn BBVA Arg's Support Rating of '5' and Support Rating Floor of 'NF' as these ratings are no longer relevant to the agency's coverage following the publication of its updated Bank Rating Criteria on Nov. 12, 2021. In line with the updated criteria, Fitch has assigned BBVA Argentina a Government Support Rating (GSR) of 'ns' (No support).

Key Rating Drivers

In Fitch's view, regardless of its overall adequate financial condition, BBVA Arg's VR and IDRs are highly influenced by the operating environment and are constrained by the low IDRs of Argentina.

The operating environment is constrained by the sovereign rating and remains highly challenging as asset quality continues to be pressured by a long recession, which has been exacerbated by the coronavirus pandemic and severe political uncertainties. Additionally, low loan growth (in real terms), rising nonperforming loans, significant margin pressure due to regulatory imposed interest rates caps and floors, and increasing operating costs due to continued high inflation will continue to affect profitability.

Diverse Business Profile: BBVA Arg is a universal commercial bank and one of the leading top-four private sector banks in Argentina. It provides retail and corporate banking services to individuals, small and medium companies and large-sized corporates. As of March 2022, the bank's consolidated market share of private sector deposits was approximately 7.1% and the consolidated share of private sector loans was approximately 7.9%. However, despite a diverse business profile, the majority of the bank's operations are concentrated in a high-risk operating environment.

Asset Quality Indicators Remains Strong: Despite its large retail and middle market corporate portfolios, the bank has maintained strong asset quality indicators that compare well with its closest peers. The bank maintains an internal policy of exceeding regulatory loan loss reserve requirements. The bank's impaired loan ratio strengthened to only 1.3% at the end of March 2022 from 1.9% at YE2021 and while coverage of impaired loans declined, it remained a comfortable level of nearly 220%, which also compares favorably with its peer group.

Pressured Profitability: In spite of the adverse operating environment, BBVA Arg has managed to post an acceptable level of profitability. For the first quarter ended March 31, 2022, its operating profit (adjusted for inflation)/RWA ratio was 3.27%, slightly higher than the full year 2021 ratio. Fitch expects BBVA's performance to remain under pressure until the political and economic situation recovers leading to an increase in credit demand, which seems unlikely in the short term. The bank prioritizes asset quality and liquidity over profitability.

Comfortable Capitalization: Similar to other banks in the financial system, BBVA Arg's capitalization has continued to strengthen over the past few years given the low loan growth. Its Common Equity Tier 1 (CET 1) ratio was strong at nearly 23% at March 31, 2022. Given the bank's traditionally conservative risk appetite, Fitch expects management to maintain the bank's capital cushion at comfortable levels in the short term, but as the operating environment improves, the ratio will likely revert to a lower level similar to that of YE 2019 when it was slightly over 17%.

Very Strong Liquidity: Like many other banks in the Argentine banking system, BBVA Arg's main funding source is deposits from its customer base. BBVA has a long track record of attracting and maintaining a stable customer base. As of March 31, 2022, these deposits accounted for slightly over 96% of the bank's total non-equity funding. The bank's loan to deposit ratio as of the same date continued to shrink to a low of 53% reflecting a modest risk appetite and low customer credit demand which is driven by the challenging operating environment.

No Government Support: BBVAArg's GSR of 'no support' (NS) reflects Fitch's view that despite the bank's systemic importance, government support cannot be relied upon given constraints on the government's ability to provide support.

Fitch does not consider any potential support from its parent Banco Bilbao Vizacaya Argentaria (BBVA; BBB+/Stable) given the risk of government intervention in the Argentine financial system.

Rating Sensitivities

Factors that could, individually or collectively, lead to negative rating action/downgrade:

BBVA's IDRs and VR would be pressured by a downgrade of Argentina's sovereign rating or a deterioration in the local operating environment beyond current expectations that leads to a significant deterioration in its financial profile;

Any policy announcements that would be detrimental to the bank's ability to service its obligations would be negative for creditworthiness.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

BBVA Arg's IDRs and VR would benefit from an upgrade of Argentina's sovereign rating.

VR ADJUSTMENTS

The Operating Environment score of 'ccc' has been assigned below the implied score of 'b' due to the following adjustment reason: Sovereign Rating (negative);

The Earnings & Profitability score of 'ccc' has been assigned below the implied score of 'bb' due to the following adjustment reason: Earnings Stability (negative);

The Capitalization & Leverage Score of 'ccc' has been assigned below the score of 'bb due to the following adjustment reason: Historical and Future Metrics (Negative).

Best/Worst Case Rating Scenario

International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

BBVA Arg's ESG score for Management Strategy of '4' reflects the high level of government intervention in the Argentine banking sector. The imposition of interest rate caps can lead to inadequate loan pricing and, together with the imposition of interest rates floors on time deposits, puts significant pressure on banks' net interest margins. In addition, restrictions on fee levels can negatively affect performance ratios. This challenges the bank's ability to define and execute its own strategy. This has a moderately negative impact on the rating in conjunction with other factors.

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.

RATING ACTIONS

Entity / Debt

Rating

Prior

Banco BBVA Argentina S.A.

LT IDR

CCC

Affirmed

CCC

ST IDR

C

Affirmed

C

LC LT IDR

CCC

Affirmed

CCC

LC ST IDR

C

Affirmed

C

Viability

ccc

Affirmed

ccc

Support

WD

Withdrawn

5

Support Floor

WD

Withdrawn

NF

Government Support

ns

New Rating

Page

of 1

VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

(C) 2022 Electronic News Publishing, source ENP Newswire

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Analyst Recommendations on BANCO BBVA ARGENTINA S.A.
More recommendations
Financials
Sales 2022 134 B 800 M 800 M
Net income 2022 25 893 M 155 M 155 M
Net Debt 2022 - - -
P/E ratio 2022 -
Yield 2022 -
Capitalization 216 B 1 295 M 1 295 M
Capi. / Sales 2022 1,62x
Capi. / Sales 2023 0,57x
Nbr of Employees 5 880
Free-Float 33,9%
Chart BANCO BBVA ARGENTINA S.A.
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Banco BBVA Argentina S.A. Technical Analysis Chart | MarketScreener
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Technical analysis trends BANCO BBVA ARGENTINA S.A.
Short TermMid-TermLong Term
TrendsBullishBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus BUY
Number of Analysts 3
Last Close Price 353,00 ARS
Average target price 527,67 ARS
Spread / Average Target 49,5%
Managers and Directors
MartÝn Ezequiel Zarich Chief Executive Officer
Carmen Morillo Chief Financial Officer
Maria Isabel Goiri Lartitegui Chairman
Leandro ┴lvarez Chief Engineering & Data Officer
Gustavo Siciliano Director-System & Operations
Sector and Competitors