Fitch Ratings has downgraded
The downgrade follows the recent downgrade of
The Stable Outlook on BCP Bolivia's support driven IDRs, reflect the Stable Outlook on the Sovereign as the parent,
The Negative Outlook on Fassil reflects the increased downside risks from the economic implications of the coronavirus pandemic, reflected in the Negative Outlook for the operating environment score. Fitch believes the weaker economic conditions reflected in the expected contraction of the economy by at least 7.5% in 2020, will result in asset quality deterioration and weigh on profitability and capitalization.
KEY RATING DRIVERS
IDRs AND VR
Fitch believes
BCP's IDRs, reflect the support it would receive from its parent,
Fassil's VR, or standalone creditworthiness, drives its IDRs. Aside from the operating environment, Fassil's ratings are highly influenced by its company profile and weak capitalization. Fassil's VR is particularly sensitive to lower than peer capitalization as
SUPPORT RATING AND SUPPORT RATING FLOOR
Fitch affirmed BCP Bolivia's Support Rating (SR) at '4', reflecting a limited probability of support due to uncertainties about
Fassil's SR and Support Rating Floor (SRF) are rated '5' and 'NF', respectively. In Fitch's view, sovereign support cannot be relied upon for Fassil, as it is not considered a systemically important bank
BCP Bolivia and Fassil have an ESG Relevance Score of 4 for Governance Structure due to their exposure to high government intervention reflected in the mandatory allocation of more than half their loan portfolio on specific sectors, which has a negative impact on the credit profile of the banks and is relevant to the ratings in conjunction with other factors.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
BCP
BCP's VR could be negatively affected if the bank's operating profit to risk weighted assets is consistently negative or near to zero, if its FCC ratio falls below 7%, or from a relevant deterioration of its access to funding or its liquidity profile.
IDRs and VR are also sensitive to changes in the sovereign rating, or further deterioration on the local operating environment. Negative rating actions on the bank's IDR will mirror those of the sovereign as its ratings are constrained by the Country Ceiling. IDRs are also sensitive to a change in Fitch views about the parent's willingness to support the bank.
Should
Fassil
Sustained negative or near-to-zero results as well as additional pressures on FCC to RWA metrics to below 7% could also underpin a downgrade. A relevant deterioration of its access to funding or its liquidity profile could also have a negative effect on ratings.
IDRs and VR are also sensitive to changes in the sovereign rating, or further deterioration on the local operating environment.
There is no room for a downgrade of the SR or SRF.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
BCP
Rating actions on the bank's IDRs would mirror those of the sovereign as BCP Bolivia's IDRs are constrained by the Country Ceiling.
BCP's VR upside potential is limited given the sovereign's current rating and unstable operating environment. Over the medium term, ratings could be upgraded by the confluence of improvements in the operating environment and the financial profile of the bank;
BCP Bolivia's support rating is constrained and an upgrade could occur if there is an upgrade of the sovereign rating, which is not likely as its Outlook is currently Stable.
Fassil
The Outlook could be revised to Stable following a revision of the operating environment factor to Stable along with a manageable impact on FCC, profitability and asset quality metrics due to the economic recession, which sustains its financial profile consistent with its current rating.
Fassil's ratings upside potential is limited given the sovereign's rating and unstable operating environment.
Upside potential for Fassil's SR and SRF is limited by its company profile.
'In accordance with Fitch Ratings' policies, the issuer appealed and provided additional information to Fitch Ratings that resulted in a Rating action that is different than the original Rating committee outcome.'
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 '
SUMMARY OF FINANCIAL ADJUSTMENTS
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.
PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS
BCP Bolivia's IDRs are directly linked to
ESG CONSIDERATIONS
BCP Bolivia and Fassil have an ESG Relevance Score of 4 for Governance Structure due to their exposure to high government intervention reflected in the mandatory allocation of more than half their loan portfolio on specific sectors, which has a negative impact on the credit profile of the banks and is relevant to the ratings 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 Fassil SA LT IDR B- Downgrade B
ST IDR B Affirmed B
LC LT IDR B- Downgrade B
LC ST IDR B Affirmed B
Viability b- Downgrade b
Support 5 Affirmed 5
Support Floor NF Affirmed NF
Banco de Credito de Bolivia S.A. LT IDR B Downgrade B+
ST IDR B Affirmed B
LC LTIDR B Downgrade B +
LC ST IDR B Affirmed B
Viability b- Downgrade b
Support 4 Affirmed 4
VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
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