Fitch Completes Peer Review for Large Dominican Banks & Related Entities

The following is from Fitch Ratings June 16:

On May 14, Fitch Ratings completed a peer review for three private sector banks and their related entities as well as one state- owned bank in the Dominican Republic. At that time, Fitch affirmed the banks' ratings as detailed at the end of this release.

The four banks included in this peer review are Banco Popular Dominicano (BPD); Banco BHD S.A.(BHD); Banco de Reservas de la Republica Dominicana, Banco de Servicios Multiples (BANRESERVAS); and Banco Multiple Leon S.A.(BML). The banks are among the largest in their market and each had assets between USD7.2 billion and USD1.2 billion, with operations primarily in the Dominican Republic. With the exception of BML, the banks' Issuer Default Ratings (IDRs) are driven by their Viability Ratings (VRs), which are based on the banks' stand-alone intrinsic financial strengths. BML's IDRs factor in potential extraordinary institutional support from its parent, Centro Financiero BHD Leon.

Based on 2013 financial statements, asset quality indicators remained stable or improved at all the banks covered in this review, driven by moderate loan growth and a strengthening local economy. However, asset quality indicators at Dominican banks were weaker than international peers (emerging market commercial/universal banks with a 'b' category VR). Given better economic conditions in the Dominican Republic, Fitch believes asset quality indicator trends will be sustained in 2014.

While BML's profitability declined, it remained flat at the other private sector banks in 2013. Asset growth and better efficiency increased BANRESERVAS' profitability during this same period. Fitch expects a stronger domestic economy to strengthen the banks' financial performance over the next year due to accelerating growth and improvements in loan quality.

With the exception of BANRESERVAS, bank capitalization compared favorably with international peers. Even with accelerating asset growth Fitch expects bank capitalization to remain stable or improve in 2014 as internal capital generation increases.

As is common to other emerging market banks, all of the Dominican banks included in this review have a large negative mismatch between short-term assets and liabilities. This contractual maturity gap is somewhat mitigated by high deposit reserve requirements, deposit stability, and the availability of credit lines from other financial institutions.

Fitch published the main findings of this peer review completed in May in a report 'Peer Review: Dominican Banks', which is available at fitchratings.com. Fitch concludes that the large Dominican banks are well positioned to take advantage of the local economy's accelerating growth.

For further details on the particular key rating factors and rating sensitivities of each of these entities, as well as for regulatory information, please view individual rating action commentaries, published today and available in Fitch's websites at fitchratings.com and fitchca.com.

Following completion of a peer review on May 14, Fitch affirmed the following international and national ratings:

BPD

--Long-term National rating at 'AA-(dom)'; Outlook Stable;

--Short-term National rating at 'F1+(dom)'.

--Long-term National subordinated debt at 'A+(dom)'

BHD

--Foreign and local currency long-term IDR at 'B'; Outlook Stable;

--Foreign and local currency short term IDR at 'B';

--Viability Rating at 'b';

--Support at '5';

--Support Floor at 'NF';

--Long-term National rating at 'AA-(dom)'; Outlook Stable;

--Short-term National rating at 'F1+(dom)'.

BML

--Foreign and local currency long-term IDR at 'B'; Outlook Stable;

--Foreign and local currency short term IDR at 'B';

--Viability Rating at 'b-';

--Support at '4';

--Long-term National rating at 'AA-(dom)'; Outlook Stable;

--Short-term National rating at 'F1+(dom)'.

--Long-term National subordinated debt at 'A+(dom)'

BANRESERVAS

--Foreign and local currency IDRs at 'B'; Outlook Stable;

--Short-term foreign and local currency IDRs at 'B';

--Viability Rating at 'b';

--Support Rating at '4';

--Support Floor at 'B';

--Long-term subordinated notes at 'B-'

--National long-term rating at 'AA-(dom)'; Outlook Stable;

--National short-term rating at 'F1+(dom)'

In addition, Fitch also affirmed the banks' related entities' ratings following the peer review:

Popular Bank Ltd. Inc y Subsidiaria (Popular Bank)

--Long-term national rating at 'AA-(dom)'; Outlook Stable;

--Short-term national rating at 'F1+(dom)';

--Long-term national rating at 'BB+(pan)'; Outlook Stable;

--Short-term national rating at 'B(pan)'.

BHD International Bank (Panama):

--Long-term National rating at 'AA-(dom)'; Outlook Stable;

--Short-term National rating at 'F1+(dom)'.

BHD Valores Puesto de Bolsa SA

--Long-term National rating at 'AA-(dom)'; Outlook Stable;

--Short-term National rating at 'F1+(dom)';

--Short-term National senior unsecured debt rating at 'F1+(dom)'.

Valores Leon S.A:

--Long-term National rating at 'AA-(dom)'; Outlook Stable;

--Short-term National rating at 'F1+(dom)';

--Long-term National senior unsecured debt rating at 'AA-(dom)'.

Additional information is available on fitchratings.com

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Jan. 31,);

--'2014 Outlook: Central America and the Dominican Republic' (Dec. 16, 2013);

--'Fitch Affirms Dominican Republic's Ratings at 'B'; Outlook Stable' (Nov. 26, 2013).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=732397

2014 Outlook: Central America and the Dominican Republic Insurance

fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=730995

2014 Outlook: Central America and the Dominican Republic

fitchratings.com/creditdesk/reports/ report_frame.cfm?rpt_id=725825

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