Fitch Affirms Banco Supervielle's VR at 'ccc' and IDRs at 'CCC'; Affirms Sub Debt at 'CC/RR5'
KEY RATING DRIVERS
VR, IDRS, AND SENIOR DEBT
Banco Supervielle's VR and IDRs are driven by the adverse economic and operating environment, and the relatively tight loss absorption capacity in the form of core capital and/or loan loss reserves, but also consider the bank's strong profitability, sound and stable asset quality, good funding and liquidity profile, and gradually strengthening franchise.
In Fitch's view, regardless of its overall reasonable financial condition, Supervielle's ratings are currently capped by the LC sovereign rating, due to the weak and worsening operating environment, and the challenges posed by the sovereign's delicate position with foreign creditors. The local environment in Argentina is characterized by ample economic imbalances and the risk of increasing political or regulatory intervention into the banking system.
Supervielle remains a medium-sized bank with roughly 2.0% of the system's loans and 1.7% of deposits, but it is gradually improving its competitive position in core business lines. It has a strong presence in factoring, leasing, and retail loans, with a particularly sound regional franchise in certain provinces.
Sound and stable core earnings are among Supevielle's top strengths. Margins are wide and increasing due to the high contribution of retail loans and improving funding mix. While there is some room for improvement, its efficiency is good for its size and model. Credit costs have gradually risen as impairments increase and Fitch expects these to put pressure on the bank's profitability.
Fitch considers Supervielle's asset quality adequate, since impairments are moderate (3.43% of consolidated loans) when considering the large contribution of retail loans, and the sizeable portion of those coming from relatively riskier segments of the population through one consumer finance subsidiary. As with the rest of the financial system, Supervielle's asset quality is slowly deteriorating due to the worsening operating environment, a trend Fitch expects to continue in the medium term.
In Fitch's view, Supervielle has sound practices regarding funding and liquidity. Customer deposits are the main source of funding. In addition, the bank has a well-diversified mix of local and foreign bank facilities, local and foreign debt programs, and a stable and recurring securitization mechanism. As of March 2015, 63.2% of the loan portfolio matures in less than six months (with 43.3% in less than 1 month).
Supervielle's capital adequacy is tight in Fitch's view. As of March 31, 2015, its tangible common equity to tangible assets ratio was 8.30%, lower than the Argentine financial system's average, although gradually increasing over the past four years. The Fitch core capital to risk-weighted assets ratio (6.98% at the same date) has also improved along with higher capital requirements and although is still relatively tight, it is adequate for the current rating level of the bank. Fitch expects that capital metrics will continue improving slowly based on higher capital requirements.
SUBORDINATED DEBT
The 'CCC/RR5' rating of Banco Supervielle's subordinated debt reflects that these securities are plain-vanilla subordinated liabilities, without any deferral feature on coupons and/or principal. Therefore, these are notched only once to reflect the below average expected recoveries for these bonds in case of bank liquidation.
SUPPORT RATING AND SUPPORT RATING FLOOR
The Support Rating of '5' and the Support Rating Floor of 'NF' reflect that, although possible, external support for Supervielle cannot be relied upon. In Fitch's view, ample economic imbalances and past track record towards sovereign support show little willingness by the authorities to provide support to local banks despite their size. As a consequence, support, should it be required, is highly uncertain.
RATING SENSITIVITIES
IDRS, VR AND SENIOR DEBT
Any downgrade of Argentina's sovereign rating could trigger further downgrades in Supervielle's ratings. Supervielle's ratings could also be affected if the worsening operating environment drives material deterioration in its financial profile, resulting in a Fitch core capital ratio falling and remaining below 3%.
Under current circumstances, Fitch considers unlikely that Argentine banks could be rated above the sovereign. Therefore, upside potential in Supervielle's ratings is heavily contingent upon positive developments in the sovereign rating dynamics.
SUBORDINATED DEBT
The rating of the subordinated debt will likely remain one notch below Banco Supervielle's local currency long-term IDR under most circumstances, meaning that this issue rating would move accordingly with any change in the bank's VR.
SUPPORT RATING AND SUPPORT RATING FLOOR
Changes in the SRs and SRFs of Supervielle are highly unlikely in the foreseeable future.
Fitch has affirmed the ratings as follows:
Supervielle
--FC and LC long-term IDRs at 'CCC';
--FC and LC short-term IDRs at 'C';
--Viability Rating at 'ccc';
--Support at '5';
--Support Floor at 'NF';
--USD50 million subordinated debt due 2017 at 'CC/RR5'.
Комментарии