Fitch Ratings has affirmed
Fitch has also affirmed the Long- and Short-Term National Ratings at 'AA(pan)' and 'F1+(pan)', respectively. The Rating Outlook for the Long-Term IDR and Long-Term National Rating has been revised to Negative from Stable.
The revision of the Outlook reflects
Key Rating Drivers
Pressured Financial Profile:
Operating Environment Weigh: Fitch's 'bb+' assessment of the Panamanian banking system's operating environment (EO) weighs the recovery of the banks' performance and continued normalization of the payment behavior of loans with relief measures. The current environment provides an opportunity for the bank to recover from the pressures of the past two years, although OE risks will tilt increasingly to the downside in 2023 due to the adverse global economic scenario.
Consolidated Business Model: The bank consolidated business model, which underpinned the business profile factor, is demonstrated in its strong knowledge of the retail segment, evident in the recent pandemic period with a reasonable control on the increment of deterioration, comparing well with the local industry despite a business mix prone to higher deterioration. The business model has a market focus of retail banking with 78% of total loans coming from retail loans including mortgages; the rest is corporate business. However, the bank has a modest franchise with a market participation in terms of asset and deposits of 1.6% that Fitch believes could increase progressively given a new growth strategy.
Good Asset Quality: Due to the bank's conservative risk profile loan quality remains good despite having increased after the finalization of the pandemic relief measures in
Moderate Profitability: As of
Funding Profile Stable: The funding structure of
Rating Sensitivities
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A sustained operating profit-to-RWA ratio below 1.5% or a CET1 ratio below 15.0%.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Upward movements in
The Negative Outlook on
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Senior Unsecured Debt
GSR
The GSR of 'ns' reflects that, while possible, external support cannot be relied upon, given the banking system's large size regarding economy and weak support stance due to
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The GSR is at the lowest possible levels and so cannot be downgraded.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
As
VR ADJUSTMENTS
The Operating Environment score of 'bb+' has been assigned below the 'bbb' implied score due to the following adjustment reason: Reported and future metrics (negative).
The Business Profile score of 'bb' has been assigned above the 'b' implied score due to the following adjustment reasons: Business Model (positive), Strategy and execution (positive).
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 '
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
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.
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