Fitch Affirms Bladex's IDR at 'BBB+'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has affirmed Banco Latinoamericano de Comercio Exterior's (Bladex) Issuer Default Rating (IDR) and Viability Rating (VR) at 'BBB+' and 'bbb+', respectively. A complete list of ratings is provided at the end of this release.

Key Rating Drivers

VR, IDRs and Senior Debt

Bladex's VR, IDRs and both national and international senior debt ratings reflect the bank's robust asset quality as well as its stable funding and adequate liquidity. Additionally, the bank's ratings reflect its expertise in Latin American trade finance, good capitalization and moderate profitability. Fitch's view of Bladex's ratings is tempered by its narrow albeit stable margins and its loan and funding concentration.

The Stable Outlook reflects Fitch's expectation that Bladex's financial profile and performance will remain in line with recent trends.

Bladex is rated above the country's Sovereign rating as it has a geographically diversified balance sheet; the bank has proven it can weather a default in one of its key host countries - and a major liquidity crunch - and it has limited risk of having a defaulted government impose restrictions on its debt service.

Asset quality improved through 2Q'14 as the bank successfully collected its PDLs (NPLs down to 0.06% of gross loans). Loan loss reserves (LLR) stood at 1.18% of gross loans at the same date. Moreover, Bladex has set aside additional LLR for off-balance sheet credit risk. The total LLR coverage of gross loans and off-balance sheet credit risk stood at 1.26% at 2Q'14.

In addition to having about 14% of its assets in bank deposits and highly liquid securities, Bladex has a very liquid loan portfolio that rolls over at least twice a year. This proved a key safeguard for the bank as it successfully navigated severe liquidity crunches. Bladex improved its funding structure, relying less on short-term borrowings and reducing its asset/liability gaps and funding costs

Bladex has developed a unique expertise and franchise since 1975 and consolidated as the top regional foreign trade bank. This expertise is a key competitive factor in a region where trade is rapidly growing.

Though lower than the peak levels of year-end 2009, capital ratios (Fitch Core Capital, tangible equity to assets) are sound by any standard and likely to remain in the mid-teens, a level considered adequate given Bladex's low-risk business, asset quality, reserves, and risk management policies.

The bank's narrow margins and the modest performance of trading and investing activities limit its profitability. Bladex's revenues increased slightly while operating expenses have decreased moderately. In turn, loan loss provisions, although well contained at present, could put more pressure on the bottom line due to portfolio growth. Accordingly, efficiency and profitability improved; ROAE stood at about 10% at June 2014 and ROAA was about 1.2%.

Bladex's key markets continue to enjoy positive albeit slower growth, fostering loan growth and sound asset quality. Bladex should maintain sound performance through asset growth, resilient margins, contained operating costs, and little provisions pressure thanks to its sound asset quality.

Given its customer base (major regional banks and corporations), the bank is structurally concentrated on its loan portfolio. By the same token, funding, mainly from central/state-owned and commercial banks, is also concentrated but fairly stable.

Support Rating (SR) and Support Rating Floor (SRF)

Bladex's support and support rating floor reflect Fitch's view that external support for the bank, though possible, cannot be relied upon.

Rating Sensitivities

VR, IDRs and Senior Debt

Assuming the maintenance of a supportive operating environment, Bladex' ratings could benefit from more stable revenues and a material reduction in credit and funding concentrations as this could result in lower risk and improved, more consistent profitability.

Significantly weaker margins, or important asset quality deterioration that erodes profitability and weakens the capital/reserves cushion beyond Fitch's base case scenarios, (Fitch Core Capital below 12%) could pressure Bladex's ratings downward.

Support Rating and Support Rating Floor

Bladex' SR and SRF would change if Fitch changes its assessment of the Government or its shareholders' ability and willingness to support the bank.

Fitch has affirmed the following ratings for Bladex:

--Long-term foreign currency IDR at 'BBB+'; Outlook Stable;

--Short-term foreign currency IDR at 'F2';

--Viability rating: at 'bbb+';

--Support Rating at '5';

--Support Rating Floor at 'NF';

--Senior unsecured notes at 'BBB+';

--Senior unsecured certificates at 'AAA(mex)':

--Senior Unsecured short term certificates at 'F1+(mex).

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Jan. 31, 2014);

--'National Ratings Criteria' (Nov. 19, 2011).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

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

National Scale Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=842497

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