NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the ratings of the Dominican-based Banco BHD (BHD) as follows:

--Long-term foreign and local currency Issuer Default Ratings (IDR) at 'B';

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

--Individual at 'D';

--Support at '5';

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

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

--Support Floor at 'NF'.

BHD's ratings reflect its diversified retail deposit base, adequate market share, good liquidity, improved asset quality and profitability, sound capital base, competent management, and robust shareholder structure. The volatility of the operating environment remains the main challenge for the bank, while further improvement on its efficiency levels will benefit its profitability in times of fierce competition. The Rating Outlook is Stable.

BHD's IDR is at the country ceiling. Future upgrades may be limited by such caps and the need to further diversify its business model. As for its individual rating, it would be benefited by the preservation of its current strong operating performance and capital in a relatively volatile environment.

BHD's revamped credit risk control tools and conservative approach toward lending have benefited BHD's asset quality metrics in the last three years, allowing the bank to post relatively low impairment figures and strong loan loss coverage, which compared better than its peer, and it is expected to be preserved in the short and medium terms. As of May 2010, past due loans represent just 2% of total loans, while loan loss reserve coverage is strong at 233%. Restructured loans are limited, and the overall performance of all business segments is sound.

A significant increase on net interest revenue, the positive results of its growing trading activity (fixed income securities) and resilient but still small fee income were more than enough to compensate a slight deterioration of its weak efficiency ratio and higher voluntary loan loss provisions. As such, operating profit to average assets remained about 3% in FY09 and improved to 3.75% during the first five months of FY10. Although, the current operating profits can be in a peak, it is expected that the bank will be able to post operating results of about 3% during FY10.

Capitalization ratios compare better than the market average. As of May 2010, Fitch's eligible capital to risk weighted assets equaled almost 16%, higher than the market average and comparable with the median of adequate capitalized banks in the region; however, the volatility of the operating environment and the current business plan of the bank require such an additional cushion.

As of May 2010, BHD ranked third among 12 commercial banks, with a 12.2% market share by total system assets. At Dec. 30, 2009, Grupo BHD controlled 51% of Centro Financiero BHD (CFBHD), the sole shareholder of BHD, with Banco de Sabadell of Spain (Sabadel) and Banco Popular de Puerto Rico (Popular PR) together holding 40% and International Finance Corporation (IFC) controlling 9%.

These rating actions reflect the application of Fitch's current criteria which is available on Fitch's website at 'www.fitchratings.com' and specifically include: Global Financial Institutions Rating Criteria (December 2009).

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

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CONTACT:

Fitch Ratings
Franklin Santarelli, +1-212-908-0739 (New York)
Larisa Arteaga, +1-908-563-2482 (Santo Domingo)
Brian Bertsch, +1-212-908-0549 (Media Relations, New York)
brian.bertsch@fitchratings.com

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