Fitch Affirms Banco de Costa Rica's IDR at 'BB+'

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SAN SALVADOR & NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed Banco de Costa Rica's (BCR) Issuer Default Rating (IDR) at 'BB+'. The Outlook is Stable. A full list of BCR's ratings follows at the end of this press release.

BCR's IDRs and Support Rating are driven by the explicit guarantee from the Costa Rican Government, its sole owner, for all its liabilities. As stated in the Banking Law, state-owned banks have the guarantee and full collaboration of the State, which allows the bank's IDRs to be aligned with Costa Rica's sovereign ratings (long-term foreign and local currency IDR 'BB+'; Stable Outlook, by Fitch).

In turn, BCR's Viability Rating (VR) reflects the bank's strong franchise, good asset quality and adequate capital ratios. The VR also considers the bank's profitability, considered modest due to the high operating expenses, low interest margins, and the negative impact of the recent economic crisis on credit quality, which resulted in higher credit costs

The Rating Outlook is Stable. BCR's IDRs and VR would benefit from improvements in the bank's intrinsic performance, including significant progress in efficiency and better asset quality. In addition, an upgrade in Costa Rica's sovereign ratings would lead Fitch to revise BCR's IDRs accordingly. In turn, further deterioration in profitability that negatively impacts capital ratios could trigger a downgrade in BCR's VR, but the bank's IDRs would not be affected as long as Costa Rica's sovereign rating remains at the current levels.

Traditionally a corporate-oriented bank, BCR has been growing towards a more diversified, universal bank profile by focusing on the residential mortgages and consumer loans. The current strategy has improved loan portfolio diversification while keeping asset quality ratios under control. While the recent economic crisis had a negative impact on credit quality, delinquency ratios are still in a good position relative to peers' and no further deterioration is expected.

BCR's profitability ratios show some recovery in 2011, but remain modest. The bank's performance has been characterized by a net interest margin below market average and a high and rigid cost structure, similar to other state-owned institutions. In recent years, results have also been challenged by increased credit costs.

Fitch's Core Capital ratio remains at an adequate level, fuelled by retained earnings. Internal capital generation has been enough to sustain asset growth, aided in 2009 by a capital injection. This capitalization was part of a set of countercyclical measures that certainly aided capital adequacy, increased confidence, and boosted loan portfolio growth, but did not respond to a specific capital shortfall in the bank.

The public's perception of the sovereign guarantee, the bank's extensive branch network, and solid deposits base, place BCR as one of the strongest competitors in the Costa Rican Banking System. BCR is the second largest bank in Costa Rica, with market shares of approximately 25% of total loans and total deposits. BCR has five subsidiaries: four wholly owned subsidiaries in regulated non-credit activities in Costa Rica, and a participation of 51% in the Panamanian General Licensed bank Banco Internacional de Costa Rica (BICSA).

Fitch has affirmed the following BCR ratings:

International ratings

--Long-term IDR at 'BB+'; Outlook Stable;

--Short-term IDR at 'B';

--Long-term local currency IDR at 'BB+'; Outlook Stable;

--Short-term local currency IDR at 'B';

--Individual Rating at 'C/D';

--Viability Rating at 'bb+';

--Support Rating at '3';

--Support Rating Floor at 'BB+'.

National ratings

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

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

--Long-term senior unsecured bonds at 'AA+(cri)';

--Commercial Paper at 'F1+(cri)'.

Additional information is available on 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Aug. 16, 2011);

--'National Rating Criteria' (Jan. 19, 2011);

--'Central American Banks: After the Crisis, an Uneven Evolution' (Sept. 28, 2011);

--'Guatemala' (August 4, 2011).

Applicable Criteria and Related Research:

National Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171

Guatemala

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648986

Central American Banks (After the Crisis, an Uneven Evolution)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651468

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CONTACT:

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or
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or
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