Fitch Affirms Tarjetas Cuyanas' LC IDR at 'B'

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BUENOS AIRES, Argentina & NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed Tarjetas Cuyanas S.A.'s (TC) ratings as follows:

--Long-term local currency Issuer Default Rating (IDR) at 'B';

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

--Individual rating at 'D';

--Support rating at '5';

--USD65 million unsubordinated fixed-rate debt long-term local currency rating at 'B/RR4'.

The Rating Outlook is Stable.

TC's national ratings were affirmed on July 4, 2011 as follows:

--National long-term rating at 'AA-(arg)', Stable Outlook;

--National short-term rating at 'A1(arg)';

--Unsubordinated fixed-rate notes totaling USD85 million national long-term rating at 'AA-(arg)';

--Short-term notes totaling ARS90 million national short-term rating at 'A1(arg)'.

--Fitch also assigned a national long-term rating of 'AA-(arg)' to TC's class V series II notes for up to ARS40 million and a national short-term rating of 'A1(arg)' to class V series I short-term notes for up to ARS30 million.

TC's ratings reflect its strong growth, maintenance of its sound historical profitability and asset quality and its satisfactory liquidity and capital base. They also reflect the benefits of belonging to the Tarjetas Regionales Group (owned by Banco de Galicia y Buenos Aires [Banco Galicia]), which has ample experience in the credit card business. Additionally, they also take into account the potentially volatile operating environment in Argentina and the small size of the company.

The low sovereign ratings add significant ratings compression to most Argentine issuers. Upside rating potential for TC lies in a sovereign upgrade. Downside potential exists in significant reduction of its capitalization or deterioration in the operating environment affecting TC's asset quality.

TC's profitability remains sound and is based on strong revenue generation and growth and healthy asset quality. Fitch expects TC's profitability to remain robust in the medium term, in line with the good economic prospects.

TC's lending has grown significantly in recent years. In 2010 loan growth resumed after a sharp slowdown suffered in 2009 due to lower demand and a self-imposed restriction following the economic slowdown. Total loans, net of loan loss reserves, grew by 74.3% year-over-year (YOY) at March 31, 2011. Fitch considers such growth rates to be a source of potential risks but it takes some comfort from TC's track record of good asset quality and sound risk management, which, together with the positive economic prospects, should allow the company to keep asset quality under control. Non-performing loans (NPLs) have declined since 2009 due to the economy's recovery and growth and accounted for a low 2.91% of the total at March 31, 2011 and were 152.5% reserved.

TC's liquidity is adequate, supported by the short-term nature of its lending. Also, it has had access to capital market funds through bond issuance, interbank lending, and loan securitizations. Exposure to foreign currency risk is low.

TC's capital base is adequate, with an equity/assets ratio of 18.42% at March 31, 2011. Although TC's capitalization has decreased due to the significant growth, its strong internal capital generation should allow it to maintain a satisfactory capital base.

TC is a credit card issuer created in 1996 in the Cuyo region (provinces of Mendoza, San Juan and San Luis) and is now the leading issuer in that region. Since 1996, it has expanded into the west, northwest, and south of Argentina. At March 31, 2011, TC had about 450,000 credit cards issued and 39 branches and commercial offices.

TC is 60% indirectly owned by Banco de Galicia y Buenos Aires, the third largest private sector bank in Argentina by deposits.

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

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Aug. 16, 2010).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547685

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CONTACT:

Fitch Ratings
Primary Analyst
Santiago Gallo, +54-11-5235-8137
Director
Fitch Argentina Calificadora de Riesgo S.A.
Sarmiento 663 - piso 7 - C1041AAM
Buenos Aires, Argentina
or
Secondary Analyst
Ana Gavuzzo, +54-11-5235-8133
Senior Director
or
Committee Chairperson
Franklin Santarelli, +1-212-908-0739
Managing Director
or
Cindy Stoller, New York, +1-212-908-0526
cindy.stoller@fitchratings.com