Fitch Maintains Rating Watch Positive on Uruguay's Nuevo Banco Comercial

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BUENOS AIRES, Argentina--(BUSINESS WIRE)-- Fitch Ratings maintains on Rating Watch Positive Nuevo Banco Comercial's (NBC) foreign and local currency long-term Issuer Default Rating (IDR) of 'BB-'. Fitch also maintains on Watch Positive, the National long-term rating of 'AA(ury)' and Support Rating of '4'. At the same time, the support rating floor was affirmed at 'B'.

The rating watch reflects the announcement of the acquisition of NBC by Bank of Nova Scotia (IDR: 'AA-' by Fitch) of 60% of the bank's equity, held by a consortium of foreign investors led by Advent International; the Uruguayan government owns the remaining 40% in the form of preferred stock with no voting rights. The rating watch will be resolved once the transaction is approved by Uruguayan and Canadian regulators. NBC's ratings will be upgraded to reflect the potential support from Bank of Nova Scotia.

NBC's ratings reflect the bank's strong national franchise, good asset quality, high liquidity and capitalization levels, and its improving overall performance. The impact on the bank's profitability of its significant asset USD position and inflation were also taken into consideration.

NBC suffered a net loss in 2010, mainly as a result of the impact of the inflation adjustment and foreign exchange losses. However, the bank's operating profit improved markedly as its operating revenues increased, fuelled by loan growth. Fitch expects NBC's operating performance to continue to improve in line with the expected increase in lending volumes. However, foreign exchange results and inflation adjustments will continue to add volatility to the bank's income statement.

NBC's asset quality is good and its ratios have improved. Only 2.7% of the loan book is past-due (60 days or more overdue, under local definitions). Loan loss reserves covered 8.9% of total loans and 238.4% of past-due loans at Dec. 31, 2010, which is considered ample.

NBC's funding is mainly through deposits; liquidity continues to be high, with liquid assets representing 48.2% of deposits and short-term funds.

NBC's capitalization is sound. Total equity represented 12.64% of assets and its Fitch Core Capital ratio 18.37% at Dec. 31, 2010. Fitch expects these ratios to go down as lending continues to grow.

NBC is the third-largest private sector bank in Uruguay. Its market presence is significant in all segments and it had 6.25% of the banking system's assets at Dec. 31, 2010.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 16, 2010);
--'Short-Term Ratings Criteria for Corporate Finance' (Nov. 2, 2010);
--'Uruguayan Banks: Annual Review and Outlook' (Nov. 12, 2010).

Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547685
Short-Term Ratings Criteria for Corporate Finance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=568726
Uruguayan Banks: Annual Review and Outlook
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=572725

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Fitch Ratings
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Director
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