Banistmo #BBB-/A-3# Ratings Affirmed On Expected Improvements In Profitability And Market Outlook Remain Stable

Stocks and Financial Services Press Releases Friday September 26, 2014 09:00
MEXICO CITY--26 Sep--Standard & Poor's
MEXICO CITY (Standard & Poor's) Sept. 25, 2014--Standard & Poor's RatingsServices affirmed its 'BBB-' long-term and 'A-3' short-term issuer creditratings on Banistmo S.A. The outlook remains stable.

The issuer credit ratings (ICR) on Banistmo continue to reflect our "adequate"assessments for its business and risk positions, thanks, in part, to itssecond-largest market position in Panama and manageable credit losses. We alsoview its capital and earnings as "adequate" based on our 7% projectedrisk-adjusted capital (RAC) ratio for 2015, and our view of its "average"funding and "adequate" liquidity. The stand-alone credit profile (SACP)remains at 'bbb-'.

Standard & Poor's Ratings Services classifies the banking sector of Panama(BBB/Stable/A-2) in group '5' under its Banking Industry Country RiskAssessment (BICRA). Our bank criteria use our BICRA economic risk and industryrisk scores to determine a bank's anchor, the starting point in assigning an

issuer credit rating. The anchor for banks operating only in Panama is 'bbb-'.

Panama's economic risk assessment reflects high levels of household debt and alimited ability to take on additional loans, which in our view, results fromthe country's low per capita GDP. The country's economy has becomeincreasingly resilient and diversified in the past decade and it has shown

adequate GDP growth rates for the past five years. However, our economic riskassessment also considers Panama's small domestic market, which leads to itshigh reliance on global and regional economic activity to drive its growth. Inour view, credit growth itself doesn't worsen economic imbalances, as it isfairly moderate. Furthermore, whenever the economy slows down, so does credit.Other factors such as commercial real estate (CRE) prices and the country'sexternal position pose additional risk in our economic imbalances assessment,in our view.

Our industry risk assessment recognizes that Panama adequately regulates andsupervises financial institutions, fostering the financial system's stability.Despite high leverage levels, Panama's authorities engage in adequateoversight of the financial system and applies international standards. Thereare some minor exceptions to this policy, but Panama's major banks'conservative management mitigates these factors. Nevertheless, our industryrisk assessment remains limited by the absence of a lender of last resort inthe country. Although the government offered liquidity support to all banks in

2008, we are uncertain that it would provide support again in the event of anadverse economic scenario.

"We continue to view Banistmo as a core entity for its ultimate parent,Bancolombia, which views Panama as a strategic growth market in the comingyears, as the group further enhances its presence in Central America andremains as one of the two largest financial groups in this region," said

Standard & Poor's credit analyst Arturo Sanchez. Our "core" group statusassessment stems from our opinion about Banistmo's solid market position inthe Panamanian banking system with a market share of 14.1% in terms of totalloans as of June 2014, making it the second largest. As of the second-quarter

2014, Banistmo contributed 11.9% of the group's total assets, 16.4% of itstotal equity, and 6.7% of total revenues. We expect these shares to remainstable, if not gradually increasing as a result of Bancolombia's strategy tocontinue expanding in the Panamanian market.

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