Multibank Upgraded To 'BBB-/A-3' From 'BB+/B' On Stronger Risk-Adjusted Capitalization; Outlook Stable
- Panama-based universal bank Multibank has continued to improve the risk-adjusted capitalization (RAC), based on the bank's stronger internal capital generation capacity, capital injections, and additional issuances of preferred shares.
- We are raising our issuer credit ratings on Multibank to 'BBB-/A-3' from 'BB+/B'.
- The stable outlook reflects our expectation that Multibank will maintain "strong" RAC levels in the next two years, while maintaining its current market position, with adequate and stable profitability and asset quality metrics.
MEXICO CITY (Standard & Poor's) April 9, 2015--Standard & Poor's Ratings Services raised its issuer credit rating (ICR) on Multibank to 'BBB-/A-3' from 'BB+/B'. Its stand-alone credit profile (SACP) is 'bbb-'. The outlook is stable. The rating action reflects the continuous improvements in our RAC ratio for Multibank. The improvement supports a led us to revise our capital and earnings assessment on the bank to "strong" from "adequate." The ratings on Multibank also reflect its "moderate" business position, "adequate" risk positions, "average" funding within the Panamanian banking industry and "adequate" liquidity. The bank's stand-alone credit profile (SACP) is 'bbb-'. Standard & Poor's Ratings Services classifies the banking sector of Panama (BBB/ Stable/A-2) in group '5' under its Banking Industry Country Risk Assessment (BICRA). Other countries in group '5' include Brazil, China, Colombia, India, and Poland. Our bank criteria use our BICRA economic risk and industry risk 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-'. Our economic risk assessment on Panama reflects the country's low per capita GDP which, combined with already high household debt levels, limits individuals' ability to take on more debt. At the same time, the country's fast-paced economic growth has increased its economic diversification. However, our economic risk assessment also considers Panama's small domestic market, which makes it highly reliant on global and regional economic activity to drive its growth. In our view, the fast pace of credit growth alone doesn't worsen economic imbalances because it has taken place amid vibrant economic activity in the past several years. However, the challenges that the CRE sector faces given the still growing vacancy rates in the country continue to add imbalances in the economy, in our view. Other factors, such as CRE price volatility and the country's external debt position, increase risk in our economic imbalances assessment. Our industry risk assessment recognizes that Panama's regulatory framework lags behind some international standards, but the regulator's adequate track record and the banks' competitive dynamics provide stability to the financial system. Nevertheless, our industry risk assessment remains limited by the absence of a lender of last resort in the country. Although the government offered liquidity support to all banks in 2008, we are uncertain about the timeliness and efficiency of this type of support in the event of an adverse economic or liquidity scenario. Our assessment also incorporates the long history of low loan loss ratios and banks' high profitability. RELATED CRITERIA AND RESEARCH Related Criteria
- Bank Hybrid Capital And Nondeferrable Subordinated Debt Methodology And Assumptions, Jan. 29, 2015
- General Criteria: Group Rating Methodology, Nov. 19, 2013
- Banks: Rating Methodology And Assumptions, Nov. 9, 2011
- Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011
- Bank Capital Methodology and Assumptions, Dec. 6, 2010
- Methodology For Mapping Short-And Long-Term Issuer Credit Ratings For Banks, May 4, 2010
- Commercial Paper I: Banks, March, 23, 2004
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In accordance with our relevant policies and procedures, the Rating Committee was composed of analysts that are qualified to vote in the committee, with sufficient experience to convey the appropriate level of knowledge and understanding of the methodology applicable (see 'Related Criteria And Research'). At the onset of the committee, the chair confirmed that the information provided to the Rating Committee by the primary analyst had been distributed in a timely manner and was sufficient for Committee members to make an informed decision. After the primary analyst gave opening remarks and explained the recommendation, the Committee discussed key rating factors and critical issues in accordance with the relevant criteria. Qualitative and quantitative risk factors were considered and discussed, looking at track-record and forecasts. The committee's assessment of the key rating factors is reflected in the Ratings Score Snapshot above. The chair ensured every voting member was given the opportunity to articulate his/her opinion. The chair or designee reviewed the draft report to ensure consistency with the Committee decision. The views and the decision of the rating committee are summarized in the above rationale and outlook. The weighting of all rating factors is described in the methodology used in this rating action (see 'Related Criteria And Research').
| Primary Credit Analyst: | Jesus Sotomayor, Mexico City; jesus.sotomayor@standardandpoors.com |
| Secondary Contact: | Alfredo E Calvo, Mexico City (52) 55-5081-4436; alfredo.calvo@standardandpoors.com |
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