Fitch Assigns 'BBB ' IDRS to Bancolombia Puerto Rico; Outlook Stable
KEY RATING DRIVERS: IDRS and NATIONAL RATINGS
BPR's IDRs and National ratings reflect [the potential support it would receive from its main shareholder, Bancolombia S.A., should it be required. BPR is highly integrated with Bancolombia and is a core part of the parent's business strategy in Colombia and abroad. Bancolombia's current IDR is 'BBB+' (For more information about Bancolombia's rating drivers please refer to 'Fitch Upgrades Bancolombia S.A.'s VR and IDR, Outlook Stable' dated July 21, 2015, available at www.fitchratings.com.)
BPR follows Bancolombia's strategic guidelines, as well as its operating policies and standards. The bank's management includes several of the group's principal officers. In addition, BPR benefits from the group's revenues, customer service, management, and marketing resources, which leads to high operating efficiency and adequate risk controls.
BPR is one of the offshore banking subsidiary that serves Bancolombia's largest corporate and private banking customers. In this regard, the bank specializes in placing loans, leasing and factoring operations, in both U.S. dollars and euros, targeting companies with a moderate risk profile located in countries such as Peru, Colombia, Mexico, Chile and Panama. In addition, the bank can place syndicated loans with the group's subsidiaries.
Even though the bank's loan portfolio exhibits good geographic and sectorial diversification, debtor concentration is still elevated, with its 20 largest borrowers representing 87% of total loans. Thus, individual delinquencies could have a negative impact on the bank's asset quality metrics. This could pressure the entity to transfer non-performing loans (NPLs) to related entities, if additional loan loss reserve requirements were to affect equity.
BPR finances its operations mainly with term deposits and funds from the group's entities. This easy access to funding is especially important in light of the bank's high depositor concentration (25 largest depositors as of June 2014: 89.5%) as well as the sensitivity of these depositors to a decline in interest rates and volatility of the Colombian peso.
BPR's capitalization is adequate, benefitting from good internal generation of capital and fully-retained earnings. This gives the bank a solid base for future asset expansion.
BPR's Support Rating of '2' reflects a high probability of external support from Bancolombia S.A. In Fitch's opinion, BPR is core to Bancolombia's international strategy and institutional support should be forthcoming, if required.
IDRS and NATIONAL RATINGS
BPR's ratings should generally move in line with those of Bancolombia. Should Fitch's assessment of the importance of BPR to its main shareholder change, its ratings could be affected negatively.
BPR's SR could be affected if Fitch changes its view of Bancolombia's ability or willingness to support the bank.
The rating actions are as follows:
--Long-term IDR assigned at 'BBB+'; Outlook Stable;
--Short-term IDR assigned at 'F2';
--Support Rating assigned at '2';
--National scale Long Term Rating affirmed at 'AAA(col)'; Outlook Stable;
--National scale Short-term Rating affirmed at 'F1+(col)'.