OREANDA-NEWS. After completing the peer review of Panama's largest banks, Fitch Ratings has affirmed Banco General S.A.'s (BG) long-term foreign currency Issuer Default Rating (IDR) and Viability Rating (VR) at 'BBB+' and 'bbb+' respectively. See the full list of rating actions at the end of this release.


The bank's VR, IDRs, and senior debt ratings reflect the bank's still sound operating environment, solid franchise, sound and consistent performance, robust capital levels, conservative policies, good asset quality and reserves, ample deposit base and well-diversified portfolio. Fitch's view of BG's creditworthiness is tempered by the heightened competition it faces and the lack of a lender of last resort.

BG has long been Panama's largest locally owned bank; it has one of the largest branch networks, presence in most key markets, a significant market share and a reputation for conservative and consistent policies.

BG enjoys a strong capital base (Fitch Core Capital [FCC] of 14% at June 2015) that constitutes an ample cushion against unexpected losses on top of adequate loan loss reserves. This sound balance sheet structure underpins BG's ratings and compares well to its regional and global peers.

Wide loan portfolio diversification, conservative credit and investment policies, and effective collection processes help curb past-due loans (PDLs stood at 0.9% at June 2015) and maintain robust asset quality amidst a benign economy. Loan loss reserves cover PDLs comfortably. Asset quality should decline moderately as BG expands into retail.

The wide, low-cost, well-diversified deposit base has steadily grown, accompanying the bank's expansion and largely funding the loan portfolio. Furthermore, BG is perceived as a safe haven. This gives BG a clear competitive advantage in that the bank is able to leverage to expand its business and curb risk.

Steady growth, resilient margins based on low-cost deposits, relatively low operating expenses due to high efficiency, and moderate credit cost thanks to its sound asset quality all contribute to BG's steady performance. BG's profitability is consistent (ROAA above 2%) and its performance metrics compare well with those of the region's top banks, which are generally more profitable than global banks.

The Stable Outlook reflects Fitch's view that in a generally stable environment and given the bank's competitive position, conservative policies and adequate risk controls, Banco General's credit metrics should remain fairly stable and well in line with those of similarly rated banks.

The bank's SR and SRF reflect Panama's longstanding dollarized economy and lack of a lender of last resort. Banco Nacional de Panama, the largest state-controlled bank, could only provide temporary liquidity loans. In Fitch's opinion, external support for BG, while possible, cannot be relied upon.

BG is currently rated one notch above Panama's sovereign rating; hence, Fitch considers that the upside potential for BG's VR and IDRs is limited in the short run. However, BG's ratings would be further underpinned by an improvement of its operating environment that would be reflected in Panama's sovereign ratings, while the bank maintains the strength of its balance sheet and performance.

In turn, these ratings could be negatively affected if asset quality deteriorates materially (impaired loans above 2.5% and/or reserve coverage below 100%), performance weakens resulting in an operating ROAA below 1.5%, and/or capitalization worsens to a FCC ratio below 12%.]

Fitch does not see upside potential in these ratings over the foreseeable future.

Fitch affirms the following ratings:

--Long-term foreign currency IDR at 'BBB+'; Outlook Stable;
--Short-term foreign currency at IDR 'F2';
--Viability Rating at 'bbb+';
--Support rating at '5';
--Support rating floor at 'NF';
--Senior unsecured notes at 'BBB+'.