OREANDA-NEWS. Fitch Ratings has affirmed Banco Provincial, S.A. Banco Universal's (Provincial) long-term Issuer Default Rating (IDR) at 'CCC', its Viability Rating (VR) at 'ccc', its Support Rating (SR) at '5' and its Support Rating Floor (SRF) at 'NF'. The ratings of Provincial are simultaneously withdrawn due to commercial reasons. See the full list of rating actions at the end of this release.

No Outlook is assigned at this rating level.

KEY RATING DRIVERS
IDRS, VR, NATIONAL RATINGS, SUPPORT RATING, SUPPORT RATING FLOOR
Despite Provincial's systemic importance (12% of the banking system by assets) and strong franchise, support cannot be relied upon given Venezuela's speculative-grade rating ('CCC') and the lack of a consistent policy on bank support. High government interference in the banking system could also negatively influence support from its major shareholder, Spain's Banco Bilbao Vizcaya Argentaria (BBVA), if Provincial were to require financial assistance.

Provincial's ratings are limited by the weak operating environment, characterized by an economic contraction (estimated at -7.5% for 2015), significant macroeconomic imbalances and high inflation, as well as high government interference in the financial sector and the broader economy.

Provincial's ratings also reflect liquidity risk. Like other banks in Venezuela, Provincial depends on customer deposits for 99.4% of funding, creating a significant mismatch between short-term assets and liabilities. However, Provincial's liquidity remains adequate given capital controls in place.

Provincial's nominal profitability at September 2015 declined compared to 2014 due to a significant increase in tax expense (from 4.9% of pre-tax income in 2014 to 34.5% at September 2015). While operating profitability has remained high in nominal terms, benefitting from increased margins and stable operating expenses, the growth in net income has not kept pace with inflation (forecast by Fitch for 2015 and 2016 at 123% and 174%, respectively).

Provincial's capital position compares favorably with peers. However, inflation-led asset growth (averaging 60.1% since 2011) has put increasing pressure on capital. Mitigating this trend, a change of risk weightings in 2014 has supported regulatory capital ratios at all banks, providing additional scope for near-term growth.

Like other Venezuelan banks, Provincial's loan quality metrics are characterized by high loan growth (72.9% at Sept. 2015), which distorts loan quality metrics. Fitch expects that in the absence of a forced economic adjustment, Provincial's asset quality indicators will remain stable.

RATING SENSITIVITIES - IDRS, VR, NATIONAL RATINGS SUPPORT RATING, SUPPORT RATING FLOOR
Sensitivities are not applicable, as the Ratings are being withdrawn.

The following ratings have been affirmed and withdrawn:

Banco Provincial, S.A. Banco Universal:

--Long-term foreign and local currency IDRs at 'CCC';
--Short-term foreign and local currency IDRs at 'C' ;
--Viability rating at 'ccc' ;
--Support rating at '5';
--Support Rating Floor at 'NF';
--Long-term national-scale rating at 'AA-(ven)' ;
--Short-term national-scale rating at 'F1+(ven)'.