Fitch Ratings has affirmed Banco de Reservas de la Republica Dominicana,
Banco de Servicios Multiples' (Banreservas) ratings as follows:
--Foreign Currency Issuer Default Rating (IDR) at 'B';
--Local Currency IDR at 'B';
--Short-Term Foreign Currency IDR at 'B';
--Short-Term Local Currency IDR at 'B';
--Individual Rating at 'D';
--Viability Rating at 'b';
--Support Rating at '4';
--Support Floor at 'B';
--National Long-Term Rating at 'AA-(dom)';
--National Short-Term Rating at 'F1+(dom)'.
The Rating Outlook on the Long-Term IDRs is Positive.
Banreservas' IDRs reflect the support provided by its shareholder, the
Dominican government. Banreserva's Viability rating balances its ample
marketshare, stable deposit base, and adequate liquidity for its weak
profitability and asset quality metrics, as well as a tight capital base
relative to domestic peers and similarly rated international peers (i.e.
commercial banks with long-term IDRs of 'B-' 'B', or 'B+'). Furthermore,
Fitch also considers Banreservas' above-average public sector exposure
on its balance sheet, which reached 6.8 times (x) equity at year-end
(YE) 2010, in its rating assessment.
Changes in the IDRs are contingent upon Sovereign rating actions. An
unexpected deterioration in asset quality or profitability that
pressures the bank's capital ratios could trigger a downgrade of its
Banreservas' higher funding cost and lower yield on its loan portfolio
result in one of the weakest net interest margins (NIM) relative to
other domestic banks. Contained operating costs and provisioning
expenses combined with non-recurring income related to recoveries and
the sale of goods supported an increase in the bank's return on average
assets ratio (ROAA) to 1.7% at YE 2010 from 1.4% at YE 2009, though this
is still below the Dominican market average and the median of
international peers with a similar market share. Weak private-sector
asset quality, a heavy operating cost structure, and a narrower margin
will continue to pressure the bank's profitability.
Private-sector loan growth and charge-offs in this portfolio reduced the
impaired private-sector loans/gross private-sector loans ratio to 6.7%
at YE 2010 from 11.4% at YE 2009, though this level remains weak
relative to peers. Similarly, at 105% as of YE 2010, reserve coverage of
total impaired loans continues to compare unfavorably with both domestic
and international peers, while improvement in 2011 has been muted.
After sustained deterioration in 2010, Banreserva's capital ratios
recovered somewhat in early 2011 though remain tight relative to
domestic and international peers. The bank's equity/assets ratio
increased to 8% at end-May 2011 from 6.8% at YE 2010 due mostly to a
contraction in total assets. Fitch's eligible capital-to risk-weighted
assets ratio reached 13.7% (8.7% if public sector loans are weighted at
100%) at YE 2010.
As of May 2011, Banreservas ranked second out of 15 commercial and
multiple service banks, with 23% of total system assets. The bank is the
government's main paying agent and also has an important share of
consumer and corporate markets.
Additional information is available at 'www.fitchratings.com'
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria', Jul. 16, 2011;
- 'Short-Term Ratings Criteria for Corporate Finance', Nov. 2, 2010;
- 'National Ratings Criteria', Jan. 19, 2011;
--'Bancos Dominicanos: Revision Anual y Perspectivas', May 31, 2010.
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
Short-Term Ratings Criteria for Corporate Finance
National Ratings Criteria
Bancos Dominicanos: Revision Anual y Perspectivas
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