BANCO DE BOGOTÁ S.A.
Fitch Ratings has affirmed
Fitch has also affirmed the bank's National Long- and Short-Term Ratings at 'AA(pan)' and 'F1+(pan)', respectively. The Rating Outlook for long-term ratings is Stable. Fitch has downgraded the bank's Viability Rating (VR) to 'bb' from 'bb+'.
The VR downgrade reflects a change in Fitch's assessment of Multibank's business profile to 'bb' from 'bb+' due to lower total operating income generation than larger local and regional peers in 2022. In addition, its business model, although favors its portfolio diversification (leading to a good asset quality) it still results in a limited profitability for Multibank's current VR level.
Key Rating Drivers
Shareholder Support: Multibank IDRs, Shareholder Support Rating (SSR), national and senior unsecured debt ratings are based on the potential support it would receive from its shareholder
Strategically Important Subsidiary: In Fitch's view, Multibank supports its group's franchise and market position in
Reputational Risk and Integration: Growing integration with
Sound Franchise, Albeit Medium Sized: In Fitch's opinion, Multibank's restructuring process - following its ownership change in 2020 - is leading to some businesses reorganizations, positive effects of which may take more time to produce effective results. Regardless, Fitch understands the importance of building a solid business model framework, more aligned to the new parent's interests. Also, Multibank's VR still reflect its sound yet medium franchise within the Panamanian banking system, with an estimated market share of around 5%-6% in terms of domestic loans and a 2018-2021 average total operating income of
Reduced Pressure on Asset Quality: Multibank's impaired loans/gross loans ratio of 2.1% at YE 2021 remained above its four-year average of 1.7% but was one of the lowest ratios among peers. Fitch expects the bank to stabilize its delinquency metrics gradually and return to its pre-pandemic level, due to the decreasing proportion of modified portfolio and the improvement in commercial loan placement. The bank's reserve coverage was reasonable and roughly in line with the sector average.
Profitability Still Below Historical Levels: Multibank's reported operating profit/risk-weighted assets (RWA) ratio was around 0.5% as of YE 2021 (four-year average: 0.9%). Decreasing COVID-19 related loan impairment charges, along with higher revenue streams and the absence of extraordinary acquisition-related expenses, favored gradual improvement from the losses generated in 2020. Profitability remains weaker than that of its closest domestic peers, although Fitch recognizes management's strategic focus to recover it.
Adequate Loss Absorption Capacity: Multibank's common equity Tier 1 (CET1) capital ratio declined to 11.3% as of 2021 from 12.2% at YE 2020, reflecting higher RWA. However, this ratio compares favorably with the minimum regulatory requirements (4.5%). Loan loss allowances for impaired loans are sound, which further supports the bank's loss absorption capacity. Fitch's assessment also considers the ordinary support that could receive from its parent if need arises.
Sound Funding and Liquidity: Multibank relies on a solid customer deposits base, strengthened by the support of a strong regional group, and also on diversified funding sources. At YE 2021, its loans to deposit ratio of 118.7% (2020: 105.7%) reflected a mild reduction of deposits by 3.4%. The bank's liquidity position is sound, as reflected in a liquid asset to deposits ratio above 35% for the last four periods.
Rating Sensitivities
Factors that could, individually or collectively, lead to negative rating action/downgrade:
A downgrade of Multibank's IDR, SSR and National Ratings could result from a downgrade of
Multibank's VR could be downgraded as a result of a sustained deterioration of profitability (operating profit to RWAs below 0.5%) and asset quality ratios that undermine the bank's financial performance, driving a decline in its CET1 ratio consistently below 10%.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Positive rating actions on Multibank's IDRs, National Ratings, senior unsecured debt rating and SSR could be driven by positive rating actions on
Positive rating actions on Multibank's VR could be driven by the sustained strengthening of the Business Profile along with profitability indicators consistently above 2.5% and a CET1 of at least 15%.
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
Senior Unsecured Debt: Multibank's ratings of its outstanding senior unsecured obligations are at the same level of the company's IDR as the likelihood of default of the obligations is the same as the one of Multibank.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Multibank's senior unsecured debt would mirror any potential downgrade on its IDRs.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Multibank's senior unsecured debt would mirror any potential upgrade on the bank's ratings.
VR ADJUSTMENTS
The Business Profile score has been assigned at 'bb', above the implied score of 'b' due to the following adjustment reasons: Business Model (positive), Group Benefits and Risks (positive)
The Earnings & Profitability score has been assigned at 'bb-' above the implied score of 'b' due to the following adjustment reasons: Historical and Future Metrics (positive).
The Capitalization & Leverage score has been assigned at 'bb-' above the implied score of 'b' due to the following adjustment reasons: Capital Flexibility and Ordinary Support (positive).
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
Multibank's IDRs are driven by the potential support it could receive from its parent,
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
RATING ACTIONS
Entity / Debt
Rating
Prior
Multibank, lnc.
LT IDR
BB+
Affirmed
BB+
ST IDR
B
Affirmed
B
Natl LT
AA(pan)
Affirmed
AA(pan)
Natl ST
F1+(pan)
Affirmed
F1+(pan)
Viability
bb
Downgrade
bb+
Shareholder Support
bb+
Affirmed
bb+
senior unsecured
LT
BB+
Affirmed
BB+
senior unsecured
Natl LT
AA(pan)
Affirmed
AA(pan)
senior unsecured
Natl ST
F1+(pan)
Affirmed
F1+(pan)
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