Fitch Ratings has today affirmed
Key Rating Drivers
Key Rating Driver 1
IDRS AND VIABILITY RATING (VR)
The operating environment remains highly challenging, as a long recession continues to pressure asset quality, which has been exacerbated by the coronavirus pandemic and the slow vaccination process. Profitability metrics have been under pressure in recent years due to very low loan growth since 2018, as well as higher loan loss provisions and administrative expenses. In addition, the net interest margin has been affected by some distorting regulations passed by the
In 1H21 profitability (in real terms) deteriorated and the bank posted a net loss mainly affected by a narrower net interest margin due to the regulatory intervention, still low loan growth and higher inflation. Its ratio of Operating Profit/Risk Weighted Assets fell to -0.33% at
Supervielle's delinquency ratios have deteriorated since 2017, given the adverse economic conditions and the effects of the pandemic, in spite of the bank's good credit risk management. However, asset quality ratios for the whole financial system significantly improved in 2020 and 1Q21, due to the
As of
The securities portfolio has increased significantly (27.6% of total assets as of
The primary source of funding is the bank's deposit base, which made up 96.8% of its funding as of
Rating Sensitivities
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The IDRs and VRs of Supervielle would be pressured by a downgrade of
Any policy announcements that would be detrimental to the bank's ability to service its obligations, would be negative for creditworthiness.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
The IDRs and VRs would benefit from an upgrade of
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
SUPPORT RATING (SR) AND SUPPORT RATING FLOOR (SRF)
Supervielle's SR of '5' and SRFs of 'NF' reflect that, although possible, external support for this bank, as with most Argentine banks, cannot be relied upon given the ample economic imbalances. In turn, the sovereign ability to support banks is uncertain, as reflected by the low sovereign ratings.
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
SR AND SRF
Changes in the SRs and SRFs of Supervielle are unlikely in the foreseeable future.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
SUPPORT RATING AND SUPPORT RATING FLOOR
Changes in the SRs and SRFs of Supervielle are unlikely in the foreseeable future.
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.
ESG Considerations
Fitch has changed Supervielle's score for Management Strategy to '4' from '3' which is the baseline score for this Governance issue assigned to all issuers globally. This reflects the high level of government intervention in the Argentine banking sector. The imposition of interest rate caps can lead to inadequate loan pricing and, together with the imposition of interest rates floors on time deposits, puts significant pressure on banks' net interest margins. Also, restrictions on fee levels can negatively impact on performance ratios. This challenges Supervielle's ability to define and execute its own strategy. This has a moderately negative impact on the rating in conjunction with other factors.
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 ACTIONSENTITY/DEBT RATING PRIOR
Banco Supervielle S.A. LT IDR CCC Affirmed CCC
ST IDR C Affirmed C
LC LT IDR CCC Affirmed CCC
LC ST IDR C Affirmed C
Viability ccc Affirmed ccc
Support 5 Affirmed 5
Support Floor NF Affirmed NF
VIEW ADDITIONAL RATING DETAILS
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