Fitch: Banco BHD and Related Entities' Rating Outlook Revised to Stable; Affirms IDRS

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed Banco BHD's (BHD) long-term foreign and local currency Issuer Default Rating (IDR), and revised the Rating Outlook to Stable from Positive. The National ratings of BHD and its related entities were reviewed accordingly. A full list of rating actions follows at the end of this press release.

RATING ACTION RATIONALE

The Outlook revision to Stable on BHD's long-term IDRs is driven by a recent change in Outlook of the Dominican Republic sovereign IDRs, and Fitch's expectations that current and expected challenges in the country's operating environment could limit improvements in the bank's financial performance, reflected in its Viability rating (VR). In Fitch view, BHD is well-positioned to keep delivering strong financial results in both the short and medium term based on the strength of its balance sheet and management experience in dealing with the inherent volatility of the Dominican Republic.

BHD's IDR is driven by its financial strength as reflected in its VR. BHD's VR continues to reflect its sustained high profitability level, good liquidity and asset quality management, and sound capital base. BHD's weak efficiency ratios, less diversified income structure compared to regional peers, and public sector exposure are also incorporated in the VR.

SUPPORT RATING

In Fitch's opinion, government support, although possible, cannot be relied upon, given the Dominican Republic's speculative grade rating, despite BHD's systemic importance in the Dominican banking system.

RATING DRIVERS AND SENSITIVITIES - VR & IDRS

BHD is currently rated at the same level as the sovereign; thus, there are limited possibilities of further upgrades on its ratings unless there is a change in the sovereign rating. Downward pressure on the bank's VR and IDR would arise from significant deterioration in the bank's asset quality that hinders its equity loss absorption capacity; however, this is not the base case scenario at the moment.

RELATED ENTITIES RATING DRIVERS AND SENSITIVITIES

BHD and its related entities' long-term National ratings are at the same level. Fitch considers BHD's related entities as core operations to their sole shareholder, Centro Financiero BHD (CFBHD) and to BHD. These rating alignments reflect the high probability of direct or indirect support that would be provided by BHD and CFBHD, should it be required.

A change in BHD's credit risk profile would similarly affect the long-term national ratings of its related entities: BHD Valores Puesto de Bolsa (BHDVAL); Banco de Ahorro y Credito PyME BHD (PYMEBHD); and BHD International Bank (Panama) (BHDIB).

BHD is the third largest commercial bank in the Dominican Republic, with a 12.11% market share of total system assets as of October 2012. BHD is 98% owned by CFBHD and is its largest subsidiary by assets and net income.

Fitch has affirmed the following ratings and revised Outlooks as indicated:

BHD
--Long-term Foreign and Local Currency IDR at 'B', Outlook to Stable from Positive;
--Short-term Foreign and Local Currency IDR at 'B';
--Viability Rating at 'b';
--Support Rating at '5';
--Support Floor at 'NF';
--Long-term National rating at 'AA-(dom)', Outlook to Stable from Positive;
--Short-term National rating at 'F1+(dom)'.

BHDVAL
--Long-term National rating at 'AA-(dom)', Outlook to Stable from Positive;
--Short-term National rating at 'F1+(dom)';
--National rating senior unsecured debt at 'AA-(dom)';
--National rating commercial paper debt at 'F1+(dom)'.

BHDIB
--Long-term National rating at 'AA-(dom)', Outlook to Stable from Positive;
--Short-term National rating at 'F1+(dom)'.

PYMEBHD
--Long-term National rating at 'AA-(dom)', Outlook to Stable from Positive;
--Short-term National rating at 'F1+(dom)'.

Additional information is available at www.fitchratings.com and www.fitchdominicana.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012);
--'Fitch Revises Outlook on Dominican Republic to Stable; Affirms IDRs at 'B'' (Dec. 11, 2012);
--'2013 Outlook: Central America and the Dominican Republic' (Dec. 13, 2012).

Applicable Criteria and Related Research:
2013 Outlook: Central America and the Dominican Republic
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696486
Rating FI Subsidiaries and Holding Companies
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

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