Fitch Ratings Affirms Davivienda’s BBB Rating and Revises Outlook from Negative to Stable

Fitch Ratings has affirmed Banco Davivienda S.A.’s long-term foreign issuer default ratings and local currency issuer default ratings at BBB and revised its rating outlook from negative to stable. The New York-based rating agency also affirmed the bank’s viability rating at bbb.

The improved outlook mirrors a similar revision Fitch made to the nation of Colombia’s sovereign rating earlier this year and reflects the Bogotá-based financial institution’s “resilient and stable financial performance that has proven effective and consistent during periods of market turmoil,” stated Fitch in its assessment.

Compared to similarly rated banks, Davivienda has adequate capital, sound asset quality, and a conservative risk management approach that all support its “clear” long-term strategy, according to Fitch Ratings. The bank’s geographical diversification and eye for cost control also favorably impact its outlook improvement from negative to stable.

On the other side of the ledger, Davivienda’s capitalization level does present a credit weakness along with its Fitch Core Capital ratio of 10.06% as of March. An increase in delinquency levels has also “weighed on profitability,” while non-performing loans have been rising, retail and mortgage portfolios have experienced a slight deterioration, and a sluggish Colombian economy has led to “a cyclical deterioration in impaired loan ratios,” according to Fitch.

Still, Fitch Ratings’ overall assessment shows renewed confidence in the bank, which has proven resilient in its Colombian operations and shown positive signs within its business outside of the country. “Asset quality has improved in Central America and is now on par with that of Colombia,” stated Fitch. “Davivienda boasts a wide deposit base of well-diversified, stable, and relatively low-cost funds … [and] has established market access to international and local debt markets. As such, Davivienda’s loans-to-deposits ratio is higher than that of its peers, as Davivienda periodically uses capital markets to better match its assets and liabilities structure.”

In full, Fitch Ratings has set the following ratings for Banco Davivienda:

Banco Davivienda S.A.

• Long-Term Foreign and Local Currency IDR at ‘BBB’; outlook revised to stable from negative
• Short-Term Foreign and Local Currency IDR at ‘F3’
• Viability rating at ‘bbb’
• Support Rating at ‘2’
• Support Rating Floor at ‘BBB-‘
• National Long-Term rating at ‘AAA(col)’; outlook stable
• National Short-term rating at ‘F1+(col)’
• Senior unsecured debt at ‘BBB’
• Subordinated debt at ‘BBB-‘
• National scale Senior unsecured debt at ‘AAA(col)’
• National scale Subordinated debt at ‘AA+(col)’

GRUPO BOLIVAR S.A.

• National Long-Term rating at ‘AAA(col)’; outlook stable
• National Short-Term rating at ‘F1+(col)’
• National scale senior unsecured debt issuance for COP600 billion at ‘AAA(col)’

Photo: Banco Davivienda headquarters in Bogotá, Colombia. (Credit: Jared Wade)