Fitch Revises Banrural's and Industrial's Rating Outlook Following Guatemala's Sovereign Action

Fitch Ratings-New York/San Salvador-19 July 2013: Fitch Ratings has revised Banco de Desarrollo Rural S.A.'s (Banrural) Rating Outlook to Negative from Stable and affirmed the bank's long-term Issuer Default Rating (IDR) at 'BB+'. At the same time, Fitch has revised Banco Industrial S.A.'s Rating Outlook to Stable from Positive and affirmed its long-term IDR at 'BB'. This action follows Fitch's revision of Guatemala's sovereign Rating Outlook to Negative from Stable (for more information on the sovereign rating action see 'Fitch Affirms Guatemala at 'BB+'; Revises Outlook to Negative', dated July 11, 2013 at www.fitchratings.com). A full list of Industrial's and Banrural's rating actions follows at the end of this press release.

BANRURAL'S KEY RATING DRIVERS - IDRs, VR AND NATIONAL RATINGS

Banrural's IDRs and Viability Rating (VR) are at the same level of Guatemala's sovereign and given its association with the public sector, particularly in its funding side, an eventual downgrade of Guatemala's sovereign rating would, in turn, lead to a similar action on Banrural's IDRs.

Banrural's IDRs and VR reflect its sound local franchise, historically high profitability, strong capital, good credit quality and ample depository base. Banrural's ratings also reflect moderate concentrations in public sector funds and the limited revenue diversification, given its main target markets (micro, and small enterprises). The affirmation of the support rating of '3' reflects Fitch's opinion that the bank maintains a moderate probability of support from the state, given its systemic importance in the banking system.

Banrural's national ratings were affirmed and its Outlook remains Stable as the bank's relative strength in the local market remains unchanged.

INDUSTRIAL'S KEY RATING DRIVERS - IDRs, VR AND NATIONAL RATINGS

Industrial's Rating Outlook has been revised to Stable from Positive, indicating that its IDR has little upside potential should Guatemala's Negative Outlook eventually result in a sovereign downgraded. Industrial's large exposure to Guatemalan bonds prevents its ratings to be above that of the sovereign.

The Outlook of Industrial's long-term national ratings was also revised to Stable from Positive, and the ratings affirmed as the relative strength in the local market remains unchanged, even with the sovereign's downgrade. The Rating Outlook of Industrial's subsidiaries (Contecnica and Banco Industrial El Salvador) were also revised to Stable from Positive while its national ratings were affirmed.

Industrial's IDRs are driven by its strong national franchise, sound asset quality, good efficiency, ample deposit base, and sound liquidity, which, in turn, are reflected in the bank's VR. Industrial's ratings are constrained by its modest capitalization, moderate profitability, and the relatively high loan portfolio concentrations.

BANRURAL'S RATING SENSITIVITIES - IDRs, VR AND NATIONAL RATINGS

A downgrade of Guatemala's sovereign ratings will result in a downgrade of Banrural's IDRs. On the other hand, if the sovereign ratings are eventually affirmed at 'BB+' and the Outlook revised to Stable from Negative, it is highly likely that Banrural's Rating Outlook would be revised accordingly. Banrural's national ratings would not be affected should Guatemala's sovereign be downgraded.

INDUSTRIAL'S RATING SENSITIVITIES - IDRs, VR AND NATIONAL RATINGS

Industrial IDR's upside potential is considered limited by Fitch, should Guatemala's Negative Outlook eventually result in a sovereign downgraded, considering the bank's high exposure to the sovereign in its securities portfolio. On the other hand, a further than expected weakening of the bank's loss absorption capacity could trigger a downgrade of the bank's IDRs.

Fitch has taken the following rating actions on Banrural:

--Long-term foreign currency IDR affirmed at 'BB+'; Outlook revised to Negative from Stable;
--Short-term foreign currency IDR affirmed at 'B';
--Long-term local currency IDR affirmed at 'BB+'; Outlook revised to Negative from Stable;
--Short-term local currency IDR affirmed at 'B';
--Viability rating affirmed at 'bb+';
--Support affirmed at '3';
--Support Rating Floor affirmed at 'BB-';
--National long -term rating affirmed at 'AA+(gtm)'; Outlook Stable;
--National scale short-term rating affirmed at 'F1+(gtm)'.

Fitch has taken the following rating actions on Industrial:

--Long-term IDR affirmed at 'BB'; Outlook revised to Stable from Positive;
--Short-term IDR affirmed at 'B';
--Local-currency long-term IDR affirmed at 'BB'; Outlook revised to Stable from Positive;
--Local-currency short-term IDR affirmed at 'B';
--Viability Rating affirmed at 'bb';
--Support affirmed at '3';
--Subordinated Tier I capital notes debt affirmed at 'B-';
--Support Rating Floor affirmed at 'BB-';

--National scale long-term rating affirmed at 'AA-(gtm)'; Outlook revised to Stable from Positive;
--National scale short-term rating affirmed at 'F1+(gtm)'.

Fitch has taken the following rating actions on Contecnica:

--National long -term rating affirmed at 'A(gtm)'; Outlook revised to Stable from Positive;
--National scale short-term rating affirmed at 'F1(gtm)'.

Fitch has taken the following rating actions on Banco Industrial El Salvador:

--National long-term rating affirmed at 'A+(slv)'; Outlook revised to Stable from Positive;
--National scale short-term rating affirmed at 'F1(slv)'.

Contact:

Primary Analyst
Franklin Santarelli
Managing Director
Latin America Financial Institutions
+1-212-908-0739
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004

Edgar Cartagena
Director
+503 2516 6613
Fitch Central America
Edificio Plaza Cristal, Tercer Nivel
79 Ave. Sur y Calle Cuscatlan
San Salvador, El Salvador

Francesca Cedrola
Analyst
+503 2516 6611

Secondary Analyst
Rene Medrano
Senior Director
+503 2516 6610

Committee Chairperson
Eduardo Santibanez
Senior Director
+562-2499-3307


Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'National Ratings Criteria' (Jan. 19, 2011);
--'Guatemala' (July 11, 2013).

Fuente: Fitch Ratings.

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