Fitch Ratings has downgraded First BanCorp''s (FBP''s) long-term Issuer Default Ratings (IDR) to ''B-'' from ''BB'' and Individual ratings to ''D/E'' from ''C/D''. Fitch also downgraded the ratings of FBP''s subsidiary, FirstBank of Puerto Rico (Bank) to ''B'' from ''BB'' and the Individual rating to ''D'' from ''C/D''. The Rating Outlook is Negative. A complete list of ratings is provided at the end of this release.
The ratings downgrade reflects Fitch''s view that FBP''s earnings pressure will be prolonged and impacted mainly by higher credit costs. Asset quality performance has been severely weakened due to the real estate market in South Florida and the weak economic conditions in Puerto Rico. The level of non-performing loans is expected to remain elevated, which may also require additional provisions. Fitch is also concerned with the tangible common equity ratio, which has trended down in recent periods and was 4.44% at June 30, 2009. As such, a future net loss of similarly size to the second-quarter period could cause the company to fall below 4%, although regulatory capital levels have remained adequate to date.
Given recent financial performance, FBP has suspended its preferred, including Capital Purchase Program (CPP) preferred, and common stock dividends. As of June 30, 2009, preferred stock outstanding totaled $926.3 million, of which $400 million related to the government''s CPP. Fitch estimates that annual debt service approximates to $70 million per year and the company had $83.4 million of holding company cash.
Fitch also acknowledges recent management changes at both the CEO and CFO level, which underscores FBP''s operating challenges.
Fitch assigns Recovery Ratings (RR) to individual security issues where the IDR of the issuer is rated in the ''B'' or below category. As such, Fitch has assigned a Recovery Rating of ''RR2'' to the uninsured long-term deposits of FirstBank Puerto Rico, which implies a recovery between 71%-90% on these instruments in the event of failure or default by the issuer.
Fitch has downgraded the following ratings:
First BanCorp
--Long-term IDR to ''B-'' from ''BB'';
--Short-term IDR to ''C'' from ''B'';
--Individual to ''D/E'' from ''C/D''.
FirstBank Puerto Rico
--Long-term IDR to ''B'' from ''BB'';
--Long-term deposit obligations to ''BB-/RR2'' from ''BB+'';
--Individual to ''D'' from ''C/D''.
Fitch has affirmed the following ratings:
First BanCorp
--Support ''5'';
--Support Floor ''NF''.
FirstBank Puerto Rico
--Short-term deposit obligations at ''B'';
--Short-term IDR at ''B'';
--Support at ''5'';
--Support Floor ''NF''.
Additional information is available at www.fitchratings.com.
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Contacts:
Fitch Ratings, New York
Doriana Gamboa, 212-908-0865
Joe
Scott, 212-908-0624
or
Media Relations:
Brian Bertsch,
212-908-0549
Email: brian.bertsch@fitchratings.com
