Fitch Ratings has downgraded Banco Santander Chile's (BSC) Foreign and local currency long-term Issuer Default Ratings (IDRs) to 'A+' from 'AA-' and its Foreign and local currency short-term IDRs to 'F1' from 'F1+'. The Rating Outlook is changed to Negative from Stable. The rating action reflects the downgrade of Spain's Banco Santander (Santander) announced on Oct. 11, 2011.
Fitch has also downgraded BSC's senior unsecured bonds to 'A+' from 'AA-' and affirmed the rest of BSC's ratings as detailed at the end of this release.
The immediate catalyst for the rating actions taken for Santander was
Fitch's downgrade of the Spanish sovereign to
'AA-' with a Negative
Outlook from 'AA+' (see 'Fitch Downgrades Spain to 'AA-'; Outlook
Negative', dated Oct. 7th, 2011 at www.fitchratings.com).
The downgrade is also consistent with Fitch's stated view that many
banks globally, and European banks in particular, continue to face a
number of material market and fundamental challenges. In a recent
special report (see 'European Banks and Market Turmoil' Sept. 20th, 2011
at www.fitchratings.com)
Fitch stressed its 'view that credit risk, and thus ratings, for many
large and currently highly rated banks face greater downside pressure
and is reinforced by the collective impact of the following: below-trend
economic growth, ongoing sovereign risks, the costs and ambiguities of
additional bank regulation, less compelling business models and returns
for banks, political pressure to reduce or eliminate implicit state
support, the consistent vulnerability of banks to market sentiment and
the market's growing realisation of and pricing for all of the above.'
At their current levels BSC's IDRs are derived from the support of its parent, and reflect the above mentioned rating actions.
However, the Negative Outlook reflects the linkage of BSC's viability rating and IDR with those of its parent, which was downgraded following the same action on Spain's sovereign ratings, and the fact that further rating actions on the latter or on Santander's ratings could affect BSC's ratings. This is consistent with the action taken on other highly rated subsidiaries of European banks located in investment grade countries.
BSC's viability rating, as its individual rating, is supported by its leading market share in Chile and its track record of strong and consistent profitability, healthy asset quality and good capital adequacy.
BSC is the largest bank in Chile, with a market share of 20.3% in total loans. Spain's Santander has majority control of the bank, with a 75% stake; the rest is widely held.
Fitch affirms Banco Santander Chile's other ratings as follows:
--Viability rating at 'a+';
--Individual rating at 'B';
--Support
rating at '1';
--Long-term national rating at 'AAA(cl)';
--Short-term
national rating at 'N1+(cl)';
--National long term rating of its
senior unsecured bonds at 'AAA(cl)';
--National long term rating of
its Subordinated bonds at 'AA(cl)';
--National equity rating at
'Primera Clase nivel 2'.
The Rating Outlook on the National Rating is Stable.
Contact:
Additional information is available at www.fitchratings.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. 16, 2011).
Applicable Criteria and Related Research:
Global Financial
Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171
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Contacts:
Fitch Ratings
Primary Analyst:
Santiago Gallo, +54-11-5235-8137
Director
Fitch
Argentina Calificadora de Riesgo S.A.
Sarmiento 663 - piso 7 -
C1041AAM
Buenos Aires, Argentina
or
Secondary Analyst:
Eduardo
Santibanez, +56-2-499-33-07
Director
or
Committee
Chairperson:
Peter Shaw, +1-212-908-0553
Managing Director
or
Media
Relations:
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com