The ratings and Outlook for Banco de Desarrollo Rural, S.A.’s (Banrural) are unaffected by its recent acquisition of Banco ProCredit Honduras, S.A (ProCredit), now Banco de Desarrollo Rural Honduras, S.A.(Banrural Honduras), according to Fitch Ratings. A complete list of Banrural’s ratings follows at the end of this press release.

El Banco de Desarrollo Rural
anrural Honduras has limited market share and franchise in Honduras

Transaction Details

Banrural and its subsidiary, Aseguradora Rural, acquired a complete stake in the Honduran bank, ProCredit in November 2014, with the insurance company participating with an equity holding of less than 1%. According to the new shareholder, the acquisition was followed by a complete change in the board of directors. Procredit has adopted the new owner’s name and brand by changing its name to Banrural Honduras. The new subsidiary will also receive a USD 5 million capital injection, required to fulfill the Honduran minimum capital requirement.

According to Fitch’s estimates, both the cash payment and the goodwill generated by the transaction have a very limited impact (less than 50 basis points) on Banrural’s liquidity coverage of liabilities and Fitch core capital figures. In Fitch’s opinion, Banrural’s figures are solid and consistent with its rating category, and any impact on capital metrics will be promptly compensated by Banrural’s consistent profitability and capital generation capacity.

Expected Changes

According to the Fitch’s forecast of Banrural’s consolidated figures after the transaction, variations in Banrural’s current financial profile are minimal. The relative small size of the acquired bank diminishes the impact of its weak financial performance and lower asset quality on Banrural’s credit profile. At this point, Fitch has not considered any benefit from geographic diversification, given the relatively small size of the acquired operation and the more challenging operating environment that prevails in Honduras.

Banrural Honduras’s assets account for 1.4% of Banrural.

Banrural Honduras has limited market share and franchise in Honduras; however, its orientation to micro small and medium enterprise financing using local deposits as its main funding source is resembles Banrural’s business model; however, Banrural Honduras’s high deposit concentration differs from Banrural’s atomized funding structure.

Fitch’s current ratings for Banrural are as follows:

Banco de Desarrollo Rural:

–Long Term Issuer Default Rating ‘BB’; Outlook Stable;

–Short Term Issuer Default Rating ‘B’;

–Local Currency Long-term IDR ‘BB’; Outlook Stable;

–Local Currency Short-term Issuer Default Rating ‘B’;

–Viability Rating ‘bb’;

–Support Rating ‘3’;

–Support Rating Floor ‘BB-‘;

–National Long-term Rating ‘AA+(gtm)’; Outlook Stable;

–National Short-term Rating ‘F1+(gtm)’.

Additional information is available on www.fitchratings.com

Applicable Criteria and Related Research:

–‘Fitch Downgrades Banrural’s IDR to ‘BB’ following Downgrade of Guatemala'(Jun. 27, 2014)

–‘Global Financial Institutions Rating Criteria’ (Jan. 31, 2014);

–‘National Scale Ratings Criteria’ (Oct. 30, 2014);

–‘Guatemala’ (June 24, 2014).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

National Scale Ratings Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082

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