S&PGlobal Ratings on July 5 maintained its banking industry risk assessment, or BICRA,on Uruguay at group 6, with an anchor for banks operating in the country at "bb+,"but changed the outlook on the economic risk trend to negative from stable.
It alsomaintained the country's economic and industry risk scores at 5 and 7, respectively,while maintaining a stable outlook on the industry risk trend.
The reasonfor the action is the greater economic risk facing Uruguayan banks as a result oflower-than-expected economic growth, continuing high levels of inflation and lowinternational prices for commodities, S&P said.
S&Pexpects Uruguay's GDP to grow just 0.7% in 2016 and 1.5% in 2017, with private creditexpected to grow between 10% and 12% in nominal terms in 2016 and 2017.
"Thesefactors could result in weaker per capita GDP levels, put at risk the government'splans to strengthen its income base and capacity to reduce its deficit, undermineeconomic resilience to adverse economic events, and increase banks' operating risksin a less stable economic environment," S&P warned.
In thisscenario, S&P affirmed 's global scaleand national scale credit ratings at B+ and uyBBB, respectively, but changed theratings outlook to negative from stable.
S&Palso affirmed Banco Bilbao VizcayaArgentaria Uruguay SA's long-term and short-term global scale creditratings at BBB and A-2, respectively, while maintaining the negative outlook onthe long-term rating. The rating agency also affirmed the bank's national ratingat uyAAA with a stable outlook.
Goingforward, the ratings of both Banque Heritage and BBVA Uruguay could be lowered ifthe negative outlook on Uruguay's economic risk trend results in a downgrade ofthe BICRA rating, S&P noted.
However,if the outlook on the economic risk trend is changed back to stable, similar ratingsactions would follow on the two banks, S&P added.
S&P Global Ratings and S&PGlobal Market Intelligence are owned by S&P Global Inc.