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Bancrédito-Banco de Costa Rica merger gets initial approval from parliament

The Costa Rican parliament has given preliminary approval for the proposed merger between troubled Banco Crédito Agrícola de Cartago, also known as Bancrédito, and Banco de Costa Rica, El Financiero reported.

The deal will see state-owned Banco de Costa Rica absorb businesses valued at US$4 million, as well as about 32.0 billion Costa Rican colones in equity and about 134.0 billion colones in debt, according to the report.

The deal remains subject to final legislative approval, which will be discussed in a session scheduled for Sept. 6.

The merger is reportedly considered to be the best rescue option for Bancrédito, which was taken over by Costa Rican regulator Conassif in December 2017 after it showed severe deterioration in liquidity and profitability amid rising problem loans.

Bancrédito's gross loan portfolio holds about 137.0 billion colones, said Marco Hernández, who was appointed as the acting auditor at the time of the regulatory intervention. He added that roughly 50% of those loans are of good quality and should be recovered over time, El Financiero reported.

Earlier in 2018, Fitch Ratings and Moody's said the intervention at Bancrédito will have limited or no rating implications for Costa Rica's other state-owned banks as the government has shown a high propensity to support the lenders.

As of Sept. 4, US$1 was equivalent to 583.25 Costa Rican colones.