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Fitch lowers Banco Cuscatlán's rating to AA(slv) after Grupo Terra acquisition

FitchRatings on July 6 lowered the long-term national rating of Banco Cuscatlán deEl Salvador, formerly BancoCitibank de El Salvador SA, to AA(slv) from AAA(slv) and affirmedits short-term rating at F1+(slv).

Theoutlook for the long-term rating is stable.

Thereason for the downgrade is Honduras-based Grupo Terra SA de CV's recent acquisition of BancoCitibank de El Salvador, which has been rebranded as Banco Cuscatlán, Fitchsaid.

ElSalvador's financial regulator, the SSF, approved the deal in June.

BancoCuscatlán's ratings are based on the support it would receive, if necessary,from Grupo Terra, said Fitch, adding the group's capacity to provide support isclosely linked to Petroholding SA de CV, which is a sister company ofInversiones Imperia Cuscatlán and part of the same group.

Fitch'sview on Grupo Terra's willingness and capacity to provide support alsoconsiders the strategic importance of Banco Cuscatlán, given that it operatesin a market where the group has important operations.

BancoCuscatlán is the fifth largest bank in the El Salvadorian financial system,with 10% of assets and a significant share of the cards segment, Fitch said.

Thebank's solid capital position, strong liquidity and broad provisions coveragein its loan portfolio, which is above average for the local banking system,should support the bank's growth under its new owner, Fitch noted.

Goingforward, improvements in the bank's capacity to generate income shouldstrengthen its financial profile, which is currently limited by high creditcosts and operating expenses, Fitch added.

GrupoTerra has also taken control of card operator Citi Tarjetas de El Salvador,along with insurance units Segurose Inversiones SA, or SISA, and SISA VIDA SA Seguros de Personas.