Moody's on Feb. 28 upgraded the ratings of two Salvadoran banks following a similar action on the sovereign's ratings.
The rating agency lifted Banco De Desarrollo De El Salvador's long-term foreign currency issuer rating to B3 from Caa1 as well as its baseline credit assessment and adjusted baseline credit assessment to "b3" from "caa1."
Meanwhile, Moody's adjusted Banco Agrícola SA's long-term foreign currency deposit rating to B1 from B2, its baseline credit assessment to "b3" from "caa1" and its adjusted baseline credit assessment to "b1" from "b2." Banco Agrícola's long-term counterparty risk assessment was upgraded to B1(cr) from B2(cr). Meanwhile, its Not Prime short-term foreign currency deposit rating and Not Prime(cr) short-term counterparty risk assessment were affirmed.
The deposit and issuer ratings carry stable outlooks.
Banco De Desarrollo De El Salvador's ratings upgrade considered its close managerial and financial linkages with the government that have resulted in improved funding access. The ratings also rely on the bank's relatively good asset quality along with prudent risk management and reserving practices. However, the bank's developmental role results in low profitability.
Meanwhile, the upgrade of Banco Agrícola's ratings reflects a credit risk reduction that leads to improved investment liquidity. The ratings are also based on the bank's good capital position and strong and stable earnings. However, they continue to reflect significant credit challenges in the country, whose economy remains very weak despite the recent upgrade.
