Fitch Ratings on Dec. 15 affirmed the long-term ratings of Dominican Republic savings and loan associations, Asociación Popular de Ahorros y Préstamos, Asociación Cibao de Ahorros y Préstamos, Asociación La Vega Real de Ahorros y Préstamos and Asociación La Nacional de Ahorros y Préstamos at AA-(dom), A+(dom), A-(dom) and BBB(dom), respectively.
The outlook for the ratings is stable.
Fitch also affirmed their short-term ratings at F1+(dom), F1(dom), F2(dom) and F3(dom), respectively.
Although their financial performance differs, all four savings and loan associations generally have good liquidity and capitalization levels, which would allow them to absorb potential losses stemming from exposure to risks in the Dominican financial system, Fitch noted.
Asociación Popular's profitability is high compared to its peers and is based on its adequate net interest margin, effective control of operating costs and moderate spending on provisions. Fitch expects its operations to continue improving in line with the execution of its strategy to penetrate the consumer loans and small business segments, while diversifying its income.
Separately, Asociación Cibao and Asociación La Vega's ratings are based on their intrinsic financial strength, especially considering the good quality of their loan portfolios, solid capitalization and broad liquidity. However, the ratings also consider their reduced profitability, lower operating efficiency and volatility of returns on assets.
As for Asociación La Nacional, the quality of its loan portfolio is moderate and its capitalization is adequate but its profitability is limited, mainly due to its low efficiency and high expenses on provisions. However, Fitch expects its operating indicators could improve slightly going forward due to lending growth in the consumer and small business segments.
All of the savings and loan associations, which are focused on medium and low-income segments, have seen their delinquency levels pressured by the country's economic slowdown, but they generally have adequate risk management strategies in place, Fitch noted.