S&P Global Ratings on Dec. 28 revised Banco Agrícola SA's stand-alone credit profile to "bb-" from "b+," while affirming the El Salvador-based bank's long- and short-term issuer credit ratings at B- and B, respectively.
The actions follow S&P's upgrade of El Salvador's sovereign credit ratings, which was based on the country's Congress approving a 2019 budget that includes new external debt to cover existing obligations.
"Although the bank's SACP remains above the sovereign rating, we rarely rate financial institutions above the long-term sovereign rating because we believe that during sovereign stress, regulatory and supervisory powers may restrict the bank's financial flexibility," the rating agency said.
S&P forecasts Banco Agrícola's average risk-adjusted capital ratio to be 6.9% for 2018 and 2019. The ratio will remain moderate since the company had higher-than-expected loan portfolio growth, which offset an improvement in economic risk.
The lender's ratings are supported by its sound business position as a leader in El Salvador's banking industry, where it is the largest bank with a consolidated market share. The ratings also reflect the bank's healthy and stable asset quality metrics compared to peers, as well as its adequate liquidity, S&P said.
The outlook on the bank is stable.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.