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Fitch places Nicaraguan banks on Watch Negative as political tensions rise


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Fitch places Nicaraguan banks on Watch Negative as political tensions rise

Fitch Ratings on June 15 placed the national ratings of several Nicaraguan financial institutions on Rating Watch Negative.

The banks affected include Banco de Finanzas SA, Banco de Fomento a la Producción, Banco Ficohsa Nicaragua SA, Banco LAFISE BANCENTRO SA, CrediFactor SA, Financiera Finca Nicaragua SA and Financiera Fundeser SA.Banco de Finanzas SA

The rating actions on Banco de Finanzas and Banco de Fomento a la Producción reflect the possible impact of the deterioration in the environment of Nicaragua on the support provided by the banks' parents. Banco de Finanzas derives support from Grupo ASSA SA while Banco de Fomento a la Producción is owned by the Nicaraguan government.

Meanwhile, the rating actions on the other banks reflect the deterioration of the operating environment and the uncertainty of the impact that political and social events could have on the bank's asset quality, financial performance and, in some cases, their funding profile and liquidity, Fitch said.

Political tensions are building in the country following protests against the government that started in April over plans to reform the country's pension system. Despite the cancellation of the measure, protests and violence have continued while risks to the country's political stability are increasing, the rating agency said.

Fitch sees that financial institutions are maintaining a good liquidity profile and reasonable loan impairment absorption capacity, despite some banks already showing loan deterioration at early default levels and a reduction in credit disbursements. The Nicaraguan central bank has also enabled liquidity mechanisms to deal with the decline in the banking system's public deposits, Fitch said.

S&P Global Ratings revised its outlook on Nicaragua earlier this month to negative from stable, citing the country's ongoing political unrest.

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.