Bangkok--1 Feb--Fitch Ratings
Fitch Ratings (Thailand) has today assigned a National Long-term ‘AAA(tha)’ rating to Central American Bank for Economic Integration’s (CABEI) senior unsecured bonds of up to THB4bn to be issued in 3 tranches with a maturity of 3, 5, and 10 years.
The ‘AAA(tha)’ issue rating is the highest on Thailand’s national rating scale, based on the fact that CABEI’s Long-term foreign-currency Issuer Default Rating (IDR) and Thailand’s Long-term local currency IDR are both at ‘A-’. Fitch notes that any rating divergence between CABEI and Thailand could affect CABEI’s issue rating. Specifically, CABEI’s ‘AAA(tha)’ issue rating may be downgraded if it is assessed to have a weaker credit profile than Thailand. However, Fitch believes this to be of low probability given that the Outlook on Thailand’s ‘A-’ local-currency IDR is Negative and the Outlook on CABEI’s foreign-currency IDR is Stable.
CABEI’s IDR reflects its preferred creditor status and privileges conferred on it by its member countries, as well as its solid fundamentals, including a strong capital base, adequate asset quality and a sustainable profitability record. Its credit profile is, however, constrained by the volatile economic environments in which it operates, its significant loan concentration and the member countries’ creditworthiness. Moreover, CABEI has a decreasing but relatively high exposure to the private sector, to which past due loans have been increasing. In Fitch’s view, downward rating pressure could arise from further deterioration in CABEI’s asset quality and an unexpected decrease of its capital ratios.
The challenging economic environment that prevailed in the Central American region in recent years and the sizable participation of private sector loans (29.3% of the total as of September 2010) continued to drive a rising trend of CABEI impaired loans during 2010. As of September 2010, impaired loans increased to 3.5% of total loans (11.8% of total private sector loans). Fitch however expects NPLs to either stabilise or decrease in 2011 as Central America resumes its economic growth. Despite loan loss reserves covered falling to 136% of the impaired portfolio, current capital levels remain strong and provide comfort about CABEI’s ability to confront credit losses.
CABEI is a Central American multilateral development bank based in Honduras, and is not subject to local regulation and is immune from taxation. It is currently 59%-owned by its so-called five founding member states - Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. The remaining shares belong to other non-regional members, such as Argentina, Colombia, Mexico, Taiwan, Spain, Dominican Republic and Panama. CABEI's objective is to fund development projects in Central America by channeling medium- and long-term foreign currency resources to public and private institutions.
Contacts:
Primary Analysts
Patchara Sarayudh
Associate Director
+66 2655 4761
Fitch Ratings (Thailand) Limited
Wave Place 13th Fl., Wireless Road, Lumpini, Patumwan,
Bangkok 10330, Thailand
Theresa A Paiz-Fredel
Senior Director
+1 212 908 0534
Secondary Analysts
Narumol Charnchanavivat
Director
+66 2655 4763
Rene Medrano
Senior Director
+503 2516 6610