Bangkok--11 Dec--Standard & Poor's
As previously announced on Dec. 10, 2014, Standard & Poor's Ratings Services lowered its issuer credit rating on Larrain Vial S.A. Corredora de Bolsa (LVCB) to 'BBB' from 'BBB+'. At the same time, we affirmed the 'A-2' short-term issuer credit rating on the company. The outlook is stable. The stand-alone credit profile (SACP) is 'bbb'.
The rating action on LVCB follows our analysis of the firm under our new criteria for nonbank financial institutions (NBFIs). Our assessment includes the firm's "strong" business position as one of the largest brokerage firms in Chile; "strong" capital and earnings profile given strong capital levels; "adequate" risk position, which indicates that risks are adequately captured in our capital assessment; and "adequate" funding and liquidity.
Our anchor for securities firms in Chile is 'bb+' and reflects our view of the sector's economic and industry risk. The anchor for securities firms in Chile is three notches below our anchor for banks in Chile, derived from our Banking Industry Country Risk Assessment (see "Banking Industry Country Risk Assessment: Chile," published July 14, 2014) to reflect our view of Chile securities firms' incremental sector risk relative to that of banks. Therefore, our anchor for securities firms is one notch above our standard adjustment to reflect the incremental risks of more volatile and less liquid domestic capital markets. This is in addition to our standard two-notch adjustment, which reflects our view of Chile securities firms' incremental industry risk relative to banks. Funding risk for securities firms is higher than banks', in our view, because these firms typically lack central bank access. However, Chilean securities firms benefit from somewhat more favorable competitive conditions thanks to the country's privatized pension system. This has helped dampen cyclicality, even though the sector's revenues are more transactional than that of banks. While regulatory standards are material and oversight fairly comprehensive, we consider the institutional framework modestly weaker than that of Chilean banks.