Fitch rates Banco Nacional as stable long-term issuer

Fitch Ratings has assigned a BB+ long-term issuer default rating to Banco Nacional de Costa Rica. The rating outlook is stable, the company said. The firm also awarded a handful of other ratings, all in the BB+ and B range.

Banco Nacional has the broadest and most diversified depository base in the banking system, which represents a significant competitive advantage, Fitch said. In terms of assets, the bank offers universal banking services and keeps its loan portfolio relatively balanced between wholesale and retail exposures, it added. The bank complements its services with subsidiaries involved in non-credit business activities.

Banco Nacional has recently tempered its appetite for credit risk after its strong expansion in recent years and the effects of the global financial crisis resulted in a serious deterioration in loan quality, said Fitch. As of June, 90-days past due loans accounted for 3.56 percent of total loans, which compares unfavorably with the banking system’s average of 2.37 percent, the rating firm added. Non-performing loans, which are concentrated in real estate exposures, seem to have reached their peak and should stabilize in the coming months, it added.

The bank’s profitability, restricted by its heavy and rigid operating expense structure, has traditionally been modest, and profits were further weakened after 2009 because of increased loan loss provisions, Fitch said, adding that this expense will continue to put pressure on 2011 profits, which are expected to be lower than those of 2010. Having absorbed most of the losses for non-performing assets in 2011, Banco Nacional’s net profits may bounce back in 2012.

Founded in 1914, Banco Nacional is one of Costa Rica’s oldest banks and is the largest one in that country’s financial system, Fitch noted. Historically, it has held a dominant position within the banking system, evidenced in its high market share in both loans (28.5 percent as of June) and deposits (30.6 percent). The bank carries out its operations through an extensive network of 171 branches and has a staff of 5,697 employees, the rating agency said.

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