Fitch Monitors Potential Impact on Produbanco's Ratings Following Acquisition Offer

Fitch Ratings is monitoring the potential impact of Panamanian based group Promerica Financial Corporation's (PFC) recently announced offer to acquire a majority stake in the Ecuadorian-based Banco de la Produccion, S. A. (Produbanco), rated 'B' with a Stable Outlook.

This transaction is still in the early stages and the details have not been confirmed. Grupo Promerica submitted a formal intent to purchase Produbanco to the Superintendence of Market Power Control on Dec. 26, 2013. Prior to the conclusion of the transaction, several regulatory approvals are required.

As in any other acquisition, the proposed transaction could create operational, legal and financial challenges to the entities involved. Fitch is monitoring the process and expects more detailed information as soon as it is possible. Currently, there is no available information regarding the creation of possible goodwill, changes in bank's capitalization strategy or business orientation that may result from the proposed transaction.

According to public sources, PFC's plans to merge Produbanco with its existing operation in Ecuador, Banco Promerica, S.A. (Promerica, not rated by Fitch), with the former as the prevailing institution. If the acquisition materializes, the merged bank would have more than USD 3,800 million in assets, based on data from the Ecuadorian Superintendency of Banks.

Promerica accounted for 25% of Produbanco's assets as of June 2013. Taking into account only Promerica's publicly available information, its risk profile appears consistent with that of Produbanco's, although its market share and franchise are smaller.

Fitch cannot evaluate the complete effect of this transaction on Produbanco's ratings at this early stage. However, any potential impact on the bank's ratings will not be attributed to the change in shareholders, as Produbanco's ratings are driven by its Viability Rating and the Issuer Default Ratings (Long-Term FC IDR' of 'B' and Short-Term IDR of 'B') and do not take into account any institutional or government support. Once the details of the transaction are disclosed, the agency can provide a better assessment of the effect on the ratings of Produbanco.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

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