Fitch Ratings expects to rate Banco del Estado de Chile's (Banco Estado) upcoming senior unsecured fixed rate notes 'A+(exp)'. This issuance is made under the umbrella of the Medium-Term Notes Program of up to USD 2 billion.
The notes will be nominated in Japanese Yen and issued for an amount equivalent to approximately USD270 million, will mature in 2020 and carry a fixed annual interest.
KEY RATING DRIVERS
The rating assigned to Banco Estado's senior unsecured notes correspond to the bank's Long Term Foreign Currency Issuer Default Rating (IDR) and ranks equal to other senior unsecured debt.
Banco Estado's IDRs are driven by the extremely high probability of support from its owner, the State of Chile. The bank is not a company by shares and relates with the Chilean Government through the Ministry of Finance. Banco Estado represents an important instrument of the State of Chile for developing credit and monetary policies, plays a strategic social role for the government and has a systemic importance. Based on these drivers, the bank's IDRs are aligned with Chile's Sovereign foreign currency IDR ('A+'; Outlook Stable) and local currency IDR ('AA-'; Outlook Stable), and they also underpin its high support rating of '1' and support rating floor of 'A+'.
The senior unsecured debt issuance is embedded in Banco Estado's strategy to diversify and extend its funding sources using international markets. Banco Estado's Viability Rating fundamentals remains unchanged by this new debt.
Banco Estado's VR reflects its strong liquidity given its high proportion of liquid assets, and sound structural funding based on a wide solid customer base. The bank's market position places it as one of the strongest competitors in the Chilean banking system, being the third largest bank measured by loans, and the first by deposits. Banco Estado's overall financial performance has been good in spite of high level of competition.
The bank's VR is limited by its low capital base, and lower, albeit steadily improving, credit quality in mortgage loans portfolio (although with a strong guarantee and additional provisions position) compared to local and international private peers (emerging market commercial banks with VR in the 'bbb' category).
RATING SENSITIVITIES
The Rating Outlook for Banco Estado's long-term IDR is Stable, the same as the Outlook of the sovereign ratings. Changes in the bank's IDR and senior unsecured debt are correlated to sovereign rating actions for Chile.
Fitch currently rates Banco Estado as follows:
--Foreign currency long-term IDR 'A+'; Outlook Stable;
--Local currency long-term IDR 'AA-'; Outlook Stable;
--Foreign and local currency short-term IDRs 'F1';
--VR 'bbb'
--Support rating '1';
--Support rating floor 'A+';
--Long-term foreign currency senior unsecured bonds 'A+';
--Long-term national rating 'AAA(cl)'; Outlook Stable;
--Short-term national rating 'N1+(cl)';
--National long-term rating senior unsecured bonds 'AAA(cl)';
--National long-term rating on its subordinated bonds 'AA(cl)'.
Additional information is available 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Jan. 31, 2014).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=971996
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