S&P affirms Panama banks

Standard & Poor's said it affirmed its BBB-/A-3 counterparty credit ratings on Primer Banco del Istmo SA, Banco Continental de Panama SA, Banco General SA and BBVA Panama SA y Subsidiarias.

The agency said it also affirmed the BBB- rating on Banco Continental de Panamá's $150 million MTNs with maturity in 2010.

The outlook on all the banks is stable.

The stable outlook follows the recent announcement that the outlook on the sovereign credit ratings on the Republic of Panama was revised to positive from stable, the agency said, noting that current ratings on major banks reflect their good profitability, asset quality and adequate capital measures.

"Although the country's overall economic situation has improved, Panama continues to have a dual economic structure, which contributes to income inequalities, relatively high unemployment and poverty that limits potential retail loan growth. In addition, intense competition in the Panamanian market is compressing interest margins and some banks have mismatches in assets and liabilities as long-term loans are financed mainly with short-term deposits," said S&P credit analyst Leonardo Bravo.

The ratings on the major Panamanian banks listed above are higher than those on the Republic of Panama, given S&P's opinion that these banks would be resilient, to a certain degree, in a sovereign default scenario due to their financial performance that is comparable to other banks rated BBB- and its view that there is a remote currency mismatch risk due to Panama's longstanding use of the dollar.

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