Moody's: Davivienda notes Baa3

Moody's Investors Service said it assigned a Baa3 long-term foreign-currency debt rating to Banco Davivienda SA's proposed five-year senior debt issuance of up to $500 million. The company has a Baa3 global local-currency deposit rating, and the outlook is negative.

The negative outlook was assigned in January 2012 following Davivienda's announcement of the acquisition of HSBC subsidiaries in El Salvador, Costa Rica and Honduras. The agency said the outlook reflects its concerns that such a large cross-border operation could affect the bank's asset quality and profitability.

Davivienda's ratings reflect its diversified banking franchise and good asset quality and loan loss reserves, Moody's said.

The bank nevertheless faces tough competition from much larger financial groups in Colombia and Central America for both assets and deposits, the agency said, and it has capitalization levels that are weaker than its peers.

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