S&P raises Banco Hipotecario

Standard & Poor's said it raised its ratings on Banco Hipotecario SA (BH) to B from B-, in tandem with the sovereign upgrade on Argentina, reflecting the close linkage between the sovereign and financial system credit quality in Argentina.

In addition, S&P said it raised its long-term sovereign credit rating on the Republic of Argentina to B from B-, its short-term sovereign credit rating on the Republic to B from C and its national scale rating to AA-(ra) from A(ra).

S&P noted that the ratings on BH reflect its relatively high exposure to the sovereign's creditworthiness - mostly originated by the government bonds received as compensation for pesification - as is the case with the rest of the financial system.

In addition, the ratings incorporate the bank's high concentration in mortgage lending and the disagreements on BH's future strategy between the controlling group and the Argentine government, the bank's other major shareholder, the agency added, noting these weaknesses are counterbalanced by a still-improving operating environment for the Argentine financial system since the completion of the sovereign debt restructuring process and more benign macroeconomic conditions that result in higher intermediation with the private sector.

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