Fitch Affirms Banco Multiple Leon Long-Term IDR at 'B-'

Fitch Ratings has affirmed Banco Multiple Leon S.A.'s (BML) ratings as follows:

--Foreign Currency Issuer Default Rating (IDR) at 'B-';

--Local Currency IDR at 'B-';

--Short-Term Foreign Currency IDR at 'B';

--Short-Term Local Currency IDR at 'B';

--Individual Rating at 'D/E';

--Support Rating of at '5';

--Support Floor at 'NF';

--National Long-Term Rating at 'BBB+(dom)';

--National Short-Term Rating at 'F-2(dom)';

--National Subordinated Debt Rating at 'BBB-(dom)'.

The Rating Outlook is Stable.

BML's ratings reflect adequate liquidity ratios and the positive trend on its capitalization and asset diversification. The operational support of its sole shareholder, the Leon family, is also reflected. On the other hand, BML's ratings are still limited by its relatively volatile asset quality and profitability metrics and the burden imposed by a challenging operating environment. BML's ratings would be positively affected by improvements to its asset quality metrics and profitability. A reversion of its capital ratios or further deterioration of its profitability and/or asset quality can negatively affect its ratings.

BML shareholders are committed to improving the capital base of the bank in terms of quantity and quality. As such, no cash dividends have been paid since 2004, while during 2009, a new minority shareholder agreed to inject an initial USD12 million into BML's capital. As a consequence, BML's equity-to-assets ratio improved to 8% on May 31, 2009 (6.5% in 2004), while the burden of fixed and foreclosed assets decreased to 49% from more than 200% in 2005. In May 2009, the Fitch free capital ratio stood at 4%, improved from previous periods but still considered tight.

In May 2009, a new minority shareholder was incorporated into BML's capital structure. With this agreement, Darby injected USD12 million into BML capital (about 11.7% of the bank equity at that time) and retained the right to increase its participation up to 25% of the bank's equity in the next 12 months. BML shareholders identify Darby as a strategic partner that would provide not only fresh capital but also its experience and know-how in the administration of a minority position in several banks in Latin America, as well as the expertise of Franklin Templeton Investments. This agreement allows Darby to name two directors on the BML board.

Despite the steady increase of its net interest revenue (NIR) and stable, although low, other operating income, the significant burden of loan loss provisions and still weak efficiency levels keep pressuring BML's overall profitability. After posting positive results in 2006, operating profit still represents less than 1% of average assets. Due to the volatility of the environment, high competition, and higher expected provision expenses, the current income stream of the bank could still be insufficient to cover unexpected swings of expenses.

Asset quality metrics are still affected by the legacy of some older corporate loans and the natural seasoning of a growing loan portfolio in times when new credit risk tools are in the developing process. On May 31, 2009, past due loans represented 4.8% of total loans, above the market average and with loan loss reserves representing just 90% of the impaired figure. Also, restructured loans were still sizable at 2.7%. The lower expected economic activity in the Dominican Republic and the need to test and improve the new risk tools demand cautious monitoring of the portfolio to avoid further increase of its past due levels.

As of May 2009, BML ranked fifth out of 12 commercial banks, with a 5.3% market share by total assets. As of May 2009, the Leon family controlled 88.3% of BML, while Darby Probanco Holding L.P. (Darby; a subsidiary of Franklin Templeton Investments) controlled the remaining 11.7%.

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