Fitch Rates Uruguay's Provincia Casa Financiera 'B'; Outlook Stable

Fitch Ratings has assigned Provincia Casa Financiera (Provincia) Foreign Currency (FC) and Local Currency (LC) Long-Term Issuer Default Ratings (IDRs) of 'B' and a Support Rating (SR) of '5'. A full list of rating actions follows at the end of this press release.

KEY RATING DRIVERS - IDRS

Provincia is a branch of Banco de la Provincia de Buenos Aires (BAPRO) and part of the same legal entity. Therefore, Provincia's IDRs reflect Fitch's opinion of BAPRO's financial and business profile, which are highly influenced by its leading franchise and systemic importance as the second largest bank in terms of loans and deposits in Argentina. Fitch also considers the bank's good asset quality, ample liquidity, moderate profitability and low capital base.

In addition, BAPRO and Provincia are wholly-owned by the government of the Province of Buenos Aires. BAPRO's liabilities (including those of its branches abroad) are fully guaranteed by the government of the Province of Buenos Aires.

The head office, BAPRO also has international coverage through branches and representative offices in five countries mainly to attend domestic needs related to intraregional foreign trade supporting the commercial activity of Argentina in the region.

In Uruguay, Provincia is small due to its narrow business focus. Its legal status is a casa financiera, which differs from a banking license because it is not allowed to raise resident's deposits and has much lower regulatory costs. However, in terms of regulatory capital limits, Provincia has to comply with the rules applied to banks (minimum of 8% of total regulatory capital ratio).

Provincia is fully integrated with its head office's strategies, corporate governance practices and risk management procedures. It operates only through one office and reports to the International Division of BAPRO. Provincia has a low profitability, low credit risk, a highly liquid balance sheet and adequate capitalization metrics. The branch's current business plan aims to improve its profitability mainly through loan growth targeting Uruguayan and Argentine companies and a more active pricing policy.

Provincia's FC IDR is above the Argentina's FC IDR of 'RD' which reflects the current default status of certain debt securities affected by a court ruling. However, in Fitch's view, Argentina's payment capacity for its LC and FC debt securities recently issued is 'B'. At the time of Argentina's local currency upgrade, Fitch indicated the resumption of timely debt service on defaulted bonds would lead to the upgrade of the FC IDR, most likely to the level of the LC IDR. The government is moving ahead with the external debt issuance to pay for the settlement with holdout creditors.

KEY RATING DRIVERS - SUPPORT RATING

The Support Rating of '5' reflects that, although possible, external support for this bank, as with most Argentine banks, cannot be relied upon given the ample economic imbalances. In turn, the sovereign ability and willingness to support banks is highly uncertain.

RATING SENSITIVITIES

IDRS

Provincia's IDRs are sensitive to changes in BAPRO's financial and business profile.

RATING SENSITIVITIES - SUPPORT RATING

Changes in the SR of Provincia are unlikely in the foreseeable future.

Fitch has assigned the following ratings:

Provincia Casa Financiera:

--Foreign Currency Long-Term IDR 'B'; Outlook Stable;

--Local Currency Long-Term IDR 'B'; Outlook Stable;

--Support Rating '5'.

Additional information is available at www.fitchratings.com

Applicable Criteria

Global Bank Rating Criteria (pub. 20 Mar 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863501

Additional Disclosures

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https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1003680

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https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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