Fitch: Government Intervention Weighs on Argentine, Ecuadorian and Venezuelan Banks

Banking sector outlooks remain negative for Argentina, Ecuador and Venezuela at third quarter, according to a new Fitch Ratings report.

"The negative sector outlook for Ecuador, Argentina and Venezuela reflects concern that these systems are highly exposed to regulatory intervention and uncertainty, which limits the development of the systems, erodes bank earnings and challenges the banks' ability to cope with these countries' adverse economic environments," said Larisa Arteaga, Director, Latin American Financial Institutions.

Decelerating economic growth in Argentina and Ecuador, as well a recession in Venezuela, have pressured banks' loan growth and profitability in 2015. Current economic conditions, in particular macroeconomic imbalances in Argentina and Venezuela, and externally driven monetary supply pressures and USD appreciation in Ecuador could negatively affect loan quality.

Fitch expects these banking systems' loan quality to deteriorate, mainly due to the seasoning of consumer loans in weak economic environments. In contrast to Ecuador, loan quality indicators for Argentine and Venezuelan banks have been supported by rapid dilution of nonperforming loans in light of inflation-led high asset growth.

In addition to weaker economic conditions, government policies have reduced income diversification and pressured margins in these countries. Higher operating and credit costs are also likely to weigh on the banking systems' performance.

Liquidity is adequate in all systems given the short-term nature of balance sheets and high levels of cash and overnight deposits with banks. Venezuelan and Argentine banks also benefit from capital controls.

For more information, a special report titled '2016 Outlook: Government Intervention Weighs on Argentine, Ecuadorian and Venezuelan Banks' is available on the Fitch Ratings web site at www.fitchratings.com, or by clicking on the link.

Additional information is available at 'www.fitchratings.com'.

2016 Outlook: Government Intervention Weighs on Argentine, Ecuadorian and Venezuelan Banks

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=871999

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151009005967/en/