NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) assigns senior unsecured debt and deposit ratings of BBB, a subordinated debt rating of BBB-, and short-term debt and deposit ratings of K3 for Coral Gables, Florida based Banesco USA (“the bank”). The Outlook for all long-term ratings is Stable.
The ratings are primarily supported by a relatively diverse revenue mix for the rating category with noninterest income consistently producing close to 20% of operating revenue. Banesco generates fee income through several sources including wire transfer fees, deposit service charges, and other loan fees, which are viewed as fairly reliable. Banesco’s below-average profitability has been mainly driven by elevated operating expenses, primarily within personnel costs. However, this is related, in part, to the bank’s large investments in BSA and AML, which are viewed as necessary given the international exposure. Going forward, Banesco plans to focus on efficiency enhancements throughout its operations. Additionally, earnings have been pressured, in part, by a modestly higher cost deposit base (0.61% as of 3Q20), which is partially offset by above average loan yields (4.8% as of 3Q20) – resulting in a near peer-average NIM. Additionally, the bank’s relatively elevated usage of non-core funding is viewed as a constraint to ratings. KBRA favorably views Banesco’s reserve coverage at 2% of loans and 2x NPLs in light of relatively high hospitality exposure (10% of loans), though capital ratios are slightly below peers. However, KBRA expects a gradual build in core capital over the medium-term supported by earnings growth and conservative capital management.
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The ratings are based on KBRA’s Bank and Bank Holding Company Global Rating Methodology published on October 16, 2019.
Disclosures
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
About KBRA
KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.
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