Buenos Aires, March 11, 2011 -- Moody's Investors Service has assigned a bank financial strength rating
(BFSR) of E+ (plus) to Compañía Financiera Argentina
S.A. (CFA). Moody's has also assigned the entity
long- and short-term global local-currency deposit
ratings of Ba3 and Not Prime, respectively, as well as long-
and short-term foreign-currency deposit ratings of Caa1
and Not Prime, respectively.
At the same time, Moody's has assigned an Aa2.ar local-currency
deposit rating and a Ba1.ar foreign-currency deposit rating
to the bank on the Argentine national scale.
Moody's has also assigned (P)Ba3 and (P) B2 local-and foreign-
currency debt ratings to CFA's US$ 250 million global medium-term
note program. The program allows for multi-currency debt
issuances. Local- and foreign-currency debt ratings
of Aa2.ar and Aa3.ar were assigned to the program on the
national scale.
In addition, local currency debt ratings of Ba3 and Aa2.ar
were assigned to the expected the third issuance of the program,
amounting up to Ar$ 100 million and to be split in to tranches.
The outlook on all the ratings is stable, with the exception of
the local currency deposits and debt ratings which were placed on positive
outlook, in line with Banco Galicia's outlook for local currency
deposits.
The following ratings have been assigned to Compañía Financiera
Argentina S.A.:
Bank Financial Strength Rating: E+, stable outlook
Long- and short-term global local-currency deposit
rating: Ba3 and Not Prime, positive outlook
Long- and short-term global foreign-currency deposit
rating: Caa1 and Not Prime, stable outlook
Long-term national scale local-currency deposit rating:
Aa2.ar
Long-term national scale foreign-currency deposit rating:
Ba1.ar
US$ 250 million global medium-term note multicurrency program:
Long-term global local-currency debt rating: (P)Ba3,
positive outlook
Long-term global foreign-currency debt rating: (P)B2,
stable outlook
National scale rating local-currency debt rating: Aa2.ar
National scale rating foreign-currency debt rating: Aa3.ar
Third Issuance: up to Ar$ 100 million issued in two tranches
Ba3 Global Local Currency Debt Rating, with stable outlook
Aa2.ar Argentina National Scale Local Currency Debt Rating
RATINGS RATIONALE
The ratings derive from CFA's very modest franchise, which
is reflected in the small size of its balance sheet, limited earnings
diversification, as well as its small participation in Argentina's
loan and deposit market (0.6% and 0.1% share
respectively). CFA is a consumer finance operation of Argentina-based
Banco de Galicia y Buenos Aires, acquired from AIG Consumer Finance
Group in mid 2009, which targets the low income segments with predominantly
unsecured personal loans and other consumer financing products.
Moody's noted that CFA's funding is mainly short-term and
sourced from a limited number of wholesale depositors, particularly
mutual funds and other banks, including Grupo Galicia, which
provides about 20% of its total deposits. Aside from poor
diversification, its funding profile exposes CFA to substantial
tenor mismatch, which management intends to improve by issuing debt
in the near future and by boosting its retail deposits base.
The ratings also incorporate the bank's weak asset quality, as indicated
by a high non-performing loan ratio of 9.1% as of
December 2010. This performance is chiefly explained by the segment
in which CFA operates, which tends to be more vulnerable to economic
shocks.. We note, however, the substantial improvement
observed in CFA's non-performing loan ratio over the past
two years as a result of Galicia's active credit management and
write off, aligned with Banco Galicia's own risk management
practices.
Moody's noted, on the other hand, CFA's solid capitalization,
with its equity representing 44.5% of total assets,
which is adequate to withstand credit losses even in a stress scenario.
This sizable capital base derives, in part, from the US$
175 million capital that was injected by AIG in late 2008, in order
to deal with the then strained domestic liquidity market.
The Ba3 global local-currency deposit rating is derived from CFA's
unsupported baseline credit assessment of B1. The uplift yields
from Moody's assessment of a high probability of support from Banco
Galicia to its finance company and a moderate probability of systemic
support as a consequence of its small market share in terms of deposits.
Moody's National Scale Ratings (NSRs) are intended as relative measures
of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale ratings in that they are not globally
comparable with the full universe of Moody's rated entities, but
only with NSRs for other rated debt issues and issuers within the same
country. NSRs are designated by a ".nn" country modifier
signifying the relevant country, as in ".ar" for Argentina.
For further information on Moody's approach to national scale ratings,
please refer to Moody's Rating Implementation Guidance published in August
2010 entitled "Mapping Moody's National Scale Ratings to Global Scale
Ratings."
Compañía Financiera Argentina S.A. is headquartered
in Buenos Aires, Argentina, and had Ar$ 1,727
million in assets, Ar$ 385.3 million in deposits and
a net worth of Ar$ 768.7 million as of December 2010.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Buenos Aires
Maria Andrea Manavella
VP - Senior Credit Officer
Financial Institutions Group
Moody's Latin America, Calificadora de Riesgo
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 4816-2332
New York
M. Celina Vansetti
Senior Vice President
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Latin America, Calificadora de Riesgo
Cerrito 1186, 11th fl
Buenos Aires C1010AAX
Argentina
JOURNALISTS: (800) 666 -3506
SUBSCRIBERS: (5411) 4816-2332
Moody's rates Compañía Financiera Argentina S.A.
