Moody's upgrades Banco PYME Los Andes Procredit

PRESS RELEASE

By Moody's

Buenos Aires City, January 10, 2017 -- Moody's Latin America Agente de Calificación de Riesgo (MLA) has today upgraded the national scale local curency deposit rating assigned to Banco PYME Los Andes Procredit S.A. (PLA) to Aaa.bo from Aa2.bo, and assigned it a stable outlook. This action concludes the review for upgrade that was initiated on November 4th 2016. PLA's other ratings, which were affirmed on November 4th 2016 following the announcement of Banco Mercantil Santa Cruz (BME) plans to acquire the bank, are unaffected by today's rating action.

This rating action follows the formalization of the acquisition of PLA by BME on December 14th 2016.

The following rating assigned to Banco PYME Los Andes Procredit S.A. was upgraded:

Bolivian long-term national scale local currency deposit rating to Aaa.bo, Stable from Aa2.bo, Rating under review

RATINGS RATIONALE

The upgrade of PLA's local currency national scale deposit rating considers the very high likelihood that the bank will receive financial support from BME in an event of financial stress. Although both banks are rated Ba3 for global scale local currency deposits, PLA's local currency national scale deposit rating was previously two notches lower than BME's. The very high probability of support considers the fact that PLA is now fully owned by BME, it is overseen by the same regulator, and conducts activities considered core to BME´s strategy, as well as the proximity of the formal merger between the two banks. Moody's expects that PLA ratings will be withdrawn once it is fully merged into BME, and BME directly assumes all of its liabilities.

PLA's global scale ratings and foreign currency national scale deposit ratings do not benefit from parental support uplift because they are constrained by Bolivia's Ba3 sovereign rating and B1 foreign currency deposit ceiling.

WHAT COULD MAKE THE RATING GO DOWN

Notwithstanding a potential deterioration of PLA's creditworthiness driven by the expected negative impact of Bolivia's banking law on the banking system's profitability and asset quality, consistent with the negative outlook on the bank's global scale ratings, we expect that it will remain among the most creditworthy Bolivian banks. This is reflected in the stable outlook on its national scale local currency deposit rating. The negative outlook on PLA's global scale ratings is in line with the negative outlook on the sovereign rating to reflect the strong credit interlinkages between the sovereign and the bank. Consequently, the bank's ratings will face downward pressure if the sovereign is downgraded. At the same time, a sovereign downgrade will likely trigger a revision of Bolivia's national scale ratings map; consequently, PLA's national scale ratings are not expected to be downgraded as a result of a sovereign downgrade.