Credit rating agency Fitch Ratings has affirmed Banco Davivienda Salvadoreno's long-term issuer default rating at 'B+' with a stable outlook, saying the Salvadoran bank's ratings are driven by expected parent support but constrained by the country's transfer and convertibility risks.

Fitch also affirmed the bank's short-term IDR at 'B', shareholder support rating at 'b+' and viability rating at 'b-' in a statement released on September 12.

The rating agency said Davivienda Sal's ratings are primarily driven by support it would likely receive from Colombian parent Banco Davivienda S.A., which holds a 'BB+' long-term rating with negative outlook.

However, El Salvador's country ceiling of 'B+' significantly limits the subsidiary's ability to draw on parent support due to transfer and convertibility risks, capping Davivienda Sal's ratings at three notches below the Colombian parent's IDR.

'Fitch views the Colombian parent's support commitment to the Salvadoran subsidiary as solid,' the agency said, placing the bank's ratings at the country ceiling level, which is two notches above El Salvador's sovereign rating of 'B-'.

Davivienda Sal operates as the fourth-largest bank in El Salvador with a universal banking model covering consumer, mortgage and corporate segments. The bank's average total operating income between 2021-2024 was $176.6mn.

Despite a gradual rise in impairments, Fitch said the bank maintains reasonable asset quality with non-performing loans at 2.4% in the second quarter of 2025, up from a 2021-2024 average of 2.1%.

The uptick was driven by higher delinquency in certain consumer and mortgage segments, though Fitch expects asset quality to remain stable given ongoing recovery plans and prudent risk controls.

Operating profit to risk-weighted assets stood at 1.6% as of the second quarter, unchanged from year-end 2024, sustained by moderate net interest margins and controlled operating expenses.

The bank's Fitch Core Capital to risk-weighted assets ratio was 14.2% in the second quarter, slightly down from 14.4% at year-end 2024 due to faster credit growth and mild loan deterioration.

Davivienda Sal's funding profile relies on a solid deposit base that has remained stable over the past four years, with the loans-to-deposits ratio improving to 94.4% in the second quarter from a 2021-2024 average of 101.7%.

Any changes to the bank's long-term IDR and shareholder support rating would primarily mirror changes to El Salvador's country ceiling rather than the Colombian parent's ratings, given the wide gap between the subsidiary and parent ratings.

The bank's viability rating is constrained by the Salvadoran banking system's operating environment score of 'b-', reflecting how sovereign risks materially influence local banks' credit profiles.

Fitch noted that local banks have delivered resilient performance in recent years with improved funding access, though their significant holdings of government debt underscore the linkage to sovereign creditworthiness.

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