Author: AtlanticIS

Countries

Fitch Upgrades Spain to ‘A’; Outlook Stable

AtlanticIS

Spain, September 26, 2025 – FitchRatings has upgraded Spain’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘A’ from ‘A-‘. The Outlook is Stable. Fitch has also upgraded Spain’s Short-Term IDR to ‘F1+’ from ‘F1’.

Key Rating DriversThe upgrade of Spain’s IDRs reflects the following key rating drivers and their relative weights:

High

Economic Outperformance: Spain’s economic performance has exceeded expectations and significantly outpaced other major eurozone economies. Economic growth is supported by large migration inflows and strong, increasingly diversified services exports. Recent productivity gains, moderate wage growth and relatively low energy prices have boosted external competitiveness and strengthened private external balance sheets. Fitch expects the economy to remain resilient, helped by limited exposure to US tariffs and ongoing net external deleveraging.

Growth Exceeds Expectations: We have raised our real GDP growth forecast for Spain to 2.7% in 2025 and 2.0% in 2026, reflecting stronger-than-expected quarterly growth in 1H25. Growth has been broad, with the services sector strengthening due to a rebound in tourism (with higher off-season inflows and quality upgrades) and solid performance in non-tourism services such as information communication technology and professional services. Business and consumer sentiment indicators are positive. The manufacturing sector (11% of gross value added) has benefited from increased solar and wind generation, which has helped lower electricity prices to well below the eurozone average.

Favourable Growth Prospects: Fitch has revised Spain’s potential growth estimate to 2% from 1.4%, mainly due to rapid expansion in labour inputs and supported by higher total factor productivity. Strong labour force growth reflects significant migration inflows, mostly from Latin America, while recent reforms and a shared language have supported labour market integration. Labour productivity growth has risen to over 1% annually from 2022 to 2024, compared with 0.3% between 2014 and 2021, although further improvements are needed to lift GDP per capita growth, which remains below headline growth.

Labour Market Supports Growth: Labour market conditions have strengthened significantly, with activity and employment rates reaching record highs, bolstering economic growth. Temporary employment has fallen to historical lows, supported by the 2022 labour market reform. The unemployment rate remains the highest in the euro area, at about 10.4% as of July, despite recent progress in reducing it.

Medium

Reduced External Vulnerabilities: Net external indebtedness continues to fall, extending the trend that began after the eurozone crisis and was interrupted only briefly by the pandemic. Net external debt declined to 44% of GDP at end-2024, down from a peak of 95% in 2013, driven by improving private external balance sheets and ongoing current account surpluses. The current account balance improved to 3.1% of GDP in 2024, supported by a stronger service surplus from tourism and diversification into non-tourism exports deficit. The primary and secondary income balance remain highly negative due to large remittance outflows and Recovery and Resilience Facility grants.

Fitch expects current account surpluses to average 2.6% of GDP between 2025 and 2027 (relative to an average deficit of 0.5% for the ‘A’ rated median), with net external debt falling below 40% of GDP, reaching 37% by 2027, gradually closing the gap to the net creditor position of the peer median of 6.1%.

Spain’s ‘A’ IDRs also reflect the following key rating drivers:

Rating Fundamentals: The ratings are supported by governance indicators consistent with the ‘A’ rating category and eurozone membership supporting institutional stability. These strengths are balanced against a still high public debt ratio.

Political Deadlock: Spain’s centre-left minority government increasingly struggles to secure parliamentary support, including for the passage of budgets since 2023, from smaller parties, including from the Catalan separatist party. Prime Minister Sánchez faces mounting pressure from corruption allegations involving the Socialist Party and family members, while political and regional fragmentation impedes progress on crucial reforms, including housing supply solutions and the development of a coherent fiscal consolidation strategy. Parliamentary elections are not due until 2027.

Moderate Fiscal Deficits: We forecast the general government deficit will fall to 2.6% of GDP in 2025 from 3.1% in 2024, driven by the absence of one-off expenses and continued revenue growth offsetting a gradual increase in interest costs. Spain will meet its NATO defence spending target of 2% of GDP this year, up from 1.4% in 2024, with a limited impact on the deficit due to spending reallocations and reclassifications. We forecast a deficit of 2.4% of GDP in 2026, reflecting the phase-out of flood relief measures, rising to 2.5% in 2027 as elections approach and interest expenses increase. This is slightly below the ‘A’ rated peer median of 3.1% in 2026 and 2.9% in 2027.

Fiscal Uncertainties: Pro-active fiscal consolidation efforts have been limited, in Fitch’s view, and fiscal improvement has been driven mostly by the phasing out of temporary measures and strong revenue growth supported by a solid labour market and robust GDP growth. Political fragmentation raises uncertainty about parliamentary approval of the 2026 budget, and Fitch expects the 2023 budget to be rolled over for a third consecutive year, with new measures likely passed on a law by law throughout the year.

Fiscal uncertainty extends to the medium term due to the lack of a credible fiscal strategy. The government targets a deficit of 1.5% of GDP and a debt/GDP ratio of 94.8% by 2029 under its seven-year adjustment plan, but the plan lacks detailed measures and faces challenges from the absence of a budget and political majority for consolidation.

High Debt, Gradual Reduction: Fitch projects the general government debt ratio will fall from 101.6% of GDP in 2024 to 100.7% by 2027, and below 100% thereafter, supported by sound nominal GDP growth. This is high relative to the ‘A’ category median of 53.7%. However, we expect debt will temporarily increase in the short term, even as fiscal deficits narrow, due to Recovery and Resilience Facility funds and cash-to-accrual accounting adjustments totalling 3.6% of GDP in 2025-2026.

ESG – Governance: Spain has an ESG Relevance Score (RS) of ‘5[+]’ for Political Stability and Rights and the Rule of Law, Institutional and Regulatory Quality and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model. Spain has a high WBGI ranking at 74, reflecting its long record of stable and peaceful political transitions, well-established rights for participation in the political process, strong institutional capacity, effective rule of law and a low level of corruption.

Source: Fitch Ratings

Banking

Fitch Affirms Credicorp Bank’s Long-Term IDR at ‘BB+’; Outlook Stable

AtlanticIS

Panama, October 06, 2025 – Fitch Ratings has affirmed Credicorp Bank, S.A.’s Long-Term Issuer Default Rating (IDR) at ‘BB+’, Short-Term IDR at ‘B’, Viability Rating (VR) at ‘bb+’ and the Government Support Rating (GSR) at ‘No Support’ (‘ns’). Fitch has also affirmed Credicorp’s Long- and Short-Term National Ratings at ‘AA(pan)’ and ‘F1+(pan)’, respectively. The Rating Outlook for the Long-Term IDR and Long-Term National Ratings is Stable.

Key Rating Drivers

Operating Environment with Moderate Influence: Panama’s sovereign rating (BB+/Stable) and broader operating environment moderately influence Credicorp’s VR, with the sovereign rating continuing to cap the Operating Environment (OE) score despite fundamentals that point to a ‘bbb’ category. While GDP growth has slowed and interest rates remain high, system credit growth, asset quality, and profitability are outperforming Fitch’s expectations. Fitch projects GDP per capita and Operational Risk Index (ORI) to remain stable and continue to preserve operating conditions for banks.

Consistent Business Profile with High Capitalization: Credicorp’s international and national scale ratings are driven by its ‘bb+’ VR. Fitch views Credicorp’s business profile as strong, supported by conservative risk management, which has led to good asset quality and resilient profitability. Credicorp’s capital strength significantly influences Fitch’s decision to rate the bank at the same level as the Panamanian sovereign and mitigates the risks inherent in its business model.

Consolidated Business Model: Fitch’s ‘bb-‘ score for Credicorp’s business profile exceeds the implied level of ‘b’. Credicorp’s consistent business model, marked by a lower-risk, atomized customer base and proven earnings generation, offsets its lower levels of total operating income (TOI) compared to regional peers. From 2022 to 2025, the bank’s average TOI was USD74 million.

Credicorp’s market position is moderate, with a market share of 1.5% by assets in the banking system. The bank’s strategy focuses on strengthening its local franchise through consumer lending and enhancing operational and commercial efficiencies via medium-term digital transformation.

Well-Managed Risks: Fitch views Credicorp’s underwriting standards and risk controls as sound, demonstrated by controlled loan deterioration over the economic cycle, resulting in lower credit costs than direct peers. As of June 2025, its loan impairment charges-to-average gross loans ratio was 0.3%, below other mid-sized banks. Fitch’s assessment is also supported by the bank’s reasonable collateral levels, prudent investment policies and conservative balance sheet growth.

Good Asset Quality: Credicorp has maintained good asset-quality metrics that compare favorably with most local peers by metrics and concentration. As of June 2025, stage 3 loans comprised 2.0% of the portfolio. Loan loss allowance coverage of stage 3 loans was a reasonable 74.9%. Good levels of collaterals also support this assessment Fitch expects asset quality ratios to remain stable, with a forecasted stage 3 ratio of 2.1% for 2026 and 2027.

As of June 2025, Credicorp’s collaterals represented 81.2% to the total loan portfolio, while the top 20 borrowers represented 0.64x of the common equity Tier 1 (CET1) ratio. Fitch expects the bank to keep loan delinquencies at manageable levels by focusing on sectors and products where it has extensive expertise.

Consistent Profitability Supported by Associates: Credicorp has demonstrated good profitability and resilience. As of June 2025, the operating profit-to-risk-weighted assets (RWA) ratio was 2.4%, above the 2022-2025 average of 2.0%. Stable asset performance and recurrent profits from investments in associated companies have bolstered profitability. The net interest income from the loan book continues to compose nearly 68.8% of TOI.

However, Credicorp’s operating profits are substantially supported by the profits generated by associates, which as of June 2025 made up 50.6% of the bank’s operating profit (average 2022-2025: 41.1%). Fitch expects Credicorp’s profitability to remain strong, supported by its growth targets and benefits from its associates. Fitch forecasts an operating profit to RWA ratio of 2.2% for 2026 and 2027.

Capitalization a Rating Strength: Credicorp’s capitalization and leverage ratios are stronger versus similarly rated peers, and Fitch deems them a rating strength. As of June 2025, the bank’s regulatory CET1-to-RWA ratio was 21.9%, far exceeding the 10.5% total regulatory minimum. When including the regulatory countercyclical buffer (CCyB), the CET1 ratio reaches 23.6%.

Fitch expects the bank’s capitalization ratios to remain strong in the foreseeable future, supported by reasonable credit growth, consistent earnings generation, and moderate dividend payments. Fitch forecasts a CET1 ratio (including dynamic provision) of approximately 24% for 2026 and 2027.

Stable Deposit Base: Credicorp’s financing is supported by a growing deposit base that has historically maintained the loan-to-deposit ratio below 100%, ahead of its closest peers. As of June 2025, the ratio was 91.5%, influenced by moderate loan growth. Although its funding is concentrated, with customer deposits representing 92.8% of total funding, Credicorp complements its funding structure with medium-term wholesale sources that support asset-liability management.

As of June 2025, the balance of the 20 largest depositors represented 27.8% of total deposits, a proportion that has decreased in recent years, in line with the bank’s funding deconcentration strategy (June 2022: 36.8%). Fitch expects funding and liquidity metrics to remain stable in the medium term, with a likely loans to deposits ratio of 91.8% for both 2026 and 2027.

Source: Fitch Ratings

Infrastructure

Latin American Sovereign External Issuance Surges in 1H25

AtlanticIS

Latin America, July 23, 2025 – Latin American sovereign hard currency issuance surged to USD38.6 billion in 1H25, a 54% increase from the previous year and nearly matching the total for all of 2024, Fitch Ratings says in a new report. Ten sovereigns accessed external markets despite global geopolitical volatility and persistent high US policy rates, as emerging market sovereign spreads narrowed since the April ‘Liberation Day’ spike. However, volatility could return after the US tariff pause ends in August.

Issuance continues to be mainly in US dollars (73%), but this proportion is down from 91% in the first half of 2024, reflecting increased regional interest in diversifying currency exposure. Chile and Mexico issued euro bonds and Uruguay debuted Swiss franc bonds, while Panama stayed out of capital markets but raised significant funds via euro and Swiss franc loans. Activity also continued in global local currency-linked bonds (Dominican Republic, Paraguay).

Barbados returned to international markets with bonds featuring the world’s first pandemic clause, following its 2019 bond with natural disaster provisions. Fitch rated the bond in line with the sovereign’s rating, noting that payment deferrals under the clause would not be considered a default.

Distressed emerging-market sovereign spreads have tightened, although market access for some remains a challenge. Ecuador saw the biggest gain after re-electing a market-friendly government and reaffirming its IMF commitments; Argentina also saw narrowing spreads after securing a new IMF program and receiving a large upfront disbursement. Bolivia still faces high yields, rising default risks, and uncertain prospects ahead of elections and a large bond payment in 2026.

Source: Fitch Ratings

Banking

Fitch Takes Actions on Davivienda and Scotiabank following integration announcement

AtlanticIS

Colombia, January 15, 2025 – Fitch Ratings has affirmed Banco Davivienda S.A.’s Long-and Short-Term Local and Foreign Currency Issuer Default Ratings at ‘BB+’ and ‘B’, respectively. The rating outlook for the Long-Term IDRs is Stable. Fitch has also affirmed Banco Davivienda (Costa Rica), S.A.’s (Davivienda CR) Long- and Short-Term Local and Foreign Currency Issuer Default Ratings at ‘BB+’ and ‘B’, respectively, and its Shareholder Support Rating at ‘bb+’. The Rating Outlook for the Long-Term IDRs is Stable.

Fitch has placed Scotiabank Colpatria S.A.’s (SBC) Long-Term Foreign Currency and Local Currency IDRs of ‘BBB-‘ and ‘BBB’, respectively, its Shareholder Support Rating of ‘bbb-‘, and its local subordinated debt on rating watch negative. At the same time, Fitch affirmed the bank’s Viability Rating (VR) at ‘bb’, its national ratings, including the local senior unsecured debt, at ‘AAA(col)’ and ‘F1+(col)’, respectively.

The rating watch negative on SBC’s ratings reflects the potential credit implications due to anticipated changes in its shareholder structure. This is because, upon completion of the transaction, the expected main shareholder, Davivienda, would be rated lower than the current shareholder, The Bank of Nova Scotia (BNS) ‘AA-‘/ROS. Consequently, the Shareholder Support Rating, which drives the ratings, will be capped at Davivienda’s rating of ‘BB+’. Upon completion of the integration, Fitch expects SBC’s IDRs to converge toward those of Davivienda, which are in turn driven by the latter’s intrinsic credit profile as reflected in its own VR.

Fitch Ratings has also affirmed the Long- and Short-Term National Ratings of Scotiabank de Costa Rica, S.A. (Scotiabank CR) at ‘AAA(cri)’ and ‘F1+(cri)’, respectively. The Long-Term National Rating Outlook is Stable. At the same time, it affirmed the senior unsecured debt ratings at ‘AAA(cri)’.

These actions follow the Jan. 6, 2025 announcement that Davivienda has reached an agreement with BNS to integrate Scotiabank’s operations in Colombia, Costa Rica, and Panama into Davivienda. In exchange, Scotiabank will receive approximately 20% ownership stake in the new combined operations and participation on the Board of Directors. Simultaneously, BNS will purchase Grupo Mercantil Colpatria S.A.’s stake (44%) in SBC. This strategic move aims to consolidate their market position in Colombia and Central America and capitalize on synergies between Davivienda and BNS. The transaction is dependent on regulatory approval from authorities in Colombia, Costa Rica and Panama.

Upon completion of the non-cash agreement, Davivienda’s assets, liabilities, and equity are expected to grow by 40% while maintaining its capital position relatively stable without any goodwill generation. The strengthened market position in these three markets will enhance Davivienda’s footprint as a regional leader, while synergies from BNS will provide access to a broad global offering of financial solutions.

Fitch expects to resolve the rating watch negative on SBC upon closing of the transaction, which could take more than six months.

Key Rating Drivers: The affirmation of Davivienda’s ratings reflects Fitch’s expectation that this transaction will not negatively impact its operations or its strong business and financial profiles. Particularly, Fitch expects Capitalization core metric to be maintained above 10%, once the transaction is completed. Upside potential is limited due to challenges regarding the integration of bank operations and the significant efforts needed to normalize asset quality and profitability, mainly in Colombia, which remain contingent on its disciplined lending standards and pace of growth.

Strong Business Profile: Davivienda’s business profile is underpinned by its stable total operating income, strong market position in Colombia and leading franchise in Central America. Davivienda has a diversified business model, serving more than 24 million customers and offering a full suite of retail and commercial banking, as well as wealth management and capital market services. Fitch expects improvements in total operating income, efficiency and profitability, based on strengthened geographic diversification and synergies between the two entities once the integration of operations is completed.

Source: Fitch Ratings

Corporates

Impact of US Tariffs on Auto Industry: Key Insights

AtlanticIS

United States, February 10, 2025 – The recently announced US tariffs on imports from Mexico and Canada, if eventually implemented, could put pressure on the credit metrics of some global automakers. However, automakers plan to take various mitigating measures, which could offset the impact of the tariffs on their credit profiles.

On 1 February, the US announced a 25% tariff on most imports from Mexico and Canada (and a 10% tariff on China). The day before these measures were due to take effect, agreements with Mexico and Canada were reached to pause them for one month for negotiations on such subjects as migration, border security and trade. It is unclear what will emerge from the US-Mexico and US-Canada negotiations and how far the US is prepared to revise its proposals.

The potential 25% tariffs on Mexico would have the most significant implications for global automakers due to large exports of vehicles produced in the country to the US, followed by the proposed measures against Canada. The additional tariffs against China are likely to have a limited impact on the sector due to decoupling from the country’s supply chains in previous years.

Potential implications of the tariffs are likely to vary by company and will depend on the direct exposure to exports from Mexico and Canada to the US and the ability to pass tariffs on to customers, cut costs, increase prices on other vehicles to spread the costs of the tariffs, reroute shipments or implement other mitigating measures. It is not expected any material changes in the production footprints of supply chains until there is clarity about the tariff implementation.

Honda, General Motors, Nissan and Stellantis have the highest exposure to the US tariffs in a rated portfolio of original equipment manufacturers due to the high share of vehicles imported to the US from Mexico and Canada in their global sales.

Issuers with adequate or ample rating headroom will have greater flexibility to withstand the impact of the US tariffs than those with tight headroom. The Negative Outlooks on Nissan and Stellantis reflect weak performance in North America, which led to a drop in the companies’ profitability and cash flows even before the tariffs were announced.

Potential implications in this sector will be assessed based on prospects for the tariffs being implemented in full, whether they are likely to be temporary, retaliatory measures and corporates’ mitigating strategies.

Source: Fitch Ratings