Fitch Ratings-New York-20 December 2016: Fitch Ratings has affirmed Banesco USA's (BNSC) Long- and Short-Term Issuer Default Ratings (IDRs) at 'B+'/'B'. The Rating Outlook has been revised to Positive from Stable. A full list of rating actions follows at the end of this release.

KEY RATING DRIVERS

IDRS AND VIABILITY RATINGS
Today's action reflects BNSC's improvements in business and financial performance. To date, the company has exhibited improving trends across asset quality, profitability and capitalization measures. Further, the company continues to build its South Florida franchise by focusing on domestic lending and deposit-gathering activities.

The Rating Outlook has been revised to Positive from Stable to reflect our expectation that the company will demonstrate sustained improvement in financial measures, particularly earnings and asset quality. Furthermore, Fitch would expect continued execution of strategic initiatives such as diversification of the deposit base and targeted growth in foreign correspondent banking relationships. Strategic initiatives include leveraging affiliated Banesco companies such as ABANCA (BB+/bb+/Stable) in Spain to grow loans and deposits within the Spanish-speaking community in Florida and gain additional foreign correspondent banking relationships. BNSC has also started an online deposit platform, providing an additional source of funding.

Fitch's rating action incorporates the view that the bank has made improvements in risk management, controls, and oversight across its major risk exposures following the Consent Order in 2013 related to the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) deficiencies. Such improvements include a formal board-approved enterprise risk management (ERM) policy and the implementation of BSA/AML oversight tools and processes to monitor and manage potential high risk activities. As these improvements season, they should help to inculcate a compliance-focused culture across the BNSC organization.

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