New York, April 07, 2016 — Moody’s Investors Service has assigned a Ba1 foreign currency senior unsecured debt rating to Banco Nacional de Costa Rica (BNCR)’s proposed US dollar senior note issuance for an expected amount of US$500 million. The instrument will be governed by the laws of the State of New York.
The outlook on the rating is negative, in line with the negative outlook on Costa Rica’s Ba1 government bond rating.
The following rating was assigned to Banco Nacional de Costa Rica:

Global long term foreign currency senior debt rating: Ba1, negative outlook
RATINGS RATIONALE
The Ba1 senior unsecured debt rating assigned to Banco Nacional de Costa Rica derives from the bank’s Ba1 global local currency deposit rating, which in turn incorporates its fundamental strength, as reflected by the ba2 baseline credit assessment (BCA). The debt rating incorporates one notch of uplift from the BCA, to reflect Moody’s assumption of full government support, which raises the rating to the level of Costa Rica’s government bond rating. The support assessment is based on BNCR’s full government ownership, the government’s guarantee of the bank’s senior obligations per Article 4 of the Organic Law of the National Banking System, and its clear public mandate and importance as the country’s largest bank.
BNCR’s ba2 BCA is supported by the bank’s competitive advantage in terms of business generation and access to low cost funding in light of the aforementioned government guarantee.
Key constraints to the BCA include BNCR’s weak core capitalization and modest profitability, owing to high operating costs and mandatory transfers to government related entities. Earnings can be further challenged by declining interest rates and rising credit costs. Asset quality remains relatively strong thus far, though pressures may arise from the bank’s sizeable borrower concentrations and from its significant amount of foreign currency lending to local currency earners, in the event of a sudden depreciation in the Colon.
WHAT COULD MOVE THE RATINGS UP OR DOWN
Upward pressures on BNCR’s ratings are limited given the negative outlook on the issuer and on the ratings of the Government of Costa Rica. However, the outlook on the bank’s ratings could stabilize if the sovereign outlook stabilizes. Should Costa Rica’s government bond rating be downgraded, BNCR’s deposit and debt ratings would also face downward pressure.
The last rating action on Banco Nacional de Costa Rica was on 9 February 2016 when Moody’s affirmed the bank’s deposit and debt ratings, and changed the outlook to negative from stable in line with a similar action on Costa Rica’s government bond rating.
The principal methodology used in this rating was Banks published in January 2016. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.
Based in San Jose, Costa Rica, Banco Nacional de Costa Rica reported total consolidated assets of about US$11 billion (CRC 5.9 trillion) and shareholders’ equity of around US$1 billion (CRC 539 billion), as of December 2015.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.