...Strengthening Fundamentals: The ratings of Caja Rural del Sur, Sociedad Cooperativa de Credito (CRS) are driven by the bank's moderate risk appetite, strengthening capitalisation and sound funding and liquidity profile. They also factor in its sound regional franchise and geographical concentration, which affect the bank's weak, though improving, asset quality and modest earnings generation. The Positive Outlook reflects a combination of expected reduction in problem assets and in capital encumbrance from this risk. Improving Asset Quality: The bank's asset quality continues to improve at an adequate pace. Non-performing loans (NPLs) accounted for 8.6% of gross loans at end-June 2016 (9.8% at end June-2015), a ratio that remains better than the Spanish banking sector average, and were 76% covered by reserves. The problem assets ratio, which takes foreclosed assets into account, was 11.3%. Reducing Capital Encumbrance: CRS maintains satisfactory buffers over regulatory minimums. Its Fitch...
