...Improving Asset Quality and Capital: Unicaja Banco S.A.'s ratings reflect the bank's sound regional franchise, strengthened capital ratios and comfortable funding and liquidity. The ratings also factor in Unicaja's weak, although improving, asset quality. The bank suffers from lower earnings diversification in a low interest-rate environment than some of its closest peers. Solid Regional Franchise: Unicaja (8th largest Spanish bank by assets at end-2018) benefits from a solid retail banking franchise in eastern Andalusia, and Castille and Leon, following the acquisition of EspanaDuero (ED) in 2014. In December 2018, Unicaja and Liberbank S.A. (Spain's 12th largest bank) published a material fact stating that the two banks are looking at a potential merger. This announcement has not been considered in Fitch Ratings' analysis. Improved Asset-Quality Metrics: At end-2018, the problem asset ratio improved to almost 9%, including non-performing loans (NPL) and foreclosed assets (down from 11.5%...
