Banco De Galicia Y Buenos Aires S.A.U.

The stable outlook for the next 12 months on Banco Galicia mirrors that on Argentina, reflecting the balance between risks stemming from remaining economic challenges--high inflation, low growth, large structural fiscal imbalances, high financing needs, and ongoing pressure in the foreign exchange markets--and a favorable near-term amortization profile. We could lower the ratings on Banco Galicia in the next 12 months if we take a similar action on the sovereign. A deterioration in the entity's credit fundamentals wouldn't lead to an automatic downgrade because its 'b+' stand-alone credit profile (SACP) is higher than the long-term issuer credit rating. We could raise the ratings on the bank in the next 12 months if we were to raise the rating on the

...The sovereign rating on Argentina limits the long-term rating on Banco Galicia. We rarely rate financial institutions higher than the sovereign where they operate, because we consider it unlikely that these institutions would remain unaffected by developments in domestic economies. Well-established brand and good presence in the Argentinean financial system allow the bank to maintain relatively stable operating revenue. This is despite the weak business environment and many distortions present in the economy. However, high inflation, lower margins, and regulated fees have hit the banking system's profitability, including Banco Galicia's. Capitalization will allow to sustain its growth plan despite profitability pressures. In addition, the implementation of the inflation adjustment on Banco Galicia's total equity due to the revaluation of fixed assets boosted the bank's capitalization. We expect Banco Galicia's asset quality metrics to worsen, in tandem with the financial system, due to...

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