NEW YORK--(BUSINESS WIRE)--Fitch Ratings has today assigned Grupo ACP Inversiones y Desarrollo (ACP) the following ratings:
--Foreign currency long-term Issuer Default Rating (IDR) 'BB-';
--Foreign currency short-term IDR 'B';
--Local currency long-term IDR 'BB-';
--Local currency short-term IDR 'B';
--Individual rating 'D';
--Support rating '5';
--Support floor 'NF'.
The Rating Outlook is Stable.
Grupo ACP Inversiones y Desarrollo's (ACP) individual and IDRs reflect its leading expertise in micro credit, consistent operational performance, sound growth prospects and consistent expansion strategy. They also factor in the tougher competitive environment in Peru, its weaker than average asset quality and its higher projected leverage.
As holding company, ACP cannot expect any type of governmental support. Its operating companies (banks) could receive some support if needed but, considering their relatively small size in their respective markets, the probability of support is considered limited and support could not be passed onto the holding company.
Given its holding company status, ACP's ratings upside potential is conditioned to a consistent improvement of its operating companies' credit standing. Deterioration of the performance of its key operating companies, a significant increase in direct expenses or rising holding company debt would pressure ACP's ratings downwards.
Having been active in microcredit since 1969, ACP created MiBanco (Peru's largest micro-credit bank, seventh overall) in 1998 and, in 2002, the group created Secura, an insurance brokerage company specialized in micro-insurance. Then, in 2005, the group was organized as a holding company. ACP's footprint and product offering continued to grow when in 2006 it acquired a minority participation in BancoSol, a specialized Bolivian micro-credit bank. The group later created business services companies in Peru and El Salvador and acquired controlling interests in small micro-credit entities in Uruguay, Argentina, Paraguay, and somewhat larger operations in Mexico (Forjadores) and Brazil (Ceape-MA, in progress).
ACP's unconsolidated operating revenues, which are largely composed of dividends, increased about 2.3% in 2010 driven by the good performance of its key operating subsidiaries (MiBanco, Secura) and affiliates (BancoSol). Since 2007, ACP's operating expenses accounted for about 20%-28% of revenues and an additional 2%-3% covered existing funding cost and taxes (total debt service accounted for about $3 million-$3.9 million); the remainder of the revenue was historically reinvested in the subsidiaries. Projected debt service will be much higher - increasing to about $8.4 million - as ACP's leverage increases (double leverage would increase from about 88% to about 145%); cash flow projections show adequate debt service coverage, albeit dependent on the sustained good performance of ACP's operating companies, something that is considered likely in the medium term. However, in Fitch's opinion, ACP has limited margin for further indebtedness but could if need be sell some assets to cover unexpected needs or shortfalls.
MiBanco's performance was driven by sustained loan growth and resilient margins, a growing yet modest contribution of non-interest revenues and improving efficiency that helped offset the growing cost of credit. Overall profitability remained very strong albeit declining with an ROAA of 2.4% and an ROAE of 28% at December 2010. MiBanco's future performance should be driven by loan growth while margins are expected to compress gradually with relatively stable costs. Overall profitability should decline slightly but remain above the industry average and continue to underpin capital and growth.
ACP is a Peruvian non-for-profit civil association created in 1969 to provide credit to micro-entrepreneurs and integrate them into the mainstream economy. The group's main holding is MiBanco and it has controlling interests in micro-credit banks and financial and business services companies. ACP is present in eight Latin American countries.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Bank Holding Companies' (Dec. 29, 2009);
--'Global Financial Institutions Rating Criteria' (Aug. 16, 2010).
Applicable Criteria and Related Research:
Bank Holding Companies
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=493324
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547685
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