MONTERREY--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings to the Peruvian Banco Interamericano de Finanzas S.A. (BanBif):
--Foreign Currency Long-Term Issuer Default Rating (IDR) 'BBB-';
--Foreign Currency Short-Term IDR 'F3';
--Local Currency Long-Term IDR 'BBB-';
--Local Currency Short-Term IDR 'F3';
--Viability rating 'bbb-';
--Support Rating '4';
--Support Rating Floor 'BB-'.
The Rating Outlook is Stable.
KEY RATING DRIVERS
BanBif's IDRs and Viability Rating (VR) reflect its solid asset quality, consistent performance, as well as a satisfactory funding and liquidity profile. The ratings also factor its adequate capitalization, moderate franchise and high competition in a concentrated banking system.
The bank's Support Rating of '4' is indicative of its systemic importance. Being the fifth largest Peruvian bank with a market share of approximately 3.2% of total loans and 3.1% of total deposits as of June 2013, Fitch believes that there would be a limited propensity for support from the government, should it be required.
BanBif's asset quality has historically been sound and exhibits one of the lowest delinquency levels in the Peruvian banking system. Non-performing loans (NPL) equaled 0.98% of gross loans as of June 2013 (2012-2010 average: 0.80%). Prudent credit policies, a business model focused on commercial banking products with low risk (leasing finance and trade finance), as well as a positive operating environment underpin the bank's low NPLs. Obligor concentration is moderate compared to emerging market mid-size commercial banks with similar VRs as BanBif's top 20 obligor groups accounted for about 18% of the gross loans portfolio as of June 2013 (1.5x of Tier I capital).
Reasonable and stable interest margins and sustainable generation of non-interest revenues support BanBif's consistent performance over the past few years. Nevertheless, relatively high funding costs and operating expenses related to the bank's current expansion continue to weigh on profitability. The bank's operating profitability remained stable in the first half of 2013 while Fitch views the bank's ROAA of 1.9% and ROAE of 24.2% at the end of June 2013 as good in light of BanBif's current business model. Positively, due to good asset quality, the bank's loan loss provisions remain under control.
The funding mix has remained stable over the past three years. Customer deposits as of the end of June 2013 represented 74% of total funding, followed credit facilities which reached 22% of funding, the vast majority from international development agencies, multilateral banks and local development institutions. The remaining participation comes from long term local debt issuances that include leasing bonds, mortgage bonds and subordinated debt, the latter of which counts as regulatory capital.
Depositor concentration is slightly higher than that of its larger domestic peers, but in line with banks that have similar business models. BanBif's top 20 depositors are comprised mostly by institutional customers at a higher cost than that of domestic peers and accounted for roughly 22% of total customer deposits in June 2013 (June 2012: 24%).Liquidity risk is carefully monitored and the bank's liquidity position is ample as BanBif held about PEN1.5bn of cash and equivalents (55% of the total short-term funding).
Fitch views BanBif's capitalization as adequate in light of its stable performance and solid asset quality. The bank recently received a capital contribution (USD50 millions) from the International Finance Corporation. The bank's capital position has remained stable over the past years, driven by the consistent earnings retention. BanBif's Fitch Core Capital (FCC) to risk-weighted assets (RWA) ratio has remained in the 8%-7% range, while regulatory capital benefited from growth in subordinated securities and subordinated loans, which do not qualify for equity credit under Fitch's methodology. Though the bank's FCC ratio is low relative to its international peers, Fitch also considers the more stringent risk weightings of BanBif's assets.
RATING SENSITIVITIES
A sustained performance that continues strengthening FCC to RWA metrics and put them above 12% could benefit bank's ratings. A more diversified low-cost funding mix and sustained improvements in efficiency levels could also benefit the bank's ratings.
On the other hand, BanBif's ratings could be downgraded if a severe decline in asset quality erodes its profitability, capital and reserve cushion.
Additional information is available on www.fitchratings.com
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug 15, 2012).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=800543
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