NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the long-term foreign Issuer Default Ratings (IDRs) of Fondo Mivivienda (FMV) at 'BBB+'. The Rating Outlook on the long-term IDRs is Stable. A full list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
IDRS, SUPPORT RATINGS AND SENIOR DEBT
FMV's IDRs, Support Rating and senior debt ratings reflect Fitch's perception that FMV would likely receive support from its owner, the Government of Peru, should it be required. Although there is no an explicit guarantee, FMV plays a key role in implementing economic development policies, is fully owned by the state, and has many operational and financial synergies with the public administration. Peru's ability to support FMV is reflected in its sovereign rating ('BBB+'/Outlook Stable).
The ratings consider the high strategic importance of FMV in promoting and financing housing in Peru (specially related to social interest), and its critical role in the government's public policies to reduce the still elevated housing deficit in the country. At year-end 2014, FMV's loans accounted for almost 28% of the residential mortgage loans outstanding in the Peruvian market. It is the largest provider of social housing financing in Peru.
FMV's financial performance stabilized in 2015 (Operating ROAA of 1.4%) but remains limited by low margins, in keeping with its business model and social mission. Historical profitability has been supported by an adequate management of operating expenses that averaged 26.1% for the past four years, paired with a well-managed asset quality that has kept contained the provision of loan loss reserves.
Despite the consistent decrease on its capitalization, given the FMV's leveraged growth strategy, the capital robustness continues as one of its main strengths, favorably comparing to other peers. FMV's Fitch core capital ratio equaled 100.4%, a level that is deemed adequate given its limited profitability and its ample concentrations.
Since 1999, the bank has granted more than 87,000 loans, and only 0.5% has defaulted. FMV's direct borrowers, Intermediary Financial Institutions (IFIs), have no impaired loans as of June 2015. However, FMV bears part of the final debtors' credit risk through its credit risk coverage (CRC). Considering final borrowers, 1.9% of the loans were impaired.
FMV's wholesale role, the size of the market and the relatively limited number of entities in the local financial sector has resulted in relatively elevated concentrations per borrower, with the four main exposures accounting for 1.2x equity. The risk is somewhat mitigated by the sound credit standings of the main debtor banks.
FMV has improved its funding sources since 2013 by raising funds in the international capital markets. However, additional funding facilities and providers would be desirable to avoid the risks of a full concentration in public debt market.
Government influence manifests primarily in the appointment of board members and indirectly through the selection of the executive officers by the board..
RATING SENSITIVITIES
IDRS, SUPPORT RATINGS AND SENIOR DEBT
FMV's ratings will mirror any potential change in Peru's sovereign ratings, which currently have a Stable Outlook. Downward risk for FMV's IDRs is limited given its parent support and Peru's sound economic prospects.
Although not a baseline scenario, FMV's ratings could change if Fitch perceives a decrease in its strategic importance to the government's public policies.
Fitch has affirmed the following rating actions:
--Long-term IDR at 'BBB+'; Outlook Stable
--Short-term IDR at 'F2'
--Long-term local currency IDR at 'A-', Stable Outlook;
--Short-term local currency IDR at 'F2';
--Support rating at '2';
--Support floor at 'BBB+';
--Senior unsecured debt at 'BBB+'.
Additional information is available on www.fitchratings.com
Applicable Criteria
Global Bank Rating Criteria (pub. 20 Mar 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=863501
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=991721
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=991721
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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