TEXT-Fitch affirms Banco Internacional del Peru (Interbank) at 'BBB-'
April 24 - Fitch Ratings has affirmed Banco Internacional del Peru's (Interbank) Issuer Default Ratings (IDRs) at 'BBB-'. The Rating Outlook remains Positive. A complete list of ratings is included at the end of this press release. Interbank's Viability Rating and IDRs reflect its sound retail franchise, focused strategy, good asset quality, adequate capital and reserve cushion, and solid performance through the global crisis. However, the ratings are tempered by the bank's deposit concentration and increased reliance on non-deposit funding to fund its loan growth. Interbank's Outlook remains Positive given its solid performance, good asset quality, and adequate capital and reserves cushion. Fitch anticipates that asset quality metrics could deteriorate moderately due to robust credit growth and loan portfolio seasoning. The ratings could be upgraded if Interbank curbs its reliance on non-deposit funding to improve its liquidity profile, while maintaining performance and capital and reserves at suitable levels for a bank with its risk profile. Interbank's ratings could be downgraded if a severe decline in asset quality or weak profitability erode its capital and reserve cushion. Interbank has built an efficient retail franchise that has helped position the bank as the leader in most retail products. The bank has not neglected its corporate lending business, which appears well focused and competitive. This brings balance and diversification to Interbank's balance sheet and revenue stream. Interbank has recorded sound performance through the economic crisis due to high margins, adequate expense control and moderate credit costs. Risk management is considered sound, and the portfolio is diversified into high margin segments. Interbank has developed and fine-tuned information-intensive credit scoring models and modern monitoring tools. Credit policies and origination are conservative while collection efforts are proactive and effective. An autonomous and dedicated risk management team helped the bank weather the 2008-2009 slowdown. Past-due loans stood at 1.5% at end-2011; this is likely to deteriorate in 2012 due to portfolio seasoning. Besides bolstering its capital in 2009, the bank maintains an ample reserve coverage thus creating a strong cushion against unexpected losses. Along with its strong profitability, this allows Interbank to confidently face an eventual downturn. Peru's economy shows a strong growth momentum based on sound macro fundamentals. In addition, a proactive regulator has created a strong regulatory environment. Interbank does not have as diversified a deposit base as its larger competitors; hence, funding costs are somewhat higher. In addition, the bank shows some concentration from its institutional funding and relies more on borrowings to fund its loan growth. Larger financial institutions and smaller, specialized and quite aggressive banks and consumer finance companies have somewhat curbed margin growth. Competition in this high growth market has heightened, and Interbank competes without compromising its credit criteria. Interbank is Peru's fourth largest bank, with a market share of about 11% of the banking system's assets. The bank is controlled by a well regarded local family which also has investments in retail and real estate. Fitch has affirmed Interbank's ratings as follows: --Long-term foreign currency IDR at 'BBB-'; Outlook Positive; --Short-term foreign currency IDR at 'F3'; --Long-term local currency IDR at 'BBB-'; Outlook Positive; --Short-term local currency IDR at 'F3'; --Viability Rating at 'bbb-'; --Support Rating at '3'; --Support Rating Floor at 'BB'; --Senior unsecured debt at 'BBB-'; --Junior subordinated debt at 'B+'. Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable Criteria and Related Research: --'Global Financial Institutions Rating Criteria' (Aug. 16, 2011); --'Rating Regulatory Capital and Similar Securities' ( Dec. 15, 2011). Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria Rating Bank Regulatory Capital and Similar Securities