May 18, 2017 / 10:21 PM / in 8 months

Fitch Affirms Banco Interamericano de Finanzas' IDR at 'BBB-'; Outlook Stable

(The following statement was released by the rating agency) NEW YORK, May 18 (Fitch) Fitch Ratings has affirmed Banco Interamericano de Finanzas S.A.'s (BanBif) Long-term Foreign and Local Currency Issuer Default Rating (IDR) at 'BBB-'. A full list of rating actions is at the end of this release. The Outlook remains Stable given Fitch's expectations for a sustained financial and risk profile in line with the bank's current ratings. KEY RATING DRIVERS VR and IDRS BanBif's Long-Term Local and Foreign Currency IDRs are driven by its Viability Rating (VR) of 'bbb-'. The bank's VR is highly influenced by its comparatively moderate franchise. Banbif's ratings also consider its tight capitalization, sound asset quality, moderate profitability, stable funding and solid liquidity. BanBif is a medium-sized universal bank whose size grew steadily over the past eight years though it remains much smaller than the four major banks that dominate Peru. BanBif's local market share was approximately 3.6% of total loans and 3.8% of total deposits at December 2016. The bank has been consolidating and strengthening its competitive advantage in the second-tier market, achieving consistent, albeit modest, performance metrics while maintaining sound asset quality. BanBif's Fitch Core Capital (FCC) ratio is comparably lower than both local and international peers, as growth exceeded internal capital generation due to the rapid increase of credit costs in recent years. Given BanBif's stable performance and focus on less risky business sectors, Fitch views the bank's capitalization as adequate. During 2016 a deceleration in asset growth contributed to an improvement in the bank's FCC-to-risk weighted assets (RWA) ratio to 8.3% at YE16 from 7.8% at YE15. Although the bank's FCC ratio is relative low compared with international peers (universal commercial banks in the 'bbb' operating environment), Fitch expects lower asset growth to reduce pressure on capital. Sustained loan growth, resilient margins despite an uncertain operating environment, and the improvement in efficiency underpinned BanBif's financial performance. Nevertheless, relatively high credit cost related to loan quality deterioration continues to weigh on profitability metrics. The bank has a relatively diversified funding structure and is reliant on deposits (77% of the total funding at December 2016; 78% at YE15), which are only moderately concentrated. Liquidity risk is carefully monitored, and the bank's liquidity position is ample, as BanBif held about PEN3.6 billion of cash and equivalents that represented 44% of the total short-term funding as of Dec. 31, 2016. Deposits in USDs represent 50% of total funding given high financial dollarization within the country. BanBif's asset quality remains good despite the Peruvian economy's lower growth trajectory in recent years which led to a rapid increase in non-performing loans (NPLs). However, BanBif continues to exhibit one of the lowest delinquency levels in the Peruvian banking system. SUPPORT RATING AND SUPPORT RATING FLOOR BanBif's Support Rating of '4' and Support Rating Floor of 'BB-' indicate its systemic importance for the Peruvian banking system. As the fifth largest Peruvian bank, Fitch believes that there would be a limited propensity for support from the government, should it be required. RATING SENSITIVITIES IDRS and VR Upside potential for the international ratings is heavily contingent on a material improvement in capitalization levels, which is currently one of the weakest elements under Fitch's rating approach. An upgrade on the VR and IDRs could occur if the bank is able to reach and sustain an FCC ratio of at least 13%, while avoiding material deterioration of its other financial and qualitative credit fundamentals. A sustained increase of BanBif's risk appetite and / or deterioration in its loan portfolio that erodes its profitability and drives overall capital cushions (measured as FCC plus excess of reserves) below 8% could pressure ratings downward. NPLs consistently above 2.5% and operating profits-to-risk weighted assets ratios consistently below 1.2% also would be negative for creditworthiness. SUPPORT RATING AND SUPPORT RATING FLOOR Upside potential for the Support Rating (SR) and Support Rating Floor (SRF) is limited and can only occur over time with a material growth of the bank's systemic importance. These ratings could be downgraded if the bank loses material market share in terms of loans and customer deposits. Fitch has affirmed the following ratings: --Long-Term Foreign and Local Currency IDR at 'BBB-'; Outlook Stable; --Short-Term Foreign and Local Currency IDR at 'F3'; --Viability Rating at 'bbb-'; --Support Rating at '4'; --Support Rating Floor at 'BB-'. Contact: Primary Analyst Mark Narron Director +1-212-612-7898 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Sergio Pena Associate Director +571 484 6770 Committee Chairperson Alejandro Garcia Garcia, CFA Managing Director +1-212-908-9137 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: Additional information is available on Applicable Criteria Global Bank Rating Criteria (pub. 25 Nov 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. 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