KEY RATING DRIVERS - IDRS, SRF and
The bank's IDRs, reflect the potential support from Banco de la Nacion's shareholder, the
It performs basic government functions (collections and payments), acts as the government's financial agent, finances key government activities (e.g. defence procurement and infrastructure), and maintains the country's most extensive branch network through which it provides financial services in remote areas where private banks are not present. Therefore, support from the government should be forthcoming, if needed. By the same token, Banco de la Nacion's support rating and support rating floor, indicate the direct link between the entity's creditworthiness and that of its shareholder, the
BN's asset quality ratios are considerably healthier than the Peruvian banking sector average and its international peers. BN's risk profile is relatively low, as lending is directed primarily to national and subnational governments, public agencies, public servants and government retirees. Past due loans (PDLs) accounted for a low 0.41% of gross loans and reserve coverage rose to 555.89% at the first quarter of 2014 (1Q'14).
In addition, despite downward pressure on interest rates, BN's profitability has remained relatively stable and strong. BN reported ROAA of 2.94% at 1Q'14 (2.92% at fiscal year-end 2012 [FYE12]). Profitability continues to be driven by asset growth and ample albeit narrowing margins, and growing non-interest revenues. BN's profitability is expected to remain robust in the near term due to its cost of funds and scope to grow its loan portfolio from existing liquidity.
A continuing constraint on the bank's
RATING SENSITIVITIES - IDRS, NATIONAL RATINGS AND SENIOR DEBT
As a fully state-owned financial institution, deeply integrated within the government, Banco de la Nacion's creditworthiness and ratings are directly linked to those of the
RATING SENSITIVITIES -
Conversely, greater protections against political influence, such as stricter eligibility criteria for Directors, would be positive for BN's
Fitch has taken the following rating actions:
Banco de la Nacion
--Foreign currency long-term IDR affirmed at 'BBB+'; Outlook Stable;
--Local currency long-term IDR affirmed at 'A-'; Outlook Stable;
--Foreign currency short-term IDR affirmed at 'F2';
--Local currency short-term IDR affirmed at 'F2';
--Support Rating affirmed at '2';
--Support Rating Floor affirmed at 'BBB+';
--Viability Rating upgraded to 'bbb-' from 'bb+'.
The Rating Outlook is Stable.
Additional information is available on www.fitchratings.com.
--'Global Financial Institutions Rating Criteria' (
Global Financial Institutions Rating Criteria
+52 81 8399 9170
+503 2516 6610
Source: Fitch Ratings
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