News Column

Fitch Completes Peer Review of Peru's Largest Banks

September 3, 2014

NEW YORK--(BUSINESS WIRE)-- On May 27, 2014, Fitch Ratings completed a peer review of large Peruvian banks that covered the top four names in the country, comprising approximately 84% of Peru's banking system's assets. Their business volumes -- largely concentrated in Peru -- ranked between USD35 billion and USD10.6 billion at year-end 2013 (YE13). Following this review, three banks were upgraded considering their sound competitive position, strong balance sheet and consistent performance. Fitch also considered the positive operating environment, GDP growth prospects and positive trends in terms of employment and GDP per capita.

Peru's top four banks - Banco de Credito del Peru (BCP), BBVA Continental (BC), Scotiabank Peru (SBP) and Banco Internacional del Peru (IBK) - have continued their healthy growth, maintained their sound performance, robust asset quality, adequate capital and stable funding and liquidity. While some differences persist, these banks boast strong credit metrics that compare very well to those of their regional and global peers. In addition, they enjoy strong competitive positions in an open yet concentrated market.

Sustained GDP growth, diversification strategies and low banking penetration allowed banks to grow and maintain well-diversified balance sheets. Retail and SME lending have increased their share of the loan portfolios. Accordingly, revenues are better diversified, cross-selling has improved and retail deposits have grown and contributed to reduce concentrations on both sides of the balance sheet.

Some performance metrics have declined from the historic highs of 2007-2009 but large Peruvian banks maintain a strong and healthy profitability. Revenues are well diversified and have shown resilience while operating expenses -- that saw periodic surges due to network expansion -- have grown in line with asset growth. Profitability is expected to decline but should continue to compare well to that of their peers.

Peruvian banks have been very active in local and international capital markets and have greatly improved their funding base with low-cost, medium-term funding. Along with the broad-based and stable retail deposits, this funding has allowed the banks to improve their asset/liability matching and better manage liquidity.

Fitch expects these large Peruvian banks to sustain their balance sheet strength and robust performance through the economic cycle, supporting current rating levels.

During the peer review, Fitch took the following rating actions:

Banco de Credito del Peru

--Long-term foreign currency Issuer Default Rating (IDR) upgraded to 'A-' from 'BBB+', Stable Outlook;

--Short-term foreign currency IDR upgraded to 'F1' from 'F2';

--Long-term local currency IDR upgraded to 'A-' from 'BBB+', Stable Outlook;

--Short-term local currency IDR upgraded to 'F1' from 'F2';

--Viability rating upgraded to 'a-' from 'bbb+';

--Support rating affirmed at'2';

--Support floor revised to 'BBB' from 'BBB-';

--Senior unsecured debt at upgraded to 'A-' from 'BBB+';

--Subordinated debt upgraded to 'BBB+' from 'BBB';

--Junior subordinated debt upgraded to 'BB' from 'BB-'.

In addition, Fitch upgraded the following rating for BCP Emisiones Latam 1 S.A.:

--Senior unsecured notes upgraded to 'AA+' from 'AA(cl)'.

BBVA Banco Continental

--Long-term foreign currency IDR upgraded to 'A-' from 'BBB+', Stable Outlook;

--Short-term foreign currency IDR upgraded to 'F1' from 'F2';

--Long-term local currency IDR upgraded to 'A-' from 'BBB+', Stable Outlook;

--Short-term local currency IDR upgraded to 'F1' from 'F2';

--Viability rating upgraded to 'a-' from 'bbb+';

--Support rating affirmed at'2';

--Support floor revised to 'BBB' from 'BBB-';

--Senior unsecured debt at upgraded to 'A-' from 'BBB+';

Continental Trustees (Cayman) Ltd.

--Senior secured junior subordinated loan participation notes upgraded to 'BB+' from 'BB'.

Continental Senior Trustees (Cayman) Ltd

--Senior secured loan participation notes upgraded to 'A-' from 'BBB+'.

Continental Senior Trustees II (Cayman) Ltd.

--Senior secured loan participation notes upgraded to 'A-' from 'BBB+'.

Scotiabank Peru

--Long-term foreign currency IDR at 'A-'; Outlook Stable;

--Short-term foreign currency IDR at 'F1';

--Long-term local currency IDR at 'A+'; Outlook Stable;

--Short-term local currency IDR at 'F1';

--Support rating at '1';

--Subordinated debt at 'A-';

--Viability rating at 'bbb+'.

Banco Internacional del Peru

--Long-term foreign currency IDR upgraded to 'BBB+' from 'BBB', Stable Outlook;

--Short-term foreign currency IDR affirmed at 'F2' ;

--Long-term local currency IDR upgraded to 'BBB+' from 'BBB', Stable Outlook;

--Short-term local currency IDR affirmed at 'F2';

--Viability rating upgraded to 'bbb+' from 'bbb';

--Support rating upgraded to '2' from '3';

--Support floor revised to 'BBB' from 'BB+';

--Senior unsecured debt upgraded to 'BBB+' from 'BBB';

--Subordinated debt upgraded to 'BBB' from 'BBB-';

--Junior subordinated debt at upgraded to 'BB' from 'BB-'.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Jan. 31, 2014);

--'Assessing and Rating Bank Subordinated and Hybrid Securities' (Jan. 31, 2014);

--'Rating Financial Institutions Above the Sovereign' (Dec. 11, 2012);

--'Rating FI Subsidiaries and Holding Companies' (Aug.10, 2012).

Applicable Criteria and Related Research: Peer Review: Large Peruvian Banks (Growing Strong)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=759567

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732397

Assessing and Rating Bank Subordinated and Hybrid Securities Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=732137

Rating Financial Institutions Above the Sovereign

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696373

Rating FI Subsidiaries and Holding Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Diego Alcazar (BCP, BC, Interbank and SBP)

Director

+1-212-908-0396

Fitch Ratings, Inc.

33 Whitehall St.

New York, NY 10004

or

Secondary Analysts

Alejandro Tapia (BCP and BC)

Director

+52 81-8399-9156

or

Larisa Arteaga (SBP)

Director

+1-809-563-2481

or

Veronica Chau (Interbank)

Director

+52 81-8399-9100

or

Committee Chairperson

Alejandro Garcia

Senior Director

+52-81-8399-9146

or

Media Relations:

Elizabeth Fogerty, New York, +1 212-908-0526

Email: elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings


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