Mar. 19, 2010 (Business Wire) -- Fitch Ratings has assigned the following initial ratings to Banco Internacional del Peru (Interbank):
--Foreign Currency Long-Term Issuer Default Rating (IDR) of 'BBB-';
--Foreign Currency Short-Term IDR of 'F3';
--Local Currency Long-Term IDR of 'BBB-';
--Local Currency Short-Term IDR of 'F3';
--Individual Rating of 'C';
--Support Rating of '3';
--Support Floor of 'BB'.
The Rating Outlook is Stable.
Interbank's ratings reflect its sound retail franchise, focused strategy, very good asset quality, adequate reserves and solid profitability through the global crisis. They also factor in the riskier profile of its portfolio, deposit concentration and below average but improved capitalization.
The bank's Support Floor is indicative of its systemic importance. Being the second largest Peruvian controlled bank, Fitch believes that there would be a strong propensity for support from the government, should it be required. Peru's ability to provide such support is deemed moderate and reflected in its 'BBB-' Sovereign rating.
Interbank's IDRs could be upgraded by Fitch if the bank strengthens its capital levels while continuing to grow, maintaining an adequate performance, good asset quality, and diversifying its funding sources. A rapid deterioration of asset quality that would increase provisions and stress capital and reserves could put pressure on Interbank's ratings.
Interbank's performance in 2008 and 2009 was driven by higher loan volumes, resilient margins and improved cross-selling. Operating revenues have benefited from the significant growth of the last few years while the expanded network and larger customer base boosted non-interest revenues but also operating costs; however, efficiency improved. The sound growth of the bank's corporate lending has added welcome diversification to its assets and revenues. Reversing the trend of the past few years, loan loss provisions increased since 2007 reflecting larger loan volumes, tighter provision requirements and the impact of the economic slowdown on asset quality. Nevertheless, profitability has improved, reaching historical highs with a return on average equity (ROAE) of 37% and a return on average assets (ROAA) of 2.8% at December 2009.
Deposits are wide-based albeit carrying a somewhat higher cost than they do for its larger competitors and being more concentrated. Asset quality declined slightly - driven mainly by credit cards and personal loans - but remains slightly better than the industry average and is adequately covered by reserves. Capital ratios improved from 2008 levels but remain below the industry average; Fitch expects that the bank will sustain its current capital levels in the medium term.
Interbank's loan portfolio growth should accelerate in 2010 as the bank exploits the opportunities created by the positive economic backdrop. Loans are expected to grow 15%-20% and should compensate for the expected increase in interest rates and ensuing pressure on margins. Continued expansion into retail should underpin margins while non-interest revenues should continue growing. Operating costs are expected to grow at a lower pace; on the other hand, loan loss provisions should continue pressuring profitability that may decline from 2009's record levels but should remain comfortably above 20% (ROAE) and 2% (ROAA).
Interbank is a medium-sized Peruvian bank, fourth in a highly concentrated market with a market share of about 11.2% by assets. A universal bank with a clear bias toward retail banking, Interbank is a top contender in each retail segment and boasts the country's largest ATM network. Interbank is controlled by a well-regarded local group.
Applicable criteria used in this rating action can be found at www.fitchratings.com including:
--'Global Financial Institutions Rating Criteria' (Dec. 29, 2009).
Additional information is available at 'www.fitchratings.com'.
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