Fitch Ratings has affirmed
In addition, Fitch has affirmed the IDRs of
Fitch has withdrawn
'bbb-'.
Key Rating Drivers
Stable Outlook:
Operating Environment Influence: Fitch believes
Strong Franchise in Retail Lending:
Stable Asset Quality: At YE 2021, the 90 days NPL ratio modestly improved to 3.0% (YE 2020: 3.2%), mainly due to significant charge-offs and a sharp reduction of credit reliefs (11.3% at YE 2021 from 17.0% at YE 2020). Reprogramed loans also declined to 14.5% of total loans at YE 2021 (YE 2020: 25.1%). The loan loss allowances coverage of impaired loans declined to 159.1% at YE 2021 (YE 2020: 212.6%), but is still adequate.
Excluding loans under the government guarantee relief program, which have low provisioning requirements, the reserves coverage is up to 187.5%, similar to pre-pandemic levels. Fitch believes that asset quality will remain stable in 2022 due to the gradual lifting of relief programs and lower unemployment compared with pre-pandemic levels, which should mitigate uncertainty from political volatility.
Improved Profitability: The operating profit to RWA ratio improved to 2.8% at YE 2021 from 0.6% at YE 2020, given the lower risk of credit related to the adjustments of expected loss estimations due to macroeconomic environment stabilization compared to the initial stages of the pandemic. Fitch expects profitability to decline in 2022 compared to 2021, when there was a significant reversion of provisions and non-recurrent income from trading, both outliers.
Adequate Capitalization:
Sound Liquidity: The bank's liquidity position is sound; however, it declined, reflecting tighter liquidity in the banking system. The loan-to-deposit ratio deteriorated to 101.0% at YE 2021 from 96.7% at YE 2020, as total deposits contracted by 1%. Historically, customer deposits have covered more than two-thirds of funding needs (71.4% at YE 2021).
Holding Company: IFS's ratings reflect the business and financial profiles of its main operating subsidiary,
Government Support Rating: The 'bbb-'GSR reflects high probability of support is forthcoming. The Peruvian government has a high propensity to provide support to
Rating Sensitivities
Factors that could, individually or collectively, lead to negative rating action/downgrade:
IDRs, VR, AND SENIOR DEBT
The IDRs are sensitive to a negative rating action on the sovereign or any deterioration of Fitch's assessment on the operating environment score.
GSR
IFS
IDRs and SENIOR DEBT
IFS's ratings are sensitive to a change in
A reduction on the importance of
A material and consistent increase in IFS's common equity double leverage above 120% or deterioration in its standalone liquidity profile.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
IDRs, VR, AND SENIOR DEBT
There is limited upside potential for
Over the medium term, ratings can be upgraded by the confluence of an improvement of the operating environment and the financial profile of the bank.
GSR
IFS
IDRs and SENIOR DEBT
IFS's ratings are sensitive to a positive change in
OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS
OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES
Factors that could, individually or collectively, lead to negative rating action/downgrade:
The subordinated debt ratings would be downgraded if
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Subordinated debt ratings would be upgraded if
VR ADJUSTMENTS
The Operating Environment score has been assigned above the implied score due to the following adjustment reason: Sovereign Rating (positive);
The Capitalization and Leverage score has been assigned above the implied score due to the following adjustment reason: Reserve coverage and asset valuation (positive).
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
RATING ACTIONS
Entity / Debt
Rating
Prior
LT IDR
BBB-
Affirmed
BBB-
ST IDR
F3
Affirmed
F3
LC LT IDR
BBB-
Affirmed
BBB-
LC ST IDR
F3
Affirmed
F3
senior unsecured
LT
BBB-
Affirmed
BBB-
LT IDR
BBB
Affirmed
BBB
ST IDR
F3
Affirmed
F3
LC LT IDR
BBB
Affirmed
BBB
LC ST IDR
F3
Affirmed
F3
Viability
bbb
Affirmed
bbb
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VIEW ADDITIONAL RATING DETAILS
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