Fitch Affirms Banco de Credito del Peru at 'BBB+'; Stable Outlook

Fitch Ratings has affirmed Banco de Credito del Peru S.A.'s (BCP) viability (VR) and Issuer Default Ratings (IDR) at 'bbb+' and 'BBB+', respectively. A full list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

VR, IDRs AND SENIOR DEBT

BCP's, VR IDR and senior debt ratings are driven by its leading franchise; consistent, sound performance; diversified balance sheet and revenues; strong asset quality; adequate capital and reserve cushions; broad, low cost deposit base; positive operating and regulatory environment; ample liquidity; and moderate efficiency.

BCP has long had the country's largest branch/ ATM network and customer base. Boasting a dominant franchise, BCP offers a wide array of banking products and has achieved leading market shares in almost all segments.

BCP shows a strong and consistent performance based on strong earnings generation, adequate cost control and adroit risk management. BCP's strong profitability reflects the bank's positive environment, strong franchise, and focused management.

BCP is well diversified on both sides of the balance sheet and has a stable, recurrent, diversified revenue stream proper of a leading domestic commercial bank. Future expansion into retail lending, as well as the integration of Mibanco, should further diversify revenues and balance sheet.

Asset quality remains very strong in spite of a slight increase in past-due loans (PDLs) this reflects its well-diversified portfolio, sound risk management, and proactive remedial action, as well as the positive economic background.

BCP's core capital continues to compare well with that of its peers. Sustained profitability and earnings retention underpin BCP's capital which should be viewed in the light of its ample reserve coverage, sound profitability, and robust asset quality.

The bank's franchise and strong perception as a safe haven have allowed it to build, maintain, and grow a wide and low-cost deposit base. This is one of the bank's key strengths as it provides stability to its balance sheet and underpins its margins.

Peru's economy shows strong growth momentum based on sound macro fundamentals. In addition, a proactive regulator, eager to take the lead and apply pre-emptive remedies, has created a strong regulatory environment.

BCP has a quite liquid balance sheet and robust asset and liability management processes. In addition, the bank has ample access to local and international capital markets which it taps regularly to fund growth and manage its liabilities.

Given its sizable network and relatively low-risk (i.e. moderate margin) loan portfolio, BCP's efficiency lags behind its peers. Growth weighs on operating expenses but should, over time, contribute to improve efficiency by deepening customer penetration and cross-selling.

The Stable Outlook reflects Fitch's belief that the bank's strong balance sheet and performance are resilient to eventual downturns and even though some credit metrics may see a slight deterioration, they are likely to remain compatible with its current rating.

SUPPORT RATING AND SUPPORT RATING FLOOR

BCP's 30% market share in deposits and its outsize presence in all business segments make it a crucial part of Peru's financial sector. Support from the government should be forthcoming in case of need; Peru's ability to provide such support is reflect in its Sovereign Rating ('BBB+/A-') and underpins BCP's Support and Support Rating Floor ratings.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

BCP's subordinated bonds are plain vanilla and lack the features that would earn them equity credit following Fitch's criteria. In Fitch's opinion, their probability of non-performance is equivalent to that of BCP's senior bonds but, they would entail a higher loss in case of default due to their subordinated nature. Hence, they are rated only one notch below the bank's VR.

BCP's junior subordinated bonds, rated five notches below the bank's VR, have very strong equity-like features including the non-cumulative deferral of the coupons and a deeper subordination. This notching reflects the incremental non-performance risk relative to that captured by the VR and the loss severity (two notches) given its deeper subordination.

BCP EMISIONES LATAM 1

BCP Emisiones Latam 1 (BCPEL1) is a special purpose vehicle incorporated in Chile with the sole purpose of issuing local bonds guaranteed by promissory notes from BCP. Hence, BCPEL1's bond ratings are tied to BCP's VR.

RATING SENSITIVITIES

VR, IDRs AND SENIOR DEBT

Sustained Financial Strength: BCP's VR and IDRs are highly correlated with the strength of the Peruvian economy; should the economic environment continue to improve, as is reflected in its sovereign ratings, and the bank maintain a consistent performance and its structural strengths, BCP's ratings could be upgraded.

Significantly Weaker Performance: Though not Fitch's base case, BCP's VR and IDRs could suffer if operating environment deterioration materially affects the bank's asset quality and performance to levels worse than the market average, and leads to an erosion of the bank's reserve and capital cushions (FCC below 10% and or Operating ROAA below 1%).

SUPPORT RATING AND SUPPORT RATING FLOOR

BCP's SR and SRF could be affected if Fitch changes its view of Peru's ability or willingness to support the bank.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES

The Subordinated and Junior Subordinated debt ratings would move in line with BCP's VR.

BCP EMISIONES LATAM 1

BCPEL1's bond ratings would move in line with BCP's VR.

Fitch affirms BCP's ratings as follows:

--Long-term foreign currency IDR at 'BBB+', Stable Outlook;

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

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

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

--Viability rating at 'bbb+';

--Support rating '2';

--Support floor at 'BBB-';

--Senior unsecured debt at 'BBB+';

--Subordinated debt at 'BBB';

--Junior subordinated debt at 'BB-'.

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

--Senior unsecured notes at 'AA(cl)'.

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).

Applicable Criteria and Related Research:

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=827462

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