Banco de Credito del Perú S A : Informes De Clasificación De Riesgo.

21 MAR 2024

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

Fitch Ratings - Monterrey/Bogota - 21 Mar 2024: Fitch Ratings has affirmed Banco de Credito Del Peru S.A.'s (BCP) Viability Rating (VR) and Long-Term Local and Foreign Currency Issuer Default Ratings (IDRs) at 'bbb' and 'BBB', respectively. The Rating Outlook for the Long-Term IDRs is Negative. Fitch Ratings has also affirmed the Long-Term Foreign Currency IDR of BCP's holding company Credicorp Ltd. at 'BBB' with a Negative Outlook.

Key Rating Drivers

BCP

Standalone Assessment: BCP's IDRs are driven by its VR of 'bbb', which is in line with the implied VR. The bank's strong and leading franchise, well-diversified business profile and funding base, as well as its sound and improving financial profile, underpin the ratings, which are constrained at the sovereign level due to limited geographical diversification outside of Peru and material exposure to foreign currency.

Challenging Operating Environment: Fitch expects financial performance to stabilize after downside risks in 2023. We believe the Peruvian banking system has been resilient despite political instability, weather-related events and continued negative impacts from slow global growth. Fitch expects economic growth of 1.9% in 2024 will be mostly a rebound from the low-base effect in 2023, while headwinds will remain for private investment and consumption, due in part due to political and social unrest.

Firmado Digitalmente por:

MARTHA PATRICIA HUAPAYA

HUAPAYA

Fecha: 21/03/2024 03:54:08 p.m.

This economic downside could result in some deterioration of asset quality, but the banking system's performance will remain solid and stable. The sound bank capitalization and liquidity levels should absorb any downside risks in 2024.

Leading Franchise: BCP is the largest bank in Peru, and the main subsidiary of Credicorp Ltd. (BBB/Negative), the country's largest financial holding company. BCP's consolidated numbers show a market share of 37.3% by loans and 38.7% by deposits at YE 2023. The bank maintains a leadership role in all major segments and products including wholesale banking, SME, microfinance, consumer, credit cards, mortgages, demand deposits, savings and time deposits. It has a universal banking business model with a well-diversified loan portfolio and healthy recurrent fee income.

Deteriorating Asset Quality: BCP's consolidated loan quality ratios were affected by a combination of lower economic activity and a challenging OE, coupled with the maturity of loans related to the Reactiva program and protests in some regions of the country. Wholesale loans decreased by 6.8% during 2023 while SME loans (especially related to the Reactiva program) decreased by 1.8%.

Consolidated past-due loans greater than 90 days slightly deteriorated to 3.4% at YE 2023 from 3.32% at YE 2022. Asset quality is well within the benchmarks for its rating category, and Fitch expects asset-quality ratios to remain stable or to deteriorate slightly in 2024 but to slowly return to pre-pandemic levels with a 3.3% to 3.5% range for the next two years. This should be amid a more benign operating environment (OE) that supports loan growth, and a more stable political environment in Peru.

Sufficient Reserves to Face Headwinds: BCP's consolidated loan-impairment charges (LICs) to

average gross loans deteriorated to 2.61% at YE23 (YE22: 1.46% due to the rise in refinancing loans and the higher economic risk, but should return to the 1.5%-2.0% range in 2024. Consolidated reserve coverage of 180.5% reached pre-pandemic levels (average of 186.5% for 2017-2019), and remains high and sufficient to cover expected losses from the remaining Reactiva loans and the refinancing retail loans.

Improving Expected Loan-ImpairmentCharges: Fitch believes the seasoning of the remaining Reactiva loans and those in the refinancing stage peaked in 2023. This better-than-expected loan performance, coupled with a low but positive grow in the loan portfolio, should result in relatively stable-to-improving LICs.

High, Sustained Profitability: Wider net investment margins (NIM), with strong fee income and commissions, outpaced the deterioration stemming from LICs. Consequently, the operating profit/ risk-weighted average (RWA) ratio rose to 3.98% from 3.80% at YE 2022, already aligned to the pre-pandemic average of 3.70% for 2016-2019, as we had expected. The gradual change in business mix in favour of retail lending, and more active balance-sheet management, should support wide NIMs even in a lower-interest-rate environment, due to the change in the Central Bank's monetary policy.

Improving Capitalization: BCP's capital position benefits from conservative internal solvency limits and its dividend policy, coupled with high profitability and negative asset growth during

2023. Capitalization ratios have increased steadily in the past few years, with common equity Tier 1 (CET1) reaching 13.09% at YE 2023.

Aligned with New Regulatory Requirements: Fitch believes BCP adapted successfully to higher and better-quality capital requirements according to Basel III principles, following adoption of the new Basel III requirements which started in 2023 and have a phase-in period ending in 2026. Fitch expects capital ratios to remain around the 11.5%-12.0% range in the mid term due to expected profitability and low loan and asset growth.

Diversified Funding Base: BCP benefits from a low-cost deposit base consisting predominantly of demand and savings deposits, which comprise about two-thirds of customer deposits. Time deposits outpaced demand and saving deposits due to customers' investment appetite under a high-interest-rate environment. BCP has the highest deposit market share in the country across all major products, at 36%. The loan/deposit ratio fell further, to 99.6%, though Fitch expects this to stabilize near the 101%-103% range. U.S. dollarization is stable and close to historical levels, and is not a focus for Fitch.

CREDICORP LTD

IDRS AND SENIOR DEBT

IDRs Driven by Main Subsidiary's IDRs: Credicorp's IDRs are driven primarily by the IDR of its main subsidiary, BCP, which has a strong business and financial profile. Credicorp's Long-Term Foreign Currency IDR of 'BBB' with a Negative Outlook is equalized with BCP's rating.

Low Double Leverage: The equalization is driven mainly by Credicorp's low double leverage and strong liquidity management. Double leverage is low, and improved to 98.6% by YE 2023. There is a long record of significant dividend flows, especially from BCP, that provide the bulk of Credicorp's liquidity.

Strong Corporate Strategy: Credicorp is a non-operating holding company that maintains an integrated business platform composed of leading Peruvian and Bolivian banking, insurance, pension, and asset and wealth-management companies, as well as entities in the microfinance (SME) sector in Peru and Colombia.

Consistent Performance: Credicorp's capital structure benefits from its subsidiaries' profitability, which allows it to maintain consistent dividend flows. Asset-quality ratios on a consolidated basis deteriorated at YE23 was 3.46% (YE 22: 3.11%) due to the challenging operating environment coupled with a decrease in gross loans and the maturity of the Reactiva portfolio, coupled with the deterioration of the SME loans at the subsidiary focused on that type of loans, Mibanco. Reserve coverage remained high, at 165.0% (YE21: 170.4%).

Improving Profitability: Consolidated profitability at YE23 was impacted by higher LIC which was

mitigated partially by improving NIM, with ROAE and ROAA at 15.88% and 2.09% (Dec 22:17.14% and 1.98%, respectively). Fitch expects this level to be stable during 2024 amid some headwinds in the OE due to the macro and political environment.

Senior Debt Ratings: The senior global debt rating is at the same level as Credicorp's Long-Term IDRs of 'BBB', as the likelihood of default of the notes is the same as that for Credicorp.

Rating Sensitivities

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/ Downgrade

BCP

• BCP's IDRs are sensitive to a material deterioration in the local operating environment or a negative sovereign rating action.
• BCP's VRs could be affected if asset quality deteriorates significantly and causes a sustained decline in operating profits/RWA to below 2.5% and in the bank's CET1 ratio to less than 10%, assuming the maintenance of excess reserves and non-core loss absorbing capital, for more than four consecutive quarters.

CREDICORP

• Credicorp's IDRs would remain at the same level as those of BCP, and would move in tandem with any rating action on its main operating subsidiary. However, the relativity between these two entities' ratings could also be affected - and the holding company downgraded - in the event of a material and sustained increase in Credicorp's double-leverage metrics (above 1.2x), and if Fitch perceives a material weakening of the holding company's liquidity position and its management;
• A change in the dividend flows from the operating companies or debt levels at the holding company that affects its debt coverage ratios could also be detrimental to Credicorp's ratings;
• The ratings for Credicorp's senior unsecured debt would move in line with its Long-Term IDR.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/ Upgrade

BCP

• BCP's IDRs are currently on Negative Outlook, which makes an upgrade highly unlikely over the rating horizon as the IDRs are constrained by the sovereign rating.
• Over the medium term, BCP's VR could be upgraded by the confluence of an improvement in the OE and the bank's financial profile.

CREDICORP

• Credicorp Ltd's ratings would move in tandem with positive rating actions on its main operating subsidiary, BCP;
• The ratings for Credicorp's senior unsecured debt would move in line with Credicorp's

Long-Term IDR.

OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS

BCP's senior unsecured bonds are rated at the same level as the bank's IDRs, considering the absence of credit enhancement or any subordination feature.

GOVERNMENT SUPPORT RATING

BCP would be likely to receive support from the Peruvian government, given its size and systemic importance, should it be required, underpinning its Government Support Rating (GSR). The ability of the sovereign to provide support is reflected in its 'BBB/Negative' IDR and underpinned by its sound financial position, ample international reserves and low debt. Regulators have a clear mandate to protect and preserve the banking system through conservative regulation and capable supervision. BCP's 34% and 36% market share by assets and deposits, respectively, and its outsized presence in all business segments make it a crucial part of Peru's financial sector.

OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES

OTHER DEBT AND ISSUER RATINGS - RATING SENSITIVITIES

-- BCP's senior debt ratings would move in line with its Long-Term IDR.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

--BCP's Government Support Rating (GSR) would be affected if Fitch negatively changes its assessment of the government's ability and/or willingness to support the bank.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

--BCP's GSR would be affected if Fitch positively changes its assessment of the government's ability and/or willingness to support the bank.

VR ADJUSTMENTS

The OE score has been assigned above the implied score due to the following adjustment reason: Sovereign Rating (positive).

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

The ratings of Credicorp Ltd are linked to Banco de Credito del Peru's ratings as it is its main subsidiary.

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.

Fitch Ratings Analysts

Ricardo Aguilar

Director

Primary Rating Analyst [phone]

Fitch Mexico S.A. de C.V. Prol. Alfonso Reyes No. 2612, Edificio Connexity, Piso 8, Col. Del Paseo Residencial, Monterrey 64920

Andres Marquez

Senior Director Secondary Rating Analyst [phone]

Claudio Gallina

Senior Director Committee Chairperson [phone]

Media Contacts

Elizabeth Fogerty

New York

[phone] [e-mail]

Rating Actions

ENTITY/DEBT	RATING			RECOVERY	PRIOR
Credicorp	LT IDR	BBB	Affirmed		BBB
Ltd.
	ST IDR	F2	Affirmed		F2
• senior	LT	BBB	Affirmed		BBB
unsecured
Banco de
Credito del	LT IDR	BBB	Affirmed		BBB
Peru S.A.
	ST IDR	F2	Affirmed		F2
	LC LT IDR	BBB	Affirmed		BBB
	LC ST IDR	F2	Affirmed		F2
	Viability	bbb	Affirmed		bbb
	Government	bbb-	Affirmed		bbb-
	Support
• senior	LT	BBB	Affirmed		BBB
unsecured

RATINGS KEY OUTLOOK WATCH

POSITIVE

NEGATIVE

RATINGS KEY OUTLOOK WATCH

EVOLVING

STABLE

Applicable Criteria

Bank Rating Criteria (pub.15 Mar 2024) (including rating assumption sensitivity)

Future Flow Securitization Rating Criteria (pub.14 Apr 2023) (including rating assumption sensitivity)

Additional Disclosures

Solicitation Status

Endorsement Status

Banco de Credito del Peru S.A.	EU Endorsed, UK Endorsed
Credicorp Ltd.	EU Endorsed, UK Endorsed

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