Banco Internacional del Perú A Interbank : Informes De Clasificación De Riesgo.

Firmado Digitalmente por:

CARLA FABIOLA MURGUIA ALVARADO

Fecha: 25/05/2022 12:54:01 p.m.

Banco Internacional del Peru S.A.A. - Interbank

Primary Credit Analyst:

Ivana L Recalde, Buenos Aires + 54 11 4891 2127; [e-mail]

Secondary Contact:

Sergio A Garibian, Sao Paulo + 55 11 3039 9749; [e-mail]

Table Of Contents

Credit Highlights

Outlook

Key Metrics

Anchor: 'bbb-' For Commercial Banks Operating In Peru

Business Position: The Country's Fourth-Largest Financial Institution And Second Largest In Consumer Lending

Capital And Earnings: Consolidated Capitalization To Finance Growth

Risk Position: Manageable Asset Quality And In Line With The System Average

Funding And Liquidity: Wide Access To The System's Retail Deposits And Adequate Liquidity

Support: Highly Strategic To Intercorp Financial Services (IFS)

Government Support: High Systemic Importance

Environmental, Social, And Governance (ESG)

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Table Of Contents (cont.)

Key Statistics

Related Criteria

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Banco Internacional del Peru S.A.A. - Interbank

Credit Highlights

		Issuer Credit Rating
		BBB-/Stable/--
Key strengths	Key risks
High systemic importance for the Peruvian government, which	Low per capita income weakens Peru's economic resilience and limits debt
is supportive of the financial system.	capacity.
Strong market position in the retail segment in Peru.	Political volatility dents short- to medium-term economic growth with a
	knock-on effect on the banking industry and the bank.
Stronger capitalization levels.	Higher exposure to the retail segment than those of peers, and which is more
	sensitive to conditions in the labor market.

Growth resumption in the retail and small- to mid-size enterprise SME segments as relief measures are gradually

withdrawn. The government's response to the pandemic, including loans guaranteed under the "Reactiva Peru" program and loan deferrals, changed Banco Internacional del Peru S.A.A. - Interbank's loan portfolio. For 2022-2023, we expect a gradual normalization in the bank's portfolio mix through the growth of retail and SME loans and a gradual decline in Reactiva loans, resulting in higher profitability.

Stronger capitalization levels. Despite the expected change in portfolio mix, with a declining proportion of loans under government programs and resumed dividend distributions, we expect Interbank's risk-adjusted capital (RAC) ratio to be 9.6%-9.7% for the next 12-24 months. This will be thanks to capitalization of results, improving profitability as provisions return to normal levels, and still overall moderate credit growth. Current capitalization levels would allow the bank to overcome the impact on its RAC ratio in a scenario of rising economic risk for Peru's banking industry.

We expect Interbank's asset quality metrics to remain weaker than historical levels, given global and domestic events

but in line with the Peruvian financial system. Over the past few quarters, the bank's 90-daynon-performing assets improved because of actions it and the government took to offset the pandemic's economic fallout. We expect Interbank's asset quality to be influenced in the upcoming months by a continued growth in retail loans and as loans under government programs mature. However, we expect the bank's asset quality metrics to remain in line with

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Banco Internacional del Peru S.A.A. - Interbank

banking system average.

The ratings on Interbank incorporate its diversified and stable funding profile and sound liquidity coverage. The bank has a sticky deposit base and wide access to domestic and international capital markets, and to central bank funding linked to government programs.

Outlook

The stable outlook on Interbank in the next 24 months reflects our expectation that it will maintain stable credit fundamentals. A potential weakening of Interbank's intrinsic credit quality wouldn't automatically result in a downgrade because of the incorporation of the potential extraordinary support from the sovereign.

Downside scenario

We could lower the ratings in the next 24 months following a downgrade of the sovereign, together with a downward revision of Interbank's SACP by one notch. Also, the rating could fall if we were to revise downward the bank's SACP by two notches. However, both scenarios seem less likely at this point.

Upside scenario

We could take a positive rating action on the bank if we were to take a similar action on the sovereign or if revise upward the bank's SACP, but these scenarios seem unlikely at this point.

Key Metrics

Table 1

Banco Internacional del Peru S.A.A - Interbank Key Ratios And Forecasts*

		--Fiscal year ended December 31--
	2019a	2020a	2021a	2022f	2023f
Growth in operating revenue (%)	12.9	(7.6)	(1.6)	5.4-6.6	2.8-3.4
Growth in customer loans (%)	11.1	15.0	3.5	3.2-3.9	1.8-2.2
Growth in total assets (%)	11.0	29.7	0.4	3.8-4.6	2.9-3.6
Net interest income/average earning assets (NIM) (%)	6.7	6.0	5.0	4.8-5.3	4.8-5.3
Cost to income ratio (%)	38.4	39.5	45.9	45.0-47.3	46.1-48.5
Return on equity (%)	21.6	4.3	18.5	11.7-13.0	11.4-12.6
Return on assets (%)	2.5	0.4	1.8	1.1-1.4	1.1-1.3
New loan loss provisions/average customer loans (%)	2.6	5.1	1.0	2.2-2.4	2.1-2.3
Gross nonperforming assets/customer loans (%)	2.6	3.4	3.6	3.8-4.2	3.7-4.1
Net charge-offs/average customer loans (%)	2.1	2.1	3.0	2.3-2.3	2.2-2.2
Risk-adjusted capital ratio (%)	9.7	9.5	10.9	10.0-10.5	9.8-10.3

*All figures adjusted by S&P Global Ratings. a--Actual.e--Estimate.f--Forecast.

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Banco Internacional del Peru S.A.A. - Interbank

Anchor: 'bbb-' For Commercial Banks Operating In Peru

Our bank criteria use our Banking Industry Country Assessment's (BICRA's) economic risk and industry risk scores to determine a bank's anchor, the starting point in assigning an issuer credit rating. Our anchor for a commercial bank operating only in Peru (where Interbank mostly operates) is 'bbb-'. Peru's economic risk reflects its low per capita GDP (about $6,000) and the banking industry's high exposure to cyclical sectors such as small- to mid-size enterprises (SMEs) and microlending. We forecast GDP growth of about 2.5% in 2022, following a rebound of 13.3% in 2021 from a sharp decline due to the pandemic in 2020. Due to political instability, investors will likely remain more cautious, resulting in meager GDP growth in the next two years. Asset quality of the industry is likely to weaken in the second half of 2022, and for it to start recovering in 2023.

The industry risk for banks operating in Peru reflects a solid regulatory framework, with ample supervisory coverage and periodic risk-based supervision. The central bank and Superintendencia de Banca y Seguros--which regulates banks and insurers--are very active. Moreover, Peru has implemented Basel III standards tailored for the domestic financial system. Despite Peruvian banks' strong profitability, it has weakened during the pandemic, but we expect a consistent recovery. We also believe the financial system has healthy capital metrics and a diversified funding mix with a significant share of deposits from loyal customers, as well as the government's ability to provide liquidity if necessary. The law on loan interest-rate caps didn't significantly affect banks' profitability, but additional similar measures could weaken the system's competitive dynamics.

Business Position: The Country's Fourth-Largest Financial Institution And Second Largest In Consumer Lending

Interbank continues to enjoy a competitive position. It's one of the largest banks in Peru, with significant presence in the retail lending (about 22% of market share in consumer loans). The bank has a diverse business portfolio, operating in various segments in the country. As of March 2022, Interbank was the fourth-largest bank in terms of loans and the third largest in terms of deposits among 16 banks operating in Peru, with market shares of 13% and 14%, respectively.

After the pandemic's peak, the bank's loan portfolio began to shift back towards consumer loans. By the end of March 2022, about 48% of the portfolio consisted of wholesale loans segments (with focus in large and medium companies) and 52% in retail loans (including mortgages), compared with 45% and 55%, respectively, at the end of 2019. About 10% of the bank's portfolio consist of loans granted under the Reactiva Peru program (down from about 15% at the end of 2020). For the next 12-24 months, we expect a moderate credit growth--high pace among SME and retail loans, while the Reactiva loans amortize. The trends in the Reactiva loans would be influenced by the government's ruling that gives the possibility to further extend the maturities of these loans until the end of 2022. Also, we expect the bank to further expand the use of its digital platform.

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