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

Firmado Digitalmente por:

GLORIA CECILIA RAMIREZ RIESCO Fecha: 23/05/2023 10:54:48 a.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

Ratings Score Snapshot

Credit Highlights

Outlook

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

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

Capital And Earnings: Consolidated Capitalization To Finance Growth

Risk Position: Cost Of Risk Increasing But Manageable And In Line With System Average Trend

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

Support: Highly Strategic To Intercorp Financial Services

Government Support: High Systemic Importance

Environmental, Social, And Governance

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Table Of Contents (cont.)

Key Statistics

Related Criteria

Related Research

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

Ratings Score Snapshot

Issuer Credit Rating

BBB-/Stable/--

Credit Highlights

Overview

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 Peru's retail segment	Political volatility dents short- to medium-term economic growth with a
	knock-on effect on the banking industry and the bank
Improved capitalization levels	Higher exposure to the retail segment than peers, which is more sensitive to
	conditions in the labor market

Banco Internacional del Peru S.A.A.'s (Interbank's) profitability is influenced by higher interest rates and the

normalization in the business mix as government guaranteed loans fade. Over the last quarters, Interbank's profitability consolidated as a result of the gradual normalization in the loan portfolio mix, with increased participation in the retail and midsize enterprises segments and a decline in loans guaranteed by the Peruvian government under the "Reactiva Peru" program. Also, revenue benefited from higher loan interest rates despite the increase in funding costs. For 2023-2024, the mentioned factors should help Interbank maintain healthy profitability despite the increasing cost of risk.

Interbank's capitalization levels have improved. Although Interbank has resumed dividend distributions and risk weights on assets have changed due to a change in the portfolio mix (with a declining proportion of loans under government programs that have 0% weight), we expect Interbank's risk-adjusted capital (RAC) ratio to remain sound at

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about 9.5%-9.7% for the next 12-24 months. This will be thanks to the mentioned improvements in profitability and capitalization of part of the results. 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, but compare well with the Peruvian

financial system averages. Over the past quarters, asset quality metrics improved as loans granted under Reactiva continued amortizing and guarantees were activated. Also, as part of actions taken at the industry level to mitigate the impact on customers affected by protests and climate events, the bank rescheduled some loans granted in the first quarter of 2023. We expect the credit quality of the industry and Interbank to remain above pre-pandemic levels amid mild economic growth and continued political volatility and the residual effects of the previously mentioned events.

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 central bank funding linked to government programs.

Outlook

The stable outlook on Interbank reflects our expectation that it will maintain stable credit fundamentals over the next 24 months. A potential downgrade of Peru wouldn't directly affect Interbank because we already rate it below the sovereign.

Downside scenario

We could lower the ratings if we downgrade Peru and lower Interbank's stand-alone credit profile (SACP) by one notch. However, we don't consider this scenario likely at this point.

Upside scenario

We could take a positive rating action on the bank if we were to revise upward its SACP due to consistent strengthening in its capital.

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 SMEs and microlending. Due to political instability, we believe investors will likely remain more cautious, resulting in meager GDP growth in the next two years. In this context, moderate economic growth, and higher inflation and interest rates will continue to drag down the industry's asset quality, although mitigated by higher provisions and conservative underwriting practices.

The industry risk for banks operating in Peru reflects a solid regulatory framework, with ample supervisory coverage and periodic risk-based supervision. Profitability is recovering after the hit from the pandemic, and we believe the

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financial system has healthy capital metrics and a diversified funding mix with a significant share of deposits from loyal customers. We also consider that the government has the ability to provide liquidity if necessary. The law on loan interest-rate caps and elimination charges for late payments didn't erode banks' profitability, but similar measures could weaken the system's competitive dynamics.

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

Interbank maintains a good competitive position as one of the largest banks in Peru, with significant presence in 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 2023, 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 toward consumer loans. By the end of March 2023, about 44% of the portfolio consisted of wholesale loans segments (focused in large and medium companies) and 56% in retail loans (now with more focus in consumer loans than credit cards and including mortgages), compared with 45% and 55%, respectively, at the end of 2019. About 4% of the bank's portfolio consists 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 moderate credit growth with a faster pace for retail loans and incorporating further amortization of loans under the Reactiva program. By the end of March 2023, the bank's remaining stock of loans granted under Reactiva programs amounted to about 1.8 billion Peruvian nuevo soles (PEN), of which about 68% were rescheduled as part of further relief measures ruled by the government in previous years. Also, we expect the bank to further expand the use of its digital platform.

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