Fitch Ratings has downgraded Banco de Credito de Bolivia S.A.'s (BCP Bolivia) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to 'B' from 'B+', with a Stable Outlook.

Banco Fassil S.A.'s (Fassil) Local and Foreign Currency IDRs were also downgraded to 'B-' from 'B'; the Rating Outlook remains Negative. BCP and Fassil's Viability Rating (VR) were also downgraded to 'b-' from 'b'. A full list of the rating actions is provided at the end of the release.

The downgrade follows the recent downgrade of Bolivia's Long-Term Foreign Currency IDR to 'B' from 'B+'. The downgrade of Bolivia's ratings reflects deterioration in the country's growth prospects and public finances amid acute political tensions, which are likely to complicate smooth policy adjustments to contain macroeconomic risks after upcoming elections. The Long-Term sovereign Rating Outlook is Stable and reflects Fitch's view that continuing economic policy tensions and political/social risks are captured in the lower rating. For additional details see, 'Fitch Downgrades Bolivia to 'B'; Outlook Revised to Stable,' dated Sept. 20, 2020 and available at www.fitchratings.com.

The Stable Outlook on BCP Bolivia's support driven IDRs, reflect the Stable Outlook on the Sovereign as the parent, Credicorp Ltd. is rated several notches above (BBB+/Negative).

The Negative Outlook on Fassil reflects the increased downside risks from the economic implications of the coronavirus pandemic, reflected in the Negative Outlook for the operating environment score. Fitch believes the weaker economic conditions reflected in the expected contraction of the economy by at least 7.5% in 2020, will result in asset quality deterioration and weigh on profitability and capitalization.

KEY RATING DRIVERS

IDRs AND VR

Fitch believes Bolivia's sovereign rating and broader operating environment considerations such as the highly regulated and interventionist framework highly influence the VRs of BCP and Fassil, given the impact of the deep economic challenges on the banking system's financial performance. The worsening economic conditions also consider the impact of the coronavirus pandemic, which will negatively affect the banks' financial performance, and result in lower profitability, rising non-performing loans due to lower payment capacity of some debtors amid the crisis, and further capitalization pressures.

BCP's IDRs, reflect the support it would receive from its parent, Credicorp Ltd, if required. Fitch believes there is a high degree of integration between BCP Bolivia and its parent. Nevertheless, the IDRs are constrained by Bolivia's Country Ceiling of 'B', which, according to Fitch's criteria, captures transfer and convertibility risks. Aside from the operating environment, BCP Bolivia's VR is highly influenced by the bank's company profile, which reflects the its solid franchise the benefits of belonging to the Credicorp group. The VR also considers as a high importance factor the pressured profitability which will likely deteriorate in the near term.

Fassil's VR, or standalone creditworthiness, drives its IDRs. Aside from the operating environment, Fassil's ratings are highly influenced by its company profile and weak capitalization. Fassil's VR is particularly sensitive to lower than peer capitalization as Fitch Core Capital (FCC) to risk weighted assets (RWA) stood at 7.4% as of June 2020 (December 2019: 7.6%), which provides lower capacity to absorb unexpected losses specially under the current challenging operating conditions. Furthermore, despite the capital injection of Bs 70 million in early August, the total regulatory capital ratio remains low at 10.4%, well below the banking system average. The bank is in the process of a regulatory approval of a capital injection of about Bs 85.9 million, which is expected to provide some additional loss absorption capacity given the low internal capital generation of the entity.

SUPPORT RATING AND SUPPORT RATING FLOOR

Fitch affirmed BCP Bolivia's Support Rating (SR) at '4', reflecting a limited probability of support due to uncertainties about Credicorp's ability or propensity to provide support.

Fassil's SR and Support Rating Floor (SRF) are rated '5' and 'NF', respectively. In Fitch's view, sovereign support cannot be relied upon for Fassil, as it is not considered a systemically important bank

BCP Bolivia and Fassil have an ESG Relevance Score of 4 for Governance Structure due to their exposure to high government intervention reflected in the mandatory allocation of more than half their loan portfolio on specific sectors, which has a negative impact on the credit profile of the banks and is relevant to the ratings in conjunction with other factors.

RATING SENSITIVITIES

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

BCP

BCP's VR could be negatively affected if the bank's operating profit to risk weighted assets is consistently negative or near to zero, if its FCC ratio falls below 7%, or from a relevant deterioration of its access to funding or its liquidity profile.

IDRs and VR are also sensitive to changes in the sovereign rating, or further deterioration on the local operating environment. Negative rating actions on the bank's IDR will mirror those of the sovereign as its ratings are constrained by the Country Ceiling. IDRs are also sensitive to a change in Fitch views about the parent's willingness to support the bank.

Should Bolivia's sovereign rating be downgraded, the SR will also be downgraded.

Fassil

Sustained negative or near-to-zero results as well as additional pressures on FCC to RWA metrics to below 7% could also underpin a downgrade. A relevant deterioration of its access to funding or its liquidity profile could also have a negative effect on ratings.

IDRs and VR are also sensitive to changes in the sovereign rating, or further deterioration on the local operating environment.

There is no room for a downgrade of the SR or SRF.

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

BCP

Rating actions on the bank's IDRs would mirror those of the sovereign as BCP Bolivia's IDRs are constrained by the Country Ceiling.

BCP's VR upside potential is limited given the sovereign's current rating and unstable operating environment. Over the medium term, ratings could be upgraded by the confluence of improvements in the operating environment and the financial profile of the bank;

BCP Bolivia's support rating is constrained and an upgrade could occur if there is an upgrade of the sovereign rating, which is not likely as its Outlook is currently Stable.

Fassil

The Outlook could be revised to Stable following a revision of the operating environment factor to Stable along with a manageable impact on FCC, profitability and asset quality metrics due to the economic recession, which sustains its financial profile consistent with its current rating.

Fassil's ratings upside potential is limited given the sovereign's rating and unstable operating environment.

Upside potential for Fassil's SR and SRF is limited by its company profile.

'In accordance with Fitch Ratings' policies, the issuer appealed and provided additional information to Fitch Ratings that resulted in a Rating action that is different than the original Rating committee outcome.'

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 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit [https://www.fitchratings.com/site/re/10111579]

SUMMARY OF FINANCIAL ADJUSTMENTS

Goodwill, Prepaid Expenses and Deferred Payments were included as other intangibles and deducted from the FCC.

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

BCP Bolivia's IDRs are directly linked to Credicorp Ltd's ratings (BBB+/Negative).

ESG CONSIDERATIONS

BCP Bolivia and Fassil have an ESG Relevance Score of 4 for Governance Structure due to their exposure to high government intervention reflected in the mandatory allocation of more than half their loan portfolio on specific sectors, which has a negative impact on the credit profile of the banks and is relevant to the ratings in conjunction with other factors.

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
Banco Fassil SA	LT IDR	B- 	Downgrade		B
ST IDR	B 	Affirmed		B
LC LT IDR	B- 	Downgrade		B
LC ST IDR	B 	Affirmed		B
Viability	b- 	Downgrade		b
Support	5 	Affirmed		5
Support Floor	NF 	Affirmed		NF
Banco de Credito de Bolivia S.A.	LT IDR	B 	Downgrade		B+
ST IDR	B 	Affirmed		B
LC LT IDR	B 	Downgrade		B+
LC ST IDR	B 	Affirmed		B
Viability	b- 	Downgrade		b
Support	4 	Affirmed		4

VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

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