Author: AtlanticIS

Banking

Fitch Affirms Credicorp Bank’s Long-Term IDR at ‘BB+’; Outlook Stable

AtlanticIS

Panama, October 06, 2025 – Fitch Ratings has affirmed Credicorp Bank, S.A.’s Long-Term Issuer Default Rating (IDR) at ‘BB+’, Short-Term IDR at ‘B’, Viability Rating (VR) at ‘bb+’ and the Government Support Rating (GSR) at ‘No Support’ (‘ns’). Fitch has also affirmed Credicorp’s Long- and Short-Term National Ratings at ‘AA(pan)’ and ‘F1+(pan)’, respectively. The Rating Outlook for the Long-Term IDR and Long-Term National Ratings is Stable.

Key Rating Drivers

Operating Environment with Moderate Influence: Panama’s sovereign rating (BB+/Stable) and broader operating environment moderately influence Credicorp’s VR, with the sovereign rating continuing to cap the Operating Environment (OE) score despite fundamentals that point to a ‘bbb’ category. While GDP growth has slowed and interest rates remain high, system credit growth, asset quality, and profitability are outperforming Fitch’s expectations. Fitch projects GDP per capita and Operational Risk Index (ORI) to remain stable and continue to preserve operating conditions for banks.

Consistent Business Profile with High Capitalization: Credicorp’s international and national scale ratings are driven by its ‘bb+’ VR. Fitch views Credicorp’s business profile as strong, supported by conservative risk management, which has led to good asset quality and resilient profitability. Credicorp’s capital strength significantly influences Fitch’s decision to rate the bank at the same level as the Panamanian sovereign and mitigates the risks inherent in its business model.

Consolidated Business Model: Fitch’s ‘bb-‘ score for Credicorp’s business profile exceeds the implied level of ‘b’. Credicorp’s consistent business model, marked by a lower-risk, atomized customer base and proven earnings generation, offsets its lower levels of total operating income (TOI) compared to regional peers. From 2022 to 2025, the bank’s average TOI was USD74 million.

Credicorp’s market position is moderate, with a market share of 1.5% by assets in the banking system. The bank’s strategy focuses on strengthening its local franchise through consumer lending and enhancing operational and commercial efficiencies via medium-term digital transformation.

Well-Managed Risks: Fitch views Credicorp’s underwriting standards and risk controls as sound, demonstrated by controlled loan deterioration over the economic cycle, resulting in lower credit costs than direct peers. As of June 2025, its loan impairment charges-to-average gross loans ratio was 0.3%, below other mid-sized banks. Fitch’s assessment is also supported by the bank’s reasonable collateral levels, prudent investment policies and conservative balance sheet growth.

Good Asset Quality: Credicorp has maintained good asset-quality metrics that compare favorably with most local peers by metrics and concentration. As of June 2025, stage 3 loans comprised 2.0% of the portfolio. Loan loss allowance coverage of stage 3 loans was a reasonable 74.9%. Good levels of collaterals also support this assessment Fitch expects asset quality ratios to remain stable, with a forecasted stage 3 ratio of 2.1% for 2026 and 2027.

As of June 2025, Credicorp’s collaterals represented 81.2% to the total loan portfolio, while the top 20 borrowers represented 0.64x of the common equity Tier 1 (CET1) ratio. Fitch expects the bank to keep loan delinquencies at manageable levels by focusing on sectors and products where it has extensive expertise.

Consistent Profitability Supported by Associates: Credicorp has demonstrated good profitability and resilience. As of June 2025, the operating profit-to-risk-weighted assets (RWA) ratio was 2.4%, above the 2022-2025 average of 2.0%. Stable asset performance and recurrent profits from investments in associated companies have bolstered profitability. The net interest income from the loan book continues to compose nearly 68.8% of TOI.

However, Credicorp’s operating profits are substantially supported by the profits generated by associates, which as of June 2025 made up 50.6% of the bank’s operating profit (average 2022-2025: 41.1%). Fitch expects Credicorp’s profitability to remain strong, supported by its growth targets and benefits from its associates. Fitch forecasts an operating profit to RWA ratio of 2.2% for 2026 and 2027.

Capitalization a Rating Strength: Credicorp’s capitalization and leverage ratios are stronger versus similarly rated peers, and Fitch deems them a rating strength. As of June 2025, the bank’s regulatory CET1-to-RWA ratio was 21.9%, far exceeding the 10.5% total regulatory minimum. When including the regulatory countercyclical buffer (CCyB), the CET1 ratio reaches 23.6%.

Fitch expects the bank’s capitalization ratios to remain strong in the foreseeable future, supported by reasonable credit growth, consistent earnings generation, and moderate dividend payments. Fitch forecasts a CET1 ratio (including dynamic provision) of approximately 24% for 2026 and 2027.

Stable Deposit Base: Credicorp’s financing is supported by a growing deposit base that has historically maintained the loan-to-deposit ratio below 100%, ahead of its closest peers. As of June 2025, the ratio was 91.5%, influenced by moderate loan growth. Although its funding is concentrated, with customer deposits representing 92.8% of total funding, Credicorp complements its funding structure with medium-term wholesale sources that support asset-liability management.

As of June 2025, the balance of the 20 largest depositors represented 27.8% of total deposits, a proportion that has decreased in recent years, in line with the bank’s funding deconcentration strategy (June 2022: 36.8%). Fitch expects funding and liquidity metrics to remain stable in the medium term, with a likely loans to deposits ratio of 91.8% for both 2026 and 2027.

Source: Fitch Ratings

Infrastructure

Latin American Sovereign External Issuance Surges in 1H25

AtlanticIS

Latin America, July 23, 2025 – Latin American sovereign hard currency issuance surged to USD38.6 billion in 1H25, a 54% increase from the previous year and nearly matching the total for all of 2024, Fitch Ratings says in a new report. Ten sovereigns accessed external markets despite global geopolitical volatility and persistent high US policy rates, as emerging market sovereign spreads narrowed since the April ‘Liberation Day’ spike. However, volatility could return after the US tariff pause ends in August.

Issuance continues to be mainly in US dollars (73%), but this proportion is down from 91% in the first half of 2024, reflecting increased regional interest in diversifying currency exposure. Chile and Mexico issued euro bonds and Uruguay debuted Swiss franc bonds, while Panama stayed out of capital markets but raised significant funds via euro and Swiss franc loans. Activity also continued in global local currency-linked bonds (Dominican Republic, Paraguay).

Barbados returned to international markets with bonds featuring the world’s first pandemic clause, following its 2019 bond with natural disaster provisions. Fitch rated the bond in line with the sovereign’s rating, noting that payment deferrals under the clause would not be considered a default.

Distressed emerging-market sovereign spreads have tightened, although market access for some remains a challenge. Ecuador saw the biggest gain after re-electing a market-friendly government and reaffirming its IMF commitments; Argentina also saw narrowing spreads after securing a new IMF program and receiving a large upfront disbursement. Bolivia still faces high yields, rising default risks, and uncertain prospects ahead of elections and a large bond payment in 2026.

Source: Fitch Ratings

Banking

Fitch Takes Actions on Davivienda and Scotiabank following integration announcement

AtlanticIS

Colombia, January 15, 2025 – Fitch Ratings has affirmed Banco Davivienda S.A.’s Long-and Short-Term Local and Foreign Currency Issuer Default Ratings at ‘BB+’ and ‘B’, respectively. The rating outlook for the Long-Term IDRs is Stable. Fitch has also affirmed Banco Davivienda (Costa Rica), S.A.’s (Davivienda CR) Long- and Short-Term Local and Foreign Currency Issuer Default Ratings at ‘BB+’ and ‘B’, respectively, and its Shareholder Support Rating at ‘bb+’. The Rating Outlook for the Long-Term IDRs is Stable.

Fitch has placed Scotiabank Colpatria S.A.’s (SBC) Long-Term Foreign Currency and Local Currency IDRs of ‘BBB-‘ and ‘BBB’, respectively, its Shareholder Support Rating of ‘bbb-‘, and its local subordinated debt on rating watch negative. At the same time, Fitch affirmed the bank’s Viability Rating (VR) at ‘bb’, its national ratings, including the local senior unsecured debt, at ‘AAA(col)’ and ‘F1+(col)’, respectively.

The rating watch negative on SBC’s ratings reflects the potential credit implications due to anticipated changes in its shareholder structure. This is because, upon completion of the transaction, the expected main shareholder, Davivienda, would be rated lower than the current shareholder, The Bank of Nova Scotia (BNS) ‘AA-‘/ROS. Consequently, the Shareholder Support Rating, which drives the ratings, will be capped at Davivienda’s rating of ‘BB+’. Upon completion of the integration, Fitch expects SBC’s IDRs to converge toward those of Davivienda, which are in turn driven by the latter’s intrinsic credit profile as reflected in its own VR.

Fitch Ratings has also affirmed the Long- and Short-Term National Ratings of Scotiabank de Costa Rica, S.A. (Scotiabank CR) at ‘AAA(cri)’ and ‘F1+(cri)’, respectively. The Long-Term National Rating Outlook is Stable. At the same time, it affirmed the senior unsecured debt ratings at ‘AAA(cri)’.

These actions follow the Jan. 6, 2025 announcement that Davivienda has reached an agreement with BNS to integrate Scotiabank’s operations in Colombia, Costa Rica, and Panama into Davivienda. In exchange, Scotiabank will receive approximately 20% ownership stake in the new combined operations and participation on the Board of Directors. Simultaneously, BNS will purchase Grupo Mercantil Colpatria S.A.’s stake (44%) in SBC. This strategic move aims to consolidate their market position in Colombia and Central America and capitalize on synergies between Davivienda and BNS. The transaction is dependent on regulatory approval from authorities in Colombia, Costa Rica and Panama.

Upon completion of the non-cash agreement, Davivienda’s assets, liabilities, and equity are expected to grow by 40% while maintaining its capital position relatively stable without any goodwill generation. The strengthened market position in these three markets will enhance Davivienda’s footprint as a regional leader, while synergies from BNS will provide access to a broad global offering of financial solutions.

Fitch expects to resolve the rating watch negative on SBC upon closing of the transaction, which could take more than six months.

Key Rating Drivers: The affirmation of Davivienda’s ratings reflects Fitch’s expectation that this transaction will not negatively impact its operations or its strong business and financial profiles. Particularly, Fitch expects Capitalization core metric to be maintained above 10%, once the transaction is completed. Upside potential is limited due to challenges regarding the integration of bank operations and the significant efforts needed to normalize asset quality and profitability, mainly in Colombia, which remain contingent on its disciplined lending standards and pace of growth.

Strong Business Profile: Davivienda’s business profile is underpinned by its stable total operating income, strong market position in Colombia and leading franchise in Central America. Davivienda has a diversified business model, serving more than 24 million customers and offering a full suite of retail and commercial banking, as well as wealth management and capital market services. Fitch expects improvements in total operating income, efficiency and profitability, based on strengthened geographic diversification and synergies between the two entities once the integration of operations is completed.

Source: Fitch Ratings

Corporates

Impact of US Tariffs on Auto Industry: Key Insights

AtlanticIS

United States, February 10, 2025 – The recently announced US tariffs on imports from Mexico and Canada, if eventually implemented, could put pressure on the credit metrics of some global automakers. However, automakers plan to take various mitigating measures, which could offset the impact of the tariffs on their credit profiles.

On 1 February, the US announced a 25% tariff on most imports from Mexico and Canada (and a 10% tariff on China). The day before these measures were due to take effect, agreements with Mexico and Canada were reached to pause them for one month for negotiations on such subjects as migration, border security and trade. It is unclear what will emerge from the US-Mexico and US-Canada negotiations and how far the US is prepared to revise its proposals.

The potential 25% tariffs on Mexico would have the most significant implications for global automakers due to large exports of vehicles produced in the country to the US, followed by the proposed measures against Canada. The additional tariffs against China are likely to have a limited impact on the sector due to decoupling from the country’s supply chains in previous years.

Potential implications of the tariffs are likely to vary by company and will depend on the direct exposure to exports from Mexico and Canada to the US and the ability to pass tariffs on to customers, cut costs, increase prices on other vehicles to spread the costs of the tariffs, reroute shipments or implement other mitigating measures. It is not expected any material changes in the production footprints of supply chains until there is clarity about the tariff implementation.

Honda, General Motors, Nissan and Stellantis have the highest exposure to the US tariffs in a rated portfolio of original equipment manufacturers due to the high share of vehicles imported to the US from Mexico and Canada in their global sales.

Issuers with adequate or ample rating headroom will have greater flexibility to withstand the impact of the US tariffs than those with tight headroom. The Negative Outlooks on Nissan and Stellantis reflect weak performance in North America, which led to a drop in the companies’ profitability and cash flows even before the tariffs were announced.

Potential implications in this sector will be assessed based on prospects for the tariffs being implemented in full, whether they are likely to be temporary, retaliatory measures and corporates’ mitigating strategies.

Source: Fitch Ratings

Countries

US corporate default tally in 2023 was highest since pandemic, with more to come this year

AtlanticIS

United States, January 31, 2024

  • Elevated defaults point to rising tide in early 2024 before easing by year-end. Nonfinancial corporate family defaults nearly tripled to 92 in 2023 from 31 in 2022, the highest annual default tally since 2020. Our 12-month trailing issuer-weighted default rate wrapped the year at 5.6%, and is set to peak at 5.8% in early 2024, before slowly reverting to its historic average by June 2024 and then moderating further to around 4% by year-end. Although Q.o.Q. defaults were unchanged at 20 in Q4, levels remain elevated.
  • Private equity (PE) backed companies lead Q4 defaults. In contrast to public counterparts, defaulted PE-owned companies affected more loans than bonds, with about $7.8 billion versus $5.0 billion, respectively. Given the high incidence of senior secured loan-only LBOs among distressed issuers, leveraged loans will continue to experience higher defaults than high yield bonds. Majority of Q4 DEs involved amend-and-extend transactions, including loan maturity extensions, interest rate conversions to PIK.
  • Half of Q4 defaults were repeat defaulters, with 70% of these having a PE backer. Most re-defaulters were companies which completed at least one round of DEs in the past, followed by another out-of-court restructuring during the last three months of the year. Many were companies which had undergone one or two rounds of DEs previously and ultimately sought Chapter 11 protection or missed debt payments. We expect this trend to persist through most of next year, as the default rate is set to remain above average through the first half of the year.
  • Media sector stood out in Q4 with three defaults, completed as distressed exchanges (DEs) . However, the total defaulted debt for this group was small relative to the largest defaults in the telecommunications, retail, services, healthcare and packaging sectors. Looking ahead, the telecommunications and durable consumer goods sectors will face the highest default rates projected for 2024.
  • Credit risks remain high for lower-rated segment of spec-grade universe. The distressed subset of the B3N List, Caa2-PD and lower rated companies rose to 97, up from 87 in the previous quarter and 82 a year earlier. Many of these weaker private companies will succumb to default as liquidity conditions for those in the leveraged loan market deteriorates in the months ahead.

Credit Outlook: 1 February 2024. Pg. 35
Moody’s Investors Service