Category: Banking

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

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

Banking

Nubank expands product offering in Mexico with Akala acquisition, a credit positive

AtlanticIS

Brazil, September 21, 2021 – Brazilian leading online credit card fintech Nu Pagamentos S.A. (Nubank) announced the acquisition of Akala S.A. de C.V., Sociedad Financiera Popular, a savings and loans cooperative in Mexico, through its newly established Mexican subsidiary NU BN Servicios México, S.A. de C.V. (Nu Mexico). Nubank did not disclose the price of the transaction, but it has already received approval from Mexico’s banking regulator, Comisión Nacional Bancaria y de Valores (CNBV).

The acquisition is credit positive for Nu Mexico and Nubank in Brazil because it will provide the financial technology firm (fintech) with an operating license to access cheap and stable core deposits and allow Nu Mexico to launch new products and services to support its Mexican expansion. This transaction is also aligned to the parent’s growth plans in the region and the rapid implementation of its successful online credit card franchise focused on low income and underserved individuals. This also signals Nubank’s strategy to start its operations by leverage regulatory and market knowledge from local and licensed operating companies.

Acquiring Akala, which is regulated and has a financial services designation, demonstrates Nubank’s intention to fast expand its operations in Latin America’s second-largest economy behind Brazil. The Mexican market has garnered interest because of its favorable operating environment, low credit penetration and strong potential for financial inclusion. According to Mexico’s Instituto Nacional de Estadística y Geografía, the national census bureau, the country has around 70 million internet users and 65 million smartphones, but only 24 million people, or 25% of the country’s working age population, has a credit card.

By being able to receive deposits from the public, Nu Mexico will be able to start with low cost of funding, which will allow it to manage its prices and have a competitive position with incumbent banks that dominate the credit card business in Mexico. With an innovative and low cost business model, the fintech will likely challenge large banks to accelerate their investments in innovation and to expand its business lines beyond their traditional products and segments.

Nubank’s acquisition follows the deal announced by Credijusto (Apjusto, S.A.P.I. de C.V., SOFOM, E.R.), a small Mexican digital lender to small and midsize enterprises (SMEs), in June that acquired Banco Finterra, S.A., a local bank focused on offering financial services to SMEs in the agricultural sector. Such transactions (see exhibit) indicate a path for fintechs to overcome the high barriers to entry into Mexico’s banking sector, and signal that licensed fintechs and digital banks specializing in niche markets will intensify competition in various credit markets, challenging the profitability of smaller incumbent banks.

Sources: Dealogic, Moody’s Analytics and Moody’s Investors Service

It is unlikely that fintechs will displace large Mexican banks because large banks will retain their dominance in the financial system by focusing on customers at the top of the economic pyramid. By comparison, fintechs and digital banks usually cater to Mexico’s sizable unbanked and under-banked segments. Additionally, several Mexican banks are forming alliances with fintechs, creating fintechs through joint ventures with large technology companies or are seeking smaller fintechs that can accelerate and improve banks’ digital strategies.

Nubank’s expansion into Mexico began when the company opened its Mexican subsidiary in May 2019, its first operation outside Brazil. In June 2021, Nubank raised $750 million in capital. which allowed it speed up its Latin American expansion. The expansion plans received an additional boost when Nubank in April 2021 received a $70 million capital injection and $65 million in revolving credit lines from US banks.

Credit Outlook: 27 September 2021. Pg. 9
Moody’s Investors Service

Banking

Peru allows state-guaranteed loans to be restructured, a credit positive for banks

AtlanticIS

Peru, March 9, 2021 – The Government of Peru (A3 stable) issued an emergency decree to allow banks to restructure loans under its state guarantee programs Reactiva Perú and FAE-MYPE until 15 July 2021 and also allow an additional 12-month grace period during which borrowers will repay only the interest portion of their loans.

By allowing banks to restructure existing Reactiva and FAE-MYPE loans through mid-July, allowing an additional grace period, and providing state guarantees for up to 98% of a loan (depending on its size), banks have strong asset-risk protection for longer. However, Peruvian banks also risk reduced interest income dragging down their margins.

The Reactiva Perú program was set up in April 2020 and is a PEN30 billion ($8.9 billion) state-guaranteed credit facility that provides working capital to small and midsize enterprises (SMEs) and large corporates. The program aims to relieve liquidity strain and limit the number of loan defaults among corporate and SME borrowers, which supports banks’ asset quality and the economy. The FAE-MYPE program targets small and micro agricultural producers and will be used by banks as well as credit cooperatives.

Under Reactiva, banks were awarded state guarantees in auctions that ensured the lowest rate for the end user for a 36-month loan with a 12-month grace period of no capital repayment. The government provides a guarantee to the lending bank for 80%-98% of the loan on a pro rata basis, depending on the size of the credit.Lending under the Reactiva Perú state-guarantee for corporations and SMEs now accounts for around 16.5% of total loans, according to Central Bank data. The program ended on 30 November 2020 which was the last date when state guarantees could be applied for.

Problem loans in Peru were 3.4% at year-end 2020, 75 basis points higher than year-end 2019 before the pandemic. However, government aid such as the Reactiva program is key to mitigate an expected deterioration in credit quality. The four largest banks in the market – Banco de Crédito del Perú (Baa1/Baa1 stable, baa21), Banco BBVA Perú S.A.(Baa1 stable, baa2), Banco Internacional del Perú – Interbank (Baa1/Baa1 stable, baa2) and Scotiabank Perú (A3 stable, baa3) – hold around 90% of total loans to midsize companies and almost 100% of total loans to SMEs and are the greatest beneficiaries of the Reactiva program.

However, the additional grace period will reduce Peruvian banks’ interest income as capital on restructured loans need not be paid, which will compress their net interest margins. We estimate that the average rate on Reactiva loans with a 24-month maturity is 1.6%, well below average rates on other loans. In 2020, bank net interest margins fell by 100 basis points as provisioning expenses rose 120%; net income to tangible assets fell to 0.4%, from the 2.1% 2016-19 average. With the ability to restructure loans and allow borrowers to pay only interest, the new measures will allow banks to keep their loan-loss provision expenses in check, which will aid their net income.

Under the new measures, loans of up to PEN90,000 can be restructured without any requirement, loans between PEN90,001 and PEN750,000 can be restructured if the borrower’s sales fell by 10% in the fourth quarter of 2020 versus fourth-quarter 2019 and for loans between PEN750,001 and PEN5 million, borrowers must show that fourth-quarter sales fell by 20% versus 2019.

Credit Outlook: 15 March 2021. Pg. 17
Moodys

Banking

Google Pay expands into consumer banking, a credit negative for US banks

AtlanticIS

United States, November 18, 2020 – Google parent Alphabet Inc. (Aa2 stable) announced that it will launch Plex Accounts next year, a digital bank account offered within its Google Pay app in partnership with 11 US banks and credit unions. Google’s expansion into the distribution of consumer banking services is credit negative for US banks because it will increase competition for customer relationships, and in particular, competition for deposits, US banks’ primary funding source.

The launch of Google Pay Plex Accounts is an example of big tech’s expansion into retail financial services. It capitalizes on the rising popularity of digital wallets, an example of the widening application of digital innovations in financial services that we expect will continue to drive disruption across banking. Digital innovation and a flourishing financial technology sector present a threat to US banks.

Alphabet’s expansion into retail financial services distribution is consistent with our central scenario that large nonfinancial institutions intent on enhancing customer engagement will partner with incumbent banks to distribute financial services. Alphabet’s ability to partner with US banks and credit unions demonstrates the increasingly low barriers to entry for firms with large existing customer bases to distribute consumer financial services including deposit offerings. Digital innovation and changing customer behavior have lowered such barriers that historically included building out an expensive branch network.

US banks’ balance sheets are built on a foundation of low-cost, sticky deposits. Google Pay Plex Accounts will have no fees for monthly service, low balance, overdraft or in-network ATM use, and market its user-friendly interface and capabilities. Many US banks have similarly introduced online-only deposit products with low to no fees and/or high interest rates to capture additional deposits and customer relationships. Over time, increasing competition could raise deposit costs, pressure deposit fees and increase the need for banks to invest in emerging technology to attract or maintain customers. Failure to respond risks driving shifts in market share to those banks who best meet customer expectations.

The 11 US banks and credit unions partnering with Alphabet to offer Plex Accounts, including Citibank, N.A. (Aa3/Aa3 stable, baa11), would benefit from an inflow of consumer deposits and the potential to deepen new customer relationships. Citibank, N.A. and the other partnering banks will also have an early-adopter advantage in evolving their digital strategies to meet new customer needs. With the accelerating use of mobile payments and rising popularity of single-click digital wallets, incumbent banks need a strategy to stay in the customer-facing part of the payments business.

Alphabet will offer Plex Accounts within its own digital ecosystem, Google Pay, which provides a level playing field for partnering banks. However, the lack of friction within such a digital environment could ultimately increase competition among financial institutions, on and off the platform. Alphabet’s expansion into the distribution of financial services would align with big tech strategies to increase the scope and appeal of their digital platforms through enhanced customer engagement and a further strengthening of their consumer value proposition.

The launch also provides a blueprint for other firms with large existing customer bases keen to capture an increasing share of consumer activity and build customer loyalty. Increased user engagement enables these firms to capture valuable data and boost revenue. In our view, partnerships in which banks cede control of a large share of customer relationships pose the greatest risk to incumbent financial institutions. Such developments increase the risk of our alternate scenario, where big tech firms control a larger share of distribution and displace incumbents that fail to execute timely, effective digital strategies.

Credit Outlook: 23 November 2020. Pg. 16
Moodys