Credicorp Ltd.
Primary Credit Analyst:
Camilo Andres Perez, Mexico City + 52 55 5081 4446; camilo.perez@spglobal.com
Secondary Contact:
Ivana L Recalde, Buenos Aires + 54 11 4891 2127; ivana.recalde@spglobal.com
Ratings Score Snapshot
Credit Highlights
Outlook
Key Metrics
Anchor: ‘bbb-’ For Financial Institutions Operating In Peru
Business Position: Largest Financial Group In Peru
Capital And Earnings: Adequate Capitalization To Support Business
Strategy
Risk Position: Diversified Business Mix
Funding And Liquidity: Stable Funding Base And Healthy Liquidity
Support: No Uplift To The Group Credit Profile
Environmental, Social, And Governance
Key Statistics
Related Criteria
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WWW.STANDARDANDPOORS.COM/RATINGSDIRECT
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JULY 4, 2024 1
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Credicorp Ltd.
Ratings Score Snapshot
Credit Highlights
| Key strengths |
Key risks |
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High-quality and diverse asset base with dominant positions in most business segments.
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Complex political landscape dents short- to medium-term economic growth in Peru, affecting business conditions.
|
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Sufficient liquidity at the holding company to meet obligations, limiting dependence on dividends from operating subsidiaries.
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Credicorp has investments in multiple large assets in the financial industry in Peru and some presence in other Latin American countries. The
rating on the Bermuda-based nonoperating holding company (NOHC) incorporates the Credicorp group’s leading position in Peru’s financial industry, business diversification, steady earnings, adequate capitalization, manageable credit risks, diverse
and stable funding base, and good liquidity coverage.
Our rating on Peru influences the creditworthiness of companies in the domestic financial sector, including Credicorp. Our
foreign currency sovereign credit rating (BBB-/Stable/A-3) limits the group credit profile on Credicorp because we don’t think such a local entity could withstand a sovereign default scenario, given large asset exposure to the country.
Credicorp’s substantial liquid assets allow it to meet its financial obligations without depending on dividend streams, which mainly come from
highly regulated entities. Therefore, we believe a hypothetical suspension of dividend flow from operating subsidiaries wouldn’t compromise the NOHC’s ability to honor its obligations. We expect Credicorp to have sufficient
resources to repay its only debt issuance, which will come due June 2025. Its liquid assets, mainly cash and short-term investments in high-quality assets, cover its outstanding financial liabilities by 1.4x. This sound liquidity is also a
cushion to cover hypothetical contingencies or capital needs at the operating subsidiaries.
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Outlook
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The stable rating outlook on Credicorp for the next two years reflects that on Peru, which will continue influencing the group’s credit fundamentals. Credicorp receives a substantial
portion of dividends from its Peruvian operations across various financial segments. In addition, the holding company has substantial liquid assets that would ensure debt service coverage even in a scenario of low or no dividends.
The stable outlook also indicates the resilience of the group’s largest subsidiary, Banco de Credito del Peru, which we don’t expect to downgrade unless its
stand-alone credit profile falls below ‘bbb-’, which is unlikely.
Downside scenario
A downgrade of Peru could trigger a similar action on Credicorp. We could also lower the rating on Credicorp if its liquidity decreases and challenging business
conditions significantly weaken dividends received.
Upside scenario
We could upgrade Credicorp if we were to take a similar action on the sovereign while the group’s intrinsic credit fundamentals remain unchanged.
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Outlook
Key Metrics
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Credicorp Ltd.--Key ratios and forecasts
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--Fiscal year ended Dec. 31 --
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(%)
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2021a
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2022a
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2023a
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2024f
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2025f
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Growth in customer loans
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7.2
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0.7
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(2.5)
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4.0-6.0
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6.0-10.0
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Net interest income/average earning assets (NIM)
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4.6
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5.7
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6.6
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6.2-6.6
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5.7-6.3
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Return on average common equity
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13.9
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16.7
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15.8
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15.0-16.0
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13.0-15.0
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New loan loss provisions/average customer loans
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0.8
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1.2
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2.5
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2.0-2.3
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1.6-2.0
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Gross nonperforming assets/customer loans
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3.9
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4.1
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4.3
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4.0-4.4
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3.8-4.2
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Risk-adjusted capital ratio
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8.7
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9.0
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9.7
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9.8-10.0
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9.6-10.2
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All figures are S&P Global Ratings-adjusted. a--Actual. f--Forecast. NIM--Net interest margin.
Anchor: ‘bbb-’ For Financial Institutions Operating In Peru
Our bank criteria use our Banking Industry Country Risk Assessment’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 financial entity operating in Peru (where Credicorp mostly operates) is ‘bbb-’. (See “Banking Industry Country Risk Assessment: Peru,” Nov. 30, 2023.)
Business Position: Largest Financial Group In Peru
Credicorp’s solid business reflects its leading position in Peru’s financial sector, primarily through its largest subsidiary, Banco de Credito del Peru (BCP; BBB-/Stable/A-3), which owns
MiBanco Banco de la Microempresa S.A. (BBB-/Stable/A-3). In addition, the group has presences in the insurance and pension funds industries through Pacifico Seguros and Prima AFP (both not rated). The company also has asset management and wealth
management operations in Peru and other countries in the region through Credicorp Capital (not rated), as well as smaller banking operations including ASB Bank Corp. (BB+/Stable/B) and Banco de Credito de Bolivia (not rated).
BCP has made up 75%-80% of Credicorp’s earnings and dividends in recent years, while insurance and pension fund business have made up 10%-20% and banking operations in other jurisdictions and
Credicorp Capital the rest. BCP, which has diversified operations across all retail and wholesale segments, is the leading bank in Peru, with a lending market share of about 37% including its microlender subsidiary, MiBanco. These factors confer
stability to the bank’s business and dividend flows to Credicorp.
The group’s other businesses also have strong market presences:
| • |
Pacifico Seguros is the second-largest insurance player in Peru, with a leading position in the health industry (43% of premiums) and the second position in the life (27% of premiums) and property/casualty
segments (21% of premiums).
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| • |
Prima AFP is the second-largest player in Peru’s pension industry, with a 30% share in assets under management.
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| • |
Credicorp Capital has a wide presence in the asset management and wealth management segments, with a leading position in Peru’s brokerage and mutual funds market. It offers alternative investments, offshore
platforms, and structured products.
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| • |
Among the group’s foreign operations, the main operation is BCP Bolivia, which is the sixth-largest bank in the country.
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The group continues to invest in digital initiatives and fintech ventures across the Andean region. These have been embedded into different business units to complement product offerings and support Credicorp’s
competitiveness. For example, Yape, a payment platform with 15 million total users (and 11.5 million active users), has been increasing its functionalities and supplementing the group’s banking and insurance products.
Other ongoing digital initiatives in domains such as payments, neobanks, insurtech, and others complement current businesses. We expect investment flows to continue in the coming years, supporting
the group’s adaptability and competitive position amid rapid disruptive changes in the financial industry.
Credicorp’s results and dividend flows have recovered to pre-pandemic levels thanks to the increase in net interest margins amid higher interest rates, which has supported higher income from both
the loan and investment portfolios. Better insurance underwriting results have also boosted earnings in recent years.
BCP’s funding structure, heavily composed of low-cost transactional deposits, has helped contain funding costs amid the high interest rates. On the other hand, the rising cost of risk--due to
increased credit risks amid challenging economic conditions--somewhat limited earnings last year.
Credicorp’s return on average equity dipped to 15.8% in 2023 from 16.7% in 2022. We expect good profitability to continue in 2024, mainly because interest rates should remain relatively high during the year.
Capital And Earnings: Adequate Capitalization To Support Business Strategy
We consider Credicorp’s capitalization metrics commensurate with its business strategy. We expect its risk-adjusted capital ratio (calculated according to our methodology) to be roughly 9.9% in 2024-2025, slightly
above the 9.7% at the end of 2023, thanks to its main operating subsidiaries’ improving capacity to build earnings. Good capital buffers would allow the group to weather a potential deterioration of the Peruvian banking industry.
Our base case considers the following:
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Peru’s GDP growth of about 2.7% in 2024 and 3.0% in 2025.
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| • |
Average monetary policy rate of 5.0% in 2024 and 4.0% in 2025.
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| • |
Annual loan portfolio growth of about 5% in 2024 and 8% in 2025, with focus on small and midsize enterprise and consumer lending.
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| • |
Resilient net interest margins in 2024 but somewhat lower ones in 2025.
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| • |
Cost of risk of about 2%-2.5% of total loans amid lower credit risks.
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| • |
Nonperforming loan ratios above pre-pandemic levels, though declining somewhat amid better macroeconomic prospects.
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| • |
Continued investment in digital initiatives.
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| • |
Dividend distributions from Credicorp to its shareholders of 50%-70% of results but with flexibility to reduce them if needed, as in 2021.
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Credicorp has good regulatory capital metrics, with total regulatory capital at 1.3x the minimum requirement.
Risk Position: Diversified Business Mix
Credicorp has good business diversification, conservative growth strategies, and manageable credit risks, in our view. Meanwhile, BCP’s banking operations focus on lending, with no relevant concentrations among
economic sectors or customers.
Although dollarization in the Peruvian financial system has fallen in the past decade thanks to the central bank’s measures, it remains high at about 30% of total loans, similar to Credicorp’s 35%.
And as in the whole Peruvian banking industry, Credicorp’s asset quality remains strained due to the challenging macroeconomic scenario last year in Peru, stemming from volatile political conditions and adverse climate events that particularly
hurt the quality of microcredits, loans to small and midsize enterprises, and consumer credits in the middle- to low-income segments.
Our base-case scenario assumes better domestic economic conditions and bank subsidiaries’ recent improvements to their new loan originations will help keep asset quality manageable in 2024-2025.
However, we will monitor latent credit risks that could arise from continued political uncertainty and climate events in Peru.
Funding And Liquidity: Stable Funding Base And Healthy Liquidity
We consider the group’s funding structure and liquidity adequate, in line with our view of BCP’s funding and liquidity. Credicorp’s stable funding ratio has averaged 113% in the past three years, and broad liquid
assets to short-term wholesale funding averaged 2.4x (according to S&P Global Ratings’ calculations).
Customer deposits make up roughly 80% of Credicorp’s consolidated funding base, and half are retail deposits, which we deem more stable during times of market distress. The funding base also includes
interbank credit lines, market debt, and central bank repurchase agreements.
The NOHC’s substantial liquidity support its creditworthiness. We expect the company will maintain high liquid unencumbered assets to meet its financial obligations on its own. In 2020, Credicorp
issued $500 million, which matures June 2025, to enhance the cash cushion for potential contingencies. Its double leverage remains adequate at about 100%.
Support: No Uplift To The Group Credit Profile
Credicorp is 12.2% owned by the Romero family (based on floating shares), and the rest is held by private and institutional investors. Because of this, we base our rating on Credicorp on its own credit quality,
excluding parental support.
Despite the relevance of banking operations, our rating on Credicorp doesn’t include potential extraordinary government support. Although BCP would receive support, given its high systemic importance
in Peru, we don’t expect such support would be extended to the holding company.
Environmental, Social, And Governance
Environmental, social, and governance (ESG) factors have no material influence on our credit rating analysis of Credicorp, as with industry and domestic peers. Peru is somewhat exposed to natural disasters such as
earthquakes, volcanic activity, landslides, and the El Niño climate pattern. However, Credicorp, like other domestic financial entities, has been able to keep credit and operating losses moderate during such conditions.
In addition, the group has low exposure to the agricultural sector, which is vulnerable to these conditions. However, the Peruvian economy depends to some extent on the commodity metals sector,
which domestic banks generally don’t directly finance. Still, banks are indirectly exposed to the agricultural and metals sectors through the whole supply chain (suppliers, subcontractors, and employees who are also retail clients).
Key Statistics
Table 1
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Credicorp Ltd.--Key figures
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--Year ended Dec. 31--
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(Mil. PEN)
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2023
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2022
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2021
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2020
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2019
|
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Adjusted assets
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236,216.8
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233,854.2
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242,111.9
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234,766.9
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185,324.4
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Customer loans (gross)
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144,976.1
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148,626.4
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147,597.4
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137,659.9
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115,609.7
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Adjusted common equity
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27,628.8
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25,774.6
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21,966.6
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17,292.3
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19,597.1
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Operating revenues
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19,732.9
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17,288.0
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14,285.1
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13,335.7
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14,487.8
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Noninterest expenses
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9,262.3
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8,620.6
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7,740.1
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7,127.0
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6,666.5
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Core earnings
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4,959.9
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4,745.4
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3,671.8
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398.1
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4,352.3
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PEN--PEN-Peruvian nuevo sol.
Table 2
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Credicorp Ltd.--Business position
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--Year ended Dec. 31--
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(%)
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2023
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2022
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2021
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2020
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2019
|
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Total revenues from business line (currency in millions)
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19,732.9
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17,288.0
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14,285.1
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13,335.7
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14,487.8
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Commercial & retail banking/total revenues from business line
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81.2
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81.2
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84.4
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83.1
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85.2
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Corporate finance/total revenues from business line
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4.7
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4.7
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6.0
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7.4
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6.6
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Insurance activities/total revenues from business line
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5.7
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5.7
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5.9
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8.5
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5.8
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Asset management/total revenues from business line
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8.4
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8.4
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2.8
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2.8
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3.1
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Investment banking/total revenues from business line
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4.7
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4.7
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6.0
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7.4
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6.6
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Return on average common equity
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15.8
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16.7
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13.9
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1.4
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17.0
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Table 3
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Credicorp Ltd.--Capital and earnings
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--Year ended Dec. 31--
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(%)
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2023
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2022
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2021
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2020
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2019
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Adjusted common equity/total adjusted capital
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100.0
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100.0
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100.0
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100.0
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100.0
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Net interest income/operating revenues
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67.9
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66.6
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65.5
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64.3
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62.7
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Fee income/operating revenues
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19.3
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21.1
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24.5
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21.8
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22.3
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Market-sensitive income/operating revenues
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6.9
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6.7
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7.9
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8.9
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9.0
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Cost to income ratio
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46.9
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49.9
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54.2
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53.4
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46.0
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Preprovision operating income/average assets
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4.4
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3.6
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2.7
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2.9
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4.3
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Core earnings/average managed assets
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2.1
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2.0
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1.5
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0.2
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2.4
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Table 4
| Credicorp Ltd.--Risk position |
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--Year ended Dec. 31--
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(%)
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2023 |
2022 |
2021
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2020 |
2019
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Growth in customer loans
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(2.5) |
0.7 |
7.2 |
19.1 |
4.4 |
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Total managed assets/adjusted common equity (x)
|
8.6 |
9.2 |
11.1 |
13.7 |
9.6
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New loan loss provisions/average customer loans
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2.5 |
1.2 |
0.8 |
4.7 |
1.6
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Net charge-offs/average customer loans
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2.0 |
1.5 |
1.8 |
0.8 |
1.4
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Gross nonperforming assets/customer loans + other real estate owned
|
4.3 |
4.1 |
3.9 |
3.5 |
3.0
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Loan loss reserves/gross nonperforming assets
|
132.6 |
128.8 |
148.8 |
205.3 |
148.6
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Credicorp Ltd.--Funding and liquidity
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--Year ended Dec. 31--
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(%)
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2023
|
2022
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2021
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2020
|
2019
|
|
Core deposits/funding base
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79.5
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78.5
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76.0
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73.5
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77.3
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Customer loans (net)/customer deposits
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92.5
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95.8
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92.5
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89.7
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98.6
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Long-term funding ratio
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85.3
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86.1
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89.5
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86.5
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90.9
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Stable funding ratio
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113.4
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110.8
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110.4
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115.7
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114.3
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Short-term wholesale funding/funding base
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17.1
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15.8
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11.8
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15.1
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10.6
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Broad liquid assets/short-term wholesale funding (x)
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2.3
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2.3
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2.6
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2.5
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3.3
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Broad liquid assets/total assets
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30.8
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28.4
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25.2
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30.6
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27.1
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Broad liquid assets/customer deposits
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49.8
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45.7
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41.0
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51.1
|
45.4
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Net broad liquid assets/short-term customer deposits
|
35.3
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31.9
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31.8
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51.9
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53.8
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Short-term wholesale funding/total wholesale funding
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83.5
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73.8
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49.3
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56.8
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46.8
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Credicorp Ltd.--Rating component scores
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| Holding company issuer credit rating |
BBB-/Stable/-- |
| SACP |
bbb |
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Anchor
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bbb- |
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Business position
|
Strong |
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Capital and earnings
|
Adequate |
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Risk position
|
Adequate |
|
Funding
|
Adequate |
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Liquidity
|
Adequate |
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Comparable ratings analysis
|
0
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Support
|
0
|
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ALAC support
|
0
|
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GRE support
|
0
|
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Group support
|
0
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Sovereign support
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0
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| Additional factors |
-1
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ALAC--Additional loss-absorbing capacity. GRE--Government-related entity. SACP--Stand-alone credit profile.
Related Criteria
| • |
General Criteria: Hybrid Capital: Methodology And Assumptions, March 2, 2022
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| • |
Criteria | Financial Institutions | Banks: Banking Industry Country Risk Assessment Methodology And Assumptions, Dec. 9, 2021
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| • |
Criteria | Financial Institutions | General: Financial Institutions Rating Methodology, Dec. 9, 2021
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| • |
General Criteria: Environmental, Social, And Governance Principles In Credit Ratings, Oct. 10, 2021
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| • |
General Criteria: Group Rating Methodology, July 1, 2019
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| • |
Criteria | Financial Institutions | General: Risk-Adjusted Capital Framework Methodology, July 20, 2017
|
| • |
General Criteria: Ratings Above The Sovereign--Corporate And Government Ratings: Methodology And Assumptions, Nov. 19, 2013
|
| • |
General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
|
Related Research
| • |
Six Peruvian Financial Institutions Downgraded Following Same Action On Peru; Outlooks Stable, April 26, 2024
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Ratings Detail (As Of July 4, 2024)*
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Credicorp Ltd.
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Issuer Credit Rating
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BBB-/Stable/--
|
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Senior Unsecured
|
BBB- |
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Issuer Credit Ratings History
|
|
|
26-Apr-2024
|
BBB-/Stable/--
|
|
15-Oct-2021
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BBB/Negative/--
|
|
08-Jun-2020
|
BBB/Stable/--
|
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Sovereign Rating
|
|
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Bermuda
|
A+/Stable/A-1
|
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Related Entities
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|
|
ASB Bank Corp.
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|
|
Issuer Credit Rating
|
BB+/Stable/B
|
|
Banco de Credito del Peru
|
|
|
Issuer Credit Rating
|
BBB-/Stable/A-3
|
|
Senior Unsecured
|
BBB-
|
|
Subordinated
|
BB+
|
|
Banco de Credito del Peru, Panama Branch
|
|
|
Subordinated
|
BB+
|
|
MiBanco Banco de La Microempresa S.A.
|
|
|
Issuer Credit Rating
|
BBB-/Stable/A-3
|
*Unless otherwise noted, all ratings in this report are global scale ratings. S&P Global Ratings’ credit ratings on the global scale are comparable across countries. S&P Global Ratings’
credit ratings on a national scale are relative to obligors or obligations within that specific country. Issue and debt ratings could include debt guaranteed by another entity, and rated debt that an entity guarantees.
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