Interbank’s Baa1 ratings affirmed by Moody’s, outlook shifts to stable

Investing.com -- Moody’s Ratings has affirmed all ratings and assessments for Banco Internacional del Perú S.A.A. (Interbank), including its Baa1/P-2 long- and short-term domestic and foreign currency deposit ratings, and its Baa1 domestic and foreign currency senior unsecured debt ratings. Additionally, Interbank’s Baa3 subordinate debt ratings in foreign currency were also affirmed. The outlook for Interbank’s long-term deposit and senior unsecured debt ratings was adjusted to stable from negative on March 25, 2025.

The ratings and assessments for Banco Internacional del Peru (Panama Branch) (Interbank Panama Branch) were also affirmed, including its long- and short-term foreign currency Counterparty Risk Ratings (CRR) of Baa1 and P-2, and its Baa1(cr) and Prime-2(cr) long- and short-term Counterparty Risk Assessments (CRA), respectively.

The change in outlook for Interbank’s long-term deposit and senior unsecured debt ratings to stable is due to a gradual recovery in the bank’s financial fundamentals since June 2024. This follows four quarters of decline in asset quality and profitability metrics. The bank has shown consistent improvement in the quality of its loan book over the past two quarters, reflecting changes in its loan origination strategy and improving operating conditions in Peru. This trend is expected to continue into 2025.

The stable outlook also takes into account the bank’s solid deposit inflows which exceed the pace of credit growth, reducing pressure on funding needs for the next 12 to 18 months and easing tensions on future profitability.

In 2024, Interbank’s problem loans decreased by 60 basis points to 2.5% of gross loans at the end of the year, compared to 3.1% reported in December 2023. This improvement was largely driven by a slowdown in problem loan formation related to the consumer segment, which also helped to reduce provisioning expenses from a record high level reached in Q1 2024.

In terms of profitability, Interbank has been improving its net interest margins with higher business volumes and lower cost of credit, both of which have helped to offset pressures from lower interest rates. In the fourth quarter of 2024, net income more than doubled compared to the same period in 2023, resulting in a ratio of 1.9% of tangible assets, while credit cost declined to 2.7% of gross loans in the quarter, from 4.6% twelve months earlier.

Interbank’s liquidity profile remains solid in 2025, supporting its baa2 Baseline Credit Assessment (BCA). The bank’s market share increased to 13% of the system’s deposits, reflecting a sound deposit growth of 7% in 2024.

However, Interbank’s capital position is still moderate compared to its local peers in Peru. As of December 2024, the bank’s tangible common equity as a percentage of adjusted risk-weighted assets increased 60 basis points to 11.5% compared to the 13.3% peers’ average at the end of 2024. Moody’s anticipates that Interbank’s internal capital generation will balance the effects of risk-weighted asset growth in 2025, maintaining stable capital levels.

The deposit and senior unsecured debt ratings assigned to Interbank incorporate one notch of uplift from its baa2 adjusted BCA, resulting from Moody’s assumption of a moderate probability of support from the Government of Peru due to Interbank’s importance in the Peruvian banking system and the systemic consequences of an unsupported failure.

Moody’s notes that the Baa1 long-term deposit and senior unsecured debt ratings assigned to Interbank are at the same level as Peru’s government bond rating of Baa1. Therefore, an upward movement on these ratings is unlikely without a sovereign rating upgrade. However, the bank’s baa2 BCA could be upgraded following a sustainable improvement in their financial fundamentals.

Conversely, downward pressures on Interbank’s baa2 BCA could arise from sudden deterioration in asset risks, which would likely build up profitability pressures and, ultimately, capitalization. A downgrade on the sovereign debt rating for Peru would also pressure Interbank’s deposit and senior unsecured debt ratings, as these ratings benefit from government support uplift.

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