Moody's assigns stable outlook to Peruvian banking system
As reported in a report, the rating agency predicts that sustained economic support, an increase in domestic demand and better conditions for the labor market will drive strong profits and stable levels of asset and capital risks for banks in the next 12 to 18 months.
The assigned outlook is aligned with the stable outlook for the A3 ratings of Peru's sovereign bonds and is in line with Moody's recent rating upgrades of three financial entities among the six rated reflecting the improvement in the credit profile.
"We expect the growth of bank loans to continue expanding at an average annual rate of 10.5% during the 2019-2020 period," said Valeria Azconegui, Vice President of Moody's.
"The loans will be mostly driven by consumer loans and mortgages, as they continue to observe low credit rates and greater financial intermediation, and to a lesser extent by corporate loans and loans to small and medium enterprises."
About 42% of Peru's loan portfolio is made up of low-risk corporate loans, which will help offset a possible increase in delinquency of consumer loans, mortgages and small and medium-sized businesses.
The lower exposure of loans denominated in US dollars to individuals whose income is denominated in local currency helps preserve the quality of bank assets.
The coverage of reserves will remain broad throughout the period covered by this perspective.
It is anticipated that the level of capitalization of Peruvian banks will remain strong and will fall slightly to 12.7% by the end of 2020 from 13% in 2018, given that loan gains and non-interest income will largely compensate consumer spending. capital on the horizon of this perspective.
"The ratio of tangible common capital of Peruvian banks is the second highest among its peers in Latin America."
Finally, the sustained growth of the level of loans together with diversified sources of income will help banks maintain solid levels of profitability, while cost controls and digital banking projects will benefit their good level of efficiency.