Fitch Expects to Rate Banco Inbursa's Proposed Senior Notes 'BBB+'
The proposed USD1,500 million senior notes will have a maturity of 10 years (due 2026) with semi-annual fixed-rate interest payments and the principal will be paid on the maturity day. The notes will be Banco Inbursa's direct, unconditional and unsecured general obligations.
KEY RATING DRIVERS
The expected rating of 'BBB+(EXP)' reflects that these are senior unsecured obligations of Banco Inbursa that rank pari passu with other senior indebtedness, and therefore, this rating is aligned with the bank's Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of 'BBB+', which in turn are driven by the bank's Viability Rating (VR) of 'bbb+'.
Banco Inbursa's ratings reflect its robust loss-absorbing capacity created by ample capital ratios and loan-loss provisions. It also considers the bank's adequate funding and liquidity profile which have been stable through economic cycles, and its historically low and contained credit losses. The ratings also factor in Banco Inbursa's strong and growing franchise on both sides of the balance sheet, especially when assessed with the other financial companies of its parent, Grupo Financiero Inbursa (GF Inbursa), and given the strong synergies with other non-financial companies related to the controlling shareholders. The bank's sound and relatively stable earnings are also considered positive.
Banco Inbursa's ratings also consider the relatively higher than its peers business, risk, and funding concentrations, although these have continued to decline gradually through increased consumer loans and retail deposits. The relatively high and volatile contribution of trading revenues is also factored in, although this item is typically positive and highly influenced by the mark-to-market of the bank's hedging positions. Also, Banco Inbursa is seeking to reduce the volatility of trading revenues by shifting the mix of its hedging positions and other funding alternatives.
RATING SENSITIVITIES
Given their senior unsecured nature, these notes will typically be aligned with the bank's IDRs, and the rating of the notes will mirror any potential change to Banco Inbursa's IDRs.
Specifically, Banco Inbursa's International scale ratings could be upgraded over the medium term if business and risk diversification continues to improve steadily, when the longer-term assets are entirely funded with stable customer deposits and/or wholesale debt that completely offsets tenor mismatches, and if the bank reduces earnings volatility driven by market-related revenues.
In turn, downside potential for these ratings and the National scale ratings would arise if the bank's capital adequacy metrics or internal capital generation deteriorate materially (i. e. FCC ratio below 15%), or in the event of a reversal in the improving trends in funding and liquidity, and/or business and revenue diversification. Materially higher earnings volatility and/or inability to sustain recurring operating profits to average assets above 1.5% could also be detrimental to the bank's ratings.
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