OREANDA-NEWS. Fitch Ratings has published its peer review of Chile's five private medium-sized banks.

This peer review of mid-sized Chilean banks covers five entities which, at December 2015, together have a 23.1% share of total loans, excluding Chilean banks' investments abroad. Their assets - ranging from USD7.715 million and USD18.700 million - are located in the domestic market and consist largely of loans to clients (74.3% of assets). This review affirmed the ratings of the five entities and withdraws Itau Chile, reflecting the banks' stable performance and healthy asset quality as well as their smaller franchise size and moderate profitability.

The five entities conduct traditional commercial banking business, with an asset structure built primarily on commercial loans and relatively concentrated funding based on domestic wholesale depositors. Mid-sized Chilean banks have historically had adequate risk/return ratios, although they tend to be more susceptible to abrupt changes in inflation and interest rates, as their funding structure is less reliant on cost-free financing (time deposits) than the large local banks.

The five banks reviewed in this report hold individually a 3.1% to 6.8% share of total loans, excluding the Chilean banking system's lending abroad. Despite their disadvantage in terms of size in a market dominated by the four largest banks, the mid-sized entities' performance benefits from operating in a well-regulated market that has strong barriers to entry and access to a deep long-term domestic funding market.