BANCO DE CRÉDITO E INVERSIONES
Fitch Ratings has affirmed
In addition, Fitch has affirmed BCI's Viability Rating (VR) at 'a-' and senior unsecured debt rating at 'A-', which is anchored by its LT IDR. The Rating Outlook on the LT IDRs remains Stable. At the same time, Fitch has affirmed the National LT and ST ratings for BCI and its bank holding company,
Fitch has also withdrawn BCI's Support Rating and Support Rating Floor as they are no longer relevant to the agency's coverage following the publication of Fitch's updated Bank Rating Criteria on
Key Rating Drivers
BCI
VR, IDRS AND NATIONAL RATINGS
The LT IDRs are driven by the bank's intrinsic financial strength as reflected in its VR, which Fitch has affirmed at 'a-'. The bank's VR exceeds its implied VR as its leading business profile as the largest bank in
Bank-based operations in the
The Stable Outlook on the Long-Term IDRs reflects Fitch's view that BCI's core financial metrics have sufficient headroom to maintain its current ratings, even if the operating environment conditions are moderately weaker than Fitch's base case because of external shocks or the ongoing economic slowdown in
Fitch's assessment for BCI's OE score is 'a-'. This is based on a blended analysis that considers the bank's significant international operations in the U.S. market, which has a high OE score (aa). BCI's OE score is one notch above those of its domestic peers (bbb+). The OE score directly impacts the benchmarks for the bank's core financial metrics, which are commensurate with the implied factor scores.
Fitch assessment of BCI's bussiness profile is 'a-' and is above its implied 'bbb' score, based on the bank leading market position as the largest bank in
BCI's risk profile, currently at 'a-' reflects the bank consistent focus on lower-risk borrowers and segments, portfolio diversification and highly collateralized or secured lending with robust valuations. BCI has further developed a strong risk management culture based on robust and prudent polices, as reflected in credit quality ratios in the recent past. In Fitch's opinion, these advances allowed BCI to reduce its global portfolio risk profile, impaired loans and concentrations.
BCI's asset quality metrics remain sound and outperformed those of some regional and local peers. This is reflected in an improved non-performing loans (NPLs) ratio of 0.92% at 2Q22 (1.2% average 2018-2021). Loan loss reserve coverage of NPLs, including additional credit impairment reserves, reached 3.1x as of 2Q22, a figure above the local peer average (2.8x). Portfolio concentrations are low and in line with its private-sector peers with the largest 20 debtors representing about 5.8% of total loans and about 0.57x common equity in
BCI's continuous growth despite a challenging macro and competitive scenario, controlled LLPs, and higher net interest margins have steadily supported the recovery of the bank's operating profit to RWA ratio, which stood at 2.1% at 2Q22 (average 2018-2021: 1.4%). BCI's diversified business model and revenues stream, improved cost/efficiency despite higher inflation and its leading digital transformation should support the preservation and improvement of its profitability level over the rating horizon.
BCI's CET1 to RWA ratio stood at 9.3% on
Fitch expects the bank's growing profitability and relatively more conservative risk appetite, underpinned by cautious growth, to support capital adequacy metrics for the foreseeable future. BCI is required to comply with an extra 1.5% of CET1 as a D-SIB considering its position as the largest Chilean bank by total assets and deposits.
BCI's funding is diversified, including a large core customer deposit base with the lowest loan to deposits ratio among Chilean D-SIBs (109%). BCI has stable long-term funding and established market funds access. Liquidity management is strong, with the bank reporting a liquidity coverage ratio of 192% on
SENIOR UNSECURED AND SUBORDINATED DEBT AND EQUITY RATINGS
Fitch rates BCI's senior unsecured bonds at the same level as the bank's LT IDRs and National LT scale ratings of 'A-' and '
Fitch rates BCI's National scale subordinated debt 'AA(cl)', two notches below its National LT issuer rating. The two-notch difference considers the loss severity due to its subordinated nature (after default), and no additional notching for non-performance risk given the subordinated debt's gone concern feature (triggered after the point of non-viability).
The rating of BCI's common shares of 'Primera Clase Nivel 1(cl)' considers the bank's solvency, reflected in its '
GOVERNMENT SUPPORT RATING
BCI's GSR of 'bbb+' is based on Fitch's view that BCI is a D-SIB, which underpins the government's propensity to support the bank should it be required. In Fitch's view, the
EJY's National scale ratings are equalized to BCI's ratings. The equalization is highly driven by the holding company's moderate double leverage (generally below 120%), and a prudent liquidity management. Equalization is also supported by the same jurisdiction of operations with its bank subsidiary; the holding company's 55.4% ownership of BCI and the long track record of dividend flows provided by the bank.
EJY' senior unsecured debt National ratings of '
Rating Sensitivities
Factors that could, individually or collectively, lead to negative rating action/downgrade:
VR, IDRs AND NATIONAL RATINGS
A negative rating action on the sovereign's IDRs would result in a similar rating action on BCI's ratings, even if the bank's financials remain relatively unchanged, as it is unlikely that the bank could be rated above the sovereign given its current financial profile.
BCI's IDRs and VR could also be downgraded if the entity's core capital metric is maintained below 9%.
SENIOR UNSECURED, SUBORDINATED DEBT AND EQUITY RATINGS
BCI's senior unsecured debt rating of 'A-' would generally move in tandem with the bank's LT rating.
Senior and subordinated debt ratings would generally move together with the bank's LT ratings. The subordinated debt remains two notches below the bank's National LT rating.
The rating of BCI common shares could be affected by a multiple notch downgrade of the bank's national LT rating or a significant decrease of the liquidity of the shares or of the market value of the bank.
GOVERNMENT SUPPORT RATING
BCI's GSR would be affected if Fitch negatively changes its assessment of the government's ability and/or willingness to support the bank.
EJY's National ratings would remain at the same level as Banco BCI's and would move in tandem with any negative rating actions on its main operating subsidiary.
The bank holding company's ratings could also be downgraded in the event of a material and sustained increase in EJY's double-leverage metrics (above 1.2x), or if Fitch perceives any weakening of the holding company's liquidity position and its management.
Additionally, a change in the dividend flows from the operating company or a material increase in debt levels at the holding company that affects its debt coverage ratios could also be detrimental to its ratings.
Factors that could, individually or collectively, lead to positive rating action/upgrade:
VR, IDRs AND NATIONAL RATINGS
As the current ratings are at the sovereign level and one notch above the implied OE score, the potential for an upgrade of the bank is limited, as it is unlikely that BCI could be rated above the sovereign considering its current financial profile.
Given the current National ratings are at the top of the National scale, there is no upside potential.
SENIOR UNSECURED, SUBORDINATED DEBT AND EQUITY RATINGS
BCI's senior unsecured debt rating of 'A-' would generally move in tandem with the bank's LT rating.
Senior and subordinated debt ratings would generally move together with the bank's LT ratings. The subordinated debt remains two notches below the bank's National LT rating.
The rating of BCI common shares could be affected by a multiple notch downgrade of the bank's national LT rating or a significant decrease of the liquidity of the shares or of the market value of the bank.
GOVERNMENT SUPPORT RATING
BCI's GSR would be affected if Fitch positively changes its assessment of the government's ability and/or willingness to support the bank.
Given the current ratings are at the top of the National scale, there is no upside potential.
VR ADJUSTMENTS
The VR of 'a-' has been assigned above the 'bbb+' implied VR due to the following adjustment reasons: Business Profile (positive); Risk Profile (positive);
The Operating Enviroment score of 'a-' has been assigned above the 'bbb' category implied score due to the following adjustment reasons: International Operations (positive);
The Business Profile score of 'a-' has been assigned above the 'bbb' category implied score due to the following adjustment reasons: Market Position (positive); Business Model (positive).
Best/Worst Case Rating Scenario
International scale credit ratings of Financial Institutions and Covered Bond issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
ESG Considerations
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
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