Title: “Banco Falabella Perú: Rating Agency Maintains A- Grade with Stable Outlook”

2024-03-29 23:11:50

The risk rating agency Apoyo & Asociados maintained the grade of Banco Falabella Perú (BFP) as an entity at A- and granted it a stable outlook.

It also maintained the classifications for its short-term deposits at CP-1 (pe), for its deposits older than one year at AA-(pe), for its sixth negotiable certificates of deposits (CDN) program at CP-1(pe ), of its first subordinated bond program in A+(pe) and of its first issuance of the seventh CDN program in CP-1(pe).

The classifications of Banco Falabella Perú are based mainly on the support of Falabella (the Holding); and it can be seen that there is a relevant link between the parent company and its subsidiaries in Peru, the latter being significant within its regional expansion strategy, he noted.

“Currently, the Chilean Falabella Group is one of the largest retailers in Latin America,” highlighted the risk rating agency.

In January and May 2022, Inverfal Perú made two capital contributions for S/ 60 million and S/ 25 million, respectively, which contributed to strengthening the bank’s equity solvency, he mentioned. “As of December 2023, BFP’s capital ratio amounted to 18.4%,” he added.

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Banco Falabella finances purchases that clients make in their related businesses

The rating agency highlighted the business model and synergies that occur between the bank in question and the Group’s commercial units in Peru, which are highly integrated.

In this sense, the bank finances part of the purchases that clients make in related businesses such as Saga Falabella, Hipermercados Tottus, Sodimac Perú (which includes the Maestro brand), Linio and Falabella.comwhich in turn, contributes to customer loyalty and the growth of sales of these companies to their customers, he added.

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2023 was challenging for consumer financial entities

Next, he said that 2023 was challenging for financial entities, particularly for those specialized in consumption, since people’s payment capacity was affected by the economic slowdown, social protests and weather events.

After the pandemic, the bank recorded an improvement in its delinquency and coverage indicators, however, in 2023 these deteriorated. The high-risk portfolio (CAR) and heavy portfolio (CP) ratios were located at 8.7% and 14.2% as of December 2023, respectively (5.1% and 10.2%, in each case, as of December 2022), he added.

Likewise, the heavy portfolio adjusted for write-offs carried out during 2023, with respect to total credit placements, was 27% (18.6% as of December 2022), he detailed.

At the end of the period under analysis, the percentage of the heavy portfolio covered with provisions was 74.5%, being lower than that observed a year before (77%), he added.

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Banco Falabella did not make unilateral rescheduling

The classification company highlighted that, unlike other consumer financial entities, the BFP did not carry out unilateral rescheduling (of debts) to its clients, so the 2020 indices were affected by showing in a more real way the impact of covid on default. .

In 2023, Banco Falabella Perú registered a reduction in its loan placements to S/ 3,763.7 million from S/ 3,935.1 million in the previous year, due to lower disbursements of products with higher risk and the reduction of lines to riskier clients. in line with the poor economic performance and the drop in consumption in the country, he said.

However, as of that date, the bank was the first in issuing consumer credit cards in the financial system, with around 1.36 million cards, he said.

Despite the reduction in the balance of loans, the increase in average active interest rates (charged for loans) allowed financial income to increase by 17.6% compared to 2022; Although the greater increase in the cost of funding affected the bank’s gross financial margin, which decreased from 82% in 2022 to 79.3% in 2023, Apoyo & Asociados indicated.

The above, added to the significant increase in spending on provisions (S/ 738.6 million in 2023) as a result of the greater risk in the system, had an impact on the results of the banking entity, which reported a net loss of S/ 45.8 million, in contrast with the net profit of S/ 17 million in 2022, he detailed.

In this way, the average annualized profitability indicator (ROAA) was -0.9% (0.4% as of December 2022).

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Conditions that could modify the classifications granted

A negative classification action could arise from an eventual deterioration in the Peruvian economy that affects the payment and/or consumption capacity of its target clients, and that has a sustained impact on the delinquency, coverage and/or solvency indicators of the bank, he noted.

Likewise, new changes in the classification of its Chilean parent company could impact the BFP’s classification, he warned.

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Related topics:

Consumer financial entities are preparing capital contributions, when will they do it?

Bank of China Peru: this factor can put pressure on its margins

BCI: corporate, syndicated and club deals would be active this year

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