Corporacion Financiera de Desarrollo S.A.

The stable outlook on COFIDE in the next 24 months reflects our view that the bank will remain an important financing tool for the government to revive Peru's infrastructure sector and an important intermediary of loans to SMEs distributed through the banking system. Furthermore, we expect the bank will maintain its current capitalization levels, considering the sale of 14% of the bank's shares in CAF to the government, with high provisions and some volatility in asset quality metrics. We could lower the ratings in the next 24 months if asset quality metrics worsens beyond our expectations as COFIDE's credit exposure remains concentrated by customer and sector. Also, we could downgrade the bank if its RAC ratio drops consistently below 5%

...The long-term rating on COFIDE is four notches above its stand-alone credit profile (SACP) because there is a very high likelihood of extraordinary support from the Peruvian government. We base our view of this support on COFIDE 's very important role in meeting the government's key economic and social objectives and its very strong link with the government. COFIDE manages several government funds for economic recovery. These include Reactiva Per·, Fondo Crecer, and the Fondo de Apoyo Empresarial program specifically to small and midsize enterprises (lending programs under the scope of Fondo de Apoyo Empresarial include FAE -MYPE, FAE- Turismo and FAE-Agro) that lead to higher fee income. In addition, the bank's 30% loan portfolio growth in 2020 was driven by loans guaranteed by the government under the FAE programs through financial institutions, which also implies the bank's lower use of capital. This year, we expect lower loan portfolio growth as the FAE portfolio begins to mature and...

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