Corporacion Financiera de Desarrollo S.A.

The stable outlook on COFIDE in the next 24 months reflects our expectation that its intrinsic creditworthiness will remain stable, with a RAC ratio above 5% in 2023-2025, even if credit risk charges increase following a potential downgrade of the sovereign and a weaker Banking Industry Country Risk Assessment (BICRA). In addition, we expect the government to continue providing support to COFIDE given our view that it will remain an important financing tool for the government's plans to restart the domestic infrastructure sector, while it also continues to be a key lending intermediary to SMEs. We could lower the ratings on COFIDE following a two-notch downgrade of Peru, or if we were to revise downward COFIDE's SACP by two notches

...We expect COFIDE to continue benefiting from the Peruvian government's support. Peru remains committed to promoting economic development through financing small and midsize enterprises (SMEs), productive sectors in the economy, and large infrastructure projects, all of which is deployed through COFIDE. Therefore, we believe there's a very high likelihood of extraordinary and timely government support in a scenario of financial distress for the entity. As a result, our long-term rating on COFIDE is three notches above its stand-alone credit profile (SACP). The entity's good capitalization supports its growth. We expect COFIDE to keep stable capitalization, with a risk-adjusted capital (RAC) ratio averaging 6.3% in 2023-2025 following moderate asset growth. COFIDE's asset quality remains weaker than the banking industry average. Although the entity's nonperforming loans (NPLs) have been decreasing to about 6.0% in recent years from 9.6% in 2020, the NPL ratio remains above the 3.5% average...

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