Promerica Financial Corp.

The stable outlook on PFC for the next 12 months incorporates the group's resilient business, supported by its broad geographic diversification and sound market presence despite adverse economic conditions in some of the countries where it operates, especially in Ecuador. We expect the bank to keep a projected risk-adjusted capital (RAC) ratio of about 4.1% for the next two years while it maintains manageable asset quality metrics and a diversified deposit base during the same period. Finally, we forecast PFC's double leverage will be about 115% for the next 12 months. We could downgrade PFC if its double leverage increases above 120% during the next 12 months, which could result in the need for higher dividends from its subsidiaries. Additionally,

...We believe PFC's broad geographic and business diversification will enable it to withstand the adverse economic and social conditions of its main market, Ecuador. We expect Promerica Financial Corp.'s (PFC's) market share and diversified and stable revenue sources to support business stability for 2024-2025, despite the subdued economic growth and risk of fiscal slippage in Ecuador. We consider the gradual increase of PFC's retail portfolio loan in Central America, its steady lending growth at about 8%-10%, and its resilient interest net margins will enable the group to continue raising its operating revenues--8% on average--for the next two years. On the other hand, S&P Global Ratings estimates PFC's higher provisioning will take a toll on profitability during 2024-2025. We believe PFC will continue raising its provisioning due to the revision and fine-tuning of the group's expected loss model. In addition, we expect a sharper drop in the group's profitability during 2024 since we also...

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