LatAm Corporate Debt

Financial Sector

Peruvian Banking System

What to look out for? An assessment on large bank investment portfolios
March 17, 2023

Following the SVB securities loss event and the subsequent concern of the market in other regions, we analyzed
the investment book for the largest Peruvian Banks: Banco de Crédito –BCP- (Holding: Credicorp), Interbank
(Holding: Intercorp), BBVA, and Scotiabank. It is important to highlight the two main forms in which investments
affect the books: i) Available for sale securities (AFS) which affects banks' profits due to the Basel reasons, and ii)
Held-to-maturity investments, which do not reflect gains or losses in the books and unrealized losses are
excluded from regulatory capital. We highlight that the only banks that have HTM investments are BCP and
Interbank, while BBVA and Scotiabank hold no securities classified as HTM.

As of December 2022, Interbank showed PEN 3.3 BN in held to maturity investments at book value, with
unrealized losses of PEN 338.1 MM, which represent 4.8% of total equity. On its side, BCP has PEN 9.3 BN in
assets classified as held to maturity, and PEN 941.3 MM in unrealized losses, representing 4.2% of shareholder’s
equity. The former has all HTM securities composed entirely of sovereign bonds of the Republic of Peru, while the
latter is composed, in its majority, of Peruvian sovereign bonds and the other part of Certificates issued by the
government to finance projects and concessions. It is important to highlight that BCP and Interbank hold a market
share of 34.4% and 12.7%, respectively, in terms of loans. As mentioned, neither BBVA Peru, nor Scotiabank Peru
hold assets recorded as HTM.

Regarding the possible effects in Total Capital Ratio, we estimated that this unrealized HTM losses will reduce
the gauge in 60 bps for BCP and 50 bps for Interbank, standing at 13.8% and 14.6%, respectively. This remains at
comfortable levels well above the minimum regulatory of approx. 10%.

All in all, we estimate there is no major risk in Peruvian Banks in terms of the embedded losses coming from HTM
classified securities, since we consider an exposure lower to 5% in unrealized losses over book value, and an effect
of approx. 50-60 bps in the solvency ratios does not represent a strong impact for the banks.

Graph 1: Unrealized losses from HTM classified

Chart 1: Summary of Financials
securities as a % of total Equity

(PEN, in millions, as of Dec'22) BCP Interbank

AFS 15,256 6,257

HTM 9,254 3,288

Unrealized losses HTM -941 -338

Unrealized losses HTM / Assets 0.5% 0.5%

Unrealized losses HTM / Equity 4.2% 4.8%

CET1 12.6% 12.0%

Capital ratio 14.4% 15.1%

Source: BCP, Interbank, Seminario Source: BCP, Interbank, Seminario

María-José Quiñones Alonso Alcorta, CFA Sebastián Cruz Carlos Carazas

Our Research Department Research Department Research Department Research Department
Lima, Peru Lima, Peru Lima, Peru Lima, Peru
analysts + 511 712 8238 + 511 712 8274 + 511 712 8239 + 511 712 8240
mquinones@seminariosab.com.pe aalcorta@mccseminario.com scruz@seminariosab.com.pe ccarazas@seminariosab.com.pe