Banco BBVA Perú S A : INFORMES DE CLASIFICACIÓN DE RIESGO.

Banks

Universal Commercial Banks

Peru

Banco BBVA Peru

Update

Ratings

Foreign Currency

Long-Term IDR	BBB
Short-Term IDR	F2

Key Rating Drivers

Shareholder Support Rating Drives IDRs: Banco BBVA Peru's (BBVA Peru) Issuer Default Ratings (IDRs) are driven by the support it would receive from its parent, Banco Bilbao Vizcaya Argentaria (BBVA S.A.; BBB+/Stable), should it be required. Fitch Ratings believes the parent's propensity to support BBVA Peru is high, given the strategic role this subsidiary plays in its regional goals. Latin America (LatAm) is a strategically important market for BBVA; hence, if required, support would be forthcoming for BBVA Peru, underpinning its Shareholder Support Rating (SSR) of 'bbb'.

Standalone Strength Drives VR: BBVA Peru's 'bbb' Viability Rating (VR) reflects its strong franchise and sizable market share, as it remains the second largest bank in Peru. The VR also considers its adequate asset quality and profitability metrics, stable deposit base and reasonable capital metric that could be enhanced by the parent, if needed.

Asset Quality Remains a Challenge: As of June 2023 (2Q23), BBVA Peru's non-performing loan (NPL) ratio (90+ days past due) increased to 4.03% from 3.70% in 2022. This continued an upward trend in place since the bank implemented its strategy of increasing participation in retail loans, which has improved profitability. This deterioration is also partially attributable to Reactiva loans that do not pose a risk of loss. Delinquent SME and commercial loans, and the heightened importance of consumer lending also contributed to this trend.

The bank's loan portfolio slightly decreased in 2022 and 2Q23, attributable to a strategy of reducing corporate loan exposure and due to maturing Reactiva loans. Fitch expects the NPL ratio to remain at about 3.5%.

Enhanced Profitability: The bank's profitability continued to improve due to its focus on profitable, although riskier, loan segments. In 6M23, its operating profit to risk-weighted assets (RWA) ratio improved to 3.12% (annualized) from 2.88% in 2022. Higher interest income on loans and investments, along with non-interest income from fees and commissions, has contributed to the enhancement. Profits could be challenged by higher loan impairment charges, given the focus on riskier loan types, although the bank's risk management is sound.

Sufficient Capitalization: The bank's capital metrics are reasonable and benefit from the reduction in the loan portfolio. As of 2Q23, BBVA Peru's Fitch Core Capital (FCC) ratio was 12.15%, which is relatively weak compared to that of other similarly rated banks in 'bbb' operating environments (OEs). When assessing BBVA Peru's capital metrics, Fitch considers the ordinary support it would receive from its parent, if needed. Fitch anticipates BBVA Peru's capital will maintain a similar pattern, with regulatory levels sufficiently above minimum requirements.

Local Currency

Long-Term IDR	BBB
Short-Term IDR	F2
Viability Rating	bbb
Shareholder Support Rating	bbb

Sovereign Risk (Peru)

Long-Term,Foreign-Currency	BBB
IDR
Long-Term,Local-Currency IDR	BBB
Country Ceiling	BBB+

Outlooks

Long-Term,Foreign-Currency	Stable
IDR
Long-Term,Local-Currency	Stable
IDR
Sovereign Long-Term, Foreign-	Negative
Currency IDR
Sovereign Long-Term, Local-	Negative
Currency IDR

Applicable Criteria

Bank Rating Criteria (September 2023)

Future Flow Securitization Rating Criteria (April 2023)

Related Research

Banco BBVA Peru (April 2023)

Fitch Affirms BBVA Peru at 'BBB'; Outlook Stable (March 2023)

Large Peruvian Banks - Peer Review (June 2023)

Ample and Diversified Funding Base: Funding continues to be stable and diversified, relying on a wide deposit base and access to capital markets. As of 2Q23, the loan to deposit ratio was 110.35%. Other funding sources include bilateral loans, and local and foreign debt issuance, including subordinated bonds. Liquidity is properly managed and the proportion of liquid assets is satisfactory.

Firmado Digitalmente por:

WILLIAM SCHELLO SANDOVAL CUBA

Fecha: 08/09/2023 04:51:10 p.m.

Analysts

Ricardo Aguilar

[phone] [e-mail]

Andres Marquez

[phone] [e-mail]

Update │ September 8, 2023

fitchratings.com

1

Banks

Universal Commercial Banks

Peru

Rating Sensitivities

Factors that could, individually or collectively, lead to negative rating action/downgrade

Issuer Default Ratings

• BBVA Peru's IDRs and Rating Outlook are driven by its SSR. A negative rating action on BBVA S.A. would result in a similar action on the SSR; however, BBVA Peru's IDRs would only be downgraded if its VR is also downgraded, given Fitch's "higher of" approach.

Viability Rating

• Any negative rating action on the sovereign or in Fitch's OE assessment would lead to a similar action on BBVA Peru's VR.
• The VR could be negatively affected if the bank's asset quality deteriorates significantly, leading to a sustained decline in operating performance and capital cushion, particularly a sustained decline in the FCC to adjusted RWA ratio to under 10%, assuming maintenance of excess reserves and noncore loss-absorbing capital.

Shareholder Support Rating

• The SSR would be affected by a negative change in BBVA's ability or willingness to support the bank.

Factors that could, individually or collectively, lead to positive rating action/upgrade

Issuer Default Rating

• The IDRs could benefit from significant improvement in the parent's ability to provide support, evidenced by BBVA's IDR, although subject to sovereign rating and Country Ceiling considerations.

Viability Rating

• There is limited upside potential for the VR, given the sovereign's current rating and Negative Rating Outlook.
• Rating upgrades are possible over the medium term via a confluence of material improvement in the OE and the bank's financial profile, within the context of a sovereign rating upgrade, as Fitch rarely rates bank VRs above the sovereign's IDR.

Shareholder Support Rating

• The SSR would be affected by a positive change in BBVA's ability or willingness to support the bank.

Debt Rating Classes

Rating Level	Rating
Subordinated: Long Term	BB+
Source: Fitch Ratings

Subordinated Debt

The subordinated debt is rated 'BB+'. This reflects the baseline notching for loss severity from the bank's support-drivenLong-Term,Foreign-Currency IDR, which Fitch deems the appropriate anchor rating.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Subordinated Debt

• The subordinated notes' rating is sensitive to any change in BBVA Peru's IDR.

Banco BBVA Peru
Update │ September 8, 2023	fitchratings.com	2

Banks

Universal Commercial Banks

Peru

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Subordinated Debt

The subordinated notes' rating is sensitive to any change in BBVA Peru's IDR.

Ratings Navigator

The Key Rating Driver (KRD) weightings used to determine the implied VR are shown as percentages at the top. In cases where the implied VR is adjusted upward or downward to arrive at the VR, the KRD associated with the adjustment reason is highlighted in red. The shaded areas indicate the benchmark-implied scores for each KRD.

VR - Adjustments to Key Rating Drivers

• The Operating Environment score has been assigned above the implied score due to the following adjustment reasons: Sovereign rating (positive) and macroeconomic stability (positive).
• The Capitalization and Leverage score has been assigned above the implied score due to the following adjustment reason: Capital flexibility and ordinary support (positive).

Recent Developments

Profitability Strengthened; Asset Quality Still Challenged.

BBVA Peru continued to gradually shift its loan portfolio mix, by increasing the importance of retail loans, which, as of 2Q23, accounted for about 35% of the total portfolio (2021: 30%). This has partially driven the improvement in profitability, as the operating profit to RWA ratio was 3.12% in 6M23 (four-year average: 2.41%). In contrast, the NPL ratio has gradually deteriorated with a metric of 4.03% as of 2Q23 (four-year average: 3.21%).

The bank's loan portfolio slightly decreased in 2022 and in 2Q23 due to a concerted effort to reduce exposure on corporate loans. Also, most of the Reactiva loans have matured, which has played a part in the portfolio decline; as of 2Q23, these loans accounted for about 4% of gross loans (4Q22: 8%), diminishing significantly from a peak of 20% in 2020. Reactiva loans also contribute to the NPL ratio, but due to the government's guarantee, these loans do not pose a risk of loss.

Banco BBVA Peru
Update │ September 8, 2023	fitchratings.com	3

Banks

Universal Commercial Banks

Peru

Summary Financials and Key Ratios

	June 30, 2023	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec 31, 2019
	Six Mos. - Interim	Six Mos. - Interim	Year End	Year End	Year End	Year End
	USD Mil.	PEN Mil.	PEN Mil.	PEN Mil.	PEN Mil.	PEN Mil.
	Not Disclosed	Not Disclosed Audited - Unqualified Audited - Unqualified Audited - Unqualified Audited - Unqualified
Summary Income Statement
Net Interest and Dividend Income	710	2.571,6	4.613,3	3.601,9	3.244,2	3.421,6
Net Fees and Commissions	145	525,8	893,4	873,4	811,5	812,8
Other Operating Income	116	421,2	620,4	709,1	659,7	692,9
Total Operating Income	971	3.518,6	6.127,1	5.184,4	4.715,4	4.927,3
Operating Costs	379	1.374,1	2.480,8	2.168,7	2.056,0	1.952,2
Pre-Impairment Operating Profit	592	2.144,5	3.646,3	3.015,7	2.659,4	2.975,1
Loan and Other Impairment Charges	207	749,5	984,6	752,7	1.751,2	757,9
Operating Profit	385	1.395,0	2.661,7	2.263,0	908,2	2.217,2
Other Non-Operating Items (Net)	-5	-19,8	14,0	-10,8	-20,8	22,1
Tax	101	367,7	753,9	691,7	239,2	630,2
Net Income	278	1.007,5	1.921,8	1.560,5	648,2	1.609,1
Other Comprehensive Income	36	131,3	-58,4	-151,9	96,3	30,8
Fitch Comprehensive Income	314	1.138,8	1.863,4	1.408,6	744,5	1.639,9
Summary Balance Sheet
Assets
Gross Loans	20.156	73.044,4	73.784,9	75.091,8	71.012,9	59.305,3
- of which Impaired	812	2.943,7	2.730,0	2.463,0	2.151,5	1.666,5
Loan Loss Allowances	1.320	4.783,3	4.662,5	4.658,2	4.419,1	2.907,0
Net Loan	18.836	68.261,1	69.122,4	70.433,6	66.593,8	56.398,3
Interbank	743	2.694,4	3.703,0	712,1	5.498,9	3.782,8
Derivatives	450	1.632,5	1.353,3	1.843,5	1.001,9	572,3
Other Securities and Earning Assets	2.878	10.428,7	11.603,9	9.773,6	11.426,0	6.655,5
Total Earning Assets	22.907	83.016,7	85.782,6	82.762,8	84.520,6	67.408,9
Cash and Due from Banks	3.299	11.954,3	8.442,0	15.582,9	19.593,0	11.184,0
Other Assets	1.488	5.394,2	3.820,8	3.150,1	3.223,7	3.186,0
Total Assets	27.695	100.365,2	98.045,4	101.495,8	107.337,3	81.778,9
Liabilities
Customer Deposits	18.266	66.195,5	65.818,3	63.013,2	70.737,7	54.556,5
Interbank and Other Short-Term Funding	3.304	11.974,0	11.588,3	17.282,1	16.948,9	5.760,7
Other Long-Term Funding	1.183	4.286,5	4.036,9	6.850,3	6.836,1	9.216,8
Trading Liabilities and Derivatives	423	1.534,3	1.349,5	1.607,1	891,0	510,7
Total Funding and Derivatives	23.176	83.990,3	82.793,0	88.752,7	95.413,7	70.044,7
Other Liabilities	1.363	4.938,6	3.999,0	2.574,4	2.561,7	2.553,7
Preference Shares and Hybrid Capital	N.A.	N.A.	N.A.	N.A.	N.A.	N.A.
Total Equity	3.156	11.436,3	11.253,4	10.168,7	9.361,9	9.180,5
Total Liabilities and Equity	27.695	100.365,2	98.045,4	101.495,8	107.337,3	81.778,9
Exchange Rate		USD1 = PEN3,624	USD1 = PEN3,809	USD1 = PEN3,9849	USD1 = PEN3,62	USD1 = PEN3,312

PEN - Peruvian Sol. N.A. - Not applicable.

Source: Fitch Ratings, Fitch Solutions, BBVA Peru.

Banco BBVA Peru
Update │ September 8, 2023	fitchratings.com	4

Banks

Universal Commercial Banks

Peru

Summary Financials and Key Ratios

	June 30, 2023	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020	Dec 31, 2019
Ratios (%, Annualized as Appropriate)
Profitability
Operating Profit/Risk-Weighted Assets	3,1	2,9	2,7	1,2	2,9
Net Interest Income/Average Earning Assets	6,1	5,3	4,3	4,3	5,4
Non-Interest Expense/Gross Revenue	39,0	40,5	41,9	43,6	39,7
Net Income/Average Equity	18,2	18,4	16,4	7,0	18,9
Asset Quality
Impaired Loans Ratio	4,0	3,7	3,3	3,0	2,8
Growth in Gross Loans	-1,0	-1,7	5,7	19,7	8,5
Loan Loss Allowances/Impaired Loans	162,5	170,8	189,1	205,4	174,4
Loan Impairment Charges/Average Gross Loans	2,1	1,3	1,0	2,7	1,3
Capitalization
Common Equity Tier 1 Ratio	12,2	12,5	10,3	10,8	10,4
Fully Loaded Common Equity Tier 1 Ratio	N.A.	N.A.	N.A.	N.A.	N.A.
Fitch Core Capital Ratio	N.A.	11,8	11,7	11,7	11,6
Tangible Common Equity/Tangible Assets	10,4	11,1	9,7	8,5	10,9
Basel Leverage Ratio	N.A.	N.A.	N.A.	N.A.	N.A.
Net Impaired Loans/Common Equity Tier	-16,8	N.A.	N.A.	-27,1	N.A.
Net Impaired Loans/Fitch Core Capital	N.A.	-17,8	-22,3	-25,0	-14,0
Funding and Liquidity
Gross Loans/Customer Deposits	110,4	112,1	119,2	100,4	108,7
Liquidity Coverage Ratio	N.A.	N.A.	N.A.	N.A.	N.A.
Customer Deposits/Total Non-Equity Funding	80,3	80,8	72,3	74,8	78,5
Net Stable Funding Ratio	N.A.	N.A.	N.A.	N.A.	N.A.
Gross Loans/Customer Deposits + Covered Bonds	110,4	112,1	119,2	100,4	108,7

N.A. - Not applicable

Source: Fitch Ratings, Fitch Solutions, BBVA Peru

Banco BBVA Peru
Update │ September 8, 2023	fitchratings.com	5