Fitch Assigns Initial 'BBB' IDR to Peru's Fondo Mivivienda S.A.; Outlook Stable

BUENOS AIRES, Argentina--()--Fitch Ratings has assigned an initial 'BBB' foreign currency long-term Issuer Default Rating (IDR) to Peru based Fondo Mivivienda S.A.'s (FMV). The Rating Outlook is Stable. A full list of FMV's ratings follows at the end of this press release.

FMV's issuer default ratings (IDRs) reflect the support it would receive from its owner, the Republic of Peru, should it be required. Peru's ability to support FMV is reflected in its sovereign rating ('BBB'/Stable Outlook). Given FMV's key role in implementing economic development policies, the government has, in Fitch's opinion, a vested interest in supporting FMV. This underpins the bank's support and support floor ratings.

FMV's IDRs would be upgraded if Peru's sovereign ratings are upgraded and would likely move in line with any change in sovereign ratings. Downward risk for FMV's IDRs is limited given its parent support and Peru's stable outlook and sound economic prospects.

FMV has an increasingly important role implementing policies to reduce the housing deficit in Peru. FMV continues to facilitate access for the growing working and middle class to home financing by lending through financial institutions.

FMV's profitability is satisfactory and has improved in line with its strong loan growth based on its ample margins, which benefit from the absence of interest expenses until March 2012, lean operations, and very low credit costs. ROAA improved to 3.06% at Sept. 30, 2012 (from 2.65% in 2011), a very good level that compares well with that of its regional peers. ROAE levels have been very similar to those of ROAA given the absence of leverage.

FMV's risk profile is low given its role as a wholesale bank and conservative risk policies and that all the loans granted by financial institutions with FMV's funds have sound collateral. FMV bears one-third of the credit risk of the ultimate mortgage loans. FMV's direct borrowers have no impaired loans. Considering the final borrowers, only 1.14% of loans were past due (90 days or more) at Sept. 30, 2012 and were highly covered by loan loss reserves and collateral. However, any changes at the strategic level could result, if the government so decides, in FMV taking more risk that could result in a weaker asset quality and deteriorating performance if not well managed. This risk appears unlikely at present but remains a source of concern for FMV's medium-term credit standing.

Historically, FMV has financed its operations only with its own funds, and as stated in its inception law, it automatically capitalizes all its profits. As its role has become more important and its activities have significantly expanded, FMV plans to finance its growth with funds from the capital markets. Consequently, FMV's leverage is set to rise, but it should remain at prudent levels in the next few years given the large equity cushion. Regulatory capital ratios have historically been above 100%, and the Fitch core capital to risk-weighted assets ratio equaled a very high 94.76% at Sept. 30, 2012.

FMV was established by the Peruvian Government in 1998 to facilitate access for the growing working and middle class to housing financing. FMV provides long-term and low-cost funds to its target sectors by lending through FIs. FMV is fully owned by the Republic of Peru through Fondo Nacional de Financiamiento de la Actividad Empresarial del Estado (FONAFE), an agency of the Ministry of Finance.

Fitch assigns the following ratings to Fondo Mivivienda S.A.:

--Foreign Currency Long-Term Issuer Default Rating (IDR) 'BBB';

--Foreign Currency Short-Term IDR 'F2';

--Local Currency Long-Term IDR 'BBB+';

--Local Currency Short-Term IDR 'F2';

--Support Rating '2';

--Support Floor 'BBB'.

The Rating Outlook is Stable.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012).

Applicable Criteria and Related Research:

Global Financial Institutions Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

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Contacts

Fitch Ratings
Primary Analyst
Santiago Gallo, +54-11-5235-8137
Director
Fitch Argentina Calificadora de Riesgo S.A.
Sarmiento 663 - piso 7 - C1041AAM
Buenos Aires, Argentina
or
Secondary Analyst
Diego Alcazar, +1 212-908-0396
Director
or
Committee Chairperson
Eduardo Santibanez, + 56 2 499 3307
Senior Director
or
Media Relations
Elizabeth Fogerty, New York, +1-212-908-0526
elizabeth.fogerty@fitchratings.com