Fitch Ratings raised its national short- and long-term rating for Banco de Ahorro y Crédito ADOPEM S.A. to ‘AA-(dom)’ from ‘A+(dom)’, and to ‘F1+(dom)’ from ‘F1(dom)’ respectively, with a stable outlook for its long-term credit rating.
According to the international agency, the key factors for this score are the solidity of the current business model –specializing in microcredit and capable of maintaining high levels of profitability, a healthy loan portfolio, robust capitalization, diversified funding sources and low exposure to liquidity risks.
The report noted that ADOPEM is broadly profitable due to the sufficient quality of the asset and the low outlay for provisions. Fitch also compared it favorably with the average for savings and loan banks and with the financial system as a whole.
The international ratings agency also considered that Banco ADOPEM will be able to continue achieving high levels of profitability thanks to expectations of further growth.
“The bank has succeeded in maintaining its default rate below the average for its peers in the region despite the high risk profile of its debtors, given the nature of its business. In addition, the credit reserves also provide an important source of coverage. The agency expects the quality of the portfolio to be maintained, based on the bank’s proven experience and knowledge of risk administration in the microfinance market”, said the agency.
It noted that in March 2016, the base capital was 30.87% over weighted assets (2015: 29.82%), higher than the average for the financial system as a whole.
Fitch considered that the bank had made efforts to increase its income from commissions, payment of remittances and micro-insurance, and through its significant penetration via banking subagents which will bring in additional future resources and contribute to its solvency and profitability.
Banco ADOPEM has a consistent policy of liquidity and funding in order to maintain a good deposit base with which to fund its operations, reinforce their renewal rate and reduce their concentration.
The long-term nature of its financing commitments compared to its portfolio period also allows it sufficient rollover in its credit operations, which Fitch regards as signaling a lower exposure to liquidity and funding risks as established in its business model.