by Fitch Ratings, one of the world’s leading credit rating agencies, has recently affirmed Banco Financiera Comercial Hondureña, S.A. (Ficohsa) at ‘A+(hnd)’, with a stable outlook. This rating reflects Ficohsa’s financial strength and consistent performance in the Honduran market.
Key rating factors
Size and market relevance
Ficohsa is the biggest financial institution in relation to assets and the second biggest concerning loans and deposits in Honduras. Its considerable franchise dimensions provide it with a noteworthy competitive edge within the market. Moreover, its business strategy concentrates on corporate and business banking, which has led to steady overall operating earnings of USD 310 million during the previous four years.
Loan portfolio quality
Although Ficohsa’s past-due portfolio ratio increased slightly to 2.1% in September 2023, compared to 1.3% in December 2022, it remains consistent with its ratings. This increase is mainly due to higher exposure in the personal segment. However, Ficohsa has managed to maintain a controlled level of risk thanks to its focus on clients with a conservative risk profile.
Concentration risk mitigated
Ficohsa encounters the risk of concentration as its top 20 borrowers account for 3.4 times the capital base, as indicated by Fitch. Nevertheless, this risk is partly alleviated by the moderate share of loans backed by collateral, constituting 49% of the overall portfolio. Fitch anticipates that Ficohsa will sustain a level of non-performing loans akin to the one disclosed in September 2023.
Stable profitability
Despite a slight decline in profitability as measured by the ratio of operating income to risk-weighted assets (RWA) to 1.7% in September 2023, Ficohsa has managed to maintain stable profitability compared to the 2019-2022 average. The bank’s profitability is expected to remain around 1.7% in the near future.
Adequate capitalization
Ficohsa’s capitalization remains at adequate levels, although it showed a moderate reduction in September 2023 compared to 2022. Fitch’s base capital to RWA ratio was 8.7% in September 2023, which is above the threshold set by Fitch for an 8% downgrade. This supports Ficohsa’s stable rating outlook.
Deposit-based funding
Ficohsa benefits from a broad deposit base, which provides a stable source of funding. The weight of deposits in total funding has increased to 76.7% in September 2023, compared to 68.4% in 2021. However, the loans-to-deposits ratio weakened slightly to 97.7% in September 2023, reflecting the rapid growth of the loan portfolio compared to deposits. Fitch expects these levels to be maintained in the future, given the bank’s expected growth. In addition to deposits, Ficohsa is also funded through credit lines, bond issuance programs in the local market, and subordinated debt.
