Fitch Affirms Chile's Coopeuch LC IDR at 'BBB'; Outlook Stable.NEW YORK New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of & SAN SALVADOR San Salvador, city, El Salvador
San Salvador (sän sälväthōr`), city (1993 pop. 402,448), central El Salvador, capital and largest city of the country. It is the center of El Salvador's trade and communications. , El Salvador El Salvador (ĕl sälväthōr`), officially Republic of El Salvador, republic (2005 est. pop. 6,705,000), 8,260 sq mi (21,393 sq km), Central America. -- Fitch Ratings Fitch Ratings
An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the ratings of the Chilean credit union Cooperativa del Personal de la Universidad de Chile's (Coopeuch) as follows:
--Local Currency long-term Issuer Default Rating (IDR IDR
In currencies, this is the abbreviation for the Indonesian Rupiah.
The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) at 'BBB';
--Support Rating at '5'.
The Rating Outlook is Stable.
Coopeuch's long- and short-term national ratings of 'AA-(chl)' and 'N1+(chl)', respectively, were affirmed on Jan. 31,2008.
The ratings assigned to Coopeuch reflect its good franchise in its niche market A niche market also known as a target market is a focused, targetable portion (subset) of a market sector.
By definition, then, a business that focuses on a niche market is addressing a need for a product or service that is not being addressed by mainstream providers. , its track record of sound profitability and assets quality ratios, and its strong capitalization.
Coopeuch's performance has been consistently sound and above that of the financial system's average; this has been supported by its strong franchise in the consumer lending Consumer lending or consumer loans refers to any type of loan product that is not a mortgage; such as a car, boat, manufactured home, home equity loan, home equity line of credit, signature loan, signature line of credit, recreational vehicle, or Certificate of Deposit loans. segment (where it has a 6.8% market share), its low-cost deposit base, and its good cost-efficiency level. Its focus on consumer lending also brings significant revenue concentration: net interest revenue accounted for about 90% of total revenue at end-November 2007. To diversify its income sources, the cooperative is offering residential mortgages, commercial lending and credit cards.
Cost-efficiency is adequate; however, due to the large portfolio concentration in retail banking additional efforts to reduce expenses are expected in order to compensate for an expected reduction in margins.
Asset quality ratios are healthy and benefit from the cooperative's collection mechanism through which it retains directly from its clients' salaries the amount needed to pay installments. Overdue loans, under local definition (i.e. past-due installments over 60 days), were only 0.08% as of November 2007, with non-performing loans at 1.5% of the total portfolio. Loan loss reserves covered around 3.6% of total loans, which Fitch considers adequate for the target market, which is also supported by the special collection mechanism developed.
Market risk is limited in light of conservative regulatory limits, and the entity does not participate in trading activities and its investment portfolio is maintained only for liquidity needs. The entity's main source of funds is its deposit base, which accounted for roughly 55.6% of total liabilities at end-November 2007. The balance of its funding is from equity (30%), and Fitch believes retail funding will continue to grow in line with the expected incorporation of additional members.
Coopeuch's capitalization is strong, supported by its high internal capital generation. Its capitalization ratios Capitalization ratios
Also called financial leverage ratios, these ratios compare debt to total capitalization and thus reflect the extent to which a corporation is trading on its equity. are better than the average of the financial system, with a total capital to risk weighted assets ratio of 26.6% as of November 2007, which Fitch considers strong given its target market and expected growth; regulatory capital mainly comprised Tier I.
Coopeuch is the largest credit union in Chile. It was created in 1967 and since 1970 has been under the regulation of the Superintendencia de Bancos e Instituciones Financieras, the Chilean banking regulator. The entity gathers customer deposits and grants consumer loans to its members through its 72 branches. It targets mainly low-income individuals working for the public sector.
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