International Finance Corporation Supranational

Transcription

1 NOVEMBER 19, 2013 SOVEREIGN & SUPRANATIONAL CREDIT ANALYSIS International Finance Corporation Supranational Table of Contents: RATING RATIONALE AND OUTLOOK 1 ORGANIZATION STRUCTURE AND STRATEGY 2 CAPITAL ADEQUACY 3 ASSET QUALITY 4 PROFITABILITY 6 ASSET/LIABILITY MANAGEMENT AND LIQUIDITY 6 RATING HISTORY 8 ANNUAL STATISTICS 9 MOODY S RELATED RESEARCH 13 RELATED WEBSITES AND INFORMATION SOURCES 13 Analyst Contacts: NEW YORK Steven A. Hess Senior Vice President steven.hess@moodys.com Annette Swahla Analyst annette.swahla@moodys.com Bart Oosterveld Managing Director Sovereign Risk bart.oosterveld@moodys.com Rating Rationale and Outlook The International Finance Corporation s (IFC) Aaa rating with a stable outlook is based on its robust capital adequacy and liquidity, preferred creditor status, and strong shareholder support. Unlike most other multilateral development banks (MDBs), the IFC lends to private sector companies in high-risk economies without the benefit of a sovereign guarantee. Its capital structure does not include the callable capital that is a factor supporting the Aaa ratings of other MDBs. Rather, its high level of paid-in capital and retained earnings are key to its rating. The IFC is conservatively leveraged, with a 2.6:1 ratio of outstanding borrowings and guarantees to capital. The IFC has a leverage policy ceiling of 4.0:1; the ratio is calculated with outstanding debt (including derivatives and other liabilities as well as borrowings) and commitments to capital. The Corporation manages its capital adequacy using a risk-based economic capital framework which establishes a level of resources required to protect from risks stemming from all of its asset classes. At end-fy2013, $16.8 billion was required and $20.5 billion was available. The Corporation's liquidity position remained strong during the year despite the ratio of liquid assets to total assets falling slightly to 46% from 47%. This is a historically strong ratio for the IFC, with a low of 36% and a high of 60% since In addition, it has very strong market access and was able to finance its activities via debt issuance at low rates during FY2013 and throughout the preceding global financial crisis. In fact, the IFC s issuance has benefited from flight-to quality in recent years. In our view, the IFC faces very little transfer risk in its portfolio because of the preferred creditor status it has historically been accorded by the member countries in which it lends. IFC loans have never been included in a sovereign debt rescheduling, nor have payments to the IFC ever been permanently interrupted by a general debt-servicing moratorium. This feature of the Corporation s status has been demonstrated in the past in the case of Argentina, where a number of creditworthy borrowers continued to make payments despite a government-imposed moratorium on external debt repayments. This Credit Analysis provides an in-depth discussion of credit rating(s) for International Finance Corporation and should be read in conjunction with Moody s most recent Credit Opinion and rating information available on Moody's website.

2 We believe it is highly unlikely that the Corporation would require shareholder assistance given the very strong management of the resources it has on hand. However, given the shareholder support that the IFC enjoys, along with its relatively modest size, it is likely that shareholder governments would provide additional capital well before any disruption in the organization s ability to maintain operations would occur. The outlook on the IFC s Aaa rating is stable. The IFC's credit strengths should continue to allow it to withstand possible increased financial problems in the countries in which its borrowers are located. However, should there be a generalized emerging market debt crisis that affected several of the organization's largest exposures, IFC's creditworthiness could be affected over time. This would depend upon the countries involved, the IFC's portfolio in those countries, and the financial condition of the IFC at that time. Such a scenario seems unlikely, though it cannot be ruled out. Organization Structure and Strategy The IFC is a multilateral institution that furthers the economic development of its member countries through the promotion of private investment. The Corporation is a member of the World Bank Group, which also includes the IBRD, the International Development Association (IDA), the Multilateral Investment Guarantee Agency, and the International Centre for Settlement of Investment Disputes. The IFC makes loans to and equity investments in private companies, organizes syndications, mobilizes third party capital, and offers advisory services. In addition to deploying its own resources, the Corporation has sought to catalyze additional investment flows to private companies in developing countries. By fiscal year-end 2013 (June 30), the 184 member countries had contributed $2,403 million of paidin capital to the IFC. Paid-in capital in turn represents 100% of subscribed capital as there were no membership subscriptions outstanding as of June 30, The largest single shareholder is the United States with 22.41% of voting power, followed by Japan with 5.58%; the combined voting power of member countries that we rate Aaa/Aa amounts to 62.30% of the total. Membership in the International Monetary Fund and the IBRD are pre-requisites for membership in the IFC. Provisions in the IFC s articles ensure that the IFC board of directors is identical to that of the World Bank, facilitating coordination of the two institutions policies and operations. However, the distribution of voting power in the IFC board differs from that of the World Bank board because of the different patterns of ownership. In March 2012 the Board of Governors adopted the resolution recommended by the Board of Directors for a selective capital increase (SCI) of $200 million as a part of the IFC Voice reform that will increase the voice and participation of developing and transition countries by increasing their voting power by 6.1% to 39.5%. The amendment to the Articles of Agreement and the increase in the authorized share capital became effective on June 27, At the same time, two new eligible members 1 were allowed to subscribe, which yielded a $3 million increase in paid-in and subscribed capital as of end-fy2012. During FY2013, IFC received $31 million of capital subscriptions related to the SCI. While it is positive that members supported a capital increase and that capital will increase over the next few years, the small scale of it does not have significant credit implications. 1 Suriname and South Sudan. 2 NOVEMBER 19, 2013 CREDIT ANALYSIS: INTERNATIONAL FINANCE CORPORATION

3 Strategy The IFC expects IDA countries (the world s poorest developing countries) to drive its growth. Thus the IFC s business strategy focuses on aiding the growth of the financial markets and small- and medium-sized enterprises in IDA countries (in addition to its largest markets in middle income countries). In addition to its focus on IDA countries, the Corporation also focuses on frontier regions of middle-income countries, thus allowing its operations to be inclusive of the poorest individuals, regardless of which developing country. 2 During FY2011 the Corporation expanded the use of its equity product offering by incorporating it into its capital strategy. Although equity investment 3 has always been a tool it uses to fulfill its development mandate, it had previously never established a portfolio strategy around it. Now the IFC will target equity investment to be 20-30% of the total investment portfolio. In IDA markets, the availability of equity is usually even scarcer than loans, so the Corporation can have an even greater development impact through the increased use of equity investments. We view this strategy as supportive of the IFC s financial strength as it will benefit from higher profitability from capital gains versus income from loans. The Corporation has proven capable of managing the inherently riskier nature of equity investments and a roughly 30% strategy does not represent a significant increase over historical operations (average equity investments as a percent of total investment portfolio for the period FY was 19.6%). Equity comprised 25.9% of the investment portfolio at year end 2013, up from 23.7% the previous year. The Corporation is also increasing its trade finance activity which has proven to be an effective way to quickly enact support, a pertinent consideration for fragile and conflict countries. It has also proven to be a safe activity in that it has not experienced any defaults, with $3.0 billion outstanding at end- FY2013; it has limited the amount of trade finance activity to $5.0 billion outstanding. The average tenor of transactions, which includes import lines of credit and pre-export finance, is four months. During FY2013 the IFC increased its exposure to Egypt, which is now among its ten largest exposures by country, as international banks withdrew due to the political turmoil in the country. Overall, we view the Corporation s increased trade finance activity to be supportive of its financial strength as it does not introduce significant risk while it tends to be profitable as pricing tends to be more favorable compared to traditional lending activity. Capital Adequacy Total equity was $22.2 billion at the end of FY2013, up from the $20.6 billion posted in FY2012. This was equal to 50.0% of disbursed assets and approved but undisbursed commitments an unweighted measure of broad economic exposure. It was also equal to around 70.0% of disbursed loans (net of loan loss provisions) and equity investments (net of impairment write-downs) a narrower measure of cash exposure. The IFC s leverage policy remains the same; its maximum leveraging exposure (defined as the ratio of drawn debt to the sum of total subscribed capital plus accumulated earnings) is 400%. At the end of FY2013, the IFC s actual leverage was around 260%, very comfortably within its policy limit. 2 IFC s strategic priorities are the following five pillars: strengthening the focus on frontier markets; addressing climate change and ensuring environmental and social sustainability; addressing constraints to private sector growth in infrastructure, including water, and health, education, and the food-supply chain; developing local financial markets with a focus on micro, small and medium enterprises; and building long-term client relationships in emerging markets. 3 The Corporation makes direct equity investments as well as through private equity funds. 3 NOVEMBER 19, 2013 CREDIT ANALYSIS: INTERNATIONAL FINANCE CORPORATION

4 CAPRI Model Key Capital Adequacy Tool, Recently Enhanced The IFC utilizes a Capital, Pricing and Risk (CAPRI) model, which it believes allows it to better differentiate and address the risks for current asset classes as well as for new products. The CAPRI framework mandates that the IFC maintain a minimum level of resources (including paid-in capital, total loss reserves and retained earnings after designations have been made) equal to total potential losses for all on- and off-balance sheet exposures at a level that allows the Corporation to maintain a Aaa rating. The potential loss estimates as of the end of FY2013 for the risk asset classes are a minimum of: a) 20% of loan, guarantee, and client risk management exposure gross of reserves; b) 35% of subordinated debt exposure gross of reserves; c) 50% of quasi equity exposure; d) 70% of straight equity exposure; e) 2% of treasury assets (including liquid assets and counterparty derivatives); f) 2% for other receivable assets; g) 2% for property assets; and h) 5% or 10% for eligible trade finance transactions, depending on tenor. The capital requirement for operational risk is 36% of gross income (with adjustments for advisory services), averaged over the last three years. Under the CAPRI framework, the minimum capital adequacy requirement is $16.8 billion. At fiscal year-end 2013 capital stood at $20.5 billion, excluding the effects of designation of $251 million for IDA 4 from FY2013 income made subsequent to the close of financial statements. During the year, the IFC updated its existing framework to enhance its measure of economic capital requirements for its treasury activities, which went into effect in FY2014. The enhancements included aligning with Basel s use of a one-year timeframe for setting capital requirements as compared to the Corporation s previous use of three years. In addition, it adopted Basel s more granular breakdown of the treasury portfolio by counterparty. Overall, the Corporation estimates the impact of the changes will result in higher levels of economic capital requirements by 0.5%-1.0% for treasury activities, depending on the composition of the liquid asset portfolio. Asset Quality Loans represent the majority of the IFC s investment portfolio, comprising 64.3% of the total. Equity investments represent 25.9% of the portfolio, with risk management products and guarantees rounding out the portfolio. At fiscal year-end 2013, IFC s disbursed investments, including guarantees and client risk management products, gross of reserves stood at $37.6 billion, up $3.3 billion from the previous fiscal year. At the end of the year the IFC s held portfolio included loans and equity investments in 128 countries and 1,950 companies. IFC s commitment volume amounted to $18.3 billion during FY2013, an 18.7% increase from the previous year. This was the second year in a row of strong growth, following a 26.9% increase between FY2011 and FY2012 which contrasted with the 3.8% decrease between FY2010 and FY2011. The IFC expects that growth will increasingly come from projects located in IDA countries. However, in terms of volume, investments will naturally be greater in larger countries with sufficient absorptive capacity and investment opportunity. Portfolio Structure Less Concentrated than Most MDBs A significant source of strength for the IFC is that concentration risk is not as prevalent compared to either smaller private-sector-focused MDBs or MDBs that lend to the public sector. This is most notable when looking at borrower concentration. The IFC s ten largest company exposures combined 4 The IDA16 Replenishment included an indicative transfer of $1 billion from the IFC to IDA, subject to IFC s profitability, growth, strategic priorities, and business and capital adequacy needs. 4 NOVEMBER 19, 2013 CREDIT ANALYSIS: INTERNATIONAL FINANCE CORPORATION

5 account for 6.5% of the total portfolio. The company with the largest exposure accounts for just under 1.0% of the disbursed investment portfolio. These figures are very low in the MDB universe. Sector concentration is slightly more prominent, as the IFC s portfolio is concentrated in the financial sector including both banking and insurance which accounts for 31.8% of its disbursed loan portfolio. The other largest exposures are to electric power and transportation & warehousing; together, these three sectors account for 52.1% of the disbursed portfolio. Sector concentration has been very slightly moderating over the past five years. There is some degree of risk concentration by country, similar to the situation at the IBRD but less than the regional multilateral banks. The country concentration guideline is based on an economic capital-based exposure approach, in which countries are grouped based on the size of their economy and risk rating, 5 and limits are set based on the economic capital required 6 as a percentage of net worth plus reserves 7. The country with the highest allowed exposure is set at 7.0% of net worth plus reserves, with India as the exception at 8.5%. On this basis, the economic capital required for India accounted for 6.8% of net worth plus general reserves, at end FY2013. The IFC's next largest disbursed country exposures, in descending order of required economic capital, are China (4.8%), Brazil (3.9%), Russia (3.6%), and Turkey (3.3%). Looking at the disbursed portfolio, the ten largest country exposures (gross of reserves) account for 43.5% of the IFC s portfolio, down from 51.9% in FY2009. Deteriorating Portfolio Quality As anticipated in light of the global financial crisis and subsequent recession, asset quality deteriorated starting in FY2009, with the stock of non-performing loans 8 rising for the first time since The impact of the global crisis, however, appeared to be diminishing in FY2012 as the stock of bad loans decreased. Most recently, in FY2013, portfolio quality deteriorated significantly, due in large part to idiosyncratic factors rather than the global turmoil. During FY2013 the ratio of IFC s loans in non-accrual status as a percentage of the total disbursed loan portfolio rose to 5.7%, the highest level since FY2006. The Ukraine and Mexico are the largest contributors to the IFC s non-accrual loans with roughly 32% of loans disbursed in each country on non-accrual status. While the loan to the Ukraine has been on non-accrual since FY2010, there were three Mexican loans that went into non-accrual status in the second half of FY2013. All three are loans in the construction and real estate sector which was negatively impacted by a change in government and policy. The next highest contributors to non-accrual loans behind Ukraine and Mexico are China, Serbia, and the Philippines. While 5.7% non-accrual loans is high in the IFC s recent history, and relatively high in the MDB universe, it remains low in the IFC s long-term historical context. It peaked at 16.7% in FY2003 and is still lower than the average level of 6.6% during FY (pre-russian and Argentine crises). 5 IFC s internal risk-ranking system. 6 Economic capital is calculated by applying a risk weight to the exposure at risk (100% of outstanding portfolio + 75% of undisbursed portfolio), based on the capital ratio assigned to different products loans, equities, quasi equities, guarantees, risk management products under the Corporation s economic capital framework. 7 This is a new procedure adopted in December 2009 and replaced the framework in which limits were set based on nominal exposure (outstandings net of specific reserves). Under that framework, the ceiling for the highest country exposure was 20% of net worth plus general reserves. 8 Loans in non-accrual status defined as those with arrears in excess of 60 days unless collection is anticipated in the near future 5 NOVEMBER 19, 2013 CREDIT ANALYSIS: INTERNATIONAL FINANCE CORPORATION

6 Sufficient Reserves Against Loan Losses Loan loss reserves consist of specific and general reserves, and additions to these reserves are charged to income. Specific reserves are determined after a case-by-case quarterly review of the entire loan portfolio. The level of specific reserves against losses on loans reflects a judgment by IFC management that the loan is suffering significant and relatively permanent value impairment. This judgment is based on the Corporation s experience with the specific borrower, its expected future performance, its security, and the position of other project sponsors. The general reserve against losses on loans is intended to provide for risk in the loan portfolio as a whole that cannot be specifically identified; management estimates the general reserve against losses on loans. As a result of the adoption of EITF in FY2005, an equity investment is written down to its impaired value when an impairment is identified and is deemed to be other than temporary. Thus, the IFC now has general reserves for the loan portfolio only. At the end of FY2013 total reserves against loan losses ($1,628 million) represented around 7% of the disbursed loan portfolio and 128% of loans on non-accrual status. Profitability Income Volatility Inherent and Manageable As IFC s business model resembles more that of a large venture capital firm and less that of a full service bank, nearly all components of revenue are subject to considerable fluctuation, which reflects the higher-risk nature of its fundamental business. Further, the Corporation s policy toward writeoffs 10 on the loan portfolio (taking as few as possible and preferring to resolve problem situations) suggests that volatility is channeled through income statement revenue instead of the conventional asset quality indicators on the balance sheet. Finally, and appropriately, the Corporation appears less willing to use its equity portfolio to smooth results and more concerned with getting the market timing right and meeting development objectives. Despite financial performance volatility, the IFC's operations continue to support the growth of the capital base, a key rating element. Retained earnings represent over 80% of total equity, a very high level in the MDB universe. In FY2013, the IFC's net income was 24% lower than the previous year, but still strong. The $1,010 million net income posted in FY2013 was primarily impacted by lower realized gains on equity sales compared to a historically large gain in FY2012. Otherwise, income from loans and guarantees (the Corporation's largest activity) increased by 13% from one year to the next. The overall net income results translated into an ROA of 1.5% and ROE of 4.4%, both down from the previous year, but still healthy for an MDB. Asset/Liability Management and Liquidity Current Financial Policies For asset/liability management, the IFC continues to match-fund its loans on the basis of interest rate tenor, currency and maturity, but there can be special cases where asset/liability mismatches are acceptable for new products as approved by the Board. In such cases the capital necessary is estimated using the CAPRI model. As before, the Corporation uses swaps, forwards, and other derivatives to 9 Financial Accounting Standards Board Emerging Issues Task Force 10 For the equity portfolio the Corporation writes down investments any time the fair value decreases below cost. 6 NOVEMBER 19, 2013 CREDIT ANALYSIS: INTERNATIONAL FINANCE CORPORATION

7 manage currency and interest rate risk pursuant to its internal policy of curtailing risks, and all equity and quasi-equity investments are funded from net worth to avoid creating market liabilities where the offsetting assets have an unpredictable cash flow. Under the liquidity policy, there is both an external funding component and a ratio component. The external funding policy stipulates that the minimum level of liquidity from external funding must cover at least 65% of the sum of: a) 100% of committed but undisbursed straight senior loans; b) 30% of committed guarantees; and c) 30% of committed client risk management products. The liquidity ratio policy calls for the Corporation to maintain a minimum level of liquidity (plus the undrawn borrowing commitment from IBRD) that would cover at least 45% of the next three years net cash requirements. Liquidity Position Exceeds Policy Requirements Liquidity on the IFC s balance sheet is high, with FY2013 cash and liquid assets equal to 54% of total assets net of swaps and 77% of the next three years cash needs. In addition, the actual external funding liquidity level is 309%, far above the minimum. The Corporation manages its liquidity with profitability as a secondary consideration to the preservation of its capital earnings. Liquid asset investments are in highly-rated instruments of governments, government agencies and instrumentalities, multilateral organizations, and corporate issuers, and include asset- and mortgagebacked securities, time deposits, and other obligations of banks and financial institutions. Investments are managed by either the IFC treasury department or external managers. To manage volatility in the sovereign bond market, the Corporation invests only less than 20% of the liquid portfolio in emerging market sovereign bonds, all with less than two years maturity and none of which are peripheral Europe. The Corporation continues to invest in structured products, but in postcrisis vintage securities which have been outperforming. Due to its robust liquidity position, it did not have to sell its portfolio of mortgage-backed securities that experienced significant unrealized losses during the crisis. It has since recovered more than 70% of the unrealized losses and the portfolio has been paid down to around $500 million in nominal terms. Bond Issuance Maintains Favorable Profile Total borrowings (including repurchased and early redeemed debt) were $11.8 billion in FY2013, essentially the same as the $12.0 billion in FY2012. The entire FY2013 program was raised in the international capital markets 11 and did not include any pre-funding for FY During the last fiscal year the average maturity of funds raised shortened to 3.7 years, in line with the Corporation s internal target. The shortening was attributable to the shortening average life of the IFC s loan portfolio and investor preference for shorter-dated instruments as a result of uncertainty in the global capital markets. Cost of funding improved to 6-month US$ LIBOR minus 21.3 bps in 2013 from minus 20.8 bps in The IFC sought different funding sources from their usual market access in order to help achieve the lower cost of funding. 11 As of end-fy2013, the IFC has $230 million in outstanding borrowings from the IBRD. The most recent borrowing during FY2013 was related to a special situation regarding Saudi Arabia s payment of capital to the IBRD in local currency and the ability of the IFC to fund loans in the same currency. 12 The FY2013 borrowing program allowed for $2.0 billion in pre-funding to take advantage of favorable market conditions; this was in addition to the $10.0 billion authorization. 7 NOVEMBER 19, 2013 CREDIT ANALYSIS: INTERNATIONAL FINANCE CORPORATION

8 Outstanding borrowings are denominated in 21 currencies, with all borrowings converted to US dollars on an after-swap basis except for a few isolated cases in which local currency borrowings are onlent to clients on matching terms. Outstanding IFC loans are denominated in a variety of currencies, but overwhelmingly concentrated in two: the US dollar (74%) and the Euro (13%). For FY2014, the IFC s borrowing authorization is $13.5 billion, up from $10.0 billion in FY2012. In addition, the IFC can borrow up to $2.0 billion to pre-fund the FY2015 borrowing program for a total FY2014 program of $15.5 billion. Rating History International Finance Corporation Issuer Rating Senior Unsecured Outlook Date Long-term Short-term Outlook Assigned Stable March-97 Rating Assigned -- P January-97 Rating Assigned Aaa December-94 Rating Assigned Aaa -- November-91 8 NOVEMBER 19, 2013 CREDIT ANALYSIS: INTERNATIONAL FINANCE CORPORATION

9 Annual Statistics Balance Sheet Summary (US$ Millions) [1] Assets Total Assets 28,487 34,475 41,823 42,900 49,994 58,526 64,749 68,413 Investments 12,731 15,796 23,319 22,214 25,944 29,934 31,438 34,677 Gross Loans 10,727 12,650 15,229 16,566 18,009 19,762 20,877 22,459 Equity Investments 2,696 3,245 7,318 5,344 7,469 9,313 9,774 11,695 Debt Securities ,620 1,542 1,815 2,166 2,168 2,151 Less Reserve against Loan Losses ,238-1,349-1,307-1,381-1,628 Net cash, deposits and securities 11,789 14,915 15,125 18,656 21,537 25,990 30,482 31,455 Other 3,967 3,764 3,379 2,030 2,513 2,602 2,829 2,281 Liabilities and Equity Total Liabilities 17,411 20,458 23,562 26,778 31,635 38,247 44,169 46,176 Borrowings Outstanding 14,967 15,879 20,261 25,711 31,106 38,211 44,665 44,869 From World Bank From Market Sources 14,887 15,817 20,207 25,660 31,056 38,161 44,623 44,639 Other Liabilities 2,444 4,579 3,301 1, ,269 Non-controlling interests Total Equity 11,076 14,017 18,261 16,122 18,359 20,279 20,580 22,237 Subscribed Capital 2,365 2,366 2,366 2,369 2,369 2,369 2,372 2,403 Less Portion not yet paid Equals Paid-in Capital (PIC) 2,364 2,365 2,366 2,369 2,369 2,369 2,372 2,403 Accumulated Other Comprehensive Income , ,202 1, ,121 Retained Earnings 8,711 11,210 13,192 13,042 14,788 16,367 17,695 18,713 Total Liabilities and Equity 28,487 34,475 41,823 42,900 49,994 58,526 64,749 68,413 [1] All data pertains to fiscal years ending June NOVEMBER 19, 2013 CREDIT ANALYSIS: INTERNATIONAL FINANCE CORPORATION

10 Income Statement Summary (US$ Millions) [1] Total Income 2,594 4,093 3,463 1,537 3,456 3,105 3,382 2,792 Income, Loans & Equity Investments 2,028 3,354 2, ,439 2,341 2,395 1,811 From Loans and Guarantees 804 1,062 1, ,059 From Equity Investments 1,224 2,292 1, ,638 1,464 1, Income from Debt Securities Financial Service Fees Advisory Services Income Income from Liquid Asset Trading Activities Other Total Expenses 1,095 1,258 1,375 1,555 1, ,215 1,513 Charges on Borrowings Administrative Expenses Provision for Losses on Loans and Guarantees Pension and Other Post-Retirement Benefit Plans Other Expenditures for Technical Assistance and Advisory Services Grants to IDA and Other Income before Net Gains (Losses) on other Non-Trading 1,409 2,589 1, ,085 1,424 1, Financial Instruments Net Gains (Losses) on other Non-Trading Financial Instruments Net Income 1,264 2,490 1, ,746 1,579 1,328 1,010 Net Loss Attributable to Noncontrolling Interests Net Income Attributable to IFC 1,264 2,490 1, ,746 1,579 1,328 1,018 [1] All data pertains to fiscal years ending June NOVEMBER 19, 2013 CREDIT ANALYSIS: INTERNATIONAL FINANCE CORPORATION

11 Financial Ratios Asset Quality Total Loans on Non-Accrual (US$ Mil.) ,272 Non-Accruals as % Gross Loans Out Non-Accruals as % Loan Loss Res Non-Accruals as % Loan Loss Res. + Accumulated Earnings Gross Write-offs (Loan & Equity) as % Gross Loans and Equity Investments Net Write-offs (Loan & Equity) as % Gross Loans & Equity Investments Loss Reserve to Net Write-offs (Loan & Equity) (X) Loss Reserve plus Accum. Earn. as % Gross Loan and Equity Investments Liquidity (%) Liquid Assets as % Undisbursed Loans + Equity Investments Liquid Assets as % Total Borrow. Out Liquid Assets as % Total Market Borrow Performance Statistics Using Net Income (%) Return on Avg Assets (Incl. Loss Res.) Return on Avg Equity (Incl. Loss Res.) Return on Earnings Assets Performance Statistics Using Operating Income (%) Return on Avg Assets (Incl. Loss Res.) Return on Avg Equity (Incl. Loss Res.) Return on Earnings Assets Equity Ratios PIC + Accum. Earn. + Loss Res. as % Gross Assets [1] PIC + Accum. Earn. + Loss Res. as % Gross Loans + Equity Investments [1] Borrowings Out. + Guarantees % Subscr. Cap. + Accum. Earn. (X) [1] Equity Investments net of Loss Reserves as % PIC + Accum. Earnings [1] [1] PIC equals Paid-in Capital 11 NOVEMBER 19, 2013 CREDIT ANALYSIS: INTERNATIONAL FINANCE CORPORATION

12 Country Exposure of IFC [1] (US$ Million; Fiscal Year 2013) Loan Equity Guarantees Risk Management Total % [2] India 2, , Brazil 1, , Turkey 1, , China , Russian Federation , Nigeria Mexico Egypt Colombia Peru Ten Largest Exposures 10,111 4,545 1, , Total 24,167 9,718 3, , [1] Ten largest country exposures in the disbursed portfolio. [2] Figures shown as percentage of gross investment outstanding. IFC Ownership Distribution by Ten Largest Shareholders (as of June 30, 2013) Capital Voting Power Amount (US$ 000) % of Total % of Total United States 569, Japan 141, Germany 128, France 121, United Kingdom 121, Russia 81, India 81, Canada 81, Italy 81, Netherlands 56, Ten Largest Shareholders 1,462, Total 2,403, NOVEMBER 19, 2013 CREDIT ANALYSIS: INTERNATIONAL FINANCE CORPORATION

13 Moody s Related Research Analysis:» IBRD (World Bank), January 2013 (148642) Credit Opinions:» International Finance Corporation» IBRD (World Bank) To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of this report and that more recent reports may be available. All research may not be available to all clients. Related Websites and Information Sources For additional information, please see:» the company s website: MOODY S has provided links or references to third party World Wide Websites or URLs ("Links or References") solely for your convenience in locating related information and services. The websites reached through these Links or References have not necessarily been reviewed by MOODY S, and are maintained by a third party over which MOODY S exercises no control. Accordingly, MOODY S expressly disclaims any responsibility or liability for the content, the accuracy of the information, and/or quality of products or services provided by or advertised on any third party web site accessed via a Link or Reference. Moreover, a Link or Reference does not imply an endorsement of any third party, any website, or the products or services provided by any third party. 13 NOVEMBER 19, 2013 CREDIT ANALYSIS: INTERNATIONAL FINANCE CORPORATION

14 Report Number: Authors Steven Hess Annette Swahla Production Associate Atmaj Rane 2013 Moody s Investors Service, Inc. and/or its licensors and affiliates (collectively, MOODY S ). All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. ( MIS ) AND ITS AFFILIATES ARE MOODY S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY S ( MOODY S PUBLICATIONS ) MAY INCLUDE MOODY S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. 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However, MOODY S is not an auditor and cannot in every instance independently verify or validate information received in the rating process. Under no circumstances shall MOODY S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) or other circumstance or contingency within or outside the control of MOODY S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (including without limitation, lost profits), even if MOODY S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The ratings, financial reporting analysis, projections, and other observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities. Each user of the information contained herein must make its own study and evaluation of each security it may consider purchasing, holding or selling. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY S IN ANY FORM OR MANNER WHATSOEVER. MIS, a wholly-owned credit rating agency subsidiary of Moody s Corporation ( MCO ), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MIS have, prior to assignment of any rating, agreed to pay to MIS for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at under the heading Shareholder Relations Corporate Governance Director and Shareholder Affiliation Policy. For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY S affiliate, Moody s Investors Service Pty Limited ABN AFSL and/or Moody s Analytics Australia Pty Ltd ABN AFSL (as applicable). This document is intended to be provided only to wholesale clients within the meaning of section 761G of the Corporations Act By continuing to access this document from within Australia, you represent to MOODY S that you are, or are accessing the document as a representative of, a wholesale client and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to retail clients within the meaning of section 761G of the Corporations Act MOODY S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for retail clients to make any investment decision based on MOODY S credit rating. If in doubt you should contact your financial or other professional adviser. 14 NOVEMBER 19, 2013 CREDIT ANALYSIS: INTERNATIONAL FINANCE CORPORATION