Institutional Presentation Central American Bank for Economic Integration. December 2017

Transcription

1 Institutional Presentation Central American Bank for Economic Integration December 2017

2 INDEX 1. Macroeconomic Overview 2. CABEI s Role and Policy Importance 3.Equity and Profitability 4. Funding and Liquidity 5. Credit Risk Management 6. Comparison with other MDBs - Rating 2

3 Fact Sheet Guatemala Key Economic Facts Extension: 572,563 km2 Population: 58.3 million Population density: people per km 2 Population Growth: 1.45% Regional GDP: US$316 billion El Salvador Costa Rica Honduras Nicaragua Belize The Central American region consists of eight countries: Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Belize, Panama and Dominican Republic. The establishment of the Central American Integration System (SICA) allows the region to work together on an economic, political and social level. Panama Dominican Republic 3 3

4 Key Statistics for Central American Region: Economic Outlook Economic Growth (Percentage) Inflation (Percentage) Economic Activities with Higher Growth Guatemala El Salvador Honduras Nicaragua Costa Rica Panama Mining Financial intermediation Financial intermediation Dominican Republic Fishing Service Activities Trade Construction Trade Transportation Manufacturing Hunting Communications Transportation Agriculture Private Services Manufacturing Agriculture Manufacturing Electricity, gas and water supply Hotels and restaurants Trade Manufacturing Transportation Financial Storage and intermediation Communications Financial intermediation Trade Manufacturing Economic growth for in Latin America is estimated to be around 1.8% whereas in Central America s is 3.8%. During , inflation gap between both regions decreased. For inflation in LATAM is estimated at 3.8%; while in CA 3.5%. Central America includes Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Dominican Republic and y Belize 4

5 Key Statistics for Central American Region : Economic Outlook Growth in Central Government debt is one of the major concerns for LATAM and CA authorities. Except for El Salvador and Belize, Central American countries exhibit a debt level below the Latin America average. During , most of CA countries reported fiscal deficits close to LATAM s regional average (3.0%). The impact of recent economic crisis affected the fiscal position of CA countries. Local authorities keep making and implementing important policy measures. Central America Region: CG Debt (Percentage of GDP) Central America Region: Fiscal Deficit (Percentage of GDP) 5

6 Vulnerabilities: Central America vs South America Given South America s dependence on hard commodity exports, the sub-region has a relatively high exposure to a drop in hard commodity prices. The situation is different for countries in Central America since depends more on economic conditions in the U.S., as its main commercial partner and source of remittances. Over , Central American countries have shown a tendency of growth above Latin America average. Future growth in Central American and Caribbean economies are expected to be closely in line with their historical trend growth. This is because Central America will benefit from lower oil prices and from their economic ties to the US. 6

7 Central America: Trade Integration Agreements and Regional Initiatives Following substantial work towards regional trade integration over the last half century, Central America has emphasized multilateral initiatives that underpin integration: Initiatives Year approved Benefits Free trade agreement between Chile and Central America Free trade agreement between Panama and Central America Central America* USA Free Trade Agreement (DR-CAFTA) Free trade agreement between Mexico and Central America The European Union - Central America Association Agreement (EU-CAAA) Formally signed October of 1999 Formally signed March of 2002 Formally signed May of 2004 Formally signed November of 2011 Formally signed June of 2012 Improved hemispheric integration. Improved rules for the investments promotion. Create an expanded and secure market for the goods produced. Improved commercial relationship in the region. Increased the economic and social development. Improved commercial relationship in the region. Increased the market access. Encouraged a complementary agenda for Central America Region. Improved the competitiveness between Central America en Mexico. Increased the economic and social development. Removed commercial barriers and facilitated the trade between Central America and Mexico. Improved commercial and cooperative relationship between regions. Increased social development in the Central America Region. Free trade agreement between Korea and Central America** *Includes Dominican Republic **Includes Panama Under Negotiation On June 18th 2015, Central American countries and Korea launched negotiations towards a free trade agreement. The first round of negotiations for the CA-Korea FTA took place on September 2015, in Seoul, Korea. The second round of free trade negotiations was held on November 2015, in San Salvador, El Salvador. CABEI supported the process through a non-refundable cooperation granted to the Central American countries. The third round of free trade negotiations between Central America and Korea was held from February 2016 in San Francisco, United States. Additional meetings were held in Seoul, Korea and Nicaragua. Negotiations for a free trade agreement concluded on November 16, 2016 in Managua, Nicaragua. In 2017, Guatemala continues negotiations on market access issues and rules of origin. 7

8 INDEX 1. Macroeconomic Overview 2. CABEI s Role and Policy Importance 3.Equity and Profitability 4. Funding and Liquidity 5. Credit Risk Management 6. Comparison with other MDBs - Rating 8

9 About CABEI CABEI's Mission* The Bank s objective shall be to promote the economic integration and the balanced economic and social development of the Central American region, which includes the founding countries and the non-founding regional countries, attending and aligning itself with the interests of all of its member countries. *Updated on March 28th,

10 About CABEI: Member Countries Supranational development bank focused on Central America, founded in 1960 Belize Dominican Republic Headquartered in Tegucigalpa, Honduras Guatemala Honduras Founding Members: El Salvador Guatemala Honduras Nicaragua Costa Rica El Salvador Costa Rica Nicaragua Panama Non-Founding Regional Members: Dominican Republic (2007) Panama (2007) Belize (2006) (*) Mexico Non-Regional Members: ROC Taiwan (1992) Mexico (1992) Argentina (1995) Colombia (1997) Spain (2005) Founding Members Non-Founding Regional Members Non-Regional Members Colombia Spain (*) As of November 9, 2016, Belize became a non-founding regional member Argentina ROC (Taiwan) 10

11 About CABEI: Organizational Structure Board of Governors Board of Directors Composition Board of Directors Executive President Executive Vice- President Operations and Technology Division Sector and Countries Division Financial Management Division Risk Management Division Credit Management Division CABEI has 321 employees situated at its headquarters in Tegucigalpa. The Bank also has 5 regional offices (1 regional office for each Founding Member Country). In the short term, the Bank expects to open two additional regional offices, one in Panama and the other in Dominican Republic. 11

12 About CABEI: CABEI s Preferred Creditor Status September 2016: "Moody's assessment of borrower quality takes into consideration not only the sovereign ratings of the borrowers, but also the likelihood that they will continue to extend to CABEI its 'most preferred' creditor status. Based on historical experience, we deem this to be highly likely, more so given CABEI s critical role as the main source of official multilateral financing for the region." July 2017: S&P considers that the positive outlook reflects our view that over the next two years CABEI will likely maintain its strong financial profile while improving its adjusted risk-adjusted capital (RAC), thanks to the benefits the bank receives from its preferred creditor status and ongoing equity support from its shareholders. (*) Average ratings based on the individual ratings assigned to Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica by Moody s Investors Service. As a supranational institution and under its Constitutive Agreement, CABEI has been accorded in the territory of its member states Preferred Creditor Status. September 2017: "Since amending its Constitutive Agreement, CABEI has sustained an excellent capitalization assessment while increasing loan portfolio diversification by raising its exposure to non-founding countries. Fitch assumes Member countries, even if experiencing severe difficulties, will continue to honour CABEI's preferred-creditor status and exempt its private-sector borrowers from any measures that may affect the transfer and/or convertibility of their debt service payments. 12

13 About CABEI: CABEI s Preferred Creditor Status As a supranational institution and under its Constitutive Agreement, CABEI is granted preferred creditor status on the territory of its member states. All of CABEI s assets and properties are considered public international property and are immune from search, requisition, confiscation, expropriation or any other form of apprehension or forced alienation by executive or legislative action. CABEI, its income, property and other assets, as well as the operations and transactions it carries out pursuant to its Constitutive Agreement, shall be exempt from all taxation and from all custom duties or other charges of a similar nature. CABEI shall also be exempt from any obligation relating to the payment, withholding or collection of any tax, contribution or duty. No tax or lien may be levied on any obligation or securities issued or guaranteed by CABEI, including any dividend or interest thereon, by whomsoever held. 13

14 CABEI is the dominant MDB in the Central American Region CABEI, IADB and World Bank participation (%) of total disbursements to the Region¹ in the last twelve years ( ) Total Disbursements : US$35.5 billion 1 Includes Guatemala, El Salvador, Honduras, Nicaragua and Costa Rica * Includes CII ** Includes IFC & IDA, Source: CABEI. Through the years CABEI has consolidated its role as the Multilateral Development Bank with the most relevant presence in the Central American region, achieving a participation close to 50% of the total disbursements to Central America over the last 12 years ( ). This consolidation has been mainly derived from the Preferred Creditor Treatment conferred to CABEI by its member countries. 14

15 Rising importance of CABEI in the region Since its creation, CABEI has disbursed over US$26.0 billion to the Central American region. More than 54% of those disbursements have taken place over the past 10 years. During periods when several multilateral development banks have frozen disbursements to some Central American countries (Nicaragua, Honduras and Guatemala), CABEI continued to fulfill its mandate, thus strengthening the Preferred Creditor Treatment conferred to it by its member countries. 15

16 SICA Member Countries CABEI / New Members SICA s purpose is to achieve the integration of Central America for the Isthmus to become a Region of Peace, Freedom, Democracy and Development. CABEI is SICA s financial arm. 16

17 Modifications to CABEI s Constitutive Agreement On April 24th, 2014, CABEI s Board of Governors instructed the Board of Directors and the Bank's Management to prepare a plan of action for eventual amendments to the Constitutive Agreement and the Bank's internal policies. On February 12th, 2015 CABEI s Board of Governors approved amendments to the Constitutive Agreement. On January 25th, 2016, the Legislative Assembly of Costa Rica ratified the modifications to CABEI's Constitutive Agreement. These reforms became effective on June 9, 2016, given that literal d) Article 35 of CABEI s Constitutive Agreement, states that such reforms shall become effective for all its members three (3) months after the date of its official communication, which occurred on March 8, 2016; after the publication of the respective law (No.9350) on Costa Rica s Official Gazette. AA- 17

18 Regional Projects & Loan Portfolio Diversification Initiatives Over 56 years promoting regional integration 18

19 Approvals and Disbursements June % 1.9% 19

20 Operations by Country & Focus Area June

21 Operations: 56 years promoting regional integration Up to 2016, CABEI approved road infrastructure projects in the region for US$5,701.9 millions. Results: Physical integration More efficient transportation for goods and people between countries and cities. Increased value of the agricultural, industrial, commercial and tourism sectors. CABEI has approved energy projects of more than US$5,800.0 millions, which increased installed capacity for approximately 5,920 MW from This installed capacity accounted for more than 38.0% of the total power generated. Funding for the energy sector, focused mainly on renewable energy. Central American Road Map Since 1996 up to 2016, CABEI has funded more than US$7,029 millions to support various programs to impact: micro, small and medium size enterprises (SMEs), educational loans, housing municipalities, foreign trade, productive sectors and financial sector strengthening. Disbursements aimed at Programs for SMEs, education and social housing have benefited more than 1,390,997 end users. CABEI has supported the most vulnerable population sectors through microfinance, allowing the Bank to reach the poorest households in rural areas, thereby promoting social and economic development in Central America. Central American Electrical Interconnection 21

22 Operations: 56 years promoting regional integration Social Housing Initiative Integration Goal: The program supports low cost housing, develops institutional capacity, and regional and national financial instruments. This program is executed by CABEI with the advice and partial financial support (22.1%) of the Mexican Government, within the Mesoamerican Project initiative. CABEI's Investment: CABEI is providing more than US$256.9 millions through its network of 95 regional public and private sector financial intermediaries. Energy Interconnectivity Transportation and Facilitation of Trade: Integration Goal: International Network of Mesoamerican Highways (RICAM), Sea Transport Project (TMCD) and Mesoamerican Multimodal Transportation System (STMM), focus on more efficient transport of people and goods. CABEI's Investment: CABEI's investment is about US$ 1,686 millions. Beneficiary countries: Belize, Guatemala, El Salvador, Honduras, and Nicaragua. Social Housing Social Housing Energy Integration Goal: The SIEPAC has two main goals: (a) support the creation and consolidation of the Regional Electricity Market (MER), and (b) to establish the regional interconnected electricity lines that will allow electricity exchanges between all MER actors. Road Network CABEI's Investment: CABEI's investment is about US$ millions, which represents 20.0% of the total project investment. 22

23 Loan Portfolio Diversification: Approvals during Program for the Sanitation of Districts of Arraiján and La Chorrera (Panama) The program consists of the financing of the design and construction of sewerage systems in the districts of Arraiján and La Chorrera in the province of Panama Oeste, which will allow the collection, transmission and final treatment of wastewater generated in this area to reduce levels of pollution of rivers, creeks and the bay of Panama, and thus improve public health and quality of life of its inhabitants CABEI Investment: The amount to be financed by CABEI is US$100.0 million. Montegrande Dam Multiple Project (Dominican Republic) The main objective of the project is to regulate the Yaque del Sur River avenues to protect the flood zone, provide the region with a supply system for irrigation, treatment and supply of drinking water, as well as electricity generation. CABEI Investment: The amount to be financed by is CABEI US$249.6 million. Productive Infrastructure Projects with Deferred Impact on the Expenditure Register (United Mexican States) RANC The project seeks to contribute to reduce the long-term costs of energy distribution and to provide electric power services with higher quality, lower cost and which proposes promotes environmental sustainability. CABEI Investment: The amount to be financed by is CABEI US$150.0 million. 23

24 Loan Portfolio Diversification: Approvals during Loan Approvals in Regional Non-Founding and Extra-Regional Member Countries (US$ Million and %) During 2016, CABEI s loan approvals in regional non-founding and extra-regional member countries reached US$596 million, or 28% of total approvals. Such level of approvals begins the loan portfolio diversification process, established as an objective under the amendments to CABEI s Constitutive Agreement. Portfolio diversification includes the first time ever loan approval to Mexico (US$150.0 million, Energy). 24

25 Loan Portfolio Diversification Portfolio diversification allow the use of capital optimization for evaluation methodologies of Risk Rating Agencies, enhancing the Bank's creditworthiness and, in turn, improving its risk rating. In 2016 concentration risk in loan portfolio was mitigated, the 5 largest exposures represented 91% of total portfolio. 25

26 Institutional Strategy 26

27 Operations: Institutional Strategy The Institutional Strategy seeks to maximize the impact of CABEI's operations on: Sustainable Economic Development of the Region. Sustainable Development Goals (SDGs) of the of the 2030 Agenda for Sustainable Development. 27

28 Operations: Institutional Strategy - Focus Areas Competitiveness Services Human Development And Social Infrastructure Financial Intermediation and Development Finance Focus Areas Productive Infrastructure Rural Development and the Environment Energy 28

29 CABEI s impact on development I-CABEI SIEMAS CABEI measures the impact of its operations on the region s development through the CABEI Development Impact Index (I-BCIE). The Bank also has a System for Identification, Evaluation and Mitigation of Environmental and Social Risks (SIEMAS), which help establish plans associated with the prevention or mitigation of environmental or social risks in CABEI operations. 29

30 Diverse Range of Products and Clients Our Clients Loans Co-Financing Syndicated Loans A/B Loans Public Sector Project Finance Global Credit Lines Equity Investments Guarantees & Letters of Credit Pre-investment Loans & Technical Cooperation Leasing Corporate Private Sector Financial Sector 30

31 Strategic Objectives of the Institutional Strategy ( ) 31

32 INDEX 1. Macroeconomic Overview 2. CABEI s Role and Policy Importance 3.Equity and Profitability 4. Funding and Liquidity 5. Credit Risk Management 6. Comparison with other MDBs - Rating 32

33 Balance Sheet 33

34 Balance Sheet Balance Sheet as of June 30 th, 2017 (US$ Million) Assets Liabilities and Equity Total US$9,566 Total US$9,566 34

35 Balance Sheet Structure 9.0% 4.0% 10.5% 5.2% 5.8% 1.3% Over the last five years, CABEI's assets have shown an average growth of 6.2% and equity has achieved an average strengthening of 5.0%. 35

36 Financials: Balance Sheet Loan Portfolio Loan Portfolio As of June 30th, 2017 Loan Portfolio by Country US$6,333 Million 6.4% -2.2% 36

37 Financials: Balance Sheet Loan Portfolio Distribution by Institutional Sector and Focus Area Loan Portfolio by Institutional Sector (US$ million) As of June 30th, 2017 Total Loan Portfolio US$6,333 Million Loan Portfolio by Focus Area (%) CABEI s loan portfolio is mainly in the public sector; which grants CABEI preferred creditor status. Within the private sector, the financial sector portfolio accounts for 49%. 37

38 Loan Portfolio Institutional Sector Distribution * As a result of CABEI s strategy to enhance public sector exposure, there has been a significant shift in the Bank s loan portfolio distribution by institutional sector. Consequently, private sector exposure has declined from a high of 44% in 2006 to 18% in June

39 Profits and Capitalization 39

40 Consistent Profits 40

41 Sound Financial Position Capital Adequacy Ratio The capital adequacy ratio is the main pillar to assure CABEI s financial soundness. The bank has a strict capital adequacy requirement (35%). CABEI also monitors the Capital Adequacy Ratio established in Basel II and Basel III Accords; as of June 30 st, 2017 the ratio reached 33.3%. 41

42 Capital Structure Capital Structure as of June 30,

43 INDEX 1. Macroeconomic Overview 2. CABEI s Role and Policy Importance 3. Equity and Profitability 4. Funding and Liquidity 5. Credit Risk Management 6. Comparison with other MDBs - Rating 43

44 Funding and Liquidity 44

45 Financials: Liquidity Risk - Investment Portfolio & Liquidity Levels Investment Portfolio Credit Quality June 2017 Liquidity risk is mitigated by CABEI s internal ALM Policy, which requires holding a minimum liquid asset coverage of 6 months of gross cash requirements which includes loan disbursements, debt service obligations and operating expenses. CABEI also maintains a high level of liquid assets in relation to its total assets. In line with international risk management standards, CABEI monitors both the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR) proposed by Basel III. As of June 30th 2017, the aforementioned ratios stood at 5.00x and 1.25x, respectively. At June 2017, the effective duration of the Investment Portfolio was 0.60 years. 45

46 Funding Strategy Objective Pilars Instruments Bond Issuances Loans Comercial Paper Program Certificates of deposit To access the international and money markets to ensure necessary resources to fulfill CABEI s obligations and provide financing at the lowest cost possible to benefit borrowing countries Markets Expiration Dates International Regional Diversification by tenors Asset/Liability Duration Matching Costs Cost Efficiency 46

47 Evolution of Funding Sources CABEI's financing structure has been evolving due to an active participation in capital markets, which reflects the good perception international markets have regarding its credit profile and maturity as an institution. CABEI's financing structure reflects the institution s preference for stable funding sources. 47

48 Financials: Funding Diversification Bonds Payable/Distribution by Markets and Currencies December 2006 US$1,200 MM June 2017 US$4,474 MM CABEI has a highly diversified funding base and has maintained an uninterrupted access to the international capital markets. As of June 30th, 2017, CABEI has made debt placements in 22 different currencies and 23 different markets. At June 2017, CABEI has issued US$487.0 million in 18 public and private placements in Central America s capital markets. * Includes Panama and Dominican Republic 48

49 Financials: Funding Diversification (December 2017) 39% 1% 29% 29% 2% During the period of global financial turmoil and as an indication of the favorable market perception towards the Institution, CABEI maintained uninterrupted access to the international capital markets. On March 2016, CABEI upsized its MTN Program from US$4.0 billion to US$6.0 billion, given its relevance towards the procurement of stable funding. 49

50 International Partners To further its mission, for over 50 years CABEI has partnered with a wide range of institutions including governments, development banks, and official agencies to channel resources to key sectors such as microfinance, renewable energy, infrastructure, rural development, and education. 50

51 Socially Responsible Investment (SRI) First Green Bond Placement On July 29 th, CABEI offered its first Green Bond ever in the Uridashi market in Japan, sold in South African Rand (ZAR) for ZAR 1.0 billion (USD 72.9 million). With this transaction, CABEI became the first Central American issuer selling a Green Bond in Japan. During the bond tenure CABEI will do it s best effort, in accordance with it s Constitutive Agreement, to allocate the net funds of this transaction to finance sustainable programs and projects that contributes with energy efficiency, renewable energy and energy infrastructure; through regional governments, corporate agencies or financial institutions. 51

52 CABEI: A Strong Partner for Combating Climate Change in Central America On December 14, 2016, during the XV Green Climate Fund (GCF) Board meeting held in Apia, Samoa, CABEI was formally accredited as a regional entity with direct access to the Green Climate Fund (GCF). As such, CABEI became the first entity in Central America to obtain accreditation to the GCF and the fourth regional entity for Latin America and the Caribbean to be accredited under the Fund s standards. Accreditation implies that CABEI has the capacity to carry out large-scale projects (maximum GCF category: over $250 million), as well as to obtain GCF funding for micro, small, medium and large projects. As an accredited entity of the GCF, CABEI will strengthen support for its member countries in order to meet the commitments and goals agreed upon in the different climate change conventions and to implement Nationally Determined Contributions (NDC) through the execution of regional and national projects and programs that contribute to increasing the resilience of communities to climate change and climate variability. 52

53 INDEX 1. Macroeconomic Overview 2. CABEI s Role and Policy Importance 3. Equity and Profitability 4. Funding and Liquidity 5. Credit Risk Management 6. Comparison with other MDBs - Rating 53

54 Financials: Credit Risk - Risk Management Policy Capital Adequacy and Leverage Policies: CABEI s Capital Adequacy Ratio requires that total equity represent at least 35% of total risk weighted assets. CABEI s total loan portfolio shall not exceed 3.5 times its total equity (Gearing Ratio). CABEI s maximum leverage cannot exceed 3 times its total equity (Debt / Equity). By policy, the ALCO Committee should monitor the capital adequacy indicator that incorporates the criteria established in the framework of Basel II and III. By policy, the ALCO Committee should monitor the leverage ratio established under Basel III. Main Credit Policies: CABEI s participation in project finance private sector loans must not exceed 40% of the total amount of the loan during its life (60% for projects with amounts lower than US$25 million or with public sector participation). For corporate private sector loans, the collateral put forth by the client, must maintain a minimum coverage of 100% of the total loan. Single Client Exposure (Private) must not exceed 5% of the Bank s equity, and the exposure to a regulated private financial economic group must not exceed 10%. State or mixed institutions with majority state participation with NSG should not exceed 20% of CABEI s equity. Main Credit Policies for Derivatives Exposures: Subscription of Credit Support Annexes (CSAs) with all counterparties in order to mitigate the credit exposure. In that sense, CABEI has established thresholds and margin calls (collateral). Credit risk in derivatives has been eliminated by requiring daily collateral and establish a "threshold" of 0. As part of this initiative, since December 2013, a third party provides collateral management service to CABEI. Calculation of net positions with counterparties under ISDA agreements. All counterparties must be approved by the ALCO Committee. Counterparties in derivatives contracts must have an investment grade rating. If an existing counterparty is downgraded below investment grade, no new derivative contracts can be agreed between such entity and CABEI. Credit exposure limits with derivative counterparties are defined bythe following conditions: Financial internacional counterparties: Up to US$50 million. For clients (Government, Financial Institutions o Corporates): ALCO Approval. 54

55 Credit Risk - Improving Credit Quality Loans in non-accrual status are those whose arrears of installments of principal or contractual interest exceed 90 days in the case of Private Sector loans and 180 days for Public Sector loans. All Public Sector borrowers are current with their payments in line with the Preferred Creditor Treatment they grant CABEI. CABEI s asset quality is under control. 55

56 INDEX 1. Macroeconomic Overview 2. CABEI s Role and Policy Importance 3. Equity and Profitability 4. Funding and Liquidity 5. Credit Risk Management 6. Comparison with other MDBs - Rating 56

57 PROVISIONING EFICIENCY LIQUIDITY LEVERAGE PROFITABILITY Central American Bank for Economic Integration Key Financial Indicators Ratio Rating (Moody's/S&P/Fitch/JCR) CABEI CAF IADB A1/A/A/AA- Aa3/AA-/AA-/AA Aaa/AAA/AAA/AAA Total Assets (US$ Million) 9,194 35, ,325 Financial Ratios 5 Year Average Year Year Average Year Year Average Year 2016 Return on Average Equity (ROE) 5.08% 4.29% 1.80% 1.23% 3.98% 3.28% Return on Average Assets (ROA) 1.50% 1.25% 0.51% 0.36% 0.91% 0.76% NII/Average Earning Assets (*) 2.65% 2.63% 0.97% 1.06% 1.72% 1.75% Equity/Total Assets 29.73% 29.62% 28.80% 29.36% 23.01% 23.35% Debt/Equity (times) Liquid Assets/Total Assets 26.82% 29.69% 31.87% 33.61% 23.08% 24.61% Administrative Expenses/Average Total Assets 0.55% 0.52% 0.40% 0.41% 0.71% 0.60% Administrative Expenses/NII 21.31% 19.75% 43.79% 41.17% 44.33% 35.79% Administrative Expenses/Net Income 37.16% 39.64% 93.57% % 83.43% 79.72% Allowance for Loan Losses/Total Gross Loan Portfolio 2.97% 3.00% 0.37% 0.29% 0.46% 0.65% Public Sector Allowance for Loan Losses/Public Sector Loan Portfolio 2.62% 2.58% 0.24% 0.12% 0.01% 0.00% (*) Earning Assets: Gross Loan Portfolio and Investments. (**) CDB Data for only; 2013 not available. 57

58 Peer Comparison Concept CABEI Peer Comparison Relevance Very Important for its Regional Shareholders. More important than IADB and CAF in Central America. Credit Quality Loan Portfolio Credit Quality Index has improved consistently. Allowance for Loan Losses Coverage is higher than its peers. Leverage Superior. Well diversified funding structure. Lower leverage ratios than IADB and CAF. Equity/Total Assets Solid capital ratios without adjustments. Average is higher than IADB and CAF. Paid-In Capital Profitability Currently receiving capital installments from its member countries as a result of the capitalization scheme approved in Solid and stable profitability ratios; all net income is capitalized to the General Reserve. CAF presents higher frequency in capital increases. Better cost-income ratios, ROE, ROA and NII than IADB and CAF. Liquidity Comparable and more stable. Superior than IADB average ratios and lower than CAF. 58

59 Financials: Credit Ratings Credit Ratings to Date Key Factors Supporting Investment Grade Rating: Agency Long- Term Rating Short- Term Outlook Last Reviewed Moody's* A1 P-1 Stable Dec-16 Fitch A+ F1 Stable Sep-17 S&P A A-1 Positive Jul-17 JCR AA- N/A Stable May-17 *According to Moody s Supranational Rating Methodology, CABEI s indicative Rating Range is: Aa1-Aa3. Multilateral/preferred creditor status Strong capitalization Relevance in Central American Region Progress in geographic diversification of loan portfolio High liquidity and solvency Diversified fund procurement Sound asset quality Sustained growth Conservative financial policies/strict credit policies 13 upgrades in 15 years 59

60 CABEI s Risk Rating among the best in Latin America CABEI s rating A1 assigned by Moody s, is the fourth best in Latin America, only behind IADB (Aaa), CAF (Aa3) and Chile (Aa3). This credit rating reflects the financial soundness of CABEI s profile, consolidated through the Bank's relevance in the region, the benefit it receives as a preferred creditor and the continued support of its shareholders. 60

61 Banco Centroamericano de Integración Económica / 61