Update Supranationals United States Ratings Long-Term IDR AAA Short-Term IDR F1+ Outlooks Long-Term IDR Financial Data Inter-American Investment Corporation (IIC) 30 Sep 13 Stable 31 Dec 12 Total assets (USDm) 1,761.3 1,814.5 Equity (USDm) 789.2 778.6 Net income (USDm) 8.9 5.6 ROAE (%) 1.51 0.72 ROAA (%) 0.66 0.34 Equity/assets (%) 44.81 42.91 Usable/required capital 315.10 328.80 Key Rating Drivers Strong Financial Profile: The ratings primarily reflect Inter-American Investment Corporation (IIC) s robust capitalisation, high liquidity, financially sustainable operations and strong risk management. It benefits from its relationship with the Inter-American Development Bank (IaDB, AAA/Stable) through a committed credit line for USD300m and the preferred creditor status accorded to IIC by member countries. Its relationship with other IADB Group entities, in terms of common shareholders and their boards of governors and directors, also underpins its ratings. Robust Capitalisation: IIC s equity/assets ratio of 44.8% at end-september 2013 was one of the highest among MDBs covered by Fitch Ratings, compensating for its lack of callable capital. IIC s debt/equity ratio, which reached 114.5% at the same date, is also low compared with its peers. Strong Risk Management: Although not subject to banking regulations, the multilateral development bank (MDB) abides by its own prudential framework. Management carefully monitors capital adequacy, liquidity and credit risk through conservative risk-management policies based on self-imposed prudential ratios and limits. Adequate Asset Quality: The weighted average rating of the corporation s loan portfolio is BB. IIC s non-accrual loans/gross loans ratio tends to be higher and more volatile than other MDBs given its private-sector focus. Nevertheless, non-accrual loans/gross loans were only 2.0% at end-september 2013 and loan loss reserve coverage is ample. This private-sector focus reduces loan concentration risk compared with other regional MDBs. Shareholder Support: IIC s subscribed capital is held by 44 member countries, with the United States (AAA/Negative) holding the largest share at 23.2%. Although the proportion of 'AAA' and 'AA' rated shareholders is lower than for other 'AAA' MDBs (35.4% of subscribed capital at September 2013), support is strong, as demonstrated by continuous capital increases since 2000 and a high level of paid-in capital. Challenging Operating Environment: Some of the countries in which IIC operates are economically volatile. However, the corporation has been able to operate without difficulty during successive periods of instability in the region due to its conservative operating policy and the member countries support. Member countries have historically accorded preferred creditor status to IIC. Related Research Supranational Industry Review (March 2013) Analysts Theresa Paiz Fredel +1 212-908-0534 theresa.paiz@fitchratings.com Rating Sensitivities Capitalisation or Liquidity Pressures: A prolonged and significant decline in capitalisation related to asset losses, fast growth in operations or an increase in earnings volatility could be negative for IIC s ratings. A structural decline in liquidity combined with weakening market access could also put the ratings under pressure. Decline in Asset Quality: Stress in a member country that significantly affects asset quality or results in transfer and convertibility restrictions could be negative for creditworthinesss. Diego Alcazar +1 212-908-0396 diego.alcazart@fitchratings.com www.fitchratings.com 6
Annex Figure 1 Spread Sheet Annex Original (USDm) 30 Sep 13 31 Dec 12 31 Dec 11 31 Dec 10 1. Lending operations 1. Loans outstanding 981.4 1,061.7 992.8 839.0 2. Undisbursed loans 113.7 123.2 95.4 143.9 3. Approved loans 299.7 373.4 458.5 368.5 4. Disbursed loans 158.4 355.4 412.1 314.9 5. Loan repayments 237.3 283.5 239.4 321.0 6. Net disbursments -78.9 71.9 172.7-6.1 2. Other banking operations 1. Equity participations 30.3 26.6 27.4 34.9 2. Guarantees n.a. 6.2 5.6 5.7 3. LCs and other off BS credit commitments n.a. n.a. n.a. n.a. 4. Total banking exposure (BS & off BS) 1,011.7 1,088.3 1,020.2 873.9 5. Growth in total banking exposure (BS and off BS) -2.7 6.7 16.7-1.8 3. Support 1. Share of AAA/AA shareholders in callable capital n.a. n.a. n.a. n.a. 2. Share of A/BBB shareholders in callable capital n.a. n.a. n.a. n.a. 3. Share of speculative grade shareholders in callable capital n.a. n.a. n.a. n.a. 4. Callable capital from shareholders rated AAA - AA/outstanding debt n.a. n.a. n.a. n.a. 5. Weighted average rating of callable capital n.a. n.a. n.a. n.a. 4. Breakdown of banking portfolio 1. Loans to sovereigns/total loans & equity participations n.a. n.a. n.a. n.a. 2. Loans to non-sovereigns/total loans & equity participations 97.01 97.56 97.31 96.01 3. Equity participation/total loans & equity participations 2.99 2.44 2.69 3.99 4. Non sovereign exposure (incl. guarantees)/total banking exposure 100.0 100.0 100.0 100.0 5. Concentration measures 1. Largest exposure 70.7 73.5 66.7 63.5 2. Five largest exposures 270.0 301.8 298.4 225.9 3. Largest exposure/equity (%) 8.96 9.44 8.58 8.21 4. Five largest exposures/equity (%) 34.21 38.76 38.37 29.22 5. Five largest exposures/total loans (%) 27.51 28.43 30.06 26.92 6. Credit risk 1. Average rating of loans BB BB BB BB 2. Loans to investment grade borrowers/gross loans 20.90 30.79 28.00 25.00 3. Share of treasury assets rated AAA-AA 55.89 60.30 94.00 94.00 Source: Fitch Related Criteria Rating Multilateral Development Banks (May 2012) 2
Balance Sheet 9 Months - 3rd Quarter As % of Year End As % of Year End As % of Year End As % of USDm Assets USDm Assets USDm Assets USDm Assets Original Original Original Original Original Original Original Original A. LOANS 1. To / Guaranteed by Sovereigns n.a. - n.a. - n.a. - n.a. - 2. To / Guaranteed by public institutions n.a. - n.a. - n.a. - n.a. - 3. To / Guaranteed by Private Sector 981.4 55.72 1,061.7 58.51 992.8 66.95 839.0 58.81 4. Of which Trade Financing Loans (memo) n.a. - n.a. - n.a. - n.a. - 5. Other Loans n.a. - n.a. - n.a. - n.a. - 6. Loan Loss Reserves (deducted) 45.4 2.58 47.4 2.61 45.0 3.03 56.5 3.96 TOTAL A 936.0 53.14 1,014.3 55.90 947.8 63.92 782.5 54.85 B. OTHER EARNING ASSETS 1. Deposits with Banks n.a. - n.a. - n.a. - n.a. - 2. Securities held for Sale & Trading 720.9 40.93 685.0 37.75 383.1 25.84 420.4 29.47 3. Investment Debt Securities - (incl. other invest.) 40.2 2.28 40.3 2.22 46.6 3.14 93.7 6.57 4. Equity Investments 30.3 1.72 26.6 1.47 27.4 1.85 34.9 2.45 5. Derivatives (incl. Fair-value of guarantees) n.a. - n.a. - n.a. - n.a. - TOTAL B 791.4 44.93 751.9 41.44 457.1 30.83 549.0 38.48 C. TOTAL EARNING ASSETS (A+B) 1,727.4 98.08 1,766.2 97.34 1,404.9 94.75 1,331.5 93.33 D. FIXED ASSETS n.a. - n.a. - n.a. - n.a. - E. NON-EARNING ASSETS 1. Cash and Due from Banks 16.7 0.95 28.4 1.57 59.3 4.00 80.8 5.66 2. Other 17.2 0.98 19.9 1.10 18.6 1.25 14.3 1.00 F. TOTAL ASSETS 1,761.3 100.00 1,814.5 100.00 1,482.8 100.00 1,426.6 100.00 G. SHORT-TERM FUNDING 1,011.70 1,088.30 1. Bank Borrowings (< 1 Year) n.a. - n.a. - n.a. - n.a. - 2. Securities Issues (< 1 Year) n.a. - n.a. - n.a. - n.a. - 3. Other (incl. Deposits) 120.8 6.86 21.5 1.18 140.8 9.50 108.2 7.58 TOTAL G 120.8 6.86 21.5 1.18 140.8 9.50 108.2 7.58 H. OTHER FUNDING 1. Bank Borrowings (> 1 Year) n.a. - n.a. - n.a. - n.a. - 2. Other Borrowings (incl. Securities Issues) 783.1 44.46 947.9 52.24 517.7 34.91 525.9 36.86 3. Subordinated Debt n.a. - n.a. - n.a. - n.a. - 4. Hybrid Capital n.a. - n.a. - n.a. - n.a. - TOTAL H 783.1 44.46 947.9 52.24 517.7 34.91 525.9 36.86 I. OTHER (Non-Int Bearing) 1.Derivatives (incl. Fair value of guarantees) n.a. - n.a. - n.a. - n.a. - 2. Fair value portion of debt n.a. - n.a. - n.a. - n.a. - 3. Other (Non-Int Bearing) 68.2 3.87 66.5 3.66 46.6 3.14 19.4 1.36 TOTAL I 68.2 3.87 66.5 3.66 46.6 3.14 19.4 1.36 J. GENERAL PROVISIONS & RESERVES n.a. - n.a. - n.a. - n.a. - L. EQUITY 1. Preference Shares n.a. - n.a. - n.a. - n.a. - 2. Subscribed Capital 704.4 39.99 689.8 38.02 704.8 47.53 705.9 49.48 3. Callable Capital 0.0 0.00 0.0 0.00 0.0 0.00 0.0 0.00 4. Arrears/Advances on Capital (12.5) (0.71) (0.4) (0.02) (20.5) (1.38) (42.5) (2.98) 5. Paid in Capital (memo) 691.9 39.28 689.3 37.99 684.3 46.15 663.4 46.50 6. Reserves (incl. Net Income for the year) 97.3 5.52 89.2 4.92 93.4 6.30 109.7 7.69 7. Fair-value revaluation reserve n.a. - n.a. - n.a. - n.a. - TOTAL L 789.2 44.81 778.6 42.91 777.7 52.45 773.1 54.19 M. TOTAL LIABILITIES & EQUITY 1,761.3 100.00 1,814.5 100.00 1,482.8 100.00 1,426.6 100.00 3
Income Statement 9 Months - 3rd Quarter As % of Year End As % of Year End As % of Year End As % of USDm Earning USDm Earning USDm Earning USDm Earning Original Assets Original Assets Original Assets Original Assets 1. Interest Received 36.0 2.79 48.5 2.75 43.9 3.12 44.2 3.32 2. Interest Paid 12.9 1.00 17.2 0.97 14.0 1.00 19.0 1.43 3. NET INTEREST REVENUE 23.1 1.79 31.3 1.77 29.9 2.13 25.2 1.89 4. Other Operating Income 10.0 0.77 9.8 0.55 6.9 0.49 11.2 0.84 5. Other Income 2.3 0.18 4.7 0.27 4.5 0.32 4.2 0.32 6. Personnel Expenses n.a. - n.a. - n.a. - n.a. - 7. Other Non-Interest Expenses 30.0 2.32 40.0 2.26 32.9 2.34 28.5 2.14 8. Impairment charge (3.5) (0.27) 0.2 0.01 (4.6) (0.33) (1.0) (0.08) 9. Other Provisions 0.0 0.00 0.0 0.00 2.4 0.17 0.7 0.05 10.PRE-DERIVATIVE OPERATING PROFIT 8.9 0.69 5.6 0.32 10.6 0.75 12.4 0.93 11. Net gains / (losses) on non-trading derivative instruments n.a. - n.a. - n.a. - n.a. - 12. POST-DERIVATIVE OPERATING PROFIT 8.9 0.69 5.6 0.32 10.6 0.75 12.4 0.93 13. Other income and expenses n.a. - n.a. - n.a. - n.a. - 14. NET INCOME 8.9 0.69 5.6 0.32 10.6 0.75 12.4 0.93 15. Fair value revaluations recognised in equity (0.8) (0.06) 0.5 0.03 n.a. - n.a. - 16. FITCH'S COMPREHENSIVE NET INCOME 8.1 0.63 6.1 0.35 10.6 0.75 12.4 0.93 4
Ratio Analysis 9 Months - 3rd Quarter Year End Year End Year End % % % % Original Original Original Original I. PROFITABILITY LEVEL 1. Net Income/Equity (av.) 1.51 0.72 1.37 1.62 2. Net Income/Total Assets (av.) 0.66 0.34 0.73 0.87 3. Net Interest Revenue + Commitment Fees / Gross Loans + Treasury Assets + Guarantees (av.) 1.75 1.89 2.04 1.75 4. Cost-Income Ratio 90.63 97.32 89.40 78.30 5. Income from Equity Investment / Equity Investment (av.) 12.65 2.96 1.93 5.66 6. Provisions / Average Total Banking Exposure (excl LCs) (0.44) 0.02 (0.23) (0.03) II. CAPITAL ADEQUACY 1. Net Total Banking Exposure (excl LCs) / Subscribed Capital + Reserves 120.53 134.42 122.88 100.92 2. Equity/Total Assets 44.81 42.91 52.45 54.19 3. Equity / Total Assets + Guarantees 44.81 42.91 52.45 54.19 4. Paid-in capital / Subscribed capital 98.23 99.93 97.09 93.98 5. Usable Capital/Required Capital 315.10 328.80 362.56 405.19 III. LIQUIDITY 1. Treasury Assets / Debt < 1 Year 643.87 3,505.58 347.30 549.82 2. Treasury Assets / Total Assets 44.16 41.54 32.98 41.70 3. Treasury Assets / Undisbursed Loans & Equity 684.08 611.77 512.58 413.41 IV. ASSET QUALITY 1. Impaired Loans /Gross Loans 2.00 2.10 2.24 4.43 2. Loan Loss Reserves / Gross Loans 4.63 4.46 4.53 6.73 3. Equity Loss Reserves /Equity Investment n.a. n.a. n.a. n.a. 4. Total reserves / Gross Loans, Equity Investment & Guarantees 4.49 4.33 4.39 6.42 5. Loan Loss Reserves/Non Accrual Loans 231.63 212.56 202.70 151.88 V. LEVERAGE 1. Debt/Equity 114.53 124.51 84.67 82.02 2. Debt/Subscribed Capital + Reserves 112.75 124.44 82.50 77.75 3. Debt/Callable Capital n.a. n.a. n.a. n.a. 4. Net Income + Interest Paid/Interest Paid 168.99 132.56 175.71 165.26 5
Spread Sheet Annex USDm USDm USDm USDm Original Original Original Original 1. LENDING OPERATIONS 1. Loans outstanding 981.4 1,061.7 992.8 839.0 2. Undisbursed Loans 113.7 123.2 95.4 143.9 3. Approved Loans 299.7 373.4 458.5 368.5 4. Disbursed Loans 158.4 355.4 412.1 314.9 5. Loan Repayments 237.3 283.5 239.4 321.0 6. Net disbursments (78.9) 71.9 172.7 (6.1) 2. OTHER BANKING OPERATIONS 1. Equity participations 30.3 26.6 27.4 34.9 2. Guarantees n.a. 6.2 5.6 5.7 3. LCs and other off BS credit commitments n.a. n.a. n.a. n.a. 4. Total banking exposure (BS & off BS) 1,011.7 1,088.3 1,020.2 873.9 5. Growth in total banking exposure (BS and off BS) (2.7) 6.7 16.7 (1.8) 3. SUPPORT 1. Share of AAA / AA shareholders in callable capital n.a. n.a. n.a. n.a. 2. Share of A / BBB shareholders in callable capital n.a. n.a. n.a. n.a. 3. Share of Speculative Grade shareholders in callable capital n.a. n.a. n.a. n.a. 4. Callable capital from shareholders rated AAA - AA / outstanding debt n.a. n.a. n.a. n.a. 5. Weighted Average Rating of Callable Capital n.a. n.a. n.a. n.a. 4. BREAKDOWN OF BANKING PORTFOLIO 1. Loans to Sovereigns / Total Loans & Equity participations n.a. n.a. n.a. n.a. 2. Loans to Non Sovereigns / Total Loans & Equity Participations 97.01 97.56 97.31 96.01 3. Equity participation / Total Loans & Equity Participations 2.99 2.44 2.69 3.99 4. Non Sovereign Exposure (incl. guarantees)/total Banking Exposure 100.0 100.0 100.0 100.0 5. CONCENTRATION MEASURES 1. Largest exposure 70.7 73.5 66.7 63.5 2. Five largest exposures 270.0 301.8 298.4 225.9 3. Largest exposure / Equity (%) 8.96 9.44 8.58 8.21 4. Five largest exposures/ Equity (%) 34.21 38.76 38.37 29.22 5. Five largest exposures / Total Loans (%) 27.51 28.43 30.06 26.92 6. CREDIT RISK 1. Average Rating of Loans BB BB BB BB 2. Loans to Investment Grade Borrowers / Gross Loans 20.90 30.79 28.00 25.00 3. Share of Treasury Assets rated AAA-AA 55.89 60.30 94.00 94.00 6
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