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Banco Agropecuario to increase loan provisions due to climate change

Banco Agropecuario will increase its loan provisions through the end of 2016 to prepare for a possible decline in credit quality as a result of the impact of climate-related factors on the ability of borrowers to repay their debts, the bank said in a regulatory filing Dec. 16.

The move will negatively affect the bank's financial results, but will improve its financial stability in the long-term, the filing said.

For now the bank remains financially solid, partly thanks to a recent capital increase worth 150 million Peruvian soles through the issuance of shares subscribed by state development fund FONAFE, which the bank said is a sign of confidence in its new board.

The board was reshuffled after chairman Richard Hale admitted that the bank was too focused on lending to large companies in the agriculture sector and had largely ignored its mandate to support small and medium-sized producers.

In this regard, the bank said it has established stricter requirements and limits for loans to medium-sized and large companies, which currently represent 49% of its portfolio.

As of Dec. 15, US$1 was equivalent to 3.41 Peruvian soles.