Fitch Ratings has affirmed the ratings of Intercorp Peru Ltd.'s (Intercorp) as follows:

--Foreign currency long-term Issuer Default Rating (IDR) at 'BBB-';

--Local currency long-term IDR at 'BBB-';

--Senior unsecured notes at 'BBB-'

The Rating Outlook is Stable.

KEY RATING DRIVERS

Integrated Platform Composed of Peru's Leading Companies

Intercorp Peru Ltd.'s (Intercorp) credit ratings reflect the company's diversified portfolio of operations, solid and leading market position in most of the industries in which it participates, and positive medium-term outlook for growth in its core businesses. The ratings also consider its business strategy supported by the integration of financial, retail, and real estate networks oriented toward the growing needs of Peruvian consumers. Intercorp's main subsidiaries are Intercorp Financial Services Inc. (IFS) and Intercorp Retail Inc. (Intercorp Retail).

Intercorp relies on dividends from operating subsidiaries to service its debt. The company maintains dividend control, as all the dividends received by Intercorp are from majority-owned or fully controlled companies. The ratings incorporate the view that the company's expected dividend flow structure should continue being driven by its financial services business - IFS's banking, insurance and wealth management operations - during the next few years.

Financial Services-Driven Dividend Flow

The company's business position in the Peruvian financial services business is viewed as solid and sustainable, which supports expectations of continued stable dividends stream from these operations to Intercorp over the medium term. IFS is the second largest provider of consumer loans (retail loans other than mortgages) in Peru in terms of total loans outstanding, the leading provider of annuities in terms of premiums, and a leading and growing wealth management business. Interbank, Intercorp's main source of cash flow generation - representing approximately 50% of the company's total dividends received - is rated 'BBB+'/Outlook Stable. Interbank's ratings are driven by its consistent, strong performance, robust credit process, good asset quality, sound franchise, adequate capital, positive economic and regulatory environment, and improving funding base.

Income-Stream Quality Incorporated

The rating considers the diversification and quality of Intercorp's dividends flow. During 2012, 2013 and 2014 the company received dividends of S/.334 million; S/.321 million; and S/.312 million, respectively. This level of received dividends was generated entirely by the financial services operations, with the banking (Interbank), insurance (Interseguro), and wealth management (Inteligo) operations making approximately 53%, 29%, and 18% of the total received dividends during 2012 - 2014. The dividend composition is not expected to materially change during 2015 - 2017. Intercorp's 2015 total received dividends are estimated at around S/.420 million, representing a 36% increase over the total 2014 received dividends. The company's retail and real estate operations are not considered to start adding to Intercorp's received dividends during this period.

Moderate Gross Leverage

The company's financial gross leverage, measured as the total debt to received dividends ratio, is expected to remain moderate at around 3.5x during 2015-2017. Intercorp is forecasted to generate annual levels of funds flow from operations (FFO), measured as received dividends minus cash interest, cash taxes, SG&A expenses, board expenses and others, of approximately S/.270 million. This expectation incorporates annual received dividends of around S/.400 million during the period. The company ended Sept. 30, 2015 with a total debt of S/.1.25 billion, which includes approximately S/.150 million in intercompany loans, USD250 million unsecured notes due in 2025; and S/.301 million unsecured notes due in 2030.

The company is anticipated to end 2015 with a total gross leverage, measured as total debt/received dividends ratio, of 3x, in line with expectations previously incorporated in the ratings.

Retail and Real Estate Operations: Solid Self-funded Businesses

Intercorp Retail manages a leading multi-format retail operation in Peru, which primarily includes Supermercados Peruanos, Eckerd Peru, the operator of the InkaFarma brand, and InRetail Real Estate. The ratings incorporate Intercorp Retail's diversified business model, continued growing operations, moderate leverage, and solid market position in Peru's supermarket, pharmacy retail, and real estate segments. The company's retail and real estate operations are viewed as self-sustaining, their capex requirements are already secured.

Under InRetail Real Estate Corp. (through the Real Plaza brand for real estate operations), the company operates 20 shopping malls and manages approximately 610 thousand square meters (m2) of gross leasable area (GLA). Under its real estate operations, Intercorp maintains unencumbered assets for an estimated market value of USD800 million. InRetail Real Estate Corp. is rated 'BB+'/Outlook Stable.

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for Intercorp's ratings include:

--Annual received dividends around S/.425 million during 2015-2017

--Annual FFO level around S/.275 million during 2015-2017

--Capital expenditure levels below S/.200 million during 2015-2017

--Gross financial leverage (total debt/received dividends), and interest coverage (received dividends/interest expenses) at levels around 3.5x and 5x, respectively, during 2015 - 2017.

RATING SENSITIVITIES

Positive Rating Actions: The combination of the following future developments could lead to positive rating actions:

--Received dividends significantly above expected levels;

--Enhanced performance of the company's operating assets;

--Significant development in the company's gross financial leverage and interest coverage at levels above expectations incorporated in the ratings;

--Consistently material improvement in the company's liquidity position;

--Upgrade in the rating of Interbank and/or increased diversification of dividend flows to the parent.

Negative Rating Actions: The combination of the following developments could lead to negative rating actions:

--Failure to maintain expected dividends levels;

--Material deterioration in gross financial leverage and interest coverage ratios from levels incorporated in the ratings;

--Deterioration in the company's liquidity by reducing assets available for sale or increasing short-term debt levels from current levels.

--Downgrade in the rating of Interbank and/or reductions in dividend flows to the parent.

LIQUIDITY

Adequate Liquidity

The company's financial strategy considers the executed refinancing, early in 2015, of its unsecured notes, lowering financial costs and extending the average life of the financial debt. Annual gross interest expenses for 2015 - post-refinancing - are estimated around S/.88 million, excluding one-time financial costs related to the refinancing of approximately S/.30 million. Intercorp's liquidity is viewed as good considering the company does not face any major debt payment schedule during the next five years, and interest coverage ratios are anticipated to remain high. The company's interest coverage, measured as received dividends to interest expenses, is forecast to be around 4.5x during 2015-2017. The company's liquidity is further supported by investments available for sale, consisting of Peruvian government bonds, with a market value of approximately USD20 million, which could be disposed of to provide an important source of financial flexibility. Intercorp's annual paid dividends to shareholders are expected to remain around S/.100 million during 2015-2017.

Additional information is available on www.fitchratings.com

Applicable Criteria

Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage (pub. 17 Aug 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=869362

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=998690

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=998690

Endorsement Policy

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