Continental was established in 1951. In 1970, the institution was nationalized, and in 1995 privatized. Holding Continental S.A. is the Bank’s main shareholder and owns 92.08% of the shares. The shares at the holding company level are split equally between Banco Bilbao Vizcaya Argentaria (BBVA) and Grupo Brescia, while the difference of 7.92% is held by almost 10,000 investors, majority of whom have positions via the pension funds Union Vida, Horizonte and Profuturo.

BBVA is one of the main international financial groups worldwide, which holds a solid position in the Spanish market, is ranked third in terms of capitalization in the European Union, and holds broad franchise across Latin America. Its international expansion began in the 1960’s and its positioning as an international bank was established in earnest in the 1970’s with the opening of operating banks and representative offices in the main capitals of Europe, the Americas and Asia. Today, BBVA serves 35 million clients in 37 countries through a 7,410 branch network, employing more than 94,500 people and managing more than €400 billion.

Grupo Brescia, on the other hand, is one of the top corporate conglomerates in Peru, with investments across most economic sectors including; mining (Minsur), banking (Banco Continental) and insurance (Rimac), pension funds (AFP Horizonte), real estate (ADESA), tourism (El Libertador), and recently fishing (Sipesa, TASA), among others.

The proposed IFC investment is an A loan of up to $130 million for IFC’s own account.

130.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	130.0
Equity

* These investment figures are indicative

Continental is headquartered in Lima and has a branch network of 215 branches across Peru. IFC’s investment can be used to fund loan activities through any of the branches.

The project is expected to have a strong developmental impact in the following areas:

- it will support Continental’s growth plans on the housing finance business, thus expanding the availability of residential mortgages and enhancing home ownership, while stimulating demand for labor, materials and other supplies for the housing industry;
- it will improve the financial fundamentals of the Bank by reducing maturity mismatches, and diversifying funding sources;
- it will increase access to finance to the SME sector, particularly those in the timber/forestry business and those adopting energy efficiency measures, by engaging in sustainable lending practices which promote economic and environmental benefits.

IFC is expected to play an important role in the project, as it will:

- Expand Continental’s role and growth in Housing Finance. This fits squarely within IFC’s Housing Finance strategy of supporting the primary mortgage market.
- Provide an alternative source of longer term local currency.
- Promote sustainable finance. The additional amounts earmarked for forestry/timber and energy efficiency uses, associated TA funds to build capacity for such and SME targeting component are all part of IFC’s support to sustainable finance, and are especially well suited for an Equator Principle adhered bank.
- Supporting a committed long-term investor in Peru. BBVA’s model of developing strong local (albeit foreign-owned) financial institutions in emerging markets requires that the vast majority of funding be sourced locally to provide proper risk management. BBVA is targeting markets such as housing finance that require longer-term finance, and although BBVA is prepared to continue providing the risk capital necessary to grow the business, the availability of term finance is essential to allow BBVA to leverage efficiently and implement its local strategy as the business grows rapidly.

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

During appraisal, IFC will analyze the FI portfolio for types of transactions, size, tenor and industry sectors and determine the Applicable Requirements if any, based on an analysis of the potential Environmental and Social risks associated with the FI portfolio, and the activities proposed to be supported with IFC financing. The Applicable Requirements would include a combination of:

- The IFC FI Exclusion List(s); and/or
- The applicable National Environmental and Social Laws and regulations; and/or
- The IFC Performance Standards.

IFC will also review, if required, the capacity of the FI to manage environmental and social risks and to establish and maintain the ESMS. IFC will suggest Supplemental Actions to address any gaps.
Based on the review, the project will be required to:

- Develop an Environmental and Social Management System (ESMS), prior to disbursement that is satisfactory to IFC, to ensure that its investments/activities supported by IFC financing are in compliance with the Applicable Requirement.
- Identify responsible, qualified persons to manage and implement the ESMS.
- Commit to implement the ESMS and take action to remedy any gaps in ESMS implementation on an ongoing basis.
- Submit a periodic report to IFC as per a format to be provided by IFC.

In addition to the above requirements, for all its investments, the FI may be required to review information available in the public domain and avoid investments in sub-projects across that have substantial unresolved environmental and social issues.