Credicorp Ltd. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Macro Environment: Peru's economy rebounding with 3.9% GDP growth in Q1 2025, supported by private spending, lower inflation, and record terms of trade. Global uncertainties like US tariffs monitored, but direct impact on Peru limited.
• Credicorp Performance: Solid first quarter with resumed loan growth, risk-adjusted NIM improved, profitability strong. Strategic investments in digital and sustainability, modernized core systems, and redesigned client journeys.
• Segment Details: BCP's strong performance due to asset quality and diversified revenues; Yape's user growth and revenue generation; Mibanco's sustained profitability; Grupo Pacifico's insurance underwriting strength; Investment Management's robust results.
• Balance Sheet Dynamics: Yield on interest-earning assets and funding costs affected by market rates, loan portfolio quality improving with NPL volumes contracting and cost of risk at 1.6%.

Segment Performance

• Universal Banking (BCP): ROE stood at 27.1% quarterly, loans expanded 1% (average daily balances) driven by wholesale banking and consumer loans, NIM resilient at 5.8% despite decreasing rates, NPL volumes fell 4.7%, cost of risk at 1.3%, efficiency ratio 37.7%.
• Yape: Added over 0.5 million new active users per quarter, revenue represented 4.8% of Credicorp's risk-adjusted revenues, payments business 56% of Yape's revenues, multi-instalment loans 50% of loan balances.
• Mibanco: Peru sustained profitability, loans grew 0.7% (average daily balances), NPL ratio 6.4%, NIM 13.9%, cost of risk 5.1% (adjusted for one-time effects). Colombia improved with resumed loan origination.
• Grupo Pacifico: Insurance underwriting strong but impacted by credit downgrades, net income rose 8% quarterly but fell 16% year-over-year.
• Investment Management and Advisory: ROE above expectations at 18.4% (excluding one-off charge), net income grew 47% quarterly and 10% year-over-year driven by asset management and capital markets.

Guidance

• Peru's GDP expected to grow ~3% in 2025.
• Loan book growth guidance: ~3.5% average daily balances, ~6% quarter end balances.
• NIM guidance: 6.2%-6.5%.
• Cost of risk expected to approach lower end of guidance.
• Efficiency ratio guidance maintained.
• Fee income expected to grow in low double-digits.
• ROE guidance maintained at ~17.5% due to global uncertainties.

Risks

• Global Uncertainties: US tariffs and trade tensions posing risks to global growth, commodity prices, and external demand.
• Political Uncertainty: In Peru and the region, though Peru's macroeconomic policy remains responsible.
• Commodity Impact: Peru's export-dependent economy vulnerable to fluctuations in copper and other commodity prices.

Question and Answer

Q: Brian Flores with Citibank asked about guidance update, election risk, and sustainable ROE above 18%.

A: Alejandro Perez-Reyes mentioned current results suggest potential above guidance, but global uncertainties keep guidance unchanged for 2025. Longer-term ROE under review for potential increase.

Q: Renato Meloni with Autonomous Research inquired about cost of risk drivers and future trends.

A: Cesar Rios stated cost of risk reduction due to macro environment, model adjustments, and origination process improvements, expecting cost of risk to trend up with improved margins.

Q: Tito Labarta with Goldman Sachs asked about upside risk to guidance and loan growth.

A: Alejandro Perez-Reyes noted loan growth expected to accelerate with strong loan sales and ramp-up of risk capabilities, NIM resilient despite lower rates.

Q: Yuri Fernandes with JP Morgan asked about loan growth rebound and Bolivia revaluation impact.

A: Alejandro Perez-Reyes said loan growth expected to pick up in Q2 and accelerate in Q3, with strong loan sales and normalization of prepayments.

Q: Carlos Gomez-Lopez with HSBC asked about rate sensitivity and political outlook.

A: Gianfranco Ferrari stated political changes in Peru expected to maintain strong performance, Alejandro Perez-Reyes mentioned 100 basis points rate shift would impact NIM by ~17 basis points, mostly from dollar portfolio.

Q: Andres Soto with Santander asked about Yape lending, multi-instalment loans, and SME lending.

A: Francesca Raffo replied Yape's focus on individual lending currently, multi-instalment loans at 50% of loan balances, with ambition to expand into SME lending.