Credicorp Ltd. Q2 FY2026 earnings call

Macroeconomic Outlook

• Peru's economic fundamentals are improving, with 13% year-over-year private investment growth, over 5% domestic demand growth, and multi-year highs in business confidence. The new political administration is expected to deliver policy continuity, macroeconomic discipline, and a predictable environment, reinforcing growth momentum.
• Regional outlook is mixed but constructive: Chile's outlook is supported by high copper prices and pro-private investment policies; Colombia's market sentiment has improved post-election despite ongoing challenges; Bolivia's 2026 FX framework shift is not expected to have a material impact on Credicorp, as the firm already incorporated market exchange rates in 2025 Q1 reporting.

Quarterly Core Performance

• Consolidated ROE for Q2 2026 was 20.3%, and first half 2026 ROE reached 21.2%. Total loans grew 13.1% year-over-year, driven by BCP (retail and wholesale) and Mibanco.
• NPL ratio improved to 4.1%, and NPL coverage ratio strengthened to 117.3%, reflecting better origination and enhanced collections capabilities.
• Net interest income grew 13.3% year-over-year, other core income grew 19.7%, fee income grew 15.9%, and FX transaction gains grew 29.8%. Consolidated risk-adjusted NIM was 5.5%, and first half 2026 efficiency ratio was 45.6%, within guidance.
• The innovation portfolio (led by Yape, Tenpo, and Culqi) contributed 9.9% of consolidated risk-adjusted revenues, on track to meet strategic targets, and is already ROE-accretive.

Strategic Update

• Management updated the medium-term ROE target from 19.5% to 22%, driven by structural improvements including enhanced risk management, stronger low-cost funding advantage, diversified revenue streams, consistent investment in technology/data/talent, and a more scalable business model. The prior 19.5% target was intentionally conservative amid a regional political cycle, and the firm has outperformed that expectation as operating conditions improved.
• The company continues to prioritize deepening financial inclusion, scaling digital innovation, and capturing operating leverage as new digital business models mature. A Digital Day will be held on November 17 to share more details on the innovation strategy.

1. BCP (Universal Banking): ROE of 29.2% for the quarter. Quarter-over-quarter total loans rose 4.7% (5.5% FX-neutral), with retail loans leading growth, followed by wholesale loans. Year-over-year total loans rose 10.9% (12.2% FX-neutral). NIM stood at 6.1%, up 12 bps year-over-year. NPL ratio fell to 3.9%, dropping 93 bps year-over-year. Cost of risk rose to 1.4% including El Nino-related provisions. Risk-adjusted NIM was 5.2%. Core income rose 15.4% year-over-year. First half 2026 efficiency ratio was 38.6%. BCP contributes approximately 55-60% of consolidated net income.

2. Yape (Digital Ecosystem): Has over 16 million monthly active users (MAUs), with 69 average transactions per month and a 78 NPS. Lending portfolio grew 4x year-over-year, reaching 5.6 million borrowing clients (33% of MAUs). Lending contributes 28% of Yape revenues, while payments contribute 45%. Revenue-generating payment transactions grew 42% year-over-year. Yape contributes 8.9% of Credicorp's consolidated risk-adjusted revenues, making it the largest contributor to the innovation portfolio.

3. Mibanco (Microfinance): Quarterly ROE was 22.9%. Quarter-over-quarter loans grew 4.4%, supported by growth in both low-ticket and higher-ticket segments. NPL ratio reached a record low of 4.8%. NIM rose 23 bps quarter-over-quarter to 15.2%, and 78 bps year-over-year. Cost of risk was 5.1% including El Nino-related provisions, down 24 bps year-over-year. Adjusted NIM was 11.2%. First half 2026 efficiency ratio dropped 4 percentage points to 48%. Mibanco Colombia delivered an 18.5% ROE with double-digit loan growth. Year-over-year loan growth for the whole Mibanco segment was 15%.

4. Grupo Pacifico (Insurance and Pension): Quarterly ROE was 19.1%. Net income was flat year-over-year: the Life business faced a base effect from 2Q2025 provision reversals, P&C net income fell due to higher claims, Corporate Health net income rose on expanded customer base, and medical services results were stable. It contributes approximately 12-15% of consolidated net income.

5. Investment Banking & Wealth Management: Quarterly ROE strengthened to 23.5%. Net income increased 47% year-over-year, driven by 44% growth in AUM (30% excluding acquisitions), higher trading revenue from market volatility, and strong performance across recurring asset/wealth management businesses.

• 2026 Peruvian GDP growth guidance is maintained at ~3.5%, including estimated El Nino impacts.
• 2026 full-year loan growth guidance (measured by quarter-end balances) is raised to ~12%, reflecting stronger-than-expected momentum in BCP and Mibanco retail banking. Management expects double-digit loan growth for both retail and wholesale segments over the medium term, barring short-term El Nino disruptions.
• NIM and risk-adjusted NIM are expected to come in at the higher end of the guidance range, supported by a loan mix shift toward higher-yield retail lending and the "higher for longer" interest rate environment.
• Full-year 2026 cost of risk is expected to remain within the guidance range, even with additional El Nino-related provisions to be booked later this year.
• 2026 fee income growth guidance is raised to high-teens, supported by stronger transactional activity and continued economic momentum.
• The 2026 full-year ROE guidance of ~19.5% is reaffirmed, with a current upside bias contingent on El Nino's evolution.
• Medium-term, the ROE target is updated to ~22% structurally, driven by stronger loan growth, higher-yield portfolio mix, sustained funding advantage, growing fee contributions, and operating leverage from scaling innovation. The mid-term cost-to-income ratio is expected to approach 40%, down from current levels, as the innovation portfolio scales.

• El Nino is the primary near-term risk for Peruvian operations, with the strongest expected impacts materializing in Q1 2027 if the event intensifies. It could reduce 2027 GDP growth, moderate loan growth and fee income, and require additional loan loss provisions.
• Approximately 9% of Credicorp's total loan portfolio is directly exposed to clients in potentially affected regions/sectors (fishing, agriculture, primary manufacturing).
• Persistent elevated inflation, geopolitical uncertainty in the Middle East, and volatile commodity prices present ongoing external risks to regional economic performance.
• Political and economic uncertainty remains in some regional markets (e.g., Colombia, Bolivia) despite recent improvements in market sentiment.

Q: With 2026 loan growth guidance raised to 12%, how should we think about segment breakdown, and what is your approach to growth in potentially El Nino-exposed segments like SMEs?

A: Management is adjusting risk appetite only for geographically/sectorally exposed segments, based on granular client-by-client analysis of expected impacts. The broader macro environment remains very positive, with record business confidence and double-digit private investment growth, so the company maintains strong growth ambitions for non-exposed parts of the portfolio. Peru's overall loan penetration is still well below pre-2019 levels, leaving significant medium-term growth room for both retail and wholesale lending; management expects double-digit growth for both segments over the medium term, with only a short-term hiccup from El Nino.

Q: What explains the currently strong, controlled cost of risk amid rapid loan growth? Is this driven by macro tailwinds, or structural improvements to underwriting and collections?

A: Both factors contribute: the positive macroeconomic environment with high system liquidity helps support asset quality, but the company has also made disciplined, long-term improvements to risk capabilities, including upgraded origination, monitoring, and collections models that are already delivering visible results. The company manages performance based on risk-adjusted NIM, not just raw cost of risk: while higher-yield growth segments like Yape consumer lending have higher nominal cost of risk, their risk-adjusted NIM is also higher, supporting overall profitability.

Q: The medium-term ROE target was raised from 19.5% to 22% after hitting ~21% H1 2026. Why adjust the target now, when conditions are favorable, and where is the upside coming from across the business portfolio?

A: The 19.5% target set in October 2025 was intentionally conservative given the large regional political cycle that has now concluded, and the company's current performance has already outpaced that conservative baseline even with El Nino provisions. Upside is broad-based: all business lines operate in underpenetrated markets (lending, insurance, investment) compared to regional peers, portfolio mix is shifting to higher-yield assets, innovation-driven fee income is growing, and operating leverage will improve as digital initiatives scale. Both high-performing segments (BCP, Mibanco) and lower-performing segments (insurance, wealth management) have room for ROE improvement, with scaling disruptive innovation adding incremental accretion.

Q: What should we expect for additional El Nino provisions going forward? Will provisions be updated, and is the current $106 million in Q2 provisions enough?

A: Q2 provisions were calculated based on granular client-by-client analysis for wholesale, and geography/client profile segmentation for retail, following IFRS 9 forward-looking expected loss rules. A reassessment of provisions will be conducted in Q3 2026 (September-October), when climatologists will have much better visibility on El Nino's eventual severity. Provisions will be calibrated based on updated forecasts at that time, but management expects full-year 2026 cost of risk will remain within the existing guidance range even for a severe El Nino scenario.