Credicorp Ltd. (BAP) Q3 2024 Earnings Call Transcript
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Overview
The financial performance is strong with increased net income and ROE, and a special dividend indicates shareholder value return. The breakeven of Yape and improved loan portfolio quality are positive. However, operational expenses and market competition pose challenges. The Q&A suggests confidence in risk management and ROE targets, though some guidance was unclear. Overall, the positive financial metrics and strategic initiatives outweigh the negatives, leading to a positive sentiment.
Key Financial Performance
Net Income PEN1,523 million, up from previous year; driven by improving macroeconomic climate and strategic initiatives.
Dividend Payout Ratio 75.3%, reflecting strong performance and commitment to returning value to shareholders.
Return on Equity (ROE) 18.5%, up from 17.7% year-over-year; supported by universal banking and insurance performance.
Net Interest Margin (NIM) 6.4%, increased by 10 basis points; driven by disciplined interest rate management and low-cost funding.
Non-Performing Loans (NPL) Ratio 5.9%, down 12 basis points; improvement attributed to better payment performance and risk management.
Provisions Fell by 20.6%; driven by improved payment performance in retail banking.
Net Interest Income (NII) Increased by 3.5%; primarily due to a decrease in interest expenses.
Fee Income Contracted by 3.5%, but rose by 4.4% excluding BCP Bolivia; driven by strong transactional activity.
Insurance Underwriting Results Fell by 7.5%; less favorable reinsurance results in the P&C business.
Operating Expenses Rose by 10.4%; driven by personnel expenses and increased spending on licenses and infrastructure.
Cash and Equivalents Increased due to excess liquidity; loan portfolio contracted.
Cost of Risk Fell to 2.4%; improvement attributed to better asset quality and risk management.
Loan Growth Contracted by 1.2% in average daily balances; primarily driven by corporate loans.
Active Yaperos Reached 13 million; on track to reach 16.5 million by 2026.
Grupo Pacifico ROE 24.3%; strong investment performance and contribution from health insurance.
Mibanco ROE 9.4%; improving profitability driven by macro recovery and risk management.
Total Loans Fell 4.8% at Mibanco; impacted by stricter origination policies.
Acquisition of BanMedica Stake Transaction value of PEN1,131 million; expected to enhance growth in insurance and healthcare sectors.
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Operating Highlights
Tenpo Bank Chile: Received provisional approval to create a new banking entity named Tenpo Bank Chile, expected to secure full operational authorization by 2025.
Acquisition of BanMedica: Acquired the remaining 50% stake in the joint venture with Empresas Banmedica, enhancing access to insurance and healthcare in Peru.
Yape: Reached 13 million active users, aiming for 16.5 million by 2026, with significant growth in transaction volume.
Market Expansion in Chile: Expansion into the Chilean financial market through Tenpo, aiming to become the first digital bank in Chile.
Insurance and Healthcare Market: Acquisition of BanMedica strengthens position in the insurance and healthcare sectors, targeting growth in these underserved markets.
Operational Efficiency: Improved asset quality with a reduction in NPLs and cost of risk, supported by strategic risk management measures.
Dividend Payout: Achieved a total dividend payout of 75.3% to date, reflecting strong financial performance.
Diversification Strategy: Aiming to generate 10% of risk-adjusted revenues from new businesses by 2026 to enhance resilience.
Focus on Digital Transformation: Continued investment in digital initiatives, particularly through Yape, to drive financial inclusion and innovation.
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Risk or Challenges
Geopolitical Risks: Ongoing geopolitical tensions in the Middle East could cause volatility in the company's performance.
Economic Recovery: The slower-than-expected recovery in business confidence is impacting private sector investment and demand for wholesale loans.
Regulatory Changes: Recent pension system reform in Peru may enhance financial security but also introduces new regulatory dynamics that need to be managed.
Loan Growth: The company is experiencing negative loan growth, particularly in corporate loans, due to cautious origination policies and economic conditions.
Cost of Risk: The cost of risk is expected to remain elevated in the short term, influenced by the economic environment and the impact of pension fund withdrawals.
Market Competition: Increased competition in the digital banking space, particularly with the launch of Tenpo Bank Chile, poses challenges to market share.
Operational Challenges: The need for continuous investment in technology and innovation to maintain competitive advantage and improve customer experience.
Insurance Sector Performance: Deterioration in insurance underwriting results due to higher claims, particularly in credit lines, affecting profitability.
Economic Factors: Potential impacts from U.S. elections and global economic conditions could affect the company's performance and growth projections.
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Guidance & Outlook
Strategic Initiatives: Credicorp is focused on diversifying revenue streams, aiming to generate 10% of risk-adjusted revenues from new businesses by 2026. This strategy is designed to enhance resilience against macroeconomic fluctuations.
Digital Transformation: The company is investing in digital transformation, particularly through platforms like Yape, to lead innovation and financial inclusion.
Acquisition of BanMedica: Credicorp acquired the remaining 50% stake in its joint venture with Empresas Banmedica, enhancing its ability to improve insurance and healthcare access in Peru.
Tenpo Bank Chile: Credicorp received provisional approval to create Tenpo Bank Chile, marking a significant step in its expansion into the Chilean financial market.
GDP Growth Projections: Credicorp maintains GDP growth projections of 3% for 2024 and 2.8% for 2025, despite geopolitical tensions.
Loan Growth Guidance: Total loan growth is revised to around 0% for 2024 due to cautious origination policies and low demand for long-term financing.
NIM Guidance: NIM is expected to be in the upper end of the guidance range, between 6% and 6.4%.
Cost of Risk Guidance: Cost of risk is expected to be in the upper end of the guidance range, between 2% and 2.5%.
ROE Guidance: Credicorp reaffirms its ROE guidance for 2024 at around 17%.
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Shareholder Return Plan
Total Dividend Payout: Credicorp achieved a total dividend payout of 75.3% to date.
Special Dividend: A special dividend of PEN11 per share was declared.
Shareholder Return Plan: Credicorp's shareholder return plan includes a special dividend and a high total dividend payout ratio.
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Key Q&A
Q:How do you see the cost of risk evolving in 2025?
A:We expect the cost of risk to continue to come down, although there might be some change in the gradient of the trend once the pension money starts being withdrawn from the system.
Q:Can you share which subsidiaries have ROEs below Credicorp's ROE of around 17%?
A:Most subsidiaries are performing well, with Mibanco being the underperformer due to the credit cycle. We expect it to return closer to the 20% mark in the coming years.
Q:What is the main driver for the BanMedica transaction?
A:We have decided to run the business by ourselves and have no plans for another joint venture.
Q:Has the recent data leakage at a competitor affected you?
A:We have been monitoring the situation closely and feel comfortable with our governance structure and investments.
Q:What is your strategy for loan growth considering the current economic conditions?
A:We expect loan growth to improve due to increased business confidence and a decrease in cost of risk.
Q:What is your expectation for the rate outlook in Peru?
A:We expect 75 to 100 basis points more cuts in rates during 2025.
Q:What is your target for low-cost deposits in the medium term?
A:We haven't given a specific target, but we expect to see growth in low-cost deposits.
Q:What will be the cash position at the holding company level after the dividend and BanMedica transaction?
A:The cash position at Credicorp level is around $200 million, which is higher now due to the retained amount for the BanMedica transaction.
Q:Are you ready to relax strict origination policies at Mibanco?
A:We are seeing more growth in the portfolio and expect to relax policies in the coming months.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding specific guidance for loan growth in 2025, stating they would provide more details in February.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
BanMedica
Banmedica transaction
Credicorp ROE
PEN
Understood
acquisition
approach
aspiration
asset quality
calculation
care sector
collection
confidence
core income
cost funding
credit cycle
date
dividend
equivalent
fund withdrawal
health care
health insurance
individual
insurance health
investor
lever
liquidity
mind
money
penetration
pension fund
pension plan
people
rate Peru
resilience
revenue
risk measure
service business
system
trend cost
usage
way
BAP Transcript
Credicorp Ltd. (BAP) Q3 2025 Earnings Call Transcript
Positive11-14
The earnings call reflects strong financial performance, including record high net income and risk-adjusted NIM. While there are concerns about cost of risk and political uncertainties, optimistic guidance on loan growth, dividends, and strategic initiatives like Yape suggest positive momentum. The Q&A indicates analysts' confidence in management's ability to navigate challenges, supporting a positive stock price outlook.
Credicorp Ltd. (BAP) Q2 2025 Earnings Call Transcript
Positive8-15
The earnings call summary and Q&A highlight several positive factors: strong loan growth, optimistic guidance on NIM and ROE, and significant contributions expected from digital initiatives like Yape. While there are concerns about increased risk, the focus on risk-adjusted NIM and profitability is reassuring. No extraordinary dividend is a minor negative, but overall, the strategic focus and growth prospects suggest a positive sentiment for the stock.
Credicorp Ltd. (NYSE:BAP) Q1 2025 Earnings Call Transcript
Positive5-20
The earnings call highlights strong financial performance with increased ROE, net interest income, and fee income. The shareholder return plan is positive with increased dividends. However, management's reluctance to update guidance and unclear responses in the Q&A indicate some uncertainty. The positive aspects, such as improved asset quality and diversified income streams, outweigh the negatives, leading to a positive sentiment.
Credicorp Ltd. (BAP) Q3 2024 Earnings Call Transcript
Positive11-9
The financial performance is strong with increased net income and ROE, and a special dividend indicates shareholder value return. The breakeven of Yape and improved loan portfolio quality are positive. However, operational expenses and market competition pose challenges. The Q&A suggests confidence in risk management and ROE targets, though some guidance was unclear. Overall, the positive financial metrics and strategic initiatives outweigh the negatives, leading to a positive sentiment.
BAP Report
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