Credicorp .(BAP) - 2023 Q2 - Quarterly Report

Financial Performance - Net Income attributable to Credicorp increased 22.6% YoY to S/1,401 million, resulting in a ROE of 18.6%[5] - Net Income attributable to Credicorp reached S/1,401 million, up 1.2% QoQ and 22.6% YoY, with a ROE of 18.6%[30] - BCP Stand-alone reported 8.5% YoY growth in Net Income, mainly from an increase in Net Interest Income (NII)[35] - Net profit for 2Q23 reached S/1,429,817, reflecting a 22.1% increase year-over-year[38] - Total other income increased by 19.7% year-over-year to S/1,433,786 in 2Q23[38] Loan and Deposit Trends - Structural Loans measured in average daily balances declined 0.6% QoQ but increased 5.5% YoY, driven by growth in Retail Banking at BCP[5] - Total Deposits at quarter-end declined 3.5% QoQ and 2.7% YoY, with Credicorp maintaining a 40.6% market share in low-cost deposits[5] - Total loans as of June 2023 amounted to S/137,905 million, reflecting a QoQ decrease of 0.5% and a YoY increase of 1.6%[66] - Government Program Loans dropped 26.7% QoQ and 64.3% YoY, representing 3.9% of total loans at quarter-end[59] - The loan portfolio quality showed an NPL ratio of 5.64% in 2Q23, an increase of 46 basis points year-over-year[38] Risk and Provisions - The Structural NPL ratio increased 23 bps QoQ to 5.3%, influenced by social unrest and high inflation[6] - Structural Provisions increased 10.5% QoQ and 124.3% YoY, reflecting a challenging macroeconomic environment[7] - Structural Cost of Risk stood at 2.3%, reflecting the impact of adverse macroeconomic conditions on client payment capacity[22] - The coverage ratio of NPLs decreased to 98.7% in 2Q23, down 790 basis points year-over-year[38] - Provisions for credit losses on the loan portfolio rose to S/ 882,156,000 in 2Q23, reflecting a 10.4% increase QoQ and a 100.3% increase YoY[108] Efficiency and Cost Management - The Efficiency Ratio improved 310 bps YoY to 44.4% for 1H23, despite a seasonal increase in 2Q23[9] - The efficiency ratio improved to 44.6% in 2Q23, a decrease of 310 basis points year-over-year[38] - Operating expenses increased 9.1% YoY, primarily due to expenses at BCP and disruptive initiatives[29] - Total operating expenses reached S/2,103,072 in Q2 2023, reflecting a 3.2% QoQ increase[140] - Disruptive expenses surged by 69.6% YTD, representing 9.0% of total operating expenses, attributed to investments in various digital initiatives[147] Digital Engagement and User Metrics - Monthly active users (MAU) of Yape reached 9.0 million, with monthly revenue per MAU up 32% QoQ to S/2.5[10] - Yape reached 12.6 million users by the end of Q2 2023, with 9.0 million monthly active users (MAU), representing a 70% engagement rate[44] - In Q2 2023, Yape executed 615 million transactions, totaling S/53 billion year-to-date, averaging 25 transactions per MAU[44] - Yape users made over 34.4 million mobile top-ups in Q2 2023, marking a 13.3% increase from Q1 2023 and a 208% increase from Q2 2022[46] - Yape's Net Promoter Score (NPS) reached 78 points in Q2 2023, indicating strong user satisfaction[49] Capital and Regulatory Ratios - The CET1 Ratio for BCP at quarter-end was 12.8%, up 123 bps YoY and 87 bps QoQ[9] - Credicorp's Tier 1 ratio increased to 12.75% in 2Q23, up 89 basis points from the previous quarter[38] - The Global Capital Ratio at BCP Stand-alone reached 17.2%, up 75 bps QoQ, driven by the same factors affecting the IFRS CET1 Ratio[156] - Credicorp's Regulatory Capital Ratio stood 1.46 times above the minimum requirement, with a slight QoQ increase of 3 bps[153] - The structural allowance for loan losses stood at S/ 7,824 million, reflecting a QoQ increase of 0.6% but a YoY decrease of 3.6%[66] Economic Environment and Challenges - In 2Q23, the Peruvian economy is expected to have contracted around 0.5% YoY, marking its worst performance in 22 years, excluding the pandemic[163] - Inflation closed 2Q23 at 6.5% YoY, after remaining above or close to 8.0% for 14 consecutive months[166] - The annualized fiscal deficit rose to 2.6% of GDP in the last 12 months to June 2023, with tax revenues falling 14.2% YoY[168] - The trade balance surplus rose to USD 11.6 billion by May 2023, although exports fell 3.2% YoY to USD 64.9 billion[169] - The Central Reserve Bank of Peru maintained the monetary policy rate at 7.75%, its highest level since January 2023[166] IFRS 17 Implementation - The implementation of IFRS 17 resulted in a net equity increase of S/. 10 million for Pacifico Seguros by the end of December 2022 compared to IFRS 4[186] - The aggregate impact of implementing IFRS 17 on the net earnings of Credicorp was not material, amounting to S/. 15 million[192] - The recognition of insurance underwriting income under IFRS 17 is fundamentally different, requiring present value measurements of insurance obligations[190] - The adjustment in the Efficiency Ratio reflects a more accurate representation of the company's operational efficiency[199] - The company is transitioning to IFRS 17, which may affect future financial reporting and performance metrics[199]