Credicorp .(BAP) - 2022 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Credicorp reported a net income growth of almost 30% for the full year, with a return on equity (ROE) of 16.7% [10] - The structural non-performing loan (NPL) ratio edged up to 4.95%, while the structural cost of risk increased by 85 basis points to 2.06% [15][36] - The company maintained a strong capital base and a diversified business portfolio, with a coverage level of 112.2% for structured and non-performing loans [17][36] Business Line Data and Key Metrics Changes - BCP achieved an ROE of 22% for the year, while Mibanco is on track to deliver expected ROEs [11] - Pacifico reached an ROE of 19.2%, showing improvement in its business performance [11] - The investment banking and wealth management business faced challenges, requiring a strategic review to enhance ROEs [11][30] Market Data and Key Metrics Changes - Peru's GDP is expected to grow around 2% in 2023, with social unrest impacting the economic outlook [19][40] - Inflation in the U.S. is trending downward, positively affecting metal prices, which is crucial for Peru's exports [18] - The Central Bank of Peru is likely to maintain high interest rates due to ongoing political and social challenges [19][40] Company Strategy and Development Direction - Credicorp is focusing on sustainability as a core part of its business strategy, aiming to drive financial inclusion and education in the Andean region [7][8] - The company is investing significantly in digital transformation and disruptive initiatives to enhance its competitive position [41] - A strategic review of the investment banking and wealth management business is underway to identify growth opportunities and efficiencies [30] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the political turmoil and social unrest in Peru, which pose near-term headwinds [12] - Despite challenges, the company remains optimistic about its ability to navigate volatility and achieve sustainable growth [10][40] - The guidance for 2023 includes expectations for structural loan portfolio growth of 6% to 10% and a return on equity around 17.5% [41] Other Important Information - Yape, a digital payment platform, has over 11 million users, with significant growth in transactional volume [24] - Mibanco's structural NPL ratio dropped to 5% due to write-offs, but profitability decreased due to increased provisions [26] - Grupo Pacifico's net income decreased 25.4% quarter-over-quarter, but showed recovery in the Life and Property & Casualty businesses [28] Q&A Session Summary Question: On operating expenses and digital investment strategy - Management believes the current digital strategy is appropriate and sees a faster path to monetization due to reduced competition [46][47] Question: On asset quality and provision charges - Management indicated that the cost of risk guidance reflects uncertainty in the macroeconomic environment and a shift towards retail lending [49][50] Question: On ROE guidance for 2023 - Management explained that the guidance for ROE at 17.5% considers various factors, including the expected cost of risk and growth in retail lending [52][54] Question: On deposits and funding breakdown - Management discussed the impact of the pandemic on deposit structures and the expected normalization of funding sources, with Yape contributing to deposit growth [71][74]