Credicorp .(US:BAP)2021-05-09 21:45Financial Data and Key Indicators Changes - Credicorp's net income for Q1 2021 totaled PEN 651 million, representing a 215.8% year-over-year increase, reflecting prior provisions set aside during the pandemic [12][13] - Return on equity for the quarter was 10.6%, driven by a decrease in provisions and improved asset quality [13] - Net interest income grew by 2.6%, with a net interest margin (NIM) remaining flat at 3.73% [13][32] Business Line Data and Key Indicators Changes - BCP Stand-Alone contributed PEN 725 million in earnings with an 18.4% return on equity, while Mibanco's earnings contribution was PEN 14 million with a 2.7% return on equity [15][18] - Pacifico's life insurance business reported losses of PEN 96 million due to increased COVID-19 claims [21] - Investment Banking and Wealth Management reported earnings of PEN 37 million, close to pre-pandemic levels [15] Market Data and Key Indicators Changes - Peru's GDP is estimated to have grown around 4% year-over-year in Q1 2021, marking the first positive growth in five quarters [9] - Loan growth in March 2021 stood at 9.4% year-over-year, driven by Reactiva loans, but total loans declined 7% year-over-year when excluding Reactiva loans [10][11] - The Peruvian Sol depreciated to a record low amid political uncertainty, while copper prices reached a peak of $4.43, supporting GDP recovery expectations [10] Company Strategy and Development Direction and Industry Competition - Credicorp is focusing on digital transformation and enhancing financial inclusion, particularly through a hybrid business model at Mibanco [39] - The company is navigating political uncertainties and regulatory changes, including interest rate caps and pension fund withdrawals, which may impact financial inclusion [42][46] - Credicorp aims to maintain a strong liquidity position and adapt to changing market conditions while managing risks associated with political volatility [66] Management's Comments on Operating Environment and Future Outlook - Management highlighted the ongoing challenges posed by the pandemic and political landscape, emphasizing the need for consensus in the new executive branch [6][8] - The company expects GDP growth in Peru to be between 8% and 10% for 2021, with loan growth anticipated to be at the lower end of guidance due to weak dynamics [41] - Management expressed confidence in the recovery of asset quality and cost of risk, projecting continued improvement in these areas [41] Other Important Information - Credicorp's efficiency ratio was reported at 44%, with an adjusted ratio of 43.06% after excluding certain charges [36] - The company published its first sustainability report, outlining its commitment to long-term value creation and alignment with the United Nations Sustainable Development Goals [40] Q&A Session Summary Question: What are the risks for the financial sector if Castillo is elected president? - Management indicated uncertainty regarding the specific impacts on the financial sector, as there are no clear details in the economic program [52] Question: Will the cost of risk remain at the lower end of guidance? - Management confirmed that the portfolio performance has been better than expected, suggesting the cost of risk may remain on the lower side of guidance [54] Question: What is the outlook for Mibanco's return on equity? - Management expressed confidence that Mibanco could return to a 20% return on equity in the future, although this year the target is high single digits due to the impact of lockdowns [60] Question: How is Credicorp preparing for political uncertainty? - Management is managing FX positions and preparing for various scenarios, emphasizing their experience in navigating uncertainty [66] Question: What is the potential impact of the interest rate caps? - Management noted that the caps could significantly affect financial inclusion, with estimates suggesting over one million people may be excluded from financial services [71]