Credicorp .(US:BAP)2020-02-06 22:02Financial Data and Key Indicators Changes - Credicorp reported a net income of 973 million soles in Q4 2019, which was 11% lower than Q3 2019 due to seasonality [11] - For the full year 2019, net income reached 4,265 million soles, a 7.1% increase compared to the previous year [12] - The return on average equity (ROAE) for the full year was 17%, while the return on average assets (ROAA) was 2.3% [12] - The cost of risk increased by 22 basis points to 1.6% in 2019 [12] - The net interest margin (NIM) increased by 11 basis points to 5.39% in 2019 [12] Business Line Data and Key Indicators Changes - Universal banking saw average daily loan balances grow by 6.9% in 2019, primarily driven by retail banking segments [5] - Mibanco experienced downward pressure on margins, with a 76 basis point drop in NIM due to strong competition [7] - The insurance underwriting results improved, mainly due to growth in the property and casualty business [9] - Investment banking and wealth management saw better results in proprietary portfolios compared to 2018, with a 6% growth in assets under management [10] Market Data and Key Indicators Changes - The banking sector loans grew by 6% in 2019, the lowest growth since 2017, with corporate loans growing only 2.9% [5] - The Peruvian economy expanded by approximately 1.6% year-over-year in Q4 2019, with a full-year GDP growth of 2% [4] - The economic activity is expected to accelerate in 2020, driven by a rebound in primary sectors and public investment [4] Company Strategy and Development Direction - Credicorp aims to enhance its governance framework and has simplified its committee structure to improve effectiveness and diversity [27] - The company is focusing on digital transformation and customer experience, with a goal to pre-approve credit for 50% of the economically active population by 2021 [25] - Credicorp plans to continue investing in technology and digital capabilities while managing costs effectively [60] Management's Comments on Operating Environment and Future Outlook - Management expects the macroeconomic and political context to improve slightly in 2020, positively impacting the banking sector [29] - Loan growth is projected to be between 8% and 10% in 2020, primarily driven by retail banking and Mibanco [29] - The cost of risk is expected to range between 1.6% and 1.8% in 2020, reflecting a focus on riskier segments [29] Other Important Information - Credicorp completed the acquisition of Bancompartir Colombia and is preparing for a merger with Encumbra [8] - The company has increased its expenditures on transformation while maintaining a focus on cost management, resulting in an improved cost-to-income ratio [6] Q&A Session Summary Question: Guidance on asset quality and cost of risk - Management explained that the cost of risk is expected to remain elevated due to the inclusion of higher-risk segments, despite improvements in risk management models [35][36] Question: Non-interest expenses increase - The increase in non-interest expenses was attributed to seasonality and consulting fees, with expectations for ongoing expenses being clarified [39] Question: Loan growth challenges - Management acknowledged tougher competition in wholesale loans but expressed optimism about retail and Mibanco portfolios growing faster through new products [45] Question: Net income growth expectations - Management indicated that net income growth is expected to be in the single digits for 2020, with a focus on maintaining a higher dividend payout ratio [49] Question: M&A activity - Management is actively reviewing M&A opportunities both domestically and in targeted countries, with potential decisions expected in the first half of the year [52] Question: CET1 ratio and ROE targets - The sustainable ROE target of 19% is based on maintaining a CET1 ratio close to the internal minimum of 11% [57] Question: Coverage in Bolivia - Management reassured that all past due loans are adequately covered, and there are no major concerns regarding the portfolio quality in Bolivia despite political volatility [64][65]