Credicorp .(US:BAP)2023-08-12 13:38Financial Data and Key Metrics Changes - Net income increased by 22.6% year-on-year, with a return on equity (ROE) of 18.6% for the quarter, driven by strong results in Universal Banking and Insurance businesses [8][35] - Net interest income (NII) grew by 21.5%, primarily due to rising interest rates and structural loan dynamics, despite higher funding costs [13][28] - The structural cost of risk increased by 127 basis points to 2.3%, mainly driven by SME-Pyme and vulnerable individual segments [13][32] Business Line Data and Key Metrics Changes - Universal Banking and Insurance businesses were the main contributors to positive results, with BCP's NII increasing by 29.6% year-on-year [19][35] - Mibanco's profitability began to recover, with NII rising by 4.6% quarter-over-quarter, and ROE rebounding to 9.5% [22][24] - Grupo Pacifico's net income increased by 32.1%, driven by the Life business, with improved profitability in life insurance and property segments [25][35] Market Data and Key Metrics Changes - The Peruvian economy is expected to have contracted by 0.5% year-on-year in the first half of 2023, marking the most significant decline in 22 years, excluding the pandemic period [15][16] - Domestic demand fell by 2% year-on-year in the first half, driven by a sharp 10% decline in private investment [16] - The GDP growth forecast for Peru in 2023 is now 1%, with expectations of a rebound to around 2% in the second half [9][36] Company Strategy and Development Direction - The company is focusing on expanding its retail business and increasing non-interest income through adjacent businesses [5][6] - There is a commitment to enhancing governance and transparency while pursuing social impact initiatives [7] - The strategy includes investing in disruptive initiatives like Yape, which is expected to reach breakeven by 2024 [6][21] Management's Comments on Operating Environment and Future Outlook - Management noted that the political scenario improved, but social unrest and climate events impacted the first half of the year [8][9] - The company anticipates softer results in the second half of the year due to challenging macroeconomic conditions [14][36] - The impact of El Nino is being closely monitored, with expectations of a weak to moderate effect on the economy [10][36] Other Important Information - The efficiency ratio improved by 310 basis points to 44.6%, reflecting strong income growth [13][35] - The company maintained a market share of 41% in low-cost deposits, despite a system-wide contraction [12][28] - Yape's monthly active users reached 9 million, with significant growth in transaction volumes [21][22] Q&A Session Summary Question: ROE guidance and compensation for softer loan growth - Management maintained ROE guidance at 17.5%, expecting to offset softer loan growth with higher non-interest income and seasonal increases in expenses [40][43] Question: Cost of risk expectations for next year - Management indicated uncertainty for next year's cost of risk, with expectations for improvement based on risk management efforts [45][46] Question: Strategies to improve ROEs across subsidiaries - A transformation plan is in place for Mibanco aiming for ROE of 16% to 17% by 2025, while BCP Bolivia's ROE is stable compared to the banking system [48][49] Question: Yape's monetization and growth drivers - Growth in Yape's transaction volumes is driven by P2P transactions and merchant services, with ongoing efforts to enhance monetization [51][53] Question: Sustainability of insurance results - Management expects sustainable ROI around the low 20s for the insurance business, despite potential reductions in collective group life business [72][73] Question: Sensitivity of margin to lower rate environment - The sensitivity of margin to a 100 basis point cut in rates is around 25 basis points, with expectations to maintain current NIM levels [76][78]