Credicorp Q1 2025 Earnings Report

Credicorp EPS Results

• Actual EPS: N/A
• Consensus EPS: $5.31
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Credicorp Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $1.51 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Credicorp Announcement Details

• Quarter: Q1 2025
• Date: 5/15/2025
• Time: After Market Closes
• Conference Call Date: Friday, May 16, 2025
• Conference Call Time: 10:30AM ET

Credicorp (NYSE:BAP) provides various financial, insurance, and health services and products primarily in Peru and internationally. It operates through Universal Banking, Insurance and Pensions, Microfinance, and Investment Banking and Equity Management segments. The Universal Banking segment grants various credits and financial instruments to individuals and legal entities; and various deposits and current accounts. The Insurance and Pensions segment issues insurance policies to cover losses in commercial property, transport, marine vessels, automobiles, life, health, and pensions; and management services for private pension funds. The Microfinance segment provides management of loans, deposits, and current accounts for small and microenterprises. The Investment Banking and Equity Management segment is involved in provision of brokerage and investment management services for corporations, institutional investors, governments, and foundations; structuring and placement of issues in the primary market; execution and negotiation of transactions in the secondary market; and structuring of securitization processes for corporate customers and manages mutual funds. The company was founded in 1889 and is headquartered in Lima, Peru.

Credicorp Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good morning, everyone. I would like

[Operator]

to welcome you to the Credicorp Ltd. First Quarter twenty twenty five Conference Call. A slide presentation will accompany today's webcast, which is available in the Investors section of Credicorp's website. Today's conference call is being recorded. As a reminder, all participants will be in listen only mode.

[Operator]

There will be an opportunity for you to ask questions at the end of today's presentation. If you have connected to the call using the HD web phone on your computer, please use the keypad on your computer screen. If you are using a speakerphone, please make sure to mute your mute function is turned off to allow your signal to reach our equipment. Now it is my pleasure to turn the conference over to Credicorp's IRO, Milago Seguenes. You may begin.

[Milagros Cigüeñas, Head - IR at Credicorp]

Thank you, and good morning, everyone. Speaking on today's call will be Gianfranco Ferrari, our Chief Executive Officer and Alejandro Perez Reyes, our Chief Financial Officer. Participating in the Q and A session will also be Francesca Raffo, Chief Innovation Officer Cesar Rillio, Chief Risk Officer Cesar Rivella, Head of Insurance Convention and Carlos Otelo, Mibanco, Chief Financial Officer. Before we proceed, I would like to make the following safe harbor statement. Today's call will contain forward looking statements, which are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties, and I refer you to the forward looking statements section of our earnings release and recent filings with the SEC.

[Milagros Cigüeñas, Head - IR at Credicorp]

We assume no obligation to update or revise any forward looking statements to reflect new or changed events or circumstances. Mr. Franco Ferrari will begin the call with remarks on the improved macro environment, a brief overview of our quarterly results and on how Ferruis positions any global uncertainty, followed by Alejandro Perez Reyes, who will provide a more detailed analysis of key macroeconomic indicators, our financial performance, and our outlook for 2025. Gianfranco, please go ahead.

[Gianfranco Ferrari, CEO at Credicorp]

Thank you, Milagros. Good morning, everyone, and thank you for joining us today. I want to begin by saying that I'm confident in Peru's macroeconomic fundamentals and Credicorp's potential to lead and generate value within it. The economy is rebounding faster than expected with momentum across sectors from construction to retail and from agriculture to services. This is translating to higher private investment expectations and formal employment recovery.

[Gianfranco Ferrari, CEO at Credicorp]

Peru's First Quarter Three Point Nine Percent GDP growth confirmed this trend, supported by private spending, low inflation, and terms of trade at record levels. Declining interest rates and the business cycle recovery are stimulating trade demand and unlocking growth in the private sector. Despite lingering political uncertainty, Peru's macroeconomic policy has remained broadly responsible. Even modest political stabilization could unlock meaningful upside. And at Gray Corp, we are well positioned to capture it.

[Gianfranco Ferrari, CEO at Credicorp]

We continue to monitor global development, including president Trump's announcement of a 10% tariff on U. S. Imports from all its trading partners. While the direct impact of this tariff on Peru's GDP is expected to be limited, the broader concern is how these developments may affect global growth and commodity prices given our position as a small and open economy, where up to 60% of GDP volatility originate from external factors. This issue is particularly relevant as China and The US are Peru's main trading partners, and China is a key destination for Peru's copper exports.

[Gianfranco Ferrari, CEO at Credicorp]

Given the rapidly evolving environment, it remains too early to fully assess the potential effect. Nevertheless, we're closely monitoring developments and are prepared to act as necessary. Against this backdrop, Graycorp delivered a solid first quarter. We saw resumed loan growth, especially in wholesale banking and individuals, while maintaining a prudent risk approach. Risk adjusted NIM improved year over year driven by lower positioning.

[Gianfranco Ferrari, CEO at Credicorp]

Profitability remained strong underpinned by operating dynamics and our ability to leverage Peru's cycle cyclical rebound. These outcomes result not only from favorable macro conditions, but also from intentional strategic investments. We've modernized core systems, expanded digital capabilities, and redesigned key client journeys across universal banking, microfinance, insurance, and wealth management. Turning now to the first quarter results. We reported a high ROE of 20.3% as strong operating results were further boosted by extraordinary gains related to the closing of the acquisition of the remaining 50% stake in the joint venture with Empresas Bank America.

[Gianfranco Ferrari, CEO at Credicorp]

Excluding this nonrecurring gain, ROE would have been 18.4%, which still exceeded expectations and reflects solid fundamentals across our core businesses. Operational performance was strong across Universal Banking and Insurance and Pensions. Performance improved microfinance alongside continued growth in noninterest income, particularly from fee based and transactional volumes. We achieved 5.4% of recent adjusted revenues from new businesses this quarter, advancing towards our 10% target by 2026. We're seeing a reactivation of great demand across our main lending segments.

[Gianfranco Ferrari, CEO at Credicorp]

In q one, loan growth was particularly robust in wholesale banking and short term loans and, to a lesser extent, individuals and Ebanco. We expect retail segments and microfinance to accelerate in the coming quarters. Risk adjusted NIM strengthened sequentially, boosted by enhanced asset quality and a resilient underlying NIM even as interest rates declined, cushioned by our increasing low cost funding base. On the funding side, deposit growth remained strong, driven by system liquidity and increased client trust. Our sustained investments in service and digital platform platforms have deepened client relationships and we've gained market share in low cost deposits, reaching four 41.3%.

[Gianfranco Ferrari, CEO at Credicorp]

The improving asset quality reflects proactive measures we've taken since 02/2023, tightening origination standards, repricing risk, strengthening low rescheduling, and investing in analytics alongside a favorable macro environment. We also continue to enhance our risk management capabilities as our risk transformation project progresses and is expected to deliver more material impacts starting in 2026. Additionally, our strong solvency has enabled us to increase our dividend to to $40 per share while also supporting our plans for sustained long term growth. Our efficiency ratio is at 45.7% within our guidance range as strategic investments in innovation and digital capabilities continue to drive diversified income streams and scalable growth through deeper market penetration. We continue to invest sustainability deeply into our strategy given that the that we view sustainability as tied directly to business performance.

[Gianfranco Ferrari, CEO at Credicorp]

From inclusive finance, financial education, and green loans to environmental risk management, a development of social impact metrics, our initiatives are aligned with long term value creation. We recently published our updated sustainability framework from 2025 to 02/1930 on our website, a more focused action oriented framework that reflects our commitment to inclusive sustainable growth. We invite investors to review the full strategy and welcome feedback as we continue to strengthen our sustainability approach. This quarter also included a P and L one off gain of approximately $236,000,000 related to the revaluation of our previously held 50% stake in Pacifico's soft business under IFRS accounting. Moreover, there was a noncash equity adjustment of around $257,000,000 stemming from the revaluation of Bolivian assets following the adoption of a more market reflective exchange rate.

[Gianfranco Ferrari, CEO at Credicorp]

Bolivia remains part of our regional footprint where we continue to take a disciplined approach to managing These results underscore the strength of our core operations and our long term commitment to building a more agile, client centric, and resilient financial platform. Looking ahead, Peru's economy is on track to grow around 3% in 2025, assuming global recession risks remain contained. The momentum from Q1 is expected to extend into Q2, supported by high terms of trades, recovering real wages and receiving private consumption. Other tailwinds include significant profit distributions to employees, the delayed impact of monetary easing and strong investment expectations.

[Gianfranco Ferrari, CEO at Credicorp]

While global uncertainty in the twenty twenty six elections could affect sentiment late later this year, the outlook remains encouraging. Let me know let me now take a step back and explore what the evolving global environment means for Peru and the potential challenges and opportunities ahead. There's no doubt that Peru is in a strong economic position characterized by a by positive macroeconomic indicators, robust domestic demand and solid performance in the first quarter. However, we are operating in a globally uncertain environment, marked by evolving trade tensions, global recession risks and geopolitical factors. While the direct impact of current tariff measures from Peru remain limited, there's broader concern about how slower global growth might affect external demand, commodity prices, and overall market sentiment.

[Gianfranco Ferrari, CEO at Credicorp]

Recent progress in trade negotiations between The US and its partners is an encouraging sign that could help mitigate potential risk to global growth. However, we remain vigilant as uncertainty contain continues to weigh on the outlook. Beyond Peru, the implication of trade tensions are moving similarly across the region. In Chile, while the direct effects of tariffs appear limited, the indirect impacts such as the slowdown of key trading partners, declining copper prices, and deteriorating business confidence post additional downside risk. Given that copper accounts for nearly nearly half of Chile's export revenues, weakening external demand prospects are extending downward pressure on growth expectations.

[Gianfranco Ferrari, CEO at Credicorp]

In Colombia, the sharp decline in oil prices, if sustained, could put pressure on fiscal revenues and investment. Peru, Colombia, and Chile's economies may benefit for over time from a realignment in global global trade close with shifting global sourcing part partners. For Credicorp, these dynamics reinforce our ability to adapt across different economic cycles. As a result, we are focusing not just on managing near term volatility, but on positioning Credicorp to benefit from long term shifts in regional trade and production partners. Our strong capital base, digital infrastructure and client centric model give us the tools to do both.

[Gianfranco Ferrari, CEO at Credicorp]

Now I'd like to turn the call over to Alejandro to go into further detail on our operating and financial results.

[Alejandro Perez Reyes, CFO at Credicorp]

Thank you, Gianfranco, and good morning, everyone. As Gianfranco mentioned, our 20.3% ROE this quarter includes extraordinary income related to the acquisition of the remaining 50% stake in the joint venture with Empreza Handmade. Isolating this effect, operating ROE was a robust 18.4%, positioning us for a strong 2025. A nonrecurring adjustment affected our balance sheet this quarter. In March, we revalued Bolivia's balance sheet using a more market reflective exchange rate.

[Alejandro Perez Reyes, CFO at Credicorp]

We generated an accounting contraction of 2% in Credicorp's total assets. As I discussed the quarter highlights, I will focus on the year over year operating trends and isolate one off effects. Loans expanded 1.5% measured in average daily balances, driven primarily by short term loans in Wholesale Banking. Asset quality has improved materially year over year. NPLs contracted in retail banking at BCP and Emibanco and Credicorp's NPL ratio stood at 5.1% this quarter.

[Alejandro Perez Reyes, CFO at Credicorp]

Cost of risk fell to a low of 1.6%, driven by a more dynamic portfolio management and supported by improvements in payment performance and in the Peruvian economic backdrop. Net interest income increased 4.3%, spread by a contraction in interest expenses after interest rates fell and low cost deposits expanded and registered a 59% share of the funding base. In this context, NIM remained resilient at 6.2% despite a year over year contraction in asset yields. Diversified sources of income reported double digit growth year over year. Fee income increased 16%, boosted by transactional activity at Yape and BCP.

[Alejandro Perez Reyes, CFO at Credicorp]

Gain from FX transactions increased 12.6% through higher volumes at BCP. Lastly, the insurance underwriting results rose 17.9%, reflecting a stronger reinsurance result in the P and C business. We delivered robust operating results through strengthened asset quality and diversified income sources, showcasing the success of our development strategy and of our investments in digital capabilities. Finally, we recently announced a dividend payout of PEN40 per share as we move capital levels closer to target across our subsidiaries. Next slide, please.

[Alejandro Perez Reyes, CFO at Credicorp]

Peru GDP grew 3.9% year over year in the first quarter of twenty twenty five, marking the third consecutive quarter of growth at this pace. This positive momentum, which reflects the transition to the mid cycle phase of the business cycle, is expected to continue supporting growth in the second quarter. High frequency economic indicators such as car sales and imports are growing rapidly, while employment and real wages continue to recover. According to the Central Bank survey, business investment expectations hit a historical peak. We affirm that private investment is forced to improve.

[Alejandro Perez Reyes, CFO at Credicorp]

Inflation remained within the Central Bank's target range of 1.7% year over year in April. This figure is among the lowest reported in both advanced and emerging economies, further supporting the recovery in private consumption. Moreover, the quota for the first annual efficient coupon announced in April was 20% higher than last year and marked a seven year high and will benefit the fishing and primary manufacturer sectors in the second quarter of this year. Record high terms of trade are also bolstering economic growth. In 2024, gold constituted nearly 20% of our exports and its price has surged to historical highs.

[Alejandro Perez Reyes, CFO at Credicorp]

Both shipments this year could be twice that of 2023 and approach the level of copper, our main export product, which represents 31% of total exports. If a global recession is kept at bay, the probability that Peru will grow above 3% this year remains high given the favorable domestic environment. Even though the heightened uncertainty imposes downside risk to growth, markets are more optimistic after the recent trade deals between The U. S. And U.

[Alejandro Perez Reyes, CFO at Credicorp]

K. And The U. S. And China. Hence, the impact of tariffs is expected to be mild.

[Alejandro Perez Reyes, CFO at Credicorp]

Next slide, please. The Federal Reserve has been in a holding pattern this year, and Chairman, Pablo, has said that it is in no hurry to adjust its policy stance as they wait for more economic data. Market expectations for rate cuts are divided, influenced by varying perspectives on the impact of tariffs and uncertainty regarding growth and inflation. Fed futures have shifted and now they are pricing two rate cuts by year end. The unpredictability of President Trump's announcement continues to drive market volatility and this tendency is likely to persist.

[Alejandro Perez Reyes, CFO at Credicorp]

In Peru, the Central Bank lowered its policy rate 25 basis points to 4.5% in May's meeting. The Central Bank will remain cautious and prudent until the global outlook can be determined with greater certainty, especially if rates come close to neutral levels. In Colombia, inflation has decelerated to 5.2 year over year in April, although it remains above the upper bound of the target range of 4%. Consequently, the Central Bank decided to cut its policy rate by 25 basis points to 9.25%, maintaining a cautious approach due to a fiscal challenges and uncertainties on the external front. Finally, in Chile, the Central Bank also opted to keep the rates stable throughout 2025 as inflation has remained pressured upwards and stood at 4.5% year over year in April.

[Alejandro Perez Reyes, CFO at Credicorp]

The latest monetary policy report suggests that only one rate cut will be made over the year. Next slide, please. BCP posted strong performance, mainly on the lack of improvements in asset quality and diversified portfolio of revenue, which continued to represent a key strength. On a quarterly basis, ROE stood at 27.1%, driven by the following dynamics. Total loans measured in average daily balances rose 1%, mainly fueled by wholesale banking and secondarily by consumer loans both at BCP and Yape.

[Alejandro Perez Reyes, CFO at Credicorp]

NIM remained resilient at 5.8% despite decreasing interest rates, cushioned by a lower cost funding structure. NPL volume fell 4.7%, mainly driven by wholesale banking and SME payment. The cost of risk stood at 1.3%. Recent improvement in cost of risk are due to cumulative impact of enhancements in underwriting and risk management, a relatively strong Peruvian economy and a few onetime events, including consumer and credit service model recalibration, pension fund withdrawals in the second half of last year and increased customized loan restructuring to clients in hardship. On a quarter over quarter basis, provisions contracted driven by the onetime events previously mentioned and by an improvement in payment performance.

[Alejandro Perez Reyes, CFO at Credicorp]

Additionally, in Wholesale, provisions were due to a higher reversal after repayments by corporate clients. In this context, BCP's risk adjusted NIM stood at 5%. From a year over year perspective, I would like to highlight the following dynamics. Loans grew 2.9% in average daily balances, driven primarily by wholesale loans and secondarily by retail loans and mortgages in particular. NIM remained resilient, impacted by the same dynamics in quarter over quarter.

[Alejandro Perez Reyes, CFO at Credicorp]

Other recurring income rose 17.8%, driven mainly by fee income, which increased on the back of rising transactional levels. Gains on FX transactions were fueled by higher volumes and mid market volatility. The cost of risk fell across retail banking segment as payment performance improved in a strengthening economic path. The efficiency ratio stood at 37.7% this quarter. Growth in operating expenses was fared by an uptick in provision for variable compensation, which rose on the back of stronger business performance and by investments in innovative innovation initiatives.

[Alejandro Perez Reyes, CFO at Credicorp]

It is noteworthy that the ratio for other core income to assets has been rising since the second half of last year, which affects to the positive impact of initiatives to diversify BCP's income stream. Next slide, please. JAPI continues to demonstrate strong user growth, adding over half a million new active users per quarter to surpass the 14,000,000 mark in the first quarter of this year. The app's popularity is reflected its solid engagement results, where actually the Apetos conduct more than 52 transactions a month on average and used 2.6 functionalities. Regarding monetization, the app's revenue generation remains strong and represented 4.8% of Credicorp's risk adjusted revenue.

[Alejandro Perez Reyes, CFO at Credicorp]

Notably, the gap between revenues and expenses per MAU is gradually increasing every quarter. Our payment business continues to be the key driver of revenue growth, representing 56% of the other's revenues. This uptick was mainly driven by bill, QR code, and checkout payments. Moreover, the financial business expanded due to improvements in the effectiveness of leads. Both the installment loans, which have better asset quality profile than single standard loans, have accelerated and now represent 50% of loan balances compared to 25% at the beginning of twenty twenty four.

[Alejandro Perez Reyes, CFO at Credicorp]

By the end of the first quarter of this year, lending revenue represented 13% of the other revenues, and we are halfway to achieving our aspiration of having 5,000,000 with at least one loan disbursement. Finally, we are improving the value proposition of current features while maintaining the highest standard of security and stability to provide the best possible for Peruvian. Next slide, please. This quarter, Pimanco Peru sustained profitability in the mid teens as asset quality metrics strengthened and loan growth resumed. I would like to highlight key quarter over quarter dynamics.

[Alejandro Perez Reyes, CFO at Credicorp]

Ivankos loan measured in average daily balances grew 0.7% following an uptick in disbursement that was particularly strong in March, which reflects improvements incorporated in our models to better assist risk profile and subsequently expand loan offerings. This growth was mainly concentrated in small ticket higher yield loans. The NPL ratio fell for a third consecutive quarter to stand at 6.4% in line with pre pandemic levels. This reflects the positive impact of ongoing adjustments to origination guidelines, debt relief activities and improvements in debt collection processes. NIM contracted due to a less favorable asset mix and stood at a strong 13.9%.

[Alejandro Perez Reyes, CFO at Credicorp]

The cost of risk rose to 5.1% due to a base effect given that write offs were low last quarter. In this context, risk adjusted NIM grew at 10.1%. From a year over year perspective, I would like to highlight the resilience of the length of NIM. Our active loan pricing management, coupled with a decrease in the cost of funding, helped sustain this. The cost of risk rose 53 basis points, which reflects onetime reversal made in the first quarter of last year.

[Alejandro Perez Reyes, CFO at Credicorp]

If we exclude this effect, the cost of risk decreased 104 basis points, reflecting an improvement in underlying risk and lower risk vintages gained traction in the portfolio. Operating expenses remained under control and efficiency stood up 2.9%. In this context, Mibanco's first quarter contribution to ROE was 14.7%. Mibanco Colombia's results improved significantly despite a challenging business environment. Thanks to its focus on efficiency as well as disciplined risk processes and control.

[Alejandro Perez Reyes, CFO at Credicorp]

In this context, loan origination resumed growth and new vintages present lower yield. Next slide, please. At Grupo Pacifico, insurance underwriting results remained strong this quarter, supported by solid commercial dynamics in both the P and C and Life businesses. Nonetheless, profitability was impacted by credit downgrades in the investment portfolio and stood at 19.3%. This quarter's figures also reflect the full consolidation of M Pesa Americas operations effective since March with no material impact on the results of this period.

[Alejandro Perez Reyes, CFO at Credicorp]

On a quarterly basis, net income rose 8%, primarily driven by a drop in operating expenses due to seasonality. This was partially offset by lower insurance underwriting results in the life business, mainly related to the disability and survivorship growth, given that Pacifico was not awarded a tranche of fiscal eight for this year as opposed to having one tranche under fiscal seven last year, and lower results from our corporate health business due to higher claims. On a year over year basis, net income dropped 16%, primarily impacted by an increase in the net loss on securities, which continued to be impacted by a credit downgrade in the investment portfolio last quarter. The impact of this variation was, nonetheless, partially offset by higher insurance underwriting results in both the P and C and Life businesses. Next slide, please.

[Alejandro Perez Reyes, CFO at Credicorp]

Operating dynamics were strong this quarter for the investment management and advisory business, which reaffirmed that our strategic approach is on target and puts us in good stead for 2025. ROE for the line of business according to internal managerial figures came in above expectations and stood at 18.4%, which is impacted by a one off charge for equity related to last year's results. If we exclude this effect, ROE stood at 16.9%, driven by the following operating trends. On a quarter over quarter basis, net income rose 47%, fueled primarily by a seasonal drop in operating expenses and growth in income from our asset management business, where AUMs in U. S.

[Alejandro Perez Reyes, CFO at Credicorp]

Dollars were up 12%. The impact of this variation was partially offset by lower income from our wealth management business and less favorable treasury results. On a year over year basis, net income increased 10%, fueled primarily by lower operating expenses and higher income from our asset management business, where AUMs in U. S. Dollars were up 20%, and our capital markets business, which raises an uptick in transactional activity among corporate clients.

[Alejandro Perez Reyes, CFO at Credicorp]

The impact of these variations was partially offset by lower income from wealth management due to a decrease in net interest income from time deposits and current accounts in the context of declining interest rates. Next slide, please. Now I would like to review Credicorp's consolidated evolution. As we mentioned earlier, we revalued Bolivia's balance sheet by increasing the exchange rate, which led Credicorp's balance sheet to contract. I will now focus on explaining underlying quarter over quarter dynamics.

[Alejandro Perez Reyes, CFO at Credicorp]

The 23 basis point drop in the yield on interest earning assets was fueled by the interest earning asset mix, which recorded a shift to our assets with lower rates by a decline in market rates. On the liability side, lower market interest rates and ongoing growth in local deposit share of total funding led the cost of led the cost of funding to drop 14 basis points. On a year over year basis, similar balance sheet dynamics drove a contraction of around 50 basis points, both in yields and assets and funding costs. Going forward, improving macroeconomic conditions and growth in retail loans should help us sustain the ceiling despite lower interest rates. Next slide, please.

[Alejandro Perez Reyes, CFO at Credicorp]

Moving on to loan portfolio quality. Asset quality has clearly turned the quarter and NPL volumes continued to contract across segments, according to levels below those reported two years ago prior to the trade presentation. Provisions dropped over the past nine months due to an improvement in payment performance. Successful risk management measures at both BCP and Ivanko and the onetime events mentioned previously. Consequently, the cost of risk dropped to 1.6%.

[Alejandro Perez Reyes, CFO at Credicorp]

In this context, the NPL coverage ratio rose and stood at 107.4%. Going forward, we expect some of the impact of onetime events to gradually dissipate. We will resume more balance origination. And as result, cost of risk is expected to increase and remain under control at the lower end of our guidance. Next slide, please.

[Alejandro Perez Reyes, CFO at Credicorp]

Let's move on to an analysis of our year over year income and the evolution of expense. Core income rose 7%, driven by other core income, which increased 15% on the back of our recovery strategy. We expect our diverse sources of fee generation and fortified FX digital capabilities to sustain growth down the line. Regarding margins, we set new highs for our risk adjusted NIM, which has risen 39 basis points to 5.24% on the back of resilient NIM and a significant decrease in the cost of risk. Deficiency ratio stood within guidance of 45.7%.

[Alejandro Perez Reyes, CFO at Credicorp]

Operating expenses grew 15.6%, driven primarily by the core business of BCP and by investments in our innovation portfolio. At the core business of BCP, expenses growth was mainly related to increased provisioning for various compensation and IT expenses. Next slide, please. ROE for the quarter stood at 20.3% after we benefited from extraordinary gains related to the finalization of our acquisition of the remaining 50% stake from the joint venture we had with Empressos Almedica. If we exclude this nonrecurring gain, ROE stood at 18.4%, fueled by strong operating results at the universal banking and insurance business.

[Alejandro Perez Reyes, CFO at Credicorp]

It is important to highlight that recurring consolidated net income this quarter represented a record high for the company as we leveraged a decrease in the cost of risk and harness the power of diversified sources of income. Now I will move on to our guidance. Next slide, please. As previously mentioned, assuming there is no global recession, we maintain our expectation for Peru GDP to grow around 3% in 2025. We expect loan book year over year growth of around 345% measured in average daily balances or around 6% measured in quarter end balances.

[Alejandro Perez Reyes, CFO at Credicorp]

In both cases, excluding the impact of Bolivia's balance sheet revaluation. Amid a more dynamic economic backdrop, we expect growth to accelerate over the remainder of the year, driven mainly by retail banking at BCP and by Mibanco. The loan acceleration anticipated and the shift in the mix towards retail should support NIM while interest rates trend downward. Accordingly, we expect NIM to stand to stand between 6.2% to 6.5%. This quarter's cost of risk was below expectations.

[Alejandro Perez Reyes, CFO at Credicorp]

As we anticipated as we anticipate the effect of onetime events to gradually fade and retail origination to increase, the cost of risk is expected to approach the lower end of our guidance range. Given the current global economic uncertainty, we are maintaining our guidance for both cost of risk and risk adjusted NIM. On the efficiency front, we maintain our guidance range for 2025. Fee income is expected to grow in the low double digits this year, supported by an acceleration in economic activity and ongoing diversification of our income sources. Additionally, insurance underwriting results are expected to remain solid and relatively stable compared to 2024.

[Alejandro Perez Reyes, CFO at Credicorp]

While the robust ROE in the first quarter of twenty twenty five places us in a favorable position with potential upside, global uncertainties have led us to maintain our guidance for ROE at around 17.5% for this year. With these comments, I would like to start the Q and

[Alejandro Perez Reyes, CFO at Credicorp]

A session.

[Operator]

We will now begin the question and answer session. If you have connected to the call using the HD web phone on your computer, please use the keypad on your computer screen. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We will pause for just a moment to allow everyone the opportunity for questions.

[Operator]

We also ask that you please only ask one question at a time. After each question has been addressed by our speakers, you will then be allowed to ask as many follow ups as you needed as needed. But again, please only ask one question at a time. Thank you. Our first question today comes from Brian Flores with Citibank.

[Brian Flores, VP - Equity Research at Citi]

Congrats on the results. I wanted to ask you on on the guidance. As you mentioned, there is a a very improving environment. Right? And as you mentioned, of course, the the first quarter ROE with or without one off is perhaps ahead of of the midpoint of the of the guidance.

[Brian Flores, VP - Equity Research at Citi]

So just wanted to ask you, of course, you mentioned the heightened uncertainty. But what is keeping you from up updating this guidance? Right? Is it more on the election side? Is it on the risk of lower commodity prices?

[Brian Flores, VP - Equity Research at Citi]

And just if these go as they are apparently going by the second quarter, would it be possible to think of a revision by the second quarter? And then just a quick follow-up because you also mentioned last quarter that the sustainable ROE of credit card would be around 18%. So maybe on the the the first question or kind of the first part of the question is on this

[Brian Flores, VP - Equity Research at Citi]

on the short term or on this kind of

[Brian Flores, VP - Equity Research at Citi]

midterm or longer term. Is it reasonable because you're already achieving it to start dreaming of, let's say, higher levels of sustainable ROE above 18%? Thank you.

[Gianfranco Ferrari, CEO at Credicorp]

Alejandro, can can you take

[Gianfranco Ferrari, CEO at Credicorp]

it?

[Alejandro Perez Reyes, CFO at Credicorp]

Sure.

[Alejandro Perez Reyes, CFO at Credicorp]

Sure. Thanks for the question. So, yes, I think you you you you you you are right in the sense that from what we're seeing today, we would expect to be probably above of the current guidance of around 17 and a half percent. But given the world situation, and I would place it not not on the Peruvian situation, to be honest, this year, we are not expecting any any changes to our to our views. We think Peru is gonna have a strong year, and the political events are probably gonna be felt more in in the beginning of 2026 and 2025.

[Alejandro Perez Reyes, CFO at Credicorp]

The main issue is related to tariffs or this trade war and not from a direct effect. So the direct effect is that that we expect for Peru are very, very mild. But the issue is that if you have a world recession where China are growing less, The US are growing less, the Afanco mentioned we're small open economy, but certainly has an impact. Price of copper has an impact. So in that scenario, we could envision, you know, a number closer to the guidance we gave.

[Alejandro Perez Reyes, CFO at Credicorp]

It's not our base scenario, especially it is what we've seen in the last couple of weeks, you know, in the sense of potential agreement happening. And, certainly, as soon as we have more clarity, we intend to give new guidance, assuming things remain stable and and we have more clarity. But, yeah, you you you could expect some revision. For the longer term ROE, again, we are in a process of realizing that we've had the conversation. I think there are the backdrop and all the things that we've been doing at Credicorp makes us feel that we might be able to increase that number.

[Alejandro Perez Reyes, CFO at Credicorp]

But we need to have a thorough review. We want to get that number to be really stable going forward. So we will review it and come back to you in a few months.

[Operator]

Pardon me. This is the conference operator. We seem to have a connection issue with the speakers. Give me one moment.

[Alejandro Perez Reyes, CFO at Credicorp]

I think I think we're okay now. Yeah.

[Operator]

You're back on you're back on

[Operator]

the line. Thank you.

[Alejandro Perez Reyes, CFO at Credicorp]

Sure.

[Alejandro Perez Reyes, CFO at Credicorp]

Yeah. So so I was gonna say that for the longer term, yes, we are doing a a review, but it's gonna have take a little bit longer because we wanna be really sure about the numbers we give the market, and we'll come back in the future with that revision.

[Operator]

The next question is from Renato, excuse me, Renato Maloney with Autonomous Research. Please go ahead.

[Renato Meloni, Senior Analyst at Autonomous Research]

Hi, everyone. Thanks for the opportunity here for asking questions. So we saw a pretty subdued couple of weeks this quarter.

[Renato Meloni, Senior Analyst at Autonomous Research]

You mentioned a revision in the models similar to what happened in '4 q, but within different different segments. So I wonder here what are the drivers if it's only helping here on the model revision and improvement in cost of risk. And if you expect this to continue going for forward, so you still can revise models for for different segments. And if the conditions improve, we can actually have cost of risk much lower than

[Renato Meloni, Senior Analyst at Autonomous Research]

the guidance this year? Thank you.

[Alejandro Perez Reyes, CFO at Credicorp]

Okay.

[Alejandro Perez Reyes, CFO at Credicorp]

Yes. Thank you, Renato, for the question. I would like to emphasize that there are several factors behind this reduction in the cost of risk. Of course, the macroeconomic environment is more positive. We have had some particular events that has impacted the current situation, but also the accumulative effect of several measures taking in the origination process since the second part of twenty twenty three through 2024 that has aligned our credit policy, streamlined the process.

[Alejandro Perez Reyes, CFO at Credicorp]

Part of this process is adjusting the models. And now our models are recognizing lower expected losses in specific segments. But given say that down the road, we expect to originate higher volumes in this year, more profitable segment. So we are going to trend up the cost of risk, but coupled with significantly improved margins in this specific sector. So the net effect in risk adjusted NIM should be net positive.

[Operator]

The next question is from Tito Labarta with Goldman Sachs. I guess my question is a

[Tito Labarta, Vice President at Goldman Sachs]

little bit of a follow-up on the potential upside with the guidance because it does look like it's primarily coming on the cost of risk and after quality returns were good performance there. But, yeah, NIM was down a little bit. Your loan growth still remains fairly muted. I understand it, you know, it should go up. I mean, it's it's hardly growing given how strong the economy is growing.

[Tito Labarta, Vice President at Goldman Sachs]

And if the cost of risk had been closer to the guidance of 2%, you know, estimates ROE and picking up on many times, ROE would be closer to 17%. So just understand that that would the upside risk come from just primarily a lower cost of risk? And, you know, to really get what's it gonna take for loan growth to accelerate from here? Because the economy is doing well, asset quality is doing well, but you still haven't really seen that pickup in loan growth. Just to understand, you know, where where the upside could come from.

[Tito Labarta, Vice President at Goldman Sachs]

Thank you.

[Alejandro Perez Reyes, CFO at Credicorp]

Sure. Thank you, Tito.

[Alejandro Perez Reyes, CFO at Credicorp]

I'm sorry. Go ahead,

[Gianfranco Ferrari, CEO at Credicorp]

Stefan. No. Go go ahead, Alejandro, and I'll I'll compliment you.

[Alejandro Perez Reyes, CFO at Credicorp]

Yes. I I was just gonna mention on the loan growth part of the question. So usually, when when these cycles, like the one we had in 2023 and 2024 happen, there's a a lag on the recovery of loans. And the other thing that we've seen is very high liquidity, which have also bring high repayments prepayments from clients. So what we are seeing is an increase in loan sales, especially in the last couple of months.

[Alejandro Perez Reyes, CFO at Credicorp]

We've seen very, very good numbers. But, again, it takes a little bit to build up the portfolio. So but still, we are confident that we are gonna be able to be in the guidance of three and a half in our daily balances and above 6% in year over year numbers. You know? So I would say that is just the the the ramp up after a complicated cycle.

[Gianfranco Ferrari, CEO at Credicorp]

Yeah. Maybe hi, Tito. Just just to complement Alejandro is first, you we need to be to feel quite comfortable with the risk processes and models and so on, and then push push the trouble in terms of loan growth and not the other way around. So so, yes, this quarter, the impact has been mainly related to to the a great cost of risk going forward. As it was mentioned before, we feel very comfortable that the loan growth is gonna be there.

[Operator]

The next question is from Yuri Fernandes with JPMorgan. Please go ahead.

[Yuri Fernandes, Executive Director at JP Morgan]

Thank you, guys, and and congrats on on another good set of results. 18 ROE, even if the one off is it's pretty good. I had a question regarding loan growth, and and I understood what is your evaluation to get hit.

[Yuri Fernandes, Executive Director at JP Morgan]

I see you

[Yuri Fernandes, Executive Director at JP Morgan]

are keeping your your average loan growth guidance of three and a half unchanged. So just trying to understand how quickly loan growth will rebound. And if you're too comfortable with this, because given this is an average accrual, right, this is your average book, not your end of year book, it gets tougher, right, after, I would say, a a more soft growth in the

[Yuri Fernandes, Executive Director at JP Morgan]

first two. So if you

[Yuri Fernandes, Executive Director at JP Morgan]

can explain a little bit the loan growth dynamics, I would appreciate. Thank you. Sure.

[Alejandro Perez Reyes, CFO at Credicorp]

Thank you, Yuri. Yeah.

[Alejandro Perez Reyes, CFO at Credicorp]

I I get

[Alejandro Perez Reyes, CFO at Credicorp]

a point. Still, as I

[Alejandro Perez Reyes, CFO at Credicorp]

was mentioning, we've already seen a couple of months that are are very strong. Actually, the numbers from the last month are very high in historical terms in the sense of loan sales. So we are expecting the second quarter to pick up and then actually accelerate more in the third quarter as sort of our risk capabilities, we we we we're gonna be more comfortable with them. So I would say this second this is next six months, we should see an important acceleration in loans. Another important thing to mention is that in in March specifically, we had some prepayments in the wholesale side that also decreased the number and showed a lower number than we've had before.

[Alejandro Perez Reyes, CFO at Credicorp]

So, again, we are confident that it's gonna pick up. And and it's what we're seeing actually right now. Again, we are seeing more more activity on the lending side right now.

[Operator]

The

[Operator]

next question is from Carlos Gomez Lopez with HSBC. Please go ahead.

[Carlos Gomez-Lopez, Analyst at HSBC]

Hello. Good morning, congratulations on on the very good results. I have a question on the sensitivity to rates.

[Carlos Gomez-Lopez, Analyst at HSBC]

You continue to post a very good margin, but because rates in The US, I mean, more most of The US have remained relatively high. Can you remind us what your sensitivity is to each hundred basis points declines in rates both locally and internationally? And coming up, I know we're supposed to have only one question, but you do sound more positive. And I I would say I'm surprised that you sound so positive about the politics, sir. You just lost the prime minister.

[Carlos Gomez-Lopez, Analyst at HSBC]

You you have elections next year. But you seem more confident than in previous cycles that things will be okay. Is that is that do I interpret it correctly? Thank you.

[Gianfranco Ferrari, CEO at Credicorp]

Yeah.

[Gianfranco Ferrari, CEO at Credicorp]

Carlos, Alejandro,

[Gianfranco Ferrari, CEO at Credicorp]

let me take the second question first. Yeah. And the the short answer to your second question, Carlos, is yes. But this is an unfortunate situation. We we we're we've been under a a really mediocre government for the last four years.

[Gianfranco Ferrari, CEO at Credicorp]

So the changes we've we've seen over last few days, what we expect is the the same situation, the continuity. And despite all the all the political noise and stability, the macro figures, as we mentioned before, are very solid. So we do believe that performance of not only Credit Corp, but Peru in the the following quarter is gonna be quite strong.

[Alejandro Perez Reyes, CFO at Credicorp]

Okay. I'll take the other question. We've actually just revised the analysis. So for 2025, if there were to be a parallel shift of hundred basis points, we will be talking about 17 basis points effect on on the NIM, which by basically, 92% of it, like, almost 15 basis points comes from our dollar portfolio. Okay?

[Alejandro Perez Reyes, CFO at Credicorp]

The the the the the solid portfolio, we we don't think there's too much risk. And besides, Central Bank is probably close to to neutral, so we're not even expecting more than 25 basis points of rate of rate cuts. So we we we don't expect too much movement from there. But in the dollar side, it would be around seven 16 basis points just on the solar side dollar side. If there were to be a parallel shift of hundred basis points, which, of course, is a very theoretical exercise.

[Operator]

The next question is from Andres So to with Santander.

[Andres Soto, Executive Director - LatAm Equity Research at Santander Investment Securities Inc]

Good morning, Jeff. Name is Alejandro.

[Andres Soto, Executive Director - LatAm Equity Research at Santander Investment Securities Inc]

Thank you for the presentation. My question is on JAPE. We we have seen positive results this quarter. Congratulations from JAPE already contributing to to profits. My question is specifically on lending.

[Andres Soto, Executive Director - LatAm Equity Research at Santander Investment Securities Inc]

I'd like to hear again what you mentioned regarding multi installment loans and how much that already represents from the disbursements made through Yape. And based on that, what are your expectations for the ramp up of lending and which areas of lending are are you see opportunities for lending are you seeing there? Is it going to be individual lending? Or are you also considering SME lending to be a driver in the short term?

[Alejandro Perez Reyes, CFO at Credicorp]

Yeah.

[Alejandro Perez Reyes, CFO at Credicorp]

Francesca, can you answer that?

[Francesca Raffo Paine, Chief Innovation Officer at Credicorp]

Yes.

[Francesca Raffo Paine, Chief Innovation Officer at Credicorp]

Thank you, Andre. And today, I would say that for the last part of your question, our main focus is on individual lending. Right now, we still have ways to go to design product offering and to fine tune the sales process, the collection process, and so forth. But our ambition is, of course, to go into SME lending. We have a lot a big portion of our customers are in in SME business.

[Francesca Raffo Paine, Chief Innovation Officer at Credicorp]

No. They're small businesses. And we have, we think, a lot of data to be able to create something there. But we have started with individuals. Today, I would say that still mono quota represents the biggest chunk of disbursement, but end of balances, of course, you see multi quarter being to be more relevant because it's not they stay for more than for for more than a month.

[Francesca Raffo Paine, Chief Innovation Officer at Credicorp]

Our idea is to move more towards multi quarter, but we're doing it on a low and grow type of view. And therefore, we do believe that the balance by the end of the year is going to be mainly the outstanding balances is going to be mainly a multi quarter.

[Operator]

It appears there are no further questions at this time. I will now turn the call back over to mister Gianfranco Ferale, our chief executive officer, for closing remarks.

[Gianfranco Ferrari, CEO at Credicorp]

Thank you. The first quarter of twenty twenty five marked a strong start for the year and reaffirmed the strength and adaptability of K Corp's businesses. With an ROE of 20.318.4% excluding the extraordinary gain from America, we exceeded expectations while remaining focused on quality, sustainability and execution. These results reflect more than favorable macro conditions. They are the product of consistent strategic decisions, deepening client relationships, strengthening risk management and investing in the capabilities that will define financial services in the years ahead.

[Gianfranco Ferrari, CEO at Credicorp]

Despite an evolving rate environment, margins remained resilient. Our deposit base grew and efficiency was in line with our expectations as we accelerated investment in disruptive growth. We're particularly encouraged by the progress of disruptive initiative strategies, which reached 5.4% of risk adjusted revenues this quarter, evidence that our innovation is scaling with impact. As these new models mature, we are confident in our ability to meet our structural ROE ambition of 18% by 2026 while expanding access and generating shareholder value. At the same time, we're embedding sustainability deeper into our business.

[Gianfranco Ferrari, CEO at Credicorp]

Our updated twenty twenty five, two thousand thirty sustainability framework reflects this commitment, linking long term value creation with financial inclusion, access to quality health care and health insurance, sustainability, finance, resilience, and trust. With over 6,000,000 Peruvians newly integrated into the financial system since 2020, this is more than a strategy. It is our purpose in action. We're also monitoring the external environment carefully. The recent U.

[Gianfranco Ferrari, CEO at Credicorp]

S. Tariff announcements are expected to have limited direct impact on Peru. However, we are mindful of second order effects on global freight and commodity flows, particularly given China's important importance to Peru's export base. The recent ninety day tariffs reprieve between The US and China, along with progress on The UK US trade deal, are positive developments. That said, we remain attentive to evolving dynamics in the external environment.

[Gianfranco Ferrari, CEO at Credicorp]

As always, we're prepared to respond with agility and discipline. Looking ahead, we see a supportive backdrop. Peru's recovery is gaining momentum. Private investment is strengthening, and confidence is returning. Credicorp is exceptionally well positioned to capture this cycle and lead to it with our diversified portfolio, strong capital base, and a clear sense of strategic decision.

[Gianfranco Ferrari, CEO at Credicorp]

Thank you all for your questions. We look forward to speaking with you again next quarter and to welcoming many of you in person at our upcoming Investor Day in New York City on 10/09/2025 as we celebrate Credicorp's thirty year IPO anniversary. We share updates, strategic priorities, and progress on our innovation agenda. More details will be shared in due course. Thank you very much.

[Operator]

Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect.

Participants

Executives

• Milagros Cigüeñas, Head - IR
• Gianfranco Ferrari, CEO
• Alejandro Perez Reyes, CFO
• Francesca Raffo Paine, Chief Innovation Officer

Analysts

• Brian Flores, VP - Equity Research at Citi
• Renato Meloni, Senior Analyst at Autonomous Research
• Tito Labarta, Vice President at Goldman Sachs
• Yuri Fernandes, Executive Director at JP Morgan
• Carlos Gomez-Lopez, Analyst at HSBC
• Andres Soto, Executive Director - LatAm Equity Research at Santander Investment Securities Inc