Credicorp Q2 2025 Earnings Report

Credicorp EPS Results

• Actual EPS: $6.24
• Consensus EPS: $5.73
• Beat/Miss: Beat by +$0.51
• One Year Ago EPS: N/A

Credicorp Revenue Results

• Actual Revenue: $1.58 billion
• Expected Revenue: $1.52 billion
• Beat/Miss: Beat by +$62.08 million
• YoY Revenue Growth: N/A

Credicorp Announcement Details

• Quarter: Q2 2025
• Date: 8/14/2025
• Time: After Market Closes
• Conference Call Date: Friday, August 15, 2025
• Conference Call Time: 10:30AM ET

Credicorp (NYSE:BAP) is a diversified financial services holding company headquartered in Lima, Peru. Through its core banking, insurance, pension, asset management and capital markets businesses, Credicorp offers a full spectrum of financial products and services to retail, corporate and institutional clients. Its flagship subsidiary, Banco de Crédito del Perú (BCP), is one of the largest banks in Peru and provides deposit-taking, lending, trade finance and cash-management solutions for individual customers and companies of all sizes.

In addition to commercial banking, Credicorp’s operations encompass insurance and pension fund management under brands such as Pacífico Seguros and Prima AFP. Its investment banking and capital markets arm, Credicorp Capital, delivers brokerage, underwriting, advisory and wealth-management services. The group also operates specialized finance businesses focused on consumer financing, microfinance and small- and medium-enterprise lending, as well as treasury and securities custody through Atlantic Security Bank and other regional affiliates.

Founded in 1995 as a holding company to unify the banking and financial interests of Banco de Crédito del Perú, Credicorp has expanded across Latin America, with presence in Bolivia, Colombia, Panama and Chile, as well as representative offices in the United States. Its regional strategy combines organic growth with selective acquisitions and partnerships, aiming to leverage digital channels and data analytics to enhance customer experience and operational efficiency.

Credicorp’s governance framework is overseen by a board of directors and an executive management team comprised of seasoned banking and finance professionals. The company emphasizes risk management, corporate responsibility and sustainable finance initiatives as key pillars of its strategy, seeking to support economic development and financial inclusion across the markets it serves.

Credicorp Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Peru’s macro tailwinds—including high commodity prices, sub-2% inflation and 3.2% GDP growth—are driving renewed SMB investment and domestic demand above 4.5%, positioning Credicorp to capture strong loan and fee income expansion.
• Positive Sentiment: Credicorp delivered a 20.7% ROE in Q2, with record 5.4% risk-adjusted NIM, 8.2% fee income growth and accelerated retail and microfinance loan origination boosting overall performance.
• Positive Sentiment: Disruptive platforms like Yape now serve nearly 50 million MAUs (75% of Peru’s active population), contribute 5.5% of risk-adjusted revenues and are on track for a 10% innovation share by 2026 as lending and transactional services scale.
• Negative Sentiment: Credicorp paid PEN 1.6 billion to settle a Sunat tax claim, which, while not affecting profitability, reduces cash flow and eliminates any extraordinary dividend payout this year.
• Positive Sentiment: Asset quality strengthened with a 5% NPL ratio (109.5% coverage) and cost of risk guiding 1.8–2.2%, enabling management to raise full-year ROE guidance to ~19% (19.5% long term) on 6.5% loan growth expectations.

Presentation

[Operator]

Good morning, everyone. I would like to welcome you to the Credicorp Ltd. Second 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.

[Operator]

As a reminder, all participants will be in listen only mode. There will be an opportunity for you to ask questions at the end of today's presentation. If you would like to ask a question, please signal by pressing star one on your telephone keypad. 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.

[Operator]

Now it is my pleasure to turn the conference over to Credicorp's CIO, Milagro Seguenas. You may begin.

[Milagros Cigüeñas, IRO at Credicorp]

Good morning. 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 Braco, Chief Innovation Officer Cesar Rio, Chief Risk Officer Vero Cabrera, Head of Universal Banking Piero Tresan, CFO of Insurance and Pensions and Rocio Renavile, Mibanco's Chief Financial Officer. Before we proceed, I would like to make the following safe harbor statement.

[Milagros Cigüeñas, IRO at Credicorp]

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. We assume no obligation to update or revise any forward looking statements to reflect new or changed events or circumstances. Gianfranco Ferrari will begin the call with remarks on the improved macro environment, a brief overview of our quarterly results and an update on our strategy to build a more agile, balanced and forward looking platform, 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. Let me begin with the reflections on Peru's evolving macro environment and why Credicorp is uniquely positioned to benefit from what's ahead. Momentum is busy. Terms of trade remain historically high, driven by strong gold, silver and copper prices.

[Gianfranco Ferrari, CEO at Credicorp]

Also, Peru maintains a solid trade surplus. Inflation is below 2%, real wages are recovering and formal employment is expanding. GDP is expected to grow 3.2% this year with domestic demand growing around 4.5%. These tailwinds are creating a more constructive backdrop. The data tells one story.

[Gianfranco Ferrari, CEO at Credicorp]

The renewed activity on the ground is even more promising. While large infrastructure projects have yet to ramp up, small and midsized businesses are investing again, modernizing, adding capacity and meeting stronger demand. Investments are increasingly spread across regions, laying a healthier foundation for sustained growth. In this environment, Payco is ready not just to participate in the recovery, but to lead it. We built a resilient, diversified business anchored in digital infrastructure, deep client engagement and scalable fee generating platform.

[Gianfranco Ferrari, CEO at Credicorp]

This enables us to perform through difficult cycles, increasingly decoupling from the macro. With improving tailwinds, we're even better positioned to capture the upside efficiency efficiently and profitably. Our q two results reflect that momentum, stronger fundamentals, improving trade dynamics, and disciplined trade execution. We now expect ROE for the year to reach approximately 19%, including a 50 basis point boost from extraordinary income in the first half, with a longer term outlook of around 19.5%. This underscores solid performance, structural resilience and the accelerating impact of disruptive platforms like Yape.

[Gianfranco Ferrari, CEO at Credicorp]

While our efficiency ratio reflects upfront investment investments to scale these capabilities, we remain focused on unlocking operation operating leverage through disciplined execution in digital data and risk. A healthier micro level recovery further reinforces our long term view and strengthens our confidence in delivering sustained shareholder value. Alejandro will detail the results and updated outlook. But before that, let me comment briefly on our situation with Sunnab. As previously announced, Sunnab has required us to pay approximately 1,600,000,000.0 in alleged unpaid income tax and associate interest, which was done this week.

[Gianfranco Ferrari, CEO at Credicorp]

This development does not alter our legal position or our confidence in a favorable resolution. We continue to believe that our case has strong legal and technical ground. We are prepared to defend our position through the appropriate channels, whether at the tax court, where proceedings may take one to three years or if necessary, through the judiciary, which could extend the process by an additional five years. We will continue to operate discipline and transparency, defending our rights while building a stronger, more agile credit card. Let's now turn to our Q2 performance.

[Gianfranco Ferrari, CEO at Credicorp]

We delivered another solid quarter with strong contributions across core businesses and continued execution on strategic priorities. These results translated into an ROE of 20.7%, supported by solid operating performance and disciplined risk management. Universal banking and insurance and pensions posted very strong results, while microfinance continued to recover. Fee based and transactional income also grew, reinforcing our diversified platform. Our innovation portfolio contributed 6.2% of risk adjusted revenues, keeping us on track towards our 10% target for 2026.

[Gianfranco Ferrari, CEO at Credicorp]

Trade dynamics improved and FX neutral, loan growth accelerated across all segments. Origination pipelines remain healthy, particularly in retail banking and microfinance, and we expect sustained engagement in the second half of the year. Risk adjusted NIM hit a record 5.4%, aided by improved asset quality and our low cost funding structure. On deposits, we increased our share of demand and saving accounts to 40.6%, reflecting our digital strategy and the trust we've built with clients. Asset quality trends remain favorable, thanks to tighter origination standards, refined risk pricing and strengthened collections.

[Gianfranco Ferrari, CEO at Credicorp]

Our efficiency ratio at 44.2% within our expected range, highlighting the scalability of our digital investments and our disciplined approach to cost control. Capital levels remain solid across all businesses. Our performance this quarter reflects more than improved macro conditions. It's the result of our deliberate multiyear strategy to build a more agile, balanced and forward looking platform. In recent years, we've modernized systems, built end to end digital capabilities and reimagine client engagement across each of our businesses.

[Gianfranco Ferrari, CEO at Credicorp]

These investments continue to pay off in performance, resilience and adaptability. We're encouraged by the strong traction of our disruptive innovation portfolio, a key pillar of our long term strategy. Credicorp is no longer just a great growth story. We're structurally shifting to a more balanced model where fee generation, client engagement and scalable innovation are just as critical as lending. This transformation strengthens our resilience and positions us for more consistent, higher quality growth.

[Gianfranco Ferrari, CEO at Credicorp]

It's the foundation for the finance of the future, more inclusive, more digital, and more sustainable. Yape continues to scale in both reach and relevance, now serving nearly 50,000,000 monthly active users, equivalent to 75% of Peru's economically active population. Its monetization strategy is advancing, making it one of the top five contributors to fee income in the Peruvian financial system. Transactional volumes and engagement remained high, and we're expanding services and deepening client interaction. With platforms like Yape and promising ones like Temple, our soon to be digital bank, we're scaling high impact services that grow revenues and deepen relationships, transaction by transaction, not just loan by loan.

[Gianfranco Ferrari, CEO at Credicorp]

As part of our long term vision, we're building the next generation capabilities to future proof our businesses, a redefined value creation for clients, employees, and shareholders. This includes advancing digital onboarding, behavioral scoring, embedded finance and ecosystem based distribution. These are not just pilots. They are core building blocks for lasting depreciation. We're embedding AI and data management across our operations to generate value in tangible, scalable ways.

[Gianfranco Ferrari, CEO at Credicorp]

Let me highlight three key areas. First, we're elevating the customer experience through hyper personalization, advanced chatbots and voicebots, making every interaction faster, smarter and more intuitive. Second, we're enhancing operational efficiency by equipping our teams with AI co pilot and productivity tools. These are already driving productivity gains of over 30% in cogeneration and simplifying daily workflows for commercial teams and analysts. Third, we're strengthening strategic decision making by harnessing data insights to identify new market opportunities, optimize our offerings and increase earnings through solutions such as ALM optimization, smart customer prioritization, and strengthened risk management framework.

[Gianfranco Ferrari, CEO at Credicorp]

By embedding AI deeply into how we operate, we're not just innovating. We're building a future where both our clients and our people benefit from smarter, faster and more effective solutions. This commitment positions us at the forefront of our reduced industry transformation. Our goal is to shape the future of finance in our region, not only through technology, but through a model that is inclusive, efficient, and highly engaging. Looking ahead, we remain focused on execution, innovation, and long term value creation.

[Gianfranco Ferrari, CEO at Credicorp]

I invite you to join us in New York on October 9 for our Investor Day, marking the thirtieth anniversary of our IPO. Together with our business leaders, I'll share how we're transforming finance to improve life and positioning our platform to lead in a changing region. We'll outline our financial services model of the future, anchored in innovation, inclusion and data driven client engagement, while scaling distribution and unlocking synergies across our ecosystem. We'll also show how AI advanced risk and data capabilities and disciplined execution are future proofing our business for sustainable growth. Having said that, let me pass the presentation to Alejandro. Thank

[Alejandro Perez-Reyes, CFO at Credicorp]

you, Gianfranco, and good morning, everyone. This quarter's 20.7% ROE reflects sustained momentum in our core businesses and the increasing contribution of our innovation portfolio. These results include a positive 120 basis point impact related to a relevant gain in BCP's investment portfolio. Similar to what we communicated last quarter, we revalued Bolivia's balance sheet using a more market respective exchange rate. We generated an accounting contraction of 2.8% in Credicorp's total assets this quarter.

[Alejandro Perez-Reyes, CFO at Credicorp]

As I discussed the quarter highlights, I will focus on the year over year operating trends. Loan metrics in quarter end balances dropped 4.1%, impacted by the revaluation of Bolivia's balance sheet and a depreciation in BCP's dollar portfolio following an appreciation of the Peruvian floor. Excluding these effects, underlying loan growth for the quarter was 2.6%. This increase was driven primarily by BCP, particularly through mortgages and consumer loans in Retail Banking and by Mibanco. Asset quality has improved materially year over year.

[Alejandro Perez-Reyes, CFO at Credicorp]

NPLs contracted across the board and Credicorp's NPL ratio stood at 5% this quarter. The cost of risk fell to a low of 1.6 on the back of Fortified Risk Management and supported by improvements in payment performance and in the Peruvian economy. Net interest income increased 4.2%, spurred by a contraction in interest expenses after interest rate sales and low cost deposits expanded, accounting for 7.2 of the funding base. In this context, NIM remained resilient at 6.4%. High single digit growth was registered for other core income.

[Alejandro Perez-Reyes, CFO at Credicorp]

Fee income increased 8.2%, boosted by transactional activity at JAPI and BCP. Gains on FX transactions rose 7.9 through higher volumes at BCP. Lastly, the insurance underwriting results grew 11.2%, reflecting a stronger insurance service result in the Life business. On the efficiency front, our cost to income ratio stood within guidance at 44.9%. Next slide, please.

[Alejandro Perez-Reyes, CFO at Credicorp]

The low GDP growth is to around 3% year over year in the second quarter, down from close to 4% in the first due to a slowdown in primary sectors and a higher comparative base from the previous year. However, domestic demand remains strong, expanding around 5% and outpacing overall GDP growth since mid-twenty twenty four. This sustained momentum reflects the economy's current mid cycle phase and ongoing support from elevated export prices. As a result, GDP expanded close to 4% over the last four quarters through the second quarter of this year, while domestic demand grew around five percent. High frequency indicators continue to sign out economic dynamism underpinned by steady recovery in employment and real wages.

[Alejandro Perez-Reyes, CFO at Credicorp]

More importantly, key projects for private investments such as heavy duty vehicle sales, capital goods imports and terms of trade are expanding at double digit pace. Notably, terms of trade have reached their highest level in seventy five years, driven by elevated gold, silver and copper prices, which together account for roughly half of Peru's exports. Supporting this trend, the Central Bank's business expectation survey showed that investment sentiment reached a historical high in the second quarter, suggesting that private investment should strengthen. Furthermore, the favorable low inflation environment continues to support recovery in private consumption. Hence, Peru's economy is expected to grow above 3% this year with domestic demand rising around 4.5%, which would represent the higher growth rate in twelve years excluding the post pandemic rebound.

[Alejandro Perez-Reyes, CFO at Credicorp]

On the external front, elevated global uncertainty persist. Regarding President Trump's announcement of copper tariffs, the direct impact on Peru is expected to be very limited as copper input materials are not subject to the 50% tariff. Next slide, please. The Federal Reserve has kept the policy rate stable throughout the year with policy signals emerging from a minority of its members. Chairman Powell has continued to communicate a cautious approach toward lowering rates.

[Alejandro Perez-Reyes, CFO at Credicorp]

Given the slowdown of the labor market, Fed futures are now pricing between two and three rate cuts this year. Sorry, persistent uncertainty surrounding President Trump's announcement continues to contribute to the unpredictability of the external environment. In Peru, annual inflation has remained below 2% for seven consecutive months, which constitutes one of the lowest trends for both advanced and emerging economies. The Central Bank has lowered the pace of rate cuts as it approaches its useful level, making its last cut in May when it dropped the rate 25 basis points to 4.5%. In Colombia, inflation has slowed to 4.9% year over year in July, which remains above the upper bound of the target range of 4%.

[Alejandro Perez-Reyes, CFO at Credicorp]

Inflation concerns and fiscal challenges have led the Central Bank to maintain a cautious stance. In Chile, the Central Bank cut its rate to 4.75% during its last meeting after holding its policy rates stable throughout 2025. The move came as inflation is to 4.1% year over year in June, the lowest level since September. A rate that appears unlikely in the next meeting given that inflation accelerated in July. Next slide, please.

[Alejandro Perez-Reyes, CFO at Credicorp]

BCP registered a strong ROE of 30.9%, which reflects resilient margins, diversification of income and a low level of cost of risk. This result includes a two percentage point impact of a significant gain realized on the investment portfolio. On a quarter over quarter basis, total loans measured in quarter end balances rose 1.4% or 2.5 in FX neutral terms. Growth was mainly driven by retail banking, which grew 2%, driven by mortgages and consumer loans. The wholesale banking portfolio, which is volatile due to the nature of the short term loans, increased 0.8%.

[Alejandro Perez-Reyes, CFO at Credicorp]

The growth recorded in Middle Market Banking was almost completely offset by the contraction registered in Corporate Banking. NIM stood at 6% due to an improvement in the asset mix and a drop in the funding cost. NPL volume fell 2.2%, mainly driven by Wholesale Banking. In Retail Banking, NPL volumes remained relatively stable both in individual and SMEs. Provisions contracted 4.8%, driven mainly by an improvement in payment performance in wholesale banking.

[Alejandro Perez-Reyes, CFO at Credicorp]

In retail banking, provisions in individuals dropped slightly due to risk model valuation. This evolution was partially offset by growth in provisions in SME PMIC following an uptick in disbursement of lower ticket, higher yield loans. The cost of risk raised at a low 1.2%, impacted by initiatives this year to shore up risk management and bolstered by favorable macro conditions in Peru. In this context, BCP's risk adjusted NIM stood at 5.2%. Other core income rose 16.4%, fueled primarily by gains on FX transactions as volumes rose via FX pricing strategies and market volatility.

[Alejandro Perez-Reyes, CFO at Credicorp]

Moreover, fee income rose from the sales of solid transactional level. Other non core income this quarter includes a relevant gain on securities of million, driven by a sovereign bond exchange that extended the duration of the investment portfolio. From a year over year perspective, I would like to highlight the following dynamics. Loans in quarter end balances remained relatively stable given that 2.1% growth in Retail Banking was offset by a 2.4% contraction in Wholesale Banking, which reflects depreciation in the dollar denominated portfolio. In FX neutral terms, Retail and Wholesale Banking drove average growth of 2.6% in BCP's portfolio.

[Alejandro Perez-Reyes, CFO at Credicorp]

NPLs contracted across all BCP segments, primarily in wholesale and SME business. In the case of individual, NPLs fell due to debt cancellation from the lack of higher liquidity and due to an improvement in loan origination and debt collection of management. NIM remained resilient, bolstered by a downward trend in the funding cost. Because of risk, Telegraph Retail Banking segment as payment performance improved due to a greater share of lower risk vintages within the loan portfolio, supported by a strengthening economic factor. The efficiency ratio stood at 38% for the first half of the year.

[Alejandro Perez-Reyes, CFO at Credicorp]

Growth in operating expenses was fared by an uptick in provisions for variable compensation, which rose alongside stronger business performance and initiatives to hire digital talent for strategic projects. The ratio for our core income to assets accelerated its upward trend, reflecting the positive impact of initiatives to diversify BCP's income streams. The strong fees and FX gains results contributed to its acceleration. Next slide, please. Yape continues to lead the good digital financial services landscape with nearly 15,000,000 monthly active users at the end of the second quarter.

[Alejandro Perez-Reyes, CFO at Credicorp]

This year is equivalent to 75% of the economically active population. With consistent quarterly growth over 5,000,000 users, Yape remains on track to meet its 2026 target of 15,500,000 monthly active users. User engagement remains robust with an average of 54.5 monthly transactions and 2.7 functionalities used per user, signaling deeper adoption of the app ecosystem. Monetization and operating leverage continued to strengthen, where revenue per monthly active user reached 6.5, while expenses per monthly active user stood at NIS 4.4 as an increasingly larger share of users contributed to revenue generation. Payment remains the primary revenue driver, fueled by growth in the average ticketed bill payment.

[Alejandro Perez-Reyes, CFO at Credicorp]

However, lending has emerged as the fastest growing segment, now serving 3,000,000 users and accounting for 18% of the other total revenue. This growth reflects an uptick in loan disbursements, driven by heightened effectiveness in lead conversion. The launch of SME loans in June marked the strategic move into higher value long term credit growth. By the end of the second quarter, Yapi's revenue had doubled year over year to represent 5.5% of Credicorp's risk adjusted revenue. Yapi remains focused on deepening user engagement, scaling monetization and enhancing its value proposition as it advances financial inclusion.

[Alejandro Perez-Reyes, CFO at Credicorp]

Notably, nearly 30% of Yape loan recipients access their first loan in the formal financial system through the platform. Next slide, please. The ongoing economic recovery is positively impacting the microfinance sector in Peru. In this context, Mibanco profitability continued to rise and stood up 16.3% this quarter, supported by a rebound in loan disbursements in recent quarters, a strengthened credit risk management and effective interest rate strategies. I would like to highlight key quarter over quarter dynamics.

[Alejandro Perez-Reyes, CFO at Credicorp]

Loans grew 2.1% in quarter end balances, mainly driven by a drop in write offs after more stringent origination guidelines were instituted one year ago. The NPL ratio fell for the fourth consecutive quarter to stand at 6.1%, in line with pre pandemic levels. NIM rose to a peak of 14.4%, its highest level since before the pandemic boosted by shifting the mix towards more ticket higher yield loans. In parallel, the cost of risk rose 25 basis points to stand at 5.4%, while risk adjusted NIM situated at 10.3%. From a year over year perspective, the decrease in the cost of funding, coupled with our active loan pricing management, helped sustain the strong NIM.

[Alejandro Perez-Reyes, CFO at Credicorp]

The cost of risk fell two seventeen basis points as lower risk vintages continued to gain traction and now account for 70% of total loans. Operating expenses remained under control and efficiency stood at 52.4% for the first half of the year. In this context, Mibanco's first half contribution to ROE was 15.1%, transitioning towards our target for a sustainable ROE in the low 20s. The Banco de Colombia results continued to pick up on the back of measures taken last year and also reflecting an improvement in the economic environment for the microfinance sector. Growth is currently steady and business controlled, results results results financial are in in quarter, supported by solid operational dynamics in both the P and C and Life businesses, As with ROEs standing at 21.1%.

[Alejandro Perez-Reyes, CFO at Credicorp]

On a quarterly basis, net income rose 23%. Insurance underwriting results rose 27% on the back of a decrease in insurance service expenses in the Life business, which was driven by a drop in claims in credit life and disability and survivorship. The net loss on securities dropped in line with a lower impact of credit downgrades on a couple of assets in the investment portfolio this quarter. On a year over year basis, net income rose 16%, primarily due to the full consolidation of corporate health insurance and medical services operations. Insurance underwriting results increased across both Life and P and particularly through lower claims in individual life and credit life in the former and cars and personal lines in the latter.

[Alejandro Perez-Reyes, CFO at Credicorp]

These impacts were partially offset by an increase in the net loss on securities, which was impacted by credit downgrades on a couple of assets in the investment portfolio. Next slide, please. Profitability of our investment management and advisory business remained resilient this quarter with ROE standing at 15.5%. On a quarter over quarter basis, core income generating businesses delivered strong results this quarter, reflecting favorable treasury performance, improved capital markets activity, particularly in the trading unit and continued growth in wealth management with AUMs in U. S.

[Alejandro Perez-Reyes, CFO at Credicorp]

Dollars up 6%. However, this solid business momentum was offset by a temporary increase in operating expenses due to a low base in the first quarter, resulting in a 6% decline in net income. On a year over year basis, net income decreased by 20%, mainly due to the absence of last year's one off income from our now discontinued corporate finance business. Nevertheless, stronger treasury performance and lower tax expenses helped partially offset the Next slide, please. Now I would like to review Credicorp's consolidated evolution.

[Alejandro Perez-Reyes, CFO at Credicorp]

As we mentioned earlier, we revalued Bolivia's balance sheet once again this quarter, leading to a contraction in Credicorp's balance sheet. I will now focus on explaining the underlying quarter over quarter dynamics. The yield on interest earning assets increased 21 basis points due to a shift in the interest earning asset mix. On the liability side, a more expensive deposit mix led the funding cost to increase two basis basis points. On a year over year basis, interest earning asset yield fell 27 basis points, driven by market interest rate dynamics and by a decrease in loan share of the asset structure.

[Alejandro Perez-Reyes, CFO at Credicorp]

On the liability side, the drop in market interest rates and the lower cost funding structure drove a 42 basis point reduction in funding costs. In this context, NIM remained resilient and stood at 6.42%, increasing nine basis points. Going forward, loan growth, particularly in retail segment, should help us sustain resilient NIM despite lower interest rates. Next slide, please. Moving on to loan portfolio quality.

[Alejandro Perez-Reyes, CFO at Credicorp]

Asset quality showed slight further improvement this quarter as NPL volumes continued to contract across segments, falling to levels below those reported two years ago prior to the twenty twenty three recession. Amidst ongoing economic recovery, provisions have dropped over the past twelve months due to an improvement in payment performance and successful risk management measures at both BCP and Mibanco. The positive impact of this improvement exceeded expectations, which kept provisioning levels low once again this quarter. In this context, the NPL coverage ratio rose and stood at 109.5%. Going forward, we will continue to accelerate retail origination and manage risk in parallel.

[Alejandro Perez-Reyes, CFO at Credicorp]

We expect the cost of risk to rise but remaining within our appetite. Next slide, please. Moving on to core income. We reported a 5.3% year over year increase. First, net interest income rose 4.2%, supported by lower interest expenses on an improved funding mix.

[Alejandro Perez-Reyes, CFO at Credicorp]

Second, other core income grew 8.1%, fueled by fee income through Yape and core transactional activities and by gains on FX transactions. We continue to set new highs in our risk adjusted NIM, reaching 5.44% this quarter, a 104 basis points increase year over year, driven by resilient NIM and a lower cost of risk. The efficiency ratio for the first half of the year stood within guidance of 44.9%. Operating expenses grew 11.4%, driven primarily by core business at BCP and by investments in our innovation portfolio. Growth in core expenses at BCP was driven mainly by provisioning for variable compensation and higher IT expenses.

[Alejandro Perez-Reyes, CFO at Credicorp]

Expenses for our innovation portfolio rose 15%, led by Yape, Tempo and CoolKeep, which represented 83% of disruptive expenses in the first half of the year. Next slide, please. ROE for the quarter stood at 20.7%, driven by strong results across all our businesses. Meanwhile, ROE for the semester was 20.9%, supported by solid business performance and bolstered by an extraordinary gain from the LaMedica transaction last year. If we adjust for this transaction, recurring ROE is 20% for the semester.

[Alejandro Perez-Reyes, CFO at Credicorp]

This quarter, the recurring net income reached a record high as we leveraged our differentiated funding structure and low cost of risk. More importantly, we continue to strengthen revenue streams beyond lending while advancing our transition towards a more diversified and resilient business model. As we communicated earlier this week, the full amount specified in the Sunaz resolution against Grupo Credico announced on June 30 has been canceled. This payment totaled totaled almost 1,600,000,000.0 solids for a less than paid income tax and associated interest. This has not changed our stance in this case.

[Alejandro Perez-Reyes, CFO at Credicorp]

We reaffirm our decision to exercise all legal rights available to charge the resolution as we consider them unfounded. We are confident in a favorable outcome and continue to set the contingency as we move. Hence, no Fed provisions have been deemed necessary. The payment does not affect the operations of our subsidiaries. However, it will impact cash flow at a critical level.

[Alejandro Perez-Reyes, CFO at Credicorp]

Consequently, we do not anticipate issuing extraordinary dividends this year. Now I will move on to our guidance. Next slide, please. As previously stated, our GDP growth expectation remains unchanged at around 3%. We expect our loan book to grow around 6.5% year over year measured in end of period balances.

[Alejandro Perez-Reyes, CFO at Credicorp]

This is equivalent to around 3% measured in average daily balances. These figures do not consider the impact of the revaluation of BCP or The U. S. Balance sheet, but they do consider the U. S.

[Alejandro Perez-Reyes, CFO at Credicorp]

Dollar devaluation against the Peruvian source. I need a more dynamic sorry. Okay. Amid the more dynamic economic backdrop and strengthening origination levels in the first half of this year, we expect balances growth to accelerate over the second half, 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.

[Alejandro Perez-Reyes, CFO at Credicorp]

Accordingly, we expect NIM to stand in the upper end of our guidance of between 6.2% to 6.5%. Although we expect a slight increase in the cost of risk in the second half of this year due to stronger retail origination, our guidance has been updated to 1.8% to 2.2 to reflect lower than anticipated provisioning levels in the 2025 as the positive impact of our risk management measures and improvements in macroeconomic conditions exceeded expectations. Accordingly, we are also adjusting our risk adjusted NIM guidance upward to between 55.2%. On the efficiency front, we maintain our guidance range for 2025. Fee income is expected to grow in the low double digit this year, supported by an acceleration in economic activity and ongoing diversification of our income sources.

[Alejandro Perez-Reyes, CFO at Credicorp]

Additionally, insurance underwriting results are expected to remain solid and relatively stable compared to 2024. We are increasing our full year ROE guidance to around 19%. This new guidance already includes extraordinary gains from the America concession, which we estimate will have an impact of 50 basis points at year end. This revision reflects both solid core performance and sustained discipline on the risk front. While global uncertainties remain, we believe the fundamentals are in place to support this higher level of profitability.

[Alejandro Perez-Reyes, CFO at Credicorp]

Finally, as Gianfranco mentioned, we are revising our long term sustainable ROE range upwards from 18% to around 19.5. This adjustment is primarily driven by stronger expectations of loan growth dynamics, particularly through the integration of new higher yielding segments, which leads to a more favorable loan mix evolution and an improvement in risk adjusted NIM. Moreover, we are seeing enhanced expectations for fee income and gains on foreign exchange operations, largely due to increased transactional activity across our diversified business lines. These factors contribute to a more optimistic efficiency outlook compared to our previous estimates. With these comments, I would like to open the Q and 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 needed. But again, please only ask one question at a time. Thank you. Our first question comes from Brian Flores with Citibank. Please go ahead.

[Brian Flores, VP - Equity Research at Citi]

Congratulations on the results and the new guidance. I wanted to ask you on cost of risk because I think it's a relevant improvement in your guidance. And if you could elaborate a bit on what is driving this? And also, you mentioned very recently that you're going to accelerate on retail, making the second half of it in this terms a bit riskier. But just if you could elaborate on the long term, what is making you be a bit more constructive on on a lower cost of risk? I think that will be very helpful. Thank you.

[Gianfranco Ferrari, CEO at Credicorp]

Hey. Good morning, Brian. I'll ask Cesar to Cesar to answer your questions.

[César Ríos, Chief Risk Officer at Credicorp]

Hi, Ryan. Thank you for the question. Yes. First, probably, it's good to explain a little bit the results of the first half of the year. Last year, we were we take several measures to assure that all our portfolios are under the risk appetite.

[César Ríos, Chief Risk Officer at Credicorp]

So in addition to improvement in capabilities, we restricted origination in certain segments. As a result of all of these effects, we have had during the first part of this year, a very low cost of risk, actually below our initial expectations. With one minor exception, all our portfolios are under the risk appetite. And beginning more clearly in the second quarter of this year, we started to originate higher yielding, higher risk portfolios with very in a successful way. So what we are anticipating in the second part of the year is to have the reflection of these improved origination and higher yielding risks that are going to change the mix. And this trend should continue in the following years.

[Gianfranco Ferrari, CEO at Credicorp]

Yeah. And and maybe no. Perfect. Brian, just just to complement the self answer, bear in mind that we do do not manage our portfolio based on cost of risk, but on risk adjusted NIM. So so which is very relevant. Yes.

[Brian Flores, VP - Equity Research at Citi]

No. Perfect. Super clear. And and then a quick follow-up on the guidance. You you reiterated the efficiency ratio, and I think you're very efficiently becoming increasingly digital.

[Brian Flores, VP - Equity Research at Citi]

Just if you could share what is your long term vision on the physical branch network? Are you planning to monetize any of your prime real estate holdings? If you could elaborate if, you know, you see branches evolving to a more, I would say, transactional hub. Just how are you thinking about this in the long term? Thank you.

[Gianfranco Ferrari, CEO at Credicorp]

Actually, Brian, this is a strategy we've started to to to deploy maybe four or five years ago. At the peak, at DCP, we we reached up to close to 450 branches. Today, have 600. So so there's been a reduction of about a third of the network. More importantly, I would say that that that the number of branches, the role of the branch has changed dramatically over the last few years from more transactional vision to more educational and commercial vision.

[Gianfranco Ferrari, CEO at Credicorp]

That that path will follow. I I would say that the bulk of the reduction have already been done. We do not plan to be as aggressive going forward. However, the world is changing so fast that we'll see.

[Operator]

The next question is from Lindsey Shima with Goldman Sachs. Please go ahead.

[Lindsey Shema, Global Investment Research Analyst at Goldman Sachs]

Hi. Thank you for taking my question, and congrats on the increased guidance. Quick follow-up on cost of risk. When you think about cost of risk long term, where do you see the ratio trending? And how long should it take to get there?

[Lindsey Shema, Global Investment Research Analyst at Goldman Sachs]

Could it be structurally lower? Or should it continue to kind of accelerate to your long term range? Thank you.

[Alejandro Perez-Reyes, CFO at Credicorp]

Thank you for the question. Once we reach, I will say, a more representative level at the end of this year, we expect for some years to increase the cost of risk based on the strategy that we are outlining. I am going to give a very simple example. Our cost of risk now is going to be around, let's say, 2%. This is a combination of wholesale retail portfolios.

[Alejandro Perez-Reyes, CFO at Credicorp]

But if we are starting to reunite in higher risk portfolios, for example, only 1,000,000,000 portfolio that has a cost of risk of 8%, but brings margin of 20% additionally, it's going to increase five basis points. The other all cost of risk in the portfolio that is going to improve significantly 2.5 times that the profitability of the business. And that's the strategy that we are going to follow Once we have stabilized all the portfolio that already happened, and we are starting to build the portfolio with new tools. So for some years, we we increased these higher risk, higher living portfolios. The overall cost of risk should increase, but with increased profitability.

[Gianfranco Ferrari, CEO at Credicorp]

Yes. Again, Vinci, we the whole strategy and growth growth strategy actually is based on risk adjusted NIM, as I mentioned, not only of of cost of risk. As a matter of fact, we also include acquisition cost and so on. But regarding the the the the risk adjusted NIM is how we how we manage it.

[Lindsey Shema, Global Investment Research Analyst at Goldman Sachs]

Thank you. If I could elaborate on that a little bit. For loan growth this year, could you break down your expectations? And then I know you switched from average balances to period end, but is the kind of better expectation, is that mostly on retail and then just segment by segment? Thank you.

[Gianfranco Ferrari, CEO at Credicorp]

Alejandro?

[Alejandro Perez-Reyes, CFO at Credicorp]

Yes. Hi, Lindsay. Yes. We we we made a change after conversation with a lot of investors that that preferred the end of year balance, but we still gave the the equivalent.

[Alejandro Perez-Reyes, CFO at Credicorp]

As we mentioned during the presentation, we or on the guidance, we are expecting growth end to end to be 6.5%, including the revaluation of the toll, which is stronger to the dollar than what we were expecting. And it does come particularly from the more retail segment, both in Mibanco and then at BCP with mortgages and consumer credit. So I mean, we're expecting most areas to grow, but those areas should be the ones picking up more. We've already seen that pickup in the last few months, and we expect that to continue and become even a little bit stronger in the next part of the year.

[Operator]

The next question is from Fernando Maloney with Autonomous Research.

[Renato Meloni, Senior Analyst - LatAm Financials at Autonomous Research]

Please go Hi, everyone. Thanks for taking the questions. Renato here. So just quickly on loan growth for this year.

[Renato Meloni, Senior Analyst - LatAm Financials at Autonomous Research]

I'm wondering just thinking of the guidance from the beginning of the year and what has materialized. If you could explain a bit on the what diverged the most here and the adjustments you've made. And then on the long term guidance, and congrats again for raising the guidance for this year and for the sustainable ROE. I just wondered if you could expand a little bit on the comments of the drivers for the higher guidance in the long term.

[Alejandro Perez-Reyes, CFO at Credicorp]

Sure.

[Alejandro Perez-Reyes, CFO at Credicorp]

I mean, for loan growth, as I was just mentioning, tying it up to the improvement in the economy that we've been mentioning both Jan Francois and myself, really, we are seeing very strong economy today and a much better situation for consumers. That ties to what Cesar was mentioning about our risk capabilities and our origination capabilities is basically what we expect to translate into higher growth in lending. In particularly, I was saying, on the retail side and the consumer side and microfinance side. And by the way, it's already been happening so far, I mean, in mortgages, FX neutral for the year, we've grown for a whole year, we've grown 6.5%, in consumer, almost 6%. So and we're seeing that actually pick up in the last couple of months.

[Alejandro Perez-Reyes, CFO at Credicorp]

So we expect that to continue. And with these capabilities and our distribution capabilities, and I'm tying this to a longer term ROE to continue to access more, let's say, this year, more of the consumer segment of retail with a good risk adjusted NIM. So that is one of the main drivers for the sustainable rate of the loan mix that with a good cost of risk that translates into a better risk adjusted NIM. And also on the fee income, we've been building a lot of different businesses and nice around that and driven by Jape, but there are other things that we're also developing that are basically important sources of growth in the coming years. When you put those together, that's what brings us to our expected 19.5% sustainable ROE.

[Gianfranco Ferrari, CEO at Credicorp]

Maybe Fernando, just additional comment on what Alejandro just mentioned is, if you very if you remember a few years ago, we stated, like, a a couple of guardrails regarding how much we were going to invest in our disruptive initiatives. And one of those that was up to 150 basis points of ROE. This year, 2025, that impact is gonna be close to zero. And going forward, as we see it, that should be a positive for that that drag should be eliminated. Obviously, again, since the world is changing, the pace is changing, we may have to invest or another idea may come.

[Gianfranco Ferrari, CEO at Credicorp]

But today, the the the vision we have is that the the digital investments going forward from '25 onwards will generate positive ROE rather than negative ROE. And as we've mentioned before, since we've been very conservative, especially in in how to register the investments we've been doing in the digital transformation initiatives, it would we basically, a 100% or 90% of those investments would register them as expenses. So the part the equity part of the those initial the digital investment It's it's not zero, but it's really irrelevant to the income they will generate going forward.

[Renato Meloni, Senior Analyst - LatAm Financials at Autonomous Research]

That's very clear. Thanks very much.

[Operator]

The next question is from Carlos Gomez with HSBC.

[Carlos Gomez-Lopez, Head - LatAm Financial Institutions at HSBC]

Congratulations on the results. And thank you for clarifying the bond exchange was extraordinary. Can I ask you briefly, is that it after tax or or before tax gain?

[Alejandro Perez-Reyes, CFO at Credicorp]

The the gain, it's it's actually before before tax, but government bonds don't have income tax. So it ends up going all the way below the nine.

[Carlos Gomez-Lopez, Head - LatAm Financial Institutions at HSBC]

Okay. That's very clear. Thank you. And and so I'm keeping here.

[Carlos Gomez-Lopez, Head - LatAm Financial Institutions at HSBC]

My my my real question is about the app. And we look at the numbers that you that you published. And I estimate that right now, you are showing a net income contribution of around $25,000,000. I could be wrong about that. How much do you think Yape can contribute this year, next year, and in the future?

[Carlos Gomez-Lopez, Head - LatAm Financial Institutions at HSBC]

What's the what's the what's the number that you are considering internally and you are talking to investors about?

[Gianfranco Ferrari, CEO at Credicorp]

I just said I wasn't that.

[Carlos Gomez-Lopez, Head - LatAm Financial Institutions at HSBC]

Yes. Hi. The the number you you you mentioned is correct. What we are expecting is as Yape begins to increase its loan portfolio, its contribution must will be much larger. And we are expecting for the next three to five years, the goal would be to for Yape to be the second largest line of business that that Credicorp has.

[Carlos Gomez-Lopez, Head - LatAm Financial Institutions at HSBC]

Primarily due to its lending business in retail and SME segment, and also its inclusion in in the newer segment in the newer lines of business at marketplace and and commerce. So that will be second to I I guess second to BCP and therefore larger than Pacifico. Are we talking a 150, 200, $250,000,000?

[Gianfranco Ferrari, CEO at Credicorp]

You have to do your math, Carlos. We don't we don't disclose specific figures. You have the figure of BCP. You have the figure of Pacifico. Do the math.

[Carlos Gomez-Lopez, Head - LatAm Financial Institutions at HSBC]

Okay. I'll do that. Thank you.

[Gianfranco Ferrari, CEO at Credicorp]

Thank you.

[Operator]

The next question is from Alonso Aramburu with BTG. Please go ahead.

[Alonso Aramburú, Associate Partner at BTG Pactual]

Yes. Hi. Good morning. Thank thank you for the call. Just following up on the update. Can you comment on your asset quality trends at the update? What's your cost of risk?

[Alonso Aramburú, Associate Partner at BTG Pactual]

What's your level of NPLs? And also some color on the lending, what kind of type of loans you're doing, the term of the loans? Has that changed in the last few months? And and do you have a target for how much lending should be as a percentage of revenues at Yape? Thank you.

[Gianfranco Ferrari, CEO at Credicorp]

Yes. Maybe I'll start and then, Francesca, you can compliment me. So and also, today, still, the the the Yape portfolio is is very small even though we're dispersing over a million loans per month. Those the bulk of that is mono installment. So the duration is actually less than thirty days.

[Gianfranco Ferrari, CEO at Credicorp]

What we're doing is basically, even though that business is profitable, the real target is to lend to lend, sorry, to to the best performance of those initial clients. We're building up multi installment loans in the consumer in the consumer finance business, which is growing rapidly. And we just started to to some testing in the SME market also. NPLs, I don't know, Francesca, you if you have the the or I have So low

[Alejandro Perez-Reyes, CFO at Credicorp]

low teens annualized.

[Gianfranco Ferrari, CEO at Credicorp]

So so and and, again, the risk adjusted NIM is very, very, very good a lot. But we are are quite positive on the impact of of of the lending business at Yape. And, again, we're not disclosing how much of the income or profit Yape should be generated by lending, but obviously, it's going to be the major contributor, which, by the way, today, it isn't.

[Alonso Aramburú, Associate Partner at BTG Pactual]

Yes. And just to follow-up generally on the cost of risk guidance. So is it correct that the expectation then for the second half of the year should be closer to 2% cost of risk for credit score?

[Alejandro Perez-Reyes, CFO at Credicorp]

The expectation for the whole year is in the range that we have stated between 1.8 to 2.2. That implies doing the math that the second part of the year should be closer to two than closer to 1.6 for the reasons that we have already stated.

[Alonso Aramburú, Associate Partner at BTG Pactual]

Right. Fantastic. Thank you very much.

[Operator]

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

[Yuri Fernandes, Executive Director at JP Morgan]

Hi, everyone, and and also congrats on the on the quarter. I have a just a question on on your deposit franchise, and and we we see the economy in Peru doing better.

[Yuri Fernandes, Executive Director at JP Morgan]

And your deposit going way way above the loan, so don't get me wrong here. But when I go to your low cost deposits, they are down a little bit quarter over quarter from 5%. So just checking if it's seasonal. On year over year, are still growing. But, you know, given you have so many different verticals, I think a four or 5% turnover on deposits, it could it could be a little bit higher. Right? So just trying to understand on on on deposits why it was down the low cost. And then I have a second question regarding dividends.

[Yuri Fernandes, Executive Director at JP Morgan]

We you are generating a lot of capital. Long growth has been a little bit of a cluster. The the quarterly question on dividends, how should we think about your extraordinary dividends for this year? Thank you.

[Gianfranco Ferrari, CEO at Credicorp]

Yes.

[Gianfranco Ferrari, CEO at Credicorp]

Yes. Hi, Yuri. It's seasonal. What what you see is seasonal regarding low cost deposit. If you if you take a look at year over year, growth has been quite quite important.

[Gianfranco Ferrari, CEO at Credicorp]

And I I would like because of your question, I would like to share an information that was shared by the Central Bank this week. The usage of cash of of in transactions in Peru has gone from 95% of total transactions done in cash in Peru in 2013 to sixty four percent. So that's over 30 per 30 per percent reduction. No. 3,000 basis points reduction.

[Gianfranco Ferrari, CEO at Credicorp]

The major driver for that decline has been the digital wallets. Mhmm. And the major digital wallet in Peru is Yape. Therefore, we are quite confident that the low cost deposit growth and market share will still be there because this is these are great news. But if you see it, there's still two thirds of of the market doing transactions in cash.

[Gianfranco Ferrari, CEO at Credicorp]

So there's a lot of room for for growth there. That's regarding deposits. Regarding dividends, the the policy is exactly the same. We haven't changed the policy. The issue that Alejandro mentioned is is during his his speech.

[Gianfranco Ferrari, CEO at Credicorp]

Since we have to pay a $101.61700000000.0 for this FNAB, we don't have even though that doesn't affect our p and l, it it does affect our cash position. Therefore, we won't be paying this year an extraordinary dividend in the second half of the year.

[Alejandro Perez-Reyes, CFO at Credicorp]

Maybe just to complement what Gianfranco, that is exactly right. We the main impact that we're having of this scenario situation is actually a cash impact. We're used the the money that we expected to pay out as a extraordinary dividend is the one that we're using to pay this this claim by by Sunat. What I just wanted to mention is that this doesn't change going forward our expectations for next year, ordinary dividend and and, ideally, also extraordinary dividend.

[Alejandro Perez-Reyes, CFO at Credicorp]

So it is definitely back on this year because it's it's it's it's the money that we were expecting to pay out at an extraordinary year.

[Yuri Fernandes, Executive Director at JP Morgan]

Oh, perfect. Thank you very much.

[Operator]

Again, if you have a question, please press star then one. The next question is from Andres So to with Santander. Please go ahead.

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

Good morning, Joel. Thank you for the presentation and the opportunity to ask questions.

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

My first question is regarding the your digital initiatives and your targets for the short term. You have mentioned the subjective of these initiatives to represent 10% of revenue by 02/1926. I would like to understand if these these targets refers to the whole year, that specific quarter. You were already at 6% in the second quarter of the year, so it will be interesting to hear your thoughts on the ramp up to get to this target.

[Gianfranco Ferrari, CEO at Credicorp]

Sure. Francesca?

[Francesca Raffo, Chief Innovation Officer at Credicorp]

Yes. Thank you, Andres. Our our our view our goal was 2026, 10% for the whole for the whole year. We're very confident with what we're seeing with the update results. And as you know, what we've shared before is that the idea around the innovation portfolio is have also initiatives graduate.

[Francesca Raffo, Chief Innovation Officer at Credicorp]

So the the challenge for the innovation portfolio is to continue to generate a new set of initiatives around tempo, around cookie, around deal. So this is the way we're viewing it. We're very confident because we have a good venture around around Yape, but the work is still is still there. So it's it's on an annual basis.

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

Okay. Thank you, Francesca. My second question is regarding the the new medium term ROE target of nineteen point five percent. It was very helpful your comment on Franco that this this partially reflects the the not considering the the the traction that you are getting from digital initiatives, which are already broken. But it looks like it's still a conservative one considering that they start to ramp up, they will actually contribute to profitability, and they will take your ROE to even higher level.

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

So what what prevents you to to get a more a more ambitious target for your sustainable ROE? That that will be the point number one. Point number two, you mentioned that part of what we we are seeing here is better research of the main higher contribution leading to better efficiency. In the past, you used to have an efficiency target tied to this 18% medium term ROE. What is your your new efficiency efficiency targeting this new new objectives?

[Gianfranco Ferrari, CEO at Credicorp]

Yeah. Maybe let me take the efficiency question, and then I'll pass it to to Alejandro. And you you you may comment the impact on the Yes. Not on on the e. So we're gonna say that.

[Gianfranco Ferrari, CEO at Credicorp]

Well, at the first of all, good morning, Andres. The efficiency ratio with this new venture growing at a much faster pace than the incumbents is tricky because they they start to become profitable, but their efficiency ratio is much higher than the efficiency ratio they incumbent have. So the more the other growth, the more inefficient we become. Obviously, at some point in time, the other efficiency ratio should be much lower than the I don't know, the BCP's efficiency ratio. Right?

[Gianfranco Ferrari, CEO at Credicorp]

It's not the situation today. That that happens with a lot of the a lot. Most of the the new ventures were were deployed. That's the main reason for efficiency ratio. Obviously, keep investing in running the business and also in in the transformation.

[Gianfranco Ferrari, CEO at Credicorp]

As I mentioned and also, as I mentioned before, the bulk of what we've done in terms of of investment in the digital transformation, mostly in the the new ventures, we've registered them as expenses. So so that that's how it's like we've been front loading expenses and going forward, that that's a trade off. Right? So as as we are successful, digital initiatives will grow, but deteriorate the the the free commercial. But at the same time, since they become profitable, the ROE impact shouldn't be negative, as I I explained before. I don't know if I made it clear.

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

That that that was clear, Ivan Franco. But what I would like to get here is is is the the number that you're putting us as needed to target is is probably conservative considering this math that you described and and to the point of the the coverage that you used to have, are there is they still valid? Are you still operating under the assumption that the disruptive initiatives are going to take away 300 basis points of efficiency and 150 basis points of of ROE, or this is something that we that we are going to be at present to support?

[Gianfranco Ferrari, CEO at Credicorp]

Yes. Again, a 150 basis points impact. As a matter of fact, this year is gonna be, let's say, zero. So that that's not an area that's it won't be addressed this year up up after starting from 2026 onwards, should be positive. That's the ROE answer.

[Gianfranco Ferrari, CEO at Credicorp]

The cost to income answer, the efficiency ratio is another answer because, as I mentioned, the concretely Yape. Yape is profitable now, but the cost to income of Yape is not 40 something percent. It's much more. The larger Yape becomes, the the more that, quote, unquote, negative impact on our on cost to income has. Going forward, that may change and end up, yep, being more much more efficient than, let's say, BCP.

[Gianfranco Ferrari, CEO at Credicorp]

And in that case, the cost to income ratio will decrease.

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

And that is fundamentally a function of lending, I I suppose?

[Gianfranco Ferrari, CEO at Credicorp]

Yes. Yes. So the the growth the major source of income growth for Yape, the marginal income growth for Yape for upcoming years is what we expect the lending business is gonna become. Yes.

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

And and then Francesca probably mentioned this before, the the three to five year period for the for the ramp up. Is is is this still a valid time frame? Or when when are you expecting to to accelerate the the lending when those 15 loans are going to start to become multi multi installment and and larger loans?

[Gianfranco Ferrari, CEO at Credicorp]

They're already multi installment, but you you know us very well, Andre. We're conservative. So we're not gonna bet the house going to to grow dramatically in that portfolio. We feel very comfortable with what we're doing both regarding risk, cost of risk coming, and growth. The more comfortable we we become and the the faster we will deploy the whole strategy.

[Gianfranco Ferrari, CEO at Credicorp]

We do not have an answer specific answer today on when when we will achieve what we're what we're

[César Ríos, Chief Risk Officer at Credicorp]

looking And if you focus on the nature of this planning, it's an exploratory business at the beginning. We deploy pilots. We monitor the pilots when we discover a specific segment that performed particularly well, we scale that. In these cases, we can be scaling up certain parts of the portfolio rapidly, but subject to have discovered profitable segments. So it's a discovery process, and we have great expectation, but it's a discovery process.

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

Thank you, Susan. What percentage of your borrowers are already in a multi installment scheme?

[Gianfranco Ferrari, CEO at Credicorp]

Do do you have that period? Fifty fifty.

[Alejandro Perez-Reyes, CFO at Credicorp]

Today, are fifty fifty. The balance is is the balance. The balance is 50. Yes. Not the number.

[Alejandro Perez-Reyes, CFO at Credicorp]

You're you're right. Not the number of clients, but the

[Gianfranco Ferrari, CEO at Credicorp]

balance is coming up. Because, again, since since the mono installment loans are mono installment, the the maturity the sorry. The duration is than one month. So you have to to work a lot to to maintain the balance. That is gonna shift dramatically in in the upcoming years.

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

Perfect. Thank you. Thank you, guys, and congratulations on the results.

[Gianfranco Ferrari, CEO at Credicorp]

Thank you. Thank you.

[Operator]

It appears there are no further questions at this time. I will now turn the call back over to Mr. Gianfranco Ferrari, Chief Executive Officer, for closing remarks.

[Gianfranco Ferrari, CEO at Credicorp]

Thank you, and thank you all for your questions. Q two twenty twenty five was another quarter of solid execution at Credicorp. Momentum in the economy, our business, and our innovation agenda give us the confidence for the rest of the year and beyond. Fee income is scaling. Digital engagement is deepening.

[Gianfranco Ferrari, CEO at Credicorp]

Trade demand is returning, and we're delivering value consistently even amid regulatory uncertainty. As I noted earlier, we operate in a more supportive environment but are not dependent on it. Our platform performs through volatility and is now better positioned to capture upside more effectively. In this context, we've revised our long term sustainable ROE upward from around 18% to approximately 19.5%, reflecting the benefit of a more diversified inclusive business model as we expand into new segments and broaden our addressable market. Our strategy will drive higher risk adjusted NIM through a more retail oriented loan portfolio while increasing transactional and noninterest income from our disruptive initiatives.

[Gianfranco Ferrari, CEO at Credicorp]

These drivers will accelerate income growth, enhance efficiency and strengthen our ability to deliver sustainable returns. Looking ahead, I invite you to join us on October 9 in New York for our Investor Day, where we'll share how Credicorp is positioning to lead the next chapter of Latin American finance. We look forward to seeing many of you there. Thank you for your continued trust.

[Operator]

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

Participants

Executives

• Milagros Cigüeñas, IRO
• Gianfranco Ferrari, CEO
• Alejandro Perez-Reyes, CFO
• César Ríos, Chief Risk Officer
• Francesca Raffo, Chief Innovation Officer

Analysts

• Brian Flores, VP - Equity Research at Citi
• Lindsey Shema, Global Investment Research Analyst at Goldman Sachs
• Renato Meloni, Senior Analyst - LatAm Financials at Autonomous Research
• Carlos Gomez-Lopez, Head - LatAm Financial Institutions at HSBC
• Alonso Aramburú, Associate Partner at BTG Pactual
• Yuri Fernandes, Executive Director at JP Morgan
• Andrés Soto, Executive Director - LatAm Equity Research at Santander Investment Securities Inc