Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Credicorp Ltd (BAP, Financial) reported a solid ROE of 16.2%, driven by universal banking, insurance, and investment management and advisory.
- The company achieved resumed loan growth and maintained a resilient risk-adjusted NIM.
- Credicorp Ltd (BAP) has a strong balance sheet and maintained a robust solvency position.
- Significant progress in strategic initiatives, particularly in digital and innovation efforts, has led to increased digital customers and transactions.
- Yape, Credicorp's digital payment platform, reached breakeven ahead of expectations, showing strong income growth and diversification.
Negative Points
- The microfinance sector in Peru, particularly Mibanco, is facing systemic issues with high delinquencies and cost of risk at the highest level since 2008.
- ROE for Mibanco fell short of expectations, and the company is not yet comfortable with the risk assessment of its portfolio.
- The cost of risk rose to 3%, driven by a weakening of payment capacities in SME-Pyme and a deterioration in payment performance in credit cards.
- Non-performing loans (NPL) ratio increased to 6%, with delinquency rising mainly in consumer, mortgage, and credit card loans.
- Loan growth guidance for 2024 was revised down to 1% to 3%, reflecting a cautious approach to originations in retail banking and microfinance segments.
Q & A Highlights
Q: How do you see the credit appetite and indebtedness in the microfinance sector in Peru and Colombia? Are there any positive signs of improvement?
A: We still don't feel comfortable with our portfolio's risk at Mibanco and have tightened credit policies. While the fundamentals of the business remain strong, it's too soon to see improvements. In Colombia, despite a complicated environment, Mibanco has a clearer path due to recent management changes.
Q: Can you elaborate on your expectations for other income and operating expenses for 2024?
A: We expect strong fee income growth, particularly from Yape and BCP's core business. While we are controlling costs, we are not planning to cut any major projects. We aim to maintain our efficiency ratio near the lower end of our guidance.
Q: What is the assessment process for Mibanco's risk capabilities, and could this impact your guidance?
A: We are conducting a thorough review of our credit process, including monitoring capabilities, model performance, and cultural aspects. We expect to have a clearer picture in the next quarter. This review aims to ensure optimal performance even under tough market conditions.
Q: How do you envision Yape's revenue growth and profitability going forward?
A: Yape's revenue streams from payments and lending are growing, with monthly active users and transaction levels increasing. We see continued growth in these areas and new revenue streams like foreign exchange remittances and marketplace transactions. We will continue investing in technology and digital transformation.
Q: Why are you more confident in Yape loans compared to Mibanco loans?
A: Yape loans are short-term and built on robust risk models and digital capabilities, resulting in lower acquisition costs. The tenure of Yape loans is around one month, compared to Mibanco's 13 months, making them less risky.
Q: What are your expectations for loan growth in 2025, given the improving economy?
A: While we don't provide specific guidance for 2025, we expect private investment to pick up, driven by new projects in the mining sector and infrastructure developments like the Port of Chancay and the new airport. This should positively impact loan growth.
Q: Are you considering distributing additional dividends given your strong capitalization?
A: Yes, we are considering the possibility of distributing additional dividends in the second half of the year, similar to our pre-COVID practice. However, no formal decision has been made yet.
Q: How sustainable is your NIM expansion given the ongoing decline in reference rates?
A: We have been able to reprice loans due to current risk conditions and improve our low-cost funding. While there may be some pressure on NIM as rates decline, we are shifting our portfolio mix towards higher-margin retail segments to sustain NIM levels.
Q: What is the level of sustainable ROE you aim for?
A: Our long-term target for sustainable ROE remains at 18%.
Q: How do you see your international operations, particularly in Bolivia, Colombia, and Chile?
A: In Bolivia, we are de-risking our portfolio due to a challenging macroenvironment. In Colombia, Credicorp Capital is performing well despite a tough financial sector. In Chile, Tenpo is on track, and we have applied for a full banking license. We will continue investing in Tenpo until it reaches breakeven.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
