Credicorp (NYSE:BAP) released first-quarter financial results and hosted an earnings call on Friday. Read the complete transcript below.

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Summary

Credicorp Ltd reported a strong first quarter with a return on equity (ROE) of 21.1%, driven by solid fundamentals across core businesses and a robust operational performance.

The company continues to focus on its decoupling strategy which includes expanding in underpenetrated markets, scaling its digital ecosystem, leveraging synergies across its ecosystem, and maintaining resilient returns through prudent risk and capital management.

Loan growth was robust, particularly in the retail and microfinance sectors, and asset quality improved with a decline in the NPL ratio to 4.3%.

Net interest income grew by 10.9% due to loan portfolio expansion and a decrease in interest expenses, while fee income and gains on FX transactions saw significant increases.

The company declared a record high dividend of 50 soles per share, reflecting strong solvency and confidence in sustained long-term growth.

Strategic investments in innovation and digital capabilities continue to drive diversified income streams and scalable growth, with Yape showing notable engagement and monetization metrics.

Credicorp maintains a GDP growth expectation for Peru of 3.5% for 2026, though recent indicators suggest a more cautious outlook closer to 3.2%.

Management highlighted the importance of political stability and institutional frameworks in Peru amid potential uncertainties from geopolitical tensions and the upcoming presidential elections.

Full Transcript

OPERATOR

Good morning everyone. I would like to welcome you to the Credicorp Ltd First quarter 2026 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. 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 then one on your telephone keypad. If you have connected to the call using the HD Webphone on your computer, please use the keypad on your computer screen. If you are using a speakerphone, please make sure to mute function. Ensure 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 IR officer Ms. Milagros Seguenas, you may begin.

Milagros Seguenas

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 at the Q and A session will also be Francesca Rajo, Chief Innovation Officer, Cesar Rios, Chief Risk Officer and Eduardo Montero, Head of Insurance and Pension. 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 on 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 recent macro and political environment, the key drivers of our decoupling strategy and a brief overview of our quarterly results followed by Alejandro Perez Reyes who will provide a more detailed analysis of key macroeconomic indicators, our financial performance and our outlook for full year 2026. Gianfranco, please go ahead.

Gianfranco Ferrari (Chief Executive Officer)

Thank you Milagros Good morning everyone and thank you for joining us today. Let me begin by thanking our shareholders for the strong support at our recent annual general meeting. The outcome of the Board elections reflects a deliberate strategy led refreshment process fully aligned with Credicorp's long term priorities. As announced, shareholders approved the appointment of three new Directors and the re election of six current members. The new directors bring complementary expertise in areas that are increasingly critical for us, particularly technology and AI, financial and regulatory oversight and strategic execution as we continue advancing our transformation and strengthening our operating model. Importantly, our governance framework remains robust with key safeguards firmly in place, including a fully independent audit committee and independent directors leading critical committees. This provides a strong foundation as we navigate different operating environments at the global level. Recent geopolitical tensions, particularly in the Middle east, have increased uncertainty mainly through higher energy prices and their potential impact on inflation and the outlook for interest rates. Since our last conference call, Peru's economic activity has been affected by a series of temporary supply side shocks, including higher oil prices related to the conflict in the Middle East, a localized energy disruption and adverse weather conditions that led to contraction in primary sectors. That said, the positive momentum of the economy continues to remain solid. Several activity indicators, including private investment, continue hosting double digit growth supported by resilient macroeconomic fundamentals and favorable export prices, with copper currently trading at around $6.50 per pound. Against this backdrop, we're maintaining our GDP growth expectation for 2026 at around 3.5%, though our outlook has become more skewed to the downside with recent macroeconomic indicators tracking closer to 3.2%. More importantly, domestic demand remains particularly dynamic, growing above 4%, which we view as the more relevant driver for loan growth going forward. As we await the official confirmation of results, the presidential runoff appears likely to feature candidates with markedly different economic visions, including one advocating for a significantly more interventionist role for the state. Should that candidate prevail, some initial market uncertainty could emerge. However, we believe the composition of the Senate is the more decisive factor and is trending toward a configuration that supports macroeconomic fundamentals and institutional continuity. In our view, this legislative balance will act as an effective counterweight, helping to preserve political stability. Peru's structural safeguards, including the Senate's vessel authority and constitutional hurdles to significant policy shifts, are likely to act as effective constraints, helping preserve the independence of the central bank and its mandate, particularly regarding monetary financing to the treasury. Given this, we remain confident that Peru's economic model will continue to grow resilient, supported by solid institutional frameworks. Against this backdrop, we continue to closely monitor price dynamics and monetary conditions. Inflation has seen an uptick to 4% year over year, mainly driven by transfer energy and food costs. As a result, monetary conditions are likely to remain somewhat tighter than previously anticipated. Across the region, the operating environment remains mixed, reflecting the initial impact of external pressures. In Colombia, activity remains relatively resilient, supported by consumption, while policy uncertainty persistent ahead of the presidential elections on May 31. In Chile, growth has softened amid weaker early year activity and higher oil prices. At the same time, the new government offers improved prospects for private investment in Bolivia Macroeconomic conditions remain challenging, with performance exceeding expectations overall, while external conditions remain dynamic. The resilience of our core markets combined with the strength and attractiveness of our offerings give us confidence that 2026 will remain a solid year. As we look ahead, we will further execute our decoupling strategy through four differentiated growth anchors. First, we're strengthening our leading position in the unpenetrated underpenetrated markets where we continue to see clear avenues of growth. We see significant room to deepen financial inclusion and expand our reach across client segments where structural gaps persist. This enables us to grow while maintaining disciplined risk standards. Second, we're scaling our integrated digital ecosystem. In 2026, we will leverage our platforms to accelerate client acquisition, deepen engagement and increase cross sell while also improving efficiency and customer experience. A key component in our innovation Portfolio is our neobank unit which effective April 1, brings together YAPE and EO in Peru, Tempo in Chile and YAPE in Bolivia under a common umbrella led by Raymundo Morales. These platforms expand our reach and open new avenues for growth, particularly in payments and lending. More broadly, we're deepening our competitive mode by leveraging our scale, client base and ecosystem integration to drive sustained differentiation and progressively higher monetization. Third, we are unlocking synergies by leveraging shared capabilities across our ecosystem. We're placing greater emphasis on data analytics and risk management capabilities that can be deployed across across businesses. This also includes advancing our knowledge sharing agenda so that best practices can be applied across subsidies, improving decision making, client targeting and risk assessment. While we are still in the early stages, we are already seeing tangible benefits and we believe this represents a minimum opportunity going forward. Finally delivering strong and resilient returns across economic cycles. This is underpinned by a prudent and holistic approach to risk and capital management across the organization. We continue to strengthen our capabilities across credit liquidity and operational risk while maintaining a disciplined approach to capital allocation. This integrated framework is translating into more consistent performance and reinforces our resilience, enhancing our ability to navigate forward volatility, support sustainable growth and protect returns across different macro environments. Turning now to the first quarter results, we reported a very solid ROE of 21.1% which exceeded expectations and reflects strong fundamentals across our core businesses. Operational performance was robust across core businesses. Additionally, we achieved 9% of risk-adjusted revenues from our innovation portfolio this quarter, advancing toward our 10% target by the end of this year. We're seeing an acceleration of credit demand across our main lending segments in the first quarter. Loan growth was robust in BCP and Mibanco. We expect retail segments and microfinance to accelerate in the coming quarters. Risk adjusted margins strengthened sequentially supported by improved asset quality and a resilient underlying Net Interest Margin (NIM) as our loan portfolio expanded and funding mix improved, deposit growth remained strong reflecting system liquidity and sustained client confidence while continuous investments in service and digital capabilities deepened our client relationships and drove market share gains in low cost funding reaching 41.2% this quarter. Asset quality reflects proactive measures taken since 2023 including tighter origination standards, risk repricing, enhanced loan rescheduling and greater investments in analytics alongside a favorable macro environment. Additionally, our strong solvency has enabled us to increase our dividend to 50 soles per share while also supporting our plans for sustained long term growth. Our efficiency ratio is at 45.8% 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. 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. Before I turn the call over to Alejandro, I would like to congratulate him on his appointment to lead our microfinance business and Mibanco. These transitions reflect the depth of talent we continue to build across Credit Corp. And our disciplined approach to succession planning and leadership development. We're also very pleased that Ignacio de Launde will assume the CFO role later this year, bringing strong financial and strategic experience to the position. In the meantime, we still have Alejandro with us for one more quarter of earnings calls before this transition takes effect. With that, Alejandro, please go ahead.

Alejandro Perez Reyes (Chief Financial Officer)

Thank you and good morning everyone. As Gianfranco mentioned, we delivered remarkable overall operating results, including record high net income which reflects solid growth in risk adjusted revenue streams in our business ecosystem. As I discuss the quarter highlights, I will focus on the year over year operating trends. Loans measured in quarter end balances increased 8.2%. This uptick was driven primarily by BCP through both retail and wholesale banking and by Mivanco. Asset quality improved across the board with Credicorp's NPL ratio declining to 4.3% for the quarter. This positive trend was driven by higher debt repayments, especially among retail banking clients, supported by ongoing refinement in underwriting standards and collections management and growth in liquidity through pension inflows. In this context, the cost of risk stood at 1.3%, bolstered by improvements in payment performance in a more favorable macroeconomic environment and by strengthened risk management. Net interest income increased 10.9% spurred by growth in interest income driven mainly by loan portfolio expansion by a contraction in interest expenses as interest rates fell and low cost deposits continued to gain share to account for 53.9% of the funding base at quarter end. In this context, Net Interest Margin (NIM) stood at 6.6%. Higher core income grew 19.5%, fee income increased 15.6% boosted by transactional activity at YAPE and BCP. Gains on FX transactions rose 30.6% through higher volumes at BCP. Lastly, the insurance underwriting results fell 9.1% on the back of lower premiums in the PNC business and inflationary pressures on expenses for claims in the life business which have no impact on the bottom line given that these claims are compensated with inflation linked financial income excluding inflation based impacts on claims expenses. The underwriting result rose 4% year over year driven mainly by the life business. We delivered 21.1% ROE this quarter fueled by strong loan growth, strengthened asset quality and diversified income sources, showcasing the success of our decoupling strategy, risk management measures and investment in the et al capabilities. Finally, as Gianfranco mentioned, we recently declared a record high ordinary dividend of 50 soles per share as we moved capital levels closer to target across our subsidiaries. Next slide please. GDP is expected to have grown close to 3% year over year in the first quarter, reflecting solid momentum in the economy despite localized energy disruptions and higher oil prices in March. More importantly, domestic demand is expected to have expanded by more than 5% year over year for the sixth consecutive quarter. High frequency indicators continue to signal broad based and robust expansion, with several indicators posting double D year over year growth. For instance, during the first quarter, light vehicle sales led the gains rising by nearly 40%, followed by upticks of nearly 20% in capital goods imports and 14% for cement consumption. Historic high terms of trade and ongoing business cycle momentum remain the key drivers of this performance. While higher oil prices introduce uncertainty, Peru is less vulnerable than other peers of the region given its lesser net importer position. Another source of uncertainty going forward will be the impact of an El Nino event. So far this has been felt in the first anchovies fishing season, but it is still early to tell how it will develop going forward. Also, as Gianfranco mentioned, while the presidential elections may generate some near term uncertainty, the broader institutional framework, including the role of the Senate, should help limit the scope of abrupt changes and provide a measure of stability. Next slide please. The Federal Reserve has maintained its policy rate since December as it continues to assess incoming economic data and determine how rising oil prices impact inflation and employer In Peru, annual inflation rose to 4% year over year in April, its highest level in more than two years, reflecting primarily higher local transportation prices. The central bank has indicated that inflation is expected to return to the target range within the forecast horizon and converge to 2% next year as the effects of these shocks gradually dissipate. In Colombia, annual inflation accelerated to 5.6% in March, driven in part by the 23% minimum wage increase rolled at the beginning of 2026. To contain inflation expectations, the central bank has increased its rate by 200 basis points since December. Presidential elections will be held in two weeks and polls suggest a runoff is likely in June. In Chile, investment sentiment improved after President cash selection, although recent gasoline price increases have tempered the outlook. Annual inflation reached 4% in April and the central bank has held the policy rate at 4.5%. Next slide please BCP's profitability posted a solid start to the year, supported by loan growth under disciplined risk management and diversified sources of revenue. In this context, roe stood at 30.5% on a year over year basis. Total loans measured in end of period balances rose 7.3%. In FX usual terms, loan growth stood at 9.1%, driven by both wholesale and retail banking. Notably, disbursement of long term wholesale loans were buoyed by a favorable outlook for private investment. In retail banking, loan growth accelerated mainly in individuals, reflecting an increase in our risk appetite for consumer loans and an uptick in mortgage loan disbursements which rose on the back of lower interest rates. SMEP loan disbursements were also boosted by an increase in our risk Appetite. Net Interest Margin (NIM) rose 21 basis points to stand at 6% mainly due to a decrease in the funding cost, while the yield on interest earning assets remained resilient in an environment of lower interest rates. NPL volumes declined 11.1% mainly due to debt cancellations by SMEP ME clients under judicial recovery and secondarily by debt repayments from individuals who availed the funds from pension fund withdrawals. Improvements in the quality of origination and in collections management also contributed to the result. Provisions fell 35.1%, driven mainly by retail banking, which was positively impacted by improvement in payment performance across earliest vintages in consumer and credit card loans and by reversals in wholesale banking after a corporate client regularized its refinance exposure. In this scenario, the cost of risk decreased to 0.8% while risk adjusted Net Interest Margin (NIM) stood at a record high of 5.5% higher core income rose 18.7%, driven mainly by an increase in fee income, where strong transactional activity was channeled through Yape and other transactional products. At bcp, a secondary driver was growth in gains on FX transactions, which was fueled mainly by retail clients served through digital channels. Variations in volumes reflect volatility related to tensions in the Middle east and the electoral calendar. Although the ratio of other core income to assets stabilized this quarter due to asset growth, the contribution of fee income plus net gains from FX transactions reached its highest level since 2022, reflecting the strength of our diversified sources of revenue. Operating expenses rose 15.1%, mainly due to an uptick in administrative expenses. This evolution was driven primarily by Yape's use of cloud infrastructure and IT related services and secondarily by marketing and consulting expenses in the traditional business. Our personnel expenses rose this quarter as we ramped up core business projects to develop commercial and technological capabilities. In this context, operating expenses and personal expenses in particular led the efficiency ratio to stand up 38.6%. Next slide please with 16.4 million monthly active users, Yape continues to expand its MAO base while shifting its focus towards deeper engagement and monetization. Reaching approximately 82% of Peru's economic gaping population, the platform has achieved nationwide scale at this level of penetration. Incremental growth is driven by higher recurrence, broader multiproduct adoption and monetization of an already large installed base positioning Yape to continue cutting into cash's share of payments the platform's positive evolution into a super app is reflected in its engagement metrics. Users transact 67 times per month, supported by consistently strong customer satisfaction with an NPS of 77. This deeper engagement translates into unit economics, with revenue per mile increasing 65% year over year to 10.3 soles, widely surpassing growth in expenses per mile which rose 26% to to 5.9 soles. This proves that operating leverage is on the right. Consistent with Yape's's asset light and scalable model, payments account for 47% of total revenues while also serving as a core engine for data generation and cross selling. Revenue generating total payment volume grew 80% year over year, reinforcing Yape's position as Peru's leading digital payment network. Lending revenue grew 3.6 times year over year, positioning as the platform's fastest growing vertical. In the first quarter of 2026, more than 5.7 million loans were disbursed, leveraging proprietary data, digital underwriting and distribution to serve the underbank. With credit penetration at approximately 30% of mouse there's still significant upside to accelerate adoption. The app has the potential to significantly scale its contributions to Credit Corp. Over time. As of the first quarter, the app represented 17% of the group's fee income and 8% of the group's risk adjusted revenues year over year, up from 12% and 5% respectively. Next Slide please. As Peru's microfinance system continues to gain traction amid a more dynamic economic backdrop, its performance has followed an upward trend. In this context, Mivanco outperformed its peers by strengthening its transactional value proposition, gaining productivity and strengthening credit risk management. As a result, Mivanco sustained double digit loan growth and robust profitability of 21.7% this quarter. From a year over year perspective. Loans measured in order end balances grew 12.4%, driving an upswing in loan disbursement which hit a new all time high in March. The NPL ratio continued with a downward trajectory that began that year, falling to 4.9%, an all time low. Our active pricing management coupled with a decrease in the cost of funding boosted Net Interest Margin (NIM) which stood at a strong 14.9%. The cost of rigs fell 29 basis points off the back of lower risk vintages which currently account for 88% of total loans. While the cost of risk remains low this quarter, we anticipate some gradual normalization in the second half of 2026 as we incorporate newer and smaller customer segments to bolster portfolio growth while remaining comfortably within our risk appetite. In Parallel, risk adjusted Net Interest Margin (NIM)S stood at 11.3%, slightly below the four year high achieved last quarter. Operating expenses increased due to higher administrative expenses related to ongoing investments in strategic projects primarily linked to digital transformation initiatives to modernize our technological architecture and improve client experience. Efficiency improved despite these investments and stood at 49.2% of quarter end. Mibanco Colombia's results continue to rise and raise their double digit loan growth both quarter over quarter and year over year, bolstered by control, risk management and improving productivity. Consequently, Profitability stood at 18.3% at quarter end, which represents a sizable improvement over the single digit levels reported at the same time last year. Next slide please. Grupo Pacifico delivered solid underlying results in the first quarter with ROE of 18.9% for the quarter. Organic net income grew 11% year over year, driven mainly by the life business and partially offset by the PNC business. In our life business, commercial execution was strong, supported by growth in our bank assurance channel and an uptick in issuances of optional policies in retail segments, both consistent with our strategy to deepen penetration in high value customer segments, the net loss on securities dropped this quarter, reflecting a base effect generated by credit downgrades on a couple of facets in the investment portfolio. In the the first quarter of last year in our PNC business, net income fell. This evolution was fueled primarily by a drop in premiums in the corporate segment and secondarily by an uptick in claims in the personal and medical assistance lines. In addition to organic growth, our net income accelerated year over year following the consolidation of Pacifico Salud, which includes medical assistance, corporate health insurance and medical services. These businesses continue to advance through solid commercial dynamics and disciplined cost management which bolsters our confidence in Pacifico Salute's long term earnings contribution. If we include the full Consolidation of Pacifico Salud's operations in Grupo Pacifico results consolidated net income rose 19% year over year. Next slide please. ROE for our investment management and advisory business stood at 15.7% in the first quarter. Let me give a brief overview of this quarter's year over year dynamics and underlying structural trends. Quarter results showed mixed dynamics. Revenues benefited from stronger performance in our wealth and asset management businesses with AUMs expanding by 28% and 34% respectively. Our capital market line also evolved favorably in line with market conditions. These favorable business dynamics were partially offset by an increase in operating expenses which was mainly attributable to a particularly low comparative base in the first quarter of 2025. In this context, net income fell 8% over the period. Next slide please. Now I would like to review Credicorp's consolidated evolution. Interest earning assets rose sequentially driven mainly by growth in investment balances as we took advantage of tactical opportunities to capitalize on our cash position. Loan growth fueled by BCP also contributed to the uptick in interest earning assets, albeit to a lesser extent. On the liability side, low cost deposits posted an increase thanks to our solid transactional offerings and inflows from pension fund withdrawals. Structural balance sheet trends are better explained on a year over year basis. Loan growth which was driven mainly by BCP and Miganco led the interest earning asset mix to generate higher yield despite cash buildup. In this context, the yield on interest earning assets rose 10 basis points year over year. On the liability side, lower interest rates along with an increase in the share of low cost deposits resulted in a 31 basis point decrease in the funding cost over the same period. In this context, Net Interest Margin (NIM) stood at 6.6% for the quarter. Next slide please. Moving on to loan portfolio quality, asset quality continued to improve this quarter as NPL volumes contracted across segments. The NPL ratio at quarter end was 4.3%, which is below the levels reported prior to the 2023 recession. Provisions dropped over the last 12 months, buoyed by steady economic recovery, which strengthened repayment dynamics, and by effective risk management at both BCP and Milano. In this context, the NPL coverage ratio rose and stood at 113.8%. Going forward, we will continue to accelerate retail origination while maintaining a disciplined approach to risk. We expect loan growth to maintain its dynamism. The cost of risk, in turn, is expected to increase modestly but remain within our risk appetite. Next slide, please.

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