Credicorp Ltd. (BAP) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects strong financial performance, including record high net income and risk-adjusted NIM. While there are concerns about cost of risk and political uncertainties, optimistic guidance on loan growth, dividends, and strategic initiatives like Yape suggest positive momentum. The Q&A indicates analysts' confidence in management's ability to navigate challenges, supporting a positive stock price outlook.
Key Financial Performance
Return on Equity (ROE) 19.6%, an increase from the previous year, driven by robust performance across core businesses, consistent delivery on strategic priorities, and contributions from the innovation portfolio.
FX-neutral loan growth 7% year-over-year, supported by healthy origination pipelines, particularly in Retail Banking and Microfinance.
Risk-adjusted Net Interest Margin (NIM) 5.5% year-to-date, supported by better asset quality and a low-cost funding base.
Share of demand and saving accounts 39.5%, reflecting the success of the digital engagement strategy.
Efficiency ratio 46.4%, within the expected range, due to digital capabilities and disciplined cost management.
Net interest income Increased by 2.7% year-over-year, driven by a contraction in interest expenses and an expansion in low-cost deposits.
Fee income Increased by 8.2% year-over-year, boosted by transactional activity at Yape and BCP.
Gains on FX transactions Increased by 23.4% year-over-year, driven by higher volumes at BCP.
Insurance underwriting result Grew by 33.1% year-over-year, reflecting stronger results in the Life business.
Loan balances Grew by 1.5% year-over-year, negatively impacted by Bolivia's balance sheet revaluation and depreciation in BCP's dollar portfolio. Excluding these effects, FX-neutral loan growth was 7%.
Non-performing loan (NPL) ratio 4.8%, showing improvement due to enhanced origination standards and stronger collection execution.
Cost of risk 1.7%, a decrease attributed to fortified risk management and improvements in payment performance.
Yape's contribution to risk-adjusted revenue 6.6%, with revenue per monthly active user at PEN 7.4 and expenses per mile at PEN 5.
Mibanco's profitability 18.8%, supported by a rebound in loan disbursements and strengthened credit risk management.
Grupo Pacifico's ROE 20.9%, driven by strong operational dynamics in both P&C and Life businesses.
Investment Management and Advisory business ROE 17.4%, reflecting improved capital markets activity and growth in Wealth and Asset Management.
Core income Expanded by 5.1% year-over-year, with net interest income up 2.7% and other core income up 11.9%.
Risk-adjusted NIM Increased by 50 basis points year-over-year to a record high of 5.5%.
Efficiency ratio (first 9 months) 45.7%, within guidance, with operating expenses growing by 12.8%.
Net income Reached a record high for the first 9 months, even when excluding extraordinary gains from the Banmedica transaction.
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Operating Highlights
Digital Ecosystem Expansion: Platforms like Yape, Tenpo, and Warda are generating new revenue streams across payments, credit, and savings.
Innovation Portfolio Contribution: Innovation portfolio contributed 7.4% of risk-adjusted revenue, on track for 10% target by 2026.
Geographic Diversification: Credicorp operates across Peru, Chile, Colombia, and Bolivia, leveraging diverse markets to mitigate risks.
Economic Resilience in Peru: Despite political instability, Peru's GDP growth is projected at 3.4% for 2025, supported by favorable export prices and domestic demand.
Loan Growth: FX-neutral loan growth accelerated to 7% year-over-year, driven by Retail Banking and Microfinance.
Efficiency Ratio: Efficiency ratio at 46.4%, reflecting disciplined cost management and digital capabilities.
Asset Quality: NPL ratio improved to 4.8%, supported by enhanced risk management and better payment performance.
Sustainable Growth Strategy: Focused on digital scalability, business synergies, and disciplined execution to achieve long-term value creation.
ROE and Efficiency Targets: Medium-term targets reaffirmed: ROE of 19.5% and efficiency ratio around 42% over 3-4 years.
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Risk or Challenges
Political Instability in Peru: The impeachment of President Dina Boluarte and subsequent leadership changes in Peru create uncertainty. While the company emphasizes resilience, political instability could impact economic conditions and business operations.
Economic Adjustment Challenges in Bolivia: Bolivia faces economic adjustment challenges, which could affect Credicorp's operations in the region. The revaluation of Bolivia's balance sheet has already led to a contraction in Credicorp's total assets.
Regulatory and Fiscal Pressures in Colombia: Colombia's fiscal pressures and inflation concerns could create challenges for Credicorp's operations in the country, particularly in maintaining profitability and managing risks.
Rising Costs in Innovation Portfolio: Expenses for innovation initiatives like Yape, Tenpo, and Culqi have risen significantly, which could pressure overall profitability if revenue growth does not keep pace.
Credit Risk in Wholesale Banking: A notable increase in credit risk for one corporate client in Wholesale Banking has been identified, which could lead to higher provisions and impact profitability.
Pending Elections in Peru (2026): The upcoming elections in Peru could introduce further political and economic uncertainties, potentially affecting business operations and market conditions.
Macroeconomic Volatility: While the macroeconomic environment is relatively stable, external factors like fluctuating commodity prices and global economic conditions could impact growth and profitability.
Operational Efficiency Challenges: The efficiency ratio, while within guidance, reflects rising operating expenses, particularly in IT and digital talent hiring, which could strain margins if not managed effectively.
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Guidance & Outlook
GDP Growth: GDP growth for 2025 is projected at 3.4%, slightly above 3%. Domestic demand is forecast to grow nearly 6%, its fastest pace in over a decade outside the pandemic rebound. GDP growth is expected to remain resilient between 3% to 3.5% in 2026, supported by sustained gains in terms of trade.
Inflation: Inflation is forecasted at 1.8% for 2025 and 2% for 2026, remaining within the Central Bank's 1% to 3% target range.
Central Bank Policy Rate: The Central Bank cut its policy rate to 4.25%, close to a neutral level. This easing cycle is supporting credit growth and private consumption.
Loan Growth: Loan growth is expected to accelerate in the last quarter of 2025, driven by Retail Banking at BCP and Mibanco. Full-year loan book growth is projected at around 6.5% year-over-year.
Net Interest Margin (NIM): NIM is expected to remain within the guidance range, supported by a shift in the mix towards retail lending and downward trending interest rates.
Cost of Risk: The cost of risk is anticipated to increase in the final quarter of 2025 due to a stronger focus on lending to higher-yielding segments but is expected to close at the lower end of the guidance range.
Risk-Adjusted NIM: Risk-adjusted NIM is expected to move closer to the upper end of the guidance range.
Fee Income and Insurance Underwriting Results: Growth is expected to stand at low double digits for 2025, supported by an acceleration in economic activity and diversification of income sources.
Return on Equity (ROE): Full-year ROE guidance is maintained at around 19%, reflecting solid core performance and sustained discipline on the risk front.
Yape Revenue Growth: Yape's revenue is expected to triple by 2028, driven by higher revenue per user as monetizable features are adopted.
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Shareholder Return Plan
Annual Total Shareholder Return: Over the past 30 years as a listed company, Credicorp has generated an annual total shareholder return above 14%, consistently outperforming regional peers.
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Key Q&A
Q:What are the expectations for cost of risk in 2026, especially with the shift to high-yield segments?
A:The cost of risk is expected to increase gradually due to the shift in portfolio composition. However, the risk-adjusted NIM is also expected to increase in absolute terms.
Q:How should we think about OpEx growth next year, particularly in relation to disruptive initiatives like Yape and Tenpo?
A:Operating expenses growth is expected to be lower in the core business compared to this year, while growth in the innovation side (e.g., Yape, Tenpo) will likely remain similar. This aligns with the mid-term target of 42% efficiency in the next three years.
Q:What is the outlook for ROE in the first quarter of next year given political uncertainty and economic factors?
A:While there may be a slowdown in the first quarter due to elections, the strong economic backdrop (e.g., record trade balances, private investment growth) suggests that the first quarter may not be as low as in previous election years. ROE guidance will be provided in the next call.
Q:What is the expected impact of the eighth pension fund withdrawal on the business?
A:The withdrawal is expected to have a positive impact on local funding (around PEN 10 billion retained) but a negative impact on loan growth (0.5 percentage point less growth next year). Prima's fee income will see a 10% reduction next year due to the withdrawal.
Q:What is the outlook for loan growth and NIM expansion?
A:Loan growth guidance is nominal and considers adjustments like Bolivia's restatement. NIM expansion is driven by a mix shift to higher-yield portfolios, despite lower risk vintages positively impacting cost of risk.
Q:What are the expectations for Bolivia under the new government?
A:The new government in Bolivia has made positive initial decisions, such as appointing a pro-market Central Bank President. While there is optimism about Bolivia's potential, significant political, economic, and social challenges remain.
Q:What is the outlook for dividends and capital returns?
A:The payout ratio is expected to increase from this year's 58% to the high 60s, with a focus on maintaining and increasing ordinary dividends. Extraordinary dividends are also possible, depending on growth and potential inorganic operations.
Q:What is the update on Yape's contribution and growth potential?
A:Yape's contribution to Credicorp's income is expected to grow significantly, potentially reaching double digits by 2026. The lending business within Yape is profitable and represents around 20% of its income, with plans for further scaling.
Q:What is the outlook for Mibanco's growth and performance?
A:Mibanco's portfolio quality has improved, and new vintages are performing well. Loan growth is expected to accelerate, and there is a focus on increasing transactionality and fee income to complement the lending business.
Q:What is the impact of political and economic conditions in the region on investment and growth?
A:The region's positive outlook, driven by high commodity prices (e.g., copper, lithium, gold), outweighs political volatility. Credicorp sees opportunities in Bolivia, Chile, and Peru, supported by strong macroeconomic fundamentals.
Q:What is the sensitivity of Credicorp to interest rate changes?
A:A 100 basis point decrease in rates would theoretically impact NIM by 17 basis points (15 from the dollar book and 2 from the soles book). However, actual NIM has grown despite rate decreases, and risk-adjusted NIM is expected to remain strong.
Q:What is the strategy for Yape's SME segment?
A:Yape's SME lending model is based on transactional data and is more efficient than Mibanco's traditional model. While still in early stages, the model shows promise and targets unbanked or underbanked segments.
Q:What is the outlook for the insurance business?
A:The insurance business is expected to grow at high rates due to under-penetration in Peru. Loss ratios may normalize to historical levels but could improve structurally over the long term as the business expands into retail and lower-end segments.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance on ROE for the first quarter of next year, citing the need to wait for more clarity on political and economic conditions. Similarly, they did not provide detailed unit economics for Yape's lending business or specific plans for inorganic acquisitions, stating that there are no relevant M&A opportunities at the moment.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI talent
Alejandro Perez
Bank Central
Banking Microfinance
Bolivia adjustment
Chile GDP
Ciguenas harbor
Colombia GDP
Congress President
Credicorp listing
Credicorp model
Credicorp result
Day environment
Dynamics loan
Exchange road
FX market
GDP gain
GDP pressure
GDP revision
GDP term
Head Congress
Insurance Pensions
Investor Day
Ltd Conference
New York
consumption
decade
delivery
diversification
election
export price
mining investment
momentum
platform
record
term value
value creation
BAP Transcript
Credicorp Ltd. (BAP) Q1 2026 Earnings Call Transcript
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Credicorp's earnings call revealed strong financial performance with a 5% revenue increase and a 10% rise in net income, driven by lower credit loss provisions and improved efficiency. The loan portfolio grew by 8%, and the efficiency ratio improved to 42%, reflecting successful cost optimization and digital transformation. Net interest margin also improved, indicating effective asset-liability management. While strategic initiatives and operational updates were not discussed, the solid financial results and improved metrics suggest a positive sentiment, likely leading to a 2% to 8% stock price increase over the next two weeks.
Chorus Aviation Inc. (CHR:CA) Q4 2025 Earnings Call Transcript
Positive2-13
The earnings call summary and Q&A indicate strong financial metrics, optimistic guidance, and strategic growth plans, such as the Kadex acquisition and defense opportunities. Despite some unclear management responses, the overall sentiment is positive with increased dividends, potential M&A, and flexible capital allocation. This suggests a likely positive stock price movement over the next two weeks.
Credicorp Ltd. (BAP) Q4 2025 Earnings Call Transcript
Positive2-13
The earnings call summary indicates strong financial performance with a projected GDP growth of 3.4% for 2025, strong loan growth, and a high ROE of 19%. The Q&A section supports this with positive sentiment on digital initiatives and economic trends. Despite political uncertainties, consumer confidence and economic activity remain strong. The strategic focus on digital growth, particularly Yape, and plans for increased dividends are positive indicators. However, some uncertainties remain due to political factors and lack of specific future targets.
Credicorp Ltd. (BAP) Q3 2025 Earnings Call Transcript
Positive11-14
The earnings call reflects strong financial performance, including record high net income and risk-adjusted NIM. While there are concerns about cost of risk and political uncertainties, optimistic guidance on loan growth, dividends, and strategic initiatives like Yape suggest positive momentum. The Q&A indicates analysts' confidence in management's ability to navigate challenges, supporting a positive stock price outlook.
BAP Report
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