Credicorp Earnings Call Highlights Robust Growth and Challenges

Credicorp ((BAP)) has held its Q4 earnings call. Read on for the main highlights of the call.

The recent earnings call for Credicorp revealed a generally positive outlook, marked by strong financial performance and strategic advancements, particularly in the realms of digital innovation and financial inclusion. Despite these achievements, the call also acknowledged challenges posed by the one-off impact from the Sartor case and subdued private investment, which somewhat tempered the overall optimism.

Record Profitability

Credicorp reported a record profitability milestone, achieving $5.5 billion with a Return on Equity (ROE) of 16.5%. When excluding the one-off charges related to the Sartor case, the ROE aligns closely with the guidance at 17.2%. This achievement underscores the company’s robust financial health and strategic execution.

Strong Economic Recovery in Peru

The Peruvian economy demonstrated a strong recovery, with the GDP expanding by over 3% in 2024. Inflation fell to 2.2%, marking the lowest rate in four years, and the central bank took measures to support this recovery by lowering its policy rate. This macroeconomic backdrop provides a favorable environment for Credicorp’s operations.

Yape’s Growth and Profitability

Yape, Credicorp’s digital payments platform, reached profitability in 2024, boasting nearly 14 million active users. The platform doubled its transaction volume and emerged as Peru’s fifth-largest e-commerce player, highlighting the company’s success in digital transformation and financial inclusion.

Improved Asset Quality

Credicorp reported improved asset quality, with the Non-Performing Loan (NPL) ratio dropping 60 basis points to 5.3%. Provisions fell by 14.4% due to better payment performance at BCP and MiBanco, reflecting enhanced risk management strategies.

Sustainable Financing Initiatives

The company allocated over $1.5 billion in sustainable financing across key sectors, significantly contributing to financial inclusion and poverty reduction in Peru. This initiative aligns with Credicorp’s commitment to social responsibility and long-term sustainable growth.

Impact of Sartor Case

The Sartor case had a one-off impact of 259 million soles, affecting the ROE and bringing it down to 13.3% for the quarter. This incident highlights the challenges Credicorp faces in maintaining its financial metrics amidst unforeseen events.

Subdued Private Investment

While public investment showed gains, private sector investment remained subdued, which poses challenges for long-term sustainable growth. This situation underscores the need for strategies to stimulate private investment to complement public initiatives.

Efficiency Ratio Concerns

Credicorp anticipates its efficiency ratio to range between 45% and 47% in 2025, reflecting continued investment in digital transformation. This focus on efficiency is essential for maintaining competitiveness and profitability in a rapidly evolving market.

Forward-Looking Guidance

Looking ahead, Credicorp provided guidance for the upcoming fiscal year, with expectations for the Peruvian economy to grow around 3% in 2025. The company anticipates total loan book growth of approximately 3.5% in average daily balances, equivalent to around 6% growth in quarter-end balances, driven mainly by retail banking at BCP and MiBanco. Credicorp expects its Net Interest Margin (NIM) to remain resilient, ranging between 6.2% and 6.5%, despite potential rate reductions. The cost of risk is projected to be between 2% and 2.4%, with risk-adjusted NIM expected to stand between 4.8% and 5%. Additionally, the efficiency ratio is forecasted to be between 45% and 47%, considering an accounting policy change related to the loyalty program. The company aims for an ROE of around 17.5% for the full year, supported by continued investment in digital transformation and a diversified source of income.

In summary, Credicorp’s earnings call painted a picture of strong financial performance, underscored by strategic advancements in digital innovation and sustainable financing. While challenges such as the Sartor case and subdued private investment present hurdles, the company’s forward-looking guidance reflects confidence in its ability to maintain growth and profitability. The insights provided offer a compelling view of the company’s future trajectory, appealing to investors and stakeholders alike.