Credicorp Earnings Call: Record ROE, Digital Surge

Credicorp ((BAP)) has held its Q1 earnings call. Read on for the main highlights of the call.

Credicorp’s latest earnings call struck a confident tone, showcasing record profitability, robust loan growth, and improving asset quality, while openly flagging macro, political and weather-related risks. Management emphasized disciplined capital returns and heavy digital investments, arguing that the group is well positioned but not complacent in a still uncertain environment.

Record Profitability and ROE

Credicorp delivered record net income with a consolidated ROE of 21.1% for Q1 2026, comfortably above its own long-term targets and market expectations. Management highlighted that the outperformance is broad-based across its main franchises, underscoring strong fundamentals rather than one-off gains.

Strong Loan Growth

The loan book expanded solidly, with consolidated loans up 8.2% year over year on quarter-end balances and BCP posting 7.3% growth, or 9.1% on an FX-neutral basis. Mibanco stood out with double-digit expansion, lifting its loans by 12.4% year over year and reinforcing Credicorp’s push in micro and small-business lending.

Improved Asset Quality and Coverage

Asset quality indicators continued to move in the right direction, as the NPL ratio improved to 4.3%, now better than pre-2023 levels, and NPL coverage climbed to 113.8%. The consolidated cost of risk settled at a low 1.3%, with BCP at 0.8% and Mibanco showing a marked improvement as vintage risk eased.

Margin and Core Income Expansion

Earnings were supported by a stronger margin and higher core income, with net interest income rising 10.9% year over year and consolidated NIM reaching 6.6% in the quarter. Other core revenues also surged, as fee income grew 15.6%, FX gains jumped 30.6%, and risk-adjusted NIM advanced toward about 5.8%.

Digital and Innovation Momentum

Digital platform Yape continued to scale aggressively, reaching 16.4 million monthly active users, equivalent to around 82% of Peru’s economically active population. Monetization is accelerating, with revenue per user up 65% year over year and Yape now contributing 17% of group fee income and 8% of risk-adjusted revenues.

Operational and Segment Profitability

Across segments, profitability stayed very strong, with BCP delivering a striking 30.5% ROE supported by a record 5.5% risk-adjusted NIM and an 11.1% drop in NPL volumes. Mibanco reported ROE of 21.7% with a high 14.9% NIM, while Grupo Pacifico generated an 18.9% ROE and organic net income growth of 11% year over year.

Deposit Mix Improvement and Funding Advantage

Funding costs trended lower as the group deepened its low-cost deposit base, which reached 63.9% of total funding by quarter-end. Management underlined that this mix shift compressed the funding cost by about 31 basis points year over year, giving Credicorp a tangible competitive advantage in pricing and margins.

Capital Returns and Solvency

Strong solvency allowed Credicorp to announce a record ordinary dividend of PEN 50 per share, signaling confidence in the sustainability of earnings. At the same time, management stressed that capital discipline remains central, balancing shareholder returns with ample capacity to fund ongoing growth and innovation.

Progress Toward Innovation Revenue Targets

Innovation initiatives are increasingly material to the group’s P&L, with the innovation portfolio contributing 9% of risk-adjusted revenues this quarter. This places Credicorp within striking distance of its 10% contribution target for 2026, indicating that digital ventures are transitioning from investment phase to meaningful monetization.

Operational Efficiency Within Guidance

Despite elevated spending on technology and strategic projects, the consolidated efficiency ratio stayed within guidance at 45.8%, with BCP at a lean 38.6% and Mibanco at 49.2%. Management acknowledged some near-term pressure from innovation costs but argued that efficiency remains under control relative to the growth opportunity.

Macro and Political Uncertainty

The backdrop is far from risk-free, with Credicorp pointing to geopolitical tensions and upcoming presidential elections in Peru as sources of volatility. While the bank still sees 2026 GDP growth around 3.5%, recent data suggest activity closer to 3.2% and the balance of risks skewed slightly to the downside.

Inflation and Monetary Conditions

Peru’s annual inflation ticked up to 4.0% in April, the highest rate in more than two years, driven mainly by transport, energy and food. This dynamic may keep monetary policy tighter for longer than previously anticipated, with potential implications for credit demand and funding costs.

One-off Drivers Behind Asset Quality

Management cautioned that part of the quarter’s unusually strong asset-quality performance was driven by temporary factors, including pension fund withdrawals, profit-sharing in mining and specific wholesale recoveries. As these one-offs fade, the cost of risk is expected to drift higher from the current low levels.

Rising Operating Expenses and Innovation Spend

Operating expenses climbed 13.1% year over year at the consolidated level, with BCP’s costs up 15.1% as digital and innovation projects scaled. Spending tied to Yape, Tenpo and Culqi surged about 40% and represented the bulk of disruptive expenses, putting short-term pressure on the efficiency profile.

Insurance Underwriting Pressure

Insurance operations faced some headwinds, as underwriting results declined 9.1% year over year due to softer P&C premiums and inflation-driven claim costs in Life. Adjusting for inflation effects, underwriting would have grown roughly 4%, but management still anticipates a high single-digit decline versus last year due to base effects.

Climate and Weather Risk

Weather-related risks are back on the radar, with El Niño and coastal El Niño already affecting agricultural output, including the anchovy season. Executives warned that a moderate-to-strong event could trim Peru’s GDP by around 1 percentage point, adding another layer of uncertainty to the macro outlook.

Wholesale Volatility and Provisioning Noise

Provisioning in the wholesale portfolio remained volatile, swinging from an unusually high 0.5% cost of risk last quarter to a slightly negative 0.1% this quarter on irregular recoveries. Management stressed that investors should expect some earnings noise from these reversals, even if underlying credit trends remain sound.

Regional Headwinds

Outside Peru, Credicorp operates in a mixed regional environment, with growth in Chile slowing early in the year and Bolivia dealing with challenging macro conditions despite the group’s relative outperformance. In Colombia, policy uncertainty and inflation pressures persist, keeping management cautious on risk-taking in those markets.

Forward-Looking Guidance and Outlook

Management reiterated a constructive yet cautious guidance, keeping total loan growth around 8.5% and expecting NIM between 6.4% and 6.7% with risk-adjusted NIM within the current range. ROE guidance stays at about 19.5% for 2026 despite Q1’s 21.1% print, while cost of risk should normalize upward and innovation revenues are on track to reach 10% of risk-adjusted revenues by year-end.

Credicorp’s earnings call painted a picture of a franchise firing on most cylinders, combining record profitability, strong capital returns and a rapidly scaling digital ecosystem. Investors were reminded, however, that macro, inflation and weather risks could introduce volatility, making the bank’s disciplined risk management and funding strength key assets in the quarters ahead.