Credicorp ((BAP)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Credicorp’s recent earnings call conveyed a positive sentiment, highlighting the company’s robust financial performance and digital innovation achievements. Despite facing challenges such as tax disputes and slower loan growth, Credicorp reported a record Return on Equity (ROE) and continued to make strides in digital transformation.
Strong Macroeconomic Environment
Peru’s economic landscape appears promising, with GDP projected to grow by 3.2% this year. Domestic demand is expected to rise by 4.5%, while inflation remains below 2%. These factors contribute to a favorable economic climate, with real wages recovering and formal employment on the rise.
Record ROE Performance
Credicorp’s second-quarter results showcased an impressive ROE of 20.7%. This achievement was driven by strong operating performance and disciplined risk management, underscoring the company’s financial strength and strategic execution.
Innovation and Digital Growth
The digital platform Yape has become a significant contributor to Credicorp’s success, serving nearly 15 million monthly active users. It ranks among the top five fee income generators in the Peruvian financial system, highlighting the company’s commitment to digital innovation.
Improved Credit Dynamics
Credicorp reported a record risk-adjusted Net Interest Margin (NIM) of 5.4%, reflecting improved asset quality and a cost-effective funding structure. The Non-Performing Loan (NPL) ratio stood at 5%, with a cost of risk of 1.6%, indicating healthy credit dynamics.
SUNAT Tax Dispute
A notable challenge for Credicorp is the ongoing tax dispute with SUNAT, which has demanded approximately PEN 1.6 billion in alleged unpaid income tax and interest. This issue has impacted the company’s cash flow at the corporate level.
Loan Growth Challenges
Credicorp faced a 4.1% decline in loans measured in quarter-end balances, attributed to the revaluation of Bolivia’s balance sheet and depreciation in BCP’s dollar portfolio. These factors have posed challenges to loan growth.
High Efficiency Ratio
The efficiency ratio was reported at 44.9%, slightly above expectations due to continued investments in digital initiatives and increased operating expenses. This reflects Credicorp’s strategic focus on enhancing operational efficiency.
Forward-Looking Guidance
Credicorp provided optimistic guidance for fiscal year 2025, projecting an ROE of approximately 19%, with a longer-term outlook of 19.5%. The company expects a loan book growth of around 6.5% year-over-year, supported by a robust economic outlook in Peru. Investments in digital platforms like Yape are anticipated to continue contributing significantly to revenues.
In conclusion, Credicorp’s earnings call highlighted a strong financial performance and strategic focus on digital innovation, despite facing some challenges. The company’s record ROE and improved credit dynamics reflect its robust operational capabilities. Looking ahead, Credicorp remains optimistic about its growth prospects, supported by a favorable economic environment in Peru.