Credicorp’s Mixed Performance and Valuation Lead to Hold Rating

In a report released yesterday, Ernesto Gabilondo from Bank of America Securities maintained a Hold rating on Credicorp (BAP – Research Report), with a price target of $207.00.

Ernesto Gabilondo’s rating is based on a combination of factors, including Credicorp’s mixed operating trends and limited upside potential. While the company reported a 6% year-over-year increase in recurring net income, this was offset by lower-than-expected fee income and higher operational expenses. Additionally, the company’s loan growth was flat year-over-year and fell short of expectations, particularly in the SME sectors, although there was better performance in commercial loans and mortgages.
Despite these challenges, Credicorp showed strengths in other areas, such as strong insurance growth and a significant reduction in provision charges, which were well below expectations. The company’s asset quality remained stable, with a consistent loan delinquency ratio and a cost of risk that was lower than the company’s guidance. However, the net interest margin declined due to lower interest on investments. Overall, while Credicorp offers attractive earnings growth, the current valuation already reflects a sustainable return on average equity above the company’s medium-term target, leading to a Hold rating.