Credicorp’s Earnings Call Highlights Strong ROE and Growth

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

Credicorp’s recent earnings call painted a largely positive picture, highlighting the company’s strong financial performance and strategic advancements. The sentiment was buoyed by robust returns on equity (ROE), favorable macroeconomic conditions in Peru, and successful investments in digital innovation. Despite some concerns about global trade uncertainties and slower loan growth in specific segments, the overall outlook remains optimistic.

Strong ROE Performance

Credicorp reported an impressive ROE of 20.3% for the first quarter of 2025. Even when excluding extraordinary gains, the ROE stood at 18.4%, surpassing expectations. This strong performance underscores the company’s effective management and strategic initiatives.

Positive Macroeconomic Indicators

Peru’s GDP growth of 3.9% in the first quarter, driven by private spending, lower inflation, and favorable terms of trade, was a key highlight. This positive economic environment is expected to continue, providing a supportive backdrop for Credicorp’s operations.

Loan Growth and Asset Quality

Loan growth was notably strong in wholesale banking short-term loans, and asset quality saw improvements with a cost of risk at a low of 1.6% and an NPL ratio of 5.1%. These metrics reflect Credicorp’s robust risk management and lending strategies.

Digital and Innovation Investment

Credicorp’s investments in digital capabilities and innovation are yielding results, with redesigned client journeys and risk-adjusted revenues from new businesses reaching 5.4%. The company is on track to meet its 10% target by 2026.

Resilient NIM and Deposit Growth

Despite declining interest rates, Credicorp’s net interest margin (NIM) remained resilient at 6.2%. Deposit growth was strong, with low-cost deposits capturing a 41.3% market share, indicating healthy financial stability.

Sustainability Initiatives

Sustainability is deeply embedded in Credicorp’s strategy, with initiatives focused on inclusive finance, financial education, and green loans, aligning with global trends towards sustainable business practices.

Impact of Global Trade Uncertainty

Concerns were raised about global trade uncertainties, including US tariffs, and their potential impact on Peru’s economy. Given Peru’s reliance on external factors, these uncertainties pose a risk to economic stability.

Bolivia Balance Sheet Revaluation

A non-cash equity adjustment of approximately PEN257 million due to the revaluation of Bolivian assets resulted in a 2% contraction in Credicorp’s total assets, reflecting the complexities of operating in diverse markets.

Muted Loan Growth in Some Segments

Despite a positive macroeconomic environment, loan growth in certain retail and microfinance segments was slower than expected, highlighting areas for potential improvement.

Forward-Looking Guidance

Credicorp’s forward-looking guidance remains optimistic, with expectations of continued economic growth in Peru and a structural ROE ambition of 18% by 2026. The company anticipates loan book growth of around 3.5% in average daily balances, driven by improvements in retail and microfinance segments. Despite global uncertainties, Credicorp is confident in its ability to seize growth opportunities.

In summary, Credicorp’s earnings call reflected a strong financial performance and strategic foresight, with positive macroeconomic indicators and successful digital investments driving growth. While challenges such as global trade uncertainties and slower loan growth in specific segments exist, the overall sentiment remains positive, positioning Credicorp well for future success.