• Net Income: Record high of $1,523 million for the third quarter.
• Dividend Payout: Total dividend payout of 75.3% to date, including a special dividend of $11 per share.
• Return on Equity (ROE): 18.5% for the third quarter; 17.7% year-to-date.
• Net Interest Income: Increased by 3.5% quarter over quarter.
• Net Interest Margin (NIM): Increased 10 basis points to 6.4%.
• Cost of Risk: Decreased to 2.4%.
• NPL Ratio: Dropped 12 basis points to 5.9%.
• Loan Growth: Contraction of 1.2% in average daily balances and 3% in quarter-end balances.
• Efficiency Ratio: Improved to 44.6% for the first nine months of 2024.
• GDP Growth Forecast: Maintained at 3% for 2024 and 2.8% for 2025.

• Warning! GuruFocus has detected 3 Warning Signs with AAUCF.

Release Date: November 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Credicorp Ltd (NYSE:BAP) reported a record high net income of $1,523 million for the third quarter, driven by strategic initiatives and an improving macroeconomic environment.
• The company distributed a special dividend, achieving a total dividend payout of 75.3% to date.
• Credicorp Ltd (NYSE:BAP) maintained a strong ROE of 18.5% for the quarter, supported by universal banking and insurance businesses.
• The company is witnessing significant benefits from investments in innovation and digital capabilities, enhancing customer relationships and promoting financial inclusion.
• Credicorp Ltd (NYSE:BAP) received provisional approval to create Tempo Bank Chile, marking a significant milestone in its expansion into the Chilean financial market.

Negative Points

• Despite strong financial performance, Credicorp Ltd (NYSE:BAP) faced negative loan growth and an elevated cost of risk, indicating challenges in the lending environment.
• Non-interest income contracted due to regulatory changes impacting foreign transfer services, particularly affecting BCP Bolivia.
• The insurance underwriting results fell by 7.5%, reflecting less favorable reinsurance outcomes in the P&C business.
• The company revised its guidance for total loan growth to around 0% due to low demand for long-term financing and cautious origination in retail banking.
• There is uncertainty regarding the impact of geopolitical tensions and the results of the US elections, which could introduce volatility into the market.

Q & A Highlights

Q: How do you see the cost of risk evolving in 2025 given the strategy to increase exposure to the retail segment? A: Alejandro Perez-Reyes, Chief Operating Officer, mentioned that the cost of risk is expected to continue decreasing in 2025, although not returning to pre-pandemic levels due to a change in portfolio mix. The expectation is for a lower cost of risk next year compared to 2024, even without returning any provisions like this year.

Q: Which subsidiaries have an ROE below Credicorp's overall ROE, and what is the strategy to improve their performance? A: Gianfranco Ferrari, CEO, stated that the microfinance business is underperforming but is expected to improve next year. BC P Bolivia is also underperforming due to its market environment. The strategy includes focusing on innovation and efficiency to improve ROE.

Q: Is the impact of excess liquidity from pension fund withdrawals short-lived, and how does it affect growth perspectives for next year? A: Alejandro Perez-Reyes explained that while the pension fund withdrawals are a short-lived event, the overall improvement in employment and economic conditions should support continued improvement in asset quality and growth in 2025.

Q: Given the strong ROE performance this year, is there potential upside to the 17% ROE guidance for 2024? A: Alejandro Perez-Reyes noted that while there is seasonality in the fourth quarter, they expect to end the year on the upper side of the 17% ROE guidance.

Q: How sensitive is the net interest margin (NIM) to changes in interest rates, particularly with expected rate cuts? A: Alejandro Perez-Reyes indicated that a 100 basis point shift in rates could impact the NIM by about 15 basis points in the first year and 25 basis points cumulatively in the second year. However, they expect to sustain or improve NIM through local funding advantages and portfolio mix adjustments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.