Credicorp Ltd. (NYSE:BAP) NII Increases 18.7%

Credicorp Ltd. (NYSE:BAP), the leading financial services holding company in Peru with presence in Chile, Colombia, Bolivia and Panama, stock fell 3.07% (As on August 12, 11:43:20 AM UTC-4, Source: Google Finance) after the company in the second quarter of FY 22 has reported the Net Income attributable to Credicorp up 60.4% YoY to S/1,122 million, reflecting core income growth and a low level of provisions at BCP, further supported by Mibanco & Pacifico. ROAE of 16.9% in 2Q22 and 17.2% in 1H22. Structural Loans increased 4.5% QoQ (+3.6% FX Neutral) and 13.8% YoY (+14.6% FX Neutral) in average daily balances. Growth was driven by the SME-Pyme and Consumer segments at BCP, and by Mibanco, which reported an uptick in disbursements through alternative channels and an improvement in the productivity of its relationship managers. The Government Program portfolio (GP) represented 10% of the total portfolio in average daily balances (9% in quarter-end balances). Total Deposits at S/147,441 million in 2Q22, relatively unchanged QoQ (-2.0% FX Neutral) and down 1.2% YoY (- 0.5% FX Neutral). This reduction is attributable primarily to a drop in Demand and Savings Deposits, driven by reduced liquidity levels systemwide (due to the amortization of Reactiva loans) and the impact of rising interest rates. Higher rates increase the opportunity cost associated with this type of deposits and has triggered a migration to Time Deposits. Low-cost Deposits decreased 6.1% YoY and accounted for 56.7% of Total Funding.

Moreover, Structural Provisions increased 45.8% QoQ and 0.3% YoY due to the deterioration of macroeconomic outlook and the Structural Cost of Risk stands at 1.08%. The Allowance for Loan Losses represents 5.9% of Structural Loans and NPL Coverage stands at 119.9%, while both ratios continue their downward trend towards prepandemic levels. Core Income increased 15.0% YoY supported by growth of 18.7% in Net Interest Income (NII), 6.7% in Fees and 9.1% in Gains on FX Transactions. Efficiency Ratio of 44.6%, compared to 44.5% in 1Q22 and 43.7% in 2Q21, driven by accelerated investments for digital transformation and innovation initiatives.

Meanwhile, in 2022, investment in disruption is expected to impact ROE by 150pbs (ROE is expected to stand around 17.5% in 2022) and efforts will focus primarily on fortifying the domains that strengthen Credicorp’s leadership in its core businesses. The domains that have been targeted in the first horizon include the digital businesses for Payments, Digital Financing, Neobanks model, Acquiring and Services for SMEs.

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