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    BAP
    Earnings call· Jun 2025(Q2 FY25)

    CREDICORP LTD BAP

    Aug 15, 2025 Source

    Executive summary

    Credicorp Q2 FY25 — Strong ROE, Digital Growth, and Upward Guidance Revision

    Credicorp delivered a solid Q2 FY25, driven by an improving Peruvian macro environment, robust digital platform growth led by Yape, and disciplined risk management. The company raised its full-year and long-term ROE guidance, reflecting confidence in its diversified business model and accelerating innovation. While a significant payment to SUNAT impacted current-year capital return plans, management remains focused on sustainable, higher-quality growth through enhanced fee generation and strategic digital investments.

    Highlights

    5

    • ROE reached 20.7% in Q2 FY25, supported by solid operating performance and disciplined risk management.

    • Risk-adjusted NIM hit a record 5.4%, a 104 basis points increase year-over-year.

    • Yape, the digital wallet, now serves nearly 15 million monthly active users, equivalent to 75% of Peru's economically active population.

    • Full-year ROE guidance increased to approximately 19%, including a 50 basis point boost from extraordinary income.

    • Long-term sustainable ROE outlook revised upward from 18% to around 19.5%.

    Concerns

    3

    • Payment of PEN 1.6 billion in alleged income tax and associated interest to SUNAT, impacting cash flow at the Credicorp level and precluding extraordinary dividends this year.

    • Temporary increase in Investment Management operating expenses due to a low base in Q1, leading to a 6% decline in net income QoQ.

    • Reported loans dropped 4.1% due to the revaluation of Bolivia's balance sheet and a depreciation in BCP's dollar portfolio following an appreciation of the Peruvian sol, though underlying loan growth was 2.6% FX-neutral.

    Guidance & targets

    15
    CategoryTargetConfidence
    ROE
    approximately 19%
    high materiality
    High
    Long-term ROE
    around 19.5%
    high materiality
    High
    Peru GDP growth
    3.2%
    medium materiality
    High
    Peru Domestic demand growth
    around 4.5%
    medium materiality
    High
    Innovation portfolio contribution to risk-adjusted revenues
    10%
    medium materiality
    High
    Yape monthly active users
    16.5 million
    medium materiality
    High
    Loan book growth (end-of-period balances)
    around 6.5%
    high materiality
    High
    Loan book growth (average daily balances)
    around 3%
    medium materiality
    High
    NIM
    upper end of our guidance of between 6.2% to 6.5%
    high materiality
    High
    Cost of risk
    1.8% to 2.2%
    high materiality
    High
    Risk-adjusted NIM
    between 5% and 5.2%
    high materiality
    High
    Efficiency ratio
    maintain our guidance range for 2025
    medium materiality
    High
    Fee income growth
    low double digits
    medium materiality
    High
    Insurance underwriting results
    remain solid and relatively stable compared to 2024
    medium materiality
    High
    Extraordinary dividends
    do not anticipate issuing extraordinary dividends this year
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Universal Banking (BCP)
    Strong ROE reflects resilient margins, income diversification, and low cost of risk, including a 2 percentage points impact from a significant gain on investment portfolio. Growth driven by mortgages and consumer loans in Retail Banking. NPLs contracted across all segments. Operating expenses grew due to variable compensation and IT expenses.
    Total loans (quarter-end balances) QoQ: +1.4%Total loans (FX-neutral) QoQ: +2.5%Retail Banking loans growth: +2%Wholesale Banking loans growth: +0.8%NIM: 6%NPL volumes fell: 2.2%Provisions contracted: 4.8%Cost of risk: 1.2%Risk-adjusted NIM: 5.2%Total loans (quarter-end balances) YoY: relatively stableRetail Banking loans growth (FX-neutral): +2.6%Wholesale Banking loans growth (FX-neutral): +2.6%Efficiency ratio (H1 FY25): 38%Relevant gain on securities: PEN 106 million
    		———ROE of 30.9%
    Microfinance (Mibanco)
    Profitability rose due to rebound in loan disbursements, strengthened risk management, and effective interest rate strategies. NPL ratio fell for the fourth consecutive quarter. NIM rose to a peak due to shift towards small ticket, higher-yield loans. Mibanco Colombia reported 11.1% profitability.
    Loans (quarter-end balances) QoQ: +2.1%NPL ratio: 6.1%NIM: 14.4%Cost of risk: 5.4%Risk-adjusted NIM: 10.3%Cost of risk YoY: -217 bpsEfficiency (H1 FY25): 52.4%H1 FY25 contribution to ROE: 15.1%Mibanco Colombia profitability: 11.1%
    		———Profitability: 16.3%
    Insurance & Pensions (Grupo Pacifico)
    Strong underwriting results supported by solid operational dynamics in P&C and Life businesses. Net income growth QoQ driven by decrease in insurance service expenses in Life business. Net income growth YoY due to full consolidation of corporate health insurance and medical services operations.
    Net income QoQ: +23%Insurance underwriting results QoQ: +27%Net income YoY: +16%
    		———ROE: 21.1%
    Investment Management and Advisory
    Profitability resilient. Strong results from treasury performance, improved capital markets activity, and Wealth Management AUM growth. Net income decline QoQ due to temporary increase in operating expenses from a low base in Q1. Net income decline YoY due to absence of one-off income from discontinued corporate finance business.
    Net income QoQ: -6%AUMs in U.S. dollars: +6%Net income YoY: -20%
    		———ROE: 15.5%

    Operational metrics

    38
    Risk-adjusted revenues from innovation portfolio
    6.2%
    Q2 FY25

    Keeping on track toward 10% target for 2026.

    Efficiency ratio
    44.2%
    Q2 FY25

    Within expected range, highlighting scalability of digital investments and disciplined cost control.

    Risk-adjusted NIM
    5.4%
    Q2 FY25

    Aided by improved asset quality and low-cost funding structure.

    Demand and saving accounts share of deposits
    40.6%
    Q2 FY25

    Reflecting digital strategy and client trust.

    Credicorp's total assets contraction
    2.8%
    Q2 FY25

    Accounting contraction due to revaluation of Bolivia's balance sheet using a more market reflective exchange rate.

    Net interest income growth
    4.2%
    YoY

    Spurred by contraction in interest expenses after interest rates fell and low-cost deposits expanded.

    Other core income growth
    8.1%
    YoY

    Fueled by fee income through Yape and core transactional activities and by gains on FX transactions.

    Core income growth
    5.3%
    YoY

    Recorded a 5.3% year-over-year increase, combining net interest income and other core income.

    Fee income growth
    8.2%
    YoY

    Boosted by transactional activity at Yape and BCP.

    Gains on FX transactions growth
    7.9%
    YoY

    Through higher volumes at BCP.

    Insurance underwriting results growth
    11.2%
    YoY

    Reflecting a stronger insurance service results in the Life business.

    Cost-to-income ratio
    44.9%
    H1 FY25

    Stood within guidance.

    Funding base from low-cost deposits
    57.2%
    Q2 FY25

    Low-cost deposits expanded.

    ROE impact from BCP investment portfolio gain
    120 bps
    Q2 FY25

    Positive impact related to a relevant gain in BCP's investment portfolio.

    ROE impact from Banmedica transaction
    50 bps
    FY25

    Estimated impact by year-end, included in full-year ROE guidance.

    Recurring ROE
    20%
    H1 FY25

    Adjusted for Banmedica transaction.

    Interest-earning asset yield increase
    21 bps
    QoQ

    Due to a shift in the interest-earning asset mix.

    Funding cost increase
    2 bps
    QoQ

    Due to a more expensive deposit mix.

    Interest-earning asset yield decrease
    27 bps
    YoY

    Driven by market interest rate dynamics and decrease in loans share of asset structure.

    Funding cost reduction
    42 bps
    YoY

    Driven by drop in market interest rates and lower cost funding structure.

    NPL coverage ratio
    109.5%
    Q2 FY25

    Rose this quarter.

    Operating expenses growth
    11.4%
    YoY

    Fueled primarily by core businesses at BCP and investments in innovation portfolio.

    Innovation portfolio expenses growth
    15%
    H1 FY25

    Led by Yape, Tenpo, and Culqi.

    Yape monthly active users
    15 million
    Q2 FY25

    Equivalent to 75% of Peru's economically active population.

    Yape quarterly user growth
    over 0.5 million
    QoQ

    Consistent growth, on track to meet 2026 target of 16.5 million MAU.

    Yape average monthly transactions per user
    54.5
    monthly

    Robust user engagement.

    Yape functionalities used per user
    2.7
    per user

    Signaling deeper adoption of the app's ecosystem.

    Yape revenue per monthly active user
    PEN 6.5
    monthly

    Monetization and operating leverage continued to strengthen.

    Yape expenses per monthly active user
    PEN 4.4
    monthly

    As an increasingly larger share of users contributed to revenue generation.

    Yape lending revenue share
    18%
    Q2 FY25

    Now serving 3 million users, emerged as the fastest-growing segment.

    Yape revenue growth
    doubled
    YoY

    To represent 5.5% of Credicorp's risk-adjusted revenue.

    Yape loans to first-time formal financial system recipients
    nearly 30%
    Q2 FY25

    Advancing financial inclusion.

    Cash usage in transactions (Peru)
    64%down from 95% in 2013
    Q2 FY25

    Major driver for decline has been digital wallets like Yape.

    BCP branch network reduction
    1/3from ~450 to 300 branches
    last 4-5 years

    Bulk of reduction already done, not planning to be as aggressive going forward.

    Yape net income contribution (current)
    $25 million
    annualized

    Confirmed by management as correct.

    Yape lending NPLs
    low teens
    annualized

    Risk-adjusted NIM is very good.

    Yape mono installment loans duration
    less than 30 days
    current

    Bulk of current disbursements are mono installment.

    Yape multi-installment vs mono-installment loan balance split
    50-50
    current

    Expected to shift dramatically in the upcoming years.

    Industry KPIs

    12
    MetricValueDetails
    Loans6.5%%
    Deposits40.6%%
    Rotce ROE20.7%%
    Capital returns—
    Fee income lines8.2%%
    Allowance reserves109.5%%
    Net interest income4.2%%
    Net interest margin6.4%%
    Net charge offs npls5%%
    Total operating expenses11.4%%
    Provision for credit losses1.6%%
    Efficiency ratio operating leverage44.2%%

    Product announcements

    1
    ProductTypeDetails
    Yape SME loanslaunch

    Deals & partnerships

    1
    BanmedicaExtraordinary gain from transaction

    Extraordinary gain from the Banmedica transaction in Q1 FY25, contributing to the full-year ROE guidance.

    Risks & headwinds

    3
    SUNAT tax dispute and paymentOngoing, legal proceedings may take 1-3 years at tax court or an additional 5 years through judiciary.

    PEN 1.6 billion (or PEN 1.7 billion) in alleged income tax and associated interest paid

    Mitigation: Company believes case has strong legal and technical grounds, prepared to defend position, confident in favorable resolution. Payment does not affect operations of subsidiaries, but impacts Credicorp-level cash flow, precluding extraordinary dividends this year.

    Global uncertainty

    Persistent uncertainty surrounding President Trump's announcement continues to contribute to the unpredictability of the external environment.

    Mitigation: Company believes the fundamentals are in place to support higher profitability despite global uncertainties.

    Copper tariffs announced by President Trump

    50% tariffs

    Mitigation: Direct impact on Peru expected to be very limited as copper input materials are not subject to the tariffs.

    What to watch in Q3 FY25

    5

    Cost of risk trajectory

    H2 FY25
    Currentvery low cost of risk, actually below our initial expectations (H1 FY25)
    Targetincrease the cost of risk based on the strategy that we are outlining (H2 FY25)

    Why it matters

    Management expects cost of risk to rise in H2 due to increased origination in higher-yielding, higher-risk retail portfolios, which is key to their risk-adjusted NIM strategy.

    So what we are anticipating in the second part of the year is to have the reflection of this improved origination in higher-yielding risk that are going to change the mix. And this trend should continue in the following years.

    Q&A highlights

    5

    Asked for elaboration on the drivers behind the improved cost of risk guidance, especially with accelerated retail origination, and the long-term structural outlook for cost of risk.

    Cesar Rios explained that prior measures and restricted origination led to a very low cost of risk in H1. The anticipated increase in H2 reflects successful origination in higher-yielding, higher-risk portfolios, which will improve overall profitability despite a higher cost of risk. Gianfranco Ferrari emphasized managing based on risk-adjusted NIM, not just cost of risk.

    “Last year, we were -- we take several measures to assure that all our portfolios are under the risk appetite. So in addition to improvement in capabilities, we restricted the origination in certain segments. As a result of all of these effects, we have had during the first part of this year, a very low cost of risk, actually below our initial expectations.”

    asked by Brian Flores · answered by César Ríos

    2 min read5 chapters

    Detailed Narrative

    01

    Macroeconomic Environment and Outlook

    Peru's economy is experiencing strong tailwinds with GDP expected to grow 3.2% and domestic demand around 4.5% in FY25, driven by high commodity prices, recovering real wages, and expanding formal employment. Private investments, particularly from small and midsized businesses, are increasing, and investment sentiment has reached a historical high. Inflation is below 2%, and the Central Bank has slowed rate cuts, approaching a neutral level. Chile's Central Bank cut rates to 4.75% in its last meeting, while Colombia's inflation slowed to 4.9% YoY in July.

    02

    SUNAT Tax Dispute and Financial Impact

    Credicorp has paid PEN 1.6 billion (or PEN 1.7 billion) in alleged income tax and associated interest to SUNAT, though the company maintains strong legal grounds for a favorable resolution. This payment, while not affecting P&L, impacts cash flow at the Credicorp level, leading to the decision not to issue extraordinary dividends this year. The company is prepared to defend its position through tax court or judiciary, a process that could extend for several years.

    03

    Digital Transformation and Innovation

    Credicorp is strategically shifting towards a more balanced model with fee generation and scalable innovation as critical as lending. The innovation portfolio contributed 6.2% of risk-adjusted revenues in Q2, targeting 10% by 2026. Yape, the digital wallet, is a key driver, serving nearly 15 million monthly active users and becoming a top 5 contributor to fee income in Peru. The company is also building next-generation capabilities, embedding AI and data management to enhance customer experience, operational efficiency, and strategic decision-making. Approximately 90-100% of digital transformation investments have been registered as expenses, front-loading costs.

    04

    Loan Portfolio and Risk Management

    The company is accelerating retail origination, particularly in mortgages, consumer loans, and microfinance, with a focus on higher-yielding segments. This strategy is expected to increase the cost of risk in the second half of the year but improve overall profitability through enhanced risk-adjusted NIM. The NPL ratio stood at 5% firm-wide, with BCP's NPL volumes falling 2.2% and Mibanco's NPL ratio falling for the fourth consecutive quarter to 6.1%.

    05

    Branch Network Evolution

    Credicorp has significantly reduced its physical branch network at BCP by approximately one-third over the last 4-5 years, from close to 450 to 300 branches. The role of branches has evolved from transactional to educational and commercial, a trend expected to continue, though the pace of reduction may slow. The bulk of the reduction has already been completed.

    AI-generated summary of the company’s earnings call. Not investment advice.