Credicorp Ltd. Q1 2015 Financial Summary
Business Context and Reporting Period
This Form 6-K reports the unaudited consolidated results for Credicorp Ltd. (NYSE: BAP) for the first quarter of 2015 (ended March 31, 2015). The results are prepared under IFRS standards and reported in Nuevos Soles (S/.). The period reflects the consolidation of Mibanco and Edyficar, the restructuring of Grupo Pacifico, and the establishment of a joint venture with Banmedica.
Key Financial Metrics
| Metric | 1Q 2015 | 4Q 2014 | 1Q 2014 |
|---|---|---|---|
| Net Income (Attributed to Credicorp) | S/. 804.7 million | S/. 495.6 million | S/. 662.1 million |
| Net Interest Income (NII) | S/. 1,790.8 million | S/. 1,711.4 million | S/. 1,401.7 million |
| Non-Financial Income | S/. 1,099.3 million | S/. 865.9 million | S/. 884.4 million |
| Operating Expenses | S/. 1,295.9 million | S/. 1,524.6 million | S/. 1,128.2 million |
| Net Interest Margin (NIM) | 5.75% | 5.66% | 5.20% |
| Return on Average Equity (ROAE) | 22.8% | 14.5% | 22.3% |
| Return on Average Assets (ROAA) | 2.3% | 1.5% | 2.2% |
| Efficiency Ratio | 40.7% | 43.3% | 40.8% |
| Cost of Risk | 2.46% | 2.19% | 2.07% |
| Total Loans | S/. 81,620.7 million | S/. 79,889.9 million | S/. 70,447.2 million |
| Total Deposits | S/. 79,142.9 million | S/. 77,160.5 million | S/. 74,533.5 million |
| Non-Performing Loan (NPL) Ratio | 3.40% | 3.33% | 3.27% |
| Loan-to-Deposit Ratio | 102.8% | 103.4% | 94.2% |
Material Changes vs. Prior Period
- Profitability Surge: Net income attributed to Credicorp increased 62.4% quarter-over-quarter (QoQ) and 21.5% year-over-year (YoY). This was driven by a 26.9% QoQ increase in non-financial income and a 4.6% QoQ increase in net interest income.
- Non-Recurring Income: Results included S/. 107 million (after tax) in extraordinary income from the joint venture agreement between Grupo Pacifico and Banmedica. Excluding this item, ROAE was 19.9% and ROAA was 2.0%.
- Loan Growth: Total loans grew 2.2% QoQ and 15.9% YoY. Real growth was 0.5% QoQ and 10.7% YoY. Local currency (LC) loans grew 6.0% QoQ, increasing their share of the portfolio to 53.4%.
- Asset Quality: The Cost of Risk increased to 2.46% from 2.19% in 4Q14 due to a more conservative provisioning approach. The NPL ratio rose slightly to 3.40%, primarily due to maturity cycles in refinanced loans and specific cases in the SME and Mortgage segments. Coverage ratios remained stable at 164.5% for Past Due Loans (PDL) and 124.8% for NPLs.
- Efficiency: Operating expenses decreased 15.0% QoQ, improving the efficiency ratio to 40.7%. This reduction was largely due to the absence of non-recurring expenses recorded in 4Q14 (related to Mibanco/Edyficar integration) and seasonal administrative cost reductions.
Guidance, Outlook, and Risks
- Economic Outlook: Management revised the 2015 GDP growth forecast downward from 4.0% to 3.5%, citing weak global performance (specifically China), falling export prices, and a significant drop in sub-national public investment (-51% YoY).
- Monetary Policy: The Central Bank of Peru (BCRP) maintained the reference rate at 3.25% but shifted its stance from dovish to neutral due to inflationary pressures and exchange rate volatility. The exchange rate is projected to reach S/. 3.20–3.25 per USD by year-end.
- Key Risks:
- El Niño Phenomenon: Potential impact on inflation and the fishing/agriculture sectors.
- Public Investment: Low budget execution at the sub-national level.
- Exchange Rate: Depreciation pressures could impact loan dollarization and inflation.
- Political: Pre-electoral year risks (elections in April 2016).
- Strategic Initiatives: Continued focus on loan dedollarization (targeting a 10% reduction by year-end) and the integration of Mibanco and Edyficar to improve synergies.
Investor Verification Checklist
- Non-Recurring Items: Verify the sustainability of the S/. 107 million gain from the Grupo Pacifico/Banmedica joint venture and its impact on core profitability metrics.
- Asset Quality Trends: Monitor the NPL ratio in the SME-Pyme and Mortgage segments, which showed deterioration due to refinancing maturities and specific large client cases.
- Cost of Risk Trajectory: Assess whether the increase in cost of risk (2.46%) is a temporary conservative measure or indicative of broader economic stress.
- Loan Dedollarization: Confirm the progress of shifting the loan portfolio to local currency (currently 53.4%) amidst exchange rate volatility.
- Public Investment Execution: Track the recovery of sub-national public spending, which is a key driver for the revised 2015 GDP forecast.