BAP

Credicorp Ltd. Financial Summary (Form 6-K)

Business Context and Reporting Period

Credicorp Ltd. (NYSE: BAP), a Bermuda-based financial holding company, reported consolidated results for the quarter and nine months ended September 30, 2004. The company operates primarily through its Peruvian subsidiary, Banco de Crédito del Perú (BCP), along with insurance operations (El Pacífico-Peruano Suiza), investment holding (Atlantic Security Holding), and subsidiaries in Bolivia and Colombia.

Key Financial Metrics

Material Changes vs. Prior Period

• Profit Growth: Consolidated net income for the nine months ended September 2004 increased 68.9% year-over-year to US$95.9 million. Third-quarter net income rose 26.8% to US$32.9 million.
• Loan Quality Improvement: The past-due loan ratio improved significantly from 7.6% in September 2003 to 4.8% in September 2004. Consequently, loan loss provisions dropped from US$23.8 million in 3Q03 to US$9.8 million in 3Q04.
• Revenue Mix: While net interest income declined slightly due to lower margins (5.23% in 3Q04 vs. 5.61% in 3Q03), non-interest income surged 33.5% in the quarter. This was driven by the consolidation of Novasalud EPS (health insurance) following its merger with Pacífico Salud.
• Merger Costs: Merger-related expenses decreased substantially to US$3.7 million for the nine months of 2004, compared to US$17.5 million in the same period of 2003.
• BCP Local Results: Under Peruvian GAAP, BCP's net income for the nine months decreased to US$66.1 million from US$69.4 million in 2003, primarily due to inflation adjustment losses and lower interest margins, despite lower provisions.

Outlook, Risks, and Unusual Items

• Strategic Transaction: On October 26, 2004, Credicorp announced an agreement to sell its equity stake in Banco Tequendama (Colombia) for US$32.0 million, pending regulatory approval.
• Insurance Merger Impact: The merger of Novasalud with Pacífico Salud resulted in significant increases in premiums, claims, and operating expenses in the third quarter as prior period transactions were retroactively registered. The unit is now stabilized with positive operating results.
• Economic Environment:
  • Peru: GDP growth is estimated at 4.3% for 2004. Inflation remains subdued (3.2% for 9M04), and the Nuevo Sol appreciated against the dollar, creating translation losses in local books but benefits for import costs.
  • Bolivia: Moderate economic recovery with GDP growth of 3.3% in 2Q04. Inflation reversed a positive trend to 0.9% in 3Q04.
  • Colombia: Noteworthy recovery with GDP growth of 4.3% in the first half of 2004. The Colombian Peso strengthened during the quarter.
• Risks: Forward-looking statements note risks related to general economic conditions, industry conditions, and operating factors. Specific risks include inflation exposure in local currency accounting and volatility in capital markets affecting managed funds.

Investor Verification Checklist

• Sale of Banco Tequendama: Verify the closing status and final proceeds of the US$32.0 million sale announced in October 2004.
• Loan Quality Sustainability: Monitor the trend of the past-due loan ratio (currently 4.8%) and the adequacy of the 130.8% coverage ratio in the face of economic fluctuations.
• BCP Inflation Adjustments: Review the impact of inflation adjustments and exchange rate movements on BCP's local GAAP results versus consolidated US GAAP results.
• Insurance Integration: Assess the long-term profitability of the Pacífico Salud/Novasalud merger, specifically the combined ratio and claims experience.
• Interest Margin Pressure: Evaluate the trajectory of net interest margins, which have declined from 5.61% (3Q03) to 5.23% (3Q04), amidst an environment of excess liquidity.