Credicorp Ltd. Form 6-K Summary: Material Event (El Niño Impact)
Business Context and Reporting Period
This Form 6-K, dated March 31, 2017, reports a material event regarding the preliminary impact of the El Niño phenomenon (FEN) on Credicorp Ltd.'s operations in Peru. The filing addresses the effects on the Peruvian economy and Credicorp's banking and insurance subsidiaries, specifically BCP, Mibanco, and Grupo Pacifico (PGA).
Key Financial Metrics and Exposure
- Insurance Loss Estimate: Credicorp estimates a maximum loss between US$4 million and US$6 million for its insurance business (Grupo Pacifico), subject to reinsurance caps and the duration/severity of the event.
- Banking Portfolio Exposure: The loan portfolio in affected regions totals approximately S/ 3,900 million (S/ 3,500 million for BCP and S/ 400 million for Mibanco).
- Portfolio Composition: The exposed portfolio consists of 40% SME and micro-finance loans, 31% mortgages, 24% credit cards and consumer loans, and 5% SME-Business loans.
- Macroeconomic Context: The Central Bank of Peru reduced its 2017 real GDP growth estimate from 4.3% to 3.5% due to infrastructure delays and FEN impacts.
Material Changes and Operational Impact
The filing does not report finalized financial results for the period but outlines anticipated operational shifts:
- Loan Origination: BCP and Mibanco have restricted new loan origination in affected areas.
- Debt Rescheduling: The banks have initiated the "Skip Programme," offering clients suspension of payments for up to six months and/or loan term extensions of up to one year without downgrading credit ratings.
- Sector Impact: The agricultural sector (lemon, banana, sugar cane) and commerce/services sectors are expected to be highly affected. The fishing sector impact remains uncertain but is expected to be less severe than in traditional El Niño events.
Guidance, Outlook, and Risks
Management states that quantifying the ultimate impact on debt-service capacity is difficult while the phenomenon is ongoing and will require weeks after the event concludes. The filing contains forward-looking statements regarding the potential impact on financial condition. Key risks include the duration of FEN, the effectiveness of the government's S/ 5,500 million reconstruction plan, and the ability of clients in the commerce and services sectors to recover. Management expects the Skip Programme to help keep losses at a reasonable level.
Investor Verification Checklist
- Verify the final quantified impact on non-performing loans (NPLs) once the case-by-case evaluation of the S/ 3,900 million exposed portfolio is complete.
- Monitor the actual utilization rate of the "Skip Programme" and its effect on future provisioning requirements.
- Track the Central Bank of Peru's subsequent GDP growth revisions and the execution speed of the government's reconstruction plan.
- Confirm the final insurance loss figures for Grupo Pacifico against the preliminary US$4 million to US$6 million estimate.