Credicorp (BAP): Navigating Legal Challenges While Delivering Exceptional ROE and Digital Growth in Q2 2025

Credicorp Ltd. (NYSE: BAP), a titan of Latin American financial services, has once again demonstrated its ability to balance regulatory turbulence with operational excellence. In Q2 2025, the Peruvian-based holding company not only navigated a high-stakes tax dispute with Peru's Superintendencia Nacional de Aduanas y de Administración Tributaria (SUNAT) but also delivered a staggering 20.7% return on equity (ROE), outpacing its own full-year guidance of 19%. This dual achievement underscores Credicorp's long-term resilience as a diversified financial leader in a region where regulatory uncertainty and digital disruption often collide.

Legal Headwinds: A Temporary Cloud Over a Resilient Business

On June 27, 2025, SUNAT issued tax assessment and fine resolutions totaling S/1.6 billion (Peruvian soles) against Credicorp. By August 14, the company announced the formal cancellation of these demands, a development that resolved immediate liquidity concerns and clarified its balance sheet. While Credicorp emphasized that the cancellation did not alter its legal stance—reaffirming its intent to challenge the dispute through all available channels—the resolution removed a significant overhang.

This episode highlights the regulatory risks inherent in operating in emerging markets, where tax authorities often test the boundaries of corporate compliance. However, Credicorp's swift resolution of the dispute and its refusal to concede on legal merits reflect a disciplined approach to governance. For investors, the key takeaway is that Credicorp's core operations remain unscathed, with no material provisions booked against the contingency. The company's ability to manage such challenges without compromising its financial discipline is a testament to its institutional strength.

Digital Transformation: The Engine Behind Exceptional ROE

Credicorp's Q2 2025 results were driven by its aggressive digital transformation, particularly through Yape, its mobile-first digital wallet. With 15 million monthly active users—equivalent to 75% of Peru's economically active population—Yape has become a linchpin of the company's strategy. The platform's lending services now serve 3 million users, contributing 5.5% of Credicorp's risk-adjusted revenue for the quarter.

The scalability of Yape's model is evident in its revenue contribution: 18% of the platform's total income in Q2 2025 came from non-loan sources, such as transaction fees and embedded finance services. This shift toward a fee-driven, high-frequency transaction model reduces reliance on traditional lending cycles and insulates the company from interest rate volatility. CEO Gianfranco Ferrari has dubbed this approach “redefining value creation,” and the numbers back it up.

Credicorp's ROE of 20.7% in Q2 2025 was fueled by a combination of digital growth, disciplined risk management, and a record net interest margin (NIM) of 5.44%. The company's non-performing loan (NPL) ratio of 5% and a cost of risk of 1.6% further underscore its operational rigor. These metrics position Credicorp as a rare entity in the sector: a high-ROE player with robust asset quality and a clear path to sustainable growth.

Strategic Vision: Balancing Innovation and Prudence

Credicorp's long-term strategy hinges on three pillars: digital innovation, financial inclusion, and capital efficiency. The company plans to increase Yape's contribution to risk-adjusted revenue to 10% by 2026, a target achievable given its current trajectory. Meanwhile, its upcoming digital bank, Tempo, is poised to expand high-impact services, leveraging AI and behavioral scoring to serve underserved segments of the Peruvian economy.

The company's efficiency ratio of 44.2% in Q2 2025—among the lowest in the sector—demonstrates the cost advantages of its digital-first approach. Strategic investments in embedded finance and ecosystem-based distribution are accelerating financial inclusion, a market Credicorp is uniquely positioned to dominate. For investors, the combination of high ROE, low NPLs, and a scalable digital ecosystem suggests a business model that is both resilient and adaptable.

Investment Implications: A Buy for the Long-Term

While regulatory headwinds remain a potential risk, Credicorp's Q2 2025 performance reinforces its status as a top-tier financial services player in Latin America. The company's ability to navigate legal challenges without sacrificing operational momentum, coupled with its digital innovation, positions it to outperform peers in both stable and volatile environments.

For long-term investors, Credicorp offers a compelling mix of high ROE, disciplined capital management, and a clear vision for digital-led growth. The recent tax dispute, though significant, is a temporary setback in a broader narrative of resilience. With a market capitalization of $20.03 billion and a 27-year streak of uninterrupted dividend payments, Credicorp remains a cornerstone holding for portfolios seeking exposure to the region's most dynamic financial sector.

In a world where digital transformation and regulatory complexity are the new normal, Credicorp's Q2 2025 results are not just a quarterly win—they are a blueprint for sustainable value creation in the 21st century.