Why Credicorp (BAP) Is the Prime Play on Peru’s Economic Rebound and Latin America’s Capital Markets Boom

Peru’s economy is roaring back to life, with GDP growth hitting 3.9% year-over-year in Q1 2025, and Credicorp Ltd. (NYSE: BAP) stands at the epicenter of this revival. The financial powerhouse—dominant in Peru’s banking, insurance, and pensions sectors—is now leveraging its scale to capitalize on the resurgence of Latin America’s capital markets. Despite limited Q1 2025 earnings details, the company’s fundamentals scream value: a 20.3% ROE, strong capital ratios, and a diversified revenue engine that’s outperforming peers. For investors seeking exposure to Peru’s growth and the untapped potential of regional investment banking, BAP is a buy.

Market Dominance: Peru’s Financial Monolith

Credicorp is the undisputed leader in Peru’s financial services landscape. Its Universal Banking division (BCP) commands a 23% market share of loans, while its microfinance arm, Mibanco, leads in serving unbanked populations. The company also dominates pensions (Prima AFP) and insurance (Grupo Pacifico), with 14 million monthly active users on its Yape digital platform. This vertical integration creates a moat against competition, allowing cross-selling and economies of scale. Even in Q1 2025, with loan growth of 1.5% YoY, Credicorp’s NPL ratio dropped to 5.1%—a testament to its disciplined risk management.

The Growth Catalyst: Latin America’s Capital Markets Boom

While Peru’s recovery is central to Credicorp’s story, the company’s expansion into regional investment banking is the wildcard. Latin America’s capital markets are undergoing a renaissance, fueled by corporate deleveraging, infrastructure spending, and rising IPO activity. Credicorp’s Credicorp Capital division is positioned to capture this upside, with assets under management (AUM) growing 19.7% YoY to $46.6 billion. The company’s penetration in countries like Colombia and Chile—where capital markets remain underpenetrated—offers high-margin growth opportunities.

The earnings call highlighted that 16% YoY growth in fee income and a 17.9% rise in insurance underwriting results are already signaling momentum. With Peru’s GDP forecast to grow 3.0% in 2025, and regional inflation cooling, this is just the start.

Robust Fundamentals, Undervalued Multiples

Critics might point to the “limited earnings details” in Q1 2025, but the data that is available paints a compelling picture:
- Strong Capital Ratios: BCP’s CET1 ratio stands at 11.62%, comfortably above regulatory minima.
- Resilient Margins: Net interest margin (NIM) held steady at 6.2%, even as rates fell, thanks to a 41.3% low-cost deposit base.
- Dividend Power: A S/40 per share payout reflects confidence in capital strength, with a dividend yield of 3.2%.

The stock trades at a P/B of 1.2x, well below its five-year average of 1.6x. Meanwhile, its ROE (18.4% excluding one-off gains) outperforms regional peers like Itaú Unibanco (14.2%) and BBVA (11.5%).

Why Buy Now?

1. Peru’s Recovery Is Just Beginning: With inflation cooling and fiscal reforms gaining traction, Peru’s real GDP growth could accelerate beyond 3% in coming years, boosting loan demand and fee income.
2. Untapped Regional Markets: Credicorp’s 5.4% contribution from innovation businesses (target: 10% by 2026) signals its ability to capitalize on digital and cross-border opportunities.
3. Resilience in Volatility: The company’s diversified revenue streams (banking, insurance, investment banking) shield it from sector-specific shocks.

Risks to Consider

• Interest Rate Cycles: Falling rates in Peru could pressure NIMs, though Credicorp’s deposit franchise mitigates this.
• Regional Political Risks: Trade tensions or commodity price swings (e.g., copper) could impact corporate clients.

Final Take: A Compelling Emerging Market Play

Credicorp’s dominance in Peru, coupled with its strategic pivot to high-growth investment banking, positions it to thrive as Latin America’s capital markets mature. The stock’s undervaluation and 18.4% core ROE make it a rare blend of stability and upside. For investors ready to bet on Peru’s comeback and the region’s capital markets boom, BAP is a buy at current levels.

Action Item: Initiate a position in BAP with a 12-18 month horizon, targeting a 1.5x P/B multiple recovery. The catalysts—Peru’s GDP growth, AUM expansion, and digital innovation—are already in motion.