Credicorp’s Digital Engine and Resilient ROE Offer a Margin of Safety in a Volatile World

In an era of geopolitical tension and macroeconomic uncertainty, Credicorp (NYSE:BAP) stands out as a fortress of financial resilience, its Q1 2025 results underscoring a compelling blend of profitability, digital innovation, and defensive attributes. With a Return on Equity (ROE) of 20.3% and a Net Interest Margin (NIM) of 6.2%—both near decade highs—the Peruvian banking giant is delivering results that far exceed its conservative guidance. Yet its stock price, despite hitting an all-time high, remains attractively priced relative to its earnings power and dividend yield. For investors seeking stability in a stormy market, Credicorp offers a rare combination of offensive growth and defensive safety.

ROE and NIM Resilience: A Foundation of Financial Strength

Credicorp’s Q1 2025 results highlight its mastery of capital efficiency. Its core ROE (excluding one-off gains) reached 18.4%, well above its 10-year average of 16.2%, while its Net Interest Margin (NIM) of 6.2% defied the downward pressure of declining interest rates. This resilience stems from its robust deposit franchise, which now accounts for 41.3% of low-cost funding, shielding margins even as rates fall.

The company’s Universal Banking division (BCP), which contributes 80% of profits, delivered a staggering 24.7% ROE, up from 20.1% in Q1 2024. This performance is underpinned by improving asset quality, with NPL ratios dropping to 5.1% for Credicorp and a coverage ratio of 107.4%, signaling a clean balance sheet. Meanwhile, its microfinance arm Mibanco, despite higher NPLs at 6.4%, continues to generate a 13.9% NIM, reflecting the high margins inherent in serving underserved markets.

Yape: The Digital Engine Driving Scalable Fee Income

Credicorp’s most transformative asset is its digital platform Yape, which now boasts 14 million monthly active users (MAU)—a 34% increase since 2022—and is nearing breakeven faster than expected. Yape’s $4.1 million in monthly revenue per MAU (versus $4.0 million in expenses) highlights its path to profitability, with multi-installment loans expected to dominate its lending portfolio by year-end.

Crucially, Yape’s fee income now contributes 4.8% of Credicorp’s total risk-adjusted revenues, up from 3.9% in 2024, and its usage per user (36 transactions/month) suggests untapped potential. As Peru’s digital payments market expands—driven by a young, tech-savvy population—Yape’s network effects and cross-selling opportunities (e.g., insurance, SME lending) could supercharge fee income, a far more stable revenue stream than interest-sensitive loans.

Valuation: A Stock at All-Time Highs, but Still Cheap

Despite hitting an all-time high of $208.52 on May 15, 2025, Credicorp’s valuation remains compelling. With a 4.74% dividend yield—among the highest in Latin American banks—and a Price-to-Book (P/B) ratio of 1.5x, the stock trades at a discount to its 5-year average of 1.8x.

The $9.29 dividend per share (in USD) translates to a 4.4% yield at current prices, offering a robust return even in a stagnant market. Meanwhile, Credicorp’s 2025 EPS of $6.09 (U.S. dollars) and forecasted 18% EPS growth imply a forward P/E of just 10x, far below global peers like JPMorgan (13x) or Itaú (12x).

Addressing the Risks: Overpriced or Overblown?

Credicorp’s management has cited risks such as Peru’s upcoming 2026 elections, global trade wars, and a potential 100 basis point rate cut, which could shrink NIM by 17 basis points. Yet these risks are already priced into the stock.

• Political Risk: While Peru’s political landscape is volatile, Credicorp’s dominance (25% of Peru’s banking sector) and diversification into Chile, Colombia, and Bolivia reduce country-specific exposure.
• Interest Rate Risk: BCP’s deposit franchise (84% of liabilities) provides a natural hedge, as falling rates benefit borrowers without eroding margins.
• NPL Risks: The 107.4% coverage ratio and falling cost of risk (1.6% YoY) suggest asset quality is strengthening, not weakening.

Conclusion: A Margin of Safety in a Digital Bank with Global Ambitions

Credicorp’s 20.3% ROE, 14 million Yape users, and $4.74 dividend yield form a compelling case for investors seeking both growth and safety. The stock’s valuation remains reasonable, even at all-time highs, given its earnings momentum and scalable digital platform. With Peru’s economy rebounding (3.9% GDP growth in Q1 2025) and Yape’s user base expanding, the upside potential outweighs the risks of political or macroeconomic turbulence.

For income-seeking investors, the dividend yield alone justifies a position, while growth investors can benefit from Yape’s untapped revenue streams. Credicorp is not just a play on Peru’s recovery—it is a testament to how digital innovation and financial discipline can thrive in a world of uncertainty. Act now, before the market fully recognizes this.