Credicorp's Q3 2025 Earnings Call: Contradictions in Cost of Risk, Loan Growth, and ROE Expectations

Guidance:

• GDP for 2025 expected at 3.4%.
• Loan book to grow ~6.5% YoY (end-period balances; excludes Bolivia accounting restatement).
• NIM to remain within guidance range.
• Cost of risk expected to close near the lower end (~1.8%).
• Risk‑adjusted NIM to move toward the upper end of its guidance range.
• Efficiency to remain within guidance; medium‑term efficiency target ~42% over 3–4 years.
• Fee income and insurance underwriting to grow low double digits.
• Full‑year ROE guidance maintained ~19%; medium‑term ROE target 19.5%.

Business Commentary:

• Strong Financial Performance and ROE:
• Credicorp reported a ROE of 19.6% for the third quarter, with a healthy operating posture and a prudent risk posture.

• The strong financial performance was driven by robust performance across core businesses and consistent delivery on strategic priorities, such as the scalability and monetization of digital ecosystems.

• Economic Recovery and Loan Growth:

• The macroeconomic environment showed signs of recovery, with Peru's GDP growth projected at 3.4% for 2025.

• FX-neutral loan growth accelerated to 7% year over year, driven by retail banking and microfinance, supported by record terms of trade and improving business conditions.

• Digital Platform Expansion and Revenue Contribution:

• Yape, Credicorp's digital platform, contributed 6.6% of risk-adjusted revenue in Q3, aiming to expand its role in the company's strategic growth engine.
• 

• The revenue per monthly active user reached PEN 7.4, with expenses per user at PEN 5, reflecting improved profitability and operational scalability.

• Microfinance Segment Success:

• Mibanco's profitability rose to 18.8%, with loan disbursements reaching an all-time high, supported by strong risk management and economic recovery.
• The loan portfolio quality improved, with the NPL ratio falling for the fifth consecutive quarter, reflecting enhanced origination standards and strengthened collections.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management described "another strong quarter" with ROE of 19.6%, NIM up to 6.6% and record risk‑adjusted NIM of 5.5%, efficiency within guidance (~45.7%), reaffirmed guidance and medium‑term targets (ROE 19.5%, efficiency ~42%), and highlighted growth in digital monetization and loan origination — signaling a positive tone.

Q&A:

• Question from Ernesto Gabalondo (Bank of America): You’re tracking much better asset quality and cost of risk than expected; is the guidance (around 2% / lower end ~1.8%) too conservative and how should we think about cost of risk in 2026? Also, how should we think about OpEx growth split between core and disruptive initiatives next year?
  Response: Management: Cost of risk expected to finish near the lower end (~1.8%) due to improved risk management and a stronger economy but will rise gradually next year as the bank shifts into higher‑yield segments; OpEx will continue to fund strategic investments—core OpEx growth should slow next year while innovation spending remains at similar levels to scale monetization.

• Question from Brian Flores (Citi): With elections in April 2026, should we expect a Q1 slowdown and will ROE converge faster to the 19.5% medium‑term target?
  Response: Management: Historical patterns show a modest Q1 election‑related slowdown, but they expect next year’s Q1 to be milder than prior cycles; they expect strong credit growth in 2026 and will provide formal guidance on ROE in the next call.

• Question from Renato Meloni (Autonomous Research): Will you reach this year’s loan growth guidance and is it FX‑adjusted? Also, how do you reconcile NIM expansion with improving cost of risk?
  Response: Management: Loan‑growth guidance is nominal (it factors the Bolivia accounting restatement) and is achievable given recent retail momentum; NIM expansion reflects a mix shift to higher‑yield retail while cost of risk has fallen due to improving vintages even as newly originated, higher‑yield vintages carry higher risk.

• Question from Yuri Rocha Fernandes (JPMorgan): Given recent political change in Bolivia, do you expect a tailwind there going forward? Also, what should we expect on capital returns/payouts?
  Response: Management: Bolivia is viewed as a positive optionality under a more pro‑market government but remains small today; on capital returns, ordinary dividends should increase and payout ratios are likely to rise to the high‑60s (with scope for extraordinary dividends depending on transactions).

• Question from Lindsey Shima (Goldman Sachs): How should we weigh the eighth pension withdrawal impacts (asset quality vs loan growth) and any effects on Prima? Also, update on Yape unit economics as you scale multi‑installment loans?
  Response: Management: The withdrawal (~PEN25bn; ~PEN10bn likely retained by Credicorp) will boost local funding and liquidity but reduce loan growth by ~0.5% next year and lower fee income (~10% impact); Yape’s lending (including multi‑installment) is profitable and scaling, but detailed unit economics are not disclosed yet.

• Question from Daniel Voss (Safra): Mibanco has improved asset quality and ROE—should we expect an acceleration to mid‑teens loan growth in 2026?
  Response: Management: Mibanco’s new vintages are materially stronger, NPLs have contracted and profitability improved; management is confident they can accelerate growth supported by higher‑yield lending and plans to expand transactional fee income to reduce funding costs.

• Question from Carlos Gomez-Lopez (HSBC): With election cycles across the region and commodity tailwinds, are you more inclined to invest rather than distribute? Also, update on rate sensitivity to a 100bp move in soles and dollars.
  Response: Management: Capital will be retained to finance growth or targeted M&A if needed; otherwise excess capital will be returned as dividends—no material deals currently; theoretical sensitivity to a 100bp parallel rate decrease is ~17 basis points (mostly from the dollar book), though NIM has shown resilience in practice.

• Question from Andres Soto (Santander): You expect Yape revenues to triple by 2028—could Yape represent ~15% of earnings by then and materially lift Credicorp’s ROE?
  Response: Management: Yape is expected to scale substantially and could contribute meaningfully (management targets ~15% of earnings contribution by 2028), which would provide upside to medium‑term ROE, though execution and political risks warrant conservative near‑term guidance.

• Question from Alonso Acuna Aramburú (BTG): Can you provide color on the Yape SME pilot—how does it differ from Mibanco and is there client overlap or direct sales reps?
  Response: Management: Yape’s SME pilot is a low‑touch, transaction‑driven model (no human reps) that is cheaper and complementary to Mibanco’s proven, higher‑touch model; early vintages are performing well and management does not see material cannibalization currently.

Contradiction Point 1

Cost of Risk Expectations

It involves differing expectations for cost of risk, which is a critical indicator for the company's financial performance and risk management strategies.

Is the current cost of risk guidance too conservative considering the lower-than-expected numbers? - Ernesto Gabalondo (Bank of America)

2025Q3: Results are better than expected, driven by improved risk management and a robust economy. Cost of risk is expected to be at the lower end, around 1.8% this year. - Gianfranco Ferrari(CEO)

What are the long-term cost of risk expectations? - Lindsay Shima (Goldman Sachs)

2025Q2: We do expect as we move through the year, the cost of risk will rise, partially because we do have higher-risk portfolios. - Alejandro Perez-Reyes(CFO)

Contradiction Point 2

Loan Growth Expectations

It involves changes in financial forecasts, specifically regarding loan growth expectations, which are critical for the company's revenue growth.

Will political uncertainty in Peru slow loan growth in Q1 2026? - Brian Flores (Citi)

2025Q3: Loan growth of 12.5% for the year is expected, driven by retail and microfinance. - Alejandro Pérez Reyes(CFO)

Could you detail loan growth expectations? - Lindsay Shima (Goldman Sachs)

2025Q2: Credit Corp's loan book grew by 12.7% in the quarter. For the year, we expect an increase of 6.5% in end-of-period loan balances. - Alejandro Perez-Reyes(CFO)

Contradiction Point 3

Approach to Cost of Risk

It involves differing expectations regarding the impact of cost of risk on the company's financial performance, which affects investor perceptions and risk management strategies.

Is the current cost of risk guidance too conservative? How should cost of risk be considered as high-yield segments are pursued in 2026? - Ernesto Gabalondo (Bank of America)

2025Q3: Cost of risk is expected to be at the lower end, around 1.8% this year. Next year, as we target higher-yield segments, the cost of risk will gradually increase. - Gianfranco Ferrari(CEO)

How can you restart originations and achieve growth next year while maintaining asset quality and provision levels under tighter credit underwriting standards? - Renato Meloni (Autonomous Research)

2024Q4: We expect to operate at an average cost of risk for the full year of 2.1%. - César Ríos(CRO)

Contradiction Point 4

Loan Growth Expectations

It involves differing expectations regarding the company's loan growth, which is a critical indicator of the company's financial health and growth potential.

Will loan growth decelerate in Q1 2026 due to political uncertainty in Peru? Will ROE reach 19.5% sooner? - Brian Flores (Citi)

2025Q3: We also expect loan growth for the fourth quarter to be modest, around 1% to 2%. - Alejandro Pérez Reyes(CFO)

Does the PEN 259 million provision fully cover potential losses from the Sartor case, and are additional provisions expected? - Sergey Dubin (HO)

2024Q4: We expect loan growth at 3.5% in average daily balances, equivalent to 6% growth in quarter end balances. - Alejandro Pérez Reyes(CFO)

Contradiction Point 5

ROE Expectations

It involves differing expectations regarding the company's return on equity, which is a key financial metric for investors.

Will loan growth decelerate in Q1 2026 due to political uncertainty in Peru? Will ROE reach 19.5% sooner than expected? - Brian Flores (Citi)

2025Q3: Our sustainable ROE expectation is around 18%. By 2026, we anticipate the disruptive initiatives to generate a positive impact on ROE, enabling us to achieve this target. - Gianfranco Ferrari(CEO)

What is the sustainable ROE outlook for the next 2 years and the timeline for OpEx growth normalization? - Ernesto María Gabilondo Márquez (Bank of America)

2024Q4: We are expecting 2025 to be a transition year, but we are going to grow more robustly starting in 2026, and we expect to operate at an ROE of around 18%. - Gianfranco Ferrari(CEO)