Credicorp's Q3 2025 Earnings Call: Contradictions in Cost of Risk, Loan Growth, and Yape's Revenue Outlook

Guidance:

• GDP for 2025 expected at 3.4%.
• Loan book to grow ~6.5% YoY (end-of-period balances, excludes Bolivia revaluation assumptions).
• NIM expected to remain within guidance (risk-adjusted NIM targeted toward upper end).
• Cost of risk to finish near the lower end of guidance (~1.8%), with a modest rise expected in Q4.
• Efficiency ratio to remain within guidance (mid-term target ~42%).
• Fee income and insurance underwriting growth to be low double-digits; full-year ROE guidance ~19%.

Business Commentary:

* Economic and Political Environment: - Peru's economic growth is projected at 3.4% for 2025, up from 3% previously, driven by favorable terms of trade and consumption boost from pension fund withdrawals. - The macroeconomic environment remains stable with key indicators pointing to a recovery across the region, supported by strong export prices and domestic demand growth.

• Loan and Asset Quality Improvement:
• FX-neutral loan growth accelerated to 7% year-over-year, driven by retail segments, primarily mortgages, and consumer loans.

• Asset quality showed a notable improvement with a net non-performing loan (NPL) ratio standing at 4.8%, a significant decline from previous years.

• Innovation and Digital Ecosystem Contribution:

• Yape's monthly active users reached 15.5 million, accounting for 82% of the economically active population, with users conducting 58.5 transactions per month on average.

• Yape contributed 6.6% of Credicorp's risk-adjusted revenue in the quarter, supporting the strategy to deepen financial inclusion and expand monetization.

• Profitability and Earnings Growth:

• Credicorp reported an ROE of 19.6%, anchored in healthy operations and a proven risk posture, supported by a risk-adjusted NIM of 5.5%.
• Earnings were driven by strong performance in core businesses, fee-based income growth, and improvements in the insurance underwriting result.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management repeatedly characterized the quarter as "another strong quarter," highlighted ROE of 19.6% and record risk-adjusted NIM (5.5%), and affirmed guidance (loan growth ~6.5%, NIM within range, full-year ROE ~19%), while noting resilient macro and improving asset quality.

Q&A:

• Question from Ernesto María Gabilondo Márquez (Bank of America): Given NPLs and cost of risk are much better than expected and you expect cost of risk around the lower end (~1.8%), is that guidance conservative and how should we think about cost of risk into 2026 as you shift to higher-yield segments?
  Response: Cost of risk guidance for the year is around the lower end (1.8%); we expect cost of risk to gradually increase next year as we intentionally expand into higher-yield (and higher-risk) segments, but risk-adjusted NIM should rise.

• Question from Ernesto María Gabilondo Márquez (Bank of America): OpEx growth was double-digit this quarter—how should we think about OpEx growth next year and the split between core vs. disruptive initiatives like Yape?
  Response: OpEx growth this year was planned and within guidance; going forward core-business expense growth should slow, while innovation/disruptive investment will stay at similar levels to drive future revenue and reach medium-term efficiency targets.

• Question from Brian Flores (Citi): With elections in April, should we expect a Q1 deceleration and will ROE converge to the 19.5% target sooner or later?
  Response: There may be a modest first-quarter slowdown historically associated with elections, but we expect next year's first quarter not to be as weak as prior cycles and remain constructive; formal guidance will be provided on the next call.

• Question from Brian Flores (Citi): Can Yape reach a double-digit contribution by 2026?
  Response: Yes—management expects Yape's contribution can reach double-digit levels by 2026.

• Question from Renato Meloni (Autonomous Research): Is your loan growth guidance nominal or FX-adjusted and do you expect to achieve it? Also, how to reconcile NIM expansion with improving vintages and rising yields?
  Response: Loan growth guidance is nominal and incorporates Bolivia restatement assumptions; we expect to achieve it given current retail momentum. NIM expansion reflects a mix shift to higher-yield retail while improved origination vintages lower cost of risk in traditional portfolios even as newly originated higher-yield segments carry higher cost of risk.

• Question from Yuri Fernandes (JPMorgan): With political change in Bolivia, could that market shift from headwind to tailwind for Credicorp?
  Response: Early signals from the new Bolivian government are pro-market and positive; Bolivia remains a small but potentially valuable optionality for Credicorp going forward.

• Question from Yuri Fernandes (JPMorgan): What should we expect on payout and dividends going forward given strong capital accumulation?
  Response: Payout this year was 58%; management expects increasing ordinary dividends and possibly extraordinary dividends, with ordinary payout ratios likely rising into the high-60s, subject to transactions or capital needs.

• Question from Lindsey Marie Shema (Goldman Sachs): Weigh the impacts of the eighth pension fund withdrawal—better asset quality vs slower loan growth and effects on fee income (Prima)?
  Response: The withdrawal (~PEN 25bn, Credicorp retain ~PEN 10bn) is positive for local funding but will reduce loan growth by ~0.5ppt next year and could reduce fee income materially next year (management cited ~10% impact to fee income under current assumptions).

• Question from Lindsey Marie Shema (Goldman Sachs): Update on Yape unit economics as multi-installment loans scale?
  Response: Multi-installment lending at Yape is profitable today versus the rates charged, represents ~20% of Yape's lending income and will scale, though management did not provide detailed unit-economics per loan.

• Question from Daniel Vaz (Safra): Given Mibanco's improving ROE, NIM and asset quality, should we expect accelerated loan growth into low- or mid-teens in 2026?
  Response: Management is optimistic: Mibanco's vintages are improving, lending and fee-transaction initiatives should support stronger growth and market-share gains, enabling higher growth rates going forward.

• Question from Carlos Gomez-Lopez (HSBC): With opportunities across the region, are you inclined to invest more (retain capital) versus distribute dividends, and any geographic focus?
  Response: We will retain capital needed to finance growth and potential inorganic opportunities; otherwise excess will be paid as dividends—management is positive on opportunities especially tied to commodity-driven recoveries in Bolivia, Chile and Peru but has no material M&A to announce.

• Question from Carlos Gomez-Lopez (HSBC): Update on sensitivity of NIM to a 100bp rate move in USD and soles?
  Response: Theoretical sensitivity to a 100bp parallel rate decrease is ~17bps on NIM (≈15bps from dollar book, ≈2bps from soles), but actual experience showed NIM resilience and growth despite large policy rate declines.

• Question from Andres Soto (Santander): If Yape revenues triple by 2028, will Yape represent ~15% of Credicorp's earnings and drive ROE above 19.5%?
  Response: Management expects Yape to represent ~15% of Credicorp's net result in ~3 years, which would be accretive and could push ROE upside, though management remains conservative given execution and political volatility.

• Question from Alonso Aramburú (BTG): Color on Yape's SME pilot—how does it differ from Mibanco and client targeting?
  Response: Yape's SME approach is a digital, low-touch model (no human reps), cheaper and distinct from Mibanco's higher-touch model; it's early stage, initial vintages look promising and near-term cannibalization is not a concern.

• Question from Marcelo Mizrahi (Bradesco BBI): Are recent lower life and Crediseguro loss ratios sustainable or exceptional?
  Response: The quarter benefited from exceptional items (e.g., pension plan restatements) that improved loss ratios; management expects a reversion toward more normalized (higher) levels over time, though medium/long-term bancassurance expansion should structurally improve metrics.

Contradiction Point 1

Cost of Risk and Loan Growth Guidance

It directly impacts expectations regarding the financial health and risk profile of the loan portfolio, which are crucial for investors and stakeholders.

Given that NPLs and cost of risk have improved this year, is the 2% cost of risk guidance too conservative? - Ernesto María Gabilondo Márquez (Bank of America)

20251114-2025 Q3: Cost of risk is expected to be around 1.8%. Next year, the shift towards higher-yield segments is anticipated, but risk-adjusted NIM is also expected to improve. - César Ríos(CFO)

Can you discuss the cost of risk improvements and long-term expectations for lower cost of risk? - Brian Flores (Citibank)

2025Q2: In Q1, we had low cost of risk due to tight origination standards. We're now originating higher-yielding, higher-risk portfolios, which will increase cost of risk but enhance profitability. - Unknown Executive(CFO)

Contradiction Point 2

Loan Growth and Segment Performance

It involves changes in financial forecasts and strategic focus, which are critical for investors and stakeholders to understand the company's trajectory.

Will loan growth guidance be reached and what is the NIM outlook? - Renato Meloni (Autonomous Research)

20251114-2025 Q3: Loan growth guidance is achievable, driven by retail segments. The NIM outlook benefits from a higher yield interest-earning asset mix, despite potential risks from new segments. - Alejandro Perez-Reyes(CFO), César Ríos(CFO)

Can you explain the change in loan growth guidance from the start of the year? - Fernando Maloney (Autonomous Research)

2025Q2: Loan growth expectations are strong, with retail and consumer loans driving the increase. Economic recovery and improved origination capabilities are key factors in the growth outlook. - Alejandro Perez-Reyes(CFO)

Contradiction Point 3

Loan Growth Expectations and Impact of Economic Indicators

It involves differing expectations for loan growth and the impact of economic indicators, which are crucial for forecasting financial performance and investor confidence.

Will loan growth guidance be met and what is the outlook for NIM? - Renato Meloni (Autonomous Research)

20251114-2025 Q3: Loan growth guidance is achievable, driven by retail segments. The NIM outlook benefits from a higher yield interest-earning asset mix, despite potential risks from new segments. - Alejandro Perez-Reyes(CFO), Cesar Ríos(CRO)

How has lower provisioning driven the increase in risk-adjusted NIM, and what is the loan growth outlook? - Yuri Fernandes (JPMorgan)

2025Q1: Loan growth in the first quarter was robust in wholesale banking and short-term loans, with expectations for retail segments and microfinance to accelerate in the coming quarters. - Gianfranco Piero Ferrari de Las Casas(CEO)

Contradiction Point 4

Yape's Contribution and Revenue Expectations

It reflects different expectations regarding Yape's contribution to earnings and its growth trajectory, which are essential for assessing the company's strategic direction and financial outlook.

Will Yape's revenue contribution significantly increase by 2028? - Andres Soto (Santander)

20251114-2025 Q3: Yape is expected to contribute 15% of Credicorp's earnings by 2028. This growth aligns with the company's strategic objectives. - Alejandro Perez-Reyes(CFO)

Can you discuss Yape's unit economics with multi-installment loans? - Lindsey Marie Shema (Goldman Sachs)

2025Q1: The growth of Yape was strong with a 65% increase in active users and +25% growth in transaction value. - Gianfranco Piero Ferrari de Las Casas(CEO)

Contradiction Point 5

Cost of Risk and Loan Growth Expectations

It involves changes in financial forecasts, specifically regarding cost of risk and loan growth expectations, which are critical indicators for investors.

Is the 2% cost of risk guidance too conservative given this year's better-than-expected performance? - Ernesto María Gabilondo Márquez (Bank of America)

20251114-2025 Q3: Cost of risk is expected to be around 1.8%. Next year, the shift towards higher-yield segments is anticipated, but risk-adjusted NIM is also expected to improve. - Cesar Ríos(CRO)

When do you expect OpEx growth to normalize from disruptive initiatives? How should we assess ROE over the next two years? - Ernesto María Gabilondo Márquez (Bank of America)

2024Q4: We expect to achieve a sustainable ROE of 18% by 2026. Disruptive initiatives are expected to have a positive impact on ROE. - Gianfranco Piero Ferrari de Las Casas(CEO)