Credicorp’s Resilient ROE and Digital Dominance Defy Macroheadwinds in 2025

Peru’s leading financial services group is proving that disciplined execution and digital innovation can turn macroeconomic headwinds into opportunities. Here’s why investors should consider it a top-tier Latin American play.

Strengths: A Fortress Balance Sheet and Digital Moats

Credicorp (NYSE: BAP) has emerged as a standout performer in a volatile year, thanks to its operational discipline and strategic focus on digital transformation. Key metrics highlight its resilience:

• ROE Resilience: The company delivered a 20.3% ROE in Q1 2025, including one-off gains from a joint venture acquisition. Excluding these, its core ROE was 18.4%, well above regional peers. This underscores strong capital efficiency, even amid a slowdown in loan growth.
• Yape’s Explosive Growth: The company’s digital wallet, Yape, now boasts 14.5 million monthly active users (MAU) after adding 0.5 million in Q1. This platform is a dual-edged asset: it drives fee income (up 16% YoY) and serves as a gateway to expand into SME lending—a strategic shift to diversify revenue streams.
• Improved Asset Quality: Non-performing loans (NPLs) fell to 5.1% in Q1, down 112 basis points from a year earlier. A 107.4% coverage ratio and a 1.6% cost of risk reflect prudent risk management, even as Peru’s economy rebounded to 3.9% GDP growth in the quarter.

Risks: Navigating Political and Economic Crosscurrents

Credicorp is not immune to macroeconomic and geopolitical risks:

• Peru’s Political Uncertainty: Upcoming elections could introduce policy volatility, particularly around fiscal reforms and mining royalties. The company’s exposure to Peru’s economy—where it holds 60% of its loans—leaves it vulnerable to shifts in political priorities.
• Global Trade Tensions: Geopolitical conflicts, such as U.S.-China trade disputes, could dampen regional export demand. Credicorp’s exposure to sectors like mining and manufacturing amplifies this risk.
• Declining Interest Rates: A 17 basis point sensitivity to interest rate shifts means falling rates could compress net interest margins (NIMs), which already face pressure from asset yield declines. Loan growth, at just 1.5% YoY, lags economic recovery, compounding this challenge.

Catalysts: Digital Diversification and Peru’s Economic Tailwind

Investors should focus on Credicorp’s ability to capitalize on near-term opportunities:

• Digital Expansion: Yape is pivoting from consumer lending to multi-installment SME loans, which could dominate its outstanding balances by year-end. This shift aligns with Peru’s small business sector, which accounts for 60% of employment, offering scalable growth.
• Peru’s Economic Rebound: The 3.9% GDP growth in Q1 2025 signals a pickup in domestic demand, which should eventually translate into stronger loan growth. Credicorp’s universal banking model—spanning retail, wholesale, and microfinance—positions it to capture this recovery.
• Capital Returns: The PEN40 per share dividend reaffirms management’s confidence in liquidity and profitability, while its modernization of core systems reduces long-term costs.

The Case for a Buy: Discipline and Digital Moats Overcome Near-Term Risks

While Credicorp faces valid risks, its fundamentals argue for a long-term hold. The 18.4% core ROE and Yape’s fee income growth (now 16% of total revenue) create a self-reinforcing cycle: strong capital returns allow reinvestment in digital infrastructure, which in turn drives diversification and resilience.

Even if Peru’s political climate stirs volatility, the company’s 107% coverage ratio and $5.2 billion in deposits (up 9.7% YoY) act as buffers. Meanwhile, the 3.9% GDP rebound suggests that loan growth will accelerate as businesses rebuild inventories and households spend.

Final Call: Credicorp’s blend of operational excellence and digital innovation positions it as a top-tier financial services play in Latin America. While near-term risks warrant caution, the stock’s 1.5x price-to-book ratio and dividend yield of 4.5% offer a compelling risk-reward ratio for investors with a 12- to 18-month horizon.

Act now while macro fears suppress valuation—a perfect setup for disciplined long-term investors.