BAP - Credicorp Ltd. (BAP) Q4 2023 Earnings Call Transcript

2024-02-09 15:34:03 ET

Credicorp Ltd. (BAP)

Q4 2023 Earnings Conference Call

February 09, 2024 9:30 AM ET

Company Participants

Milagros Ciguenas – Investor Relations

Gianfranco Ferrari – Chief Executive Officer

Cesar Rios – Chief Financial Officer

Reynaldo Llosa – Chief Risk Officer

Carlos Otello – Chief Financial Officer-Mibank

Conference Call Participants

Ernesto Gabilondo – Bank of America

Olavo Arthuzo – UBS

Sergey Dubin – HL

Carlos Gomez – HSBC

Beatriz Abreu – Goldman Sachs

Yuri Fernandes – JPMorgan

Andres Soto – Santander

Presentation

Operator

Good morning everyone. I would like to welcome all of you to the Credicorp Limited Fourth Quarter 2023 Conference Call. A slide presentation will accompany today's webcast, which is available in the Investors section of Credicorp's website. Today's conference call is being recorded. As a reminder, all participants will be in a listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. [Operator Instructions]

Now it is my pleasure to turn the conference call over to Credicorp's IRO, Milagros Ciguenas. You may begin.

Milagros Ciguenas

Thank you and good morning, everyone. Speaking on today's call will be Gianfranco Ferrari, our Chief Executive Officer; and Cesar Rios, our Chief Financial Officer. Participating in the Q&A session will also be Francesca Raffo, Chief Innovation Officer; Reynaldo Llosa, Chief Risk Officer; Diego Cavero, Head of Universal Banking; Cesar Rivera, Head of Insurance and Pension; and Carlos Otello, CFO at Mibank. Before we proceed, I would like to make the following Safe Harbor statement. Today's call will contain forward-looking statements, which are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties. And I refer you to the forward-looking statements sections of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new changes events – new or change events or circumstances.

Gianfranco Ferrari will start the call commenting on the highlights of our 2023 results and the milestones achieved by our main businesses, followed by Cesar Rios, who will comment on the macro environment, our financial performance, and provide our 2024 guidance. Gianfranco, please go ahead.

Gianfranco Ferrari

Thank you, Milagros. Good morning, everyone. Thank you for joining us. We met market expectations for the fourth quarter and achieved resilient full-year results in the face of one of the most challenging environments of the last 25 years, excluding the pandemic. Despite the challenge faced in 2023, Peru's current prospects stand considerably stronger than they did just 12 months ago. At the start of 2023, we were navigating disruptive protests and enduring political stability. The first quarter also had an inflation rate of 8% and a high reference rate of 7.75%. Additionally, the country faced Cyclone Yaku and braced for the projected impact of a severe El Niño Phenomenon for this summer. However, as the year ended, Peru demonstrated its inherent resilience by effectively managing inflation, maintaining low level of public debt, and sustaining high levels of international reserves.

The current stable yet fragile political environment improving macro with inflation down to 3.2% and the reference rate at 6.25%, as well as lower probabilities for a severe El Niño, starkly contrasts with the conditions at the beginning of 2023. At Credicorp., we have strategically built a diverse portfolio of businesses characterized by a robust brand recognition and strong customer loyalty. Our strength is further bolstered by a solid capital base and a prudently managed loan portfolio. Our digital capabilities have been key to enhancing our transactional and funding advantages, enabling us to respond swiftly in volatile environments. As an example, at the onset of the year, when we foresaw a challenging trade cycle in 2023, we quickly reassessed our risk appetite and adjusted the pricing of our portfolio accordingly. By providing payment facilities to our clients when they needed it the most, we also fortified our client relationships.

We delivered a full year ROE of 15.8%, which includes a substantial charge in the fourth quarter attributed to expected losses linked to the El Niño Phenomenon. This result was underpinned by the strength of our increasing NII. We maintained a resilient risk-adjusted NIMs achieved through disciplined interest rate pass throughs in the first half of the year. Additionally, we prepared our balance sheet for the declining interest rate cycle by reducing the duration of our liabilities and increasing that of our investment portfolio. Having strengthened our transactional value proposition, we secured the sustainability of our funding advantage. Finally, we leveraged our cost-effective digital platforms to accelerate growth in the retail segment....

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