Seeking Alpha • Feb 13

Credicorp Executing Well, But Macro Risk Remains High

Summary Credicorp's fourth quarter results were better than expected at the pre-provision line, but higher provisioning drove a miss for net income. Management is taking a more conservative stance on credit, noting some signs of weakness in real estate and tourism. Credicorp continues to see growth in its digital businesses, while competitors are getting more aggressive in corporate lending. Peru's political unrest threatens to spill over into the economy, as protests disrupt tourism and mining operations. Credicorp is undervalued on long-term growth of around 10%, but macro issues in Peru are a near-term issue for sentiment. I’ve used the “good house in a difficult neighborhood” analogy before with Credicorp (BAP), and it remains valid today – this Peruvian bank is a very well-run bank and one with above-average growth prospects, but political (and potentially economic) turmoil remains a significant challenge for sentiment and will, at some point, spill over into the operations unless the government of Peru can find a path out of its current crisis. Thus far, the shares have held up alright, declining modestly since my last update. It will take time for Peru to get back to some semblance of normal, but in the meantime two of the country’s main engines of economic growth, mining and tourism, are vulnerable to ongoing social unrest. I do still believe that Credicorp can generate around 10% long-term core earnings growth from here, and that it is undervalued on that basis, but investors considering the shares today should at least go in with their eyes open to the macro risks here. A Good Quarter On A Core Basis, But Higher Provisions Are A Concern Credicorp’s core results were better than expected in the fourth quarter, but there were some warning signs, including slowing loan demand and rising provisions, with management getting more cautious on the economic outlook. Revenue rose 22% year over year and 6% quarter over quarter, with net interest income driving the growth. Net interest income rose about 31% yoy and 8% qoq, beating by around 5% (different third-party services reported different “consensus” numbers for the quarter), with net interest margin up almost 150bp yoy and 42bp qoq to 5.73%. Earning assets fell about 3% sequentially. Fee income declined 3% yoy and 4% qoq, while insurance earnings rose 44% yoy and fell about 7% qoq. Operating expenses rose 11% yoy and about 16% qoq reported. Pre-provision profits rose 37% yoy and fell 3% qoq, beating by about 3%. Provisions, though, were much higher than expected, driving pre-tax profits down 18% qoq (up 1% yoy), missing by about 6% to 9%. Slowing Growth And Rising Non-Performing Loans Overall constant currency structural loan performance wasn’t too bad, rising close to 12% yoy and about 4% qoq, only a modest deceleration from the sequential growth in the third quarter. For the Peruvian operations, though, loans were up less than 1% sequentially versus the 5%-plus growth in the prior quarter, with particularly noticeable slowdowns in business lending. Corporate lending was down about 2% qoq, while small/medium-sized business lending slowed to the low single-digits. Consumer lending growth remains in the low single-digits on a sequential basis, with Mibanco slowing from about 4% qoq growth in the third quarter to less than 3% qoq growth this quarter. Given higher rates (Credicorp’s average loan yield improved 180bp yoy and 50bp qoq to 9.9%) and growing concern about the economy in 2023, it’s not so surprising that loan demand is slowing. At the same time, I think it’s worth monitoring the performance of competitors – BBVA (BBVA) and Bank of Nova Scotia (BNS) (“Scotiabank”) have both been getting more aggressive in going after Credicorp’s nearly 40% market share in corporate lending. I also find Intercorp’s (IFS) efforts on the retail and digital side to be interesting. I’m more concerned at this point by the credit situation. Non-performing loans rose 10% sequentially, with the structural NPL ratio climbing slightly (3bp) to 4.95%. Mibanco’s NPL ratio actually improved meaningfully on a sequential basis, from 6.5% to 5%. Cost of risk jumped 85bp qoq to 2.06%, with Mibanco up 320bp to 5.9%, as management takes a more conservative stance on credit. Management pointed to increased signs of weakness in the corporate business from businesses in the real estate and tourism sectors, and does sound more cautious overall about the business climate in 2023. Political Risk Will Eventually Become Economic Risk Credicorp is doing well with the things it can control. It has maintained strong share in a wide range of lending categories while simultaneously maintaining good risk control and expanding its lending to smaller businesses and microfinance customers. There are a few areas where Credicorp punches below its weight (credit cards, most notably), but competing for more share against Intercorp and Scotiabank may not be worth the risk and cost. Credicorp also continues to leverage its digital efforts. About two-thirds of its customers use the bank’s digital tools for half or more of their transactions, and Yape continues to grow nicely, with a 42% sequential increase in users and an 84% sequential increase in active users. Not only is Credicorp starting to monetize Yape (largely through transactions and marketplace services), it’s expanding its digital offerings on Culqui (its acquiring/POS platform) and moving forward with a new digital bank offering for affluent customers. All of that is great, but there are bigger events underway in Peru. The arrest and impeachment of former president Castillo has not only put the country’s sixth president in place within the last five years, but also sparked violent protests across the country (more in the southern areas). Protests have led to the closure of Machu Picchu and disruptions to the mining industry, and the U.S. State Department and Britain’s government both now advise caution with respect to traveling to Peru. A resolution seems distant at this point. Some of the protestors are talking about themselves as an insurgency, and in multiple cases the government has treated them as such, leading multiple ministers of Boluarte’s government to resign in protest of the government’s use of violence to quell protests. Meanwhile, although the populace seems to support new elections in 2023, the congress seems reluctant to move on this, with elections currently scheduled for 2026.

Seeking Alpha • Aug 23

Credicorp Remains A Well-Run House In A Tricky Neighborhood

Credicorp has seen better than expected leverage to higher interest rates, but ongoing investments in business development have weighed on pre-provision profits. Loan demand, yields, and credit trends look positive, but Peru's macroeconomic and political outlooks are shakier now, increasing overall operating and sentiment risk. Credicorp shares look undervalued on the prospect of high-single-digit long-term core earnings growth, but macro-driven volatility is a risk to consider. I’ve long been a fan of Credicorp (BAP), a well-run leading Peruvian bank, and I’ve been impressed with the company’s ability to navigate challenges in the political and macroeconomic environment of Peru, while continuing to maintain good lending share and investing in growth drivers like digital banking. I haven’t been as big of a fan of operating conditions in Peru, though, and I’m not altogether surprised that Credicorp’s shares are about 20% lower than at my last write-up, as the macroeconomic situation in Peru has gotten more challenging. It’s easier to be bullish on Credicorp at this lower valuation, though I still see economic and political risk as major factors in the investment analysis. Weak business confidence and low real wage growth aren’t great underlying trends for the near term, nor is a 20% approval rating for the president or a significant increase in the price of credit default swaps for Peru since the start of the year. All in all, I like the double-digit prospective returns here, but investors need to go in with their eyes open with respect to the above-average risks and volatility here. A Minor Miss On Core Earnings Credicorp’s second quarter was more “okay” than “good”, with positive loan and interest margin trends offset by some shortfalls in fee-based lines and higher expenses. Revenue rose 21% year over year and 4% quarter over quarter, with net interest income up 19% yoy and 8% qoq on a stronger-than-expected 46bp qoq improvement in net interest margin (to 46bp). While Credicorp isn’t an especially asset-sensitive bank, rate hikes have exceeded earlier expectations. Fee-based income rose 7% yoy and 3% qoq. Operating expenses rose 10% yoy and 5% qoq, and this was a notable contributor to a modest miss on the pre-provision line. Expenses were driven significantly by ongoing investments in IT (including digital banking) and customer loyalty initiatives – both of which are think are worth upfront investment in pursuit of improved long-term efficiency. Pre-provision profits rose 35% yoy and 3% qoq, but missed by about 1% - not a big deal, but you’d still rather see a beat. Provisioning expense was a fair bit higher than the sell-side expected, driven in large part by management caution regarding a deteriorating macro outlook, though underlying loss formation trends aren’t concerning at this point. Loan Growth Despite Macro Challenges Credicorp posted 15% yoy and 4% qoq adjusted constant-currency loan growth in the second quarter, which was solid relative to management and sell-side expectations. Mibanco, a segment of Credicorp that focuses on microfinance transactions, saw 20% yoy and 8% qoq loan growth, while Pyme (small-to-medium-sized business loans) saw 22% and 8% qoq loan growth. Corporate loan growth was also healthy (up 16.5% yoy and 3%), with middle-market (up 21% yoy and 3% qoq) standing out a bit. Mortgage loan demand was softer (up 8% yoy and 2.5% qoq), and the Bolivian segment saw loans contract more than 1% yoy (flattish qoq). Reactiva loans (a program in Peru very roughly akin to the U.S. PPP program remain about 10% of loan balances). Credit quality is somewhat mixed. The 90-day non-performing loan ratio was down both annually (down 65bp) and sequentially (18bp) to 4.9%, but the cost of risk is trending toward the high end of management’s expectations and the bank is seeing some moderate NPL formation within small/medium-sized business working capital lending. At the same time, Mibanco credit quality is trending positively, with the NPL ratio down 570bp yoy and 60bp qoq to 6.1%. Healthy loan demand and improving credit quality are coming despite some notable challenges in the macro environment. While the Peruvian economy has been helped by higher commodity prices, copper prices are already about 25% off their high, and business confidence in Peru is fairly low at around 34 in July – down from close to 45 at the start of the year (numbers above 50 indicate positive feelings about the near-term outlook for Peruvian economy). At the same time, Peru remains stuck with low real wage growth and real GDP growth is only expected to be in the neighborhood of 2.5% to 3% over the next couple of years. The political situation also remains volatile. There have been ongoing clashes between the legislative and executive branches, and President Castillo’s approval rating is currently hovering around 20%.

Snowflake Score
Valuation	3/6
Future Growth	2/6
Past Performance	5/6
Financial Health	5/6
Dividends	4/6

Historical stock prices
Current Share Price	US$384.10
52 Week High	US$398.52
52 Week Low	US$216.87
Beta	0.86
1 Month Change	10.30%
3 Month Change	19.13%
1 Year Change	71.55%
3 Year Change	160.16%
5 Year Change	216.94%
Change since IPO	3,209.66%

	BAP	US Banks	US Market
7D	0.4%	3.3%	-2.7%
1Y	71.5%	23.1%	18.6%

BAP volatility
BAP Average Weekly Movement	7.2%
Banks Industry Average Movement	3.3%
Market Average Movement	7.2%
10% most volatile stocks in US Market	16.9%
10% least volatile stocks in US Market	3.1%

BAP fundamental statistics
Market cap	US$30.22b
Earnings (TTM)	US$2.12b
Revenue (TTM)	US$6.43b

BAP income statement (TTM)
Revenue	S/21.92b
Cost of Revenue	S/167.16m
Gross Profit	S/21.75b
Other Expenses	S/14.54b
Earnings	S/7.21b

Earnings per share (EPS)	90.76
Gross Margin	99.24%
Net Profit Margin	32.90%
Debt/Equity Ratio	64.2%

Data	Last Updated (UTC time)
Company Analysis	2026/06/26 22:23
End of Day Share Price	2026/06/26 00:00
Earnings	2026/03/31
Annual Earnings	2025/12/31

Package	Data	Timeframe	Example US Source ^*
Company Financials	10 years	Income statement Cash flow statement Balance sheet	SEC Form 10-K SEC Form 10-Q
Analyst Consensus Estimates	+3 years	Forecast financials Analyst price targets	Analyst Research Reports Blue Matrix
Market Prices	30 years	Stock prices Dividends, Splits and Actions	ICE Market Data SEC Form S-1
Ownership	10 years	Top shareholders Insider trading	SEC Form 4 SEC Form 13D
Management	10 years	Leadership team Board of directors	SEC Form 10-K SEC Form DEF 14A
Key Developments	10 years	Company announcements	SEC Form 8-K

Analyst	Institution
Roberto de Aguiar Attuch	Barclays
Ernesto Gabilondo Márquez	BofA Global Research
Francisco Navarrete	Bradesco S.A. Corretora de Títulos e Valores Mobiliários

Credicorp (BAP) Stock Overview

Rewards

Risk Analysis

Analyst Price Targets

Digital Finance Expansion And Lending Guidance Will Shape Peru's Market Outlook

Digital Monetization And Financial Inclusion Will Drive Powerful Long Term Earnings Expansion

Credicorp Stock Will Face Pressure As Higher Risk Lending And Neobank Costs Rise

Top Analyst Narratives

Digital Finance Expansion And Lending Guidance Will Shape Peru's Market Outlook

Digital Monetization And Financial Inclusion Will Drive Powerful Long Term Earnings Expansion

Credicorp Stock Will Face Pressure As Higher Risk Lending And Neobank Costs Rise

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Price History & Performance

Recent News & Updates

Credicorp (BAP) Stock Could Be 16% Below Fair Value After Dividend Growth And Downgrade

Credicorp: Good Macroeconomic Backdrop, But Valuation Limits Upside

Credicorp Stock Will Face Pressure As Higher Risk Lending And Neobank Costs Rise

Now 20% undervalued

Insider recently sold US$1.1m worth of stock

BAP: Future Returns Will Rely On Dividend Policy And Board Changes

Recent updates

Credicorp (BAP) Stock Could Be 16% Below Fair Value After Dividend Growth And Downgrade

Credicorp: Good Macroeconomic Backdrop, But Valuation Limits Upside

Credicorp Stock Will Face Pressure As Higher Risk Lending And Neobank Costs Rise

Now 20% undervalued

Insider recently sold US$1.1m worth of stock

BAP: Future Returns Will Rely On Dividend Policy And Board Changes

Credicorp Delivers Strong Q1 With 21.1% ROE and Record 50 Soles Dividend

Now 20% undervalued after recent price drop

BAP: Future Returns Will Depend On Dividend Policy And Board Transitions

Credicorp Ltd. announces Annual dividend, payable on June 12, 2026

Credicorp Ltd. Announces Changes Executive Changes

BAP: Future Upside Will Depend On Dividend Actions And Board Leadership

BAP: Future Returns Will Rely On Dividend Policy And Board Leadership Decisions

Now 27% undervalued

BAP: Future Returns Will Depend On Digital Bank Progress And Dividend Decisions

Credicorp Ltd. Announces Board and Committee Changes

Insufficient new directors

BAP: Future Returns Will Depend On Digital Bank And Dividend Reserve Actions

BAP: Future Returns Will Rely On Digital Bank And Capital Reserves

Now 20% undervalued

Credicorp Ltd. Announces Retirement of Directors, Effective March 31, 2026

BAP: Future Returns Will Rely On Chilean Digital Bank Execution

Full year 2025 earnings: EPS and revenues exceed analyst expectations

BAP: Future Upside Will Depend On Digital Banking Execution

Credicorp Ltd., Annual General Meeting, Mar 31, 2026

BAP: Stable Outlook Will Rely On Digital Progress And Steady Profitability

BAP: Stable Margins And Revenue Outlook Will Support A Fair Future Profile

BAP: Modest Revenue Outlook And Stable Profitability Will Support A Fair Future Profile

Credicorp Ltd. to Report Q1, 2026 Results on May 14, 2026

BAP: Stronger Margins And Revenue Mix Will Support A Balanced Outlook

BAP: Improved Revenue Projections And Lower Discount Rate Will Drive Outlook

Third quarter 2025 earnings: EPS exceeds analyst expectations

BAP: Net Interest Margin Guidance And Resolved Tax Dispute Will Shape Outlook

Digital Finance Expansion And Lending Guidance Will Shape Peru's Market Outlook

Digital Finance And Lending Expansion Will Widen Market In Peru

Digital Finance And Lending Expansion Will Widen Market In Peru

Digital Finance And Lending Expansion Will Widen Market In Peru

Digital Finance And Lending Expansion Will Widen Market In Peru

Now 20% undervalued

Second quarter 2025 earnings: EPS and revenues exceed analyst expectations

First quarter 2025 earnings: EPS exceeds analyst expectations

Credicorp Ltd. Declares Cash Dividend for Fiscal Year 2024, Payable on June 13, 2025

Credicorp: Methodical Disruption And Better Growth In Peru Support Strong Growth And More Upside

Full year 2024 earnings: Revenues exceed analysts expectations while EPS lags behind

Credicorp Ltd., Annual General Meeting, Mar 27, 2025

Credicorp Ltd. to Report Q2, 2025 Results on Aug 14, 2025

Credicorp: New Growth Engines Emerge

Expansive Growth In Chilean Financial Markets Through Innovative Tech And Tactical Acquisitions

Third quarter 2024 earnings: EPS and revenues exceed analyst expectations

Credicorp Ltd. Announces Special Cash Dividend, Payable on October 18, 2024

Credicorp: Yape Growth Is A Tailwind

Second quarter 2024 earnings: Revenues exceed analyst expectations

Credicorp: Stay Upbeat On Peru's Premier Financial Group

First quarter 2024 earnings: EPS and revenues exceed analyst expectations

Credicorp Ltd. Raises Annual Dividend, Payable on June 14, 2024