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Gregory.Harrington@aporter.com
(202)
942-5082
(202)
942-5999 Fax
Washington,
DC 20004-1206
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September
17, 2010
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Michael
Clampitt
Senior
Attorney
Division
of Corporation Finance
100
F Street, N.E.
United
States Securities and Exchange Commission
Washington,
D.C. 20549
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Credicorp
Ltd
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Form
20-F for the Fiscal Year Ended December 31,
2009
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Filed
June 18, 2010
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File
No. 001-14014
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We are
responding to the letter of the Staff of the Division of Corporation
Finance (the “Staff”) dated August 25, 2010, regarding the above-referenced
filing of Credicorp Ltd. (“Credicorp” or the “Company”) on Form
20-F. We set forth below Credicorp’s response to the comments in the
letter. For ease of reference, we have included the Staff’s
comments in their entirety in bold preceding the corresponding
responses.
Form 20-F for the fiscal
year ended December 31, 2009
Item 3. Key
Information
(D) Risk Factors, page
7
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1.
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Please
revise to avoid making statements that “we cannot assure” that a given
event might or might not happen. The point of a particular risk
factor is to discuss a material risk and explain to the reader the
likelihood of the risk impacting an investment in your securities, not
your ability to provide assurance.
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Response to Comment
1:
Credicorp
will amend the disclosure in the Form 20-F accordingly. See Appendix
A.
September
17, 2010
Page
2
Item
4. Information on the Company
(A) History and
Development of the Company, page 16
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2.
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Please
revise your disclosure so that the organizational chart of BCP’s
subsidiaries reflects the subsidiaries listed on page 25 of the
filing.
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Response to Comment
2:
Credicorp
will amend the Form 20-F such that the organizational chart of BCP’s main
subsidiaries included on page 16 will reflect the same subsidiaries listed on
page 25. See Appendix B.
(B) Business
Overview
(1) Introduction — Review of
2009, page 16
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3.
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We
note your disclosure that you operate through four operating segments:
banking, insurance, pension funds and brokerage and other. Therefore,
please add. or please explain why you have not added, a subheading for
“Brokerage and other” in this
section.
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Response to Comment
3:
Credicorp
did not include the segment “Brokerage and others” in the “Section (1)
Introduction – Review of 2009, (B) Business Overview” because the Company
believes that this segment is not material. As indicated on page 13
of the Form 20-F, as of and for the year ended December 31, 2009, it represented
approximately 1.6% of total revenue, 0.8% of operating income, and 1% of total
assets. Furthermore, during 2009 no significant changes or transactions occurred
in this segment.
Nevertheless,
Credicorp presented information related to the “Brokerage and others” segment in
more detail in “Section (3) Credicorp Operating Segments, (B) Business
Overview.” In future filings, Credicorp will include information
about the segment “Brokerage and others” in “Section (1) Introduction – Review,
(B) Business Overview.”
September
17, 2010
Page
3
(6)(iii) Pacifico Peruano
Suiza — Investment Portfolio, page 44
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4.
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We
note your disclosure on page 45 regarding Pacifico Peruano Suiza’s
investment in U.S. and European sovereign debt. Please tell us and revise
future filings to quantify your material European Sovereign Debt exposures
by country.
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Response to Comment
4:
As of
December 31, 2009, Pacífico Peruano Suiza did not hold a material amount of
European Sovereign Debt. The disclosure provided on page 45 of the Form 20-F
referred to investments that were mainly in US sovereign debt and the debt of
U.S. federal agencies. As of December 31, 2009, only US$2.3 million of the total
investment corresponded to European Sovereign Debt, all of which consisted of
debt instruments of the Republic of Italy. An additional US$3.5 million was an
investment in debt instruments of the State of Qatar.
Item
6. Directors, Senior Management and Employees
(A) Directors and Senior
Management, page 112
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5.
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We
note that in many of the director biographies, the directors are described
as being on the boards of “various other companies”. Please
revise to provide the names of the companies where your directors are
concurrently serving as directors. Refer to Item
6(A)(2).
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Response to Comment
5:
Credicorp
will amend the Form 20-F to add the information regarding the various other
companies where a director is member of the board. See Appendix
C.
September
17, 2010
Page
4
Item
18. Financial Statements
Note
3. Significant Accounting Policies
3(e) — Insurance activities,
page F-20
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6.
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Please
tell us which generally accepted accounting principles (e.g. Peruvian,
U.S., etc.) you look to in developing your accounting policy for your
insurance activities. Please ensure your response addresses how
this developed policy complies with the guidance and principles outlined
in paragraphs 10-12 of IAS 8. Please ensure your future
disclosures specifically address which principles you use to account for
insurance premium income.
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Response to Comment
6:
Before
the adoption of IFRS 4 in 2005, Credicorp followed the applicable US Generally
Accepted Accounting Principles (US GAAP) for the recognition and measurement of
insurance and reinsurance contracts. For the adoption of IFRS 4 “Insurance
Contracts”, Credicorp’s management concluded that US GAAP used as of December
31, 2004 was the relevant framework to be used as permitted by IFRS 4; Credicorp
complies with the requirements of paragraphs 10-12 of IAS 8 detailed in
paragraph 14 of IFRS 4.
In
Credicorp’s next filing on Form 20-F, the Company will clarify its accounting
principles disclosure to account for insurance premium income.
3(i) — Impairment of
financial assets, page F-28
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7.
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We
note your disclosure on page F-30 as well as on page 93 related to
renegotiated loans. We also note that you disclose on page
F-105 total “loans that are neither past-due nor impaired whose terms have
been renegotiated” of US$6.5 and US$10.3 million at December 31, 2009 and
2008, respectively. Please tell us whether you hold any loans
whose terms have been renegotiated that are classified as past-due or
impaired as of each period end. If so, please tell us and
revise future filings to disclose in greater detail the terms and success
rates of your loan modification programs, and discuss how your allowance
for loan losses incorporates the fact that some modifications end up being
unsuccessful.
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September
17, 2010
Page
5
Response to Comment
7:
As of
December 31, 2009 and 2008, Credicorp held renegotiated loans amounting to
US$59.5 million and US$55.2 million, respectively, of which US$53.0 million and
US$44.9 million are considered to be “past due but not impaired” or
“impaired”. These amounts represent approximately 7.23% and 7.92%, respectively,
of the “past due but not impaired” and “impaired” loans.
Although
Credicorp does not currently track success rates of its loan modification
programs, its procedures to estimate the allowance for loan losses
take into consideration the risk that the client might not comply with the
modifications of the terms based on the client’s financial information,
historical experience and the loan classification described on page
F-47 of the Form 20-F.
The main
terms that Credicorp has for renegotiated and restructured loans are the
modification of the payments schedule and reduction of interest rates on a case
by case basis.
In future
filings on Form 20-F, Credicorp will revise the disclosure of the terms of its
loan modification programs that are considered for the estimation of its
allowance for loan losses.
Note 5 — Investments
available-for-sale, page F-42
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8.
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We
note your disclosure on page 101 that net gains on sales of securities
increased 132.8% during 2009 to US$120.9 million primarily due to the
increased volatility observed in capital markets, which caused the
appreciation in stock prices in your investment
portfolio. However, we also note the statement in your Q4
Earnings Call that this gain resulted from an exchange and repurchase of
bonds initiated by the Peruvian Government. Please tell us and
revise your future filings to clarify the origin of the gain and describe
in detail how the related transaction(s) resulted in such a material gain
to your operations.
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September
17, 2010
Page
6
Response to Comment
8:
Credicorp
will amend the disclosure on page 101 of the Form 20-F to provide further
explanation of the increase in net gains on sales of securities during 2009. See
Appendix D.
Note 29.1 Credit
risk, page F-97
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9.
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We
note on pages F-104 through F-106 you disclose total impaired loans of
US$356,348,000 and US$202,460,000 at December 31, 2009 and 2008,
respectively. We also note your disclosure on page 79 that states loans
considered to be impaired include those loans classified as substandard,
doubtful or loss, which totaled (on page 81) US$356,305,000 and
US$199,835,000 at December 31, 2009 and 2008,
respectively. Please revise future filings to reconcile the
apparent difference between the two impaired loans balances disclosed at
each period end. Further, please revise future filings to
disclose whether the specific allowance for loan losses amounts disclosed
on page F-106 relates to the entire impaired loans balance at each period
end or, if not, disclose the amount of impaired loans for which a specific
allowance for loan losses has been recorded at each period
end.
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Response to Comment
9:
The
impaired loan balances disclosed on page F-104 through F-106 present loans
considered to be impaired, while the balances presented on page 81 correspond to
impaired loans, net of unearned interest.
Credicorp
will revise in future filings on Form 20-F its disclosures related to specific
allowance for loan losses amounts.
Exhibits 12.1 and
12.2
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10.
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We
note that the certifications required by Exchange Act Rule 13a-14(a)
replaced the word “report” with “Annual Report”. In future filings, the
certifications should be revised to refer to simply the
“report”.
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September
17, 2010
Page
7
Response to Comment
10:
Credicorp
will make this correction in future filings.
The
Company hereby acknowledges that:
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·
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the
company is responsible for the adequacy and accuracy of the disclosure in
the filing;
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·
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Staff
comments or changes to disclosure in response to Staff comments do not
foreclose the Commission from taking any action with respect to the
filing; and
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·
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the
company may not assert Staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
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Please do
not hesitate to contact me at (202) 942-5082, to discuss this
letter.
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Sincerely,
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Gregory
Harrington
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cc: Mr.
Alvaro Correa
Chief Financial Officer
Credicorp Ltd.
APPENDIX
A
We will
amend page 8 as follows (change in the statement underlined):
The
Peruvian government’s economic policies during the last decade have provided the
appropriate fundamentals to support positive performance by the Peruvian
economy. As a result, the international financial crisis did not impact Peru as
severely as other countries. In addition, the current government has also
implemented a US$3 billion anti-crisis program to alleviate any effects from the
crisis. However, while the economic policies of recent Peruvian
governments have been relatively stable, future governments might
adopt different economic policies that are less favorable for the Peruvian
economy.
Foreign
exchange fluctuations and exchange controls may adversely affect our financial
condition and results of operations.
Even
though the functional currency of our financial statements is U.S. Dollars and
our dividends are paid in U.S. Dollars, BCP, PPS and Prima AFP for local
statutory purposes, prepare their financial statements and pay dividends in
Nuevos Soles. The Peruvian government does not currently impose restrictions on
a company’s ability to transfer U.S. Dollars from Peru to other countries, to
convert Peruvian currency into U.S. Dollars or to pay dividends abroad.
Nevertheless, Peru has had restrictive exchange controls in the past and the Peruvian government
might in the future consider it necessary to implement restrictions on such
transfers, payments or conversions. See “Item 10. Additional
Information—(D) Exchange Controls.” In addition, depreciation of the
Nuevo Sol against the U.S. Dollar would decrease the U.S. Dollar value of any
dividends BCP, PPS and Prima AFP pay us, which would have a negative impact on
our ability to pay dividends to shareholders.
Although
Peru’s foreign reserves currently compare favorably with those of many other
Latin American countries, Peru may not be able to
maintain adequate foreign reserves to meet its foreign
currency-denominated obligations. Similarly, Peru may impose
exchange controls should its foreign reserves decline. A decline in Peruvian
foreign reserves to inadequate levels, among other economic circumstances, could
lead to currency devaluation or a volatility of short-term capital inflows. We
have taken steps to manage the gap between our foreign currency-denominated
assets and liabilities in several ways, including closely matching the volumes
and maturities of our Nuevo Sol-denominated assets against our Nuevo
Sol-denominated liabilities. Nevertheless, a sudden and significant devaluation
of the Nuevo Sol could have a material adverse effect on our financial condition
and results of operations. See “Item 11. Quantitative and Qualitative
Disclosures about Market Risk—Foreign Exchange Risk.”
September
17, 2010
Page
9
We will
also amend page 10 as follows:
While we
expect this economic stability to continue in the short-term, there is still some level of
concern regarding the continued stability and Bolivia’s long-term economic
performance. Bolivia has a high dependence on commodities exports and
needs to generate larger local and foreign investment. These long-term concerns
could adversely affect BCP Bolivia’s income and results of
operation.
September
17, 2010
Page
10
APPENDIX
B
We will
replace the organizational chart of page 16 for the following:
September
17, 2010
Page
11
APPENDIX
C
We will
amend the disclosure of Item 6. (A) as follows (change in the statement
underlined):
Fernando Fort is a lawyer and
partner at the law firm of Fort Bertorini Godoy Pollari & Carcelen Abogados
S.A. Mr. Fort served as a director of Banco de Crédito del Perú from 1979
to 1987 and from March 1990 to the present. Since March 2009, he has served on
our Board of Directors and on the board of directors of ASB, BCB and BCP’s
subsidiaries. Mr. Fort also serves as a director on the Board of Inversiones Centenario
and Edelnor
S.A.A.
Reynaldo Llosa is a business
manager and since August 1995 has been a director on our board of directors and
on the boards of ASB, BCB, Pacífico Peruano
Suiza and BCP’s subsidiaries. He has also been a director of BCP from
1980 to October 1987 and from March 1990 to the present. Mr. Llosa is the
main partner and general manager of F.N. Jones S.R. Ltda. and serves as a
Director on the boards of Edelnor S.A.A. and
Distrilima,
Juan Carlos Verme is a
businessman and has served on the Board of Directors since August 1995. He has
served on the board directors of BCP since March 1990 and is also on the board
of directors of ASB and BCB. Mr. Verme is Chairman of Inversiones Centenario
and he also serves as
member of the Board of some BCP’s subsidiaries (Creditítulos S.A., Credifondo
S.A.C., and Solución Financiera de Crédito del Perú S.A. He is a director
of the Asamblea General de Asociados del Patronato del Museo de Arte de Lima
(the General Assembly
of Patron Members of the Lima Art Museum).
Luis Enrique Yarur is a
businessman with an undergraduate degree in law and graduate degrees in
economics and management. He has served on the Board of Directors since October
2002 as well as the board of directors of BCP since February 1995. Mr. Yarur is
Chairman of the Board of Empresas Juan Yarur S. A. C., Banco de Crédito e
Inversiones of Chile, BCI Seguros Generales S.A,
BCI Seguros de Vida S.A., Chairman of Empresas Jordan S.A. and Vice-Chairman of
Empresas Lourdes S.A. He is Vice-President of the Asociación de Bancos e
Instituciones Financieras A. G., a member of the International Advisory Board
IESE, España and director of the Bolsa de Comercio de Santiago.
September
17, 2010
Page
12
Felipe Ortiz de Zevallos is
an industrial engineer with a Master’s degree in Management Science from
Rochester University and a degree in Management from Harvard Business School.
Mr. Ortiz de Zevallos has served on the Board of Directors since March 2005. He
also serves as a director on the boards of BCP, Grupo Apoyo (where he is the
Chairman), Compañía de Minas Buenaventura S.A., Sociedad Minera el Brocal
S.A.A., AC Capitales SAFI, HTA Perú SAC, and AC Pública. From September
2006 until March 2009, Felipe Ortiz de Zevallos was Peru’s Ambassador to the
United States. Prior to becoming Peru’s Ambassador to the United States, Mr.
Zevallos served as the President of Universidad del Pacífico in Lima (elected
for the period 2004-2009).
Germán Suárez is an economist
with a Master’s degree in Economics from Columbia University. Mr. Suárez was
elected to the Board of Directors in March 2005. Mr. Suárez was President and
Chairman of the Board of Banco Central de Reserva del Perú from 1992 to 2001,
and serves as a director on the boards of BCP and Compañía de Minas
Buenaventura S.A.
September
17, 2010
Page
13
APPENDIX
D
We will
amend the disclosure provided on page 101 as follows (change in the statement
underlined):
Net gains
from sales of securities increased 132.8% to US$120.9 million in 2009 as
compared to US$51.9 million in 2008, following an increase from US$46.4 million
in 2007, which represented an increase of 12.0%. The increase in 2009 was
primarily due to the increased volatility observed in capital markets, which caused the
appreciation of prices in our investment portfolio, mainly in positions of
global and sovereign bonds of the Peruvian government and of Colombian
government bonds, where we realized gains on the sale of such
instruments. The increase in 2008 was principally due to gain
from market value fluctuation on sales of investments.