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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 under the
Securities Exchange Act of 1934
For the month of August 2022
Commission File Number: 001-14014
CREDICORP LTD.
(Translation of registrant’s name into English)
Of our subsidiary
Banco de Credito del Peru:
Calle Centenario 156
La Molina
Lima 12, Peru
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F☐
 Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
 Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
The information in this Form 6-K (including any exhibit hereto) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 11th, 2022
 
CREDICORP LTD.
(Registrant)
  
     
       
 
By:
/s/ Guillermo Morales
  
   
Guillermo Morales
  
   
Authorized Representative
  


Exhibit 99.1



2Q/2022Milagros Cigüeñas Roxana Mossi Fernando Castillo, CFA Andrea Sertzen, FRM Diego Nieto, FRM Sebastian del Águila Sebastian Ardiles investorrelations@credicorpperu.com

Earnings Release 2Q / 2022
Table of Contents

Operating and Financial Highlights
 03
     
Senior Management Quotes
 04
     
First Quarter 2022 Earnings Conference Call
 05
     
Second Quarter 2022 Earnings Conference Call
 06
     
Financial Overview
 10
     
Credicorp’s Strategy Update
 11
     
Analysis of 2Q22 Consolidated Results

  01
Loans and Portfolio Quality
 14
  02
Deposits
 20
  03
Interest Earning Assets and Funding
 23
  04
Net Interest Income
 24
  05
Provisions
 27
  06
Other Income
 29
  07
Insurance Underwriting Results
 31
  08
Operating Expenses
 33
  09
Operating Efficiency
 35
  10
Regulatory Capital
 36
  11
Economic Outlook
 38
  12
Appendix
 43

Earnings Release 2Q / 2022
Operating and Financial Highlights

Credicorp Ltd. Reports Second Quarter 2022 Financial and Operating Results
ROE of 16.9% Driven Mainly by Higher Core Income and a Low Level of Provisions
Well-Positioned in Current Environment, Driving Sustainable Growth by Strengthening Our Core and Building Disruptors
Lima, Peru – August 11, 2022 – Credicorp Ltd. (“Credicorp” or “the Company”) (NYSE: BAP | BVL: BAP), the leading financial services holding company in Peru with presence in Chile, Colombia, Bolivia and Panama today reported its unaudited results for the quarter ended June 30, 2022. Financial results are expressed in Soles and are presented in accordance with International Financial Reporting Standards (IFRS).
2Q22 OPERATING AND FINANCIAL HIGHLIGHTS


 •
Net Income attributable to Credicorp up 60.4% YoY to S/1,122 million, reflecting core income growth and a low level of provisions at BCP, further supported by Mibanco & Pacifico. ROAE of 16.9% in 2Q22 and 17.2% in 1H22

•
Structural Loans increased 4.5% QoQ (+3.6% FX Neutral) and 13.8% YoY (+14.6% FX Neutral) in average daily balances.

•
Total Deposits at S/147,441 million in 2Q22, relatively unchanged QoQ (-2.0% FX Neutral) and down 1.2% YoY (-0.5% FX Neutral). Low-cost Deposits decreased 6.1% YoY and accounted for 56.7% of Total Funding.

•
Structural NPL ratio declined 65bps YoY and 18 bps QoQ to stand at 4.9%, with lower ratios across segments principally due to an uptick in structural loan volumes in Peru, which offset higher NPL volumes at BCP.

•
Structural Provisions increased 45.8% QoQ and 0.3% YoY due to the deterioration of macroeconomic outlook and the Structural Cost of Risk stands at 1.08%. The Allowance for Loan Losses represents 5.9% of Structural Loans and NPL Coverage stands at 119.9%, while both ratios continue their downward trend towards pre-pandemic levels.

•
Core Income increased 15.0% YoY supported by growth of 18.7% in Net Interest Income (NII), 6.7% in Fees and 9.1% in Gains on FX Transactions.

•
Efficiency Ratio of 44.6%, compared to 44.5% in 1Q22 and 43.7% in 2Q21, driven by accelerated investments for digital transformation and innovation initiatives. If we exclude operating expenses for our disruptive initiatives Yape and Krealo the efficiency ratio stands at 42.1%.

•
Sound Capital base, with CET1 Ratio of 11.6% at BCP Stand Alone and 15.2% at Mibanco, up 36bps and relatively unchanged YoY, respectively. As of 2022, both subsidiaries report solvency levels in IFRS and as such, CET1 ratio figures will differ from reported figures in 2Q21. Regulatory Capital stood at 1.56 times Regulatory Requirement

•
On June 10, 2022, Credicorp paid a cash dividend of S/ 15 per share for a total amount of S/1,415.7 million.

•
Advancing our Strategic Initiatives: BCP Stand-alone digital clients accounted for 58% of total BCP retail clients as of June 2022; ii) more than 230 thousand individuals were financially included through Credicorp’s businesses in the quarter, and iii) BCP issued the first international green bond in the Peruvian banking system.

3
Earnings Release 2Q / 2022
Senior Management Quotes

SENIOR MANAGEMENT QUOTES


Credicorp once again delivered robust operating and financial results as the strong, positive momentum from the first quarter continued into the second quarter and the power of our scale, dynamic culture and solid customer relationships came to the fore. Despite the adverse economic and political environment, we continued to challenge, transform and disrupt ourselves while leveraging our competitive advantages to strengthen our core businesses. Our focus on strengthening our core while building disruptors gives us a stronger footing and positions us to pursue our objectives judiciously as we navigate the current environment. We remain firmly on track to achieving our guidance. Gianfranco Ferrari, CEO


in the high teens on solid loan growth and effective asset repricing strategies. Higher fee income, bolstered by growth in cashless transactions─ which accounted for 42% of total transactions, also contributed to this good performance. Risk-adjusted NIM stood at 4.25%, similar to pre-pandemic levels, riding on the back of a year over year decrease in the cost of risk. Prudent risk management during the pandemic allowed us to set aside a healthy level of allowances for loan losses, which puts us in good stead in today’s challenging environment. In 2Q22, our allowance for loan losses was equivalent to 5.9% of total structural loans while the structural NPL coverage stood at 120%.César Ríos, CFO

4
Earnings Release 2Q / 2022
Senior Management Quotes

SECOND QUARTER 2022 EARNINGS CONFERENCE CALL
Date: Friday August 12, 2022
Time: 10:30 am ET (9:30 am Lima, Peru time)
Hosts: Gianfranco Ferrari - CEO, Cesar Rios - Chief Financial Officer, Francesca Raffo – Chief Innovation Officer, Reynaldo Llosa - Chief Risk Officer, Diego Cavero - Head of Universal Banking, Cesar Rivera - Head of Insurance and Pensions, and Investor Relations Team.
To pre-register for the listen-only webcast presentation use the following link:
https://dpregister.com/sreg/10169419/f3b8e39472
Callers who pre-register will be given a conference passcode and unique PIN to gain immediate access to the call and bypass the live operator. Participants may pre-register at any time, including up to and after the call start time.
Those unable to pre-register may dial in by calling:
1 844 435 0321 (U.S. toll free)
1 412 317 5615 (International)
Conference ID: Credicorp Conference Call
The webcast will be archived for one year on our investor relations website at:
https://credicorp.gcs-web.com/events-and-presentations/upcoming-events
For a full version of Credicorp´s Second Quarter 2022 Earnings Release, please visit:
https://credicorp.gcs-web.com/financial-information/quarterly-results

5
Earnings Release 2Q / 2022
Summary of Financial Performance and Outlook

Loans (in Average Daily Balances)
Structural loans grew 3.6% QoQ (FX neutral) to stand at S/131,785 million. Growth was driven by the SME-Pyme and Consumer segments at BCP, and by Mibanco, which reported an uptick in disbursements through alternative channels and an improvement in the productivity of its relationship managers.
YoY, structural loan growth stood at 14.6% (FX neutral). This evolution was primarily attributable to Wholesale Banking and secondarily to SME-Pyme and Consumer at BCP and spurred by economic reactivation. Growth was also driven by Mibanco, reflecting the positive impact of the bank’s hybrid model.
The Government Program portfolio (GP) represented 10% of the total portfolio in average daily balances (9% in quarter-end balances).

Deposits

Our deposit base fell 2.0% QoQ (FX Neutral). This reduction is attributable primarily to a drop in Demand and Savings Deposits, driven by reduced liquidity levels systemwide (due to the amortization of Reactiva loans) and the impact of rising interest rates. Higher rates increase the opportunity cost associated with this type of deposits and has triggered a migration to Time Deposits.
In the YoY comparison, the deposit base fell 0.7% (FX Neutral). This evolution was primarily driven by a reduction in Demand Deposits, which reflected the impact of amortizations of Reactiva loans; the migration of funds to Time deposits; and a reduction in Severance Indemnity balances (CTS) after restrictions on fund availability were lifted.



Net Interest Income (NII) and Margin (NIM)

NII rose 8.1% QoQ to stand at S/2,740 million. This evolution was driven by an uptick in the yield of interest-earning assets, primarily in LC, which reflected solid loan growth, a drop in low-yield assets and effective repricing strategies. These dynamics were partially offset by an increase in the funding cost, mainly in LC. In this scenario, NIM rose by 50bps sequentially to stand at 4.9%.

YoY, NII grew 18.7%, fueled by growth in interest income in a context marked by an uptick in structural loan volumes and in yields on IEAs in LC. In this context, NIM rose 90pbs.
 



 
6
Earnings Release 2Q / 2022
Summary of Financial Performance and Outlook

Structural Portfolio Quality and Cost of Risk (CoR)

QoQ, structural NPL growth was driven mainly by SME-Pyme and Wholesale Banking at BCP Stand-alone. In SME-Pyme, growth in early delinquency was attributable to clients that also have Reactiva loans. In Wholesale, growth in NPLs was associated with clients in sectors that were heavily impacted by the pandemic. Given that structural loans grew at a faster pace than structural NPLs, the structural NPL ratio stood at 4.9% (-17 bps QoQ).

YoY, growth in the NPL portfolio was fueled mainly by SME-Pyme and driven by an uptick in delinquency for long-term loans.  This was attenuated by an improvement at Mibanco, which has bolstered its collections capabilities, and by the evolution in Individuals, which benefitted from growth in personal liquidity. Finally, the positive loan evolution led the structural NPL ratio to fall 65bps.

The structural CoR increased QoQ, driven by growth in provisions in Individuals, which primarily reflects the deterioration in current and projected macroeconomic conditions.

YoY, the slight increase in provisions was offset by growth in origination volumes, which reduced the CoR at the majority of subsidiaries. YTD, the reduction in the CoR reflects our prudent management during the pandemic.

The structural NPL coverage ratio has followed a downward trend since Sept 20, driven by growth in NPLs and a gradual reduction in allowances for loan losses.

Other Income
Other Core income (Fees + Gains on Foreign Exchange Transactions) rose 3.4% QoQ and 8.1 YoY, which reflected the impact of growth in transaction volumes and exchange rate volatility.
Other non-core income fell QoQ due primarily to growth in the Net loss on Securities and to a lesser extent, to a drop in Other Non-Financial Income. In YoY terms, the decline in Other Non-Core income was mainly driven by a drop in gains on speculative derivatives and by the exchange rate difference.
 


 
7
Earnings Release 2Q / 2022
Summary of Financial Performance and Outlook

Insurance Underwriting Result

The insurance underwriting result fell 3.2% QoQ, which reflected growth in claims in the Life business and in Group Life in particular, where compensation for the Complementary Insurance for Occupational Risk product was impacted by inflation. This evolution was partially offset by growth in net earned premiums in P&C, particularly in the Cars and Medical Assistance lines. In YoY terms, the insurance underwriting result recovered after claims levels normalized in the Life business and net earned premiums registered solid dynamism in both the Life and P&C businesses.

Efficiency

The Efficiency ratio deteriorated 90bps YoY to stand at 44.6%. This evolution was driven by an uptick in IT investments and in disruptive initiatives. If we exclude operating expenses associated with disruptive initiatives (Yape + Krealo), the efficiency ratio will stand at 42.1%, which represent an improvement of 240bps with regard to the reported figure. 

Net Income Attributable to Credicorp

Net income attributable to Credicorp stood at S/1,122 million, down -1.3% QoQ but up +60.4% YoY. With these results, net shareholders’ earnings totaled S/.26,175 million (-2.6% QoQ due to dividend payments). In this scenario, ROAE stood at 16.9%.
 
8
Earnings Release 2Q / 2022
Summary of Financial Performance and Outlook

Contributions* and ROE by subsidiary in 2Q22
(S/ millions)

*Contributions to Credicorp reflect the eliminations for consolidation purposes (eliminations for transactions among Credicorp’s subsidiaries or between Credicorp and its subsidiaries).
- The figure is lower than the net income of BCP Stand Alone as contribution do not consider investments in other Credicorp subsidiaries (Mibanco).
- The figure is lower than the net income of Mibanco as Credicorp owns 99.921% of Mibanco (directly and indirectly).
- The contribution is higher than Grupo Pacifico’s net income because Credicorp owns 65.20% directly, and 33.66% through Grupo Credito.
- Includes Grupo Credito excluding Prima, others of Atlantic Security Holding Corporation and others of Credicorp Ltd.

9
Earnings Release 2Q / 2022
Summary of Financial Performance and Outlook

Universal Banking Business

Profitability is up at BCP due to growth in
NII and controlled levels of loan
provisions. Strong origination of
structural loans, as well as a reduction in
cash and investments, worked alongside
higher interest rates to buttress
expansion in NII. The YoY drop in loan
provisions, which was driven by an
improvement in payment behavior in the
mortgage and corporate banking
segments also bolstered profitability.

Insurance and Pension Businesses

Pacifico Seguros consolidates its recovery
due to an improvement in the sanitary
situation and to an uptick in the issuance of
policies in the Life and P&C businesses.
Microfinance Business

Mibanco’s hybrid model continues to
drive positive performance and led to
record highs for loan origination. This
dynamic, coupled with active yield
management strategies, allowed Mibanco
to boost its Net Interest Income, while
keeping asset quality at healthy levels.

Investment Banking
& Wealth Management

The IB & WM business is challenged by the
current environment. Market volatility and
political uncertainty negatively impacted the
non-core businesses while AM & WM
reflect the impact of last year´s funds
outflows.

Outlook

We expect an ROE close to 17.5% for the full year figure. Likewise, current loan dynamics in a
context of high inflation and interest rate hikes led us to expect Net Interest Margin and Cost
of Risk figures to situate within the upper end of the guidance range.

10
Earnings Release 2Q / 2022
Financial Overview

Credicorp Ltd.
Quarter
% change
As of
% change
S/ 000
2Q21
1Q22
2Q22
QoQ
YoY
Jun 21
Jun 22
Jun 22 / Jun 21
Net interest, similar income and expenses
2,309,042
2,534,090
2,740,440
8.1%
18.7%
4,432,425
5,274,530
19.0%
                 
Provision for credit losses on loan portfolio, net of  recoveries
(363,380)
(257,590)
(363,291)
41.0%
0.0%
(921,027)
(620,881)
-32.6%
                 
Net interest, similar income and expenses, after provision for credit losses on loan portfolio
1,945,662
2,276,500
2,377,149
4.4%
22.2%
3,511,398
4,653,649
32.5%
Total other income
1,191,694
1,242,749
1,203,980
-3.1%
1.0%
2,386,224
2,446,729
2.5%
Insurance underwriting result
(136,335)
141,546
137,042
-3.2%
-200.5%
(201,582)
278,588
n.a
Total other expenses
(1,860,447)
(1,950,182)
(2,054,810)
5.4%
10.4%
(3,540,718)
(4,004,992)
13.1%
Profit (loss) before income tax
1,140,574
 1,710,613
1,663,361
-2.8%
45.8%
2,155,322
3,373,974
56.5%
Income tax
(423,491)
(546,001)
(513,181)
-6.0%
21.2%
(761,090)
(1,059,182)
n.a
Net profit (loss)
717,083
 1,164,612
1,150,180
-1.2%
60.4%
1,394,232
2,314,792
66.0%
Non-controlling interest
17,614
27,786
28,420
2.3%
61.3%
33,965
56,206
n.a
Net profit (loss) attributable to Credicorp
699,469
1,136,826
1,121,760
-1.3%
60.4%
1,360,267
2,258,586
66.0%
Net profit (loss) / share (S/)
8.77
 14.25
14.06
-1.3%
60.4%
17.05
28.32
66.0%
Loans
143,091,752
144,621,513
150,370,184
4.0%
5.1%
143,091,752
150,370,184
5.1%
Deposits and obligations
149,161,803
147,915,964
147,440,575
-0.3%
-1.2%
149,161,803
147,440,575
-1.2%
Net equity
25,073,706
26,872,626
26,175,222
-2.6%
4.4%
25,073,706
26,175,222
4.4%
Profitability


   


Net interest margin
4.01%
4.44%
4.90%
 46 bps
 89 bps
3.90%
4.65%
 75 bps
Risk-adjusted Net interest margin
3.38%
3.99%
4.25%
 26 bps
 87 bps
3.09%
4.10%
 101 bps
Funding cost
1.18%
1.33%
1.59%
 26 bps
 41 bps
1.31%
1.45%
 14 bps
ROAE
11.3%
17.0%
16.9%
 -10 bps
 560 bps
10.9%
17.2%
 630 bps
ROAA
1.1%
1.9%
1.9%
 0 bps
 80 bps
1.1%
1.9%
 80 bps
Loan portfolio quality


   

 
Internal overdue ratio (1)
3.53%
4.06%
4.06%
 0 bps
 53 bps
3.53%
4.06%
 53 bps
Internal overdue ratio over 90 days
3.53%
4.06%
4.06%
 0 bps
 53 bps
3.53%
4.06%
 53 bps
NPL ratio (2)
4.79%
5.25%
5.18%
 -7 bps
 39 bps
4.79%
5.18%
 39 bps
Cost of risk (3)
1.02%
0.71%
0.97%
 26 bps
 -5 bps
1.29%
0.83%
 -46 bps
Coverage ratio of IOLs
185.8%
140.7%
136.1%
 -460 bps
 -4970 bps
185.8%
136.1%
 -4970 bps
Coverage ratio of NPLs
137.0%
108.9%
106.6%
 -230 bps
 -3040 bps
137.0%
106.6%
 -3040 bps
Operating efficiency
  

   


Efficiency ratio (4)
43.7%
44.5%
44.6%
 10 bps
 90 bps
43.9%
44.5%
 60 bps
Operating expenses / Total average assets
2.96%
3.23%
3.49%
 26 bps
 53 bps
2.92%
3.34%
 40 bps
Insurance ratios
  

   


Combined ratio of P&C (5) (6)
88.9%
94.4%
89.9%
 -450 bps
 100 bps
88.9%
89.9%
100 bps
Loss ratio (6)
107.4%
69.1%
70.5%
 140 bps
 -3690 bps
68.5%
93.1%
 2460 bps
Capital adequacy - BCP Stand-alone (7)
    
   


Global Capital ratio (8)
15.34%
15.79%
15.23%
 -56 bps
 -11 bps
15.34%
15.23%
 -11 bps
Tier 1 ratio (9)
10.31%
10.74%
10.25%
-49 bps
-6 bps
10.31%
10.25%
 -6 bps
Common equity tier 1 ratio (10) (12)
11.21%
11.63%
11.57%
 -6 bps
 36 bps
11.21%
11.57%
 36 bps
Capital adequacy - Mibanco (7)


   


Global Capital ratio (8)
17.25%
15.61%
14.81%
 -80 bps
 -244 bps
17.25%
14.81%
 -244 bps
Tier 1 ratio (9)
14.69%
13.24%
12.55%
-69 bps
-214 bps
14.69%
12.55%
 -214 bps
Common equity tier 1 ratio (10) (12)
15.16%
15.21%
15.25%
 4 bps
 9 bps
15.16%
15.25%
 9 bps
Employees
35,776
36,198
34,398
-5.0%
-3.9%
36,806
36,358
-1.2%
Share Information


   


Issued Shares
94,382
94,382
94,382
0.0%
0.0%
94,382
94,382
0.0%
Treasury Shares (11)
14,866
14,862
14,849
-0.1%
-0.1%
14,915
14,866
-0.3%
Outstanding Shares
79,516
79,520
79,533
0.0%
0.0%
79,467
79,516
0.1%
(1) Internal overdue loans includes overdue loans and loans under legal collection, according to our internal policy for overdue loans. Internal Overdue ratio: Internal overdue loans / Total loans.
(2) Non-performing loans (NPL): Internal overdue loans + Refinanced loans. NPL ratio: NPL / Total loans.
(3) Cost of risk: Annualized provision for loan losses, net of recoveries / Total loans.
(4) Efficiency ratio = (Salaries and employee benefits + Administrative expenses + Depreciation and amortization + Association in participation + Acquisition cost) / (Net interest, similar income and expenses + Fee Income + Net gain on foreign exchange transactions + Net Gain From associates + Net gain on derivatives held for trading + Result on exchange differences + Net Premiums Earned).
(5) Combined ratio = (Net claims / Net earned premiums) + [(Acquisition cost + Operating expenses) / Net earned premiums]. Does not include Life insurance business.
(6) Considers Grupo Pacifico's figures before eliminations for consolidation to Credicorp.
(7) All Capital ratios for BCP Stand-alone and Mibanco are based on Peru GAAP.
(8) Regulatory Capital / Risk-weighted assets (legal minimum = 10% since July 2011).
(9) Tier 1 = Capital + Legal and other capital reserves + Accumulated earnings with capitalization agreement + (0.5 x Unrealized profit and net income in subsidiaries) - Goodwill - (0.5 x Investment in subsidiaries) + Perpetual subordinated debt (maximum amount that can be included is 17.65% of Capital + Reserves + Accumulated earnings with capitalization agreement + Unrealized profit and net income in subsidiaries - Goodwill).
(10) Common Equity Tier I = Capital + Reserves – 100% of applicable deductions (investment in subsidiaries, goodwill, intangibles and net deferred taxes that rely on future profitability) + retained earnings + unrealized gains.
Adjusted Risk-Weighted Assets = Risk-weighted assets - (RWA Intangible assets, excluding goodwill, + RWA Deferred tax assets generated as a result of temporary differences in income tax, in excess of 10% of CET1, + RWA Deferred tax assets generated as a result of past losses)."
(11) Consider shares held by Atlantic Security Holding Corporation (ASHC) and stock awards.
(12) Common Equity Tier I calculated based on IFRS Accounting.

11
Earnings Release 2Q / 2022
Credicorp’s Strategy Update

Credicorp Strategy
Credicorp remains resilient as it continues to register profitability levels in the high teens. In the current context, Credicorp differentiates itself through its solid management performance; adequate capitalization levels; efforts to develop technological capacities; and attraction and retention of the best talent through a comprehensive value proposition.
Credicorp continues to strengthen and consolidate its core business, while developing its own disruptors. The Company is continuously reviewing its business portfolio with a long-term view. The aim is to strengthen its leadership position and continue operating as a top player in the markets where it operates.
In terms of its digital strategy, Credicorp made progress in 2Q22 in defining its appetite for investment in innovation at the Group level. Additionally, Credicorp has determined which domains will be allocated resources to secure a competitive position.
In 2022, investment in disruption is expected to impact ROE by 150pbs (ROE is expected to stand around 17.5% in 2022) and efforts will focus primarily on fortifying the domains that strengthen Credicorp’s leadership in its core businesses. The domains that have been targeted in the first horizon include the digital businesses for Payments, Digital Financing, Neobanks model, Acquiring and Services for SMEs.
Mai KPIs of Credicorp’s Strategy
 
Experience 
Efficiency
Growth  

 
Traditional Business Transformation (1)
  
Subsidiary
2Q19
2Q21
2Q22
 
Day to Day
          
 
Digital clients (2)
BCP
34%
56%
58%
 
Digital monetary transactions (3)
BCP
23%
48%
57%
 
Transactional cost by unit
BCP
0.42
0.20
0.11
 
Disbursements through leads (4)
Mibanco
ND.
68%
77%
 
Disbursements through alternative channels (5)
Mibanco
13%
33%
49%
 
Mibanco Productivity (6)
Mibanco
20.9
18.7
24.1
 
Cashless
          
 
Cashless transactions (7)
BCP
20%
40%
43%
 
Mobile Banking rating Apple
BCP
ND.
2.2
4.7
 
Mobile Banking rating Android
BCP
3.7
3.3
4.2
 
Digital Acquisition
          
 
Digital sales (8)
BCP
15%
34%
37%
 
Digital loans (9)
BCP
26%
44%
58%
(1) Figures for June 2019, 2021, and 2022
(2) Digital Client: Retail Banking clients that conduct 50% of their monetary transactions through digital channels or have purchased an online in the last 12 months. Digital clients; Total Retail Banking clients.
(3) Retail Monetary Transactions conducted through Retail Banking, Internet Banking, Yape and Telecredito/Total Retail Monetary Transactions in Retail Banking.
(4) Disbursements generated through leads/Total disbursements.
(5) Disbursements conducted through alternative channels/Total disbursements.
(6) Number of loans disbursed/ Total relationship managers.
(7) Amount transacted through Mobile Banking, Internet Banking, Yape y POS/ Total amount transacted through Retail Banking.
(8) Units sold by Retail Banking through digital channels/ Total number of units sold by Retail Banking.
(9) Retail Banking loans disbursed through digital channels/ Total Retail banking loans disbursed.

12
Earnings Release 2Q / 2022
Credicorp’s Strategy Update

Disruptive Initiatives: Yape
Yape continues to make progress in its quest to become the main payment venue in Peru. Proof of this is the fact that we hit the 10-million user mark in early July.  To bolster the affiliate base and usage levels, Yape has conducted a number of campaigns. Additionally, in 2022, Yape continued efforts to jump-start the application’s use at different establishments, including gas stations, convenience stores, pharmacies and other low-ticket establishments.
This quarter, Yape also focused on boosting the use of mobile phone top-ups. Yape rolled out this new service on November 2021 and at quarter-end, 142 thousand mobile top-ups were registered on a daily basis.
Additionally, in line with its goal to be present in the day-to-day of Yaperos, Yape will launch “Yape ofertas” this quarter. This new functionality will allow Yaperos to access different offers and unique promotions at participating establishments if they use Yape to pay.
Finally, after concluding the pilot run of Friends and Family for Microloans, Yape is about to launch the Microcredit functionality to the public. Microloans are granted through Yape for either S/100 and S/200 and can be paid in 15, 20, 25 and 30 days.
Disruptive Initiatives: Yape (1)
  
2Q19
2Q21
2Q22
Day to Day




% Microbusiness users (2)
0.6%
20%
22%
Mobile phone top-ups (thousands)
-
2,769
4,185
Cashless



Users (thousands)
1,106
6,610
9,965
% User’s clients of BCP (3)
100%
71%
59%
% of Yape Users (4)
-
26%
37%
Active users (thousands) (5)
333
3,051
5,957
% Active users on a monthly basis (6)
30%
46%
60%
No. of monthly Transactions (thousands)
1,262
27,222
88,950
Monthly transaction amount (millions, S/)
62
1,735
4,951
Number of monthly transactions by Active Yapero (7)
4
9
15
(1) Figures for 2019, 2021 and 2022
(2) Yape users that are Microbusinesses/Total Yape users
(3) BCP clients that are Yape users/Total Yape users
(4) Yapecard users / Total Yape users
(5) Yape users that have conducted at least one transaction a month
(6) Yape users that have conducted at least one transaction in the past month/Total Yape Users
(7) Number of Yape transactions/Active Users

13
Earnings Release 2Q / 2022
Credicorp’s Strategy Update

Integrating Sustainability in our way of doing business

For more information on our sustainability strategy, program and initiatives please review the documents “Sustainability Strategy 2020-25” and our latest Annual and Sustainability Report.

Among the milestones hit in the second quarter of 2022 in the framework for the company’s ESG journey, the following stand out:
Governance front – New Corporate Sustainability Policies
To ensure that our initiatives are aligned with our purpose, we continue to implement a series of corporate policies that will guide and direct our businesses in the quest to incorporate more sustainable practices. In 2Q22, the following corporate policies were approved and published: (i) Sustainability Policy, (ii) Corporate Human Rights Policy  and (iii) Corporate Policy for Responsible and Sustainable Investments.
Environmental Front – Developing sustainable financial solutions and making progress with the ESG risk management framework

 •
BCP launched the Peruvian banking system’s first international green issuance for a total of US$ 30 million. The funds raised will be used to finance projects for eco-friendly production plants.

•
BCP granted a certified green loan to Aceros Arequipa, a company in the steel sector, to finance the development of a steel recycling plant.

•
BCP granted a certified green loan to Hialpesa, a company in the textile sector, to finance the development of a water treatment plant.

•
Credicorp Capital acted as a structuring and placement agent for sustainable commercial papers for Bosques Amazonicos S.A. The company will use the funds for conservation and reforestation projects in the Amazon.

•
Within the ESG risk management platform, Credicorp has defined the strategic criteria at the corporate level to determine clients’ eligibility for or exclusion from financing and is working to incorporate these guidelines at the operating level based on each subsidiary’s characteristics and capacities. The Pilot for the Green Taxonomy Program was satisfactorily completed for a portion of the loan portfolio and will eventually be applied to the complete portfolio.
Social Front – Expanding financial inclusion and education; helping small businesses grow; and providing solutions to reinsert people with financial problems in the system

 •
Yape spurred the financial inclusion of more than 1.9 million people since November 2020 and Mibanco, through its microfinance role, has included over 600 thousand entrepreneurs in the financial system over the past seven years.

•
BCP launched Ando ─ a web platform that offers Yape users who have no credit history and are interested in obtaining microloans ─ the opportunity to demonstrate their debt service capacities by successfully completing a series of challenges.

•
Yape launched a campaign to create fraud awareness among users and ensure prevention. These initiatives provided affiliates with educational information on fraud as well as advice and tools to prevent cybernetic and organized crime.

•
Yape implemented a chatbox to reduce response times and efficiently address users’ requests in real time.

•
Through Yape, nearly 65K people have received training on financial matters through workshops and working groups this quarter. At Mibanco, more than 76K clients have benefitted from different financial and business advisory services.

•
BCP and Prima AFP launched new chapters of the financial education programs “El Depa” and “5to piso”.

•
Mibanco’s Yevo, which is an online ecosystem for entrepreneurs, hit the 100 thousand-affiliate mark and launched 7 online courses for financial education and digital tools.

•
Mibanco granted its first loan “A-morosos”; this program seeks to reinsert delinquent clients in the financial system. The program has registered 400+ payment agreements with delinquent clients.

14

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
01 Loan Portfolio
     
 
Structural loans increased QoQ and YoY. This evolution was mainly driven by an uptick in growth at the subsidiaries in Peru, spurred by higher demand for financing in a context of economic reactivation and boosted by sales through digital or alternative channels.

Structural NPL portfolio grew QoQ and YoY mostly attributable to BCP Stand-alone, driven by an increase in early delinquency from clients who also hold Reactiva loans in SME-Pyme and to specific clients who were impacted by the pandemic in Wholesale Banking at BCP Stand-alone. Nevertheless, the structural NPL ratios improved QoQ and YoY, fueled by an increase in structural loans and a reduction in the refinanced portfolio.
  
     

1.1. Loans
Structural Loans (in Average Daily Balances) (1)(2)(3)

Structural Loans
(S/ millions)
As of
Volume change
% change
% Part. in total structural loans
                     
 
Jun 21
Mar 22
Jun 22
QoQ
YoY
QoQ
YoY
Jun 21
Mar 22
Jun 22
BCP Stand-alone
93,418
102,936
107,668
4,732
14,250
4.6%
15.3%
80.7%
81.6%
81.7%
Wholesale Banking
45,890
52,039
53,465
1,426
7,575
2.7%
16.5%
39.6%
41.3%
40.6%
Corporate
28,244
31,234
32,099
865
3,855
2.8%
13.6%
24.4%
24.8%
24.4%
Middle - Market
17,646
20,805
21,366
562
3,720
2.7%
21.1%
15.2%
16.5%
16.2%
Retail Banking
47,528
50,897
54,203
3,306
6,675
6.5%
14.0%
41.1%
40.4%
41.1%
SME - Business
4,866
4,858
5,430
572
564
11.8%
11.6%
4.2%
3.9%
4.1%
SME - Pyme
10,836
12,210
13,190
980
2,353
8.0%
21.7%
9.4%
9.7%
10.0%
Mortgage
17,884
18,833
19,301
468
1,417
2.5%
7.9%
15.4%
14.9%
14.6%
Consumer
10,076
10,974
11,848
874
1,772
8.0%
17.6%
8.7%
8.7%
9.0%
Credit Card
3,866
4,022
4,435
412
569
10.2%
14.7%
3.3%
3.2%
3.4%
Mibanco
10,232
11,411
12,313
902
2,081
7.9%
20.3%
8.8%
9.0%
9.3%
Mibanco Colombia
963
1,077
1,152
74
189
6.9%
19.7%
0.8%
0.9%
0.9%
Bolivia
8,747
8,602
8,622
20
-125
0.2%
-1.4%
7.6%
6.8%
6.5%
ASB
2,402
2,103
2,030
-73
-372
-3.5%
-15.5%
2.1%
1.7%
1.5%
BAP's total loans
115,761
126,129
131,785
5,655
16,024
4.5%
13.8%
100.0%
100.0%
100.0%

For consolidation purposes, Loans generated in Foreign Currency (FC) are converted to Local Currency (LC).
(1) Includes Work out unit, and other banking. For Quarter-end Balances figures, please refer to “12. Annexes – 12.2 Loan Portfolio Quality”.
(2) Structural Portfolio excludes the Loans offered through Reactiva Peru and FAE-Mype Government Programs (GP).
(3) Internal Management Figures.
  

QoQ, structural loans increased 3.6% FX Neutral (excludes the effect from the +3.4% USDPEN FX depreciation). This evolution was mainly driven by:

•
BCP Stand-alone, particularly in the SME, Consumer and Corporate segments. In SME-Pyme, disbursement volumes increased for Working Capital Loans (+17% QoQ). Better performance was focused on Micro and Small Clients with average ticket disbursements of up to S/45K, driven by successful leads and powered by data analytics and digital channels. In the Consumer segment, growth was fueled by a 17% increase in preferential cash loans (S/18k ticket approximately) after improvements were made in the quantity and effectiveness of leads to reach payroll-based employees with medium to high income levels. In Corporate, growth was
concentrated in short-term operations with corporate clients in Foreign Currency (FC), mainly in the energy, hydrocarbons, mining and fishing sectors; and
•
Mibanco, due to an uptick in disbursements generated through leads (disbursements through leads represented 78.2% of total placements in 2Q22 vs 74.5% in 1Q22) and by an increase in the productivity of relationship managers (sales levels rose to 26.6 operations per month in 2Q22 vs 25.2 in 1Q22). It is important to note that Mibanco’s market share for loans has followed an upward trend over the last four months.  Growth was also due, albeit to a lesser extent, to debt purchases, mainly in the month of April.
 

15

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
01. Loan Portfolio

YoY, structural loans grew 14.6% FX Neutral, with all segments reporting an uptick with the exception of ASB Bank Corp. Growth was driven by:

•
Wholesale Banking at BCP Stand-alone, via an increase in short-term loans in the corporate segment reflecting higher financing needs for Working Capital loans and to a decrease in volumes in 2Q21 due to an uptick in prepayments. In this context, Wholesale Banking structural loan’s share of total loans increased 100bps. SME-Pyme and Consumer segments also drove YoY growth in loans. It is important to note that initiatives in the

Government Program Loans (in average Daily Balances – S/ million)

Government Program (GP) loans decreased 17.1% QoQ and 39.1% YoY, which was primarily due to amortizations of loans in the SMEs segment at BCP Stand-alone. GP loans in quarter-end balances represented 9% of total loans at quarter-end (vs. 11% in March 2022 and 16% in June 2021).

On average, loan terms in Wholesale Banking, Retail Banking and Mibanco expire in 1.4, 1.8 and 2.9 years respectively.
Consumer segment alone led to a 0.9% increase in its loans market share (MS); and
•
Mibanco, which garnered the fruits of a hybrid model that incorporates centralized assessment and multiple distribution channels that registered significant improvements in disbursements through alternative channels (ACH).  At the end of June 2022, operations through ACH accounted for 49.2% of total disbursements vs 31.7% in June 2021.  It is important to note sustained growth in the average loan ticket (S/10.3k in 2Q22 vs S/8.9K in 2Q21), which reflect successful efforts to follow more leads to clients with better risk profiles.

 

Total Loans (in Average Daily Balances) (1)(2)

Total Loans
(S/ millions)
As of
    
Volume change
% change
  
% Part. in total  loans
  
                     
 
Jun 21
Mar 22
Jun 22
QoQ
YoY
QoQ
YoY
Jun 21
Mar 22
Jun 22
BCP Stand-alone
114,436
118,248
120,299
2,051
5,863
1.7%
5.1%
82.0%
82.3%
82.2%
Wholesale Banking
51,684
55,580
56,447
867
4,763
1.6%
9.2%
37.0%
38.7%
38.6%
Corporate
28,825
31,625
32,435
810
3,610
2.6%
12.5%
20.7%
22.0%
22.2%
Middle - Market
22,859
23,955
24,012
56
1,153
0.2%
5.0%
16.4%
16.7%
16.4%
Retail Banking
62,752
62,668
63,852
1,184
1,100
1.9%
1.8%
45.0%
43.6%
43.7%
SME - Business
11,279
9,435
9,330
-105
-1,950
-1.1%
-17.3%
8.1%
6.6%
6.4%
SME - Pyme
19,647
19,404
18,939
-465
-707
-2.4%
-3.6%
14.1%
13.5%
12.9%
Mortgage
17,884
18,833
19,301
468
1,417
2.5%
7.9%
12.8%
13.1%
13.2%
Consumer
10,076
10,974
11,848
874
1,772
8.0%
17.6%
7.2%
7.6%
8.1%
Credit Card
3,866
4,022
4,435
412
569
10.2%
14.7%
2.8%
2.8%
3.0%
Mibanco
13,023
13,582
14,172
589
1,149
4.3%
8.8%
9.3%
9.5%
9.7%
Mibanco Colombia
963
1,077
1,152
74
189
6.9%
19.7%
0.7%
0.8%
0.8%
Bolivia
8,747
8,602
8,622
20
-125
0.2%
-1.4%
6.3%
6.0%
5.9%
ASB
2,402
2,103
2,030
-73
-372
-3.5%
-15.5%
1.7%
1.5%
1.4%
BAP's total loans
139,570
143,613
146,275
2,662
6,704
1.9%
4.8%
100.0%
100.0%
100.0%

For consolidation purposes, Loans generated in Foreign Currency (FC) are converted to Local Currency (LC).
(1) Includes Work out unit, and other banking. For Quarter-end Balances figures, please refer to “12. Annexes – 12.2 Loan Portfolio Quality”.
(2) Internal Management Figures.

QoQ and YoY, loans were affected by amortizations of GP loans. This effect was more than offset by growth in the structural loan portfolio. Note that in 3Q22, new reprogramming facilities will be rolled out for Reactiva Peru loans that fulfill certain requirements.  Accordingly, we expect GP loan amortization levels to drop slightly in coming quarters.

16

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
01. Loan Portfolio

Evolution of the Dollarization Level of Loans per Segment (in Average Daily Balances)(1)(2)

Total Loans
Local Currency (LC) - S/ millions
% change
  
% Structural change
Foreign Currency (FC) - US$ millions
% change
% part. by currency
 
Total
Structural
        
Total
    
Jun 22
 
Jun 21
Mar 22
Jun 22
Jun 21
Mar 22
Jun 22
QoQ
YoY
QoQ
YoY
Jun 21
Mar 22
Jun 22
QoQ
YoY
LC
FC
BCP Stand-alone
80,960
85,292
85,162
59,941
69,980
72,531
-0.2%
5.2%
3.6%
21.0%
8,758
8,751
9,278
6.0%
5.9%
70.8%
29.2%
Wholesale Banking
25,860
29,181
28,411
20,065
25,640
25,429
-2.6%
9.9%
-0.8%
26.7%
6,757
7,009
7,403
5.6%
9.6%
50.3%
49.7%
Corporate
12,572
15,548
15,375
11,990
15,157
15,039
-1.1%
22.3%
-0.8%
25.4%
4,252
4,268
4,505
5.5%
5.9%
47.4%
52.6%
Middle-Market
13,288
13,633
13,036
8,074
10,482
10,390
-4.4%
-1.9%
-0.9%
28.7%
2,504
2,741
2,899
5.7%
15.7%
54.3%
45.7%
Retail Banking
55,100
56,111
56,751
39,876
44,340
47,102
1.1%
3.0%
6.2%
18.1%
2,002
1,741
1,875
7.7%
-6.3%
88.9%
11.1%
SME - Business
8,284
7,016
6,586
1,871
2,440
2,687
-6.1%
-20.5%
10.1%
43.6%
783
642
724
12.8%
-7.5%
70.6%
29.4%
SME - Pyme
19,463
19,238
18,775
10,653
12,044
13,025
-2.4%
-3.5%
8.1%
22.3%
48
44
43
-1.5%
-9.4%
99.1%
0.9%
Mortgage
15,722
16,922
17,353
15,722
16,922
17,353
2.5%
10.4%
2.5%
10.4%
566
507
514
1.4%
-9.1%
89.9%
10.1%
Consumer
8,491
9,615
10,373
8,491
9,615
10,373
7.9%
22.2%
7.9%
22.2%
415
361
390
7.9%
-6.1%
87.6%
12.4%
Credit Card
3,139
3,320
3,664
3,139
3,320
3,664
10.4%
16.7%
10.4%
16.7%
190
187
203
9.0%
7.0%
82.6%
17.4%
Mibanco
12,551
13,109
13,696
9,760
10,938
11,837
4.5%
9.1%
8.2%
21.3%
124
126
126
0.0%
1.8%
96.6%
3.4%
Mibanco Colombia
                 -
                 -
                 -
-
-
-
-
-
-
-
252
286
304
6.3%
20.8%
                 -
100.0%
Bolivia
                 -
                 -
                 -
-
-
-
-
-
-
-
2,289
2,284
2,277
-0.3%
-0.5%
                 -
100.0%
ASB Bank Corp.
                 -
                 -
                 -
-
-
-
-
-
-
-
629
558
536
-4.0%
-14.7%
                 -
100.0%
Total loans
         93,511
98,401
98,858
69,701
80,918
84,368
0.5%
5.7%
4.3%
21.0%
12,051
12,005
12,521
4.3%
3.9%
67.6%
32.4%

(1) Includes Work out unit, and other banking.
(2) Internal Management Figures.

At the end of June 2022, the dollarization level of structural loans increased 20bps QoQ (35.8% in Jun22). This evolution was primarily attributable to an uptick in FC disbursements in Wholesale Banking (whose share in FC rose 170bps QoQ) and to a variation in the exchange rate, which impacted the Wholesale Banking and Middle Market portfolios at BCP Stand-alone and BCP Bolivia in particular.

YoY, the dollarization level of the structural portfolio fell (-380bps) given that growth in LC loans (+21.1%) outstripped the increase registered for FC loans (+3.9%). The uptick in LC was seen primarily in the Wholesale Banking and SME-Pyme segments at BCP Stand-alone and was driven by short-term financing for Working Capital.

Evolution of the Dollarization Level of Loans by Segment (in Average Daily Balances)

(1) The FC share of Credicorp’s loan portfolio is calculated including BCP Bolivia and ASB Bank Corp., however the chart shows only the loan books of BCP Stand-alone and Mibanco.
(2) The year with the historic maximum level of dollarization for Wholesale Banking was 2012, for Mibanco was 2016, for Credit Card was in 2021 and for the rest of segments was 2009.
* For dollarization figures in quarter-end period, please refer to “12. Annexes – 12.2 Loan Portfolio Quality”.

Evolution of Quarter-end Loan Balances

Structural loans balances increased 6.8% QoQ. If we isolate the impact of the drop in the exchange rate, structural loans increased 5.7% QoQ, driven by upticks in Wholesale Banking, SME-Pyme and Consumer loans at BCP Individuals and by growth at Mibanco, which was attributable to the same factors that drove the evolution of average daily balances. If we incorporate the contraction of the GP portfolio in the analysis, total loan balances increased 4.0% QoQ.

In the YoY evolution, structural loans registered 14.1% growth in quarter-end balances. FX Neutral, structural loans rose 14.8%, driven by the same segments responsible for QoQ growth.  Taking into account the decline in GP loans, total loans increased 5.1% YoY.

17

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
01. Loan Portfolio

1.2. Portfolio Quality
Structural Portfolio Quality (in Quarter-end Balances)(1)
Structural Portfolio quality and Delinquency ratios
As of
% change
S/ 000
Jun 21
Mar 22
Jun 22
QoQ
YoY
Structural loans (Quarter-end balance)
120,095,401
128,265,640
137,036,175
6.8%
14.1%
Structural Allowance for loan losses
9,245,140
8,061,670
8,112,356
0.6%
-12.3%
Structural Write-offs
                 742,211
                 378,093
                 413,501
9.4%
-44.3%
Structural IOLs
            4,913,569
            4,841,329
            5,077,879
4.9%
3.3%
Structural Refinanced loans
            1,800,076
            1,714,074
            1,686,186
-1.6%
-6.3%
Structural NPLs
            6,713,645
            6,555,403
            6,764,066
3.2%
0.8%
Structural IOL ratio
4.09%
3.77%
3.71%
-6 bps
-38 bps
Structural NPL ratio
5.59%
5.11%
4.94%
-17 bps
-65 bps
Structural Allowance for loan losses over Structural loans
7.7%
6.3%
5.9%
-37 bps
-178 bps
Structural Coverage ratio of NPLs
137.7%
123.0%
119.9%
-305 bps
-1778 bps

(1)
The Structural Portfolio excludes Government Programs (GP) effects.
The structural NPL portfolio grew QoQ and YoY, which was attributable to an uptick in overdue loans and loans under legal collections at SME-Pyme and Wholesale Banking at BCP Stand-alone and, to a lesser extent, to growth at BCP Bolivia. Nevertheless, given that loan growth outstripped the expansion registered in structural NPLs, the structural delinquency ratio improved QoQ and YoY.
NPL Ratio by Segment


In the QoQ analysis, the segments that contributed to the increase in the NPL portfolio of structural loans were:


 •
SMEs: due to an increase in overdue loans in the early delinquency tranche (<30 days behind), which represents loans that although volatile, tend to be highly recoverable. This increase was driven mainly by SME-Pyme Working Capital loans and from clients that also have GP loans and were unable to service both debts simultaneously. The increase in the NPL portfolio is also due to a drop in write-offs, given that structural loans held by clients that also have GP loans cannot be written-off (for further information see “1.2 Portfolio Quality – Structural Write-offs”);

18

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
01. Loan Portfolio


•
Wholesale Banking: NPL growth is mainly due to the performance of some clients in the real estate (builders and office leasing) and tourism (hotels) sectors, primarily in the Middle Market Banking segment, which were impacted by the pandemic and had been offered debt reprogramming facilities that have already expired. In the coming quarters, we expect an increase of the NPL portfolio. However, this evolution is within our expectations and the exposures are provisioned; and


•
BCP Bolivia: the increase in NPL volumes was in line with expectations, driven by the expiration of grace periods in most of the reprogrammed operations, giving rise to the payment obligation and reflecting an increase in the overdue portfolio. It is important to note that by the end of 2Q22, the grace periods of the majority of high-risk clients had already expired. As such, we expect the delinquency ratio to stabilize and tend towards pre-pandemic levels in coming quarters.

The aforementioned was partially attenuated by the positive evolution at Mibanco, which registered an improvement in payment behavior, and by the evolution at Mibanco Colombia, which benefitted from good collections management.

In the YoY analysis, the uptick in NPL volumes was due to:


 •
SMEs: growth was driven by the same factors discussed in the QoQ analysis. Additionally, the increase in NPL volumes is due to an increase in the late delinquency tranche (>61 days) of long-term loans in SME-Pyme. The latter reflects the accumulation of pending GP related client’s write-offs, which are expected to be regularized in the coming quarters;


•
Wholesale: where the increase in NPLs was driven by the factors outlined in the QoQ analysis. Higher NPLs are within expectations and reflect the real delinquency of clients affected since the pandemic started; and


•
BCP Bolivia:  where delinquency was spurred by the same drivers as those outlined in the QoQ analysis. It is important to note that the NPL volumes in 2Q21 was lower in YoY terms due to the fact that a portion of loans were reprogrammed, which led overdue loans to be reclassified as current.

The aforementioned evolution in NPL levels was partially attenuated by the positive performance of both Mibanco, which has bolstered its collections capabilities, and of Individuals at BCP Stand-alone, where payment behavior improved alongside an uptick in personal liquidity following fund releases from AFPs (Pension Funds) and Severance Indemnity (CTS) accounts.

Structural Write-offs (in Quarter-end balances – S/ thousands)

QoQ, growth in structural write-offs (+9.4%) was driven by BCP Stand-alone, which registered upticks through Individuals and Wholesale Banking. This was partially attenuated by a drop in write-offs at Mibanco and BCP Bolivia. Despite the increase of structural write-offs, the structural write-offs over total structural loans ratio continued to fall below pre-pandemic levels.

YoY, contraction was attributable to Individuals and SMEs at BCP Stand-alone and, to a lesser extent, to Mibanco. This reflects atypically high write-offs in 2Q21, after regulatory restrictions on write-offs (instituted in 2020) were lifted and qualifying loans were allowed to progress to write-off status. It is important to note that new regulatory requirements to report write-offs for clients that simultaneously hold Reactiva loans has been announced. This regulation will go into effect in August and will lead to additional write-offs in 2H22.


 
 
 
19

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
01. Loan Portfolio

NPL Coverage Ratio for Structural NPL Loans by Segment

Credicorp’s Coverage ratio fell QoQ. This was attributable to an uptick in NPL loans (+3.2%), driven primarily by BCP Stand-alone and BCP Bolivia, which outpaced growth in the Allowances balance (+0.6%). In this context, the NPL coverage ratio stood near pre-pandemic levels.

YoY, the NPL coverage ratio continues to follow a downward trend. This reflects a reduction in the Allowances balance, which was driven by a better-than-expected improvement in payment behavior and by a slight increase in the NPL portfolio. It should be noted
that the significant drop in NPL Coverage at BCP Bolivia is due to the fact that grace periods for loans that had been reprogrammed under government mandate in 2021 began to expire and were reflected in the NPL portfolio recently in 2022.

NPL Loans in the Government Program Portfolio (in quarter-end balances – S/ thousands)

At the end of June 2022, NPL loans in the GP portfolio fell slightly QoQ after honoring processes for SME-Pyme loans were completed. This was attenuated by deterioration at Mibanco and within Wholesale Banking.

Honoring processes are being executed through state-backed guarantees for loans that are more than 90 days past due. Average coverages under these guarantees stands at 84%, 91% and 97% for Wholesale Banking, Retail Banking and Mibanco respectively.
 
 
Finally, the reprogrammed portfolio represented 45% of the total GP portfolio at quarter-end (vs 42% in March 2022) due to new reprogramming facilities.

Quality of the Total Portfolio (in Quarter-end Balances)

Loan Portfolio Quality and Delinquency Ratios
As of
% change
S/ 000
Jun 21
Mar 22
Jun 22
QoQ
YoY
Total loans (Quarter-end balance)
143,091,752
144,621,513
150,370,184
4.0%
5.1%
Allowance for loan losses
9,391,151
8,262,383
8,306,500
0.5%
-11.5%
Write-offs
                 742,211
378,093
413,501
9.4%
-44.3%
Internal overdue loans (IOLs) (1)(2)
            5,054,353
            5,872,999
            6,105,256
4.0%
20.8%
Internal overdue loans over 90-days (1)
            3,817,463
            4,424,384
            4,596,259
3.9%
20.4%
Refinanced loans (2)
            1,800,076
            1,714,074
            1,686,186
-1.6%
-6.3%
Non-performing loans (NPLs) (3)
            6,854,429
            7,587,073
            7,791,442
2.7%
13.7%
IOL ratio
3.53%
4.06%
4.06%
0 bps
53 bps
IOL over 90-days ratio
2.67%
3.06%
3.06%
0 bps
39 bps
NPL ratio
4.79%
5.25%
5.18%
-7 bps
39 bps
Allowance for loan losses over Total loans
6.6%
5.7%
5.5%
-19 bps
-104 bps
Coverage ratio of IOLs
185.8%
140.7%
136.1%
-463 bps
-4975 bps
Coverage ratio of IOL 90-days
246.0%
186.7%
180.7%
-603 bps
-6529 bps
Coverage ratio of NPLs
137.0%
108.9%
106.6%
-229 bps
-3040 bps

(1) Includes Overdue Loans and Loans under legal collection. (Quarter-end balances net of deferred earnings).
(2) Figures net of deferred earnings.
(3) Non-performing Loans include Internal overdue loans and Refinanced loans. (Quarter-end balances net of deferred earnings).

In the aforementioned context, Credicorp’s NPL ratio fell 7bps QoQ due to the positive evolution of the structural portfolio. YoY, however, the ratio increased 39bps due to the deterioration and amortization of GP loans.

20

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
02 Deposits
     
 
At the end of 2Q22, 72.2% of Credicorp’s deposit volume was low-cost, which represents a competitive advantage in a context of rising funding costs. In YoY terms, low-cost deposits (FX Neutral) fell 5.1%, driven by a decrease in demand deposits in LC clients moved to amortize GP loans. Likewise, Severance Indemnity deposits (CTS) dropped 23.6% (FX neutral) YoY after the government decreed that funds be released for withdrawal.
Over the same period, Time Deposits registered an increase after a migration from low-cost deposits to this deposit type to take advantage of higher interest rates.

At the end of May 2022, BCP Stand-alone’s share of total deposits stood at 32.4% (-100 bps with regard to June 2021). This evolution was triggered by drop in demand deposits related to the amortization of Reactiva loans. Mibanco reported an MS of 2.5% (+30bps with regard to June 2021) in a context marked by an uptick in time deposits after retail clients that had withdrawn funds last year due to unfavorable juncture migrated back.
  
     
Deposits
As of
% change
Currency
S/ 000
Jun 21
Mar 22
Jun 22
QoQ
YoY
LC
FC
Demand deposits
59,998,764
56,923,859
51,554,195
-9.4%
-14.1%
41.9%
58.1%
Saving deposits
52,687,270
56,454,479
54,936,107
-2.7%
4.3%
52.9%
47.1%
Time deposits
30,302,103
30,029,261
35,923,266
19.6%
18.6%
48.4%
51.6%
Severance indemnity deposits
5,456,510
3,750,593
4,155,932
10.8%
-23.8%
70.1%
29.9%
Interest payable
717,156
757,772
871,075
15.0%
21.5%
48.2%
51.8%
Total Deposits
149,161,803
147,915,964
147,440,575
-0.3%
-1.2%
48.2%
51.8%

Our deposit base fell 0.3% QoQ. FX neutral fell 2.0% due to:

 
•
An 11.2% drop in Demand Deposits, which was triggered by the fact that Wholesale Clients at BCP Stand-alone used deposit balances to amortize Reactiva loans and to regularize income tax;
 
•
A 4.2% drop in Savings Deposits, which was driven by an outflow from LC funds. The latter was partially offset by an increase in FC after individuals purchased US Dollars at BCP Stand-alone;
 
•
A 17.6% increase in Time Deposits, which was driven primarily by evolution at BCP Stand-alone (fund inflows due to rising interest rates) and by an uptick at Mibanco, which also, reflects efforts to capture stable funding.
 
•
Growth of 9.7% in Severance Indemnity Deposits, given that statutory payments are deposited in May. The effect of these deposits was partially offset after the government lifted restrictions to fund access.

Low-cost deposits (Demand + savings) represented 72.2% of total deposits, which represented a drop of 4.5 p.p QoQ.

In the YoY analysis, deposits fell 1.2%. FX neutral deposits dropped 0.7%, driven by:

 
•
A 13.6% drop in Demand Deposits in both currencies after clients used balances to amortize Reactiva loans and meet other liquidity needs.
 
•
A 23.6% decrease in Severance Indemnity Deposits after restrictions on fund use were lifted.
 
•
A 19.1% increase in Time Deposits, spurred by outflows from low-cost deposits at BCP Stand-alone to this deposit type to take advantage of higher interest rates and to a lesser extent, by an increase in the Time Deposit volume at Mibanco, after retail clients that had withdrawn funds last year due to the juncture migrated back.
 
•
Growth of 4.7% in Savings Deposits, after funds were released from AFPs and Severance Indemnity Accounts (CTS) and subsequently deposited in FC to hedge against exchange rate volatility.

21

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
Deposit Dollarization Level

Deposits by Currency
(measured in quarter-end balances)
At the end of June 2022, the dollarization level was up 0.6 p.p. QoQ (-0.3 p.p FX neutral) due to an uptick in the exchange rate. Savings Deposits absorbed the brunt of this impact after individuals at BCP Stand-alone moved to purchase dollars. Dollarization levels of Time Deposits fell slightly after LC balances registered growth in a context of interest rate hikes in LC.
In YoY terms, dollarization rose. This was primarily driven by 4.3% drop in LC deposits, which was attributable to a decrease in Demand Deposits, which in turn reflected the consumption of excess liquidity and the use of funds to amortize Reactiva loans. FC balances increased 1.9% (+2.8% with a constant exchange rate), through Time Deposits and Savings Deposits.

Deposits by currency and type
(measured in quarter-end balances)


Loan/Deposit Ratio (L/D Ratio)

The L/D ratio rose 8.7 and 3.9 percentage points YoY at BCP Stand-alone and Mibanco respectively. This growth reflects a significant uptick in loan origination at both subsidiaries due to economic reactivation. In parallel, deposit balances fell, driven by reduced volumes of Demand Deposits in LC, mainly at BCP Individual and triggered by amortization of GP loans.  In this scenario, the L/D ratio at Credicorp stood at 102%.
L/D Ratio Local Currency
L/D Ratio Foreign Currency
 

22

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
02. Deposits
Market Share of Deposits in the Peruvian Financial System
At the end of May 2022, the MS of Total Deposits at BCP Stand-alone and Mibanco in Peru was 32.4% and 2.5% (-100bps and +30bps with regard to June 2021 respectively. At BCP Stand-alone Demand Deposits dropped due to amortizations of loans through government programs, where the bank was a major player. The increase of the share of Time Deposits at Mibanco is noteworthy and primarily attributable to a returned of funds from retail clients and secondarily, to the bank’s successful strategy to capture stable funds.
It is noteworthy, in a context of higher interest rates, BCP leads the market share of low-cost deposits in the Peruvian financial system.

23

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
03 Interest-earning assets (“IEAs”) and Funding
     
 
At the end of 2Q22 IEAs dropped 3.1% YoY, due to a decrease in cash and due from banks and investment’s balances, which was partially offset by growth in structural loans. The decrease in cash and due from banks reflects the drop in the liquidity level of the banking system, the use of liquid assets to fund loan growth and the fact that dividend payments were made this quarter. Investments fell 17.2% YoY, mainly due to the expiration of CDs, which were not renewed. The latter was aimed to maintain liquidity in a context of loan growth but with a reduced funding balance. Structural loans increased 14.1% YoY, driven by growth in economic activity and in client consumption.
 
YoY, funding fell 4.6%, spurred by lower balances of BCRP instruments and the utilization of deposits balances by clients, which impacted our low-cost funding base (core deposits).
  
     

3.1. IEAs
Interest Earning Assets
As of
% change
S/000
Jun 21
Mar 22
Jun 22
QoQ
YoY
Cash and due from banks
29,058,684
29,560,067
23,644,089
-20.0%
-18.6%
Interbank funds
16,790
3,445
187,376
5339.1%
1016.0%
Total investments
54,772,644
48,145,429
45,342,775
-5.8%
-17.2%
Cash collateral, reverse repurchase agreements and securities borrowing
1,616,654
1,516,855
2,046,209
34.9%
26.6%
Financial assets designated at fair value through profit or loss
921,851
856,337
765,195
-10.6%
-17.0%
Total loans
143,091,752
144,621,513
150,370,184
4.0%
5.1%
Total interest earning assets
229,478,375
224,703,646
222,355,828
-1.0%
-3.1%

QoQ, IEAs fell 1.0%. This evolution was triggered by a decrease in balances cash and due from banks and investments, which was partially offset by loan growth.

The decline in cash and due from banks was associated with (i) a system-wide decrease in liquidity levels due to amortizations of government program (GP) loans, (ii) the use of liquid assets to fund loan growth, and (iii) Credicorp’s dividend payment. The decrease in investments was attributable to the expiration of certificates of deposits, which were not renewed to maintain liquidity in a climate marked by both loan growth and a decrease in the funding base.

Loans grew 4.0%, spurred by mixed dynamics, where growth was influenced by an exchange rate effect on our dollar-denominated portfolio, and by amortizations in GP loans. If we isolate the exchange rate effect and the effect of variation in the GP loan balance, structural loans grew 4.9%, driven by better dynamics at both the wholesale and retail portfolios.

YoY, IEAs fell 3.1%. This decline was spurred by the same factors identified in the quarterly analysis, but the YoY evolution reflects a larger reduction of investment balances, which was attributable to (i) a drop in the company and system-wide liquidity levels due to the decrease in GP loan balances following amortizations and to (ii) strategies to reduce the portfolio duration. Structural loans rose 14.1% in line with post-pandemic economic recovery while government loans fell 42.0%.

3.2. Funding
Funding
As of
    
% change
  
S/ 000
Jun 21
Mar 22
Jun 22
QoQ
YoY
Deposits and obligations
    149,161,803
   147,915,964
     147,440,575
-0.3%
-1.2%
Due to banks and correspondents
         6,239,161
        6,362,990
          6,456,360
1.5%
3.5%
BCRP instruments
      23,329,990
     17,532,350
       16,031,618
-8.6%
-31.3%
Repurchase agreements
         1,276,678
        1,218,028
          1,340,423
10.0%
5.0%
Bonds and notes issued
      16,951,481
     16,044,671
       16,579,674
3.3%
-2.2%
Total funding
    196,959,113
   189,074,003
     187,848,650
-0.6%
-4.6%

QoQ, funding fell 0.6% mainly due to a decrease in the BCRP instrument volume, which was attributable to amortizations of GP loans. YoY, funding fell 4.6%. This evolution was driven primarily by amortizations of GP loans and by moves by retail and wholesale clients to use account balances.

24

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
04 Net Interest Income (NII)
     
 
In 2Q22, Net Interest Income continued to recover. This evolution was attributable to the fact that loans ─our highest yielding asset─ reported strong growth, which was accompanied by our effective repricing strategies. It is worth mentioning that the volume dynamics explained in the IEAs section led to a higher yielding IEA mix. These factors offset the negative effect generated by an increase in the funding cost that was driven by higher interest rates and by a decrease in low-cost funding sources which negatively impacted the funding mix. At the end of 2Q22, 56% of the funding base was composed of low-cost deposits.
In this context, the Net Interest Margin in 2Q22 rose 46bps QoQ and 89bps YoY to stand at 4.90% while the Structural Net Interest Margin stood at 5.18% (+46bps QoQ, +86pbs YoY).
  
     
Net Interest Income / Margin
Quarter
    
% change
As of
  
% change
S/ 000
2Q21
1Q22
2Q22
QoQ
YoY
Jun 21
Jun 22
Jun 22 / Jun 21
Interest Income
          2,891,579
          3,172,346
           3,488,113
10.0%
20.6%
         5,707,652
         6,660,459
16.7%
Interest Expense
             582,537
             638,256
             747,673
17.1%
28.3%
          1,275,227
          1,385,929
8.7%
Net Interest Income
  2,309,042
  2,534,090
  2,740,440
8.1%
18.7%
  4,432,425
  5,274,530
19.0%
                 
Balances
                
Average Interest Earning Assets (IEA)
    230,237,853
     228,195,289
    223,529,737
-2.0%
-2.9%
    227,052,978
     227,021,380
0.0%
Average Funding
       197,108,681
     192,347,695
      188,461,327
-2.0%
-4.4%
       194,215,081
       191,735,019
-1.3%
                 
Yields
                
Yield on IEAs
5.02%
5.56%
6.24%
68bps
122bps
5.03%
5.87%
84bps
Cost of Funds
1.18%
1.33%
1.59%
26bps
41bps
1.31%
1.45%
14bps
Net Interest Margin (NIM)
4.01%
4.44%
4.90%
46bps
89bps
3.90%
4.65%
75bps
Risk-Adjusted Net Interest Margin
3.38%
3.99%
4.25%
26bps
87bps
3.09%
4.10%
101bps
Peru's Reference Rate
0.25%
4.00%
5.50%
150bps
525bps
0.25%
5.50%
525bps
FED funds rate
0.25%
0.50%
1.75%
125bps
150bps
0.25%
1.75%
150bps

Net Interest Income rose 8.1% QoQ, 18.7% YoY during the quarter and 19.0% YTD as of the end of June given that growth in income outpaced the increase registered in expenses in a context marked by rising interest rates, on-going growth in structural loans, and a drop in low-yield assets. The positive evolution of interest income offset growth in expenses, which was attributable to an uptick in passive rates and a reduction in low-cost funding. In this scenario, NIM grew 46pbs QoQ, 89bps YoY and 75bps YTD to stand at 4.90% in 2Q22 and 4.65% YTD at the end of June.

For more information on interest income and interest expenses by segment, see annex 12.3.

Net Interest Margin

Structural NIM registered an uptick in recovery, driven by a higher-yield balance structure and the positive price effect generated by an increase in interest rates and active yield management strategies.  This dynamic also explains the evolution of the Risk-Adjusted NIM, which stood at 4.25% this quarter, very close to pre-pandemic levels.

To analyze the evolution of Net Interest Income, it is important to differentiate dynamics by currency given that the trends for volumes and variations in market rates vary for each. The reference rate in LC (BCRP) increased 150bps QoQ and 375bps YoY while the FC rate (FED funds rate) rose 125bps QoQ and 150 bps YoY.
 

25

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
04. Net Interest Income (NII)

Dynamics of Net Interest Income by Currency

Interest Income / IEA
2Q21
1Q22
2Q22
  
Jun 21
Jun 22
S/ millions
Average
    
Average
    
Average
      
Average
    
Average
    
 
Balance
Income
Yields
Balance
Income
Yields
Balance
Income
Yields
  
Balance
Income
Yields
Balance
Income
Yields
Cash and equivalents
30,485
6
0.1%
30,979
35
0.5%
26,697
48
0.7%
  
28,826
14
0.1%
28,113
83
0.6%
Other IEA
2,598
16
2.4%
2,557
19
2.9%
2,592
14
2.2%
  
2,878
25
1.7%
2,777
33
2.4%
Investments
57,093
394
2.8%
48,549
433
3.6%
46,744
497
4.2%
  
54,973
760
2.8%
47,148
929
3.9%
Loans
140,061
2,476
7.1%
146,109
2,686
7.4%
147,496
2,930
7.9%
  
140,376
4,909
7.0%
148,984
5,615
7.5%
Structural
116,439
2,397
8.2%
128,597
2,619
8.1%
132,651
2,871
8.7%
  
116,557
4,744
8.1%
132,982
5,490
8.3%
Government Programs
23,622
79
1.3%
17,513
66
1.5%
14,845
59
1.6%
  
23,819
165
1.4%
16,002
125
1.6%
Total IEA
230,238
2,892
5.0%
228,195
3,172
5.6%
223,530
3,488
6.2%
  
227,053
5,708
5.0%
227,021
6,660
5.9%
IEA (LC)
59.9%
75.7%
6.4%
57.8%
78.8%
7.6%
58.6%
78.2%
8.3%
  
60.5%
75.9%
6.3%
57.2%
78.5%
8.1%
IEA (FC)
40.1%
24.3%
3.0%
42.2%
21.2%
2.8%
41.4%
21.8%
3.3%
  
39.5%
24.1%
3.1%
42.8%
21.5%
2.9%

Interest Expense / Funding
2Q21
1Q22
2Q22
  
Jun 21
Jun 22
S/ millions
Average
    
Average
    
Average
      
Average
    
Average
    
 
Balance
Expense
Yields
Balance
Expense
Yields
Balance
Expense
Yields
  
Balance
Expense
Yields
Balance
Expense
Yields
Deposits
148,894
210
0.6%
149,128
259
0.7%
147,678
337
0.9%
  
145,764
433
0.6%
148,891
596
0.8%
BCRP + Due to Banks
29,589
101
1.4%
25,400
116
1.8%
23,192
142
2.4%
  
30,641
213
1.4%
24,697
258
2.1%
Bonds and Notes
17,407
179
4.1%
16,562
165
4.0%
16,312
168
4.1%
  
16,635
446
5.4%
16,829
334
4.0%
Others
1,218
92
30.3%
1,257
98
31.1%
1,279
101
31.5%
  
1,175
183
31.2%
1,318
198
30.1%
Total Funding
197,109
583
1.2%
192,348
638
1.3%
188,461
748
1.6%
  
194,215
1,275
1.3%
191,735
1,386
1.4%
Funding (LC)
54.5%
48.6%
1.1%
51.4%
53.6%
1.4%
51.4%
58.4%
1.8%
  
55.5%
45.5%
1.1%
51.0%
56.2%
1.6%
Funding (FC)
45.5%
51.4%
1.3%
48.6%
46.4%
1.3%
48.6%
41.6%
1.4%
  
44.5%
54.5%
1.6%
49.0%
43.8%
1.3%
                                 
NIM
230,238
2,309
4.0%
   228,195
2,534
4.4%
  223,530
      2,740
4.9%
  
  227,053
4,432
3.9%
227,021
5,275
4.6%
NIM (LC)
59.9%
82.5%
5.5%
57.8%
85.1%
6.5%
58.6%
83.7%
7.0%
  
60.5%
84.6%
2.7%
57.2%
84.4%
3.4%
NIM (FC)
40.1%
17.5%
1.7%
42.2%
14.9%
1.6%
41.4%
16.3%
1.9%
  
39.5%
15.4%
0.8%
42.8%
15.6%
0.8%

QoQ analysis
QoQ, Net Interest Income rose 8.1%. This evolution was driven primarily by the dynamics of IEAs in LC and by Peru’s reference rate. IEAs in LC represent 59% of total IEAs and account for 84% of the Net Interest Margin generated in 2Q22.

Local Currency Dynamics (LC)
Net Interest Income in LC rose 6.3%, product of the fact that growth in interest income outpaced the increase reported for expenses due to the following dynamics:

Average IEAs in LC fell slightly and registered mixed variations in their components. Average structural loans grew 3.8% while liquid assets, investments and government program loans (GP) dropped. The movements in these accounts generated a higher-yield IEA mix in LC. Yields on components of IEA in LC increased, mainly for our loans and investments, which reflects the increase in Peru’s reference rate and our active yield management strategies. Yields of IEAs in LC rose from 7.6% in 1Q22 to 8.3% in 2Q22. Accordingly, the key factors that contributed to a 9.2% increase in interest income in LC were price and mix effects.

Average funding in LC fell 2.1%, driven by a decrease in the volumes of BCRP instruments and deposits after GP loans were amortized. Within the deposit mix, funds from demand deposits and savings deposits (both low cost) migrated to time deposits, which entail higher costs and led the funding cost to rise.  The funding cost in LC rose from 1.4% in 1Q21 to 1.8% in 2Q22, driven primarily by an increase in market rates, which subsequently impacted wholesale banking deposits and funding sources. Interest expenses in LC increased 27.5% due to negative price and mix effects.

Dynamics in Foreign Currency (FC)
Net Interest Income in FC rose 18.9% due to the following dynamics:

Average IEA in FC fell 3.9%, spurred by a decrease in the balance for liquid assets and investments. This drop was partially offset by loan growth, where wholesale segments drove demand. The aforementioned dynamic generated a higher-yield mix of IEAs in FC. FC rates increased slightly, in line with growth in the FED’s funds rate. Higher yields and a favorable evolution of the IEA mix led interest income in FC to rise 12.8%.

Average funding in FC dropped 1.9%, spurred by income tax regularization payments, which impacted account balances, and the fact that wholesale funding registered a decrease. The cost of funding this quarter rose due to interest rate hikes in US Dollars. In this context, interest expenses in FC rose 5.1%.

26

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
04. Net Interest Income (NII)

YoY Analysis

YoY, Net Interest Income rose 18.7%, driven primarily by the evolution of IEAs and of LC rates.

Dynamics in Local Currency (LC)
Net Interest Income in LC rose 20.3% YoY in tandem with the following dynamics:

Average IEA in LC fell 5.0% YoY due to the following:
 
•
Average structural loans grew 20.3% after origination levels rose in Wholesale Banking, Retail Banking and Microfinance;
 
•
Average balances of government programs fell 37.2% due to loan amortization;
 
•
Investments fell after certificates of deposits were not renewed to maintain liquidity to fund loan growth, and sales of sovereign bonds to reduce the portfolio’s duration; and
 
•
Available funds fell due to a drop in liquidity in the system; dividends distribution; and a reduction in retail funding.

Movements in these accounts led to a higher-yield IEA mix in LC. Yields on assets with shorter maturities (Available funds and Short-term Investments) increased due to upward shifts in the reference rate, which led market rates in LC to rise. Additionally, our loan portfolio has benefitted from higher yields through effective repricing strategies. Combined, these effects boosted the yield of IEA in LC, which rose from 6.4% in 2Q21 to 8.3% in 2Q22. In this context, income in LC increased 24.7%, driven by an uptick in the volume of structural loans and by a positive price effect across IEAs.

Average funding in LC fell 9.9% due to lower balances of BCRP Instruments and low-cost deposits, in line with our clients’ amortizations of Reactiva loans.

Yields on LC funding sources increased, in particular for interest-bearing deposits and BCRP Instruments, in line with the increase in the reference rate. The cost of funds in LC rose from 1.1% in 2Q21 to 1.8% in 2Q22. Due the price effect, interest expenses in LC increased 54.1%.

Dynamics in Foreign Currency (FC)
Net Interest Income in FC grew 11.1%, which was driven by the following dynamics:

Average IEA in FC remained stable given that the drop in investments was offset by an uptick in structural loans. This generated a positive mix effect on the IEA yield.

The IEA yield in FC rose from 3.0% in 2Q21 to 3.3% in 2Q22 due to the mix effect described above and to a slight increase in yields on liquid assets. Positive volume and price effects led FC income to rise 8.1%.

Average funding in FC rose 2.1%, which was attributable to an increase in savings deposits after clients migrated to the US dollar as a refuge in a context marked by exchange rate volatility. The FC funding cost rose from 1.3% in 2Q21 to 1.4% in 2Q22, in line with an increase in FC rates. Interest expenses in FC grew 4.0%, which was primarily attributable to an increase in passive rates.

YTD analysis

In the YTD analysis, Net interest Income rose 19%. The drivers of this growth were the same as those that drove the YoY evolution.

27

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
05 Provisions
     
 
Structural provisions remain below pre-pandemic levels. Nonetheless, provisions increased QoQ due to the deterioration of economic projections. Growth in expenses was primarily driven by the Individuals segment at BCP Stand-alone and by BCP Bolivia and to a lesser extent by a reduction in recoveries of written-off loans. YoY, structural Provisions remained stable, given that higher expenses at BCP Bolivia were offset by a decrease at BCP Stand-alone and Mibanco.

The Structural Cost of Risk (CoR) stood at 1.08% in 2Q22. This quarter, the increase in provisions was offset by Loan growth. YTD, the reduction in provisions was attributable to our prudent management during the pandemic. Currently, CoR is situated in the inferior range of our guidance.
  
     
Provisions(1) and Cost of Risk (CoR) of the Structural Portfolio

Structural Loan Portfolio Provisions
Quarter
% change
As of
% change
S/ 000
2Q21
1Q22
2Q22
QoQ
YoY
Jun 21
Jun 22
Jun 22 / Jun 21
Gross provision for credit losses on loan portfolio
(446,508)
(346,809)
(453,605)
30.8%
1.6%
(1,053,509)
(800,414)
-24.0%
Recoveries of written-off loans
77,627
93,091
83,745
-10.0%
7.9%
142,962
176,836
23.7%
Provision for credit losses on loan portfolio, net of  recoveries
(368,881)
(253,718)
(369,860)
45.8%
0.3%
(910,547)
(623,578)
-31.5%
Structural Cost of risk (1)
1.23%
0.79%
1.08%
29 bps
-15 bps
1.52%
0.91%
-61 bps

(1) Annualized Provision for credit losses on loan portfolio, net of recoveries.
(2) The Structural Cost of risk excludes the Provisions for credit losses on loan portfolio, net of recoveries and Total Loans from the Reactiva Peru and FAE Government Programs.

QoQ structural Provisions increased, which was mainly attributable to the evolution at BCP Stand-alone. Notably, the structural Cost of Risk remains within the Guidance range. The segments that pushed the ratio upwards were:

•
Individuals: mainly Consumer and Credit Card (CC) after the macroeconomic variables of our models were updated to reflect the deterioration in real and projected indicators (such as GDP and inflation), which led real and forward-looking risk to increase for low-income clients. Additionally, the increase in Credit Cards was triggered by a change in the portfolio mix, where the share of “revolving” vs “total payers” clients rose. The Mortgage segment also registered an expansion in provisions due to an increase in client risk; and

•
BCP Bolivia: due to grace periods expirations; debt forgiveness and charge-offs, which reached historic levels; together with an exchange rate effect. In line with grace periods expirations, we expect a normalization of provisions during the 2H22, given that most of the delinquency from reprogrammed operations was already materialized in the first half of the year.

The above was partially attenuated by a reduction in provisions for Wholesale Banking at BCP Stand-alone, which was mainly driven by a base effect from 1Q21, when methodological adjustments were made to models. The drop in was attributable to SMEs at BCP Stand-alone, which registered an improvement in payment behavior among a specific set of clients.  Mibanco also registered a decrease in provisions, albeit comparatively lower, due to positive payment behavior. However, we expect expenses at Mibanco to increase in 2H22 due to a less favorable macroeconomic context.
Structural Cost of Risk by Subsidiary
YoY, the structural provisions increased slightly, while the structural CoR fell 15 bps due to a denominator effect. Within the main variations, the following stood out:

28

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
05. Provisions

•
Bolivia: growth in provisions for approximately S/80 million was primarily driven by the base effect given that in 2Q21, historically low levels of provisions were reported due to reversals after the Bank required clients in the Consumer segment to provide collateral against loans.

The aforementioned was offset by a drop in provisions expenses in Individuals and Wholesale Banking at BCP Stand-alone and, to a lesser extent, by a drop in expenses at Mibanco after methodological adjustments were made to its models to reflect variations in payment behavior. In Individuals, the reduction was driven by a base effect in 2Q21, when extraordinary provisions were set aside for Mortgage loans. In Wholesale Banking, the reduction was spurred by a drop in the balance of Stage 3 loans of specific clients. At Mibanco, the decline was attributable to a decrease in volumes of written-off loans.

Provisions and CoR in the Government Loan Portfolio (PG)

GP Loan Portfolio Provisions
Quarter
% change
As of
% change
S/ 000
2Q21
1Q22
2Q22
QoQ
YoY
Jun 21
Jun 22
Jun 22 / Jun 21
Gross provision for credit losses on loan portfolio
5,501
(3,872)
6,569
-269.6%
19.4%
(10,480)
2,697
-125.7%
Recoveries of written-off loans
-
-
-
-
-
-
-
-
Provision for credit losses on loan portfolio, net of  recoveries
5,501
(3,872)
6,569
-269.6%
19.4%
   (10,480)
2,697
-125.7%
GP Cost of risk (1)
-0.10%
0.09%
-0.20%
-29 bps
-10 bps
0.09%
-0.04%
-13 bps
(1) The GP Cost of risk includes the Provisions for credit losses on loan portfolio, net of recoveries and Total Loans from the Reactiva Peru and FAE Government Programs.

GP Provisions fell QoQ after more honoring processes of state-backed guarantees were executed and the portfolio registered lower levels of deterioration, particularly in SME-Pyme. YoY, the drop reflects an uptick in amortizations and effective execution of honoring processes.

The GP Allowances for loan losses represents 2% of the total Allowances balance at Credicorp. This volume reflects the fact that state-backed coverage of GP loans is significant (loan coverage between 80% to 98%). For more information, see 1.2 Portfolio Quality – NPL Portfolio of Government Loans.

Provisions and CoR of Total Portfolio

Loan Portfolio Provisions
Quarter
% change
As of
% change
S/ 000
2Q21
1Q22
2Q22
QoQ
YoY
Jun 21
Jun 22
Jun 22 / Jun 21
Gross provision for credit losses on loan portfolio
(441,007)
(350,681)
(447,036)
27.5%
1.4%
(1,063,989)
(797,717)
-25.0%
Recoveries of written-off loans
77,627
93,091
83,745
-10.0%
7.9%
142,962
176,836
23.7%
Provision for credit losses on loan portfolio, net of  recoveries
  (363,380)
  (257,590)
  (363,291)
41.0%
0.0%
 (921,027)
 (620,881)
-32.6%
Cost of risk (1)
1.02%
0.71%
0.97%
26 bps
-5 bps
1.29%
0.83%
-46 bps
(1) Annualized Provision for credit losses on loan portfolio, net of recoveries / Total Loans.

The analysis of structural and GP loans shows that the CoR for the total portfolio rose 26bps QoQ and dropped -5bps YoY. The impact of GP loans, which stood at 11 bps, was attributable to a denominator effect, in line with amortizations of GP loans.

QoQ Evolution of the Cost of Risk 
(1) Others include BCP Bolivia, Mibanco Colombia, ASB Bank Corp and eliminations. 
YoY Evolution of the Cost of Risk
 (1) Others include BCP Bolivia, Mibanco Colombia, ASB Bank Corp and eliminations.
 
29

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
06 Other Income
     
 
Other core income rose maintains a growing trend driven by growth in fees in a context marked by an uptick in transactions and higher on-going FX volatility.

Non-core other income fell due to Net losses on securities. These losses were driven by higher volatility in the stock markets, which negatively affected investments at Credicorp Stand-alone, Prima, ASB and Pacífico.
  
     
6.1 Other core income
Core Other Income
Quarter
% Change
As of
% Change
(S/ 000)
2Q21
1Q22
2Q22
QoQ
YoY
Jun 21
Jun 22
Jun 22/ Jun 21
Fee income
         862,411
         891,031
         920,492
3.3%
6.7%
     1,693,182
     1,811,523
7.0%
Net gain on foreign exchange transactions
         238,440
         259,710
         269,059
3.6%
12.8%
         413,251
         528,769
28.0%
Total other income Core
     1,100,851
     1,150,741
     1,189,551
3.4%
8.1%
     2,106,433
     2,340,292
11.1%
 The upward trend in other core income continued. This positive evolution was led by BCP Stand-alone, which registered an increase in fee income due to an uptick in digital transactions, which reflected on-going migration from traditional to digital channels, and growth in POS use.  In this context, cashless transactions represented 43% of the transaction amount at the end of June. Mibanco also reported an increase in fee income, which was driven primarily by growth in insurance sales and secondarily by a decrease in in fees paid to commercial partners. The aforementioned was partially offset by a drop in fee income from mutual funds, after extraordinary income from entry to third-party funds through international platforms were reported in 2Q21. Gains of foreign exchange transactions continued to trend upward due to growth in transaction volumes and an uptick in exchange rate volatility.

Fee income by banking business

Composition of fee income by banking business
Banking Business Fees
Quarter
% Change
As of
% Change
S/ 000
2Q21
1Q22
2Q22
TaT
AaA
Jun 21
Jun 22
Jun 22 / Jun 21
Payments and transactionals (1)
234,282
290,197
306,095
5.48%
30.65%
460,039
596,292
29.62%
Liability accounts (2)
207,005
217,956
234,038
7.38%
13.06%
624,606
692,623
10.89%
Loan Disbursement (3)
88,473
90,576
91,940
1.51%
3.92%
575,178
634,510
10.32%
Off-balance sheet
60,592
60,370
59,304
-1.77%
-2.13%
286,081
302,190
5.63%
Mibanco (Peru and Colombia)
16,713
33,276
35,190
5.75%
110.56%
160,252
188,140
17.40%
Insurances
26,897
30,303
28,823
-4.88%
7.16%
93,882
127,592
35.91%
BCP Bolivia
30,558
27,400
25,470
-7.04%
-16.65%
119,176
111,996
-6.02%
Wealth Management and Corporate Finance
21,590
18,785
18,126
-3.51%
-16.04%
98,537
89,781
-8.89%
ASB
11,202
12,280
9,483
-22.78%
-15.34%
57,784
58,674
1.54%
Others (4)
9,407
4,596
-1,145
-124.91%
-112.17%
42,566
25,214
-40.77%
Total
706,719
785,739
807,324
2.75%
14.24%
2,518,100
2,827,012
12.27%
(1) Corresponds to fees from: credit and debit cards; payments and collections.
(2) Corresponds to fees from: Account maintenance, interbank transfers, national money orders y international transfers.
(3) Corresponds to fees from retail and wholesale loan disbursements.
(4) Use of third-party network, other services to third parties and Commissions in foreign branches.

Fees for banking services registered maintain a growing trend due to:

 
•
Economic reactivation in Peru as well as growth in digital transactions and an uptick in the use of POS, both of which were reflected an increase in fee paying transactions. In the aforementioned context, credit and debit cards registered growth of 32% and 118% year over year respectively.
 
•
Fees relative maintenance of deposits and for interbank transfers rose 51% year over year.
 
•
Fees relative to loan disbursements rose, led by personal loans (+12% QoQ, +96% YoY and +72% YTD).  In a context marked by an uptick in digital adoption, 71% of the personal loans were granted through digital channels.
 
•
Growth in the fee level registered by Mibanco, which was driven by an uptick in sales of bancassurance; and in the level reported by Mibanco Colombia for microfinance fees, which was associated with an uptick in loan disbursements.

The aforementioned was partially offset by an increase in fees relative to other networks use and other third-party services.

30

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
06. Other Income
6.2 Other Non-Core income
Non-core Other income
Quarter
% Change
As of
% Change
(S/ 000)
2Q21
1Q22
2Q22
QoQ
YoY
Jun 21
Jun 22
Jun 22/ Jun 21
Net gain on securities
         (69,947)
         (56,866)
         (94,180)
n.a.
n.a.
         (53,660)
       (151,046)
181.5%
Net gain from associates (1)
           12,302
           24,014
           29,219
21.7%
137.5%
           41,707
           53,233
27.6%
Net gain on derivatives held for trading
           52,606
            (5,982)
           12,304
n.a.
-76.6%
         131,153
             6,322
-95.2%
Net gain from exchange differences
           32,959
         (17,060)
         (17,066)
0.0%
-151.8%
           23,677
         (34,126)
-244.1%
Other non-financial income
           62,923
         147,902
           84,152
-43.1%
33.7%
         136,914
         232,054
69.5%
Total other income Non-Core
           90,843
           92,008
           14,429
-84.3%
-84.1%
         279,791
         106,437
-62.0%
(1)
Includes net income from other investments, mainly from the result of Banmedica.

YoY evolution of other non-core income
(thousands of soles)
(1)Others includes Grupo Credito, Credicorp Stand-alone, eliminations y others.
YTD evolution of other non-core income
(thousands of soles)

 
Other non-core income fell driven primarily by to the negative results reported for the Net loss on securities in a context impacted by higher levels of volatility across stock markets this quarter. This volatility has mainly affected:
•
Investments in mutual funds at Credicorp Stand-alone,
•
International fixed-income portfolios at ASB and Credicorp Capital,
•
Investments that are part of Prima’s legal reserve; and
•
Fixed-income investments at Pacífico.

In addition, YoY, other non-core income was affected by Net Loss on derivatives at BCP Stand-alone which maintains where these losses were offset by higher interest income on investments in fixed income in LC.  
YTD, these losses were partially offset by extraordinary income at BCP Stand-alone, which was associated with tax refunds in 1Q22.

31

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
07 Insurance Underwriting Results
     
 
The insurance underwriting result registered a decrease of 3.2% QoQ. This result was driven by growth in claims in the life business attributable to higher cases reported and the negative effect of inflation, partially mitigated by an improvement in the results of the P&C business.
In the YoY and YTD analysis, the underwriting result increased due to a drop in claims in the Life business associated with the improvement in the sanitary context. Net earned premiums also rose YoY and YTD in both the Life and P&C lines, which reflected economic reactivation.
  
     
Insurance underwriting result (1)
Quarter
% change
As of
% change
S/ 000
  
2Q21
1Q22
2Q22
QoQ
YoY
Jun 2021
Jun 2022
2022 / 2021
Total
Net earned premiums
         639,944
         690,536
         695,547
0.7%
8.7%
1,283,872
1,386,083
8.0%
Net claims
       (691,335)
       (478,506)
       (492,258)
2.9%
-28.8%
    (1,314,688)
       (970,764)
-26.2%
Acquisition cost (2)
         (84,944)
         (70,484)
         (66,247)
-6.0%
-22.0%
       (170,766)
       (136,731)
-19.9%
Total insurance underwriting result
       (136,335)
         141,546
         137,042
-3.2%
n.a.
       (201,582)
         278,588
n.a.
Loss Ratio
108.0%
69.3%
70.8%
150 pbs
-3720 pbs
102.4%
70.0%
-3240 pbs

Net earned premiums
         331,825
         365,492
         365,452
0.0%
10.1%
674,983
730,944
8.3%
Life
Net claims
       (546,439)
       (315,718)
       (335,204)
6.2%
-38.7%
    (1,048,152)
       (650,922)
-37.9%
 
Loss Ratio
164.7%
86.4%
91.7%
530 pbs
-7300 pbs
155.3%
89.1%
-6620 pbs

Net earned premiums
         291,172
         308,891
         313,518
1.5%
7.7%
575,595
622,408
8.1%
P&C
Net claims
       (135,982)
       (156,851)
       (153,046)
-2.4%
12.5%
       (250,114)
       (309,897)
23.9%
 
Loss Ratio
46.7%
50.8%
48.8%
-200 pbs
210 pbs
43.5%
49.8%
630 pbs
(1) Includes the results of the Life, Property & Casualty and Crediseguros business.
(2) Includes net fees and underwriting expenses.

From a QoQ perspective, the underwriting result decreased. This was attributable to 6.2% growth in claims in the Life business, which was primarily attributable to higher cases reported in D&S and Credit Life, also the negative effect of inflation on Group Life particularly in Complementary Insurance for Occupational Risk (SCTR) product. It is important to note that this quarter, reported cases dropped and IBNR reserves for COVID-19 were released, which reflected the fact that the fourth wave of the pandemic has generated less severe impacts. This result was partially mitigated by growth in net earned premiums and a decrease in claims in P&C.
From a YoY perspective, the insurance underwriting result returned to positive terrain. This evolution was drive by the following factors:
 
•
A 38.7% decrease in claims in the Life business. This reflected the improvement in the sanitary situation and the fact that COVID-19 reserves were released in a context marked by advances in vaccination in 2Q22 versus 2Q21, when higher levels of excess mortality were reported; this was partially mitigated by an inflationary effect;
 
•
Growth of 10.1% and 7.7% in net earned premiums in the Life and P&C businesses respectively associated with economic reactivation; and
 
•
A drop of 22.0% in the acquisition cost, which was driven primarily by a drop in commissions after a contract in the alliance channel expired at the end of 2021 and to a lesser extent by a decrease in underwriting expenses in the P&C business.

In YTD terms, Insurance Underwriting results rose specifically in the life business due to lower excess mortality from COVID-19 given the advance in vaccination process and to a lesser extent, the improvement in net earned premiums in both businesses associate to the economic reactivation.

32

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
07. Insurance Underwriting Results
Net Earned Premiums by Business

Net earned premiums in the Life Business (1)
(S/ millions)
 
Net Earned Premiums in P&C (1)
(S/ millions)
 
 
In the QoQ analysis, net earned premiums in the Life business remained stable. Growth in Credit Life stood out and was attributable to an uptick in sales through BCP and Mibanco. This effect was offset by a drop in Disability and Survivorship and Group Life. In P&C, net earned premiums rose 1.5%, which was primarily driven by growth in Cars and Medical Assistance.

In the YoY and YTD analysis, net premiums in the Life Insurance business reported growth of 10.1% and 8.3% respectively in (i) Credit Life, which was primarily associated with an increase in premiums through BCP and Mibanco and (ii) Group Life, in line with price adjustments and an uptick in new sales for the Complementary Insurance for Occupational Risk Product (SCTR). Net premiums rose in P&C, 7.7% YoY and 8.1% YTD, drive by: (i) Personal Lines, due to growth in sales for Card Protection products and Household Mortgages through Bancassurance channel, and (ii) Medical Assistance, which was associated with growth in sales for Oncological and Compensation Products.

Net Claims by Business
Loss Ratio
(%)
The Total Loss Ratio stood at 70.8%, (+150 bps QoQ). This result was driven primarily by the Life business (+530 bps QoQ), which was in turn due to the evolution of (i) Group Life, where inflation impacted compensation for Complementary Insurance for Occupational Risk and (ii) Disability and Survivorship, due to an increase in cases. It is important to note that COVID-19 IBNR reserves were released in 2Q22, which reflected a drop in reported COVID-19 claims due to an improvement in the sanitary situation and the advances in the vaccination process.

The Loss Ratio in the P&C business fell 200 bps QoQ. This was primarily attributable to the evolution of Commercial Lines, which reported high claims frequency in the previous quarter, particularly in the Transportation and Machinery lines and (ii) Cars, which reported a drop in claims frequency in the business segment.
 
In the YoY and YTD analysis, the Total Loss Ratio improved due to a 28.8% and 26.2% reduction respectively in net claims primarily in the Life business. This was associated with a decrease in reported COVID-19 cases and to the release of IBNR COVID-19 reserves, in line with the positive evolution of the vaccination process.

It is important to mention that the negative impact of inflation on claims and the accumulation of technical reserves adjusted for constant purchasing power are counterbalanced by a positive impact on net interest income associated with the assets that back said claims and reserves.

1 Total premiums less premiums ceded to reinsurance and adjustments in constitution of technical reserves

33

Earnings Release 2Q / 2022

Analysis of 2Q22 Consolidated Results
07. Insurance Underwriting Results
Acquisition Cost

Acquisition cost
Quarter
% change
As of
% change
S/ 000
2Q21
1Q22
2Q22
QoQ
YoY
Jun 2021
Jun 2022
2022 / 2021
Net fees
         (53,808)
         (39,875)
         (39,352)
-1.3%
-26.9%
       (109,413)
         (79,227)
-27.6%
Underwriting expenses
         (31,842)
         (31,286)
         (27,943)
-10.7%
-12.2%
         (63,399)
         (59,230)
-6.6%
Underwriting income
                 706
                 678
             1,047
54.5%
48.5%
             2,045
             1,725
-15.6%
Acquisition cost
         (84,944)
         (70,484)
         (66,248)
-6.0%
-22.0%