Credicorp Ltd.

Primary Credit Analyst:

Camilo Andres Perez, Mexico City + 52 55 5081 4446; camilo.perez@spglobal.com

Secondary Contact:

Ivana L Recalde, Buenos Aires + 54 11 4891 2127; ivana.recalde@spglobal.com

Table Of Contents

Ratings Score Snapshot

Credit Highlights

Outlook

Key Metrics

Anchor: ‘bbb-’ For Financial Institutions Operating In Peru

Business Position: Largest Financial Group In Peru

Capital And Earnings: Adequate Capitalization To Support Business

Strategy

Risk Position: Diversified Business Mix

Funding And Liquidity: Stable Funding Base And Healthy Liquidity

Support: No Uplift To The Group Credit Profile

Environmental, Social, And Governance

Key Statistics

Related Criteria

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JULY 4, 2024  1

Key strengths	Key risks
High-quality and diverse asset base with dominant positions in most business segments.	Complex political landscape dents short- to medium-term economic growth in Peru, affecting business conditions.
Sufficient liquidity at the holding company to meet obligations, limiting dependence on dividends from operating subsidiaries.

Credicorp has investments in multiple large assets in the financial industry in Peru and some presence in other Latin American countries. The rating on the Bermuda-based nonoperating holding company (NOHC) incorporates the Credicorp group’s leading position in Peru’s financial industry, business diversification, steady earnings, adequate capitalization, manageable credit risks, diverse and stable funding base, and good liquidity coverage.

Key Metrics

All figures are S&P Global Ratings-adjusted. a--Actual. f--Forecast. NIM--Net interest margin.

Anchor: ‘bbb-’ For Financial Institutions Operating In Peru

Our bank criteria use our Banking Industry Country Risk Assessment’s economic risk and industry risk scores to determine a bank’s anchor, the starting point in assigning an issuer credit rating. Our anchor for a financial entity operating in Peru (where Credicorp mostly operates) is ‘bbb-’. (See “Banking Industry Country Risk Assessment: Peru,” Nov. 30, 2023.)

Business Position: Largest Financial Group In Peru

Credicorp’s solid business reflects its leading position in Peru’s financial sector, primarily through its largest subsidiary, Banco de Credito del Peru (BCP; BBB-/Stable/A-3), which owns MiBanco Banco de la Microempresa S.A. (BBB-/Stable/A-3). In addition, the group has presences in the insurance and pension funds industries through Pacifico Seguros and Prima AFP (both not rated). The company also has asset management and wealth management operations in Peru and other countries in the region through Credicorp Capital (not rated), as well as smaller banking operations including ASB Bank Corp. (BB+/Stable/B) and Banco de Credito de Bolivia (not rated).

BCP has made up 75%-80% of Credicorp’s earnings and dividends in recent years, while insurance and pension fund business have made up 10%-20% and banking operations in other jurisdictions and Credicorp Capital the rest. BCP, which has diversified operations across all retail and wholesale segments, is the leading bank in Peru, with a lending market share of about 37% including its microlender subsidiary, MiBanco. These factors confer stability to the bank’s business and dividend flows to Credicorp.

The group’s other businesses also have strong market presences:

The group continues to invest in digital initiatives and fintech ventures across the Andean region. These have been embedded into different business units to complement product offerings and support Credicorp’s competitiveness. For example, Yape, a payment platform with 15 million total users (and 11.5 million active users), has been increasing its functionalities and supplementing the group’s banking and insurance products.

Other ongoing digital initiatives in domains such as payments, neobanks, insurtech, and others complement current businesses. We expect investment flows to continue in the coming years, supporting the group’s adaptability and competitive position amid rapid disruptive changes in the financial industry.

Credicorp’s results and dividend flows have recovered to pre-pandemic levels thanks to the increase in net interest margins amid higher interest rates, which has supported higher income from both the loan and investment portfolios. Better insurance underwriting results have also boosted earnings in recent years.

BCP’s funding structure, heavily composed of low-cost transactional deposits, has helped contain funding costs amid the high interest rates. On the other hand, the rising cost of risk--due to increased credit risks amid challenging economic conditions--somewhat limited earnings last year.

Credicorp’s return on average equity dipped to 15.8% in 2023 from 16.7% in 2022. We expect good profitability to continue in 2024, mainly because interest rates should remain relatively high during the year.

Capital And Earnings: Adequate Capitalization To Support Business Strategy

We consider Credicorp’s capitalization metrics commensurate with its business strategy. We expect its risk-adjusted capital ratio (calculated according to our methodology) to be roughly 9.9% in 2024-2025, slightly above the 9.7% at the end of 2023, thanks to its main operating subsidiaries’ improving capacity to build earnings. Good capital buffers would allow the group to weather a potential deterioration of the Peruvian banking industry.

Our base case considers the following:

Credicorp has good regulatory capital metrics, with total regulatory capital at 1.3x the minimum requirement.

Risk Position: Diversified Business Mix

Credicorp has good business diversification, conservative growth strategies, and manageable credit risks, in our view. Meanwhile, BCP’s banking operations focus on lending, with no relevant concentrations among economic sectors or customers.

Although dollarization in the Peruvian financial system has fallen in the past decade thanks to the central bank’s measures, it remains high at about 30% of total loans, similar to Credicorp’s 35%. And as in the whole Peruvian banking industry, Credicorp’s asset quality remains strained due to the challenging macroeconomic scenario last year in Peru, stemming from volatile political conditions and adverse climate events that particularly hurt the quality of microcredits, loans to small and midsize enterprises, and consumer credits in the middle- to low-income segments.

Our base-case scenario assumes better domestic economic conditions and bank subsidiaries’ recent improvements to their new loan originations will help keep asset quality manageable in 2024-2025. However, we will monitor latent credit risks that could arise from continued political uncertainty and climate events in Peru.

Funding And Liquidity: Stable Funding Base And Healthy Liquidity

We consider the group’s funding structure and liquidity adequate, in line with our view of BCP’s funding and liquidity. Credicorp’s stable funding ratio has averaged 113% in the past three years, and broad liquid assets to short-term wholesale funding averaged 2.4x (according to S&P Global Ratings’ calculations).

Customer deposits make up roughly 80% of Credicorp’s consolidated funding base, and half are retail deposits, which we deem more stable during times of market distress. The funding base also includes interbank credit lines, market debt, and central bank repurchase agreements.

The NOHC’s substantial liquidity support its creditworthiness. We expect the company will maintain high liquid unencumbered assets to meet its financial obligations on its own. In 2020, Credicorp issued $500 million, which matures June 2025, to enhance the cash cushion for potential contingencies. Its double leverage remains adequate at about 100%.

Support: No Uplift To The Group Credit Profile

Credicorp is 12.2% owned by the Romero family (based on floating shares), and the rest is held by private and institutional investors. Because of this, we base our rating on Credicorp on its own credit quality, excluding parental support.

Despite the relevance of banking operations, our rating on Credicorp doesn’t include potential extraordinary government support. Although BCP would receive support, given its high systemic importance in Peru, we don’t expect such support would be extended to the holding company.

Environmental, Social, And Governance

Environmental, social, and governance (ESG) factors have no material influence on our credit rating analysis of Credicorp, as with industry and domestic peers. Peru is somewhat exposed to natural disasters such as earthquakes, volcanic activity, landslides, and the El Niño climate pattern. However, Credicorp, like other domestic financial entities, has been able to keep credit and operating losses moderate during such conditions.

In addition, the group has low exposure to the agricultural sector, which is vulnerable to these conditions. However, the Peruvian economy depends to some extent on the commodity metals sector, which domestic banks generally don’t directly finance. Still, banks are indirectly exposed to the agricultural and metals sectors through the whole supply chain (suppliers, subcontractors, and employees who are also retail clients).

Key Statistics

Table 1

PEN--PEN-Peruvian nuevo sol.

Table 2

Table 3

Table 4

Credicorp Ltd.--Risk position

	--Year ended Dec. 31--
(%)	2023	2022	2021	2020	2019
Growth in customer loans	(2.5)	0.7	7.2	19.1	4.4
Total managed assets/adjusted common equity (x)	8.6	9.2	11.1	13.7	9.6
New loan loss provisions/average customer loans	2.5	1.2	0.8	4.7	1.6
Net charge-offs/average customer loans	2.0	1.5	1.8	0.8	1.4
Gross nonperforming assets/customer loans + other real estate owned	4.3	4.1	3.9	3.5	3.0
Loan loss reserves/gross nonperforming assets	132.6	128.8	148.8	205.3	148.6

ALAC--Additional loss-absorbing capacity. GRE--Government-related entity. SACP--Stand-alone credit profile.

Related Criteria

Related Research

*Unless otherwise noted, all ratings in this report are global scale ratings. S&P Global Ratings’ credit ratings on the global scale are comparable across countries. S&P Global Ratings’ credit ratings on a national scale are relative to obligors or obligations within that specific country. Issue and debt ratings could include debt guaranteed by another entity, and rated debt that an entity guarantees.

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