Q2 2021 Credicorp Ltd Earnings Call
Good morning, everyone I would like to welcome all of you to credit Court Limited's second quarter 2021 conference call.
We now have all of our speakers in conference.
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With us today is Mr. Walter Bayly, Chief Executive Officer, Mr. Gianfranco Ferrari Deputy Chief Executive Officer, Mr. Al Zahra Correa, Deputy Chief Executive Officer, Mr saves already owes Chief Financial Officer Mr.
Mr. Reynaldo Llosa, Chief risk Officer, and Mrs. Milagro Segue, that's Investor Relations Officer.
And now it is my pleasure to turn the conference over to credit Courtis, Chief Financial Officer, Mr. Cesar Rios, Mr. Rios, you may begin.
Thank you very much good morning, and welcome to put any clubs conference call on our earnings results for the second quarter. If you could tell us on 'twenty, one I hope you and your families are healthy.
That indicates that the economy grew around 20% in the first half of 2021 and came close to hitting pre pandemic levels. It is noteworthy that the construction sector grew 15% with respect to the first half of 2000.
19.
<unk> just statistical rebound recall, Gary asked few months has been boosted by a favorable external environment, where copper prices remain high and our main trading partners how questions will.
You got from the sanitary situation mortality rates falling considerably.
Reaching the peak at the beginning of the second quarter.
This improvement has been driven by a noteworthy uptick in the vaccination rates in June and July currently around 37% for the album population have received at least the first of those although these rate locks behind that reduced today by some payoffs in the region the Goldman School.
Not all of them are chasing from.
12 to 18 year will be vaccinated by year end.
All in all we are still estate GDP to rebound around 9% in 2021 due to a strong commodity prices and expansive monetary policy piece culpable.
Yes.
Political uncertainty in.
<unk> has generated a data platform financial indicators the exchange rate.
As depreciated more than 12% year to date and the dollar has reached a record high despite the central banks move to sell almost $6 billion, that's yet to date in 2021.
Now keeping credentialing matrix market yeah.
A little bit more so we're in great in domestic currency.
I think CBD bid table has also declined to levels above the peak and reduce their in 'twenty two.
Despite the pandemic and political shocks Pedro continuous to perform peer seem to agree terms macroeconomic indicators, our net income national luxury silk cooling to represent 35% of GDP, our annual inflation rate stands at three 8% and our public debt.
Which represents 37% GDP, it's among the lowest in the region. Additionally, our bankruptcy and maintained high liquidity.
Political instability exclusive in decisions taken by the new government.
Beginning with the move to a highly confidential probably get with limited technical chops questions regarding deterioration that monetary policy will take us well at school, we beat the sector continues to be.
Announcements have been made indicating that higher labor state intervention I wont youre right, the new probably credit facility. The regulations increased regulation driving self insurance and as truckload changes the private pension system.
The second is our ability to implement its a radical agenda make me with significant obstacles Atlas systems first Liberty has only 37 seats or 100 theory in Congress.
All right.
<unk> only by multiples.
It is worth noting that in the first round of elections, Pedro Castillo secure only 19% valid votes, which represents 10% registered holders and in the <unk>.
Meanwhile, one, but then extremely narrow margin of 44000 volt lithium 0.2%. Additionally, we.
I think that's sort of been conducted between the second and fourth this months indicates the prestigious approval rate is 79% one week into his term one of the lowest initial rate introduced by marine.
What are you kind of prejudice in recent Keystone.
In the same salary only by sort of saying those polled indicated that the constitutional assembly should be the coverts next top priority impact, yes same thing he's from six among saving priority diesel belief with the reactivation of the economy improvements in the health system.
And some of the quality of education, where Ryan.
Cycle.
Respected.
Going on to create CT results, let me highlight our quarter over quarter evolution.
The loan portfolio rose four 4% in the quarter and buttons breathing primarily by an uptick in his trunk total loans in the wholesale banking it's in.
Business segments.
Net interest income grew eight 7% driven by an increasingly struck to launch a drop on the expenses and the fact that a one off explains what's reported last quarter.
Modest NIM operation context means resumed growth.
Our core point or 1%.
Provision expense of sale.
The client behavior for you Sir.
Across segments, which led the cost of risk and the structural cost of risk to seek rate up one point or two on 123% respectively. This quarter.
Core non financial income, which is composed piece I mean fixed transactions grew eight 4% due to weak construction considerable uptick in transactions. This evolution was upset by a contraction in noncore non financially driven mainly by BCP, which saw a long term bonds.
At a loss to reduce the interest rates MTBE equal level of wholesale portfolio.
Insurance underwriting results continued to be impacted by COVID-19 related claims and in Q, but don't reported provisions in the larger pieces from a peripheral works whoever the train.
The efficiency ratio improved 30 basis points boosted by income be called area Knitting upgraded Corp totaled 619.9 million. So late in the second quarter of 2021, which represents an increase of five 9% quarter over quarter or return on equity continues its upward trend.
Situated at 11, 3% at quarter end.
In the first half of the year utterly astute pinpoint 9% within our guidance range.
Our balance sheet remains strong with ample liquidity and adequate.
Capital ratios.
I will briefly describe the results of the lines of business Levered that provide further detail in the section of consolidated before.
Okay that does help banking drives Halloween Colbert BCP stand alone contributed 726 million.
Registering a return on equity of 18, 1% in book reduced their multiple of Google at 8% quarter over quarter, which was mainly driven by you're not speaking of structurally logs a contraction in the appendix pulse on growth in transactions.
Peaceful available for sale long term bonds at a loss to reduce interest rates sensibility.
Actually opposite it negative.
U S don't have a long position. These are strategies result, partially offset core non financial income.
The main driver of an uptick in profitability. This quarter was the 83% quarter over quarter NIM contraction leash on expenses, which reflected an improvement in client payment levels.
Patients deteriorated 10 basis points quarter over quarter, mainly driven by higher digital marketing on mileage. The daily programming expenses line with growth in digital sales and David on credit card usage.
BCP, Bolivia <unk> stood at eight two.
2%, which reflects a decrease in the apathy and relative stability in the loan portfolio in a context marked by actress Kate Goldman mandated longer program.
What impacted by coalition results due to the inclusion of guarantees and the consumer portfolio.
Was partially offset by new provisions to Corporately.
The provision flavored water cooling.
For 72% of the total loan portfolio.
Okay.
New Banco reduced clear recovery this quarter.
Net interest income goals due to peak origination of lower structural logs a trough in the funding cost and neighborhood worth of interest income provisions made previously corporate program portfolios. This positive evolution was partially offset by regulatory restrictions on fees.
No prohibition and normalize in a context of an improvement in payment or format growth transaction wherever we are closely monitoring the 12 purchasing off this truck portfolio that existed within grace periods or past due.
Columbia Square folds improved due to an uptick in disbursement or goal will be initial volume passive slowed due to social tensions they focus in school and maintaining adequate risk management workforce productivity and efficiency at the commercial level.
Regarding insurance purchase this quarter Pacific Coast contribution continued to be impacted by higher COVID-19 related a naive Vietnam provisions in the life business losses in this business now you got to take that.
Turning to profitability the group level. It is important to note that at quarter end claims IV NR prohibitions began to fall in line with the drop in COVID-19 mortality.
In property and casualty will be net premiums was offset by an increase in claims up their mobility restrictions were lifted.
Typically levels rules, the corporate health insurance and medical services.
Pegged it by higher claims quarter over quarter and income.
Recent healthcare demand I think Colombia Wilkins.
Assets under management contracted two 2% quarter over quarter, which reflects primarily drove for up to one 8 billion solid.
And the government mandated.
These represent 15% of total funds available for withdrawal we ASP.
Assets under management to continue to contract in the short term given that the withdrawals can be made through the year.
Despite these piece constant maintenance stable due to growing contribution from a P.
Investment banking and wealth management, the quarterly evolution indicates assets under management contracted minus one 5%, which was primarily attributable to Caribbean based fund outflows from the asset management business.
Political uncertainty wealth management assets under management remained basically stable local clients in the greater tableau onto our home shore platforms.
Traction in asset management, plus I can we buy a devaluation in block warrant.
Income contribution expanded 15, 8% driven primarily by positive were sold to copy talking about wealth management.
The gain was fueled mainly by growth in the sales of securities and upfront fees from entering third party funds to international outlook.
It is worth noting that investment banking wealth management line of business continues to contribute eight regional presence and 76% of its assets funded by much NIM at a scale outside the U S.
Leasing the duration with funds to offshore platforms represents an opportunity to broaden investment option for clients.
Now I will discuss creating corp's consolidated performance.
Third quarter loan portfolio grew four 4% in lending balances and two 2% in other state your bonds.
This evolution of what's driven primarily by you not peaking are structurally going to be in Asia wholesale banking two campaigns in the fishing and agricultural sectors.
Onshore was ultra pure lead to a lesser extent by growth excuse me business mortgage and consumer loans by the evolution of the exchange rate.
The mix of interest, earning assets improved mark by saving 8% quarter over quarter construction in the investment portfolio. After BCP sold sovereign bonds and reduce its exposure to long term interest rate risk.
The deposit mix improved and reflected an uptick in low cost demand and savings deposits in foreign currency.
Partially offset by withdrawals of time and save it asking basically if you get past. Additionally.
Funding needs in foreign currency due to low interest globally and through the execution of the remaining make whole redemption from a liability management operation the consequent funding structure, coupled with lower interest rates led the funding cost.
Paul and his son of 118%.
Well payment behavior and the structure of the portfolio for fight Ebola favorable this quarter.
Banking and payments on loans do you have stood at 95% in June driven by you're not peak.
The SME <unk> segment quarter over quarter, the high uncertainty portfolio, which is composed of the program loans that havent seen with English period, I know that new loans increased slightly and represented 10% of the stroke of a launch. It is important to note that this increase was driven by doing that work.
In base.
Which are considered the most recordable.
Banco on time payments improve in a context of lower exploration, so growing transactions and income due to economic reactivation the high uncertainty portfolio constructed from 19% to 12% this quarter due to the positive evolution payments the.
A government program and box for government, which are primarily and where do you hope it began to expire in June 2021.
By the end of the month, the balance was 7% lower than the record high in the fourth quarter of last year.
The retail banking government program portfolio represent 65% of the total.
I'll go over them.
Program portfolio by the end of June 54% of the painful corridor.
Grace period, 30% have made the first statement, 14% had the program in 2% has become overdue.
The chart on the right on site you can see the profile of wholesale banking and told me about it is important to note that the new government in their.
Programming facility expires next year, so the real deterioration Davis will not be fully evident until 2022.
It's important to note that the government guarantees back a substantial for these portfolios.
The NPL ratio for these trucks will be launched in the wholesale banking would you say are no valuation up there the deterioration of a small number of middle market clients plus offset by the increasingly important retail banking the ratio aboard positively in the individual segments unless it slightly.
By increasing overdue SME loans Calms me Banco.
Positive payment behavior, how your vital drove an improvement in NPL.
Silver sold pretty.
Cortes truckload of NPL dropped from six point <unk>, 5% to 538% the downward trend in the structural and cost of risk was not war.
In.
Good evening by BCP stand alone with the ratio dropped 46 basis points to 21, 11% in a context marked by an increase in the probability of default.
Scenario really courts as truckload coastal risk contracted 69 basis points from 192% to 123% in year to date figures the structural and cultural please.
At one point, 51% at the end of June the provisions is talk was equivalent to seven 7% of credit cards is shrunk pool loan portfolio.
So the court has structurally mean increase.
13 basis points quarter over quarter to a stock of 432% recovery was attributable to a more profitable asset mix, which was generated by Google in a structurally normally in Asia and improvement in the funding mix and a decrease in interest expenses and positive evolution.
<unk> was mainly driven by the ECB, we suggested NIM increased 64 basis points. This quarter and reached 338%. This metric is recovering ASP I mean in line with the normalization of provisions.
Core income, which is composed of net interesting piece on Inpex transaction was he created close to pre pandemic levels. The increase in net interest income was primarily attributable to growth in construction loans and a decrease in the funding cost fee income grew alongside an uptick in transactions on foreign.
DCP and NIM.
Brokerage fees are critical.
Fish transactions also increased in a context of high demand for the donuts.
Noncore Nonfinancial income this quarter results reflect a management decision to reduce interest rates and CBD in the investment portfolio at BCP as indicated here.
Additionally, we executed a nasty CLIA waiver is trading at <unk> 30 core capital both of which were in the positive results.
<unk> continued to be severely impacted this quarter, which was mainly due to an increase in COVID-19 cleaned in the life business.
To a lesser extent to higher claims in the appropriate cash with a business update mobility restrictions were lifted.
Quarter over quarter basis regarding net earning premiums there was a slight contraction in light.
With the decrease in sales of <unk> and seasonality effect of renew life insurance for highways occupations.
In property and casualty and whatnot.
Q2 renewals in the medical assisting light and then increasing costs due to new sales and renewals in the life business COVID-19 claims, which are peaking April before beginning of March downward accompanied by ongoing decline <unk> provisions in a context of decline in mortality in the quarter.
If there's any commodity inflation continues to improve we expect this trend to continue.
It is important to note that when that year to date basis.
Premiums grew in the life business too.
Cisco <unk>, which expanded the FPGA space for fees and contemplated a more favorable chapter.
This is a pension fund related business the risk of a third wave appears imminent Nonetheless vaccination rates on building market mandates may mitigate impact this time around.
In the first half of 2021 clearly caught sufficient to ration.
Is it 50 basis points year over year improvements were driven mainly by the positive evolution of indigo.
In the micro finance and insurance and pension liabilities.
Banco <unk> interest income.
Due to growth in its truckload lumped in a depletion deposit funding while expenses remained under control.
<unk> was listed in the first half of this year due to pricing and the fact that people want a higher proportion of the physical 510 minutes.
Yes.
Critical Joel shows an operating leverage of six percentage points.
<unk> income acceleration of uncontrollable expenses year over year Rolling operating expenses during the first half. This year reflects our commitment to get utilization on was generated primarily by cyber security and 19.
Garden distribution footprint recycling it is worth nothing that BCP Standalone Banco.
We do use the number of branches by 90% to purchasing.
Italy year over year.
In terms of liquidity ebay master country outflow for foreign currency BCP stand alone <unk> high levels of liquidity well above regulatory.
It does.
That would be capital each of our subsidiaries maintained adequate capital labor, which ensures solvency is slight increase in the core equity tier one will BCP stand alone revenue Banco Whatsapp to pivotal trial not peaking.
Which was to do impact the quality of both subsidiaries. This court.
Our BCP, we continue toward compete digital initiatives achieve our objectives.
Building and efficiency.
Our competitiveness in the long term.
Unknown type initiatives to accelerate digital investment, we seek to improve time to market and operating stability without losing sight of cyber risks.
The number of new software releases more than doubled year over year this semester and the downtown core key channels.
54% in the same period.
For gearing is to fully comply with all of these statements.
The <unk>.
<unk> cyber security assessment tool.
The baseline at Bolton and intermediate inhibit field, 90% of all statements I'd be advanced to date, we have contributed 82%.
Client satisfaction was negatively impacted by an uptick in the demand for services, which coincide with that reduction.
Saturday's capacity.
We moved swiftly to replenish our service capacity by Liberalizing. The adult Saturday has had some decline in Germany.
But sequencing, we have pre COVID-19 and satisfaction levels are now now shooting to exceed expectations.
The effective.
Our efforts to secure digital initiatives is reflected in the delusional affordable digital clients, which represented 55% of the total client base this quarter and continues to grow.
Exponential growth these are transactions, coupled with an increase in the.
Recent years made us to rethink and we size our distribution model. Consequently, we have reduced our branch network by 9% in the last 12 months.
A great core players, we are developing different fintech initiatives and ecosystems to boost the group's potential later this year.
Able to give you a much more detailed with you right now I would like to comment on our progress with key or specific in nature.
Added one new clients to the banking system. She's 'twenty 'twenty transactions grew fivefold with regard to defeat will report that for the same period last year recent integration with numerous and ECP opened ecosystem payments through a bunch of cells, which will propel and <unk>.
Increasing transactions indicators, such as frequency of fuels closer look we see Shaw MTS continues to improve.
We expect that these will be the case moving forward.
In the second half of this year yuppie, we provide an interesting monetization Michael we will share more information on this point as new features.
It is now.
To operate independently at BCP and the decision making will shows Gucci.
Sure and operating levels.
We have no intention of divesting this business in the foreseeable future.
Kimball is the only thing we've got digital wallet solution in Chilean.
Within a year of peak lunch, Tim with the second largest solution in terms of number of users with a client base of 537000 people, we did not incur montijo table for processed transactions that this type of 30%.
High volumes and a strong NPS performance TD, 868%, we expect positive trends to continue.
This represents an opportunity to continue growing our customer base as we consolidated these market finally, kiva a digital initiative that began in Colombia, low ticketing business of heat.
293000, new subs, Mark this quarter with $8.9 million assets under management fever is still has significant room to grow in Colombia. Additionally deal was lunch is core thing.
We expect it to grow profit related the rest of our lending position in the market.
<unk> knowledge base.
Now, let me talk about our.
Sustainability.
We publicly stated that honey, our social focus is the core objective of our sustainability program.
Our airports has exceeded up in.
The first half of 2021.
Progress is to work with our milestones when they buy Golan and Cellcom, we are pushing that to mitigate and reduce carbon emissions through three pumps outerwear mortality by governmental policy.
Environmental management plan it is worth nothing that on.
BCP was recognized by the Ministry of environment Covid.
Using a cargo footprint on what first banking twin the Liberty Tree Awards.
The support of industry experts, we have made progress in assessing our ESG risk management framework. Additionally, we have lunch a nickel factory blindly that sustainable big size.
Social point, yes, and.
<unk>, our financial inclusion of airports and one Neely on CPC.
1000 <unk>.
We have broken through the banking fall.
Naturally vocational programs at BCP Pacifico.
Also reach millions of people.
And because the program.
<unk> Board members and exchange views with Canadian senior executive with a nine opinion networks.
Recently be CBD.
I'm addressing gender equity.
We have also established directional guidance.
Our gender balance.
Turning to the agenda perspective in our compensation plan for senior executives.
On the government front, we have included sustainability goals.
The incentive program.
Further improvement on the compliance.
By year end, we expect to report progress umbrella on ESG initiatives and that Theyre going to have natural.
Yes.
We expect our over all.
2021.
We remain within guidance, even that favorable goods sold in the banking businesses are expected to upset.
That sounds quite revolutionary in the chess pieces.
It will be a real GDP growth is decelerating and lower estimates towards the angle of the year.
Loan portfolio growth in average daily balances is expected to decelerate, even though Keith in the second half of 2020, what generated by these.
These bookings.
Moving on to the main part.
The numbness in Europe.
Net interest margin achieved an inflation point that recovery will be gradual such we expect NIM in.
In 2021, just hit right at the lower end of the guidance the cost of risk or whatever.
<unk> grew faster than expected given the positive evolution I'll try to.
These conflicts.
We expect to release at a cost of risk below our guidance range.
Regarding efficiency.
<unk> 43, 9% ratio posted in the first half 'twenty one is slightly below our guidance. Nonetheless, we expect the leverage to increase as the with an expected range higher yearend expenses have reported.
The outlook, we are sharing today is for 2021, although uncertainties remain on an extended the rifle update evaluated different asking that we have.
For our long term business is tracking well.
Carefully monitoring the evolution Pacific variables and are poised to make tactical changes to adapt to challenging situations. We will continue accelerating value generation to the digital strategy in each of our businesses, which coupled with our sustainable Germany will ensure that we saw.
Sustained growth efficiently.
With these comments I would like to start the Q&A session.
Thank you Sir.
You would like to ask a question. Please signal by pressing star one on your telephone keypad.
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We will pause for just a moment to allow everyone. The opportunity for questions. We also ask that you. Please only ask one question at a time.
After each question has been addressed by our speakers you will then be allowed to ask as many follow ups as needed but again. Please only ask one question at a time. Thank you.
Yes.
Our first question comes from Ernesto get Alonso with Bank of America. Please go ahead.
Hi, Good morning, John Franco Samsung.
Morning, everybody.
For the opportunity.
My first question is related to the insurance business.
We saw better operating trends in general.
And congrats for the first time in three quarters unimportant recovery fees and significantly lower depletion charges. However, we saw this wider and losses in the insurance results.
No.
Considering that the region is going through a third wave of COVID-19.
And that the Delta is perfect Joe.
Are people not vaccinated, how do you see the outlook.
Because insurance business in the next quarters.
Thank you Ernesto this is Walter Bayly.
I will let Alvaro Correa.
Answer that question. Please.
Hello, Michael This is Alberto.
Well it does.
There are a few things that are happening faster.
Trends that we saw in the second quarter of the year, which are.
At the end was.
I mean for the second wave it was like a 15% or so higher impact on results in the first wave.
So.
The question that you're raising is what is going to happen in this potential third wave.
There are a few elements.
That we have to take it.
It's a consideration why did the vaccination process is.
Getting better.
And since.
The government has.
But maybe people from from older to younger that coincide somehow with the.
The population that isn't shirt. So basically what we're expecting is that the impact for the country would not be.
As high as the second wave and the impact on the insurance business won't be as high as it is a second way as well right. So that's that's very.
That's something that we are expecting written but again this is something that we do not.
Well, we do not have specifics.
Guidelines so far.
Thank you and then my second question here.
On the outlook.
How do you see that possibility, but none of it.
In another two years on the scale of the Central Bank.
Do you think.
His position with reduced volatility in the sector.
And also related to the political outlook.
Do you think that the proposal to change the private pension system is this deal on the table or do you see a more moderate done from the new administration.
Sure I'll answer those questions.
Uh huh.
I think the basic scenario here, regardless of whether a whole new voice, a very well respected central banker.
<unk> is whether we will have an orthodox central back or not.
Our expectation at this stage is that yes, we will continue to have a central bank that will act accordingly.
More orthodox policies and once those are.
Confirmed of course volatility should be reduced.
Regarding the pension system.
It has been on the table for quite a while to redo the pension private pension fund system at the public system as well.
It is a necessary thing to do.
The private pension fund system.
It has.
Being I think severely damaged the amount of withdrawals that have happened and the fact that currently the current legislation allows people from 16 year.
The amount of which you can start withdrawing funds has been reduced and that is of course countered to what has happened all over the world.
Due to the low.
Well in terms of the portfolios because of low interest rates.
The Asia.
Individuals can achieve their pension has been.
Increased we have got a culture that cycle.
So at this stage the private pension system does not have enough money to provide for adequate ventures. So our reform is urgently needed.
It is a difficult task for any government and any Congress. It is on the table, but we do not have expectations that this is something that is going to happen very quickly or very easily.
This answered both your questions.
Yes, perfect. Thank you very much and then just one last question related to your digital transformation.
We're starting to see a niche countries of the region the creation of digital banks. So given all your fintech initiatives, such as <unk> been tenfold Diva.
Did you touch on for administering inside BCP.
Do you see the possibility at some point to consolidate all of these initiatives digital bank in the future.
I will pass this question to jump from cooked in Frankfurt would you care to take it and I can complement afterwards.
Sure.
Good morning.
Yes. The answer is yes, we are.
Considering the possibility of launching a digital buy.
Doug.
Earlier conference calls.
The vision that we have is that we have to make.
A few different bets in order to be successful.
Some of their beds, we've already made are being successful.
We fail.
However guidance specifically for your questions we may make.
So I would say a dual slot one is with <unk>.
Vision of launching.
Digital bank built on what we already have a while at the same time.
Keep the car.
Our initiatives are ventures.
Growing.
Our growing on the ones that are successful and expanding them to other countries.
Excellent. Thank you so much.
The next question is from Yuri Fernandes with Jpmorgan. Please go ahead.
Hi, good morning, I'll limit myself to one question regarding loan growth I guess, it provided as guidance likely converging to the lower end of the guidance for this year.
Looking ahead, what should we expect because my concern here is that about 70% of our loans are business related to loans right. When you add to the Smes for the wholesale.
70% of your loans into who they are.
He was related and the concern here is that this is kind of political uncertainty.
May drive, maybe you decreasing our risk appetite right and also your clients like lower demand from them. So how should we think about the loan growth not only for this year, but for 2022 for 2023, even like these higher in a sense should loan growth in Peru.
All I can let me know what would it be like what should we expect now and if you can provide some data in June or July that maybe can I dunno show. Some trains of deceleration that would be helpful. As well because in the second Q I guess, that's what a good quarter right for growth. The question Mark is what's going to happen in the second half and I'm stuck into any chip. Thank you.
Thank you Judy I will gave up prevents or that maybe have youre going to compliment.
Yes, you are right to the extent that the.
Private sector is not aggressively investing growing and spending obviously loan growth will be subdued the long term trend in Peru is that.
Loan should grow at what are the.
Five times nominal GDP.
I think that to the extent that there's political uncertainty continues to be a cloud.
Us.
We will be of course on the lower end of that long term trend.
That is that is reality that is what we are preparing ourselves for.
Having said this since I would you care to comment a little bit more on loan growth.
Yes, Thank you Judy yes.
Only to complement.
Think in terms of individuals.
There is still demand.
For consumer mortgages in line with a private spending thats, probably is going to be fewer temporary daily with a number of.
Government in pools initiatives.
In the wholesale segment.
Being safe that is going to be probably less investment is going to be also some substitution effect from less emission in international markets are probably a little bit less appetite risk appetite from international banks. So.
At least in the short term, we think that we can be.
These sources of growth.
Thank you very much.
The next question is from Tito <unk> with Goldman Sachs. Please go ahead.
Hi, Good morning, Thanks for taking my questions, maybe first a follow up on the political environment any.
Update or what Youre hearing on.
The cap on interest rate regulation on fees and any any forced lending anything that any color you can provide there.
Good morning, Peter No no further news.
The three issues that you mentioned are the ones that.
Course Bose.
Amount of difficulty or risk for the financial sector, you will mention we do have.
Law that said steps of interest rates and that.
Is.
Reviewed every six months by the Central Bank. So at this stage there have been no comments to make any changes from that.
Theres been a little bit noise, all on fees, but nothing we do have rather.
Oranges regulation on fees already so.
Short term on the Dot anticipate anything further and no mentioning about force lending.
Have heard there's been.
A lot of noise on from the government.
The extent that Banco de <unk> should be an active participant particularly emission ambition.
That of course is.
Could create distortions in the short term and the long term we have in the past competed with public sector banks and in the long run they usually are not the toughest competitors.
Then to have difficulty attracting talent are usually not very good on the commercial front.
And you.
Usually technology.
It's not the strengths of government owned financial institutions, particularly in Peru, thus in the long term. It is no concern there.
Though in the short term because of price considerations it can create.
The amount of <unk>.
Distortions in the market.
We all remember what happened in the Brazilian banking system.
During the lunar administration when the serious of government owned financial institutions.
Their mandate of political mandate.
Aggressively lending in several sectors of the banking industry.
And that of course in the short term creates distortions.
So we are not concerned in the medium term or long term, but in the short term there could be.
Distortions Nevertheless.
Banco lineup not preferred today from a risk management perspective from a commercial perspective.
To grow and aggressively we cannot give participants it is important to keep in mind that in Peru about 45% of all the lending done income.
SME and micro.
Uh huh.
Micro lending is done by public sector.
Some institutions basically the cash is when you see published.
<unk>.
We are watching this closely but.
At this stage, we do not have a lot of serious considerations. It answered your question.
Yes, Walter that was very helpful. Thank you.
A separate question then on cost of risk.
So this quarter I know you provision quite a bit last year, how do we think about that for the rest of the year.
Sure I will pass the question along to right.
No.
Can you start.
Yeah.
Our reported performance on all of our portfolios a lot better than we expected.
We see these trends continuing during the second half of the year.
And brought it in London during 2022.
You said that there are still some small portion of the portfolio would you still benefit from great spirits, so doesn't that might have.
It's more of an impact on the performance of the portfolio, but we're feeling very positive to date.
We're four months, both wholesale and retail portfolios.
Portfolios as well as the trends in Europe.
Watching.
Banco <unk>.
Yeah.
Is benefiting benefiting from regulatory.
Rules that give our clients the opportunity or time.
Very long Grace periods.
I would say that would be broadly.
The most challenging things for credit Corp.
In 2022.
Thank you.
Is there something you would like to us.
He only it's something very slightly.
In language right now.
The positive behavior in probability of default and cost of lease, but probably a little bit of peak in.
Deteriorated portfolio asset deterioration that less expected expected to materialize, but materially Westwood ready provision.
As different programs portfolio is starting to come to you.
Thank you.
Okay.
Excuse me. The next question is from Jason Marlin with Scotiabank. Please go ahead.
Hello, everyone.
Walter Gianfranco outgrow since over now go the loggers and team you've got the presentation was excellent. All my questions have you address all of them actually as well as in the previous questions, but I can ask one on and given the.
Consumer demand that you talked about from government support and perhaps companies that are not in the best position exit need some liquidity here. How are you managing the risk here and how do you see that impacting your market share going forward do you think that.
That credit Corp businesses will actually be looking in this environment.
To give up to the weaker the weaker credits or weaker clients and we will retrench and that would result in lower market share.
Thank you Jason.
And thank you for your kind words no at this stage, we do not anticipate of course.
As it was mentioned by SEC started during the presentation, we have made.
A thorough review of our long term strategic positioning and we do not think that at this stage there is anything that marriage.
Any long term changes in our long term strategy or view, what we want to become and where we want to play.
Nevertheless.
Such a changing environment tactical responses are something that one has to be ready to tackle.
And of course, we are watching the development of each of our different market segments product market segments, but at this stage we have no.
And tension.
Now continuing active participation that we have all the product.
Segments in which we are currently pricing so the answer in short the answer is no.
Do not have.
Any objectives of reducing any portion of our portfolio or market share going forward.
And since I've mentioned.
Maybe a a what could provide a.
Somewhat of a growth opportunity is the fact that the domestic capital market because of the.
The lack of liquidity in the pension funds.
And the lack of international capital markets, maybe there could be some more.
Lending for top Corporate's available.
Corporate Center I don't know, sometimes when you would like to add something.
Yes.
Good morning, Jason.
As always there's a fine balance balancing act between risk on.
Based on opportunities on top of what Walter said.
We still have a long term strategy leveraging our technology in order to boot.
You do reach.
New segments of both of them operation on Smes.
At BCP embarking so.
Even though they maybe the macro environment might not be.
Okay.
So positive.
Still offer brief on the opportunities.
In getting more benefit sometime in <unk>.
Back in new segments.
Maybe I could just ask I mean, you guys have mentioned that some of the competitors I think that.
The micro lending some of your competitors have had tough time with funding.
And that is a segment that there are a lot of question marks about the addressable market and how that will evolve.
Could it actually results could you guys see some gain in market share in that segment in the near term.
If competitors are not are not going after the clients are not able to.
Or any color on that.
Sorry.
Well Yeah go ahead, John Franco.
Yes.
So maybe the answer is twofold Jason.
Hum.
I mean, if we talk about it before the Michael business the Microfinance business is hub.
Our high cost business.
Banco <unk>.
At this stage, we're developing a hybrid model.
Leverage even though it's still a high touch business based on RMS.
Leveraging technology.
Technology.
<unk> goal.
We are much more efficient.
As a matter of fact.
We feel measured.
Cost to asset ratio.
Bob.
Way off.
On the competitors. So we do we do.
We'll see an opportunity there.
Then I switched to BCP in the past, where we haven't been successful.
Those those low ticket clients in the SME business basically because of the distribution cost.
Again, where we already have.
Distribution channel full.
Digital distribution channel, which we are.
Biologic today, and we do we do see opportunities to tap that market.
Through.
That channel.
So the answer in the long run is I do see opportunities to gain market share.
The SME business in the low two times.
Thank you very much. Thank you as a friend, Jason let me add to that that particularly on the Smes and micro finance side.
As you well know last year, we did a very aggressive provisioning.
And we did a capital increase.
To allow the bank to continue to operate under.
Capital standards.
But we feel comfortable.
The pressure from the.
Other participants in the Microfinance, particularly that got us the government set up a program that allowed.
Injection of capital.
So far that program is still not active.
And we have not seen the level of <unk>.
Provisioning or.
Uh huh.
A statistical evidence.
The cleanup in the portfolios of some more of that cash has kind of happened.
And we are all operating in the same market with the same customers.
So that leads us to believe based on that data that did they have revenue has to get to be.
Alleged in the in those portfolios and when that happens is probably win.
Opportunities that you mentioned.
Probably start to appear and allow us to become even.
Further more of a leader in that market.
We answered your question yes.
Yes, thank you very much.
Thank you Jason.
The next question is from Alonso Garcia with Credit Suisse. Please go ahead.
Hi, Good morning, everyone and thank you for taking my question. My question is regarding the into the GAAP I mean back in April the Central Bank said the rate cut, but 83% Portland, Maine to October period. So now three months later I wanted to hear how you've adapted to the new regulation have you had to do some adjustments to your strategy.
In certain segments of the portfolio or it's not really an Moreover, how did you see your competitors are adapting to the regulation.
Probably your competitive positioning I guess against them changed in some way following the implementation of these regulation. Thank you.
Sure. Thank you Alonso.
I'll answer regarding.
Banco <unk>.
John Frank Okay, and after I finish tackle the issue of BCP and the consumer side.
Banco side, yes, we have had.
To withdraw from a.
A certain portion of the customers that because of distribution costs and <unk>.
Cost of risk.
Not.
We're not profitable with the interest rate gap.
It was it was not the most profitable segment.
But that is a reality so we have.
Abandon that market, we're not aggressively pursuing there.
Those loans it was as I mentioned not the most profitable segment. It was even probably just a breakeven segment.
It was very core to our purpose of including financial inclusion. So so it is a shame.
That will enable us to be more aggressive there.
But having said that I don't think it will have an impact on the P&L.
So that is the answer from from the.
Microfinance side, and perhaps what would you tackle from the consumer side.
Sure just a quick comment.
You have mentioned.
We've said it before from a client perspective, the most expensive loan the one doing it and you can look at.
In a country where the.
We are still lacking financial intuition.
<unk> dot.
Legislation like the ones you mentioned as being.
Installed.
Regarding the consumer business.
Yes, we've adopted.
Yeah.
The heat more than a couple of interest rate it comes from the delinquency fee.
The whole the whole thing.
The business.
It has been good.
The subsidy is quite similar to what Walter mentioned for Big Arkansas, where all these off of some of the low segment.
In consumer finance.
Specifically, <unk>, which is a business that were affected by the way.
Which for us.
Watson as relevant enough our competitors both in terms of market share in terms of profitability.
Thank you and if I may a second question on the Opex side I mean for the first half of the year expenses are up three 9%. So slightly ahead of inflation, but for the second quarter alone expenses increased strongly move quarter on quarter and year over year.
So switching you attributed to digital marketing campaigns. So I just wanted to check what drove this uptick in marketing campaign, I mean was it driven by pressure from competition and maybe from other banks or when you think the companies.
Based on these what should we expect for Opex growth for the full year. Thank you.
Thank you for your question says could you tackle this one please.
Yes, how long hole.
Thank you for the question.
In addition to the impact of that you already mentioned that they are going to pay that you could beat it also the seasonality as you remember at BCP, particularly we have a low level of expenses in the first quarter than in a higher one in the port. So when you compare to the second one with the first quarter you are capturing the seasonality.
In fact, another two pack those word I will say the normalization of the variable compensation.
Given the fact that now we are close to.
I would say normal levels of profitability in dry dock.
The pool of a.
But it will compensation.
And finally, we have a jumpstart on hop improves a lot there.
Digital marketing initiatives in DRP on me and all of that DCP probes. We are starting to gain awareness spending awareness back also in OXXO and player engagement and this is a correlation with the label sales digital Rollouts.
<unk> is part of the entire all this traffic.
Perfect. Thank you very much.
The next question is from Carlos Gomez with HSBC. Please go ahead.
Thank you for taking the question.
I wanted to ask you about the relationship with the.
Economic uncertainties.
And I mean, I remember in previous conference calls you make a judgment.
We were going to have any other question that's what's happened.
Would you say that the current economic team is going to last for the duration of this administration or should we expect.
Further changes and would you say that you have already engaged in dialogue with them. Thank you.
Thank you Carlos for your question.
It's you're asking for a very.
Speculative answer obviously, we have absolutely no clue as to whether this current.
Ministration or administration.
Minister of finance will be there for the next five years, that's a tough call.
So we don't know.
Sure.
We have not engaged in conversations with the Ministry of finance.
A couple of meetings with some with contempt and some of the other.
Groups not individual meetings.
I think the scenario.
We are.
Seed at this stage is London was described to me, but having.
Having a good level of macroeconomic orthodoxy.
Both at the Central Bank and the Ministry of finance, meaning that we would have.
Central Bank that we'll be watching.
Monetary policy with a good eye on keeping inflation under control and the NIM.
A ministry of Finance, we will have a team that will make sure that that.
And we run a relatively balanced situation. So we would have.
Macro economic orthodoxy from a monitoring physical point of view and a lot of initiatives from the macro point of view that are quite unorthodox that.
Is this scenario.
We are we.
We are seeing.
And.
But of course these are just speculative.
On my side, we have no further evidence there.
There is still a lot of uncertainty going around.
Did I answer your question Carlos.
I think you answered the question.
As can be answered at this point.
If I can comment a little bit is completely different.
That was very clear that there was a decline in the level of service to your clients.
With more resources.
Anytime you have reduced the number of branches by 9% isn't that a contradiction in reducing your rhythm network when perhaps there's more demand for your services.
Thank you.
Uh huh.
I understood. The comment you made regarding the fact that we are introducing the branches. Yes that is reality that is happening both at Banco and at BCP and that is of course, because customers are utilizing more actively digital channels to interact with either institutions, but did not understand the first.
Part of your question, we are reducing the level of services.
At some point at some point during the presentation, you mentioned that the <unk>.
Reception of your clients.
A little bit then you have to put more <unk>.
Our resources to risk Tony.
Yes, Okay got you.
Yes, well, we are constantly measuring the level of customer satisfaction.
And yes that that results in a whole series of initiatives to how do you come to that.
But less and less than quality of the service provider is related to the amount of branches.
We measure which are all the different pain points in which our customers and points of contact that our customers have and.
I reiterate that less and less that has relevance to do with the actual branch it has to do with <unk>.
Some of the digital channels.
His phone.
Maybe even the way our.
Bank statements are sent via E mail, it's a whole bunch of different points of interaction and pain points, our customers have that.
That are not related with the branches. So we think there is no contradiction.
All with the fact that we are gradually reducing our physical footprint with the fact that we want to continue improving our customer satisfaction.
Thank you very much.
Youre welcome. The next question is from Andres Soto with Santander. Please go ahead.
Good morning, everybody and thank you for the opportunity to ask questions. My first question was regarding.
They are potential new regulation that will.
Potentially come under Castillo administration, when I look at his proposals in terms of more active role of a government owned bank.
Hitting caps differentiated by SEC sourcing the economy, etc. This looks a lot to me like what you guys have experienced in Bolivia, So I would like to hear your thoughts given that you have.
Agency MBS market, you'll see a parallel.
They believe you have right now on what we see.
Moving to on given that the ROE that you got in <unk> back in 2019 pre pandemic is 8% kind of can we assume that these 8% could be a reference for our credit card borrowing under a more radical version of our custody administration.
Both a strange question, Okay, let me tackle this.
We do not think that the scenario that we are looking.
As the most likely scenario is anything related to what you have just described.
I have already mentioned.
All made a lot of comments regarding.
The more active participation of the government entities in the lending.
Arena and that will make those comments again.
What has been mentioned is that Banco de <unk> will take a more active role in lending to small Smes and micro companies.
That is of course is a possibility that in the short term could create distortions.
But in the medium term it is of no concern.
Competing against public sector entities.
It's proven to be not the most difficult task.
But in the short term it could create distortions to the extent that you have an institution that.
Lens at rates that do not reflect cost of risk or return on equity.
Having said that implementing that strategy.
Is it can be into short, Brian it's not easy for Banco de <unk> Banco unless you only saw an institution that is struggling with some of those changes in its core applications and systems does not have a lending.
Lending experience nor does it have a commercial.
Muscle to go ahead and aggressively compete with about 20 or 30 different financial institutions that are out there aggressively competing in the market. So yes, it's a possibility it's a long shot it does not.
Awake at night.
Interest rate caps again, we have already commented on that.
The responsibility to regulate that has been given to the central Bank, which will review this on a six month period.
The regulation that we have to date.
Is one that has tried to comply has complied.
Adequately with the law, while trying to minimize its impact on financial inclusion.
To the extent that we have a central bank that continues to have that view and we believe that will be the case.
That further.
Damages to financial inclusion.
It happened could be marginal more than dramatic we have not had any discussions there has been any noise in creating buckets of lending <unk> lending.
And the scenario that.
You pointed out the Peru becomes Bolivia is not our basic scenario and I'll give it a 15% probability and that's 15% probability happens our return on equity would come down yes at what level I have absolutely no idea I don't know if that answers your question on this.
No that does clear Walter and I'm talking about an order of country, where do you guys have experienced which is Colombia.
When you look at Kirsty just proposals all of them are.
Fiscal expansionary and will increase the efficacy.
It required additional taxes are you are you guys concerned about the possibility of increased taxation over the medium term on potentially is specifically targeted towards the banks.
Yes, I think this is something that is going to happen all over the world.
During the.
The health prices that we have are still living but hopefully that they land.
All the governments in the World has embarked rightly so on very aggressive fiscal spending and all the competition the world need to get back on a more sustainable fiscal bump.
That will require additional taxes, which will further.
Which are further.
Compounded with a movement all over the world.
Let's call it the tax the rich is that the.
Rich individuals of the rich companies. So yes, we think that there is a very likely scenario it all over the world, including Peru.
Dr. <unk> will increase yes that is that it's a very likely scenario.
Perfect, Walter and moving to a totally different topic.
When you when you described the outlook on the answer to any of these kind of potential.
<unk> growth for the second half of this year and even next year.
Okay.
And I look at your capital and you obviously have a an excess capital position I would like to hear your thoughts regarding this.
What is your current assessment order your capital level in the past you spoke about $850 million, if I'm not wrong.
And if that investors can expect these there's money to be returned to them either a buyback or extraordinary dividend.
Yeah.
The short answer is yes.
The scenarios that we see going forward.
And which we have are discussing in this call.
Probably call for less growth less growth in the country less growth.
And the lending needs and less growth in risk weighted assets.
While we continue to generate.
Decent returns on equity thus.
The scenario is that we will be generating excess cash, which will clearly be distributed to our shareholders.
We are going.
And the next board meeting to think a proposal, which has to be reviewed and approved and discuss at the board level.
What to do with the current excess capital that we have.
And.
We will communicate as soon as that is of course decided upon.
But.
In summary, yes, we do think that we will be able to generate.
Profit that will exceed the funding requirements the capital requirements of our subsidiaries that we will be able to.
The REIT take or.
Hugh.
Growth in our dividends as we have.
As we had prior to the crisis.
That's very helpful. Thank you Walter for your answers.
Youre welcome.
The next question is from Thiago Batista with UBS. Please go ahead.
Right.
Yes.
Hi, guys. Thanks for the opportunity.
Two small questions.
First one is about the funding.
Yes, because of all the uncertainties in Peru.
The bank has seen already.
Integration of the deposits to U S dollar and.
If this is true.
We consolidated each with the material reduction.
Probably close to the all time low.
Level of cost of funding for local currency.
So if we're seeing this shift to U S dollar deposits and how this consolidated with the very low level of funding costs.
The second one is about the output.
You mentioned that the digital wallets attributed already about 7 million clients or close to it.
Do you have a sense, if there's a big overlap between credit Corp clients and your Apple clients.
And how do you believe will be the monetization process of Yahoo.
Okay. Thank you those are good questions terrible.
I will pass the.
I will let Theresa answer the first part.
The first question regarding funding dollarization.
And then John Frank could you can tackle the question about the updated yet the customers and monetization so.
But something <unk>.
Thank you well done.
And looking at all funding what we have seen is.
Significant increasing low cost funding.
BCP level.
In General terms you have seen.
Greece of these.
Low cost funding inform salt.
Savings and noninterest bearing.
It's called the wholesale business.
Results of the liquidity provided by the Goldman NIM, but also the government mandated release of funds from the pension funds.
We have maintained during all this period very high levels of liquidity that has maintained almost including more than we would have expected previously and we have seen some integration from Charlotte to doing that.
But not really significant degree.
From the tourist populations to now has been strong integration with funds from the rule to outside but.
Aggregate limit of the policy. It's in the system has been my team and in the case of BCP, we have even gained market share.
And to reconcile this with the coastal plants, a compositional explain the reduction of cost of funds because most of our funding gone from these really low cost sources and when you blend the proportion of long term funding.
We reduced our cost of funds.
In the short term.
As a result of the increase in the reference rate of the Central Bank announced last night. This is a net positive for us because the cultural fun in the short term are you starting to see a continued to be a very senior living for a significant part of how this trucked up while at the same time, we are going to be able to reprice.
This proportion is 25 basis points through the rest of the year the high.
The very liquid, but so far what English audio and visual.
To one part of our loan portfolio. So we.
<unk> seen a low coastal funding and with these.
A small increase hold great revenue straight into central bank and increasing our marketing additional term.
By the way these signs from this.
He is very positive.
At the same time they.
Maintained ample liquidity and support for the financial system. They are giving us signals that they are watching over inflation on setting expectations.
Okay.
This helps to you.
No clear very clear.
Let me go on the other question.
Out of the 7 million clients at their house I would say, it's 20% to 25%.
Related to two credit club.
Okay.
The remaining clients.
The plan from our institutions, you'll have to bear in mind that the already six or seven financial institutions.
A part of Yahoo.
Client Guy.
Their clients they come down.
But more important.
We already have over 2 million.
The users that are not necessarily related to.
Any financial institution through epic.
Uh huh.
David Karp.
But more important than that is.
The overlap in dental usage.
We.
We're talking about it for several years now.
<unk> vision of war on cash and debt.
Ill turn it updates we provide our clients the more.
Yes.
Gosh, we'll see some of our clients.
What we do.
So the amount on sector.
Through yesterday.
In June was like five or six times.
It was being transacted a year ago.
Meantime, the amount of onsite and debit cards.
I'd cards grew over 20 over 20% as compared to 2019. So I would argue that there is basically no.
Let me finish on our margin.
Patients.
Among those ponds and when you compared the amount that ticket the average ticket for a fact that.
Compared to the.
They can transact that.
Through mobile banking.
Mobile banking is like 10 times larger so so.
The vision there is that.
That base definitely.
Hum.
Very strong complement to the.
And therefore, we have in the past.
On top of that.
It has already reached 1 million.
QR codes, we see here.
Micro micro businesses so yes.
I recall you have to start with is happy to be application now. It's obviously I think would be also upbeat to be through these QR codes QR codes.
Add to that since I mentioned, yes, you are.
Gold is already exposed through the point of sale of those EC pay.
Which basically represent I would say, 99% of that amount or impact that.
Banca fail.
Uh huh.
I think I didn't get a question on Monday Education August that's one.
Lineup on the decision and we are we get through QR codes.
Yeah.
There'll be some debate on for this quarter.
We're launching top ups.
We're launching micro loans.
Top ups.
Obviously, we get a fee from the from the telephone companies, but the vision is Laura.
Theres about one that inflation is a vision of how to how to further increase the usage of lumpy.
A number of transactions per client and in terms of micro loans were already lending.
Providing micro loans.
Based on the update information, but.
Through yesterday looked through the Yelp app. So the U S is not good debate. However, they have response rate is quite quite interesting. We really expect that to have response rate should increase dramatically.
So we're very positive on this new tool features that should be launched this quarter.
Okay.
Very clear thanks for the answer.
The next question is from Ingo <unk> with Autonomous research. Please go ahead.
Hi on the increase in the expenses coming from marketing and how should we think about it moving forward in the second half and also in 2022. So how much is transitory versus should we expect to increase our digital efforts continue thank you.
Thank you Ingo could you help me with this one.
Okay.
A focus on the specific lines Ingo, probably they are going to increase but what we are striving to do is to transform that caused this chunk of sort of the time.
Particular at BCP and <unk> in the bank. So you are going to see the increase of certain lines related to <unk>. While at the same time for example, a ASP.
Reflected in the reduction of the traditional footprint, we are going to control costs and all that.
But jointly its trial for improvement.
Two ratio of the both all the organizational BCP so.
I think we are striving to improve efficiency ratio about changing the composition only specific lines.
In line with that they get their transformation.
Perfect.
Marketing expenses, how should we expect it to move to <unk>.
<unk>.
In this particular line in the same time for example, critical national efforts to launch new products new facilities in D.
<unk> tends to be much more active in the market.
Probably at the beginning of spending more in third party. When we have more slow in terms of accrual we employed probably to change a using internet traffic to gain awareness of dispatch.
Part of the thing is trying to get to lunch road being no for the clients improve engagement. When you have more traffic is 32.
Exposure approach using a gradually.
Yes.
Pete on most closely alternatives.
Perfect. Thank you for the answers.
And now I would like to turn the conference back to Mr. Walter Bayly, Chief Executive Officer for closing remarks.
Thank you.
The results of this first half of 2021 are very much in line.
What we have been anticipating to the market.
Namely the 2021 is the year in which we rebuild our margins our volumes and our profitability.
This of course, after a very difficult 2020, and which the focus was to adequately generate there.
Quiet credit provisions to reflect the damage in our loan portfolios.
The biggest drops GDP in Peruvian water in history.
Even though this first half results, which show.
<unk> return of 11, 3% are as mentioned before well in line with anticipated results. There are differences within the different business units of credit Corp. I will briefly comment on the three main subsidiaries.
Clearly Pacific or is the unit, whose results are way under what we had anticipated.
Second wave of Covid infections, and mortality greatly exceeded our expectations and those of the first wave.
As you know Pacifico is the clear market leader in life insurance, which includes credit life and life insurers associated customers of the private pension system.
Our life insurance business has been and once normalized will continue to be a driver of growth and profitability.
Thus short term results to not change our long term view going forward.
We anticipate our life insurance business.
To return to profitability this third quarter.
The impact of the second wave of infection has already decreased in a very relevant point.
As I've mentioned of course, the possibility of a third wave is real.
Vaccination efforts have recently accelerated and already reached 75% of the most vulnerable population with at least one dose thus a potential third wave should result in lower mortality.
BCP Standalone results are for the second quarter in a row very positive.
TV returns of equity above 18%.
Structural loans have started to grow though at a subdued rate.
Needs have started to recover while cost of risk is coming down.
We continue to be extremely focused on all different digital initiatives, which continue to advance very successfully.
Dissipated, we have accelerated the pace at which we invest and spend in this initiatives.
The Broncos results are also encouraging and recovering very well as we are already exceeding our anticipated return on equity.
Estimated at high single digits by year end, and we already have 10, 3% as of June <unk>.
Volumes have started to grow while cost of risk is coming down.
Productivity is climbing ahead of our plans.
One third of the number of monthly disbursements are.
<unk> already been done without the intervention of the loan officer.
Finally, the evolution of NIM is also positive.
We are very encouraged by yesterday signed the decision of the Central bank to very modestly increase our local currency reference rates.
This modest increase gives a message that our central bank is watching closely the evolution of inflation, while still maintaining an expansive monetary policy.
This move is also a message to the FX market.
To conclude.
All variables under management's control are evolving favorably and believe we are well positioned.
Positioned to exceed our expected results this year.
We are faced with an unstable political scenario.
But it is good to remember that unfortunately political stability has not been the norm.
Our macro fundamentals and the physical monitoring financial system continued to be strong.
And while our demographic system of checks and balances and will be tested and challenged we're cautiously optimistic on the final outcome.
The coming year will be full of challenges and not without volatility on the political front.
We will nevertheless, as we have in the past whether this political volatility and continue to be focused on our mission and purpose.
With this I finalize our conference call and again, we thank you all for your continued interest and for joining US on this call. Thank you very much.
Thank you ladies and gentlemen. This concludes today's presentation you may now disconnect.
Okay.
Sure.
[music].
Yes.
[music].