Q3 2021 Credicorp Ltd Earnings Call
Good morning, everyone I would like to welcome all of you to the credit course limited third quarter 2021 conference call.
Now have all of our speakers in conference. Please be aware that each of your lines is in a listen only mode. At the conclusion of today's presentation. We will open the floor for questions. If you would like to ask a question. Please signal by pressing Star then one on your telephone keypad.
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With us today is Mr. Walter Bayly, Chief Executive Officer, Mr. John Frankel, Ferrari Deputy Chief Executive Officer, Mr. Alvaro Correa, Deputy Chief Executive Officer, Mr Say saw real Chief Financial Officer, Mr. Reynaldo, Yolasa, Chief risk Officer, and Mrs. Mueller grows to Gwen.
Yes Chi Investor Relations Officer.
And now it is my pleasure to turn the conference over to credit Corp, Chairman of the board Mr. Luis del Matto you may begin.
Good morning, everybody and welcome to our critical Goldberg School.
I Hope you and your families are healthy and safe.
Before beginning the presentation so I.
I would like to share some opening remarks.
I'm very pleased to join you today.
Thank you Peter.
Our strong third quarter results.
And inflation point efficiency recovery.
Digital as well our sustainability journey.
This side.
We got to see soon.
Steve's team.
And this happens to be Walters, and noggin bottles not conference call.
I wanted to take this opportunity to express our deepest gratitude to Bill Walton.
Well arguably contribution to critical.
They are the leaders.
All right.
Transform our business and.
Our success.
I'm going to have.
Exceptional 24 year career, we seem to do.
Including the last two years.
Deputy CEO, what we're seeing in stories.
Thanks, Jim.
Basically banking and wealth management.
Over the last few years. He has played an invaluable role.
Driving and <unk>.
We are closed.
Great sustainability.
Sorry.
Followed by those technical chops transparency.
The value of indicators by investors and colleagues alike.
Walter has had an extraordinary 28 years ago.
Including the last two years.
CEO Grady Gore royalty.
Eight years I've been CEO.
With a strong vision statement.
What this has laid out.
<unk> embarked on new jobs.
Including penetrating new.
These specialties.
Some markets, which now represent.
I mean, we did not grow.
Most importantly, whilst there has been an inspirational yet approachable leader.
Attractive undeveloped Colin.
Thanks, you know minus routine.
Alongside these visuals.
<unk> built a resilient organization of a decades old.
<unk> geology and promising periods.
Been a privilege to have Walter.
Hum.
We felt plan and manage this transition process very carefully and are fully confident that Jim <unk> as well.
Skills.
Please go ahead.
George.
We will build up on the foundations of the organization before us today.
Leading and diversified financial services group with more than 40000 employees and a solid person, Peru, Colombia, Chile and Bolivia.
Yes, I'm practical knows organization inside and out and that's actively participating in the process to define critical strategy.
Although it is 25 years with the group.
He has successfully led our immediate area.
Yes.
Including corporate banking investment banking <unk>.
People media, our retail banking or key experience.
The bank's digital transformation.
Yeah, you said inspiration on either angry.
Energized and engaged with management teams to set the bar higher.
We are very pleased to have three bucks next yield critical.
Again, many thanks to both Walgreens and that was about.
Now I would like to give the product the SSR and his management team.
The conference call.
So for third quarter 'twenty one.
Thank you.
Go ahead.
Thank you Lee.
Good morning.
This conference call.
So for the third quarter of 2021.
I hope you and your funding.
Does that indicate that the modest economic activity.
Seven 8% year over year, like one 6% compared to the figure will be pulled there.
Those 2019.
What estimates indicate.
The third quarter, we don't trade one economy expanded 11, 2% topping pre pandemic levels.
Well the bulking that the construction sector grew 21%, which we walked through the fourth quarter 2019.
In addition, just that piece because we bought them we call digging in recent months has been boosted by a favorable mix definitely vitamin corporate prices, it's been at least close to high levels.
<unk> main trading partners are reduced to me.
Sure.
We are asking to any type of situation.
Prepaid top quality influence he literally after reaching a peak at the beginning this April quarter.
<unk> group has been greeted by noteworthy advances in the vaccination program.
81% of the other population of at least one dose to go over in this room is to pool all other countries in between 12 and 18 to be vaccinated.
Yeah.
We just take the whole GDP to rebound a one 1%.
And between one which is initially expected due to our strong commodity prices and expansive monetary pizza.
Mix was slightly.
But it is interesting deals recent cutting into a shuffle, what's their teeth by economic agents seek medical potential moderation.
We did have to vacation.
To me as chair of the Central Bank bolstered by National market and don't indicate to us before.
For example, the exchange rate as volume grew four.
Before solely at Goldman Additionally, the 10 year.
Local currency, what would've been bonds yields dropped from a peak of.
Six 8% to five 9% a small denver.
While the level of non resident halls.
They normally makes it all of them and that will be called from our loan book.
<unk> four.
We're thinking June please stand by.
Same thing October trend.
The international number of Sims heat.
And then by calling $4 billion from October after expanding at Sydney, One 8 billion.
We'll mention that the central Bank has raised only two rate by 100 basis points.
Oh looks to controlling session matter pressures these right.
One 5%.
When do you people from the new Prime Minister appear before Congress to be glad to take both compute and forehead cabinet. Additionally, the executive branch, but it needed.
Congress will be quite extraordinary powered.
Toledo favorite is layla.
So these proposals include increasing the medicine hat in contact for ETP.
More than 300, how some stronger than a year.
We get vacation will be the impact to them, maybe creating a new mining tax regime.
Wholesale net sales actual licensure are holding.
And as the mix shifts to about capital requirements in the international space.
Please standouts in greeting the Mega look at economic sanctions that NATO cutting bullish on financial institutions.
Implementing initiatives to ensure a more peaceful for Banco de Valencia, we continued to close pneumonia talk for you because I'm thinking I told you then and be an.
In our business mix.
Next slide please.
Going on to create a course for four months, we continued to post their financial institution.
So the penetration one with equivalent profitability across the board.
In line with our ambition to create more sustainable inclusive economy, the last nine months.
How can we get savings.
I was going to be it looks from the international piece been too gassy.
So our GAAP equivalent equal.
Okay.
So if you'd give you want from a micro businesses has also benefited from our ABC financial education programs at BCP.
We operate in an underpenetrated market and decide.
Global opportunities while accelerating our.
Transformation is growing client base, mainly to digital clients, which as of September <unk>.
At 457% below plan.
Eastern really reaping the benefits of implementation of these hybrid mode.
And we're seeing normal duration work and sports channels.
Yeah.
But there.
For the quarter results.
Loan portfolio rose two 4% in quarter paid bottles boosted by local currency devaluation OIBDA.
Excluding exchange rate effects the loan portfolio remained blocked gave at that one.
Now keep in the stroke totally lost.
By eight 6% drop in government program portfolio.
Equal, which is composed of net interest income fee income and FX transaction school.
8% due to a peak in the structure of the lungs.
Now you are into this week. Additionally, the equal one boosted by Gould from transactional activity in truck line transfers.
Additional expenses dropped between improvement independent behavior appliance at D. C. P M.
Which limit the cost of wheat structural costs I'm pleased to drop.
Record loan Oh Oh.
Slide 14, CLO, 154% with Texas.
Sure from the right thing with phones with color.
COVID-19 related claims in the life business with a material reduction.
Let's be prudent independent Italian situation.
Fourth quarter people are crazy caused reduced to one <unk>.
164 million totally achievable.
Although equal 18, 57% year to date, although ESP up 13 point, 46%, which is within our guidance.
Finally, our balance sheet remains strong with ample liquidity.
Capable capital, which makes it slightly.
I will briefly describe the soul of the line of business level at least.
I put the details in the sexual and consolidate the poll.
Wholesale banking.
You said you sit in a strong rebound at BCP accelerates as transformational investments.
In the third quarter of twin peaks.
People attribute one telephone 58 media. So this is more or less with a return on equity of 23, 1%.
BCP, although you score section on.
The $69 same quarter over quarter construction, provisional expenses, which reflected an improvement in payment behavior.
But what could even buy a baked in that expected.
The nickel market reputation.
Going forward to grow three 3% quarter over quarter, which was mainly driven by growth in the structural demands and interest rates and by leasing transactions.
Why do you buy that increasing consumption.
Got it.
Yes.
BCP stand alone.
14% year over year, reaching their standard which was primarily attributable from upkeep 19 alcohol sweeping expanses for digital transformation.
Are we at ETP for the first nine months of 2021.
At 19, 7%, which reflects a strong rebound for the COVID-19 prices BCP stand alone core equity tier one ratio remained within our covenant limits and institute at the Maidenform, 1% this quarter.
You see people leave you for soap Shouldnt do you think that ratio will grow.
Which reflects a lower risk appetite.
Goodbye.
Right.
Microfinance continues to recover as business activity pickups and implementation of the hybrid barley begins to abate.
Thank you uncle the use of that.
Now turning to the channel has begun to yield improvements in productivity and allow us to streamline assortment of lighting for good quality borrowers structural displacement costs exceeded pre pandemic live in August.
Net interest income grew seven 5% quarter over quarter.
Boosted by Yahoo.
Interest income provisions at that site previously what we program launch reaching.
We think net interest income what folks were treated but not peaking of the major bulk.
Loan provisions dropped slightly due to an improvement in client.
The pro forma of new origination we built what we spoke.
Our hybrid model has helped us control of operating expenses and improve for the nation volumes I mean part of it and how can we view as branches under same stores.
Bancolombia was faulty group teaching origination borders micro loans had a gaming really boosted yields.
The decrease in the level of provisions were placed on improvements in credit quality country smaller.
The company is now focused on implementing the vanquish people best practices as it improved it further.
<unk> for the sale of digital a couple of weeks.
Next slide please.
We've got an in vitro MPC.
Typically those back this quarter and interestingly positive range due to a decrease in pain and the life segment on growing premiums in the life property and casualty businesses life, COVID-19 claims dropped 82% quarter over quarter up there.
DNR.
But what really.
A significant drop.
Like fulfilled were also boosted by growth.
Which is part of a pre commitment levels.
He published impartial equal shows were impacted by an increasing clean that's COVID-19 related restrictions will move things that business activity this quarter.
You can pick what's mitigated by an increasing net premiums were sold and our corporate insurance segment also bone stack due to a reduction Colby as it relates to me.
Mostly medical therapies is what impact it will be policed impacting related tenants.
In the pension business pretty much feet remain profitable despite an 18% reduction at the time.
Remind us when the quarter before.
Pension fund V. We are closely monitoring.
These patients.
Next slide.
Yeah.
Regarding our investment banking and wealth management businesses income from quarter over quarter, mainly by the capital markets and asset management business due to lower trading volumes.
Assets under.
Under management with respect.
In this quarter.
Quanta announced assets under management grew one 6% in local currency buffer you said he dropped the iPhone.
Same in U S dollar assets.
Assets under management construction agreement by the asset management business, where traditional funds experienced outflows.
Assets under management in the wealth management business.
Stable.
We can play in some great assets.
Offshore platforms, where we are growing value proposition to cockpit hour flight changes.
The income contribution from this business.
And then 4% reflects mainly attributable to the capital markets business equaled one affected both of our solar hybrid portfolios no conflicts of rising interest rates and a decrease in construction activity.
I just think the dropping income contribution what's the given by the asset management business, where assets under management contracted.
Next slide please.
Now I will discuss credit course consolidated before.
Interest, earning asset mix improved in a context marked by an increasing chunk of the loss share of total asset.
The decrease in react fever loans balances was partially offset by a 12, 2% quarter over quarter construction and the investment portfolio grew 20 exploration wells that if he gets a deposit which we're not seeing the liquidity assets.
We therefore, coupled with an increase in market rates.
And just why now why interest there.
Quarter over quarter credit costs.
Corporate thing.
Ending balances at four 8% and mother's day and the balance was fueled by an uptick in the exchange rate equal controlling both the exchange rate effect and the Gordon for Windows. The structure of the portfolio one points of a benefit quarter end balances by what we're seeing out there.
Our stadium.
On the liability side it was addiction funding from Golar and below what subset.
Low cost deposits, which resulted in a less expensive funding mix all of them you finish really high type of limited to impacting our funding cost, which is not barrick shrinking to interest rate movements, even that low.
Low cost deposits account for approximately 58% of our funding.
Most of our wholesale funding benefit from peak schemes risk weights for granted.
Mix looks like.
This quarter, but this critical folio and payment behaviors continue to evolve favorably across all things equal.
Bob This truckload NPL ratio under cost of each ratio improves.
Some payment behavior did you see improvement in retail banking and the bank will be sport policy because of dilution attributable cause economic regulation and are seeking employment growth levels personally.
Pension funds, the girls and increasing public investments in this context.
So at some point in the industry.
<unk>, 2%, which represented a quarter over quarter reduction of 40 basis points.
What changed in the cultural belief, it's all from our board at least 4% Wakefield mill.
This improvement was.
All our subsidiaries.
My basic opinion behavior, partially offset by an increase in provision related to an adjustment to write off all issues.
It would be Cincinnati.
As Chuck already call hopefully, it's contracted 69 basis points from 123% to Cedar point, 54% year to date, the cultural beliefs stood at 115.
The level of a stroke total allowance for loan loss in the quarter and lots of savings one one per se or created clubs loan portfolio. It is important to note that the quantity of the Gorgon.
I'll detail your way through these quarters.
Grace period explanations.
The ratio made ethics impacted asset quality ratios for the total portfolio and definitely we are not highly concerned about this evolution because the launching of the ballroom portfolio sale.
Safeguard my mistake.
Okay.
Hum.
Total <unk> increased 21 basis points quarter over quarter. This time by a four 3%.
Recovery will have a look.
Hmm mm.
Thank you.
Sydney.
And he was probably the strongest portfolio of normalization and then redemption.
Group adjusted neat ingredients.
Seven basis points this quarter and reached 395% this metric corporate prostatectomy boosted by a significant decrease the leasing levels, causing increased four 8% quarter over quarter, which was primarily driven by Google mentioned tourism.
He can do alongside them.
Sexual activity and distributor in China.
Banking international transport of BCP.
This will also be impactful, we think they can definitely changes was plagued you restriction for relevant sources for people.
And the type of work.
These 15, $3, saying it'll be getting.
What's driving that.
Tableau, bringing tourists.
Secondary lead time, we can see and convenient fiction.
Frictions that were in place last year due to the pandemic no longer in effect.
Right.
And the first nine months of the year.
<unk> sufficiency ratio of 120 basis points year over year.
Improvements were driven mainly by the positive evolution of operating income in the banking businesses into our bank.
This evolution of how your expenses.
And along with digital transformation.
We used to grow each year, but it won't be largest tranche of the physical file tender for a related corridors. The premium paid for these pending Hyatt.
That's offered by this fiscal fourth with prudent by Yahoo.
Zankel operating income grew 19% year to date, while operating expenses grew only 1%.
Thanks, Good remain under control. Despite the fact that we can do some transformational expenses.
To implement by hybrid business model it is.
Gordon interim and bankruptcy monthly pay 8% September launch operations, which represents a 5% total the spokesman tomo were processed through alternate channels.
Because they're not just China complemented our traditional have been missed by originating don't keep.
Keep it cost efficient lowest goodbye.
Fiscal period.
Next slide please.
At <unk>, we continued to work on key digital initiatives to achieve our objective for customer experience and efficiency and ensure our competitiveness in the long term.
Regarding technology in Detroit as nine months of 2021, our software releases increased 87% year over year our downtime.
<unk> and <unk>.
Our next outside of risks.
By year end is to fully comply with all of these statements.
If I.
Private securities assessment tool at the baseline volume and mix.
90% of all the statement of yet consummated to date with concrete.
Corporate samples we stopped.
The consumer segment customers had restructuring possible Cray broker driven by improvements in key customers gotten with football.
Apart from that process.
Growth in digital clients, which represented 57%, but the total client base this quarter continuous client.
The use of that thing.
Got it.
So which is 237% this quarter.
Burn program driving digital channels.
Could you take the 9% reduction in branches over the last 12 months.
User consumption continues to grow exponentially and this war highlighting how rapid share of total kind of factoring that showed up this.
This quarter the athletes with pop mobile banking in terms of when we tried to transaction level why just to get a cycle yapping on Westwood.
Next slide please.
Yeah, I think for lunch.
Two key application pullout BCP Italia estimate it's multiple transfer.
The telephone number for you at Kohl's instead of using cash.
Yup.
Both broker new features are numerous partnerships over the last year you have to use the charts. We only play in terms of back to the April more than savings.
We expect to reach the medium.
Mark.
Yeah.
And not just a small premium ecosystem through rapid decisions to become.
Wichita Third party distribution channel for the company.
The epic Huh.
Boston.
Growth in financial inclusion and is used by every corporate zinc yep.
Okay.
We're able to open that vehicle.
Nationality amplification.
No bank account as required by.
By Chinese government, social assistant payments to blue carbon capture.
Uhm.
With <unk> in China.
A new block of Boardman ceasing payments.
Starting from the fourth quarter of each year, 49% of total user active on a monthly basis.
This unit at six 1% RBC decline 19 third thing or it's a new flags. We talk you felt like multiple escalation of our transaction to work.
Frequency of usage.
<unk> also grow with them.
Okay.
Good evening.
From.
Once debate there.
Eight in September last year.
Our inflection how can reach there.
Nino toward our volume for two or three months old.
Both of these products.
Well growing the user base and increasing frequency of use to date.
Shaping the monetization phase before the end of this year, we launched micro loans mortgage tokbox and dynamic.
So.
We are also working on inventory monetization pipeline, which we will launch down the road.
Slide.
As part of our innovation efforts, we have developed to say that as we speak with initiatives to pinpoint the exponential growth opportunities.
New sources of funding these initiatives a condition will give this stuff forward tasked with being out of the box and practices relies on pick up of execution. So vis a vis our closest forward core science develop within a specific product groups.
Initiatives adjusting cohort.
Those that have considered more transformational.
They may look to another regional centers.
What comscore toward on project market.
What interesting idea and depending in HSBC based central priolo or calling for eventual profit company being bid activity correlated.
In the early stages of this maybe some small space.
Perspective.
This is Katie initiative, which was completed recently.
The innovation cycle.
Maybe that should be TV customer base and commercial muscle to grow user base.
Along with the actual transaction.
Initiatives, such as <unk>, which will develop dependent.
Making it easy for customers.
<unk>.
They have flexible architectures that can easily be adapted for UHD y and time to market purposes, when developing new features.
You can learn from different experience, we are now getting.
Seem distracting from our Fintech ecosystem to review aspect like this.
Definitely.
Pardon me, ladies and gentlemen, we seem to be experiencing some technical difficulties. Please hold for a moment.
Reconnect our speaker.
Okay.
[music].
We're like really connected to our speaker line, so I'd like to turn it back to stay back.
Hi, I'm sorry for this technical issue.
Probably I am going to be the loss rates.
You can learn from different experiences. We are now revisiting this tried to equal our assistance to the view assets relative to investment vehicles, the Goldman that small management or.
Our aim is to develop the best disruptive business models by liberalizing, our incumbents market knowledge and customer relationships. The goal is to enhance decision, making a pretty closely at.
The same time avoid conflicts of interest within our covenants.
Thank you sure I'll, let revisit the digital strategy with the market in the first quarter of next year.
Next slide please.
Regarding the sustainability front, we have recently published an ESG update.
Converse with investors to comment on our recent milestones and upcoming initiatives.
Find these documents in the present pension sector said Shlomo what we want to highlight some specific milestones from this update.
This year, we made a solid commitment to the environment by declaring our goal to achieve carbon neutrality in our dealers' operations by 2032.
<unk> also made progress already in Asia related to these companies.
On the social problems, we successfully extended the benefits of our hybrid model or concepts can be safe.
For our small and micro finance.
I mean, the amended OLED initiatives related to our gaming equity program.
Additionally, we continue to make progress in bolstering financial and clinical education banking more.
It's a neat and also reaching a failure large holdings thinking now about the financial limitation initiatives they've got the Golar unless we have incorporated gender diversity Guy next hour process for the board in our corporate Goldman last quarter. Additionally, we are seeking to ensure that the board actively engage with members.
Another relevant stakeholders.
All the sales force argue they could.
Cooper devices.
Our senior manager of sensors, staying ability sponsors with a focus on providing leadership at the company. We've been known to be effective role models for sustainability, which will ensure the sustainability mindset, it's Bob communicated pool and in China likely buying big training organization.
Right.
We are confident.
That they are one train and profitability weakness this quarter will continue in the short term we expect.
William GDP growth for 2021% of around 12%.
Context modestly better than expected economic recoveries that pop the pandemic levels on record high prices for coal.
Loan portfolio Blue measured in average daily balances expected to dissipate it.
Valuable the Guy who got change impacted by local currency devaluation, we expect NIM to situate in the new financial guidance in line with our more profitable until the 70 of asset mix and higher interest rates.
We gotta be cost of lease we expect to close the year below cooling year to date.
Nevertheless.
Regarding efficiency ratios just takes it to situate at the upper end of the guidance range of how your expenses are recorded in the last quarter.
Accelerate transformation initiatives.
In our conflicts.
Ongoing gains in profitability overall ROE for 2021 is suspected to seek rate and they operate in a couple of guidelines, we will continue us simulate and value creation by executing our digital as charges, which coupled with our sustainability of course will ensure that we sustain.
Long term competitiveness.
I would like to start the Q&A session.
Okay.
Thank you Sir.
He would like to ask a question. Please signal by pressing Star then one on your telephone keypad. If you have connected to the call using the HD web phone on your computer please mute.
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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 who will then be allowed to ask a little follow ups as needed but again. Please only ask one question at a time. Thank you.
Our first question today will come from Jason Nolan with Scotiabank.
Yeah.
Thank you very much and Hello, everyone.
My question is is.
After all of this I mean things like really the economic reactivation has been done on moving ahead at full steam even faster than many expected.
I mean, what happens next how are you thinking about.
The economic outlook for next year 2022.
And what that means for the banking system.
And in that context.
I guess, if I were to calculate the depreciation of the Peruvian Sol.
From probably the beginning of 2020, it would probably be close to 20% off the top of my head.
From like $3 30 to four.
So that's per dollar.
We've seen a big move there and I guess it was the end of 2014 that we saw.
Push to be Dollarized the loan book.
But if you can also in that context of what Youre looking for talk about how the movements in.
In the in the FX has impacted.
The economy in your business and if you see that being an important factor going forward. Thank you.
Okay.
Thank you Jason this is Walter.
I will give you some of the things that come off the top of my head and then I will pass it on to setup for maybe a little bit more and more and more be built but I'll try to give you color.
The way I think we're viewing it at this stage is that.
You will have an economic recovery of growth next year that will be somewhere between maybe two two and a <unk>.
Have you know around that number.
It is difficult to estimate long growth.
Because we have had a distortion in the growth of the loan portfolio because of the injection of the money via Aspira. So the long term or medium term.
Measure of.
Loan growth is one and a half times nominal GDP has been disrupted does it is it is.
Not easy to predict growth for next year, but I would say it will be kind of the low end.
All of what we would expect so with that thought I have maybe three 5%.
GDP growth.
We should be growing at somewhere around six.
And maybe loan growth will be somewhere between.
Five and seven that's politics, but with very big differences, probably a lot more dynamics in the retail card and a lot less dynamic growth in the wholesale side.
But it's very unclear I mentioned, because this long term trend.
Bye.
Incredible amount of injection of the craft beer program regarding the FX.
We expect a lot of.
Stability going forward.
It is very clear that the current level of foreign exchange.
Is severely impacted by the political noise.
And.
Thus the fundamentals do not.
If it were just for the fundamental priorities exchange rate will be lower.
But we don't expect more political noise going forward just to maintain.
Actual existing relatively high level of political noise, but with very strong.
Positive factors in the global economy, Thus, we do not expect any significant deterioration in the foreign exchange rate.
The devaluation as you mentioned has not had a severe impact on the economy.
It has been.
That's happened over a relatively medium.
Got very short timeframe.
I'll make.
Agents have adopted and it hasnt created I think any long term sustainable.
Sustainable damage.
It did greater or a level of inflation, but I don't think that this deterioration in the exchange rate.
Any long lasting effect.
They did have some effect and our common equity tier one at BCP because of course, the risk weighted assets measured in local currency.
Gotcha.
Perfect ability that BCP is having.
You know that that is not an issue at all I think I will stop here.
Maybe you can add some more of your opinions and color too for this comments.
Thank you.
Probably aid.
So only song a additional opinions to mention the devaluation has been significant this year around 20% at the top was how long can be 5%, but you didn't say that.
The impact of inflation was moderate at the expectation that there's going to be a one 1% and the central bank affected the CCT to control that.
And using a number of instruments.
Including due to close in the market that they worry about the XL has been probably around $10 billion and the daily life.
For additional $1 billion.
But.
Due to the stability in the country has already suffered an outflow of funds.
It's estimated that probably from the beginning of the election process to the close of October being around $15 billion that is noteworthy to say that the trend has decreased significantly in the last.
Probably has been Camille.
So it's early days.
Despite of being stability prostate hustle really Hasan has caused international ourselves has had some impact on it.
The level of the status of the Central Bank that the Central Bank at the end of <unk> $75 billion of yourself now.
And the exchange rate is trading in a narrow range at this point so probably the multiple it is possible the impact has already being absorbed by the economy.
In the.
Thanks, Tony.
Thank you Sir I think we have we have covered jason's concern.
Yes.
I was just turned up for sure my only I mean, one comment that one number I was looking at was just the proportion of dollars as a percentage of total deposits and that has increased to about 51% from around 46% a year ago.
Is that something that we should expect to reverse or is that.
Here to stay.
Uh huh.
I would expect that that is going to stay there for a little while.
We're only gradually start to decrease to where we were before as.
People realize I understand that there is no concern or expectations for further devaluation of the currency.
But I would say that's wrong.
For a while.
Thank you.
Thank you.
Next question please.
Our next question comes from the Air National Guard Alonso with Bank of America.
Hi, good morning.
Walter Frankel says.
And good morning to all your team.
Good luck Walter.
Got it.
Congratulations on your results.
My first question is on the political and economic landscape.
We have seen the vote of confidence for the cabinet.
We have seen a more moderate speech from testing against government.
So we think all of these should be helping in the short term.
However, I would like to know your thoughts about the medium term outlook.
I think the country needs to blend in a tax reform.
Maybe some structural reforms to promote growth.
How do you see all these oh.
Is there a divided Congress.
And also I don't know if you have been hearing the noise.
If a potential inhibition of kras.
See you at some point.
And also in obese environment.
You pointed out in your initial remarks.
There could be more competition from state of bench.
So I would appreciate your thoughts.
Sure well. Thank you very much for your question.
I was going to actually address a lot of your comments in my closing remarks, but I don't think the opportunity to us.
Mentioned that now and repeat them later on.
I think we have to take.
The conversation.
The conversation or after the call for.
Away from politics.
I think what we have seen in the first 100 days of this government is probably going to be the norm, which is basically decent macroeconomic policies.
A lot of political noise.
The new political noise, and probably not a very strong execution capability to implement changes. So that it's most likely that is what we have seen in the past 100 days. The first 100 days of the government and I would expect that that will be the case for the next couple of years.
So I think it's time to take the conversation out of politics and focus on fundamentals of what is happening.
Within the country in terms of economic development.
I don't what covenant, which is critical so basically summary of less so I don't expect anything very different for what we have seen in the past.
100, <unk> that did answer your question.
Yes, yes.
Helpful. Thank you so much.
And then I have a second question related to your NIM.
We saw a year over year expansion.
Also in <unk> remarks.
Saying that we should expect NIM expansion in the next quarters.
In light of higher rates.
But considering that the human lungs were extended.
For the end of the year.
What should be the impact of fewer loans in your names in the next quarters.
Sure I will.
I'll take a first crack at your question and frankly that is sitting here with me would like to a lot of comments after fits us.
First response.
Yes.
Yes.
It did not change we expect that clarity to respond.
Driven by a mix in the portfolio.
The increase in the short term and long term interest rate that goes through.
The pricing process, so the general change should be upward.
So if we have to see about what's alone 40 basis points in the knee, but this is Bob is going to decrease gradually.
In the next quarters to be I will say may doable in what you're getting on a hub.
Jeff just a quick addition short revision.
In fact, it even though we do not expect.
Our rent growth in terms of.
Title of the book in terms of me make sure.
Improved because of the fever loans.
We expect some substitution with higher margins.
Okay perfect. Thank you very much.
Sure.
Our next question comes from Thiago Batista with UBS.
Yes, hi, guys.
I think I was just going to follow a follow up on this last question about the margins.
For the margins of <unk> Corp.
Now, we're talking about 45% of them.
Looking to move to.
Hum and equal viewed these used to be lets say five five.
Now more or less 100 kilo.
It could be level.
It is possible to see margins going back to the pre COVID-19 level or all the changes the retrofit.
The cap et cetera.
There is no didn't factor for good cause but with all the change in Peru do you see a.
It's possible to do it.
The pre COVID-19.
And the second one.
So it's pretty hard to do.
Second question is about Oh.
A level that is possible with corporate income.
We did this at a 14% or we can see.
Okay.
Yeah.
High teens.
Hello.
That is feasible in the current scenario applicable.
Okay. Thank you Derrick for your questions. The answer to the first question is yes, we think things will get back to where we were pre COVID-19.
And just off the top my head.
We'll probably be there sometime around last quarter next year.
And second regarding your return on equity.
We are very confident that the sustainable return on equity for credit Corp will be.
Around the 70% level.
Thank you Erica and thanks.
Next question please.
Our next question comes from Peter on the BARDA with Goldman Sachs.
Hi, Good morning, everyone and thank you for the call first of all.
Best of luck.
Walter and I don't want you guys both for a very high standard. So wish you guys. The best.
My question is on your cost of risk very good performance in the quarter, a little bit of deterioration in asset quality looking at your coverage ratio getting closer back to historical levels.
Help us think about the cost of risk going forward.
From here do you automatically now go back to that 123 can you still keep the cost of risk below three year end and into next year.
When when do you expect that to normalize.
To more normal levels.
Okay. Thank you for your warrants it.
So could you just tackle the question on <unk>.
Of Tito please.
Yes.
We expect the coastal risks are going to remain below pre crisis levels. During this year and some part of next year.
Due to a combination of a better quality of origination and the maturity of loans.
With better performance at less anticipated booking our books, who in 2020.
And we aren't going to came back to more normal levels.
Even the composition of the portfolio in 2023.
Thank you Sir so in summary data.
I think that all crop next year cost of risk will still be below pre COVID-19 levels.
Just to be very precise.
Okay, Yes.
Thanks, a lot.
And maybe just one follow up on not necessarily politics, but as you mentioned on the GDP given the political environment you mentioned for next year too.
Is that what you think.
Sort of the mid term growth outlook for Peru should be right I mean, I imagine getting back to historical levels. It will be tough, but is that sort of a sustainable growth level you think under this administration.
Unfortunately yesterday.
It is below the potential but I don't see that.
The next two to three years at least the.
Investment from the private sector will be able to drive the economy to higher levels of GDP growth as we have the potential to do.
Yep.
Okay. Thanks, a lot.
Best of luck to you and walk around.
And also when you take them.
Thank you Tito.
<unk>.
Our next question comes from Andres Soto with Santander.
Good morning to all and thank you for the presentation. My first question is just a quick follow up on the margin outlook I would like to just understand instead of some of.
The substitution process that we have seen better active ALS, how how does this new origination and our clients are willing to take the interest rate that they used to pay in the past for the goals.
Loans are there have been any type of consequence in terms of pricing given the low rates that they were getting before.
Also on margins if you can remind us your sensitivity to the policy there does seem to get there with your balance sheet to the policy right.
Sure.
First part of the question will go to John Franco and the second part too.
Yes.
Hi, Andrew.
We haven't seen any sense whatsoever.
Among clients that are getting.
Getting a new law under.
Market conditions in order to replace or to replace runoff.
Not only our PCB, but most importantly, Banco where as you know the margin rates are much higher so we don't foresee any any issue regarding that.
It's our traditional product.
Go ahead with the second part of it.
Yes.
Doing I would say anesthetics exceedingly that 90 to 100 basis points of increase in rates.
Along the Q will mean 200 million addition that was for this full margins.
On a consolidated basis.
Oh, perfect what is already very timeline to sub four.
And how long it takes for you.
I think to reprice.
The whole period is longer but I am but I'm, giving you is the one year one next year of the sensitivity if you will.
Talking now and you've moved 100 basis points.
The 200 million views that were sold or <unk>.
It was sold in our books.
Perfect. Thank you so much more that I might have a question regarding digital transformation on the investments that you guys have.
Planning on maybe which.
Which is a stepping up.
This quarter and probably next one I would like to understand if this is something that will continue into 2022, and therefore, we would still expect efficiency to remain.
Ground level.
Thank you John Franco go ahead, yes, the answer is yes.
Definitely I believe we have this conversation a few quarters ago.
We will definitely give you invest in.
Speed up our investments in digital transformation.
We achieved.
Salt.
As you are all aware of disease.
Especially on the on the new ventures.
We are not cash flow positive in the short run and domestic travelers yesterday we.
As I mentioned, we already have over 7 million clients.
We do not expect that.
Next year, maybe by the end of <unk> with three or four.
Still do.
Cash flow positive. So the answer is yes, we will keep investing obviously in debentures that are in our in our visual successful.
Key in order to stay.
No longer competitive, but also shape, the new digital marketing in the markets, where we operate.
Perfect. That's very clear. Thank you for your answers on to Walter and Alberto. Thank you so much for all.
E Sun and good luck.
Thank you.
Our next question comes from Yuri Fernandes with JP Morgan.
Hi, and congratulations on the results I have no question regarding dividends.
I guess, the historical payout and we'd do the adjustment for adults any shares.
It should be around 50% to 60% rate.
And as you said, maybe loan growth will not be there.
22, I mean, it's going to be 5% to 7% you just mentioned and your IRA Louise it's likely there will be a more normalized level. So my question is do you plan to increase the payout can you can you share some color on that or maybe just say Judy maybe we want to create more capital. So maybe 2023.
We want to grow more so what is the the view for capital allocation. Thank you.
Yeah. Good question. Thank you Judy and the answer is increase dividend payout.
We do not need additional capital we have the levels of capital that we think are the appropriate ones and.
So.
As we have more a higher return on equity that exceed obviously the growth in risk weighted assets, we will be distributing dividends.
Thank you.
Welcome.
Our next question comes from Carlos Gomez Lopez with HSBC.
Thank you and I would also like to say thank you.
And good day to all.
I don't want to work that in particular, because he's got a very very tough job and the insurance business and I think <unk> said he went over there. So from the point of view of P&L in times of distress.
Thank you very much.
And what could I know you want to focus on the Panther had a policy question. We now have a new competition of the Central Bank Board you have mentioned in the past how this could be determinant.
As to the policies, there and obviously the interest rate caps.
Everybody are important.
Important for the bank in <unk> do you expect any most likely over the next couple of years or you're just saying that we have seen what we are going to see in terms of cups. Thank you.
We should wait thank you Carlos for your comment and your question.
We should expect to first.
The complete board of governors of the Central bank to get done.
These three members has changed and there are three more that are coming from Congress.
But even with that level of uncertainty the answer is no we do not expect.
Any changes in the interest rate caps for for the next year.
Year, two or something like that.
Thank you so much.
Scott This is Joe.
I'm trying to just complement Walter.
Yes.
Comment.
It is clear that the rates in Peru are what they are because there is a lot of.
Cost in order to assess risk.
Because of the level looking for monitoring the economy. So I would say that the current authority as well as.
The Central Bank.
These are very very aware of the negative impact that.
<unk>.
Got home, great coffee and in order to get it.
Financial inclusion.
Suddenly if my second follow up because yes, I think the Congress he said what about input components on inclusion.
That would also extend to the discussion around the pension funds and we have not.
Over the last few months, but.
But obviously, that's a debate that will come back I do are pessimistic I said, what a few months ago regarding the future of Pip private pension system.
Okay, Yes regarding the pension system as you know there will be.
The government has called for a reform.
A commission or they will study review there's been a lot of work that has to be done.
I have mentioned in the past from credit cost perspective, it is more important that the country and SAP with a pension system.
It works and it's.
Financially sustainable fiscally sustainable over time more than that what happens with FEMA.
That's a very.
Good contributor to profit from credit Corp.
I would expect that the industry is going to change completely our likely scenario is that yes.
We will have a smaller.
Contribution from putting about two critical going forward.
So our vision has not changed.
Thank you.
You're welcome Carlos.
And then if you have a question please press star one.
Our next question comes from Jorge <unk> with Citigroup.
Hi, everyone. Thank you for taking my question.
Just to follow up with regards to what do you what do you what segments you expect loan growth to be.
More than <unk>.
During the next year or going forward I think you mentioned credit card or retail.
To be more more than not make but I was wondering how does this or how do you reconcile this with what with the figures that we've been seeing lately and that is.
Somewhat weak growth from from credit cards.
Improving.
Economic and overall COVID-19 conditions. So so how can we think about the retail going forward looking at current figures.
What could this mean given the ever growing in a particular, a riskier segment, what conditioning for core and Npls.
Sure I'll give you a first comment and then Frank maybe you can complement.
Actually what I was thinking when I mentioned retail I was really thinking a lot about mortgages in my mind and I should've been clearer on that.
So I think that but I think there is an appetite I feel there is an appetite for low end of the consumer market and that includes.
Tumor loans more than actual credit card portfolio, our credit card portfolio. As you probably know is more focused on the bid over the upper end of the consumers.
But I think there is there continues to be a good dynamic of the low end of the consumer probably installment loans, particularly as we utilized more data coming from all the new customers and our ability to distribute.
Yeah.
Digital channels that lowers the distribution costs and make smaller loans more economically viable for us so installment loans and mortgages were AC.
A nice the math going forward John.
Frank maybe you can just yes, just specifically with regards to if youll see the overall market the market.
Due to current trends like the outstanding balances Trump like by 30% to 35%, mostly driven by big ticket big ticket items that obviously because of the situation like I don't know travel tourism.
Appliances, and so on and so even though the economic outlook is no.
It is.
As a positive we do expect that that somehow that demand will come back. So that's the main reason our double what Walter said.
That's the main reason why we see opportunity for growth in that product specifically.
Thank you.
Okay.
This concludes our question and answer session I'd like to turn the conference back to Mr. Walter Bayly for closing remarks.
Thank you.
Before we conclude this call I would like to say a few words.
<unk> has generally mentioned I will be retiring from credit Corp. By year end after almost 29 years of being part of this company.
This will be the last quarter's conference call that I will be participating in.
I joined <unk> 1993, before credit Corp was actually formed and it was very much part of the team that worked on the exchange of shares of BCP Atlantic Security and pacificorp by the way that is the origin of the letters Vap. Thus credit Corp was created.
Since then I have been in several several roles and positions being part of credit Corp. 's Senior management and have participated actively in almost all major strategic decisions with critical I have gone through all the possible business and political cycles, and we have managed to steer the company through always emerged.
Got it.
Healthy profitable and focus on delivering value for customers and society.
Guardedly, along the way I have made my share of mistakes and make decisions that proved to be the wrong ones.
This was of course is very much part of what being a manager is all about.
As an advisor and listen to those taking the leadership, having the clarity humility courage to recognize those mistakes is what allows us to grow as our organization and individuals.
I would like to be very emphatic is thinking the members of the corporate team that have worked with me over the years.
It is this wonderful as talented team that always brought the best and meet their support has always been a conditional even under the most difficult and stressful situations.
I know that some of you are listening today. Thank you again, you have made it all worthwhile.
National investment community. Thank you Oswald for to support understanding and patience.
Took the role of being the main spokesperson for approximately 15 years ago and have always in Georgia the dialogue challenge.
Challenged by our investors and analysts I am confident that okay.
And a very solid position, having fully recover its profitability after the very dramatic impact of Covid in our markets, particularly in Peru.
Going forward I believe the future of <unk> changes.
Changes of three very fundamental issues, one the continuation and maintenance prudent macroeconomic policies both of the fiscal and monetary front in the countries in which we operate in this regard I believe it is time to shift the conversation around credit Corp away from bulk.
Over the past couple of months the market has been rising so very concerned with the political scenario what.
What we have seen the last 100 days is probably a good indicator of the next couple of years, namely decent macroeconomic policies continued political infighting of noise limited capacity to execute government policies.
Thus I reiterate the recommendation given to us by one of our long term institutional investors.
It is time to shift away from politics and focus on fundamentals.
The other two key factors that I believe will be will determine critical future better management and they are.
The successful outcome of our multiple digital initiatives relative to two day to day interactions of our customers as well as the escalation of the various disruptive initiatives.
Combination of both sets of initiatives will ensure the continuation of our customer preference as well as the cost reduction that will allow us to successfully compete with alternative business models.
But at least our wholehearted embrace of our very well articulated ESG initiatives.
The talent and commitment of the team that is taking leadership gives me tremendous confidence of the continued strength of credit score.
Thank you all very much and with this we conclude the call.
The conference has now concluded.
You for attending today's presentation you may now disconnect.