Q1 2022 Credicorp Ltd Earnings Call
[music].
Good morning, everyone.
I'd like to welcome all of you to the credit Cortland and limited first quarter 2022 conference call.
The slide presentation will accompany today's webcast, which is available in the investors section of critical right.
Today's conference call is being recorded.
As a reminder, all participants will be in a listen only mode.
There will be an opportunity for you to ask questions at the end of todays presentation.
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Now it is my pleasure to turn the conference over to credit Corp. I R. L.
Rustic wanted you may begin.
Thank you and good morning, everyone.
On today's call will be down cycle kept Ronnie R. A T.
Uh huh.
So if somebody else, our chief financial Officer.
Participating in the Q&A session, we'll also be [laughter], Chief Innovation Officer.
Neither yasar chief risk officer.
Oh, Hey, don't Universal banking, unless there's something that I said often sharply.
Before we proceed I would like to make the following safe Harbor statement.
Today's call will contain forward looking statements.
Which are based on management's current expectations and beliefs and are subject to a number of risks.
And I refer you to the forward looking statements section of our earnings release, and we shouldn't filings with the SEC.
Yeah.
We assume no obligation to update or.
Or revise any forward looking statements to reflect new or changed events.
Okay.
Yeah, Michael So Ronnie will start the call discussing our strategic initiatives.
That's up New York, who will comment on the macro environment English football.
That's what the farmers and provide an update.
Our outlook for 2022.
Yeah. In fact go please go ahead.
Yeah.
They give me their ROE good morning, everyone. Thank you for joining US today, let's turn to slide three of our earnings presentation.
Well, we were pleased to recently have the opportunity at our digital day to introduce many of you or a holistic approach to competing to challenge and drove almost felt for months.
Our leadership position.
As we expand regionally.
Our first quarter results underscored the effectiveness Oh, sorry.
Capture market opportunities.
Excellent.
Leverage our brand and scale.
Do you ever own strong operation.
All financial metrics and in house shareholder button.
Despite the current pardon me to go through the successful execution of multiple initiatives, Oklahoma a little bit.
They want us to maintain strong solvency and boost our declared dividend 215 saw this for sure for 2020 one piece about Korea.
Today, we are also adjusting our outlook for Greg or Jim.
Scott will discuss this in more detail shortly.
No.
Slide four.
As you all know when I came to a halt yo early this year.
After having spent many years working hunting Titan was the priority.
Establish the foundation of what are the key.
We remain focused on today.
Years ago, We announced an important addition, strong governance and operating structures when should that sustainability will remain and become even more a core part of how we do business and Todd. It is one of the three key priorities our long term strategy that these guys.
In the future.
And then in fact that we want to have on society.
Although well do you know.
That took place late March you have lines, the governance structure and growth initiatives.
Also ensured that the early successes with visa for information on the cheap DCP would be replicated throughout the company all while intensifying our focus on internal and external disruption.
To meet and anticipate their needs of our expanding customer base.
Finally, everything we do is based on the relationships, we have with our customers and our ability to deliver on their cost they're reporting.
As such our truck.
Dean.
It's fundamental to the success of all of the initiatives.
Working down our framework guided by these three key priorities will allow us to unlock.
It was disruptive scalable American expression for fashion.
Just turn to slide five to review these initiatives in more depth.
Starting with integration of our digital strategy.
As I just mentioned, we've been expanding our governance structure by adding two new yogurt with all these other great governmental named Alicia Innovation Committee and the Vap innovation.
Both led by Francisco Russell, our Chief Innovation Officer.
This is designed to enhance our disruptive.
Mercury culture, while adding an extra layer of support to foster a grass EVP and innovation, while optimizing the return on investment and innovation.
Mentally our digital strategy is aimed at facilitating our ability to lead our partner to contribute to improving lives by driving the changes that our country's nu.
Execute on our bodies are not cheap all sustainable growth objective of London, a couple of different markets.
And then all of the operational drivers.
Oh in the aviation are taking place both internally through innovation, the lotteries well, we're disrupting ourselves in it.
Funding or thinking about another driven approach each of our subsidiary.
And externally through put out.
Corporate venture capital up there.
Please turn to slide two.
It looks like that's moving needle.
Information on growth objectives, we are committed to continue to retain and attract the best.
All right.
Great potential development and profession with Scott, we're not comprehensive volleyball confusion that strikes a balance between human and business perspective.
Turning to our balance probably follow a bit.
This transformation strategy. This includes focusing on developing and attracting talent.
You cannot pick up all these.
Epocrates, well accelerating initiatives or gender equality.
We know this is a completely different environment and are committed to evolving our model work for current and potential employees a proposal on their first of all of them.
C D E and won't be including specifically addressing that figure is compensation and the hybrid remote work from home.
Generating new opportunities and realities.
That's nice to talk to both of them right.
Well.
Onto a new update on slide seven.
During the quarter, we were especially active.
In the environmental and social fronts, we continue to progress, although our ESG journey on.
The environmental trusts, we doubled down or.
You've got partners.
Reaching 4 million salt and disbursements during the first quarter of the year, We also launched new products.
That's a sign of imports and acquisition of electric vehicles.
This is Eva I'll leave you out and continue to develop capabilities and sustainability insurance broker.
During the quarter.
Nashville is do it although it's too hard on five.
5000 people through our deep water.
All sorts of data or generally why these initiatives with our great I'm aware that need uncle burden.
Poultry model.
Thousands of it why.
You're welcome Colombia, we issued the first social bond with a gender and.
<unk> really seen plenty of millions of dollars to.
To fund micro loan for Colombia, and other noise.
Yeah.
On governance.
Theory wherever it goes nice like medical or they're good corporate reputation the word rank among the top.
20 best companies in Peru.
You would not know that do not include an instructional earnings report outlining our ESG priorities and approach.
We'll be updating our progress on a quarterly basis.
We were pleased that the progress, we're making on our sustainability journey.
And I'd say the markets.
That's all it is M. S C I a great great job.
<unk> got the variability you thought December but sustainability also U K Cups ESG this fall in Paraguay.
Finally, I invite all of you to review our two recent publication.
Yeah.
An update on our 23025 since they got anything Saturday and execution I've ever worked with anyone.
Okay.
Now, let me turn the call since the Saville, who will provide a brief overview of all that burden.
For the quarter.
Uh-huh. Please go ahead.
Thank you Yun Frankel and good morning, everyone.
Franco mentioned, we believe are favorable over all operational and financial results.
These currently have life before I will focus on the year it'll be give us all.
We are not impacted by seasonality effects.
It's structurally long, 12% driven by BCP.
While low cost deposits grew three 9% and accounted for 60% of our funding base.
Corey also grew 17, 7% compared to the previous period.
Can you sort of single was boosted by a more favorable asset mix higher interest rates and an ongoing funding cost control.
Fees and gains well, maybe it makes transaction where it used to run at peak in line with highest transactional market policy perspective.
Net income was negatively impacted by where so where do you stand made gains on securities, which was associated with the Pacific like Crazy coats healthy these fixed income investment portfolio.
Cost of risk remained low.
While the loss ratio insurance piece mix continues to improve.
Finally, I mentioned moving our digital day, we anticipate operating expenses to continues to rise as we accelerate our digital innovation with stripe.
In summary, our brokerage were more robust this quarter, we maintained a solid capital base and BCP on your bank contributed significantly to securing a consolidated Roe of 17%.
Move to slide eight where I'd go buy a brief overview of the macro dynamics in our markets.
Good morning, patio towards how long the war responding to global supply chain disruption and mounting inflation by increasing interest rates. This liberated from funding to rise across countries.
The economy has remained resilient despite the negative from veterinarians social impact generated by rising commodity prices.
Full banking single Heartbeat.
Controlling lags from expectation.
Raised there.
Interest rates to achieve a new trial real interest rates are one 5% plus expected inflation buildable.
Excise taxes has been substantially reduced booked some fuels and the number of desktop has been temporarily Exxon you're right that from a sales tax to mitigate the impact of higher prices for inputs. Additionally, the minimum salary once a recently increased while expectations targets no you go.
Thanks, Chris I appreciate it.
0.5 birthday yesterday, the exchange rate has dropped from portfolio at the end of.
The year 11382 shortlist of Golar today.
Context, or higher commodity prices for items, such as some commodity therapy.
So that'd be lighter SKU, Dolly Colbert I'm not sure I've got the balance of payments has only been marginally up.
February is expected to grow 2.5 dollars change in <unk> 'twenty.
Peru, Colombia, and Chile are all experiencing.
Challenging before you'd be calling bright light.
Political and economic indicators and excuse me.
The Colombian economy is expected to grow by 5% or the inflation remains high.
Interest rates continue to increase quickly Chile, because the coupon on that is developing a group of made sure that proof are likely to happen.
The impact on the business climate and on GDP growth potential.
Nevertheless.
Polls indicate that lithium.
Peace without being the outcome Super Bowl walk through.
A new constitution.
The Chilean economy is expected to grow one 5% each year.
These macro dynamics has a mix impact across our business, mostly me pretty temporary.
The rising interest rates increase our margin.
B they increased their funding costs for our micro finance businesses. Moreover, high long term interest rates.
The value of our fixed income investment portfolio.
And then the rate challenges for our investment banking on work by Hirschmann basis, while client statements or format remains strong we are closely monitoring the dynamics I just described.
Now I will discuss the performance of our lines of business makes it slightly.
DCP continues to reduce at a strong profitability.
On a year over year basis.
Pinpoint six put a crimp growth Corey was fueled by net interest seems cool, which was driven by rising interest rates and a 14% uptick in a stroke or a long measure in average daily balances in wholesale banking has shrunk very long 19.
19.7% due to a base of say even back in the first quarter of 'twenty, one corporate clients humbled by short term.
Retail banking, a stroke of a long school eight 8% driven by cliffs humor.
Peanuts, where we are penetrating new ship segments by Liberace that analytics and our digital capabilities.
Digital sales represented 34%, but the total number of units sold this quarter.
Additionally, fee income increased 15% driven by higher transaction levels.
P O N E.
Bank promises gains on real estate transactions increased by 38, 4%, which represents active because Google, but nonetheless reflects our capacity to labor it actually paid against capabilities.
It takes market finally.
Operating expenses grew 19% due to higher investments in our digital strategy and increase in transaction I'll call. It to a housekeeping transaction volumes on group variable compensation in this context, the return of arbitrage acreage. They stood at 23, 5% this quarter.
Quarter over quarter results were impacted by seasonal effects. This was particularly true for the extent.
Slide please.
I Hope you all had a chance to see you break wound Scott yuppie digitally.
D D D.
<unk> goal is to conquer Louisiana go to lock these yuppies evolving into a stupid up between maintenance patients. The first ambition needs to be candid main payment networking pivotal competing with cash okay.
Complexities yuppie bulk of low ticket payments that probably usually made in cash as of March five Boeing 1 million monthly.
Users, who made 13 transactions a month.
Hum.
Two 4.1 billion soldiers during the month.
Yup its long term target is to talk Craig Millian, who will assist us transact more than 100 billion Salt Lake.
Yeah.
One of them be shouldn't be stupid person.
It's used her day to day is happy with the launch of the Pops in November 2021 in the first quarter 'twenty to 'twenty two the number the absolute 113%, capturing five 3% or a market overall, some merchandise levels 1 billion by year end.
Yup its long term objective is to become the roofs number one marketplace port growth.
Finally, yuppie seeks to solve every young pedros financial me.
Yeah happy lunch, a pilot feature that allow a small group of BCP climbs to acquire no longer to be out there.
The long term goal.
To measure our CIP to provide financial products and services to more than 2 million users.
Next slide.
Yeah.
We won't go there.
Hybrid model continues to play a crucial role in boosting Brussels by offering centralized assessment on that.
Jordan I think distribution channels.
He has led to record breaking level of soccer structurally loan disbursements, when our year over year basis.
The 20% growth in Korea.
By an increasing net interest simple, which washingtonians breathing by 12, 6% in our structural loans onboard yields.
Additionally, Michelle well bolstered by growth in bank assure themselves.
The evolution Corey.
Kelly I'll sit by gold Eagle.
Operating expenses, which rose in tandem with another two more people eating out.
After the pandemic subsides.
Improvements in the microenvironment and try and paint performance led to a 24% reduction in provisions in this context. The return of average check with your studio city.
Two 1% a quarter.
And a quarter over quarter basis, your ankles fairly 18, portraying the slight increase in core income coupled with a draw people to rethink expenses due to seasonality was largely offset by different trying to more typical levels of provisions, which grew 163% this quarter.
The Banco Columbia portfolio grow quality, where a strong unbalanced brokerage sale quarter over quarter in a context marked by more people kind of Kobe Sean.
It makes it a flight.
Typically shouldn't have the right people so let's continue to recover.
COVID-19 claims.
Right.
D C claims rise in a more typical operating conflicts.
Year over year basis.
Life business.
Ingredients increased due to price adjustments and higher origination. This dynamic was complemented by a reduction planes at the sandy situation.
The P&C business midterm ingredients increased primarily due to price increases and higher origination in the medical assisting in line.
Could it possibly be for evolution of digital channels in personal lines claims increase mainly in the commercial lines due to economic reopening.
And Ingo restriction.
These dynamics led to total loan ratio, great 60, 94, 3%, which is closer to pre pandemic levels.
On a quarter over quarter basis.
Wassa decreasing net earning premiums in the life business net premiums were impacted by basics in our contract cancellation in the alliance.
In the B and C business, the Trump reflected a seasonal increase in policy when you were last quarter.
This drop was largely offset by a decrease in large claim in summary, total underwriting results continued to improve before.
It is important to note that typically where.
Yeah, Nathan it's impacted this quarter by a new term charters due to downgrades in some more fixed income.
All in all group.
But typically with common equity.
12.8 per cent makes it slightly.
The investment banking and wealth management line of business challenge in the current environment.
Market volatility political uncertainty are Nader.
I think the impacting the appropriate target for corporate.
Corporate finance and capital market fees.
Well get more involved in the asset and wealth management businesses reflect the impact of last year found culturally in 2021.
Management fees were offset by anticipated with Angel.
The upfront piece as offshore platforms, which buffer the impact of withdrawals.
Contractually, we do scenario in 'twenty, 'twenty, two where they impact of lower volumes materialize in market value of assets under management all of it deteriorate.
<unk> reported income dropped both year over year and quarter over quarter and year over year trends I said minus number so we're not affected by outflows from people who have fun.
Brokerage would meet or third party.
Fun and a drop in market volumes, which were impacted by higher wages for the T V.
Broker portfolio break Easter games in the sales of securities in the first quarter 2021.
The reduction in quarterly <unk> was primarily driven by lower Eagle Ford Wells.
Businesses corporate finance team.
What's affected by seasonality volumes, Oxford impression on the D V D tends to be higher in the last quarter of the year.
Assets under management remained stable quarter over quarter, but fell 6% year over year.
We are lunching different initiatives some campaigns to recover volumes I'm going to try.
Newsprint to bring Nathan.
In your mind.
No that's right.
I will explain net interest income and net interest mainly dynamics within the consolidated results.
Our net interest income increased 19, 3% year over year, driven by an increase or 12, 7% in interest income and a reduction of seven 9% and insurance expenses.
The interest income rise reflects any lease up 62 basis points in the Avalon.
Deal with minor changes in total volumes, which was oversold.
A more profitable mix, which is trucker long measure.
Average daily balances increased Quinn.
Four per cent lower yielding asset classes, such as government program loans and meet with us its decrease.
You increase in cash and equivalents.
The investment portfolio, which primarily reflects a gradual increase in the local currency rate for 335 basis points all of last year.
Short term market interest rate portfolio increased only 25 basis points each year.
Uh huh literally right on.
Before I go into the deals.
Our structurally long says talk Albuquerque is still impacted by the sportsman took 20 training 2021.
No you're right.
Mm bye.
Shorter term loans for a whole set of clients and the fact that growth in the wholesale banking outpaced expansion you'd be paid back in this quarter.
The reduction in interest expenses reflect the basic generated by a nonrecurring liability management times indeed.
First quarter of 'twenty, one and subsequently lowered interest rates on Baas, which was partially offset by an increase in interest expenses on kind of what.
The fact that 60% of our funding base is comprised of low cost deposits has been key to keeping recurring expenses under control.
All in all our mean increased 71 basis points year over year to reach four point.
44 this quarter.
Even though we did not have a relevant bodies floating rate asset.
Going forward, our sensitivity to increasing interest rates with the pain of cold boxes for our balance sheet is structured.
Mainly concentrated.
In local currency.
Truckload lumped in particular.
The magnitude of rate hikes, which has been substantial and short and long term rates in local currency.
It was very important.
Employee costs for the pass through of market debate, where more things he deferral subsea tree leak with US is on short time also laws and to a lesser degree in consumer loans.
Finally, the ratio of our portfolio.
It's short term investment short term wholesale loans.
It's high on time deposits and short term funding on the liability side.
Ratio lower than or equal to one year ago, and secretly reprice pasta maker flight.
Year over year core income increased 17, 7% due to a strong growth in each of these companies.
Fee income increased seven 3% and was bolstered by cashless transaction adoption, which reflected the map you can consumption trends.
Transaction at this time.
Instrument and you've got a bunch of assumptions.
Which grew 84, 8% and 67, 9% year over year perspective.
It is important to note that provoking consumption what cause EBIT by your smaller.
Net gains on FX transactions increased 45, 8% year over year in a context marked by world can transactions and it takes baller beats, we have labor actually water crisis and distribution capabilities.
Over the quarter.
Other income decreased <unk> four per se due to growth in net interest income while fee income on FX transaction trends did you see some of that.
Next slide.
We now move to create call it structurally loan portfolio quality diagnostics.
Over to you is structurally long through 17, 13.7% driven primarily by wholesale banking and retail banking at BCP.
Got it.
The increasingly towards probably loan volumes and an improvement in client payment behavior that they struck protein inflation to drop during the period.
Before knocking down your ankles NPL volumes konstantinos for both favorably and that won't be sportsman hotbed of preschool products.
Quarter over quarter, they start pulling down slightly due to an exchange rate effect and peaceful.
This construction coupled with an increase in a structural overdue portfolio led the NPL ratio increased 24 basis points.
Volume growth will tie ins.
Any PMA segment.
Along that.
We're in Grace period, which had not rig program initiated.
Initiated the payment cycle. This led to an increase in delinquencies that is within the expected levels.
Year over year Rhodesians constructed in retail banking, mainly due to improvements in payment behavior.
Pardon me it looks like we've lost connection with UBS. Please wait while we reconnect.
[music].
Is it okay.
Ladies and gentlemen, if we can go ahead.
Thank you sorry for this technical problem.
I am going to take.
At this point year over year provisions constructed in retail banking, mainly due to improvements in payment behavior.
And I'd be bankable due to less risky profile of recently originated loans.
Provision expenses grew quarter over quarter after Easter and historically low level in the fourth quarter of 2021 in this context, the truckload, possibly astute at normally low.
Single point, 79%, whereas the colonoscopy ratio trend towards pre pandemic levels next slide please.
Operating expenses grew 14, 2% year over year, which reflected an increase in administrative expenses and employee salaries and benefits growth in administrative expenses reflect an increase in the transactional cost, which was driven by higher transaction volumes and now he can.
The piece of our digital transformation and disruptive initiatives. The salary line was up this quarter due to an increase in variable compensation and a club picks up higher anticipated earnings this year.
We sold three quarters efficiency ratio deteriorated 50 basis points year over year.
And cost efficiency ratio improved 900 basis points.
But in a hybrid model that has enabled <unk> to increase operating income by 25, 6%, while keeping growth expenses in check.
Just 10% year over year.
If we exclude opex for investments in disruptive initiatives, such as Yelp in pretty yellow.
You shouldn't see ratio expense of 42, 5%, which represents a difference of 200 basis points from the reported <unk>.
Mix of flight.
Summary.
With a narrow equaled 17% this quarter, we continued to consolidate their work with tons that would feed the beast.
This positive evolution was driven primarily by our banking businesses by generating for both some consistent results and maintaining a strong solvency across our businesses, we will be in the position to gradually increase the dividend payment last week, we announced a regular dividend of <unk> per share.
To be paid in June .
Rick Lakes that dividend payout equivalent to 39% of our 2021 yeah, we can.
Continuing to generate results.
Huge capital trend unplanned upcoming capital investment we may evaluate these are.
I called them entirely D V D. In the last quarter of each year now I will explain our revised outlook.
It makes it slightly.
Given the current geopolitical situation and the measures adopted by the Central Bank, we keep be colored revised our guidance for 2022 our GDP growth estimate remains unchanged at two 5% for the year.
Taylor has experience in that especially in the consumer SME and micro finance. It we now expect that structurally loan portfolio to grow between nine and 11% measured in average daily balances.
The pace of growth in interest rate increases on our loans shift more towards retail.
Need to accelerate and see trade between four 6% four 9%.
With regards to insurance underwriting. So we believe that a significant portion of COVID-19 related impacts have been sort of this quarter.
Additionally that should be a smaller.
We are carefully monitoring the back of higher inflation on our client statement for four months and they've reached four five liter.
In Asia that we have to date, we feel comfortable maintaining our coastal fleet data, we doing 0.8% one Walker St. Jude this year it flipped.
Defense for four months it across segments.
Higher than expected Eagle not only through net interest income, but also to see some being.
Transaction.
Led us to adjust our guidance range for the efficiency ratio to between $44 46 per cent.
Based on diesel or salt, we expect to achieve a narrow.
In the B C meeting the high end of the initial guidance range of around 75%.
With these comments I would like to start the Q&A section.
We will now begin the Q&A session.
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Again, please only ask one question at a time.
Yeah.
Our first question comes from Ernesto <unk> with Bank of America. Please go ahead.
Hi, good morning, gentlemen.
Good morning to all your team.
Congratulations on your results and your R&D guidance, regardless of the political uncertainty.
So my first question is on the macro outlook.
Can you provide us some color on the recent political uncertainty.
There could be a potential regulation affecting different management sector.
Garry Neil.
Yeah.
Yeah.
Okay.
Okay.
Alright.
That's probably that's one second thing.
Okay.
Hello.
Now we can hear you again Michael.
Yeah.
Okay.
Alright.
Picking a problem.
So good morning, everyone. Thank you for your work with vessel.
Difficult question to answer.
Yeah.
Okay.
You might be reading that.
A lot of political turmoil.
A lot of.
Both are being juggled at the same time.
However, nothing specifically on the financial system as we speak that doesn't mean that going forward there might be any regulation will go through anything big.
I hope this time.
Okay perfect. Thank you. So then my second question is on loan growth.
<unk>.
Considering.
Inflation.
Higher interest rates.
Why do you think is the level of interest rates.
You could start to see any impact in loan growth or maybe some specific products such as mortgages.
Which have long term maturity and how that fits.
Right.
Can you take that question.
Yeah.
Yes.
Hey, Thank you for the question.
Our guidance are already capturing part of the product as they say well we are seeing is.
A very good pace of growth in micro finance and consumer segments in which we are also being able to have some pass through of interest rates by the long term operations and Janet I'd already challenge.
Mortgages in long term.
Corporate and middle market clients, you already see a combination of the impact of higher rates and political uncertainty in the current.
Further investments.
So different dynamics in consumer feeling and medium term operations.
Perfect. Thank you Sir.
The next question comes from Jason Mullen from Scotia Bank. Please go ahead.
Hello, everyone. Thanks for the opportunity to ask questions. My question is mainly on the outlook for profitability.
<unk> talked about guidance.
Group.
Pretty constructive range and this.
In this quarter, we had 17% for credit score and and their contribution.
Hmm.
It is also a lot of the story with the bank ECP generating over 23%.
ROE V. The largest contributors BCP V wankel at 17%.
Hum.
<unk> FICO Grupo Pacifico at almost 13.
And then frame Ed.
Good Roe.
Almost 20% with a 24.
Million contribution how should we think about the evolution of the subsidiaries contributing to the longer term ROE clearly I would imagine it's D. C P. But do you imagine big changes in the 17% ROE we're seeing it in the Bronco.
13% at Pacifico has has been.
I think an improvement of course, so and green box to see what's going on if you can give us a sense of the contribution to the.
The outlook the profitability outlook that would be helpful. Your expectations in general terms.
Good morning, Jason I'll take maybe the multiple steps rollouts around them, that's how you want to.
To add something.
We actually we say that.
Sure as a portfolio.
The end goal is to we've talked before to reach an overall <unk> cotton in the high teens.
And obviously, depending on the performance on the environment for each of the subsidiary.
Obviously always trying to prove that out.
Indiana is too.
Duane.
Having said that what we what we expect is that.
The banks.
If you think that you should be on the Bronco.
Moreover, alcohol.
Going coming back to the bridge.
Recoveries alloy that's in the midterm.
I would say they turn by year end.
<unk>.
In the insurance business is very related or influenced by Covid.
This quarter.
Still in the insurance business there was some.
Relevant corvid.
Impact.
Uh huh.
Sure.
We don't see.
No.
Any further impact in terms of.
The bulk of the impact going forward.
Also.
Sorry.
Sure.
Susan.
Especially if you want to add anything else.
Yes, probably in the same line only putting a little bit more color in the case of BCP.
<unk> is now her ankle nature in which we are going to have relatively higher margins and higher cost of risk and indeed, not having <unk>.
I'll be superior to 20% in the bank was improving in the short term they are going to have shown challenges due to the cost of funds, but overall.
The profitability is improving and we expect to return.
Level similar to pre pandemic.
In the case of Pacifico.
Yeah, John Franco mentioned, we are having a good dynamic this quarter, we have been impacted for a couple of factors are still quality and.
On impairments, but down the road, we see the business.
Improving profitability in the high teens.
We significantly pulled from bank assurance on DG digital sales and I think these are.
The biggest business.
In corporate banking investment management, we see some challenges in the medium term due to the close correlation between this was sold and market dynamics. All in all this operating business, how we're going to grow in profitability and sustain that.
Need to consider and also the impact in the short term impact both the disruptive initiatives that.
In the short term around 3% of our coffee in both but we are building and creating business for the future I'm fine that'd be a the impact of the withholding tax that is.
I expect it to grow in line with the.
With growing dividends.
We feel comfortable with the guidance that we've provided with a short term perspective.
And in the general ballpark figure that we provide in the digital day for the medium term.
Thank you very much Jim Hong Kong, and South Africa household the color I appreciate it.
Okay.
The next question comes from Quito, Nebraska from Goldman Sachs. Please go ahead.
Hi, Good morning, everyone and thank you for the call and taking my question also my question is on your cost of risk guidance.
How long do you think you can sustain the cost of risk around these levels you know I noticed you didn't change the guidance but.
But we did see some deterioration, particularly in the SME portfolio, you know GDP growth is slowing.
And your coverage ratio now E. Ms structural coverage ratios in line with historical level. So I.
I guess, one is the outlook for asset quality from here in Mpls and then with that on the cost of risk I know you had the guidance for this year, but just thinking about on a longer term basis. When do you get back to more normalized levels on the cost of risk. Thank you.
We're going to look when you take that one please.
Yes. Thank you for your question.
I mean.
Europe , we had mentioned on that perspective.
Beginning of the year.
We will have these blown past that.
And then the levels.
The rest of the year.
I mean, do you feel comfortable with our level of provisions today.
I'm, sorry, we'll get back to normal bye bye.
I'm sorry, Mr Earl.
23.
But we'll have to see how the economic conditions of the country.
On the following quarters.
That concludes the call rich, we're still above that.
The new levels.
And I want to emphasize that the difference between the coverage ratios.
Portfolios you see in the presentation.
Round voyage contract coverage.
140%.
And remember that's that's our portfolio.
Almost no collateral.
On BBB.
17%.
<unk> is also about.
And then it levels off.
And we have important corner Donaldson.
Our nonperforming portfolio there so.
So what I would say that we feel quite comfortable.
<unk> levels.
Still some space for further provisioning.
And without affecting the brokerage everyday deal.
Of the year.
Following years.
Great. Thank you that's helpful.
A follow up I guess on the asset quality outlook, Yeah, we did see some deterioration in the SME portfolio.
Other segments still kind of an improving D. Do you expect particularly I guess the other segments.
Improve any further and went when do you expect some deterioration there and also on the SME portfolio I think there was some FX impact on there but.
RBC outlook for that portfolio as well thank you.
In terms of the SME portfolio needs to be in great numbers.
On the loans.
There hasn't been a.
Special effects.
This quarter is that.
We when we write off.
Four years.
We write off the whole position.
The government backed program from our.
Our our own portfolio.
So this is a perfect that takes some some months we are delaying some of the write off already.
And your portfolio, both <unk> waiting for the well.
Are you taking out the garbage.
Directly to your right.
The loans, so that there's there's negative.
From one.
You gave a number in terms of.
What you have seen in our report.
Having said that we.
And we see I mean, we.
It will be comparable.
The outperformance of your equity portfolio.
They are below our expectations.
There's a lot of the loans off of our garden Broncos are starting to do.
We will be repaid by the clients.
We expect that some some deterioration of the portfolio.
And so the other portfolios I would say the wholesale.
Book would be payable.
On.
The personal loan probably would start to pick up a little bit.
Just because we are starting to underwrite.
The segment's revenue segments.
Rich come along with Robert started yield.
Okay.
In the retail market is on the personal lines.
Okay. Thank you.
Your next question comes from <unk>, our CFO with UBS. Please go ahead.
Hi, guys.
But to hear me.
Yes, yes.
We got there.
Okay.
You very much for this Antonio I was having some problems with so thank you for taking my question actually.
Question very alive.
That one made from Tito.
About the delinquency increase using the wholesale gas in China I just wanted to hear from you.
What do you expect for what can we expect for the next quarter.
Along this year.
For the behavior of the delinquency rates.
For these two portfolios.
And.
Further I just wanted to hear from you as well about.
Negotiate a law, which sadly of credit portfolio does that inform the strategy because I couldn't find game with a mention about.
Credit portfolio renegotiated loans.
So I just wanted to hear from you.
What is the expectations for this bank going for a related Judy.
Potential renegotiation of more loans in the setting of credit portfolio. Thank you.
Hello.
I'm not sure.
Right.
He was having some problems with troubles.
In June you.
I think I got your question, So let me answer it.
That wasn't your question, let me interrupt me and do it again, so when I go out Okay. No problem. So two things one is the overall portfolio going forward and the second one is called the <unk> program is going is that correct.
Yes, yes.
We now look digital digital okay right.
Yes.
I would say.
Robert.
The portfolio would probably be stable going forward following months or for the rest of the year. I mean, we will have some big ups and downs.
Some segments on Brian , we'll see better results in our wholesale portfolio. So I would say not really.
Things are.
Looking good I'm proud of them.
On the performance of <unk>.
All the books are burdened with.
And internally budgeted for.
But by year end of 2001, when we when we had our forecast.
And that's why you are I mean, you've seen.
Our calls are basically go up our guidance in the first quarter.
In terms of <unk>.
As of today and the numbers are better than <unk>.
Perfect.
General number of around 20% default in a riskier loans.
And that's.
In the low two digit numbers.
So today from government bonds.
You will know.
And we're trying to help our clients face.
Great.
Well we are.
Our general policy of.
Making sure that clients they bought the government backed loans.
One of the portfolios.
Okay.
Okay. Okay.
Thank you very much.
Thank you.
The next question comes from Geoffrey Elliott with Autonomous. Please go ahead.
Hello, Thanks, very much for taking the question.
The rate environment has clearly shifted much faster than I think any of us would have expected a few months ago and at this point it seems very much like I would say.
Positive for you in terms of net interest margins.
Can you.
Give us a.
A sense of.
When you're saying.
Benefit stops decrease as rates go higher and I'm talking both about the point that was mentioned earlier in terms of credit demand credit policy, but also is there a point where <unk>.
Thank you could start to see deposit repricing accelerate on deposits.
Just out of noninterest bearing and into interest bearing I think we'll see that as positive for now.
Is there a level.
Continue to go up if inflation continues to accelerate where you'd start to see it as less of a positive. Thank you.
Okay.
Thanks, Doug.
Yes.
Thank you for the question, Chris probably will come back.
The main factors that impact our wire.
Pricing capability.
Thank you.
It goes back to the structure of our balance sheet in which we don't have actually.
Body of all loans has a significant part of the portfolio is also really being among the most of that fixed rate. So we need to do to go through that to take to the market.
The rate increases, let me have Pat eastern shortly.
We have a significant increase in short term interest rates and in long term interest rate from the third quarter of Nokia for now but in dollar is that not really run, particularly for the wholesale portfolio as you know better than us.
The real increase has is starting to happen only dcs. So what we are looking in our books is a combination of a solid really impacting our books and all that is only Bailey mall it Lee.
Point, we are back.
Passing to the interest rate, but we care and carefully because we have parcels reported a folio in which we can reasonably translate the interest rate without affecting the demand, but there are parts of the portfolio. There is a lot of competition, particularly in the long term.
Loans mortgages as a nation medium and long term.
Corporate and <unk>.
A company companies.
Hum.
Challenges, we bid a month.
All in all what we are seeing and I am repeating a little bit myself is a good combination of pass through on volumes from short term facilities and a challenging environment with London 10 facilities.
As a general rule, we think that we are going to have this high interest rate and solid for this year and probably half of next year.
But after some point, we started to work with.
You have to see a decrease in solid interest rates because the nominal rate.
Is too high to be sustainable.
Hey.
The long term goal of the Central Bank is an inflation of two and a real rates have Ron 115%. So we should see an increase in this rate.
While he is proud of being at the middle of next year and decreasing rates.
Comfort to match economic growth I don't know if this helps you.
Yes that does thank you and I guess from your comments on expecting rates to go down again, it sounds like you're quite optimistic on the inflation outlook kind of gone from 2% to nearly 8% in Peru over the last year and it clearly.
Truckers are unhappy and we know that.
But.
Saying that Youll seeing that makes you think inflation might be getting.
More entrenched stickier harder to harder for the central banks.
So reverse.
Yes perfect.
Okay.
Allow me only may guys like plumbing and international Grace.
I agree with you in the Lockhart rates, probably we have a different means that a significant part of the inflation is not demand driven by supply driven or the price of the commodity D D.
The things that we import and this was a key driver of nature in our page, let's note that demand driven inflation for most part mark.
Thank you.
Sure.
The next question comes from Alonso Garcia with Credit Suisse. Please go ahead.
Good morning, everyone and thank you for taking my question. My question is on capital and dividends.
So you would declare to announce a dividend last week of <unk> <unk> per share, which represents a payout of around 33%.
Based on last year earnings.
Which is below what you paid on 2018 in 2019 earnings prior to the pandemic, even though you are still above your internal minimum CET one level of 11% and the fact, you are expecting to accumulate capital going forward. So my question is what led you to take a more conservative approach can be easier and if we could expect second.
Payment later in the year or if you are seeing other uses for your capital or maybe some opportunities on M&A or something.
Thank you.
Yeah, Hi, good morning.
As we've always stated.
It's quite.
Quite simple equation.
To distribute dividends so out of the profits we made it.
Yes, we are.
And whatever is needed.
Also.
So to keep our growth.
Our growth in terms of portfolio at the bank of America.
Safely.
On top of that.
If there is a.
As you said M&A opportunity, which as we speak there's nothing relevant on the table.
We give some.
The excess cash for that.
Not that everything is distributed so so.
That's the position we've been following for a few years now with data.
Again several times.
Being more specific on that.
On the zircon spin.
A special dividend of the year, we might do it.
Anything yet.
<unk> given.
Giving you a more long term vision regarding data, but maintaining the same policy.
We will try to increase.
Slightly.
As we move forward over the following years.
Okay, great. So it's mostly related to.
The stronger.
For yourself or for loan growth.
That's correct that's correct.
Okay got it thank you very much.
Okay.
Your next question comes from Gary Fernandez with JP Morgan. Please go ahead.
Hello, Joe.
Rather than the logarithm entire team congrats on the guidance and the results I have a quick one on the OCI impact on your equity we saw some inquiries I guess 200 $300 million solid this quarter and my question is what do you expect to hear because markets have been very volatile FX rates, but what I would like.
To understand the moving parts here appears OCI or your equity growth.
My concern here is the 10 year like when we look to the 10 year in Peru.
March it move up a lot. So my question is should we expect like your OCI accounts.
Keeps being infected.
This year and if it is important for your dividend payment because I gave you mention a potential additional dividend payment later this year. So just trying to understand how this could have some impact on your payout later, thank you very much and again congrats on the results.
Thank you.
Got it right.
You are talking about is suffering the sovereign bond portfolio right.
Sure.
Yeah, I was talking about your shareholders' equity like when you look to the shareholders' equity C. Like Youll see I talked a lot of things right I guess treasury, it's a big portion of that and there was a legacy if you hit this quarter.
Sure.
You're going to take that one.
Yes, okay.
To establish the levels of equity dividends, we've followed that John Franco explain and you have the current profits for the period.
And realized gain of losses and in this regard in some of the books of the company, we have and anticipate due to the rate increases as you mentioned.
We have had a great love it the impact in the first quarter and probably we are going to have some impact.
And the next.
The next one but nothing that we're seeing.
Change fundamentally our policy or solvency ratio is now down the road, but you are right. The interest rates are rising and beach have peaked the prices of our long term investments in several books.
But we have DCP.
Pacific on political capital.
True ASB in particular.
Perfect. Thank you guys.
The next question comes from Carlos Gomez with HSBC. Please go ahead.
Hello, Good morning.
Good question.
More on the political side I mean, the current discussions.
What do you think the probability is that we will have changes in the constitution.
And as you mentioned there has been no discussion about changes to bank regulation, but where are we on the changes to the pension funds or to the mining sector. Thank you.
Sorry, I forgot.
Thank you Carlos and good morning.
We can believe it related in order to ask your first your first question.
If you'll recall and I met with most of you in March.
The changing cost of the solution at that time in March I mean, as I mentioned no over the table, but.
Please go up very low.
We still believe that this obviously slow maybe.
Change from March to today is the.
Yes.
Discussion is on the table again.
Having said that our base case scenario.
It will change.
Got it.
It shouldn't pass through Congress, that's our base case scenario.
As we've mentioned regarding the financial system.
Actually that what has changed is that there has been some.
Regulation promoting.
More competition, which I believe.
And kelcey.
The whole system.
Regarding pension funds.
Yesterday was approved.
Lower withdraw from.
Pension funds.
Could be could be released.
In our opinion, that's a huge mistake.
Actually the pension fund the overall system has been I would say structural damage not not because of this loss.
Hello, Bob.
Because of what has been happening over the few.
Few years hopefully.
Total.
Pension fund total on structural pension fund reform.
Reform comes into play.
As we speak.
A lot of damage is being made through additional pump system.
Regarding the mining sector.
A lot of those.
We haven't seen anything.
Regarding.
Any.
Legal changes.
As we speak.
Okay. So no changes.
No.
Okay.
Okay. Thank you.
As a reminder, if he would like to ask a question. Please press Star then one on your telephone keypad.
If you have connected to the call either HD web site on your computer. Please mute the keypad on your computer screen.
The next question comes from Andrea <unk> from Santander. Please go ahead.
My question is related to the profitability of the nonbanking subsidiaries and particularly looking at.
The insurance and pension management system.
Curious by your comment you think that you'll see.
Based on our portfolio.
Based on what is going on in the country ever got mutational phone withdrawal, while somebody need for structural reform.
Good call.
Only the profitability, but you'll get from this business in the interim on expenses.
But at the same time, what I see is.
The insurance one in the past, we say that the structural not worry about youll need work.
Well, 12% now at 13% even with impairments.
Corporate impact.
I wanted to actually be thinking about the profitability for insurance over the medium term.
Is that going to be enough to offset the impact of any structural reform under pressure.
Yes to answer actually there were two questions in one.
Regarding regarding the insurance business, we expect.
A high teens return.
I would say the short run.
It is.
So.
This quarter, if you take out the.
Impairments on the investment they bought them all of the business has been very healthy. So we do expect.
<unk> business to be in the high teens.
And in the high teens, even this year.
So we're very positive on that.
A lot of all.
I thought it was in the business a lot of little initiatives, including digital initiatives, but most importantly.
A lot of focus on Barbara sure that is helping a lot.
Business.
Regarding pension funds as I just mentioned.
I'm more worried about the pension fund system.
Specific results on three mode.
We when I say, we not us of course, but we our political.
Our politicians they are putting at risk the whole Samsung.
The system or maybe <unk> going forward on that cycle and serve a real concern for us and that's where we where we need to focus on trying to be proactive on for both significant Brian to come up with.
Again, the structural reform that gun.
Really buildup.
Based on.
Yes.
Pension system.
Sustainable for the next decade.
Okay.
Oh.
Perfect. Thank you for your answer.
Your next question comes from Alonso Aramburu with BTG. Please go ahead.
Yes, hi, and thank you. Thank you for the opportunity.
To follow up one more time on the pension funding withdrawal.
Wanted to ask you yes.
Triangle or says this is a six withdrawal right. So.
What sort of impact in the short term and I agree with you just certainly not great for that from the system over the long term, but in the short term you probably will get increasingly policies, which will probably be good for your funding cost, but maybe you can give us some color as to what could be the impact in the short term of those funds excuse me my personal opinion potentially.
Entering the banking the banking system.
Second question related to two private investment in general.
I believe you have a GDP estimate up to one 5% for this year, where do you see private investment that on what are you hearing or talking to the companies that you work with.
What are the what are you seeing in terms of private investment moving forward over the next few quarters.
We're already I'll answer I'll take the first one maybe says Hello.
Okay I'll take the second one.
Yes.
Yeah.
With a yes.
India.
Oh, but overall.
<unk> Corp.
Excess liquidity because of days withdrawals from the pension funds.
Because of that.
Those funds and up in deposit and we have a very strong position in retail deposits.
So as I mentioned before are local.
We're more concerned about what's going on structurally going forward, Doug what's going to happen.
Fremont Besides obesity in deposit besides going specifically.
So we get a benefit because of dose those withdrawals and up in the banking system.
As we all know.
Market share, we havent retail deposits.
Good.
We've got an important chunk of cop.
Hello, George.
The second one.
Well the only currently ICANN.
Got it swung a small comment to your answer.
Early with.
A more macro view we have.
Is that a decent fairly green is going to propel a little bit more inflation.
Local interest rates.
What is going to be the short term impact.
Great.
Regarding regarding the private investment.
That's helpful.
So we have been providing private investment I think we are going to have a couple of factors because with these impacts although the facial client you are.
Really taking one key player out of the table.
In terms of funded long term low Cal no Cal bonds because it.
The private pension funds.
Instead of buying a long term facilities they are forced to sell fund the withdrawals.
That's an extra layer of uncertainty regarding the hood. So in terms of private investment I would say all in all is a negative one.
Yeah.
Okay.
So in terms of book.
Business sentiment I would say that.
Most mode.
Corporate large investments are being held.
And they are in the wait and see mode.
<unk> client and business for Monday, Nancy R. R.
Yes going forward Mark.
We don't expect investment private investment to grow this year.
Okay. Thank you very much.
Oh.
It appears there are no further questions at this time.
I will now turn the call back over to Mr. Gian Franco Ferrari Chief Executive Officer for closing remarks.
Thank you all for joining us in this conference call lumping up despite the escalating political stability.
We have been experiencing barrel, we manage to deliver a solid quarter with strong profitability upgrades.
This result, underscores the consistent execution and strong progress <unk> made on each of our three strategic.
Hi, how are you.
During this call our sustainability journey, our focus on advancing on our digital strategy.
Both attract and retain the best talent.
<unk> earnings power on the recovery experience over the recent quarters up also logo still maintain strong solvency alcoholic beautiful with under Levered.
Earnings per share cash dividend announced last week for our shareholders.
Recent global and local dynamics of high inflation, and increasing interest rates generate near or midterm tailwind, particularly for BCP, but also represents a challenge for funding cost for a microclimate.
Moreover, in addition, long term interest rates negatively impact the value of our fixed income investment portfolio.
Volatile capital market generally challenging for our investment banking and wealth management.
Looking ahead, we are closely monitoring macro dynamics or the impact on their disposal income payment requirement of our customers.
As we have done in the past we were minus the variable.
So while navigating market and political volatility.
Although we report how we focus we expect them to continue to result in strong performer. Unfortunately, our country is missing out on opportunities to drive higher growth lower unemployment reduce poverty and attract higher.
For our part we are guided by our purpose of contributing to improving lives.
For the reason that changes our country's needs.
It is eight years.
Achieving this goal is closely tied to increased by 900 locations.
With these power goes out until at least going forward.
Yes.
People that live in rural area as well.
Lower socioeconomic.
Level <unk> level of security.
Greater income generation.
We said we are committed to accelerating our pie nationally personal agenda to facilitate greater financial obligation.
Close to the financial model that we operate.
A key element of this strategy with a lot of products and channels that involve anywhere.
Hey, Bob.
Again, thank you all for joining US did we conclude the call have a great day.
Thank you ladies and gentlemen. This concludes today's presentation you may now disconnect.
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