Q1 2023 Credicorp Ltd Earnings Call
Good morning, everyone I would like to welcome all of you to the credit Cork limited first quarter 'twenty to 'twenty three conference call.
A slide presentation will accompany today's webcast, which is available in the investors section of credit core website.
Today's conference call is being recorded as a reminder, all participants will be in listen only mode.
There will be an opportunity for you to ask questions at the end of todays presentation.
If you would like to ask a question. Please signal by pressing star one on your telephone keypad if.
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Now it is my pleasure to turn the conference over to credit Coors I R. O b lateral seem quite as you may begin.
Thank you good morning, everyone.
Today's call will be canceled that Randy our chief Executive Officer, and that's kind of a young our chief financial Officer.
Participating in the Q&A session, we'll also need and just got about well geez.
Okay Sir.
And I know your Sac Chief risk officer. So somebody they are paid on the insurance front bencher I've got lots that they love CFO .
Before we can see Betsy I would like to make the following safe Harbor statement.
Today's call will contain forward looking statements, which are based on management's sports stations and beliefs and are subject to a number of risks and uncertainty.
And I refer you to the forward looking statements section of our earnings release and recent filings with the SEC.
We assume no obligation to update or revise any forward looking statements.
New or change events or Tim.
Alrighty, well start the call discussing our strategic initiatives, followed by somebody else, who will comment on the macro environment in which we work our financial performance and provide an update on our outlook for 2023.
Franklin. Please go ahead. Thank you Ms. Irene good morning to everyone and good afternoon to those in Europe . Thank you for joining us on today's earning call.
You all know the first quarter of the year presented significant challenges for Bruce economy Yeah.
The social unrest at the beginning of the year, coupled with the damage and disruption.
Yeah cool in the northern and central parts of Peru impacted GDP growth in the first quarter, we now expect GDP to grow by one 8% in 2023.
They will discuss the impact these events had on our business and the actions we took in response as well as all of them.
Outlook for the full year.
Before going through our results I would like to take a moment to comment on important progress related to our commitment to drive long term stakeholder value to taking a leadership role in corporate governance in Latin America, We recently held our.
I know the general meeting, where our shareholders voted to strengthen our governance structure through the election of two new board members increasing their knowledge on traditional banking opened find this and these are the initiatives under representation of women on our board the one third.
This move not only underscores our commitment to diversity and inclusion, but all sort of conviction the importance of a balanced representation in decision making.
Our shareholders or if electrified maintaining a majority of independent board members, ensuring the objective and unbiased guidance.
2022 was also a year of significant progress towards integrating sustainability at the growth of our business strategy.
I hope by now our recently published 2022 and all our sustainability report.
These reporting process began with implementation of new mother battery technologies, which confirmed that our 'twenty 'twenty 2025 strategy goals and initiatives continue to coincide with what our stakeholders considered relevant.
The report not only presents our consolidated every fault, but also emphasizes critical role as a catalyst for change within the countries, where we operate.
Finally, we're happy to share that we finished the formulation of our corporate environmental strategy. What's implementation will start this quarter. The strategy covers the generation of capacities for the measurement of the carbon footprint of our portfolio the promotional of Cartesian financing this management on their environmental risks.
Among others.
As we move forward our commitment to sustainability sustainable growth our responsible business practices. We remain at the center of all we do.
No worries.
Onto the next slide I will provide an overview of our if I'm not sure we are not breaking default before it.
Goes into more detail.
Our results for the quarter demonstrate the resilience of our businesses and the expertise of our management teams, although we navigated a very challenged challenging environment.
Additionally, we were pleased to have recently announced a dividend of 25. So all of this for sure after prioritizing the needs of each of our four theories and taking into consideration our plans for continued sustainable growth.
Our net income grew 18, 1% and our ROE was 18, 7% driven by strong income in the universal banking and insurance.
Our balance sheet is strong and our liability management practices are pooling, which positions us well to navigate the current economic environment and pursue initiatives that align with our value creation goals.
However, due to the challenging environment in the first quarter and the shift in our loan mix towards higher risk retail customers. We're seeing position further shows the cost of risk increased as we anticipated returning to pre pandemic levels.
We've tightened our origination standards and specific retail sentiment and adjusted our risk appetite accordingly.
While the Microfinance business faces some near term challenges it remains an important long term opportunity for us.
Despite.
These recent events.
Microeconomic fundamentals remain robust the country's debt to GDP ratio is low I think I'm not sure. We said around the important levels as we move forward, we remain committed to managing with leveraging our strengths to drive sustainable sustainable growth and profitability.
Finally last quarter I noted that we would be giving you an update of the strategic assessment of investment banking and wealth management businesses was completely.
After all so anybody took arthritis by political uncertainty the deteriorating macroeconomic dynamics new industry trends, we've made some important adjustments to investment banking and wealth management business strategy.
Moving forward, our study will be focused on profitable and sustainable growth. We have designed a three year program that comprises income generating plan. The reorganization of our main lines of business and a rigorous governance methodology the money totally sold I'd make timely adjustments.
We will focus our growth on the more stable fee generating businesses, such as wealth and asset management, along with capital markets transactional capabilities for our clients I suppose the volatile investment banking and trading businesses.
I don't want to pay it all head of investment banking and wealth management, we can go into more detail on these adjustments.
Vessel day.
Now I'll hand, the call to fifth all of them will go into more detail on our operating and financial results as well as well as the current outlook.
Yeah.
Thanks, John and good morning, everyone, Hi, John Franco mentioned, we delivered favorable at all operating and financial results. It is important to note that we are reporting the insurance business and data <unk> 17 for the first time did it impact of this change on consolidated net income was not material.
Reclassifications of items in the P&L have impacted the formula used to calculate our efficiency ratio. Please.
Please refer to the release or appendix two of this presentation for more details we have restated first quarter and 22 figures for competitive positioning over on that.
Hey, discuss the highlights of the court then I will focus on the year over year, Russell, which are not impacted by seasonality.
<unk> grew 28% on the back of solid structural loan dynamics and a competitive funding base is structurally loans rose 9.7 per saying make sure nobody else daily balances driven primarily by retail banking at BCP on new loans or asset quality metrics continue within range, but impacted by negative GDP royalty there.
In the first quarter of 'twenty three the structural cost of risk increased 128 basis points due to an increase in delinquency driven by negative GDP growth in the first quarter, which impacted the full year expectation and the consumer downgraded car segments in retail banking at BCP.
Social unrest on climate events, which adversely affected me vanquish portfolio by weakening payment performance on high Tinian probabilities of default.
Allowance for loan losses were equivalent to 5.6% they'll just total loan book.
Operating in Texas increased 13, 5% driven mainly by expenses, a b C D and disruptive initiatives whitewash everything equal increased 21%.
Through BCP young you uncle in particular, the efficiency ratio improved 296 basis points and stood at 44.3 person on there.
Paris 17 finally, the recent banking crisis in the U S has led financial institutions to focus intently on adequate balance sheet management, we manage our business with sound boiler now some crude that we suffered.
Labeling I will provide details on some key matrix later on Nick.
Slide please.
Two main factors contributed to supportive conditions in emerging markets. This quarter first the market expectation that the fed has reached terminal rate and second economic data from China, showing that the loosening of COVID-19 restriction has boosted economic growth.
Prices have remained high prices for copper it ruin Chiles main export problem returned to levels around $4 per pound a set of brief dropped in mid March gold I know they don't they lose main export pros reached its highest levels in almost 20 training.
A weaker global dollar has also supported high commodity prices in this environment Latin currencies have appreciated.
Next slide please.
In the first quarter of 'twenty three the Peruvian economy contracted around 0.4% year over year after by prolonged social projects, mainly in the south and heavy rains and floods, which he'd harvest in the north These factors mainly impacted non primary sectors be up private consumption and private investments.
In the primary sector growth in corporate production from Korea vehicle Hudson weighted impact of these events in this context <unk> GDP is expected to grow around one 8% D. Here.
Bruce Central Bank Husky's policy rate is stable over the last three months and reaffirmed its commitment to combat inflation before pushing rates.
Current conditions suggest that ongoing climate events may moderate and we are closely monitoring the possibility of a global El Nino later this year GDP.
GDP growth in Colombia is suspected to have slow understand one person one Chilean GDP growth is expected to be.
Finally on the regulatory front in Peru, the Minister of Finance published a regulation to create a minimum pension. He just stipulate that the funds and accounts of having reached the minimum retirement bonus will only be available to affiliates once they have formally retire.
Next slide please.
And we're standing a complicated context, BCP delivered strong profitability regarding key quarter over quarter metrics.
<unk> increased slightly despite a drop in loan volumes the reduction in volumes, reflecting seasonality and more importantly, a countrywide don't try and economic activity due to social and climate events. Our N is resisting reflects a disciplined approach to pass throughs and our ability to leverage its transactional funding base.
Mitigate racing funding costs.
Yeah formation was partially offset by a drop in fee income after intercity transfers piece were eliminated transactional levels due to adverse local effects and FX transactions dropped as volatility level off.
Additional sale quarter over quarter, but remain high this decrease.
What's driven by wholesale banking, which reduced to a drop in creative expulsion expenses fell due to seasonal effects. When we continue to invest in business transformation and disruptive initiatives on a year over year basis growth in net income was fueled by <unk> 41.
1% increase in NII, which was bolstered by raising interest rates, a nine 7% increasing a structurally loans measured in average daily balances retail banking grew 14, 1% led by consumer mortgages and SME PMA segments, while wholesale banking expanded five 3% late but work.
<unk> capital loans.
The aforementioned was partially offset.
By a 236% increase in loan loss provisions or a very low base driven by credit card and consumer sentiment higher provisions respond to a deterioration in payment behavior and a downturn in macroeconomic outlook.
Expenses grew 14, 9% fueled by growth in administrative and <unk> expenses.
Chicken investments in disruptive initiatives. Consequently, bcp's efficiency ratio stood at 36, 8%, which reflects an improvement of 300 basis points in this context, our ROE reached 25.2% at BCP, Bolivia, our risk appetite remains slow due to uncertainty.
Macroeconomic front since the beginning of the year U S. Dollar reserves in Bolivia Central Bank has dropped materially Unbox House daily limits on U S. Dollar withdrawals, regardless BCP, Bolivia net income remains a stable next slide please.
Yuppie contingency journey into monetization and hustle lunch six functionality of these in the last 15 months to develop is three main ambitions to become their roof. Maintaining network yuppie now offers top ops, who are payments view is our newest hung ECP in the local market.
I'm quietly the brother firms checkout with the web pages of affiliate establishment and six January a functionality to pay basic services to solve your payroll financial needs yet their lunch micro loans in August of last year and to be pressing the pharaohs daily lives began offering yuppie promos in September these.
Six functionality has improved client experience over the last year. The number of active users jumped from $5 1 million to $8 8 million and the monthly transaction volume rose from 69 million to 160 million the number of clients that generate income heat three.
One 9 million in March 2023, and incorporate active users reached one six songs.
Our Titan expenses, which stands for $900 per active user per month is still outpaces our revenue. Nonetheless, yelp is well on its way to reaching breakeven in 2024 next slide please.
Me Banco registered a drop in profitability this quarter, we're not quarter over quarter basis, Despite the slight growth of one 6% in our structural loans.
Yeah, I dropped three 8% due to funding cost pressures.
Loan portfolio has been impacted by social unrest and climate events on me Banko has provided a special credit support to six 8% of its loan portfolio wherever the severity of any bus bar is by region Unreached provides.
Tobacco provisions reflect the basis Nate we can offer at this time with information available we have been tightening our approach to normal origination, which reflects Italy adjustments made to the risk appetite in the second half of last year.
Operating expenses fell four 2% quarter over quarter, driven by seasonality from year over year perspective, net income grew one 3% driven by a $16 nine increasing a structurally loans and discipline in pass throughs of rates. This was sold was offset by higher finding cost.
Provision expenses Rose rose, 116% driven by the same factors of those outlined in the quarter over quarter analysis operating expenses grew five 2% year over year fueled mainly by T expenses seeing equal grew at a slower pace the efficiency ratio rose to 54.
For one Pursing Y R. O E stood at three 3% me Banco Columbia is facing a number of challenges high inflation, which drives up costs high funding costs and recent regulation that will reduce interest rate caps by a weighted average of 5% points.
We believe that the micro finance market in Colombia on.
On tape and potential and are adjusting the strategy to reflect current market conditions.
Next slide please.
Yeah.
Yeah.
Before explaining Grupo Pacifico resource it is important to remember that ourselves at the beginning of this year, we are reporting under a year for 17.
This is standard reporting items have change in 2022 numbers have been restated for comparative purposes.
The overall impact on 19 countries not material in consolidated terms, but some reclassifications in our efficiency ratio as a critical level.
Please refer to our earnings release and the appendix of this presentation for specifics now let me explain group of Pacific resolved from a year over year perspective, Grupo Pacifico reduced is significant year over year increase in profitability due to an uptick in insurance underwriting results in the life business and expansion.
Net financial income the latter was attributable to growth in interest income and to a base effect associated with bond impairments in the first quarter of 2022.
In this context group of Pacific loss net income increased 107, 4% in terms of our reinsurance business lines in the life business. The insurance underwriting results improved 133, 6% driven by an upswing in income from insurance services to pension and <unk> credit.
Problems the pension segment benefited from higher fees under our fiscal six white traded life improve via price adjustments on growth in bancassurance placements hunting hunt with an uptick in loan volumes. These dynamics were partially offset by an increase in reinsurance results mainly be a pension problems in the <unk>.
Currently on casualty business insurance underwriting result for 39%. This decrease was driven by higher expenses for insurance services due to growth in claims through property and casualty risk on car insurance in this context group or a cyclical return on equity is student.
New surely high 36, 5% this quarter.
Next slide please.
The investment banking and wealth management business whaler still facing complex market conditions have registered a slight recovery in recent quarters.
On a quarter over quarter basis earnings growth was driven primarily by the asset management via new money from traditional and alternative funds.
The wealth management business through are not seeking assets under management from a year over year perspective assets under management dropped 17.7% driven by fund outflows, mostly in Chile, amaya decreasing the market value of funds the.
Despite the decrease in assets under management business income increased 40% driven mainly by capital markets, which reported gains on the appropriate fixed income portfolio in Colombia by the wealth management business actually on Franklin mentioned this line of business has adjusted to the strategy and we'll focus on fee income generating initial.
These are targeted more stable businesses.
Optimizing the cost base to return to our OE levels in the high teens.
Next slide please.
Now, we will look at credit card consolidate and dynamics on a quarter over quarter basis, our structurally alone.
So 0.7% driven by a seasonal contraction in wholesale banking at BCP.
Core income fell one 2% fueled by a drop in gains on FX transactions. Some fees. The construction update format reflected a decrease in exchange traded volatility in Peru, while decreasing fees reflected the elimination of inter city transfer fees and a drop in transactional activity in Peru net income report.
That little variation.
The net interest margin increased nine points.
Basis points quarter over quarter, NIM reached 584% risk adjusted NIM increased two four points to 54% on a year over year basis structurally loans grew nine 7% measuring average daily balances driven primarily by retail banking at BCP on Mueller.
Core income rose 18, 8% fueled by growth in niche interesting, which rose 28, 2% on the back of high interest rates and expansion in the structurally loan book in this scenario <unk> grew 136 basis points, while risk adjusted NIM increased 50 basis points.
The aforementioned was partially offset.
By a four 3% drop in the net gains on FX transactions given that the base of the first quarter of 'twenty two was high due to FX volatility.
And by a $1 one decrease in fee income due to the same factors scene in the quarterly analysis next slide please.
Let's look at the dynamics of a structurally nonperforming loans on a quarter over quarter basis growth in a structurally nonperforming loans was driven by an increase in yogurt new loan volumes in wholesale banking, which has already been provision given that our model anticipated deterioration.
In the impact of social and climbing event, some macroeconomic deterioration can be bankers portfolio, where the overdue and refinance portfolio inquiries and an increase in the nonperforming loans in retail banking, which was concentrated in the higher risk segments and offset by the sale of judicial portfolio on write offs.
Year over year basis, the structurally nonperforming loan volume increase of a low base and due to an uptick in refinance loans in the real estate on tourist centers.
Well by wholesale back it is important to note that these loans are backed by collateral that covers more than 100% of each debt.
The evolution of nonperforming loans and retail banking on your bank or was driven by the same factors as those seen in the quarterly analysis in this context, the structural coverage ratio stood at 110% finalize our structural coverage ratio. It is important to review the NPL portfolio mix in terms of secure and call.
Realized products, please refer to appendix two for more details.
Slide please.
Regarding provisions and cost of risk we have consistently informed the market that our cost of risk will increase this year as will return to pre pandemic levels in each segment and shift our loan portfolio mix towards more retail and higher risk higher yield profiles growth in both of these companies was driven upward.
<unk> seen unforeseen events, namely social upheaval and adverse climate occurrences, both of which contributed to a downturn in the macroeconomic outlook for the year.
Going to a specific quarter over quarter and dynamics provision remained high on Rosa slightly driven by retail banking, which exceeded their downturn payment behavior. In this specific segment and was impacted by new microeconomic expectations on me, Blanka, where social and climate events in Peru weekend payment behavior and increased probabilities of default.
Those movements were partially offset by lower portfolio exposure in wholesale bank.
On a year over year basis provision increase or with a low base in both the CPM, Nevada. Additionally growth in BCP was led by the consumer and credit card segments of their payment behavior deteriorated, particularly among higher risk lines. The uptick of the bank will follow the same path or a blinded in the quarter over quarter analysis. These dynamics were partially.
Offset by an improvement in payment behavior in wholesale.
In this context, the structural cost of risk stood at two 1%. We are closely monitoring our asset quality metrics and have implemented stricter origination guidance for a specific segments within consumer credit card and SME and continue to adjust my bank loan risk appetite, which began in the second quarter.
Order of last year.
Slightly.
Operating expenses grew 13, 5% year over year, driven primarily by core businesses at BCP and disruptive initiatives are they critical level at DCP quota business caused fuel the uptick in expenses, if we analyze the core business, excluding ICD general expenses increase out there David that created.
Got it used rose, which led to an uptick in expenses for fidelity program and to manage operating volumes in terms of expenses. The increase was driven by cloud use as we step up software development to increased transactional and service capabilities. We have also attracted more specialized digital.
In line with our digital and data analytics is choppy.
Expenses for disruptive initiatives dollar year over year to ensure that we continue to lead the market in the long term.
Operating leverage remains strong at BCP stand alone operating expenses remained under control by global slightly outpaced expansion reduced our reporting the efficiency ratio at a critical level has been impacted by the application of.
Our first 17 22 figures has been restated for comparative purposes.
Our efficiency ratio has stood at 44, 3% this quarter down 296 basis points compared to last year and driven by higher income at BCP Pacifico.
Next slide please.
Now, let's look at the structural balance sheet risk management framework upgrading core we manage this risk to a structure governance and prudent risk appetite our internal guidelines are more stringent than those said by local regulators. We perform annually stress test is to assure that we operate with a solid capital base.
We closely monitor a variety of liquidity indicators. It is important to note that internally.
LCR supply more stringent criteria that does required by the regulator, we actively manage the duration of assets and liabilities and monitor duration behaviors of DCP.
The duration of our asset portfolio and solid is around two years very close to the duration behavior reduce them by our liability portfolio. The duration of liabilities in dollars whoever is longer than that of assets as a matter of prudence to.
To manage interest rate risk, we maintain financial margins have economic value sensitivities within the limits established by your stress simulations, our balance sheet managers do our currencies and we hedge FX positions daily to maintain targeted gaps.
We maintain a high quality investment portfolio, which is liquid and contains a high proportion of central bank and sobering instruments for liquidity on liabilities indicators in some indicators, we focus from BCP stand alone balance sheet as it concentrates materiality, 66% of assets 70% of <unk>.
Total liabilities Mi band BCP, Bolivia, and <unk> have a smaller and less complex balance sheets and Pacific, Ohio by designed a structurally close much booths and adjustments are captured in <unk> 17.
Slide please.
First.
The profitability was fueled by better results as universal banking and by our strong results in our insurance business. Consequently, ROA this quarter expanded.
170 basis points year over year, Tristan I'd say.
18, 7%.
All in all we first of all are a testament to our resilience and ability to adapt to challenging circumstances now I will move on to the outlook.
We maintained our 'twenty three.
Outlook. However, given the implementation of <unk> 17 were restating, our efficiency ratio guidance range regarding GDP grow our hearing estimates of stands at one 8% our structurally loan portfolio measured in average daily balances continued to reduce overall we are expecting.
Spansion to instant at both the lower end of our guidance, we expect NIM to extent, we deem guidance Rick.
Got it and cost of risk.
We now expect 2023 figures will see trades closer to upper end of the range due to the impact of social unrest and weather events in the first quarter. Our efficiency ratio calculation is being restated to reflect changes to credit course, P&L lines and the Paris 17, accordingly previous ranges.
Equivalent to a <unk> 47, and 49% range under the new idea for a 17 efficiency ratio and we reaffirm this range. Finally, we still expect our ROI Tristan, Iran 17, 5% with these comments I would like to start the Q&A session.
We will now begin the Q&A session.
If you would like to ask a question. Please signal by pressing star one on your telephone keypad.
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Any follow ups as needed, but again, please only ask one question at a time. Thank you.
Yes.
Our first question is from Ernesto Gallardo with Bank of America. Please go ahead.
Thank you Kai good morning, Yeah, Franklin says and good morning, everybody.
Congratulations on your first quite a resolve these by the headwinds of the social unrest and the weather conditions in Peru.
So my first question would be on the political and economic outlook.
How do you think about a lower probability for Peru.
To celebrate early elections in April 2024.
Which do you think would be the implications for the economy for your business.
And also related to the economy.
How do you see the threats of the potential formation of El Nino.
Yeah. Good morning, I guess, Don Thank you. Thank you for your words.
That's a tricky question.
So what our base case scenario is.
As a matter of fact.
Because of legislation.
Basically impossible to have a electrical bye bye.
By next year by April of next year because of the of the timescale you will admit.
Having said that our base case scenario is that the current government will finish its Monday is constitutionally mandated.
By 2026, that's our base case scenario again tricky question, you know how that all the way to go environment changes.
Change in Peru.
Because of that where we believe we strongly believe that there always to be in a much better position than it was six months ago remember that six months ago. It was I don't know early in November we add up the circles government at that time.
The New administration is.
Even though they maintain their political vision there are much more professional and.
They're working on promoting private investment and that's not only at the central level, but also the regional government level.
Recall the regional governments.
<unk>.
Change.
At the beginning of this year.
That happens every every every year, there's a change in body and government.
Investment the public investment in those windows.
Re dose.
A little bit slower at the beginning so.
Again on the political side.
We.
On top of the political stability or tranquility, we see today.
Do you believe that there's a much better environment to date.
So we expect a.
Private investment to pick up a little bit light.
The rest of the year.
Regarding the El Nino effect.
Phil I would say it's too soon to tell we are monitoring the Nino report both international reports a logo report so as to.
Sure.
Evaluate what can be done we're working with our clients both on the corporate side and also on the retail and Microfinance.
Trying to.
Help them and educate them and how to reduce the potential impact they may have in their core businesses.
Excellent yeah, Frank Thank you very much just a.
Second question on your ROE guidance.
You are maintaining the 17, 5% for the year.
However, while the first quarter came almost 19%. So I'm just wondering if your new guidance is concerned about these.
Or do you see some risks I can't.
Yep.
Actually the reasons are the ones you just mentioned.
We still have a question mark regarding El Nino that even though political the political environment is more stable. They again, it's not that we have a very strong government Uh huh.
We can play.
Or yeah, we're going to play a longer or provide a longer term vision recall that we our guidance is around $17. Five is not centered on the spot. So that's the reason we're maintaining it.
I've also heard already mentioned that the insurance with US provided exceptional our way this quarter, we don't expect that to.
To keep that going forward, we expect.
The insurance business to go back to what I always we had reported last year.
Early it may add a couple of technical details as Youll remember, we have seasonally a low level of expenses of DCP, though in the first quarter that happens every year.
And this is impacting our result assemblage on practical nation, we had thought.
Pacific Latin an exceptionally good quarter.
Oh, perfect Super kept full year Franco and says I'm. Thank you.
Okay.
The next question is from Reni Perez with Scotiabank. Please go ahead.
Hello, Good morning, and congratulations everyone can you hear me.
Yes perfectly.
Yes, so he wanted to ask on the effective tax rate.
So moving forward.
How should we think about this line and should it remain at levels that we saw during this quarter.
Thank you.
Yeah, I think we can pick up on it yes, I think is the composition of our income this quarter that explains this.
I will say low tax rate and is the relative importance of investments at BCP that has some type of advantages and the relative weight of the proceeds of Pacifico that also has a lower tax rate. This.
I will say not usual proportion of main sources of income has decreased our tax rate during the work.
Yeah.
Okay.
Very helpful. Thank you guys.
The next question is from a lot of us are tusa with UBS. Please go ahead.
Hi, good morning, everybody.
Got it.
I have just a very good question food forward.
First one is related to the insurance results.
Because I just wanted to understand.
Good luck.
Yes.
Ah levels reported in the first sustainable.
We could consider for the following quarters.
And my second question is related to the appeal to range some of the bank.
What can we expect along with GE.
You could also add up for the next year.
Okay.
Sure.
Would be very helpful. Thank you very much.
Good morning, and Aloha, We got your first question Oh, I'll try to answer it and then.
Ask you to repeat the second question on the Gulf It wasn't very clear Oh, we didn't get it very clear communications.
As I mentioned, we don't expect the insurance business.
The report.
Similar to our own.
Resolved going forward.
We're going to go into the VITAS why why would I forgot.
Such a how you are always this quarter, having said that we expect the insurance business to get there are always we posted last year.
With Washington Heights.
High teens low plenty. So we do believe that because of what what what we've been pursuing the strategy in the insurance business focusing much more on retail.
Our original insurers specifically on the bank assurance, we expect that that are always.
Teens low pennies is sustainable going forward.
I'm sorry, your question could you repeat the second one.
Yes, yes.
Helpful. Sorry, I believe that you guys can you hear me now.
The next question. The second question was related to the payout ratio because it's just one that's going to expand our portfolio qualities.
Fortinet ship.
Two dynamics for all of the tier one ratio close to 11%.
One on the guidance I just wanted to understand what could we expect.
<unk> been distributed and also with <unk>.
Attitudes.
Finishing towards visibility for the next year. It will also be helpful.
Sure.
First has to do I heard that specific question. Just a quick reminder, the policy. We follow regarding theater that is we retain what our profits will be day, whatever is needed to capitalize on particularly the bank saw us too.
Finance or apartment.
From a capital standpoint, a fund our growth.
Our expected growth.
Coming years.
Yes.
See any inorganic opportunities growth opportunities that's like the philosophy, we follow in general terms, how assets are two complementary yes.
Actually I called in.
The two matched on that and if you make very simple calculation thinking and narrow EUR 17, 5%.
The portfolio growing probably half of that we can think in the short term as a result of that are not considering any potential acquisition for a lovely.
50, some payout ratio, but totally subject to the basic conditions that jump frankly stated previously.
So because they are going to skip from that calculation. Thank.
Thank you very much guys.
Rocco.
The next question is from Geoffrey Elliott with Autonomous. Please go ahead.
Hello, Thanks, very much for taking my question I just wanted to clarify on the loan growth guide them.
Because the.
Earnings release says single digits in the fourth quarter, it's at high single digits.
Single digits sort of a structural low growth.
But the slide continues to say, 6% to 10%, so which of those two is it and then what has driven the the tweak and.
Thank you.
Yes, probably is some clarification in the expression, but the concept, but similar between six and 10%.
With information that we have now we are thinking in above the minimum probably not at the maximum due to the events in the fourth quarter that holds really have impacted.
The size of the wholesale portfolio and guided us to be a little bit more cautious regarding growth and retail segments.
Alright, thanks very much.
The next question is from Nicholas Walker with Goldman Sachs. Please go ahead.
Hi, Thank you for the chance to ask questions. My My question is on asset quality, we saw structural mpls up slightly in the quarter do you expect further deterioration given the recent social and climate challenges in Peru, or Ken asset quality remain mostly stable and then just with that you know we saw the cost of risk at 2% at the high.
The end of the guidance and you mentioned that for the full year of can be customers can be at the high end, but.
Do you think it could be a little bit higher in the coming quarters and is it possible it could be above that range. Thank you.
I was wondering if you got out of her life.
So to answer that question Nicolas.
Nicolas in terms on the NPL performance.
We see some stability on the number.
I was just playing it.
Most of the increase in this quarter, what do you do anything specific casing in wholesale banking, so I would say.
That number should remain stable during the rest of the year.
Declining a little bit.
In terms of the cost of risk.
It is hard to tell right now, but our guidance is on a higher we're not hiring or the.
The number we don't expect to go.
Somewhat.
Larger than the 2% that is already resized.
In the presentation.
Okay, great. Thank you and then just on the efficiency ratio, we saw 444, 3% in the first quarter well below the range I think it's possible that you know that.
Efficiency ratio can be below your guidance range guidance range or if not what should lead to that ratio increasing.
Nicolas I think.
The 44, 3% is driven mainly by seasonal effects that happens every year at BCP as I mentioned previously and the <unk>.
Exceptionally good results specifically, we maintained the guidance at the more likely scenario.
For the whole year.
Great. Thank you very much.
The next question is sometimes care of the guests with White Oak capital. Please go ahead.
Hi.
Any question.
Two questions one on the.
The comments you mentioned that.
The situation back now.
Much better than six months ago. So could you remind us in terms of how many of your branches that affected back then and how many of them are back in operation.
Is he doing in Houston.
I think the issues you're facing in terms of your operation.
Sure.
So.
Maybe I'll answer the last part of your question first of all of our branches are normally operate in today.
Most of them if I can call a DCP I would say that then in Bordeaux, which is the.
The most affected regions in Peru, where the bank will have to have relevant.
Well about the process, we might be operating our Idaho 70, 75% of our capacity for.
That's it from us.
Corporate standpoint is totally marginal.
The effect.
The worst moment of the political and social unrest.
About 25% of their branches have me Banco were shut down or operating on an hourly basis something similar at DCP are getting that southern park, but today, we're operating at normal normal activity whatsoever.
Thank you My second question is on Monday.
So <unk> outlined.
A few months.
<unk> maintained our new product launches that you have in mind could you also just.
And then what sort of market share in the payment system will be having in Peru.
Yes.
Great question.
You'll have to define what the payment market is in Peru, because still I would say, 85% to 90% of payments in Peru.
Payments in Peru are done in cash so that's huge market.
Yup Yup as penetration is still small that's why we see a lot of potential if you go back to a.
Well have more specific or a market, which is a digital wallet market Theres no. There are no official figures, but our calculations are that represents around 75% to 80% of the back of that Mark.
Yeah.
Yes.
It's not the only segment and the online ticketing segment.
And that's my last question. Thank you.
Yes.
Relative more participation yup, it even though it's growing at.
Double at least double digits.
However, L O N.
Take advantage of your question and invite you to the Investor Day in New York, We will have a specific presentation on GAAP it and a lot of all information actually even more information about the one you're asking.
So that would be a great opportunity to share more specifics on the other.
Looking forward to it. Thank you so much and congratulations on the quarter.
The next question is from Alonso Aramburu with BTG. Please go ahead.
Yes, hi, good morning, and thank you for the call.
Following up on your iPad disruptive initiatives I mean, when we look at expenses cause disruption expenses doubled year over year and last quarter, you mentioned temple in Chile. That's why it's one of the sources of that growth can you comment on pinpoint what's your what's your profitability. There given that you mentioned that yet based on track too to be breakeven by.
Next year, yes.
I would say temporaries, maybe after you paid the largest disruptive initiative, we have in terms of ambition and on budget.
Hum.
The past hour.
Sure sure.
Next.
Initiatives were having a simple but the path to profitability is by by.
Adding features to that features to the value prop yup purple husk in Chile.
The first one the first relevant wireless should be launched by the third quarter of this year.
And do you have to bear in mind that our temple was launched after yesterday.
So it's a relatively younger initiative.
Well for us.
In Chile, we don't have the muscle we have in Peru.
DCP, so as we speak.
What happened with a temporary result, but still.
Again. These are they are more in our less mature stage.
Unfortunately, I cannot share the next the next launches for this year.
Okay. Thank you everyone step already generating revenue.
Yes sure.
It is generally the net revenue actually started you're generating revenue before you got there.
Oh is it still got thrown out there.
Okay. Thank you.
Yeah.
Again, if you have a question. Please press Star then one.
The next question is from my dress soda with Santander. Please go ahead.
Good morning, and thank you for your presentation on underperforming last questions. My first question is regarding the micro finance business.
You know this quarter you posted a weak euro E. How long do you think it's going to take orders operation in Peru.
Returning to <unk>.
More.
Closer to historical profitability levels, and when you look at your Colombia operations or micro finance I remember in the past you considered the possibility of making further acquisitions in order to increase the scale given the challenges now in terms of bolt ons and regulatory environment are you still thinking of.
So sorry, as a good opportunity in terms of capital allocation.
Yes sure.
Two questions I have two offers to those questions. The first time horizon on a more longer term.
Term vision, we're very happy with the results of the Microfinance business.
We've just calculated our ROE for the last.
Over 10 years actually.
And it's it's over 21% I believe so so quite happy with those results and we strongly believe in keeping it in that.
We have a.
Competitor advantage not only in Peru, but the model is exportable.
Parts of Latam.
Regarding Peru, Yes, we are we have had a.
Very about first quarter we.
<unk> because of the social unrest and the assortment, especially.
Social unrest impacted.
I really mean Bronco <unk>, we expect that next quarters to pick up in terms of ROA.
So the year should be much better than what we've seen in the first quarter.
Regarding Colombia.
Colombia is today, it's a very complex as you mentioned a complicated environment.
Rates on deposits have gone up.
Grace gaps in general have gone down so margins are much slimmer today, and we are basically in a wait and see.
<unk> today in Colombia, not only I would say pneumonia regarding potential acquisitions, but also offering is slowing down.
All of our growth.
On a longer term vision, we're still positive on what can be done in Colombia, but obviously the.
Current environment.
It's not about just want to be as active as we've been in the past.
Thank you, Jim Frankel and I'm talking about the investment banking and wealth management business you say.
Do you expect with your three year plan to obtain a high end.
<unk> sorry.
Type of borrower.
What is needed.
But like you said, it's just a matter of scale and will you consider it.
Acquisitions in this segment.
Or do you somehow better efficiency on the contract you are playing to our.
Scale back a certain part of the business and if I. If I just one point to that question. If you can remind us what is.
You know in the past you had at the holding level you have a rainy day pump, which you may have considered report or do any money. If you kind of beat us on what is the number that you are seeing after paying dividends.
The holding company. Thank you yes.
Regarding the investment banking and wealth management with the government there will be much more specific and on the Investor day.
But basically go into a question it's both actually so we've seen some businesses, which we have no competitive advantage.
Cost to income or the efficiency ratios on those bases are.
Way off the Mark.
So the idea is to focus on the more stable a bit.
And where we have competitive advantages in the markets, where we play and.
In that sense.
We will be.
Active not only in making more efficient our laurels successful our business, but also in looking for inorganic growth and obviously we will.
All out of some of other businesses in order to reduce operating costs and on top of that and maybe more importantly complexity, we built our company.
<unk> failed.
<unk> in the region are actually what we are expecting the upcoming years is headwinds. So we have to we have to adopt.
Regarding the fun.
To date, we are rebuilding that fun.
After paying.
We mentioned that it would be at the beginning of the goal we will still have it.
Is a wrong.
$200 million.
Or are there other corporate level debt position net position that's a good.
Good point, because remember that we have around half a billion in debt issue that great globally should that.
During the call it during the pandemic, but that's basically squared with the.
Short term investments.
Yeah.
That's very clear things are suffering.
Okay.
It appears there are no further questions at this time.
I'll now turn the call back over to Mr. Gianfranco Ferrari Chief Executive Officer for closing remarks.
Thank you and thank you all for your for your questions.
I began my comments by noting that difficult environment, we've been navigating through mark like the waves of social unrest in the south and the adverse weather events in the northern and southern coastal area.
I'd like to give you a better understanding of how we remain close to our clients and support our communities during difficult times.
We have not only contact our clients evaluate impact and offer suitable financial relief alternatives, but also provided hub through donations to the affected region as.
As of the end of March DCP in the Banco had granted payment relief to almost 60000 clients.
Furthermore, our businesses contributed to the affected regions through donations and our employees participated in volunteer programs to bring emergency kits.
Non perishable food to vulnerable families.
Our work on this front is not done as we foresee continued uncertainty I heard on the political climate effects.
Despite this political risk have clearly diminished.
The macroeconomic landscape landscape as improved compared to six months ago.
In this context, Greg Corp is well positioned to capture and create value for all our stakeholders based on the significant opportunities ahead.
Our dedication to financial inclusion in education essential elements in poverty reduction.
<unk> firm supported by the solid fundamentals of our country.
We're committed to investing in digital transformation, promoting innovation and attracting and developing talent to fulfill our long term promise.
As we pursue these goals will be prudent in managing risk and controlling our spending will closely monitor our targeted efficiency ratio Roe.
Sure that we achieve our financial objectives.
By striking a balance between innovation and financial discipline will be well positioned to deliver sustainable growth and value to our shareholders over the long run.
Again, thank you for your product.
Look forward to seeing many of you in New York on June .
Goodbye.
Thank you ladies and gentlemen. This concludes today's presentation you may now disconnect.
Yeah.
[music].