Credicorp Q4 2024 Earnings Report

Repay EPS Results

• Actual EPS: $3.76
• Consensus EPS: $4.42
• Beat/Miss: Missed by -$0.66
• One Year Ago EPS: N/A

Repay Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $1.45 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Repay Announcement Details

• Quarter: Q4 2024
• Date: 2/10/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, February 11, 2025
• Conference Call Time: 9:30AM ET

Repay (NASDAQ:RPAY), payments technology company, provides integrated payment processing solutions to industry-oriented markets in the United States. It operates through two segments: Consumer Payments and Business Payments. The company's payment processing solutions enable consumers and businesses to make payments using electronic payment methods. It also offers a range of solutions relating to electronic payment methods, including credit and debit card processing, automated clearing house (ACH) processing, e-cash, and digital wallet services; virtual credit card processing, enhanced ACH processing, instant funding, clearing and settlement, and communication solutions; and proprietary payment channels that include Web-based, virtual terminal, online client portal, mobile application, text-to-pay, interactive voice response, and point of sale services. It serves customers primarily operating in the personal loans, automotive loans, receivables management, and business-to-business verticals through direct sales representatives and software integration partners. The company was founded in 2006 and is headquartered in Atlanta, Georgia.

Repay Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Good morning, everyone. I would like to welcome you to the Credicorp Limited Fourth Quarter twenty twenty four Conference Call. A slide presentation will accompany today's webcast, which is available in the Investors section of Credicorp's website. Today's conference call is being recorded. As a reminder, all participants will be in listen only mode.

[Operator]

Now, it is my pleasure to turn the conference over to Credit Corp's Iorio Milagros de Cuenas. You may begin.

[Milagros Cigüeñas, Investor Relations at Credicorp]

Thank you, and good morning, everyone. Speaking on today's call will be Gianfranco Ferrari, our Chief Executive Officer and Alejandro Pellegrino, our Chief Financial Officer. Participating in the Q and A session will also be Francesca Raco, Chief Innovation Officer Cesar Reyes, Chief Risk Officer Diego Cabrero, Head of Universal Banking Cesar Rivera and Carlos Otelo, Mibanco. 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 uncertainties.

[Milagros Cigüeñas, Investor Relations at Credicorp]

And I refer you to the forward looking statements section on our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward looking statements to reflect new or changed events or circumstances. Gianfranco Ferrari will start the call with remarks on a brief overview of our results and business strategy development for 2024, followed by Alejandro Perez Reyes, who will comment on the macro environment improvement, our financial performance and provide our outlook for 2025. Gianfranco, please go ahead.

[Gianfranco Ferrari, CEO at Credicorp]

Thank you, Milagros. Good morning, everyone. I'm very pleased with our full year results, delivering record profitability of PEN5.5 billion and an ROE of 16.5%, which equals 17.2% aligned to our guidance, while excluding one off charges related to the Sartor case. Operationally, the fourth quarter was robust with improved cost of risk at BCP and Nibanco, increased lending and exceptional transactional volumes at BCP and Yape, providing a strong foundation for sustained growth in the years ahead. These achievements underscore the impact of our strategic initiatives, which have strengthened resilience, enhanced efficiency and reinforced our competitive advantages.

[Gianfranco Ferrari, CEO at Credicorp]

This enabled us to navigate periods of volatility effectively, while keep capitalizing on market opportunities to drive future growth and further advance our strategy of decoupling from the macroeconomic cycles. Our efforts align well with Peru's economic recovery, which saw GDP expand by over 3% in 2024 after contracting in 2023. Inflation fell to 2.2%, its lower level in four years as the Central Bank lowered its policy rate to support the recovery. Improved weather boosted fishing, primary manufacturing and agriculture, while strong copper and record high coal prices further supported economic performance. Despite gains from increased public investment, private sector investment remains subdued.

[Gianfranco Ferrari, CEO at Credicorp]

Achieving long term sustainability growth will require political stability, responsible fiscal policies and structural improvements in essential services to fully restore business confidence. Looking ahead, we expect the Peruvian economy to grow around 3% in 2025, supported by historically high tons of trade, controlled inflation and continued recovery in real wages. However, the onset of the electoral campaign toward the end of the year may introduce uncertainty as campaign activities intensify. Reported ROE came in slightly below expectations as we chose to prioritize client relationships and mitigate the risk related to the Sartor in the fourth quarter. However, adjusting for this, we will have delivered an ROE of 17.2% in line with expectations.

[Gianfranco Ferrari, CEO at Credicorp]

Our results were primarily driven by strong results at our Universal Banking and Insurance and Pension business. Lines alongside continued improvement at Mibanco. This was further supported by growth in device of five revenue streams and record high transactional volumes, particularly in FX and diesel transactions during the fourth quarter. This shift enhances our revenue mix, advancing our strategy to diversify revenue income sources with the goal of achieving 10% of risk adjusted revenues from new businesses by 2026. Risk adjusted NIM continued to strengthen underpinned by disciplined interest rate management, a leading low cost funding position and enhanced credit risk management.

[Gianfranco Ferrari, CEO at Credicorp]

Meanwhile, our investments in innovation and digital capabilities are delivering tangible results, driving a better than expected efficiency ratio, reinforcing our competitive advantages and deepening client relationships. Client satisfaction also improved with a five percentage point increase in average NPS across our businesses, while these efforts also promote greater financial inclusion. Lastly, the significant asset quality improvement since late 3Q of twenty twenty four has led us to gradually increase our risk appetite and allow for a more proactive lending approach at both DCP and Evanco, particularly in the retail segment, reflecting the improved operating conditions. Please move to Slide three. We're advancing our strategic priorities to proactively address challenges and capitalize on opportunities, ensuring our long term competitiveness.

[Gianfranco Ferrari, CEO at Credicorp]

These priorities are attracting and retaining top talent through a compelling value proposition, accelerating digital transformation and innovation and integrating sustainability into our core business strategy. We cultivate innovating teams with a growth mindset, aligning their purpose with Credit Corp's to unlock potential. Through continuous training and development, we're making Craycorp an increasingly agile organization that enhances both efficiency and experience. Our strong value proposition led to a 12 employee NPS increase, making Craycorp Peru's top employer brand for executives. Additionally, five of our companies are number one in their respective categories in the Merco Talento Peru reputational ranking.

[Gianfranco Ferrari, CEO at Credicorp]

To further reinforce our identity, we launched Grayskorp Culture, a strategic framework built on shared values of teamwork and vision, innovation, customer centricity and ethics. We drive digital transformation and innovation by enhancing AI and cybersecurity capabilities. Over the past decade, we've advanced data and analytics and technology, boosting productivity and customer experience. AI driven initiatives such as improved voice response at BCP contact center have increased self-service interactions to 40%. Moreover, the implementation of SkipCap Copilot among over 1,500 developers boosted productivity by over 30%.

[Gianfranco Ferrari, CEO at Credicorp]

We strengthened internal cybersecurity management, invested in new technologies and improved processes to elevate protection standards. Recognizing that cybersecurity is an ongoing priority, we continuously monitor and adapt to emerging threats while keeping both employees and clients with enhanced digital security practices. We integrate sustainability into our strategy to drive meaningful change. As a leader in financial inclusion and education in Peru, we have brought over 5,700,000 people into the financial system since 2020 and expanded access to insurance with more than 3,600,000 inclusive policies issued. We've also allocated over $1,500,000,000 in sustainable financing across the agriculture, fishing, energy and textile sectors.

[Gianfranco Ferrari, CEO at Credicorp]

These are just a few of our main initiatives aimed at improving lives and reducing poverty in Peru. Looking ahead, we will continue to focus on these three fundamental pillars, talent, digital transformation and sustainability as key drivers of Creative Cloud's long term success. Now let's turn to a summary of performance across our business units and disruptive initiatives. Our balanced portfolio innovation strategy including disruptive initiatives allow Paycorp to decouple from the macro and drive resilience, profitability and long term value creation. At BCP, we prioritize customer experience and long term competitiveness through investments in digital channels like Yape and mobile banking, which drive exponential transaction growth.

[Gianfranco Ferrari, CEO at Credicorp]

We now have 36% digital customers. Our branch modernization efforts, including quick service modules and digital allocation zones, supports this evolution. Additionally, we improved multi channel value propositions, raised NPS across segments. While our focus on optimized credit risk management in consumer and SME segments is unlocking significant growth potential. Mibanco's performance improved, driven by the broader economic recovery, enhanced risk management and operational efficiency improvements.

[Gianfranco Ferrari, CEO at Credicorp]

Our hybrid model helped navigate an acute cycle in Peru's microfinance system, supporting clients with great facilities and training. We shifted to lower volume higher profit grade tickets, improved monitoring and collection and implemented more effective risk controls than our peers. We also attracted savings, diversifying income and strengthening resilience, boosting customer NPS by over four percentage points and turning in solid results in the quarter. Looking ahead, we're exploring additional synergies with Credit Corp to drive further structural improvements to achieve our minimum target of 20% of ROE. Pacifico served our over 6,500,000 clients in 2024, expanding its offerings through commercial partnerships and leveraging the Credicorp ecosystem with a particular focus on retail via bank assurance and Yaping.

[Gianfranco Ferrari, CEO at Credicorp]

We developed a new strategic alliance, including a collaboration with Falabella in embedded insurance. As a result, our NPS increased two percentage over the year. Our commitment to enhancing digital capabilities supports our ambition of making Peru the most protected country in Latin America. At Craycor Capital, we recovered income and profitability, driven by capital markets and wealth management, with growth in assets under management. These results reaffirm the strength of our strategic approach.

[Gianfranco Ferrari, CEO at Credicorp]

Following the Chilean Financial Markets Commission intervention of Sartor, a third party fund manager, we prioritize client interests by proactively protecting their investments in our factoring funds. While we expect a partial recovery of funds, our actions reaffirm our commitment to long term client relationships. We continue to drive revenue growth through our consolidated innovation strategy. Yape, now Peru's most recognized brand, reached profitability in 2024 with nearly 14,000,000 active users. As a leading payments platform, Yape has nearly doubled its transaction volume in 2024.

[Gianfranco Ferrari, CEO at Credicorp]

Expanded credit access with 1,800,000 users with credit and became Peru's Fifth largest e commerce player. In Bolivia, Yape has emerged as a top digital wallet with over 1,200,000 active users. Crayalo, our corporate venture capital arm remains at the forefront of innovation with Tempo in Chile set to become the country's first neo bank, already serving over 750,000 users. Strategic internal collaborations like Monokera, a platform linking insurance to digital channels is enabling JAPED to become a digital insurance distributor for Pacifico. With that, I will now turn the call over to Alejandro, who will go into the highlights of the quarter and provide further detail on the macro environment, each of our operating businesses and our consolidated results.

[Gianfranco Ferrari, CEO at Credicorp]

Alejandro?

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Thank you, Gianfranco, and good morning, everyone. As Yafrancos mentioned, we delivered solid operating results in 2024 and are well positioned for a strong 2025. Our 16.5% ROE was negatively impacted by a $259,000,000 1 off related to the start quarter case this quarter. Excluding these charges, the ROE would have been 17.2%. As I discussed the quarter's highlights, I will focus on the quarter over quarter results to emphasize recent shifts in Q operating trends.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Loans expanded 0.7% measured in average daily balances and 2.2% in quarter end balances. This expansion was primarily driven by short term corporate loans, borrowing program loans at the SME business and mortgage loans. Asset quality further improved this quarter. The NPL ratio dropped 60 basis points to 5.3%, driven by BCP and Mibanco. At BCP, the NPL contraction was led by SMEs and wholesale clients.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Provisions fell 14.4%, fueled by improvement in payment performance after the risk management measures at both BCP and Vivanco continued to bear fruit. As a result, the cost of risk fell to 2.1%. Net interest income increased by 1.1%, primarily driven by a decrease in interest expenses via a drop in interest rates and by growth in low cost deposits, which now represent 56.4% of the funding base. The yield on interest earning assets, however, fell 20 basis points as the asset mix shifted towards cash and equivalents and market interest rates dropped. Consequently, NIM fell nine basis points to stand at 6.3%.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Non interest income expanded this quarter. However, fee income contracted slightly by 0.4% due to a drop in brokerage results at Credit Corp Capital. This evolution was offset by a 29.4% increase in gains on FX transactions, which was boosted by BCP Bolivia and BCP. Lastly, the insurance underwriting results rose 7.2%, reflecting a stronger reinsurance result in the P and C business. All in all, we delivered ROE of 13.3% this quarter, supported by steady revenue dynamics and asset quality improvement, but nonetheless impacted mainly by one off charges and seasonal expense.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Next slide please. The Peruvian economy struck a more positive note at year end in 2024, recovering from a contraction in 2023, which interrupted twenty five years of constant growth except for the pandemic. The economy grew around 4% year over year in the fourth quarter of twenty twenty four and three point two percent for the year. And inflation is well controlled at 2%, one of the lowest figures among both advanced and developing economies. Thanks to solid external accounts, the Peruvian Sol is one of the best performing currencies in emerging markets.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Great rating agencies have upgraded their outlook for Peru from negative to stable, reducing the risk of a downgrade in the near term. In 2025, the economy is expected to transition from early stage to mid cycle recovery. Some indicators that this phase has begun are already evident. For example, recovery has grown to include drivers such as car sales, local sales tax revenue and imports, which are now experiencing growth. Additionally, employment and real wages continue to gradually recover.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

And according to the Central Bank Survey, investment expectations have recently accelerated and stood in the optimistic range throughout the second half of the year, and a moderate improvement in prior investment is anticipated. We expect the Peruvian economy to grow around 3% for a second consecutive year in 2025, despite uncertainty on the global front and a pre electoral environment in Peru. Dinamicem should continue to pick up in the first half of the year. Finally, we anticipate GDP growth of 2.4% in Chile and 2.1% in Colombia. Next slide please.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Expectations for federal reserve rate cuts have diminished with some analysts suggesting that the cuts are over. President Trump's recent announcements aligned with his campaign promises and underscores his administration's intent to leverage tariffs negotiating tools. Consequently, increased market volatility is anticipated during his presidency due to heightened uncertainty. In Peru, as mentioned earlier, inflation is under control at 2%. The Central Bank has cut its policy rate 300 basis points in September 2023 and is expected to implement one or two additional rate cuts throughout the year as it approaches its neutral level.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

In Colombia, inflation ended the year at 5.2% year over year, remaining above the upper limit of the target range of 4%. The Central Bank decided to pause at its February meeting after previously slowing the pace of rate cuts, adopting a cautious approach to allow time for evaluating the effects of multiple recent shocks on inflation. Finally, in Chile, the market has priced in only one additional rate cap. The Chilean peso has depreciated around 6% since September and last month the exchange rate reached its highest level since 2022. Next slide please.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

DCP raised their full year ROE of 22%. This strong performance was mainly driven by resilient margins amid a shift in the loan portfolio to retail and solid transactional funding alongside diversified income streams. On a quarterly basis, ROE stood at 20.1%, driven by the following quarter over quarter dynamics. Total loans measured in average daily balances rose 0.9% rebounding on the back of improving macro conditions. Growth in average daily balance was driven mainly by an uptick in short term corporate loans, particularly to the mining and energy sectors.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

The SME business and mortgage segment also contributed to loan growth. NPL volumes fell 9.6%, mainly driven by a drop in overdue loans in SMEs, debt repayments in wholesale banking and an increase in write offs and debt repayments in consumer and credit cards. NIM decreased 20 basis points to stand at 6%. This decline was driven by growth in cash and in corporate loans coupled with a drop in market interest rates, both of which pressured the average asset yields downward. Other income in contrast grew 1.9% on the back of FX transactions, which were bolstered by corporate transaction volumes.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Fee income also contributed to income growth, driven mainly by record high transactional levels at Yape, while debit and credit card activity at BCP remained at solid levels. The cost of risk fell to three basis points to stand at 1.8%. The contraction in provisions was driven primarily by SME Pime and mortgage portfolios. In SME Pime, provisions dropped due to an improvement in payment performance, which reflected improvements in the portfolio's average risk profile. In mortgage, the contraction was due to parameter updates to our risk models and to strengthen payment capacity in individuals.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

The consumer and credit cards in contrast reported an uptick in provisions due to our risk model calibration. It is important to note that underlying risk has improved for both products. Payment performance improved mainly after healthier vintages increased their weight within portfolios and rescheduling efforts were ramped up. In this context, BCP's risk adjusted NIM stood at 4.9%. BCP's asset quality metrics have improved due to risk management measures such as adjusting credit guidelines in high risk segments, fine tuning credit processes and calibrating specific models to better predict losses.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

We will gradually increase risk appetite in certain segments with strict monitoring and a disciplined risk return approach. From a full year perspective, I would like to highlight the following dynamics. Loans decreased 0.7 in average daily balances, driven mainly by a drop in wholesale loans, where demand for long term financing remains weak. NIM rose 30 basis points to stand at 6%, bolstered by an improvement in the funding, which was positively impacted by lower interest rates and growth in low cost deposits. An uptick in the yield on interest earning assets also contributed to growth in NIM.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Other core income rose 15.2% as fee income was boosted by Yapis consolidation as a key revenue stream and BCP's strong transactional activity. Additionally, gains on FX transactions rose via an uptick in volumes and better pricing in retail and wholesale clients. Efficiency ratio stood up 39.3% for the year due to higher operating expenses and slower operating income growth. Salaries and employee benefits increased alongside an uptick in variable compensation, which rose on the lack of better business performance. Technology costs increased hand in hand with an uptick in the transactional volume.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

It is worth noting that the other core income to assets ratio remains high, illustrating the increasing diversification of PCP's income streams. Next slide please. Yape reported close to 14,000,000 active users, around 69% of the economically active population. Today, Yape is on track to achieving its target of 16,500,000 active users by 2026. Revenues grew alongside Adaptive in the use of features.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

By quarter end, monthly revenue per active user reached S6.5. Revenue generation outpaced growth in expenses despite seasonal charges related to marketing campaign and IT expenses. Fourth quarter seasonality expenses were anticipated in line with results in previous years. Consequently, monthly expenditures per active users stood at S5.3. YAPES payments business is the forerunner for revenue growth and year over year growth was primarily attributable to bill and QR code payments and YAPES for business.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Over the period, the total payment volume rose 1.9 times. In the financial business line, revenues were mainly obtained from floating, while loan disbursements continued to grow exponentially. Year over year, loan disbursements rose 7.3 times, as Yape focused on loans with higher tickets and durations. By the end of the fourth quarter, loans have been granted to 1,600,000.0 and we are well on our way to reaching our target of 5,000,000 with a loan disbursed by 2026. Finally, our e commerce business has boosted customer engagement.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

This is reflected in the gross merchant volume, which grew three times year over year, mainly through Yape Pro. In 2025, Yape will enhance its offering with new features and improve its value proposition. We will develop and implement new risk models to expand our lending business while maintaining the highest standards of security and stability. Next slide please. After a challenging year marked by a complex trade cycle for the microfinancing industry, Bivancro Peru is recovering profitability among improved credit risk management and a reduction in the cost of funds.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Fourth quarter ROE contribution rose to 17.3% as we move closer to our target levels of profitability. I would like to highlight key quarter over quarter dynamics. Evancos loans measured in average daily balances fell 1.2%. Despite hitting a turning point this quarter as we probably ramped up disbursement of small ticket higher yield loans, gains were overshadowed by a decrease in higher ticket loans. The NPL ratio fell for the third consecutive quarter and improved at a faster pace than our peers.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

This evolution, which was driven by a reduction in overdue loans, reflect the positive impact of tighter adjustments in origination guidelines, debt relief facilities and improvement in debt collection processes. NIM rose 30 basis points to 14.2%, boosted by a drop in the cost of funding after the funding rate decline. Cost of risk fell 154 basis points to stand at 4.7%, driven by improved payment performance and risk adjusted NIM stood at 10.7%. Improvements in Milanko asset quality metrics reflect discipline grade processes, including origination restrictions and stricter monitoring of the performance of these facilities. From a full year perspective, I would like to highlight the resilience of Milankov NIM, which was buoyed by active loan pricing management and a decrease in the cost of funding.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Improvements in risk management processes led to a decrease in cost of risk. Finally, operating expenses remained under control with efficiency standing at 52.7%. In this context, Evanka's full year contribution to ROE stood at 10.9% in an accumulated base. Going forward, we expect profitability to continue to improve as healthy loan growth resumes and newer and lower risk vintages increase their weight in the mix. Mibanco Colombia's result improved significantly, thanks to a focus on efficiency and disciplined risk processes and controls despite a challenging business environment.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

This helped us become the third largest private microfinance lender in Colombia. Next slide please. Grupo Pacifico concluded 2024 with another year of remarkable performance, achieving an ROE of 23.7% on the back of solid commercial dynamics in both the P and C and life business lines. On a quarterly basis, ROE stood at 20.5%, driven by the following dynamics. Net income dropped 10, primarily impacted by an increase in the net loss on securities impacted by one credit downgrade in the investment portfolio and by higher operating expenses due to seasonality.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Insurance and the revenue results rose 22% on the wrap of an improvement in both business lines explained by credit life, cars and P and C risks. From a full year perspective, in 2024, Grupo Pacifico delivered strong performance. Net income slightly dropped 5%, mainly driven by lower insurance underwriting results due to normalization of underwriting margins in the life business, which was partially mitigated by strong performance in P and C and higher operating expenses attributable to investments to strengthen Pacifico's digital capabilities. Next slide please. Operating dynamics have been strong throughout the year for investment management and advisory, which affirmed that our new strategic approach is on target and puts us in good stead for 2025.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Managerial ROE for the end of business came in at below expectations due to our decision to prioritize client relationships and mitigate the risk related to the starter matter in the fourth quarter. Excluding one off related to the start order case, ROE stood at 15.3 in a full year basis. I will go through operating trends that drove a managerial fourth quarter ROE of around 10.9%, which excludes one off charges. Net income dropped 31%, driven primarily by higher operating expenses and a drop in trading results in our capital markets business due to market dynamics. From a full year perspective, net income rose 15%, led primarily by sales activities in our capital markets business.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Our wealth and asset management businesses also contributed to growth in net income, where AUMs climbed 1618% in U. S. Dollars respectively. These dynamics were partially offset by a drop in treasury results. Next slide.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Now I would like to review credit card's consolidated evolution beginning with the quarter over quarter dynamic for the balance sheet. On the asset side, as previously mentioned, loans resumed growth, but mainly in lower yielding corporate loans. Meanwhile, cash and equivalents maintained an upward trend in a context of ample liquidity. The shift toward lower yielding assets resulted in a 20 basis point drop in the yield on interest earning assets. On the liability side, lower interest rates and growth in low cost deposits continued to be at a slower pace than the previous quarters, contributing to a decrease in the cost of funds.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

On a full year basis, interest earning assets rose 7.2%, mainly driven by cash and equivalents in a high liquidity environment. In the meantime, we have slightly increased the duration of our investment portfolio to safeguard our interest income. Lower interest rates and growth in local deposits led the funding cost to drop 17 basis points. Going forward, improving macroeconomic conditions should bolster lending as excess liquidity contracts, which will help us sustain a resilient NIM despite lower interest rates. Next slide please.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Moving on to loan portfolio quality, NPL fell 8.3% quarter over quarter, driven by both BCP and Mibanco. It is important to note that NPL volume this quarter continued to drop after reaching a turning point in the third quarter, particularly in the segments most impacted by the recent credit cycle, individuals and the SME portfolio BCP, as well as Milanko's portfolio. The improvement in the payment performance coupled with successful risk management measures at both BCP and Milanko led provisions to drop 14.4% quarter over quarter, while the cost of risk decreased 34 basis points to stand at 2.1%. In this context, the NPL core cash ratio rose five sixty six basis points quarter over quarter to stand at 104.3%. Next slide please.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Let's move on to analysis of our income and expenses. Core income rose 1.7% quarter over quarter, driven mainly by NII and FX gains. NII expanded on the back of a reduction in interest expenses. FX gains were boosted by better results in Bolivia and by growth in FX volumes for corporate clients at BCP. In terms of margins, NIM decreased nine basis points to stand at 6.34%, while risk adjusted NIM rose 15 basis points to stand at 5.08%.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

On a full year basis, core income grew 9.6, which is evidenced of our ability to sustain growth as we see opportunities in a more dynamic environment. Regarding margins, we achieved a NIM of 6.29% with a record high risk adjusted NIM of 4.77%. As we analyze expenses and efficiency on a full year basis, operating expenses rose 9.3%, driven primarily by core business at BCP and disruptive initiatives at the critical level. Expenses for disruptive initiatives at the credit card level rose 27.1% mainly fueled by Yape via technology and systems related expenses and by transactional costs. Finally, an uptick in operating income and accelerating operating expenses, net efficiency ratio will drop 33 basis points to stand at 45.8% for the year.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Next slide please. Creditor full year profitability was fueled by strong results at our Universal Banking and Insurance business and a gradual recovery on the microfinance fee. ROE for the full year 2024 stood at 16.5%. It is important to highlight that consolidated net income in 2024 represented a record high for our company despite an environment of low growth and high cost of risk. This result demonstrated our ability to add to challenging circumstances supported by our diversified sources of income in line with our decoupling strategy.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Now I will move on to our guidance. Next slide please. As Pery mentioned, we expect total GDP to grow around 3% in 2025. Regarding loan growth, we expect our total loan book measured in average daily balances to grow around 3.5%, driven mainly by retail banking at BCP and Mibanco. This growth is equivalent to around 6% growth measured in quarter end balances.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

The ongoing shift of our loan book towards a higher yield mix and stronger loan growth should ensure a resilient NIM despite potential policy rate reductions in solids and dollars down the line. Accordingly, we expect NIM to stand between 6.26.5%. The cost of risk guidance is between 22.4%. This range reflects the recent improvement in asset quality indicators as well as the shift of our loan portfolio mix towards retail. Given this expected dynamic for NIM and cost of risk, risk adjusted NIM should start between 4.85%.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

In 2025, we'll continue to invest in digital transformation and disruptive initiatives to bolster our long term competitive position. As mentioned in our earnings release, starting in 2025, we are adopting an accounting policy change related to our loyalty program. Considering this adjustment, we expect that 2025 efficiency ratio to situate between 4547%. It is worth noting that the impact of this adjustment is a reduction of about 80 basis points in our cost to income. Regarding non interest income, we expect fee income growth to pick up and stand in the low double digits in 2025 as activity accelerates and our efforts to first diversify sources of income gain traction.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Additionally, insurance and the right to results should remain solid and relatively stable against 2024. Given the aforementioned dynamics, we expect our ROE to stand at around 17.5% for the full year. With these comments, I would like to start the Q and A session.

[Operator]

Thank you. We will now begin the Q and A session. And today's first question comes from Ernesto Gabilino with Bank of America. Please go ahead.

[Ernesto Gabilondo, Director - LatAm Financials Bank of America at Bank of America Merrill Lynch]

Thank you. Hi, good morning, Gianfranco, Alejandro, Francesca, Cesar, Milagros, and good morning to all your team. And thanks for the opportunity to ask questions. My first question will be on the political side. I know that it's still soon on the presidential elections, but which other political parties that could be in the next election?

[Ernesto Gabilondo, Director - LatAm Financials Bank of America at Bank of America Merrill Lynch]

How should we think about the left, radical and right parties? Any color on this, I think, will be very helpful. And related to this, what tends to be the long road for the industry and for credit card one year ahead of the presidential election?

[Gianfranco Ferrari, CEO at Credicorp]

Yes. Good morning, Ernest. I'll take the first question. Actually, as you said, it's too soon to tell. There might be anything between 30 to 40 candidates.

[Gianfranco Ferrari, CEO at Credicorp]

So as of today, it's actually a raffle. So I wouldn't venture myself in saying in providing any color. As you can imagine, if there are thirty, forty candidates and we're over a year away from elections, anything could happen. We're totally cautious that it's a very relevant issue, obviously for us, but also for U. S.

[Gianfranco Ferrari, CEO at Credicorp]

Investors. And as we get closer and have much more clear vision on what may happen, we'll share that with you. I'll ask Alejandro for the second part of the question.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Sure.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Tying both parts of the question, we are not expecting a high impact from the election process for most of the year. This starts to happen late in the year, considering elections are in April of twenty twenty six and There's a lot of candidates, so there's going to be more clarity towards the end of the year. So we're expecting a good year for Peru in general terms with growth. I mentioned something earlier, the cycle is improving. So going to the specific question, what we're seeing for the industry of loan growth for the banking industry is around 5.5% growth.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

In our case, we're expected to grow above the market for a year. I mentioned earlier around 6%, probably a little bit more. It's going to depend on some factors on international volatility, but we're expecting a good year for 2025.

[Ernesto Gabilondo, Director - LatAm Financials Bank of America at Bank of America Merrill Lynch]

Perfect. And then for my second question will be on your sustainable ROE. So you are guiding around 17.5% for this year. But when do you expect to normalize OpEx growth from the disruptive initiatives? And how should we think about the ROE in the next two years like around 2027?

[Gianfranco Ferrari, CEO at Credicorp]

Yes. Ernesto, as we mentioned before, what we expect our sustainable ROE is to be around 18%. We're very confident that we will achieve that tier by 2026. Basically, because the main lever for that is that we expect that actually from 2025 and onwards that the disruptive initiatives as a whole will generate a positive ROE, a positive impact on ROE. So yes, the answer is by 2026 onwards, we will be operating we expect to be operating at an ROE of around 18%, which is a sustainable ROE we expect.

[Ernesto Gabilondo, Director - LatAm Financials Bank of America at Bank of America Merrill Lynch]

Okay, perfect. Thank you very much.

[Operator]

Thank you. And our next question today comes from Renato Maloney with Autonomous Research. Please go ahead.

[Renato Meloni, Senior Analyst at Autonomous Research]

Hi, everyone. Thanks for taking the question here. So I think the tighter credit origination policy has contributed a lot to the improvement in asset quality. So I'm wondering here what gives you a conviction that you can already restart originating and grow next year with and still maintain the same asset quality level and provisions level. And then still connected to this, right, the guidance also implies a mix shift towards consumer loans, but at the same time a lower or similar provisioning cost of risk here.

[Renato Meloni, Senior Analyst at Autonomous Research]

So just trying to reconcile these two as well. Thank you.

[Gianfranco Ferrari, CEO at Credicorp]

Yes. Maybe I'll take the broader vision and ask to go into the details. But yes, what gives us confidence is where the macro environment is in a much better position nowadays as compared to twelve months ago. The trend is still positive. Late December figures are positive.

[Gianfranco Ferrari, CEO at Credicorp]

Inflation in January was close to zero. The cumulative inflation for the last twelve months was the lowest inflation since prior to the pandemic. So the overall macro environment is positive. That's the macro answer. And on the more specific answer, all of our bad vintage all vintages, sorry, which had higher NPL ratios have been digested and the new vintages, the new originations have a much better performance.

[Gianfranco Ferrari, CEO at Credicorp]

So that's the reason why we feel quite comfortable going forward. I don't know, Federally, if you want to add?

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Yes, probably add something to try to reconcile how is that possible. I think it's a change in the composition. We expect to have cost of risk in the range that we are provided. But with different composition, that implies that we are going to have this kind of cost of risk with much higher yields because the oil vintage has been digested. For some time, we have been originated loans with a lower cost of risk and gradually we are starting to originate higher yield, higher cost of risk, but in a much tighter control range.

[Renato Meloni, Senior Analyst at Autonomous Research]

Understood. Thank you.

[Operator]

Thank you. And our next question comes from Brian Flores with Citi. Please go ahead.

[Brian Flores, VP - Equity Research at Citi]

Hi, Tim. Thank you for the opportunity. Just wanted to touch upon the provisioning of Sartor. So can you open a bit more on the details as to the level of provisioning? Also what is the base case regarding the evolution of the case?

[Brian Flores, VP - Equity Research at Citi]

I know you entered into a factoring operation. So just what is like the base case you're already discussing internally? And finally, just to confirm if the impact of the operation is directly in

[Brian Flores, VP - Equity Research at Citi]

Credit Corp. Capital? Thank you.

[Gianfranco Ferrari, CEO at Credicorp]

Yes. Alejandro?

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Sure. So as mentioned, we've done a provision of PEN259 million. It's not at the credit corp capital level.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

So we've done provision for losses in the fund, which are Atlantic Security Holdings, which is a holding for the group. And we have also a small provision for a loan that was given to another and related charter fund at Atlantic Security Bank. So it's not there. We feel comfortable with the level of provision we have done with the information we have seen so far. You have to bear in mind that this company is under intervention, it has a liquidator, so they are managing most of the things.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

But we think that the level of provision we have done should allow us to not have to raise there any expenses, any additional expenses this year. It's still early in the process, so we'll have to wait and see for the liquidator and the information they might give us to have a clear sense of how is the collection going along.

[Brian Flores, VP - Equity Research at Citi]

Perfect. Just a follow-up, just to be very clear, is this case expected to be resolved by 2025 or do you think it's something that could go beyond

[Brian Flores, VP - Equity Research at Citi]

that?

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

I mean, at this time, as I said, it's hard to tell. This is a factor in funds. So theoretically speaking, at least from the maturity of the investments, it should be short maturity. But again, there are a lot of things around it and we'll have to wait and have a conversation with the liquidator. It shouldn't be as long, but it depends on how it gets resolved.

[Gianfranco Ferrari, CEO at Credicorp]

Maybe just complementing what Alejandro mentioned. As to the best of our knowledge today, the economic impact we expect overall have been registered last year in the provisions we made in the fourth quarter of last year.

[Brian Flores, VP - Equity Research at Citi]

Super clear. Thank you.

[Operator]

Thank you. And our next question comes from Tito Laboda with Goldman Sachs. Please go ahead.

[Tito Labarta, Analyst at Goldman Sachs]

Hi, good morning. Thanks for the call and taking my question. My first question, just on the efficiency ratio, the guidance implies stable to actually a little bit weaker. So just to understand that because Yapez, you're already profitable there, some of these digital initiatives should begin to pay off. So just to understand why you expect efficiency only stable to potentially a bit weaker this year?

[Tito Labarta, Analyst at Goldman Sachs]

Thank you.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Sure. So, yes, basically the guidance we've given is slightly lower than the guidance we gave last year in the sense that it's almost if you adjust for the accounting change that I mentioned, it's almost the same 46% to 48%, but adjusting for it. So, yes, it implies similar levels, as you say, maybe a little bit of potential deterioration. I would say that we are still investing in important way, both in innovation and also in the core business in developing some capabilities. We have important projects in risk, also in our mobile banking between among others.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

So we see it is important for us to keep investing to maintain our competitive advantage in the market. Having said that, it is something that we look very closely into. For example, this year, we ended up slightly below guidance as you've seen. And just to give you a little bit more color on how much we're looking into that, as management, for example, our goal comes below the guidance that we've given. That's an internal guidance.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

So the logic behind it is we think we need to do these investments, but we want to do them as efficiently as possible and our aim is to getting ideally on the lower side of the range and keep the cost to income stable.

[Gianfranco Ferrari, CEO at Credicorp]

Tito, this is Afranco. Maybe just to compliment Alejandro. Bear in mind, you mentioned Yape. Bear in mind that Yape, you're correct, is profitable and profitability this year is going to be much higher than 2024. But the cost of cost to income of Yape is way higher than the 45 or 47 were provided.

[Gianfranco Ferrari, CEO at Credicorp]

And as Yape grows, even though the ROE impact is positive, the efficiency ratio impact is negative because it's operating still operating at higher levels. I don't know if I was clear.

[Tito Labarta, Analyst at Goldman Sachs]

Yes, no, very clear. Thanks, Gianfranco for that. So I guess, we should expect efficiency to get to that 18% longer term ROE, we should begin to see efficiency improving in 2026, I think if that makes sense. And then just a second question on the insurance. I think, Gianfranco, you also mentioned you expect insurance results to be stable.

[Tito Labarta, Analyst at Goldman Sachs]

I mean, ROE this quarter was a bit lower than it was for the full year. Just what do you think is the right level of ROE for the insurance business from here? Thank you.

[Gianfranco Ferrari, CEO at Credicorp]

Yes. What we're expecting is low 20s in the future. As we mentioned in previous calls, the insurance business has had two exceptional years for specific reasons related to the pension fund insurances. We do not expect that to be sustainable going forward. So we expect the shares business to go to operate at ROEs of low 20 around low 20.

[Tito Labarta, Analyst at Goldman Sachs]

Okay. Very clear. Thanks, Gianfranco.

[Operator]

Thank you. And our next question today comes from Nicholas Reba with Bank of America. Please go ahead.

[Nicolas Riva, Analyst at Bank of America]

Thanks very much, Gianfranco and Tim for the chance to ask questions. I have two questions on the bonds of both BCP and Credicorp. First on BCP, you have the Tier 2s, the 2030s that you can call this year. I think the outstanding is $850,000,000 Is it reasonable to assume given that you can issue the old style Tier 2s that those are going to be called and refinanced again with the issuance of Tier 2s? And then my second question, Credicorp, the holding company also has a bond, which I believe is which matures in June for $500,000,000 If you can discuss the refinancing plans for that bond as well, if possible?

[Nicolas Riva, Analyst at Bank of America]

Thanks.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Sure. I'll start with the second one. We are thinking about letting it mature and not refinancing it. We took it at a time where it made sense because of the price and the volatility in the world. But as of now, there's no need to maintain that debt for Credicorp.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

For BCP, we are looking at our capital and the best way to manage those bonds. So we are assessing what to do in the market. We'll let you know when we have a decision in the market.

[Nicolas Riva, Analyst at Bank of America]

Okay. Thanks very much.

[Operator]

Thank you. And our next question today comes from Yuri Fernandez with JPMorgan. Please go ahead.

[Yuri Fernandes, Executive Director at JP Morgan]

Hello, everyone. Good morning. I have a question regarding capital distribution. If you can provide some color on how should we think about payout and dividends? This was a better year for dividends, I guess, 65%, sixty six % payout.

[Yuri Fernandes, Executive Director at JP Morgan]

So just checking if we should see similar shareholders return, given on growth is not that sound yet. So just checking the box here on dividends. Thank you.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Sure. So as we said before, the policy that we're following is basically, we pay out all of the money that is not needed for the growth of the business. So we basically look at the plan for the businesses in the year and then all the excess capital is paid out as dividend. We are also aiming to have a growing dividend in March. So ideally, we will be able to do that this year.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

But from a policy perspective, the idea is to just not retain any capital that is not needed for the business in the particular year.

[Yuri Fernandes, Executive Director at JP Morgan]

And what is the number like on the correct Ichorwand that you are working with as the minimum for you to pay the excess?

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

I'm sorry? Correct. Yes, it's 11 at BCP and it's 13.5 at Bivancu.

[Yuri Fernandes, Executive Director at JP Morgan]

No, great. And if I may, just a second follow-up here on the APE. This for Q, usually we see a seasonality on expenses, right, on cost to serve. Just trying to ask you about your 2026 guidance for the new initiatives. I think you had a 10% of your risk adjusted revenues to come from new initiatives.

[Yuri Fernandes, Executive Director at JP Morgan]

Yap seems to be on track. So just checking where we are, if you are comfortable, if you can be above the 10%, below, how you are seeing basically the YAP evolution versus your prior 2026 guidance for the new initiatives? Thank you.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Sure. We're still aiming for the above 10% at 2026. That is from all disruptive initiatives, not the way we've defined it, not specifically for Yape, but of course, Yape is the main contributor for the following years. So yes, we are tracking to get to that number.

[Yuri Fernandes, Executive Director at JP Morgan]

Okay. Thank you very much.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Sure.

[Operator]

Thank you. And our next question today comes from Sergey Dubin with H. O. Please go ahead.

[Sergey Dubin, Portfolio Manager at Harding Loevner]

Yes. Hello. Thanks for the call, Jeff Franco and Alejandro. Just a clarification regarding loan growth. I think you mentioned on the call that you're expecting 5% to 6% for

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

the banking

[Sergey Dubin, Portfolio Manager at Harding Loevner]

industry. And then you're showing on your guidance that you're looking at 3.5%. So I was just not clear whether are you going to be below the industry or in line with industry or how does 3.5% relate to 56%?

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Sure. Thanks for the question and for the opportunity to clarify it. We guided for average daily balances, so not full year growth. So in average daily balances, it's a 3.5% growth and that is equivalent to around 6% growth in quarter end balances basically. So that's the continuation.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Yes, so we're expecting the market to grow 5.5% and have to grow somewhat above the market this year.

[Sergey Dubin, Portfolio Manager at Harding Loevner]

Understood, understood. Okay. And then the second question is regarding this, Strador case that you referred to. So just to understand, the press release that you issued on December 30 says that the maximum possible exposure there is $125,000,000 right, which is about $460,000,000 and you provisioned $259,000,000 so roughly 55% of that. So is it your belief that your provision would fully cover the possible losses and therefore you won't expect any more provision.

[Sergey Dubin, Portfolio Manager at Harding Loevner]

So the full exposure is not provisioned because you believe that whatever you provisioned is sufficient already. Is that correct?

[Gianfranco Ferrari, CEO at Credicorp]

That's correct, RJ. As you just mentioned, the maximum closure at the time was that figure.

[Gianfranco Ferrari, CEO at Credicorp]

There were

[Gianfranco Ferrari, CEO at Credicorp]

other funds in which we invested. And as I mentioned before, we expect that the major with the knowledge we have to date, we expect that the major impact should be what we provisioned.

[Sergey Dubin, Portfolio Manager at Harding Loevner]

Okay. And then just to clarify one more thing. Is this the kind of a so you felt the need to backstop your clients who invested in this fund. Is that kind of a typical practice or is that because you felt like that was the oversight on your part that perhaps this kind of dealt with this entity or if you I guess what I'm trying to understand is if you're distributing funds by a third party and another one gets in trouble, would you continue like would you always do this or was that just a one off or how should we think about this case?

[Gianfranco Ferrari, CEO at Credicorp]

Fair question. It's not a usual practice whatsoever. However, because of what this unprecedented environment and details with the counterpart, we decided to bear the whole risk and take our clients out of the matter. It's not a usual practice whatsoever.

[Sergey Dubin, Portfolio Manager at Harding Loevner]

Okay. So it's more of a one off, right, hopefully?

[Gianfranco Ferrari, CEO at Credicorp]

That's correct. That's correct.

[Sergey Dubin, Portfolio Manager at Harding Loevner]

Okay. Very clear. Thanks.

[Operator]

Thank you. Our next question comes from Carlos Gomez at HSBC. Please go ahead.

[Carlos Gomez-Lopez, Analyst at HSBC]

Hello, good morning and thank you for taking my question. I would like to ask about expenses and in particular, verification of expenses. As you mentioned, the fourth quarter tends to be higher. I look at some of the lines such as professional fees and they really do jump a lot in the fourth quarter. And I wonder if you are thinking of perhaps distributing the expenses differently over the year so that we get a more clearer picture of how they evolve.

[Carlos Gomez-Lopez, Analyst at HSBC]

Second, in terms of also expenses, could you give us an idea about how much you think you might have to invest in Chile for the Tempo operation in the coming years? Thank you.

[Alejandro Perez-Reyes, Chief Financial Officer at Credicorp]

Thank you for the question, Carlos. For the first one, we haven't changed any process as of now. So we are not planning on expensing things differently. And for the second one, we're going to keep spending the same amount of money for the next year in Tempo.

[Gianfranco Ferrari, CEO at Credicorp]

Maybe just to provide some additional color on Carlos. Tempo already got the final license of our full bank. The pending Separation. Last authorization is based on that tempo of compliance with all operational matters and connectivity matters, which we expect to be complied by the last quarter of this year.

[Carlos Gomez-Lopez, Analyst at HSBC]

Okay. No, that's my question. So once you are fully operational and you have the full license, do you need to make an extra investment to make it a full fledged plant to compete in the market?

[Gianfranco Ferrari, CEO at Credicorp]

The answer is yes. Actually, it has two answers. I don't have the exact figures. One is that we need to make another equity investment by regulation. And then we need to since 10 hasn't reached Regulate.

[Gianfranco Ferrari, CEO at Credicorp]

Regulate is going to need more funding from our side to ramp up operations. Sorry for not being specific enough. Maybe what is relevant is what I answered before. Overall, we expect this year that the new ventures should generate should be cash flow slightly cash flow negative, almost cash flow neutral overall. That's including everything.

[Carlos Gomez-Lopez, Analyst at HSBC]

Thank you.

[Operator]

Thank you. It appears there are no further questions at this time. So I will now turn the call back over to Mr. Gianfranco Ferrari, Chief Executive Officer for closing remarks.

[Gianfranco Ferrari, CEO at Credicorp]

Thank you. In 2024, we achieved record breaking results, reflecting our strategic strength and resilience amid the changing macroeconomic landscape. Our success highlights our diversified portfolio, digital innovation and strategic risk management. Building on this momentum, we will continue to benefit from Peru's recovery, which is fueling growth across our key business lines. These achievements highlight the effectiveness of our strategic initiatives in bolstering stability, improving efficiency and reinforcing our competitive advantages.

[Gianfranco Ferrari, CEO at Credicorp]

As a result, we are well positioned to navigate volatility and capitalize on opportunities to drive sustainable growth. We reaffirm our sustainable ROE target of 18% by 2026. This expectation is supported by a resilient NIM and an increasing risk adjusted NIM as we continue to shift our loan portfolio towards retail and accelerate digital transformation, targeting 10% of risk adjusted revenues from new business models by 2026. This will also lead to an improvement in efficiency as our disruptive initiatives mature. Looking ahead, we remain focused on three strategic pillars: attracting and retaining top talent, accelerating digital transformation and integrating sustainability into our core strategy.

[Gianfranco Ferrari, CEO at Credicorp]

By advancing these priorities, we will sharpen our competitive edge and drive long term value in an evolving global landscape. Our robust risk management framework is also central to our strategy. Our twenty fivetwenty seven risk transformation program will enhance capabilities across all subsidiaries through automation and advanced monitoring and structure implementation approach. Key initiatives include strengthening the risk function, scaling distinctive capabilities and embedding a stronger risk culture. These efforts are expected to lead to higher growth of the lending portfolio, while optimizing it, improve risk adjusted profitability and expand financial access for underserved Peruvians.

[Gianfranco Ferrari, CEO at Credicorp]

With a clear strategy, disciplined execution and a commitment to innovation, we are confident in our ability to drive sustainable growth and create long term value for all stakeholders. Thank you all.

[Operator]

Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect your lines and have a wonderful day.

Participants

Analysts

• Milagros Cigüeñas, Investor Relations at Credicorp
• Gianfranco Ferrari, CEO at Credicorp
• Alejandro Perez-Reyes, Chief Financial Officer at Credicorp
• Ernesto Gabilondo, Director - LatAm Financials Bank of America at Bank of America Merrill Lynch
• Renato Meloni, Senior Analyst at Autonomous Research
• Brian Flores, VP - Equity Research at Citi
• Tito Labarta, Analyst at Goldman Sachs
• Nicolas Riva, Analyst at Bank of America
• Yuri Fernandes, Executive Director at JP Morgan
• Sergey Dubin, Portfolio Manager at Harding Loevner
• Carlos Gomez-Lopez, Analyst at HSBC