Credicorp : 2Q23 Earnings Release

2Q/2023

Milagros Cigüeñas

Roxana Mossi

Fernando Castillo, CFA

Andrea Sertzen, FRM

Fernando Salgado

Jose Bartra

Juan Carlos Benites

Marco Perez

[e-mail]

Table of Contents

Operating and Financial Highlights						03
Senior Management Quotes								05
Second Quarter 2023 Earnings Conference Call						06
Summary of Financial Performance and Outlook				07
Financial Overview										12
Credicorp's Strategy Update						13
Analysis of 2Q23 Consolidated Results
01	Loans and Portfolio Quality	16
02	Deposits										22
03	Interest Earning Assets and Funding			25
04	Net Interest Income			26
05	Provisions							29
06	Other Income						31
07	Insurance Underwriting Results		34
08	Operating Expenses			37
09	Operating Efficiency			39
10	Regulatory Capital				40
11	Economic Outlook			42
12	Appendix			46

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Operating and Financial Highlights

Senior Management Quotes

Credicorp Ltd. Reports Second Quarter 2023 Financial and Operating Results

ROE of 18.6% Driven by Strong Results in Universal Banking and Insurance

together with a Moderate Recovery in Microfinance

Efficiency Ratio Improved 310 bps to 44.6%

Cost of Risk Increased 25 bps Sequentially to 2.3% Reflecting Challenging Macro Dynamics in 1H23

Lima, Peru - August 10, 2023 - Credicorp Ltd. ("Credicorp" or "the Company") (NYSE: BAP | BVL: BAP), the leading

financial services holding company in Peru with a presence in Chile, Colombia, Bolivia and Panama today reported its unaudited results for the quarter ended June 30, 2023. Financial results are expressed in Soles and are presented in accordance with International Financial Reporting Standards (IFRS). Effective 1Q23, the Company reports under IFRS 17 accounting standards for insurance contracts. While the impact on consolidated net income is not material, the reclassification of line items in the P&L has impacted the efficiency ratio. To facilitate comparability, figures for 2Q22 and 4Q22 have been restated to reflect IFRS 17.

2Q23 OPERATING AND FINANCIAL HIGHLIGHTS

• Net Income attributable to Credicorp increased 22.6% YoY to S/1,401 million, supported by Universal Banking and strong results in the Insurance business. This resulted in ROE of 18.6% compared to 18.7% in 1Q23 and 17.3% in 2Q22.
• Structural Loans measured in average daily balances declined 0.6% QoQ, principally due to Wholesale Banking, but increased 5.5% YoY, driven by growth in Retail Banking at BCP and to a lesser extent by Mibanco.
• Total Deposits at quarter-end declined 3.5% QoQ and 2.7% YoY, after lower liquidity and continued migration to Time Deposits in a high-interest rate environment led to a system-wide drop in Demand and Savings deposits. Nonetheless, Credicorp maintains its undisputable leadership position in low-costdeposits with a 40.6% market share, which accounted for 51.3% of total funding.
• The Structural NPL ratio increased 23 bps QoQ to 5.3%, after social unrest and climatic events in 1Q23, coupled with a contraction in internal demand and high inflation and interest rates, impacted payment performance. At Mibanco, loans reprogrammed in the first quarter fell delinquent. At BCP, payment behavior in SME-Pyme deteriorated, particularly in lower-ticket segments, while in Credit Cards and Consumers Loans, the debt service capacity of vulnerable subsegments fell due to over-indebtedness. These dynamics were partially offset by a sale of a delinquent portfolio in the energy sector in Wholesale banking.
• Structural Provisions increased 10.5% QoQ and 124.3% YoY. Provisions in Consumer Loans and Credit Cards at BCP and at Mibanco remained at high levels after a recessive, high-inflation environment in the first semester affected client payment capacity. The Structural Cost of Risk increased 127bps sequentially to 2.3% against a particularly low base in 2Q22, while Structural NPL Coverage ratio dropped 2.3 pps to 107.7%. Credicorp has fine-tuned client segmentation by risk profile and gradually implemented stricter origination guidelines for Consumer Loans, Credit Cards, SME-Pyme at BCP and Mibanco.
• Core Income increased 2.7% QoQ and 14.3% YoY, reflecting structural loan growth and a high-interest rate environment, both of which drove an uptick in Net Interest Income (NII) of 2.3% QoQ and 21.5% YoY. In turn, Other Core Income increased 3.6% QoQ but fell 1.6% YoY. In this context, growth in the yield of IEA outpaced the expansion in the funding cost, which led the Net Interest Margin (NIM) to stand at 6.0%, up 18 bps QoQ and 110 bps YoY.
• Insurance Underwriting Results remained unusually high, up 53% YoY driven by higher profitability in the Life Business and stable P&C performance.

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Operating and Financial Highlights

Senior Management Quotes

• The Efficiency Ratio was seasonally higher at 44.6% in 2Q23 compared to 44.3% in 1Q23 but improved from 47.7% in 2Q22. For 1H23, the efficiency ratio improved 310 bps YoY to 44.4% as core income growth at BCP more than offset higher expenses at BCP and in disruptive initiatives at Credicorp.
• The CET1 Ratio for BCP at quarter-end was 12.8%, up 123 bps YoY and 87 bps QoQ. CET1 at Mibanco increased 157 bps YoY and 21 bps QoQ to 16.6%.
• At BCP stand-alone,30-day local currency LCR currency stood at 198.7% under regulatory standards and 118.4% based on more stringent internal standards, while USD 30-day LCR stood at 179.8% and 115.1% under regulatory and more stringent internal standards, respectively.
• Yape continues to advance towards monetization as it pursues its goal of driving financial inclusion. Monthly active users (MAU) reached 9.0 million at quarter-end with monthly revenue per MAU up 32% QoQ to s/2.5 while the cash-cost per MAU declined to S/4.4.Yape stands on track to reach cashflow breakeven in 2024.
• On June 9, 2023, the Company paid a cash dividend of S/25.00 per share equivalent to a total of S/ 2,359,557,925. This translates to a 50.8% dividend payout ratio.

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Senior Management Quotes

SENIOR MANAGEMENT QUOTES

Senior Management Quotes

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The first half of the year was tougher than expected due to social and climate events which led GDP to stagnate in 1H23. Despite this, Credicorp delivered favorable results for the quarter with Net Income expanding 22.6% YoY and an ROE of 18.6%, driven by strong results at BCP; extraordinary performance at Pacifico Seguros; and moderate recovery at Mibanco. We actively managed risk on the Retail side and Wholesale demand slowed in a less favorable economic climate, which pressured loan volumes downward. Our strong balance sheet has sustained our resilience as we navigate a weak macro backdrop and continue to execute our value creation strategy. This strategy includes investing in disruptive initiatives to expand our share of the retail business and bolster Non-interest Income as we decouple our performance from macro conditions in the midterm. Alongside these efforts, we will continue to invest in transformative initiatives to enhance our efficiency. With more than 9 million active users, Yape continues to show promising results. The app has reinforced our commitment to advancing financial inclusion and is on track to reach break-even at some point in 2024. Finally, we are closely monitoring the impacts of the "El Niño Costero" phenomenon, which are currently expected to be weak to moderate in magnitude. On this front, we are proactively implementing initiatives to safeguard our business and minimize adverse effects on lives and businesses in Peru.

Gianfranco Ferrari, CEO

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We delivered positive results overall this quarter while navigating a challenging macroeconomic environment. Core income increased 15% YoY supported by NII, which benefited from disciplined pass-throughs to leverage a high-interest rate environment and growth in average daily loan balances in Retail Banking at BCP and Mibanco. Although low-cost deposit volumes at Credicorp fell this quarter, following a system-wide trend, we maintain our undisputable leadership position with a 40.6% market share, which currently accounts for 65.1% of our total deposit base. In this context, the Net Interest Margin rose 110 bps year-over-year to 6.02%. In 2Q23, the Cost of Risk rose after client payment capacity fell due to adverse macroeconomic conditions, which impacted mainly the most vulnerable segments in Consumer Loans and Credit Cards, lower-ticket segments in SME Pyme and clients at Mibanco. It is important to note that we are closely monitoring asset quality metrics; have enhanced our client segmentation by risk profile; and have gradually implemented stricter origination guidelines for Individuals, SME-Pyme and Mibanco. Nonetheless, the impact of recent measures to manage asset quality metrics will take some time to fully materialize. Finally, Credicorp's investment in disruptive initiatives has risen to ensure sustained long-term market leadership. Notwithstanding, our efficiency ratio improved 310 bps in 1H23 to stand at 44.4%, which reflects strong operating leverage at BCP and Pacifico.

César Ríos, CFO

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