Credicorp : Reports Fourth Quarter 2015 Earnings

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Lima, Peru, 08 de February, 2016 - Credicorp (NYSE:BAP) announced its unaudited results for the fourth quarter of 2015. These results are consolidated in Soles according to IFRS.

Results for the Fourth Quarter 2015

Credicorp reported net income of S/. 731.1 million in 4Q15, which led to an ROAE and ROAA of 18.7% and 1.9%, respectively. After excluding the effect of non-recurring net expenses for S/. 38.4 million, the result translates into net recurring income of S/. 769.6 million. This represents slight growth of +3.3% QoQ and +23% YoY and recurring ROAE and ROAA of 19.9% and 2.0%, respectively.

The main drivers of 4Q15 results were:

• An expansion of +2.8% QoQ and +13.1% YoY in period-end loan balances, which represented real growth of +0.5% QoQ and +7.4% YoY. Unlike the scenario in previous quarters, the QoQ increase in loans was led by Retail Banking.

• Growth of +5.8% QoQ and +15.4% YoY in net interest income (NII) due to higher income from interest on loans, which offset the increase in interest expenses. This year, NII posted significant expansion of 16.5%.

• The Net Interest Margin (NIM) was 5.55%. This represented an increase of +6 bps QoQ, which was attributable to significant growth in NII (the highest quarterly level this year) and a lower increase in average Interest Earnings Assets (IEAs), which was in turn due to a decrease in the number of BCRP instruments. The YoY evolution reveals a decrease of -11 bps due to: (i) more use of BCRP instruments, which require restricted deposits that "inflate" the IEAs; (ii) an increase in loan growth in lower margin segments; and (iii) the increase in the funding cost. The aforementioned attenuated the contraction in NIM in 2015, which fell only -8 bps, in line with expectations.

• The +13.1% increase QoQ and +14.9% YoY in net provisions, which was mainly generated by the Wholesale, Mortgage and Credit Card segments. This led the cost of risk to rise from 2.02% in 3Q15 and 2.19% in 4Q14 to 2.23% in 4Q15. In 2015 the cost of risk fell to 2.08% (vs. 2.15% in 2014), which was lower than expected.

• The increase of 3.5% QoQ in non-financial income due to good growth in fee income and, to a lesser extent, in gains on Foreign Exchange Transactions, which offset the loss on Sales of Securities. The YoY and accumulated evolution for the year show an increase of +9.5% and +8.7%, respectively, which were due primarily to gains on Foreign Exchange Transactions and to a lesser extent, to fee income.

• The insurance underwriting result increased +7.3% QoQ, which was primarily attributable to a decrease in the acquisition cost and higher net premiums for property and casualty insurance, which offset an increase in claims. In this context, the combined ratio fell to 86.4%, which is lower than the 92.2% registered in 3Q15 and the 100.2% reported in 4Q14.

• As expected, the efficiency ratio deteriorated QoQ (+140 bps) due to the seasonality associated with administrative expenses but in YoY terms, and in comparison to the accumulated level in 2014 in particular, this ratio fell more than expected: -180 bps and -200 bps, respectively.

As such, net recurring income in 2015 was situated at S/. 2,950.9 million, which represented a recurring ROAE and ROAA of 19.7% and 2.0%, respectively.

Table of Contents

Credicorp (NYSE: BAP): Fourth Quarter Results 2015 3

Executive Summary 3

Results 2015 vs 2014 6

Credicorp and subsidiaries 7

1. Interest-earning assets (IEA) 9

2. Evolution of IEA 9

3. Credicorp Loans 10

4. Loan evolution by business segment 11

5. Evolution of dollarization by segment 13

6. BCRP de-dollarization plan at BCP Stand-alone 13

7. Market share in loans 14

8. Funding Sources 15

9. Funding Structure 16

10. Funding Structure by currency and tenure - BCP Stand-alone 17

11. Deposits 18

12. Deposit dollarization 19

13. Market share in Deposits 20

14. Other funding sources 20

15. Loan/Deposit (L/D) 21

16. Funding Cost 22

17. Mutual Funds 23

18. Portfolio quality and Provisions for loan losses 23

19. Provisions for loan losses 24

20. Portfolio Quality 25

21. Delinquency ratios by business 27

22. Net Interest Income (NII) 32

23. Interest Income 32

24. Interest Expenses 33

25. Net Interest Margin (NIM) 33

26. Non-Financial Income 35

27. Insurance underwriting result 38

28. Net earned premiums 38

29. Net claims 39

30. Acquisition cost 39

31. Operating expenses and efficiency 40

32. Regulatory Capital 42

33. Regulatory Capital -BAP 42

34. Regulatory Capital -BCP Stand-alone based on Peru GAAP 43

35. Distribution channels 45

36. Economic outlook 47

37. Appendix 52

38. BCP Consolidated 52

39. Mibanco 55

40. BCP Bolivia 56

41. Credicorp Capital 57

42. Atlantic Security Bank 58

43. Grupo Pacifico 60

44. Prima AFP 62

45. Credicorp 63

46. Table of calculations 65

Credicorp (NYSE: BAP): Fourth Quarter Results 2015




Executive Summary




Credicorp Ltd. S/. 000	4Q14	Quarter 3Q15	4Q15	Change QoQ YoY		Year 2014 2015		Change 2015 / 2014
Net interest income	1,711,398	1,866,893	1,975,440	5.8%	15.4%	6,409,805	7,464,895	16.5%
Provision for loan losses, net of recoveries	(437,258)	(444,425)	(502,574)	13.1%	14.9%	(1,715,809)	(1,880,898)	9.6%
Net interest income after provisions	1,274,140	1,422,468	1,472,866	3.5%	15.6%	4,693,996	5,583,997	19.0%
Non-financial income	865,920	916,081	948,554	3.5%	9.5%	3,505,209	3,811,793	8.7%
Insurance services underwriting result	103,992	125,245	134,392	7.3%	29.2%	422,898	476,235	12.6%
Medical services gross margin	23,467	-	-	N/A	-100.0%	98,232	-	-100.0%
Operating expenses	(1,524,644)	(1,337,802)	(1,558,143)	16.5%	2.2%	(5,331,188)	(5,557,993)	4.3%
Operating income	742,875	1,125,992	997,669	-11.4%	34.3%	3,389,147	4,314,032	27.3%
Translation results	(1,751)	2,940	32,733	N/A	N/A	430	46,563	N/A
Income taxes	(257,220)	(300,989)	(297,398)	-1.2%	15.6%	(968,333)	(1,197,207)	23.6%
Net income	483,903	827,943	733,004	-11.5%	51.5%	2,421,245	3,163,388	30.7%
Non-controlling interest	(11,703)	20,798	1,872	-91.0%	-116.0%	33,394	71,082	112.9%
Net income attributed to Credicorp	495,606	807,145	731,132	-9.4%	47.5%	2,387,851	3,092,306	29.5%
Non-recurring income (expense)(1)	(130,175)	61,903	(38,434)	-162.1%	-70.5%	(60,085)	141,359	-335.3%
Recurring net income	625,781	745,242	769,566	3.3%	23.0%	2,447,936	2,950,947	20.5%
Net income/share (S/.)	6.21	10.12	9.17	-9.4%	47.5%	29.94	38.77	29.5%
Total loans	79,889,948	87,842,690	90,328,499	2.8%	13.1%	79,889,948	90,328,499	13.1%
Deposits and obligations	77,160,494	86,426,707	90,593,302	4.8%	17.4%	77,160,494	90,593,302	17.4%
Net shareholders' equity	13,979,455	15,153,252	16,128,015	6.4%	15.4%	13,979,455	16,128,015	15.4%
Profitability	5.66%	5.49%	5.55%	6 bps	-11 bps	5.68%	5.60%	-8 bps
Net interest margin
Funding cost	1.91%	1.97%	2.01%	4 bps	10 bps	1.94%	1.97%	3 bps
ROAE	14.5%	21.6%	18.7%	-290 bps	420 bps	18.5%	20.5%	200 bps
Recurring ROAE (2)	18.3%	20.1%	19.9%	-20 bps	160 bps	18.6%	19.7%	110 bps
ROAA	1.5%	2.2%	1.9%	-30 bps	40 bps	1.9%	2.1%	20 bps
Recurring ROAA (3)	1.9%	2.0%	2.0%	- 10 bps		2.0%	2.0%	-
Loan portfolio quality	1.78%	1.88%	1.80%	-8 bps	2 bps	1.78%	1.80%	2 bps
PDL over 90 days
Internal overdue ratio (4)	2.51%	2.57%	2.56%	-1 bps	5 bps	2.51%	2.56%	5 bps
NPL ratio (5)	3.33%	3.40%	3.41%	1 bps	8 bps	3.33%	3.41%	8 bps
Cost of risk (6)	2.19%	2.02%	2.23%	21 bps	4 bps	2.15%	2.08%	-7 bps
Coverage of internal overdue loans	164.7%	162.8%	166.2%	340 bps	150 bps	164.7%	166.2%	150 bps
Coverage of NPLs	124.5%	123.2%	124.7%	150 bps	20 bps	124.5%	124.7%	20 bps
Operating efficiency	46.2%	43.0%	44.4%	140 bps	-180 bps	45.3%	43.3%	-200 bps
Efficiency ratio (7)
Operating expenses / Total assets	4.1%	3.5%	4.0%	50 bps	-10 bps	4.0%	3.7%	-30 bps
Insurance ratios	100.2%	92.2%	86.4%	-580 bps	-1380 bps	98.3%	90.5%	-780 bps
Combined ratio of P&C (8)(9)
Loss ratio (9)	65.1%	60.4%	59.7%	-70 bps	-540 bps	63.3%	58.9%	-440 bps
Underwriting result / net earned premiums (9)	14.5%	12.9%	20.2%	730 bps	570 bps	14.5%	15.8%	130 bps
Employees	32,313	33,423	33,658	0.7%	4.2%	32,313	33,658	4.2%

1. Includes non-recurring income / (expense) and translation results (net of taxes).

2. Recurring ROAE: Net recurring income is used for calculations. In the equity side, adjustments are made to exclude non-recurring income (expense).

3. Recurring ROAA: Net recurring income is used for calculations.

4. Internal overdue loans ratio = includes overdue loans and loans under legal collection. From this reporting period and for future reporting periods, we refer to loans that are considered past due under our internal guidelines as "internal overdue loans". In previous reporting periods, such loans were referred to as "past due".

5. NPLs: Non-performing loans = Internal overdue loans + Refinanced loans. NPL ratio: NPLs / Total loans.

6. Annualized provision for loan losses / Total loans.

7. The formula has been adjusted, for further details see appendix 11.9. New formula of efficiency ratio = [ Total expenses + Acquisition cost - Other expenses] / [Net interest income + Fee income + Gain on foreign Exchange transactions + Net gains from subsidiaries + Net earned premiums + Gross margin from medical services].

8. Combined ratio= (Net claims + General expenses + Fees + Underwriting expenses) / Net earned premiums. Do not include insurance Life business.

9. Considers Grupo Pacifico's figures before eliminations for consolidation to Credicorp.

The following chart shows Credicorp's non-recurring income/expense for 2014 and 2015:




2014	4Q15	2015
Net income Credicorp				2,387,851	731,132	3,092,306
Non-recurring items (S/. 000)	Subsidiaries	Explanation	Affected line in the P&L
	Mibanco	- Amortization - Edyficar's brand	Operating expenses - Administrative expenses	-14,241	-	-
		- Non-recurring expenses Mibanco&Edyficar	Operating expenses - Others	-45,814	-	-
	Grupo Pacífico	- JV with Banmédica	Non-financial income - Net gain on subsidiaries	-	-7,609	99,391
	Atlantic Security Bank	- Compensation received from reinsurers for incurred losses in 2008	Non-financial income - Other income	40,822	-	-
		- Sale of a fund position	Non-financial income - Net gain on sales of securities	-	-	58,963
	Prima AFP	- Real estate sale	Non-financial income - Net gain on sales of securities	3,958 2,057	- -	- -
		- Reversal of tax provisions	Tax
	Credicorp Capital	- Puts&Calls	Operating expenses - Others	-51,800	-
		- Impairment and others		-69,817	-61,538	-61,538
	Others	Sale of securities - Alicorp Sale of securities - Bonds	Non-financial income - Net gain on sales of securities	59,835 15,030	- -	- -
		Shutdown of Tarjeta Naranja Deferred Tax Asset adjustment	Operating expenses Others	-7,573 -23,882	- -	- -
		- Tax adjustment	Tax	2,952	-	-
		- Others, mainly a non-recurring income from Edyficar	Other income / expense	27,959	2,491	2,491
	Translation result(1)			430	28,223	42,053
Total non-recurring income / expense (2)				-60,085	-38,434	141,359
Recurring net income Credicorp				2,447,936	769,566	2,950,947

1. Only translation result in 4Q15 is net of taxes.

2. Figures net of taxes.




Credicorp reported net income of S/. 731.1 million, which led to an ROAE and ROAA of 18.7% and 1.9%, respectively in 4Q15. These solid results allowed the organization to post positive figures for the third consecutive quarter, which is particularly noteworthy given an adverse macroeconomic context and market volatility. It is important to note that recurring net income totaled S/. 769.6 million (+3.3% QoQ and +23% YoY), which represents a good level of profitability with recurring ROAE and ROAA of 19.9% and 2.0%, respectively.




NII at Credicorp rose +5.8% QoQ and +15.4% YoY, which was the highest quarterly growth posted this year. This expansion was primarily associated with an increase interest income, which was driven by higher interest on loans in 4Q15. Growth in interest income offset the increase in interest expenses, which reported a decrease in the pace of expansion due to a drop in the level of BCRP instruments.




The aforementioned led to an increase of +6 bps QoQ in Credicorp's NIM (5.49% in 3Q15 and 5.55% in 4Q15). This was attributable to significant expansion in NII and to a smaller increase in average IEA, which was due to a decrease in the level of BCRP instruments. The YoY evolution reveals a decline of -11 bps due to: (i) more use of BCRP instruments, which require restricted deposits that "inflate" the IEA; (ii) higher expansion in loans in segments with lower margins; and (iii) an increase in the cost of funding.




Total loans increased +2.8% QoQ and +13.1% YoY in period-end balances and +4.8% QoQ and +16.8% YoY in average daily balances. Unlike the scenario in previous quarters, loan expansion was led by Retail Banking and to a lesser extent by Wholesale Banking. In real terms, loans rose +0.5% QoQ in terms of period-end balances and 3.1% QoQ when measured in average daily balances.