CREDICORP THIRD QUARTER 2026 EARNINGS CONFERENCE CALL - CREDICORP LTD

Financial Performance:

• Achieved a 19.9% return on equity (ROE) for Q3 2026, with a 9-month ROE of 20.4%, driven by strong operating performance and diversified earnings.
• Total loans grew 14.8% year-over-year (YoY) and 5.1% quarter-over-quarter (QoQ), led by retail banking and SME segments.
• Net interest income (NII) increased 17.7% YoY, resulting in a Net Interest Margin (NIM) of 6.9%, with a risk-adjusted NIM of 5.7%.
• Non-performing loan (NPL) ratio declined to 3.9%, supported by improved origination quality and collection capabilities.
• Cost of risk (CoR) stood at 2.0% for the quarter; underlying CoR remained healthy at 1.6%, though higher due to El Niño-related provisions.
• Other core income grew 18.8% YoY, with fee income up 20.4% and gains on FX transactions rising 14.3%.
• Insurance underwriting results decreased due to a base effect from prior-year reserve releases.
• Efficiency ratio improved to 45.1% for the quarter and 45.4% for the first nine months, driven by revenue growth outpacing expense increases.
• Operating expenses rose 13.6% YoY in the first nine months, primarily due to investments in digital capabilities, IT infrastructure, and variable compensation.
• Low-cost deposits represented 62% of the funding base, maintaining a low funding cost of 2.2%.
• Coverage ratio increased to 120.9% (slide text notes 100.9% in one section, but management commentary emphasizes 120.9% in context of reserves), reflecting prudent risk management.

Guidance and Future Outlook:

• Maintained Peru GDP growth forecast for 2026 at ~3.5%, accounting for El Niño impacts.
• Loan growth guidance for 2026 remains at ~12%, supported by retail momentum.
• Full-year cost of risk is expected to stay within the 1.7%–2.1% range despite anticipated higher provisions in Q4 2026.
• 2026 full-year ROE guidance remains around 19.5%, with a reaffirmed medium-term ROE target of ~22%.
• Fee income growth is expected to be in the high-teens, driven by transactional activity and economic momentum.
• No extraordinary dividend is expected for 2026; capital will be deployed to support profitable growth.
• El Niño impact on GDP is estimated at 0.9% for 2026 and ~1.0% for 2027, with loan growth potentially slowing in 2027 due to the event.
• Management reaffirms confidence in long-term growth despite short-term weather-related headwinds.

Business Segments and Product Lines:

• BCP (Core Banking): Delivered 27.7% ROE; loans grew 15.0% YoY. Fee income rose 20.8%, driven by Yape and transactional activity. NPL ratio dropped to 3.7%.
• Yape: Reached 17 million monthly active users (MAU) with an average of 71 transactions per user/month. Risk-adjusted revenue grew to 9.8% of total Credit Corp revenue. Lending portfolio expanded to 2.3 billion soles (6M+ borrowers). Revenue per MAU reached 11.9 soles vs. 6.1 soles cost per MAU.
• MiBanco: Achieved 20% ROE; loans grew 18.7% YoY. NIM increased to 15.3%, and NPL ratio fell to 4.8%. Other income surged 40.1% YoY due to insurance premiums.
• Nibanco Colombia: Maintained strong momentum with 18.4% ROE, focusing on client growth and commercial productivity.
• Grupo Pacifico (Insurance): Reported 20.6% ROE. "Our Life" business grew, offset by lower results in disability/survivorship lines. P&T business saw lower net income due to vehicle and commercial lines.
• Investment Management: Net income dropped 9% YoY but revenues grew due to capital markets volatility and growth in AUMs for wealth and asset management.

Market and Competitive Landscape:

• Peru's economy shows strong momentum with private investment growing double-digits (est. 14%), driven by mining and infrastructure.
• Credit penetration in Peru remains below pre-COVID levels, indicating significant upside potential for market expansion.
• Regional inflation trends: Peru 5.3% (Oct), Colombia 6.3% (Sep, above target), Chile 4.5% (stable), Bolivia (IMF program approved).
• Yape leads in digital wallet penetration in Peru, though transaction growth is slowing due to market saturation; focus shifting to monetization paths (cross-border, lending).
• Competition in digital banking is increasing, but Credit Corp leverages its integrated ecosystem to deepen customer relationships and capture value.

Risks and Challenges:

• El Niño: Identified as a primary near-term risk; direct exposure estimated at 8% of total loans (approx. 200 billion soles).
• Provisioning: Added ~500 million soles in provisions by quarter-end (100m in Q2, 400m in Q3); net P&L impact was lower due to recoveries. Additional provisions expected in Q4 to stay within guidance.
• 2027 Outlook: Potential for reduced loan growth and credit quality deterioration in 2027 if El Niño effects persist.
• Macroeconomic Volatility: High copper prices support exports, but primary sectors face disruption; global commodity prices and geopolitical factors remain variables.
• Operational: Managing risk in vulnerable consumer and SME segments while maintaining growth.

Management Commentary and Tone:

• Tone was confident and proactive, emphasizing disciplined risk management and preparation for El Niño.
• Management expressed strong confidence in Peru's medium-term outlook and the company's ability to navigate weather-related disruptions.
• Emphasized "growth-based approach" to risk, balancing portfolio protection with targeted origination.
• CEO Gianfranco Ferrari highlighted the "strategic update" scheduled for November 17th to detail ecosystem capabilities.
• CFO Ignacio Belaunde stressed that current provisioning is forward-looking and sufficient to absorb volatility within guidance ranges.

Analyst Questions and Answers:

• El Niño Provisions: Confirmed ~500 million soles stock of provisions (200m net P&L impact in Q3). Additional Q4 provisions expected but total CoR to remain within 1.7%-2.1% guidance.
• 2023 vs. 2027: Management noted 2023 was a different cycle; 2027 impact is expected to be managed through better tools and risk mitigation, with bulk of provisions occurring in 2026.
• Growth Sustainability: Growth is expected to continue at double digits long-term, though 2027 may be a "bump in the road." Market share gains are less critical than expanding credit penetration in an underpenetrated market.
• Yape Metrics: Slowing transaction volume growth (0.5% QoQ) attributed to market saturation in Peru; future growth drivers include cross-border payments and lending monetization.
• TEMPO (Chile): Credit card processing transition completed for Chile; market share ~1% for cards, ~2% for deposits. Management changes expected next year to accelerate growth.
• Political Environment: No major executive powers approved yet, but Ministry of Finance is working on legislation to fast-track investment authorizations in mining and infrastructure.

Other Key Points:

• The Peruvian government announced a fiscal stimulus plan (~1.5% of GDP) to mitigate El Niño, including cash transfers and loan guarantees.
• Direct exposure to El Niño is considered a "concentrator" risk rather than a broad-based systemic threat.
• Yape's monetization is advancing with lending and payments, contributing nearly 10% to risk-adjusted revenue.
• Management reiterated that the 22% ROE target is sustainable long-term despite short-term weather-related headwinds.