Transcript PERU: Economy and the Financial System

CREDICORP
Jorge Ramirez-del-Villar
Head of Planning & Finance
Banco de Credito del Peru
CONTENTS
• PERUVIAN ECONOMY AND BANKING SYSTEM
• CREDICORP
– BCP
– Other Major Subsidiaries
– Overview 3Q 2003
2
PERUVIAN ECONOMY AND
BANKING SYSTEM
3
PERU’S HIGHLIGHTS
Colombia
• Regime: Democracy with three
independent Powers: Executive,
Congress and Judiciary
Ecuador
Brasil
Bolivia
• Area : 496,234 sq. miles
Chile
• Population: 27 million (Urban 72.3%,
Rural 27.7%)
• GDP per capita: US$ 2,100
• Unemployed or sub-employed : 56.5%
• Major cities : Lima (capital), Arequipa
and Trujillo
• Religion: Catholic
80%
Households’
Indicators
70%
60%
50%
40%
30%
20%
10%
0%
Electr
Water
TV's
Phones
Cars
Cable TV
PC's
4
PERUVIAN ECONOMY vs. OTHER LATIN AMERICAN
ECONOMIES
2003(e)
Mexico
GDP (US$ Bn)
590.5
GDP Growth (%)
1.5
Inflation (%)
3.5
Devaluation (%)
22.0
Deposits/GDP (%)
16.6
Fiscal Surplus *
(0.5)
Current Account *
(2.1)
Int. Reserves/Mthly Imports
3.1
Country Risk (bps)**
187
Brazil Colombia
497.5
0.7
9.6
29.1
32.5
(5.0)
0.0
9.2
568
77.1
2.8
6.3
29.1
24.4
(5.0)
(2.0)
7.9
448
Chile
Peru
68.3
3.2
3.6
(2.7)
62.2
(0.8)
(0.3)
8.5
143
61.1
3.8
1.7
(0.7)
22.7
(2.1)
(1.6)
11.2
290
* As a % of GDP
** JP Morgan Index EMBI : Spread of Government Bonds over US Treasury Bonds as of Nov. 2003
Source : The Economist Intelligence Unit, BCP (Peru)
5
PERUVIAN BANKING SYSTEM vs. OTHER LATIN
AMERICAN BANKING SYSTEMS
2002
US$ Bn
Assets
Loans
Deposits
Equity
Past Due Loan/ Loans
Reserves/Past Due Loans
Cost/Income
ROE
Source: Fitch Ratings , IMF
Brazil
Mexico
320.5
90.3
128.8
25.3
12.5%
105.4%
53.9%
8.8%
163.2
90.0
121.8
16.3
4.8%
136.2%
64.5%
12.8%
Chile Colombia Peru
68.2
42.3
27.3
5.7
2.0%
135.2%
51.5%
14.8%
26.3
16.5
19.3
2.6
10.2%
77.8%
84.7%
11.3%
17.6
10.6
13.2
1.8
8.0%
133.0%
60.5%
8.2%
6
MOST LIKELY SCENARIO FOR THE ECONOMY AND
THE PERUVIAN BANKING SYSTEM FOR 2003-2004
•
•
•
•
•
•
•
GDP growth of 4.0% for years 2003-2004. Inflation and devaluation
under 2.0%. Marginal improvement in fiscal position
Growth of loans and deposits in line with the economy
Slight increase of private investment
Gradual reduction of spreads due to increased competition
(Banks and Capital Markets), as well as excess of liquidity
Continued improvement of loan quality ratios
Lower growth of non-financial revenues due to banking
transaction taxes
Reduction of bank’s operating costs
7
8
CREDICORP’S ORGANIZATION
Ic
INV.CREDITO
FOCUS
LOCATION
% OWNED
Banking
Peru/Bolivia
96%
Banking
Cayman
100%
Banking
Colombia
100%
Insurance
Peru
76%
BCP accounts for 85% of Credicorp’s assets
Investments
Peru
100%
9
CREDICORP HIGHLIGHTS
• One of the top 20 financial institutions
in Latin America
• Established in Bermuda in 1995
• Presence in Peru, Bolivia, Colombia,
USA (Miami) and Cayman
• Total Assets US$ 8,224 Mn, Net Equity
US$ 892 Mn
• 353 offices, 489 ATM’s
• 9,321 employees
• Listed in the NYSE
10
CREDICORP vs. LARGEST BANKS OF OTHER
LATIN AMERICAN COUNTRIES
Sept. 2003
US$ Bn
Assets
Loans
Deposits
Net Equity
Net Income (Mn)
RATIOS
Past Due/ Loans
Reserves/Past Due Loans
Cost/Income
ROE
Source: Bank’s 3Q Reports
BBVA
México
Bradesco Santander Bancolombia Credicorp
Chile
Brazil
43.1
22.7
29.3
5.9
499
56.3
24.3
20.0
4.4
545
16.9
11.6
8.1
1.4
212
4.8
2.6
3.3
0.5
112
8.2
4.5
6.3
0.9
57
5.6%
119.7%
53.0%
13.1%
7.9%
142.1%
55.9%
16.7%
2.4%
94.3%
45.1%
24.3%
1.5%
324.6%
56.0%
31.0%
7.6%
113.7%
49.2%
9.0%
11
CREDICORP vs. LARGEST BANKS OF OTHER
LATIN AMERICAN COUNTRIES (Cont.)
Sept. 2003
BBVA
México
Bradesco Santander
Brazil
Chile
Bancolombia Credicorp
Branches
ATM’s
Employees
1,643
3,875
28,613
3,033
21,585
77,154
346
1,098
7,684
364
760
6,364
353
489
9,321
Market Share
- Loans
- Deposits
25.6%
27.7%
19.5%
15.2%
25.9%
25.5%
13.2%
11.5%
32.9%*
35.4%*
* BCP’s Market Share
Source: Bank’s 3Q Reports
12
CREDICORP OVERVIEW
Summary of Results (USMn)
3Q02
3Q03
9M02
9M03
Net Interest Income
77.2
90.0
247.5
267.9
Provisions
Other Income
32.2
89.9
23.8
105.3
87.9
275.2
77.8
327.4
Claims on Insurance Activities
Operating Expenses
25.5
94.9
24.7
102.7
73.4
295.9
76.3
324.2
BSCH Peru Merger Costs
Translation Result
Earnings before Taxes and Min. Int.
-0.9
13.6
0.4
44.5
-2.9
62.6
17.5
-3.7
95.8
Income Tax
-8.8
-13.3
-26.6
-29.8
Minority Interest
-1.8
-5.2
-7.2
-9.2
3.0
26.0
28.8
56.8
0.04
0.33
0.36
0.71
NET INCOME
EPS*
* Based on 79.8 million net outstanding shares in all periods. The total number of shares is 94.4 million,
14.6 million are held by affiliates as treasury shares
13
CREDICORP OVERVIEW
Earnings Contribution (USMn)
Banco de Credito
3Q02 3Q03
9M02
9M03
10.0
28.7
37.3
63.8
Pacifico
2.7
0.1
6.3
6.9
Atlantic
0.1
2.5
1.5
4.7
Tequendama*
-3.1
-0.2
-3.5
-0.4
Credicorp & Others**
-6.6
-5.1
-12.7
-18.2
0.7
-0.3
-0.4
-4.2
-6.0
-0.5
-2.0
-
-6.1
-4.0
-5.3
-
-
-2.0
-
-6.5
• Goodwill amortization
-0.8
-0.8
-2.2
-2.2
TOTAL INCOME
3.1
26.0
28.8
56.8
7,399
798
12.2
8,224
892
11.1
7,399
798
12.2
8,224
892
11.1
• Financial & administrative expenses
• Tequendama’s loan loss provissions &
translation losses
• Venezuela’s operation translation loss
• Generic provision
Assets
Net Equity
BIS Ratio (%)
* Excludes transfers to Credicorp and others
**Includes income from ICSA
14
15
BCP HIGHLIGHTS
• Largest bank in Peru
• 114 years old
•Total Assets US$ 6.7 Bn, Net Equity US$ 611 Mn
• Market share of 35.4% in deposits and 32.9% in loans
• More than 1.2 million of customers (40% of the market)
• 213 offices, 427 ATM’s
• 5,583 employees
Considered in year 2002 by LatinFinance as the
best bank in Latin America
16
BCP’S BUSINESS SCOPE
Wholesale Banking: Commercial Banking, Investment Banking and
transactional products offered to corporate and middle market
companies.
Retail Banking: Wide range of products and services for individuals,
small businesses and non-profit institutions.
Capital Markets: Brokerage, mutual funds, foreign exchange trading,
custody, asset management, securitization and trusts.
Distribution Network: 213 offices, 427 ATMs, 11,645 POS, telephone
banking and home banking for over 1.2 million clients.
17
BCP’S DEPOSIT & LOAN STRUCTURE
Deposits
US$ 5,694 Mn
Middle Mkt
25%
Demand
24%
Savings
27%
Loans
US$ 4,102 Mn
Retail
31%
Time
49%
Corporate
44%
PYME
10%
Mortgages
14%
Consumer
5%
Credit Cards
4%
18
BCP OVERVIEW
Key Figures (US$Mn)
3Q02
3Q03
9M02
9M03
Deposits
Mkt Share (%)
Total Loans
Mkt Share (%)
Net Interest Income
5,329
32.9
3,699
32.9
76.0
5,694
36.4
4,102
33.8
84.1
5,329
32.9
3,699
32.9
236.8
5,694
36.4
4,102
33.8
247.5
Provisions
31.9
22.6
87.2
75.0
Non-Interest Income
56.6
64.5
164.2
196.8
Operating Expenses
84.5
84.1
253.8
259.2
-
-
-
17.4
7.9
0.2
14.9
-5.9
6.3
11.6
21.1
23.8
17.8
30.5
53.8
63.0
OPEX / Income (%)
52.9
48.6
55.2
51.9
CONTRIBUTION
10.0
28.7
37.3
63.8
Merger Costs
Gain (Loss) on Inflation Adjustment
Income tax
NET INCOME
19
BCP’S RESULTS
• Positive outlook for the bank during year 2003:
- Lower provisioning requirement
- Significant growth of non interest income. 20% more than in year 2002
- Marginal increase of operating expenses
• Merger with BSCH Peru concluded successfully. Results are better than
expected.
• Strong recovery of written-off loans in BCP and BSCH-Peru.
• Market share consolidated with a slight reduction in loans after BSCH-Peru
acquisition.
• NIM continued falling due to excess liquidity in the market, increasing
competition in middle market and retail segments, and growth in domestic
capital market.
• Focus on the informal sector of the perimeters of Lima. Large population
density, very active in small businesses.
• Acquisition of 45% of Financiera Solucion. Ownership increased to 100%.
Merge will be completed by February 2004.
20
BCP’S LOAN QUALITY
PDLs / LOANS
10
9
8
7
6
5
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
IQ03
2Q03
3Q03
1Q03
2Q03
3Q03
RESERVES / PDLs
140
130
120
110
100
90
1Q01
2Q01
3Q01
4Q01
1Q02
Consolidated
2Q02
3Q02
4Q02
w/o Bolivia
21
CREDICORP’S OTHER MAJOR
SUBSIDIARIES
22
CREDICORP’S OTHER MAJOR SUBSIDIARIES
Sept. 2003
23
CREDICORP’S OTHER MAJOR SUBSIDIARIES
Sept. 2003
Country
% Ow nership
Cayman
100%
Mkt Share Deposits
NA
Mkt Share Loans
NA
Ranking
NA
Assets (US$ Mn)
747
Shareholders' Equity (US$ Mn)
129
Funds under adm. (US$ Mn)
598
N° of Employees
53
N° of Branches
1
23
CREDICORP’S OTHER MAJOR SUBSIDIARIES
Sept. 2003
Country
Cayman
Bolivia
100%
100%
Mkt Share Deposits
NA
12.8%
Mkt Share Loans
NA
12.3%
Ranking
NA
4
Assets (US$ Mn)
747
480
Shareholders' Equity (US$ Mn)
129
55
Funds under adm. (US$ Mn)
598
28
N° of Employees
53
713
N° of Branches
1
47
% Ow nership
23
CREDICORP’S OTHER MAJOR SUBSIDIARIES
Sept. 2003
Country
Cayman
Bolivia
Colombia
100%
100%
100%
Mkt Share Deposits
NA
12.8%
0.8%
Mkt Share Loans
NA
12.3%
1.5%
Ranking
NA
4
22
Assets (US$ Mn)
747
480
273
Shareholders' Equity (US$ Mn)
129
55
36
Funds under adm. (US$ Mn)
598
28
25
N° of Employees
53
713
319
N° of Branches
1
47
15
% Ow nership
23
CREDICORP’S OTHER MAJOR SUBSIDIARIES
Sept. 2003
Country
% Ow nership
Mkt Share Deposits
Mkt Share Loans
Ranking
Assets (US$ Mn)
Shareholders' Equity (US$ Mn)
Funds under adm. (US$ Mn)
N° of Employees
N° of Branches
Cayman
100%
NA
NA
NA
747
129
598
53
1
Bolivia
100%
12.8%
12.3%
4
480
55
28
713
47
Colombia
100%
0.8%
1.5%
22
273
36
25
319
15
Perú
76%*
30.2%**
NA
1
511
109
NA
1,074
37
* AIG 25%
** Total Premiums
23
ATLANTIC SECURITY BANK
Key Figures (US$Mn)
9M02
Assets
657
747
Equity
102
129
- Share Capital
40.7
40.7
- Unrealized gain/losses on investments
-15.1
8.9
- Dividends
-25.0
-5.0
- Retained earnings
96.3
77.1
5.6
7.8
Net Loans
154
151
Investments
299
423
Deposits
537
585
Managed Funds
510
598
NIM (%)
3.4
2.4
0
0
- Net income
PDLs/ Loans (%)
9M03
OPEX / Income (%)
37.8
20.7
CONTRIBUTION TO CREDICORP
1.5
4.7
24
Key Figures (US$Mn)
9M02
9M03
Assets
468
480
Equity
57
55
330
387
12.5
12.8
322
320
Mkt Share (%)
11.9
12.3
PDLs / Loans (%)
25.3
21.7
Reserves / PDLs (%)
47.9
77.0
Deposits
Mkt Share (%)
Loans
25
Key Figures (US$Mn)
9M02
9M03
Assets
293
273
Equity
37
36
159
154
0.9
0.8
210
230
Mkt Share (%)
1.5
1.5
PDLs / Loans (%)
4.7
1.2
Reserves / PDLs (%)
73.8
191.0
CONTRIBUTION TO CREDICORP
-0.2
-0.4
Deposits
Mkt Share (%)
Loans
26
Key Figures (US$MN)
9M02
9M03
Equity
102
109
Premiums
192
225
- General Insurance
121
129
- Health Insurance
19
19
- Life Insurance
52
77
Mkt Share (%)
32.7
30.2
Net Loss Ratio (%)
58.4
47.4
Combined Ratio* (%)
93.7
93.0
6.3
6.9
CONTRIBUTION TO CREDICORP
*Sum
of net claims, general expenses and commissions / net premiums
27
CREDICORP OVERVIEW 3Q03



Good results for Credicorp during the third quarter
- Significant increase in BCP´s revenues with control on costs
- Positive trends in most subsidiaries
BCB
- Improved results during the quarter with lower provisions
- Loan portfolio clean-up concluded
- Focus on restructure operations following BCP´s business model
ASB
- Improved results during the present quarter with US$9 MM in nonrealized gains in the investment portfolio
- Reduction of risk profile of investment portfolio
- Growth in administered funds due to increased focus on wealth
management business

Tequendama
- Search for alternatives to provide viability for its business
28
CREDICORP OVERVIEW 3Q03 (Cont.)


PPS
- Results benefited from lower claims and growth in premiums
- Lower margins in property & casualty business due to increased
competition and higher reinsurance costs
- Attractive growth opportunities in life insurance with short-term
increase on reserves
BCP
- Continued pressure on margins due to increased corporate funding
in local capital market and higher competition in middle market and
retail segments
- Positive outlook based on:
-- Lower provisioning requirements
-- Growth in non-financial income
-- Increased revenues from purchase of BSCH-Peru assets and full
ownership of Financiera Solucion
-- Control on expenses with increased business volumes
29
Safe Harbor for forward-looking statements
This material includes “forward-looking statements” within the meaning of Section 21E of the Securities
Exchange Act of 1934. All statement other than statements of historical information provided herein are
forward-looking and may contain information about financial results, economic conditions, trends and known
uncertainties.
The Company cautions readers that actual results could differ materially from those expected by the
Company, depending on the outcome of certain factors, including, without limitation: (1) adverse changes in
the Peruvian economy with respect to the rates of inflation, economic growth, currency devaluation, and
other factors, (2) adverse changes in the Peruvian political situation, including, without limitation, the reversal
of market-oriented reforms and economic recovery measures, or the failure of such measures and reforms to
achieve their goals, and (3) adverse changes in the markets in which the Company operates, including
increased competition, decreased demand for financial services, and other factors. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
The Company undertakes no obligation to release publicly the result of any revisions to these forward-looking
statements which may be made to reflect events or circumstances after the date hereof, including, without
limitation, changes in the Company’s business strategy or planned capital expenditures, or to reflect the
occurrence of unanticipated events.
30
CREDICORP
Jorge Ramirez-del-Villar
Head of Planning & Finance
Banco de Credito del Peru