Transcript PERU: Economy and the Financial System

UBS Roundtable Conference
October 27, 2003
Walter Bayly
Head of Wholesale Banking
Banco de Credito del Perú
CONTENTS
• PERUVIAN ECONOMY AND BANKING SYSTEM
• CREDICORP
• BCP
• OTHER CREDICORP’S MAJOR SUBSIDIARIES
• CREDICORP OVERVIEW 2Q 2003
PERUVIAN ECONOMY AND
BANKING SYSTEM
PERUVIAN ECONOMY vs. OTHER LATIN AMERICAN
ECONOMIES
México
Brazil
**
623.4
0.9
5.7
11.0
19.5
(1.3)
(2.7)
3.3
227
**
516.6
1.5
12.5
53.0
24.9
(5.4)
(1.4)
9.6
822
GDP (US$ Bn)
GDP Growth (%)
Inflation (%)
Devaluation (%)
Deposits/GDP (%)
Fiscal Deficit (%of GDP)
Current Account (%of GDP)
Int. Reserves/Mthly Imports
Country Risk (bps)+
Colombia Chile Perú
2003*
**
83.9
1.9
7.0
22.0
23.0
(4.6)
(2.3)
10.1
465
**
67.8
2.1
2.8
5.0
40.3
(0.8)
(1.1)
10.5
143
60.2
4.5
1.8
2.2
22.8
(1.8)
(2.0)
14.6
491
* As of June 2003
**As of Dec.2002
+JP Morgan Index EMBI : Spread of Government Bonds over US Treasury Bonds as of June 30, 2003
Source : Latin Focus, IMF
PERUVIAN BANKING SYSTEM vs. OTHER LATIN
AMERICAN BANKING SYSTEMS
US$ Bn
Assets
Loans
Deposits
Equity
Past Due Loan/ Loans
Reserves/Past Due Loans
Cost/Income
ROE
* As of June 2003
** As of Dec 2002
Source: Fitch Ratings , IMF, ASBANC
Brasil
México
Chile Colombia Perú*
**
**
**
**
320.5
90.3
128.8
25.3
12.5%
105.4%
53.9%
16.75%
163.2
90.0
121.8
16.3
4.8%
136.2%
64.5%
12.8%
68.2
42.3
27.3
5.7
2.0%
135.2%
51.5%
15.8%
26.3
16.5
19.3
2.6
10.2%
77.8%
84.7%
19.3%
17.6
10.6
13.5
1.8
8.0%
127.5%
60.5%
9.9%
MOST LIKELY SCENARIO FOR THE ECONOMY AND
THE PERUVIAN BANKING SYSTEM FOR 2003- 2004
•
•
•
•
•
•
•
Reduced growth of 3.5% of GDP for 2003- 2004, and marginal
improvement in fiscal position
Low growth of loans and deposits in line with the economy
Slight increase of private investment
Gradual reduction of interest rates of spreads due to increased
competition (Banks and Cap. 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
CREDICORP’S ORGANIZATION
Ic
INV.CREDITO
FOCUS
LOCATION
% OWNED
Banking
Peru/Bolivia
97%
Banking
Cayman
100%
Banking
Colombia
100%
Insurance
Peru
75%
Investments
Peru
100%
BCP accounts for 85% of Credicorp’s assets
SECURITIES
Brokerage
Miami
100%
CREDICORP HIGHLIGHTS June 2003
• 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$ 8,234 MM, Net Equity
US$ 856 MM
• 346 offices, 469 ATM’s
• 9,242 employees
• Listed in the NYSE
CREDICORP vs. LARGEST BANKS OF OTHER
LATIN AMERICAN COUNTRIES
US$ Bn
Assets
Loans
Deposits
Funds Administered
Net Equity
Net Income
RATIOS
Past Due/ Loans
Reserves/Past Due Loans
Cost/Income
ROE
* As of June 2003
** As of Dec. 2002
Source: Bank’s Annual Reports
BBVA
México
**
41.8
24.2
30.9
25.9
5.6
651
Bradesco Santander Banco de Credicorp*
Chile
Colombia
Brazil
**
39.3
14.0
15.5
12.5
3.0
557
**
15.1
11.1
8.6
1.5
1.4
221
**
4.4
2.2
3.2
n.a.
0.6
79
8.2
4.2
6.4
1.3
0.8
31
4.4%
3.1%
112.8% 181.0%
56.5% 54.6%
12.4% 18.7%
2.3%
98.0%
44.9%
19.0%
2.3%
175.5%
69.5%
13.3%
7.9%
113.1%
52.1%
7.3%
CREDICORP vs. LARGEST BANKS OF OTHER
LATIN AMERICAN COUNTRIES (Cont.)
BBVA
México
Bradesco Santander
Brazil
Chile
Banco de
Colombia
Credicorp*
Branches
ATM’s
Employees
**
1,665
3,752
25,704
**
5,460
21,210
74,393
**
347
1,119
8,314
**
364
760
6,364
346
469
9,242
Market Share
- Loans
- Deposits
25.5%
28.8%
19.4%
15.5%
23.9%
23.4%
12.4%
11.7%
34.3%***
36.3%***
* As of June 2003
** As of Dec. 2002
***BCP’s Market Share
Source: Bank’s Annual Reports
Credicorp Overview
Summary of Results (USMN)
2Q02
2Q03
6M02
6M03
Net Interest Income
86.1
89.0
170.3
177.9
Provisions
Other Income
30.3
93.8
19.7
109.6
55.7
185.3
53.9
221.9
26.9
100.5
26.4
112.4
47.9
201.0
51.6
221.5
Merger Costs
Translation Result
Earnings before Taxes and Min. Int.
-0.1
22.2
2.0
2.6
40.7
-2.0
49.0
17.5
-4.1
51.4
Income Tax
-9.1
-9.8
-17.8
-16.6
Minority Interest
-2.1
-2.6
-5.4
-4.0
NET INCOME
11.0
28.3
25.8
30.8
EPS*
0.14
0.35
0.32
0.39
Claims on Insurance Activities
Operating Expenses
* 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
Credicorp Overview
Earnings Contribution (USMN)
Banco de Credito
2Q02 2Q03
6M02
6M03
13.3
27.2
27.2
35.2
Pacifico
1.4
5.6
3.6
6.7
Atlantic
0.1
1.6
1.4
2.2
Tequendama*
-0.5
0.9
-0.3
-0.2
Credicorp & Others**
-3.3
-7.0
-6.1
-13.1
TOTAL INCOME
11.0
28.3
25.8
30.8
7,291
801
12.0
8,234
856
11.4
7,291
801
12.0
8,234
856
11.4
Total Assets
Net Equity
BIS Ratio (%)
* Excludes transfers to Credicorp and others
**Includes income from ICSA
Credicorp Overview, Break down
(US$ Mn)
BCP
ASH
5.4
Credicorp
PPS
Tequen
and
Others
9.3
(0.2)
(3.8)
Net Income
Deferred taxes
Dividends received from Credicorp
Profit from Tequendama's forward
Roham Investment loss
Headquarters depreciation
Credicorp loss from Tequendama portfolio
Generic Provisions
BCB's profit
BCP's profit
Net Income after adjusting
(-) Minority Interest
Goodwill Amortization
37.4
(0.1)
(0.5)
Consol. Earnings Contrib.as of June'03
35.2
2.3
6.8
Consol. Earnings Contrib.as of June'02
27.2
1.4
3.6
(3.1)
(1.5)
48.1
(0.1)
(4.4)
0.0
(0.4)
(0.3)
(3.0)
(4.5)
0.0
0.4
35.9
(3.5)
(1.5)
(0.2)
(13.1)
30.8
(0.3)
(6.1)
25.8
(0.8)
0.0
(0.4)
(0.3)
(3.0)
(4.5)
0.0
36.5
(1.4)
2.3
0.4
8.9
(2.2)
Total
(0.2)
(11.6)
Consolidated
HIGHLIGHTS June 2003
• Largest bank in Peru
• 114 years old
•Total Assets US$ 6.7 Bn, Net Equity US$ 578 Mn
• Market share of 36.3% in deposits and 34.3% in loans
• More than 1.2 million of customers (40% of the market)
• 250 offices, over 417 ATM’s
• BCP 5,472 employees, BCP consolidated 7,570 employees,
Considered in year 2002 by LatinFinance as the
best bank in Latin America
Consolidated
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: 250 offices, 417 ATMs, over 6,000 POS,
telephone banking and home banking for over 1.2 million
clients.
Consolidated
• Positive outlook for the bank during 2003 year:
- Lower provisioning requirement
- Significant growth of our non interest income. Second Quarter 2003 amounted $90.3 Mn, 16%
higher than in the same period of 2002. Fees continue to have a positive trend
- Increased revenues from the merger and marginal increase of personnel expenses
• We experienced a strong recovery of written- off loans in BCP and BSCH Perú
• Market share consolidated with a slight reduction in loans after BSCH Peru acquisition
• NIM continued falling due to the excess liquidity in the market and increased competition in
middle market and retail segment, as well as from domestic capital market
• The “umbrella” T-3 project of technological transformation seeks simplicity in our systems.
-As of June 2003, general expenses in this project were $3.8 Mn, still in budget for the rest of
the year are $3.9Mn
• Focus on the informal sector, which is not banked. The expansion has been aimed on the
perimeters of Lima, which have a large population density and a dynamic economic activity in
small businesses.
Consolidated
Key Figures (US$MN)
2Q02
2Q03
6M02
6M03
Deposits
Mkt Share (%)
Total Loans
Mkt Share (%)
Net Interest Income
5,092
31.4
3,756
27.2
80.3
5,766
36.3
4 ,212
34.3
81.9
5,092
31.4
3,756
27.2
160.5
5,766
36.3
4,212
34.3
163.1
Provisions
29.9
19.1
55.2
52.3
Non-Interest Income
54.6
61.2
107.4
132.7
Operating Expenses
85.1
85.7
169.0
175.5
-
2.0
-
17.4
6.9
1.1
7.0
-6.1
OPEX / Income (%)
54.8
53.0
56.3
53.7
CONTRIBUTION
13.3
27.2
27.2
35.2
Merger Costs
Gains on Inflation Adjustment
Consolidated
DEPOSIT & LOAN STRUCTURE
Deposits
US$ 5,766 Mn
Middle Mkt
26%
Demand
22%
Savings
27%
Total Loans
US$ 4,212Mn
Retail
31%
Time
51%
Corporate
43%
PYME
10%
Mortgages
13%
Consumer
4%
Credit cards
3%
Consolidated
Loan Quality
PDL / TOTAL LOANS (Consolidated)
PDL / TOTAL LOANS (w/o Bolivia)
10
9
8
7
6
5
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
RESERVES / PDLs (Consolidated)
3Q02
4Q02
IQ03
2Q03
RESERVES / PDLs (w/o Bolivia)
150
140
130
120
110
100
90
80
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
CREDICORP’S MAJOR
SUBSIDIARIES
OTHER MAJOR SUBSIDIARIES OF CREDICORP
Country
%Ow nership
Market Share Deposits
Market Share Loans
Ranking
Assets (US$ Mn)
Shareholders' Equity (US$ Mn)
Funds under adm. (US$ Mn)
N° of Employees
N° of Branches
* AIG 25%
** Total Premiums market share 2002
Cayman
100%
NA
NA
NA
726
129
560
53
1
Bolivia
100%
12.5%
12.1%
4
475
57
22
670
46
Colombia
100%
0.8%
1.5%
22
267
29
25
380
17
Perú
75%*
32.1**
30.0%
1
400
95
NA
1,023
37
Atlantic Security Bank
Equity as of Jun. 2002:
USD 105
Equity as of Dec. 2002:
USD 110
Equity as of Jun. 2003
USD 129
-Share Capital
40.1
-Share Capital
40.1
-Share premium
account
-Share premium
0.6
-Reserve for valuation for
account
0.6
-Net unrealized gain/loss
sale financial assets
(7.4)
on investment
10.6
-Retained earnings
77.1
-Dividends
(5.0)
-Retained earnings
77.1
-Net income
5.4
Key Figures (US$MN)
6M02
6M03
Equity
105
129
Net Loans
167
157
Investments
312
360
Deposits
504
584
Managed Funds
502
560
NIM (%)
3.3
2.4
0
0
31.2
18
1.4
2.2
PDLs/ Loans (%)
OPEX / Income (%)
CONTRIBUTION
Key Figures (US$MN)
6M02
6M03
Assets
529
463
Equity
57
57
13.5
12.5
11.9
12.1
PDLs / Loans (%)
25.3
23.4
Reserves / PDLs (%)
47.9
69.9
Deposits
Market %
Loans
Market %
Key Figures (US$MN)
6M02
6M03
Assets
334
267
Equity
33
29
0.7
0.8
1.4
1.5
PDLs / Loans (%)
4.3
2.0
Reserves / PDLs (%)
67
122
-0.3
-0.2
Deposits
Market %
Loans
Market %
CONTRIBUTION
Key Figures (US$MN)
6M02
6M03
Equity
98
104
Net Premiums
84
105
-General Insurance
39
39
-Health Insurance
12
13
-Life Insurance
36
53
Market Share (%)
35.2
29.3
Net Loss Ratio (%)
58.1
48.4
Combined Ratio* (%)
80.9
69.4
CONTRIBUTION
3.6
6.7
*Sum
of net claims, general expenses and commissions / net premiums
Credicorp Overview 2Q03
1. Good results for Credicorp during the second quarter:

Significant increase in BCP´s revenues with control on costs

Positive trends in most subsidiaries
2. BCB

Improved results during the quarter with lower provisions

Loan portfolio clean-up almost concluded

Focus on restructure operations following BCP´s business model
3. ASB

Improved results with increased non- realized gains in the investment
portfolio

Reduction of risk profile of investment portfolio

Increased concentration on wealth management business
4. Tequendama

Refocus its business to the retail and middle-market segments

Additional support expected of close to US$4.5MM for the year
Credicorp Overview 2Q03
5. PPS

Results benefited from growth in premiums relative to net claims and
operating costs but are still affected by growth in reserves for life insurance

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

6. BCP



Gradual recovery in loan demand
Continued pressure on margins due to increased competition in middle
market and retail segments
Positive outlook based on:
- Lower provisioning requirements
- Significant growth in non-financial income
- Increased revenues from purchase of BSCH- Perú and full
ownership of Financiera Solucion
- Reduction in personnel expenses with increased business
volumes
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.
Credicorp Overview
Summary of Results (USMN)
6M02
6M03
Net Interest Income
170.3
177.9
Provisions
Other Income
55.7
185.3
53.9
221.9
•Fee Income
81.0
93.7
7.4
7.3
•Net gain exchange operations
10.1
12.2
•Net premiums gain
63.0
64.9
•Other Income
24.3
43.8
•Net gain on securities sale
Claims on Insurance Activities
Operating Expenses
47.9
201.0
51.6
221.5
Merger Costs
Translation Result
Earnings before Taxes and Min. Int.
Income Tax
Minority Interest
NET INCOME
EPS*
-2.0
49.0
-17.8
-5.4
25.8
0.32
17.5
-4.1
51.4
-16.6
-4.0
30.8
0.39
* 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