Yuri Fernandes: I just have a hard time, like your loan growth will accelerate. Your margins, they should be mostly stable from here, right? And the new initiative, they’re getting more mature, right? Like when you look to cost to serve and they are back of your asset. They are almost crossing each other, right? So the breakeven is real and it’s getting closer. So I struggle to see like the efficiency moving from 44 to 46, 48. That is your guidance and I wish we could see some upside here. That was my point, but is very clear.
Gianfranco Ferrari: Yuri, you’re right. Your view is right. Maybe the only caveat is that if there were new investments to do or to make in either innovation or new technologies, we’re going to do that and that might have a negative impact. But your view is right.
Operator: The next question is from Carlos Gomez Lopez with HSBC.
Carlos Gomez Lopez: You’ve talked extensively about Yape. Could you also perhaps refer to the other initiatives, like Tenpo in Chile and [iO] in Peru? How are those advancing so far?
Gianfranco Ferrari: I’ll go with Tenpo and I’ll ask Diego to talk about — Diego or Francesca to talk about [iO]. Tenpo is right on track. Remember though that Tenpo is way below breakeven yet. Having said that the leading indicators, the operating leading indicators are on track and some of them are outperforming our initial expectations. We filed an application for a full banking license for Tenpo in Chile. And that should be approved anything between 18 to 24 months. But in a nutshell, Tenpo is performing well. We do not expect to breakeven in the short run. And maybe in the next call or in a couple of calls, we can be more specific on the Tenpo figures. I don’t know if Francesca or Diego want to go into a specific on [iO].
Francesca Raffo: Let me complement a little bit on Tenpo and continue on [iO]. In addition to what Gianfranco said, I think two facts to Tenpo, which are very promising. One is the transactional base on the prepaid and debit card is still growing. And now the credit card passed is also around 40,000 customers already on-boarded and using with a healthy transaction base as well. So GPV is solid and we’re on track on those two main metrics. So that’s very promising. And if you look at the brand landscape, whether it’s credit card or debit card, [iO] is on the top 10 brands for Chile. So I think that shows a good positioning. The other venture that you didn’t mention is [Kulki] acquiring business. I think that’s another very mature business that BCP is now embracing in their SME business to continue to grow, because it complements the value proposition and it’s still growing in fee income.
But GPV volumes are good and the customer base continues to grow. On the [iO] side, we’re focusing more on the mass affluent segments in Peru with a new value proposition that is completely digital. Growth is still slow. Now we’re growing, because we have a value proposition that is still not complete with the credit card, that we’re seeing good transaction levels and good levels of active users, stickiness in terms of the customers that we do acquire stay with for the past 12 months. So that is promising as well.
Carlos Gomez Lopez: So if you’re going to expand on [iO], are you already in the general advertising level or still in the friends and family phase?
Francesca Raffo: No, we’re at the general advertising level. We still use a lot of digital marketing more than TV or mass market advertising. But we are open to the public using at this point only BCP’s risk policies. So we’re targeting — we’re using the BCP’s risk modeling to target customers that are not currently — basically not currently BCP customers with a credit card.
Carlos Gomez Lopez: And can we have an idea of the order of magnitude of customers that you have either activated or registered? Again, not exact numbers, but how many are we talking about, 100,000, 10,000…
Francesca Raffo: No, we’re at the 10,000 number still. This is a early venture…
Operator: The next question is from Andres Soto with Santander.
Andres Soto: My question is regarding dividends. You guys declared a dividend that implies a significant increase versus last year 40%. And yet when I look at the capitalization levels of your main subsidiaries, there is still above what you say is the minimum that you expect. Specifically, when I look at BCP, BCP is currently at 12% and you say that the target post dividends is 11%, at Micanco is at 16% versus 15% that you set as a target. So my question is, what prevented you from being more aggressive in terms of dividend distribution and if you see any space for additional distribution, special dividends throughout the year?
Cesar Rios: First, I am going to address probably the capital levels of the operating units and after that, the dividend at Creditcorp level. Actually, we set up a minimum of 11%, as you rightly mentioned, at BCP and we usually put some kind of a small cushion. Particularly at the end of the quarter in BCP, we have a decrease in corporate loans that were beyond what we were expecting. For that reason, we have an Core Equity Tier 1 above that was going to be, I would say, unexpected level, some decimal points there. And at Credicorp level, we expect to have a growing first dividend through the year. So we feel that this was a significant increase over the last year and we, based on the capital needs of the remaining part of the year, can evaluate further dividends.
Operator: The next question is from Alonso Aramburu with BTG Pactual.
Alonso Aramburu: I wanted to ask also about Yape. Regarding the multi-installment loans, which you guys have been growing lately, can you comment on the asset quality behavior of those loans? What are the size of those loans? Are these going to be new clients, non-BCP clients? And have you been able to develop a risk model based on Yape data, or are you still using the BCP risk models?
Gianfranco Ferrari: So I would say — going to the specifics, in Yape, we started with one installment loan, very, very short duration, less than 30 days. NPLs have been very, very low. Surprisingly low, I would say. And that has been mostly targeted to or using BCP’s model. We’ve learned with those loans and now we’ve launched multi installment loans, which are longer in tenure and larger in tickets. And we are currently also using the data and pilots so as to enhance the models at BCP that haven’t worked solely with BCP data and also leveraging on Yape’s data. Today, as I mentioned in my initial words, we’re at very early stages in the lending business in Yape but so far the performance of that business is very promising.
Operator: The next question is a follow-up from Yuri Fernandes with JPMorgan.
Yuri Fernandes: Just a follow-up on capital. Two topics. Do you have excess capital at the holding? I remember sometimes in the past, Credicorp Holding had excess capital, so just checking if there is any capital there. And two, FX, I know that sol has been mostly stable. But can you remind us, whatever the sol goes, like do you have any character to impact? Like does FX impact your capital base because you have, I don’t know, loans in dollars and this can affect your RWAs? Can you just refresh me here on FX volatility for you?
Gianfranco Ferrari: I’ll take your first question and then ask Cesar for the second one. We’ve explained it before that the policy we have is we retain whatever is needed from profits, whatever is needed at the subsidiaries level to fund growth within the common equity tier, one that we’ve decided to get. From that — which basically are Mibanco and BCP and obviously, at Pacifico regarding the solvency ratios we need to maintain. Beyond that, the policies that we pay, all of the subsidiaries pay dividends in full of what is — the rest of what is needed to Credicorp. As Cesar mentioned, the policy we’re following at Credicorp is that the usual dividend to rise it on a yearly basis and that’s the reason we’ve risen the dividend, this current dividend.
And depending on the performance of the economy, depending on the growth of the businesses and depending of inorganic growth activity that — opportunities that we may find, we do pay extraordinary dividend in the last quarter, last quarter or the second semester of the year. That’s how we manage it. So going to the specific question, yes, short answer is yes we have excess capital but the logic is what I just explained.
Cesar Rios: And regarding the second question, I would like to remind you that our functional currency is soles. And our books are, I will say, by policy structurally balance and neutral. So we try to maintain in all the subsidiaries within a very short range outside of a specific trading operations a balanced book. So we are going to have some impact for the FX impacts in the P&L. but structurally, we are neutral in operating currency at subsidiary level. Given say that we have operations outside of Peru that are conducting the business and other currencies, dollar is of Colombian pesos or Chilean pesos, in which case we have on top of the volatility of the FX and the P&L, an impact of the relative exchange from this currency to soles in the balance sheet reflected as nonrealized losses or gains. At this point, these impacts are very moderate.
Operator: It appears there are no further questions at this time. I will now turn the call back over to Mr. Gianfranco Ferrari for — Chief Executive Officer, for closing remarks.
Gianfranco Ferrari: Thank you all for all your questions. As Cesar mentioned, we’re optimistic about Credicorp’s ability to realize our revised guidance for 2024 and reiterate our 2024 ROE guidance. Furthermore, I’d like to reaffirm that we’re confident in our ability to achieve the 18% sustainable ROE by 2025 based on the following drivers; a resilient NIM as we have managed the sensitivity of our margins to market interest rates on the back of our asset liability management and our ongoing shift towards retail loans; a reduced cost of risk as we leave the current through the grade cycle behind; and enhance efficiency as Yape and all disruptive initiatives mature. Moreover, the political environment now is clearly more stable than the one a year ago, and we expect that the current administration will remain in office until 2026.
This is without a doubt positive to business confidence. Having said that, the recent S&P downgrade should serve as a wake-up call for us. Merely having stable governments is insufficient to capitalize the robust growth needed to alleviate poverty improve. We need our executives and legislative authorities to take both steps forward in fostering growth and safeguarding democracy. This entails implementing structural reforms in education and health and eliminating the bureaucratic barriers that hindered execution of our mining and infrastructure projects. As leaders, it is our responsibility to advocate for policies that unlock our country’s untapped potential and drive progress. And on that note, we recently published our 2023 annual and sustainability report, prompting me to take this opportunity to reaffirm our commitment to our purpose, to contribute to improving lives by driving the changes that our countries need.
Lastly, I would be remissed if I do not mention that this marks Cesar Rios’ final presentation in our quarterly earning calls. I wish to express my gratitude for his invaluable contribution during his tenure as CFO. Starting July 1st, he will transition to the role of Chief Risk Officer at Credicorp and BCP, leading our risk management strategy into a new chapter as we continue to tap new segments and markets. Additionally, I look forward to working closely with Alejandro Perez-Reyes in his new position as CFO of Credicorp and BCP. Our experienced leadership team has a long track record of successfully managing through both challenging economics and regulatory environments. We’re focused on driving sustainable profitable growth and building long term value for our shareholders through prudent capital and risk management.
Thank you all for participating in today’s call.
Operator: Thank you, ladies and gentlemen. This concludes today’s presentation. You may now disconnect.
