Reynaldo Llosa: Yes, I think it’s worthwhile to remember that this is a cyclical event. We have experienced different levels of EL Nino each five-seven years has been several severe Ninos in the past, and we have developed a capacity to manage that. The whole country is not paralyzed by El Nino. During the presentation we shared some figures relating to the level of direct exposure for our Credicorp portfolio in the northern part is around 6% directly exposed. And so the rest of the country has a spillover effects, but this one is working. And we expect a more or less but a rebounding economic growth next year.
Sergey Dubin : Okay, all right. That’s fine. Thank you.
Operator: The next question comes from Carlos Gomez with HSBC. Please go ahead.
Carlos Gomez : Hello, good morning. Thank you for the call. I want to ask you about expenses. At the beginning of the year, you mentioned that your budget for transformation was equivalent to 1.5% of ROE which we calculated to around $125 million. Has that changed? And what is your expectation going into next year?
Cesar Rios : I think this is a more than a budget this is an appetite and a boundary. We adjust that according to the dynamics of the underlying business and the specific disruption initiative. So I will say that is a rough number that is a guide for us is abandoning but I wouldn’t qualify that as on a budget.
Carlos Gomez : Okay, but mentioned we understand that you have been adjusted during the year and should we expect more or less in 2024?
Cesar Rios : As I mentioned this is I would say an upper limit and we are going to be operating under this this upper limit.
Carlos Gomez: Okay. Thank you.
Operator: The next question is from Andres Soto with Santander. Please go ahead.
Andres Soto : Good morning and thank you for the presentation and the opportunity to ask questions. My question is regarding your macro assumptions for 2024. I believe you, Cesar, mentioned you have in numbers 2% GDP growth is that what you have, the implicit for the cost of risk that you are guiding to this year? We have already incorporates this assumption for 2% growth next year. And when I look at the weather pattern that you show n your presentation on slide number 10, which is quite interesting. It looks like it is turning increasingly similar to the – this Nino to the 1997 event. And based on that experience, is that the type of growth that you may expect? I remember back then, the economy was growing the year before El Nino the economy was growing 7% and it came to a decrease of 1% so dramatically slowed down. Are you still expecting it, it makes sense to expect the recovery next year considering that this sort of El Nino can come to realize?
Cesar Rios : I think these are very relevant questions. We still have an expectation of a 2% GDP growth for 2024 that it considers an impact of El Nino. The Nino considering in this GDP growth is more than it was strong already consider. And still we are considering that the year of reference, as El Nino is 2017. It’s also good to remember that at the end of the century in 1998, we have a combination of El Nino and the debt crisis an international debt crisis. So this significant drop in GDP that you mentioned is a combination. We have probably a stronger El Nino that is now expected and an international monetary crisis.
Andres Soto : That’s very helpful, Cesar. And regarding monetary policy, now that Peru is officially in a recession, do you see additional space for this? And the actually inflation is printing pretty well? Do you see additional space for the central bank to cut rates more aggressively that they have done or you believe that, the carry trade will prevent a more aggressive move?
Cesar Rios : I think the carry trade is a factor but another very important one is the Fed funds looking only to internal factors probably the central bank will be more aggressive cutting rates. But a combination of El Nino that usually have inflationary effects in the short term. And the higher for longer guidance from the Fed suggests that the central bank has only limited room to decrease rates until the middle of next year.
Andres Soto : Perfect. That’s very clear. Thank you so much.
Operator: It appears there are no further questions at this time. I will now turn the call back over to Chief Financial Officer Mr. Cesar Rios for his closing remarks.
Cesar Rios : Thank you all for your questions. As discussed challenging circumstances persist in Peru. Given weak economic performance and higher probability of El Nino is scenario worsening to moderate a strong in the upcoming ’24 summer season. Nevertheless, we are confident that the preventive measures that we are taking together with our flexibility to adapt to changing conditions rapidly will allow us to effectively navigate these near term challenges. It’s important to keep in mind that El Nino is a transitory shock. And historically, we have seen the economy rebound after prior El Nino events. We expect to see the same trend again. Prior to closing today’s call, I would like to leave you with these four key messages. First, Credicorp is resilient and has the ability to adapt to challenging circumstances.
We deliver help to risk adjusted margins this quarter, even as we increase provisions for a specific customer segments with weakening payment capacity giving a prolonged resale — regressive, and inflationary environment in Peru. Seconds, we have increased our efforts across different fronts to mitigate the negative impacts of El Nino on the population, our customers and our businesses. Pacifico, BCP and Mibanco are promoting preemptive actions to limit damage to homes and businesses through various educational programs. In addition, we have modified our underwriting policies for the most exposed retail segments at BCP and Mibanco. Only about 6% of our portfolio is in the area suspected to be directly impacted. Our teams are working closely with clients in these areas to anticipate the likely financial requirements.
Beyond the private sector, the government’s capacity to unlock and execute progress will be key to jumpstart growth. There is significant — there’s a significant package of projects that will be key to jumpstart role. There is a — there are a lot of projects in the pipeline. The global long-term trend to transition to a greener economy favours copper consumption. As a leading global copper producer with the lowest production costs and the highest copper reserves, Peru stands to benefit from this trend. Though it is imperative to accelerate execution of mining projects. Third, the strength of our balance sheet, prudent management and leading franchise built upon top notch transactional capabilities provide solid foundation for us to weather the short term challenges.
Lastly, we continue to investing into the future. We are remained focused on executing our midterm strategy that evolve decoupling from the macro and securing a healthy long term ROE. We are committed to continue to develop our disruptive strength our competitive mode while further enhancing the efficiency of our core businesses to technological transformation. In closing, we thank you for your continued support and are committed to delivering on our value creation strategy. Thank you for joining us in this call. Goodbye.
Operator: Thank you, ladies and gentlemen. This concludes today’s presentation. You may now disconnect.
