CREDICORP LTD (BAP) Q2 2026 Earnings Call Transcript

Good morning, everyone. I would like to welcome you to the Credicorp Limited Second Quarter 2026 Conference Call. A slide presentation will accompany today's webcast which is available in the Investors section of Credicorp's website. Today's conference call is being recorded. As a reminder, all participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. If you would like to ask a question, please signal by pressing *1 on your telephone keypad. If you have connected to the call using the HD web phone on your computer, please use the keypad on your computer screen. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Now it is my pleasure to turn the conference over to Credicorp's IRO, Milagros Cigüeñas. You may begin.

Thank you, and good morning, everyone. Speaking on today's call will be Gianfranco Ferrari, our Chief Executive Officer, and Alejandro Perez-Reyes, our Chief Financial Officer. Participating in the Q&A session will also be Francesca Raffo, Chief Innovation Officer; César Ríos, Chief Risk Officer; Diego Cavero, Head of Universal Banking; Eduardo Montero, Head of Insurance and Pensions; and Rafael Enabies, CFO at Mibanco. Before we proceed, I would like to make the following safe harbor statements. Today's call will contain forward-looking statements, which are based on management's current expectations and beliefs and are subject to a number of risks and uncertainties. I refer you to the forward-looking statements section in our earnings release and our recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances. Gianfranco Ferrari will begin his remarks on the current operating environment, Credicorp's strategic priorities, and the key drivers underpinning our confidence in achieving a medium-term ROE of around 22%. He will also highlight our strong performance this quarter. Alejandro Perez-Reyes will then review our financial performance in greater detail and discuss our outlook for 2026. Franco, please go ahead.

Thank you, Mr. Jose. Good morning, everyone, and thank you for joining us today. Before reviewing our quarterly performance, I would like to begin by sharing why we have greater confidence in Peru's medium-term outlook and what this means for Credicorp. We believe Peru is entering a more favorable environment for growth. This confidence is grounded first in the continued improvement of the country's underlying economic fundamentals. Private investment, domestic demand, favorable commodity prices, and business confidence were already gaining momentum before the recent elections. The political transition could help reinforce this momentum. Greater visibility around the policy agenda, a less fragmented Congress, and continued commitment to Peru's sound macroeconomic framework and private investment would further support confidence. Everything points to policy continuity and discipline, including the formation of a new and solid technical team at the Ministry of Economy and Finance, and continuity at the Central Bank. These are encouraging and consistent with a more predictable economic environment. Data support this view. Business confidence has recovered to its highest level in years. Private investment is growing by approximately 13% year over year and domestic demand more than 5%. Peru also continues to benefit from exceptionally favorable commodity prices, with gold prices having roughly doubled since 2023 and copper prices increasing nearly 60%. Together, these factors are strengthening investment, trade, demand, and economic activity, providing a solid foundation for stronger medium-term growth. The principal near-term risk to this outlook is El Niño. While we recognize its potential impact on families, communities, and small businesses, we continue to view it as a temporary and manageable shock rather than a structural change in Peru's growth trajectory. We are prepared to support our clients and communities through this period, leveraging our ecosystem, distribution channels, and digital capabilities to help them anticipate and manage potential disruptions. Alejandro will provide more details on the expected financial impact and how we are incorporating currently available information related to El Niño risk into our financial outlook. Importantly, based on the information currently available, El Niño does not alter our broader confidence in Peru's medium-term outlook or Credicorp's ability to continue delivering sustainable growth. Across the region, the outlook remains mixed but constructive over the medium term. In Chile, while near-term activity has been softer than expected, the investment pipeline, elevated copper prices, and policies aimed at encouraging private investment support a better outlook. In Colombia, despite ongoing challenges and the terrible impact of the recent earthquake, market sentiment has improved following recent political developments, reflected in a stronger currency and lower sovereign yields. Overall, the improving operating environment reinforces our confidence in Credicorp's long-term outlook. Against this backdrop, we delivered a strong second quarter with solid performance across our businesses and continued progress against our strategic priorities. Let me now walk you through the key results. We delivered another quarter of strong execution, reporting a 20.3% ROE, reflecting the strength of our diversified business model and solid performance across our core businesses. Operational momentum remained robust across the franchise. Our innovation portfolio contributed 9.9% of Credicorp's risk-adjusted revenues, keeping us firmly on track toward strategic objectives while demonstrating that our portfolio is becoming an increasingly meaningful contributor to our earnings profile. We are also seeing trade demand continue to strengthen. Loan growth accelerated across our main lending businesses, supported by both retail and wholesale banking at BCP as well as Mibanco. Our profitability continues to benefit from disciplined execution. Risk-adjusted NIM stood at 5.5%, supported by our low-cost funding advantage, healthy portfolio mix, and digital mix. Our strong capital position and disciplined risk management continue to provide resilience. We are actively monitoring El Niño risk, reinforcing our ability to support clients while maintaining a sound risk profile. At the same time, we remain focused on building the business for the long term. Our efficiency ratio stood at 45.4%, while investments in innovation and capabilities continue to broaden our revenue base, deepen customer engagement, foster financial inclusion, and support more scalable growth. As we have discussed in recent quarters, our previous medium-term ROE expectations of around 19.5% had become increasingly conservative as our performance strengthened and the underlying economics of our business continued to improve. With greater visibility across our key markets and earning drivers, we believe the time is right to update our medium-term ROE expectation. We now believe Credicorp has the capacity to deliver a medium-term return on equity of approximately 22%. This reflects a more favorable operating environment, but more importantly, the structural transformation of our ecosystem. Over the past several years, we have strengthened the drivers of our earnings, improving the quality of our loan portfolio, enhancing risk management capabilities, reinforcing our structural funding advantage, and diversifying our sources of revenue. At the same time, we have invested consistently in technology, data, and talent, creating a more scalable and efficient business model. Innovation is an increasingly important part of the transformation: it is expanding financial inclusion and deepening customer relationships while becoming a more meaningful contributor to growth, earnings diversification, and long-term resilience. Together, these structural improvements position us to deliver stronger and more sustainable profitability across economic cycles. We look forward to sharing more information about how our innovation strategy is becoming an increasingly important driver of growth and value creation across Credicorp at our Digital Day on November 17. Now let me turn the call over to Alejandro.

Thank you, Gianfranco, and good morning, everyone. Gianfranco mentioned we delivered a 20.3% ROE this quarter, supported by strong operating performance, accelerated loan growth, and higher risk-adjusted revenues across our diversified business. As I discuss the quarter highlights, I will focus on the year-over-year operating trends. Loans measured in quarter-end balances increased 13.1%. This uptick was driven primarily by BCP through both retail and wholesale banking and by Mibanco. Asset quality improved further. Credicorp's NPL ratio continued declining to 4.1% for the quarter, supported by better origination quality and enhanced collections capabilities. Cost of risk stood at 1.9%, reflecting portfolio growth within our risk appetite and an impact of 27 basis points due to El Niño-related provisions based on currently available information. Net interest income increased 13.3%, mainly driven by lower interest expenses supported by our low-cost funding structure and by a higher-yielding loan mix. Against this backdrop, NIM stood at 6.6%. Other core income grew 19.7%. Fee income increased 15.9%, boosted by transactional activity at Yape and BCP. Gains on FX transactions rose 29.8% through higher volumes at BCP, which rose in the context of higher volatility. Lastly, insurance underwriting results decreased mainly reflecting a base effect from provision reversals recorded in the second quarter of last year in the Life business. Our diversified business portfolio, strong capital position, and healthy asset quality put us in good stead to navigate potential El Niño impacts as we continue to execute our strategic priorities. Next slide, please. Peru's economy remained resilient, growing 2.3% year over year in the second quarter. This result reflects the offsetting effects of robust domestic demand, supported by historically high terms of trade, employment gains, and ongoing business cycle momentum, which helped offset a sharp contraction in primary activities. Primary GDP is estimated to have fallen by nearly 5% year over year, marking its deepest decline since 2014, excluding the pandemic, as El Niño-related disruptions weighed on fishing, agriculture, and primary manufacturing. Despite these headwinds, domestic demand is estimated to have expanded roughly 5% year over year, reporting the seventh consecutive quarter of strong growth. High-frequency indicators continue to signal broad-based, robust economic expansion, with several indicators posting double-digit year-over-year growth. Private investment expectations have rebounded sharply following the presidential election, reaching their highest levels since the series began in 2013. President Dina Boluarte has confirmed Julio Velarde's continuation as governor of the Central Bank and appointed Jose Arista, a respected macroeconomist and former Central Bank Director, as Finance Minister, reinforcing expectations of solid and predictable macroeconomic policy under the new administration. Next slide, please. Under Fed Chair Powell, the Federal Reserve has emphasized its commitment to price stability and signaled limited tolerance for persistently elevated inflation. Economists remain divided between expectations of additional rate hikes and an extended pause in monetary policy. In Peru, annual inflation remained around 4% year over year between April and July, its highest level since late 2023, driven primarily by higher local transportation costs. Core inflation, excluding transportation, is still below 2%. In Colombia, annual inflation eased slightly to 6% year over year in July, from 6.1% in June, marking the first moderation after four consecutive monthly increases. Inflation remains elevated, however, partly reflecting the significant minimum wage increase implemented at the beginning of the year. The Central Bank has responded by raising its policy rate by 275 basis points since December. Investor sentiment, in turn, has improved following the election of President Gustavo Petro. In this context, the peso has appreciated sharply, making its strongest showing against the U.S. dollar since 2019. In Chile, higher oil prices and weaker-than-expected mining production have weighed on the economic outlook this year. Annual inflation eased to 3.5% year over year in July, after reaching its highest level in nine months in June. The Central Bank has kept the policy rate unchanged at 4.5%. In June 2026, Bolivia transitioned to a market-based FX framework, replacing its longstanding peg. We do not anticipate a material impact on Credicorp, given that we incorporated market exchange rate dynamics in Bolivia in our reporting as of the first quarter of last year. In parallel, the IMF and authorities reached a staff-level agreement for a new program of about $1.9 billion to support the country's economic reform program. Although uncertainty persists around oil prices, geopolitical developments in the Middle East, and the potential impact of El Niño during the remainder of the year, as Gianfranco mentioned, we believe that improvements in the regional operating environment support our confidence in a more favorable medium-term outlook. Next slide, please. Before moving on, I would like to address El Niño risk in Peru, a key topic for investors assessing our earnings, asset quality, and capital generation resilience. El Niño is a transitory event that periodically affects Peru. While it may create short-term volatility, it does not alter our long-term view of the Peruvian economy or its underlying strength. So far in 2026, El Niño Costero has mainly affected Peru's fishing, agriculture, and related activities in the north, while the broader economy has remained resilient. The strongest impact would likely materialize in the first quarter of next year if the event intensifies or converges with a global scenario. From a macro perspective, we estimate 2027 GDP growth to remain resilient around 3% under a moderate to strong El Niño scenario, while an extraordinary event could lead to a more pronounced slowdown. Importantly, Peru is entering this period with stronger fundamentals and higher liquidity across the financial system than in prior events. For Credicorp, estimated direct exposure to potentially affected clients is approximately 9% of total loans. While visibility should improve toward the last quarter of this year, we are already incorporating the currently available information related to El Niño risk, resulting in additional provisions starting in June. Under the scenarios currently assessed, we expect full-year 2026 cost of risk to remain within guidance. Looking toward 2027, a more severe event could moderate loan growth and fee income through downward pressures on activity. However, we are better prepared than in previous similar events, supported by lower direct exposure, early mitigation, stronger risk management and analytics, and healthier portfolio quality. More broadly, this is not a new risk for us. We have a robust governance framework and mitigation playbook supported by enhanced data and detailed capabilities. This helps us identify vulnerable clients earlier, communicate at scale, and deploy targeted deductions. In short, we are approaching this scenario from a position of strength: portfolio quality remains healthy, the balance sheet is strong, and we are confident in our ability to manage potential El Niño impacts while supporting clients, communities, and the broader Peruvian economy and preserving profitability. Next slide, please. This quarter, BCP's profitability remained strong with a favorable economic backdrop. Loan growth continues to accelerate as underlying credit risk trends remain positive. In parallel, currently available information related to El Niño risk has been incorporated into provisions. In this context, ROE stood at 29.2%. From a quarter-over-quarter perspective, total loans rose 4.7%. In FX-neutral terms, loan growth stood at 5.5%. Retail loans led the expansion, bolstered by performance in the consumer and SME segments. Additionally, wholesale loans grew primarily on the back of long-term loans as the outlook for private investment continued to improve. NIM stood at 6.1% as the loan portfolio shifted to a higher-yield mix while funding costs remained stable. The NPL ratio fell to 3.9%. This result was driven by improvements across business segments, where the NPL ratio fell on the back of fortified risk management capabilities. The cost of risk rose to 1.4% reflecting the normalization of underlying cost of risk and additional El Niño-related provisions. Underlying provisioning was mainly driven by portfolio growth in specific retail segments, particularly consumer and SME-Pyme, where higher-yielding products continue to perform within our expectations. As a result, BCP's risk-adjusted NIM stood at 5.2%. On a year-over-year basis, total loans rose 10.9%, 12.2% in FX-neutral terms, led by retail banking and secondarily by wholesale banking through the same factors mentioned in the quarter-over-quarter analysis. NIM rose 12 basis points mainly driven by funding cost improvement alongside an increase in low-cost deposit share of total funding. The NPL ratio dropped 93 basis points fueled mainly by the SME-Pyme and individual segments, mostly driven by better origination and enhanced collection capabilities. Cost of risk rose 25 basis points mainly as a result of higher loan volumes rather than a deterioration in underlying credit. Higher core income rose 15.4%, driven mainly by fee income as strong transactional activity was channeled through both Yape and BCP. Gains on FX transactions also contributed to this result, albeit to a lesser extent; our transacted volumes rose significantly in a context marked by high volatility. As a result, the ratio of other core income to assets remains strong, supported by our diversified revenue stream. Finally, operating expenses, better explained on an accumulated basis, rose 14.9% year-to-date due to an uptick in both administrative and personnel expenses. Administrative expenses rose on the level of growth in IT-related services and use of cloud infrastructure. Personnel expenses rose driven by the continued development of commercial and technological capabilities and by an uptick in variable compensation. In this context, the efficiency ratio stood at 38.6% for the first half of the year. Next slide, please. Yape continues to strengthen its position as Peru's leading digital ecosystem. The platform remains highly engaged with more than 16 million monthly active users transacting 6-9 times per month and maintaining an NPS of 78. Customer engagement remains exceptionally strong, and we continue to see that translate into stronger unit economics. Revenue per MAU reached PEN 10 (note: original text referenced a local currency figure), outpacing growth in expenses per MAU, which stood at PEN 6. As a result, the contribution of Yape to Credicorp's risk-adjusted revenues increased to 8.9%, reinforcing its growing relevance within the ecosystem. At the same time, Yape continues to expand its financial services lending footprint. Loans reached PEN X billion, up four times year-over-year, while the number of clients receiving loan disbursements increased to 5.6 million. With loan penetration at around one-third of monthly active users, we continue to see significant opportunities to further expand lending adoption, increase customer lifetime value, and deepen financial inclusion across Peru. As Yape scales, the composition of Yape revenues continues to evolve. Lending further increased its contribution to 28%, while payments contributions stood at 45%. Moreover, revenue-generating payment transactions grew 42% year-over-year, continuing to strengthen Yape's ability to generate data, enhance customer engagement, and unlock cross-selling opportunities across the Credicorp ecosystem. Yape has strong engagement, improving monetization, and significant headroom for deeper financial service adoption, which positions the platform to sustain scalable profitable growth. Next slide, please. Mibanco continues to strengthen its franchise, combining healthy growth with disciplined risk management. At the same time, we continue fostering revenue diversification to enhance the resilience and quality of earnings. This strong execution translated into a quarterly ROE of 22.9%. On a quarter-over-quarter basis, loans measured in quarter-end balances grew 4.4%, supported by continued growth in low-ticket loans, the main driver of recent quarters, and a greater focus on higher-ticket segments where larger loan sizes accelerated volume growth. In this context, the NPL ratio continues its downward trend, reaching a record low of 4.8%. The average yield on interest-earning assets maintained an upward trend, offsetting a slight uptick in the cost of funding. As a result, NIM rose 23 basis points to stand at 15.2%. The cost of risk rose 30 basis points to stand at 5.1%, reflecting higher underlying provisions and additional El Niño-related provisions. Provisioning for underlying credit risk was driven primarily by portfolio growth within our risk appetite and, to a lesser extent, a slight increase in write-offs. Adjusted NIM stood at 11.2%, down 5 basis points. From a year-over-year perspective, loans rose 15% supported by improved productivity amid a dynamic economy. In this context, our portfolio's margin increased despite a slight uptick in the cost of funding. As a result, NIM rose 78 basis points. The cost of risk fell 24 basis points on the back of lower-risk vintages. Despite ongoing investments in strategic initiatives to fuel digital transformation and modernize technology, the efficiency ratio for the first half of the year improved and dropped 4 percentage points to stand at 48%. Mibanco Colombia continued to deliver strong results with double-digit loan growth, disciplined risk management, and enhanced commercial productivity. As a result, ROE reached 18.5% for the quarter. Next slide, please. Grupo Pacífico delivered solid results this quarter on the back of strong commercial execution across all businesses. In this context, ROE stood at 19.1% at quarter end. Net income remained relatively flat year over year. Pacífico continues to deliver solid profitability led by our Life business, the largest contributor to net income. Our Life business posted healthy organic growth this quarter, driven by strong momentum in bancassurance and retail sales. Nevertheless, net income reported lower results due to a base effect associated with provision reversals in the disability and survivorship line in the second quarter of last year. In the P&C business, net income fell driven primarily by lower underwriting results, which reflected higher claims. Our Corporate Health business posted higher net income for the quarter, supported by stronger premium production as the customer base expanded. Meanwhile, results in our medical services business remain relatively stable, supported by resilient commercial dynamics and disciplined cost management. Next slide, please. Profitability in our Investment Banking & Wealth Management business strengthened significantly this quarter. Sustained growth in recurring businesses coupled with an uptick in trading contribution due to temporary market volatility drove a strong ROE of 23.5%. From a year-over-year perspective, revenues increased supported by solid performance across our recurring business. Asset management and wealth management contributed positively with AUM up 44%, or 30% excluding new AUM from acquisitions. The Capital Markets line also contributed significantly to results, where heightened market volatility and increased activity among corporate clients created favorable conditions to boost trading and client-driven earnings. Higher revenues were partially offset by an increase in operating expenses where the uptick was driven by a comparatively low base in the first half of 2025. As a result, net income increased 47% year over year. Next slide. Now I would like to examine the evolution of our consolidated balance sheet. Sequentially, interest-earning assets grew 1.8%, driven primarily by loan growth at BCP and to a lesser extent by higher investment balances as we capitalize on tactical opportunities while leveraging our cash position. On the liability side, the 3.5% funding increase was driven by growth in demand and time deposits and an uptick in the balance of central bank funding. On a year-over-year basis, interest-earning assets rose 12.2%, led by loan growth at BCP and Mibanco. The impact of this shift in the asset mix offset the impact of decreasing interest rates, keeping the yield on interest-earning assets stable at 8.4%. On the liability side, lower interest rates and an increase in the share of low-cost deposits drove a 29 basis-point decline in funding cost, which stood at 2.2% at quarter-end. Against this backdrop, NIM was 6.6% for the quarter. Next slide, please. Moving on to loan portfolio quality. Portfolio quality continues to evolve favorably this quarter as NPLs dropped to 4.1%, driven by improvements in origination, monitoring, and collection capabilities. Based on current available information, we registered approximately $106 million in additional provisions related to El Niño risk. This brought our reported cost of risk to 1.9%. Excluding this impact, cost of risk stood at 1.6%, primarily reflecting portfolio growth within our risk appetite. Underlying portfolio trends remained solid, supported by healthier vintages and enhanced risk capabilities. As a result, coverage levels remained strong, reinforcing the balance sheet's ability to absorb future volatility while preserving capacity to support growth. In this context, the NPL coverage ratio rose and stood at 117.3%. Next slide, please. Core income grew 15.1% year over year on the back of diverse revenue streams, with net interest income, fees, and FX gains reporting double-digit expansion. Profitability metrics continued to strengthen year over year, with risk-adjusted NIM standing at 5.5% this quarter, reflecting disciplined pricing, portfolio mix optimization, and solid underlying credit performance. The efficiency ratio for the first half of the year stood within guidance at 45.6%. Operating expenses grew 13.5%, fueled primarily by core businesses of BCP and investments in our innovation portfolio. Growth in core business expenses at BCP was driven mainly by IT expenses for commercial and transactional capability development. Expenses for our innovation portfolio, which were led by Yape, Tenpo, and Culqi, rose 33% and represented 84% of disruptive expenses for the group. Next slide, please. First-half ROE reached 21.2%, supported by the strength of our integrated business ecosystem and ongoing improvement in economic conditions. Income remained robust, bolstered primarily by accelerated loan growth across key businesses. Expansion was achieved alongside prudent risk management complemented by increasing contributions from diversified revenue streams, which rose from the back of market-leading transactional and digital capabilities. Now I will move on to our guidance. Next slide, please. We continue to expect GDP to grow around 3.5% in 2026 including the estimated impact of El Niño. We are raising our outlook for loan growth measured in quarter-end balances to around 12%, reflecting stronger-than-expected momentum primarily in retail banking at BCP and Mibanco. The expected loan mix shift towards retail, coupled with a scenario where interest rates are expected to remain higher for longer, should support NIM and risk-adjusted NIM, which we expect to stand at the higher end of our guidance range. As retail origination continues to expand and we incorporate currently available information related to El Niño risk, we expect the cost of risk to increase in the second half of the year and to remain within our guidance range. We are also raising our fee income outlook, now expecting high-teens growth supported by stronger transactional activity, continued economic momentum, and our strategy to strengthen principalities. Our efficiency ratio is expected to remain within guidance. We are reaffirming our 2026 ROE guidance of around 19.5% with a current bias to the upside subject to how El Niño evolves. While operating income came in ahead of our expectations, visibility on the potential severity of El Niño remains limited. As new information becomes available, we will continue to reflect updated El Niño-related provisions. Looking ahead to the medium term, as Gianfranco mentioned earlier, we expect ROE to move structurally higher. This outlook is supported by stronger loan growth across our core businesses, a higher-yield portfolio mix, sustained funding advantage, and increasing contributions from fee-based revenues. As our ecosystem-led initiatives continue to scale, we expect to capture greater operating leverage while maintaining disciplined risk management and capital allocation. Together, these drivers strengthen our ability to deliver a medium-term ROE of around 22%. Before we begin the Q&A and given that this will be my last conference call as Credicorp's CFO, I would like to take a moment to thank all of you for your support, engagement, and constructive dialogue throughout my tenure. Your questions, insights, and feedback have helped us become a better company and I am deeply grateful for your professionalism and trust. As I take on my new role at Mibanco and Credicorp's microfinance business, I look forward to staying connected with many of you and sharing our progress and perspectives on the opportunities ahead. I would also like to wish Ignacio every success in his new role. Having worked closely with him for the last 2.5 years, I am confident that he will do an outstanding job and I know Credicorp will continue to benefit under his leadership and expertise. Now, I would like to open the Q&A session. Thank you.

We will now begin the question-and-answer session. If you would like to ask a question, please signal by pressing *1 on your telephone keypad. If you have connected to the call using the HD web phone on your computer, please use the keypad on your computer screen. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We will pause for just a moment to allow everyone the opportunity to register for questions. We also ask that you please only ask one question at a time. After each question has been addressed by our speakers, you will then be allowed to ask as many follow-ups as needed. But again, please only ask one question at a time. Thank you. The first question will come from Ernesto Gabilondo with Bank of America. Please go ahead.

Thank you. Hi. Good morning, Gianfranco, Alejandro, Ignacio, César, Francesca, Milagros. Congrats on your second-quarter results and on your conviction of reaching a medium-term ROE of 22% in the next few years. The El Niño slide you provided was very helpful. My question is on loan growth. Congrats on returning to double-digit loan growth and noting you are expecting around 12% growth this year. How should we think about the loan growth breakdown by segment? Should we be conservative in the riskier portfolios, like SME, or how comfortable are you to grow the portfolio under a potentially stronger El Niño? Thank you.

Yes. Thank you, Ernesto, for your question. Regarding El Niño, I would say our approach has been both comprehensive, trying to address the different dimensions of the impact, and also very granular at the same time. As Alejandro has highlighted, we have to identify the parts of the portfolio by segment, by geography, and by the field of the client that will be more impacted under the scenarios that we have contemplated, and we are adjusting and will continue to adjust gradually. The appetite in these segments varies geographically, so our impact will be related to that part of the portfolio depending on the severity. But in the rest of the country, subject to economic growth, our ambition and expectations remain strong.

Maybe to complement César's comments, the question has a twofold answer. One is specifically on El Niño, which is what César just answered. I would only add that we are also trying to be proactive in helping our clients to be more prepared for the impact by industry and by region—really granular. The other answer is longer term: as we mentioned in the presentation, business confidence is at record levels and private investment has been growing at double digits. Travel and consumption have been growing at over 5% for many quarters now, and commodity prices are supportive. So yes, El Niño is, I would say, a hiccup in terms of potential negative impact. But in a longer-term vision, we are very confident that the macro environment is very positive.

Hi. This is Alejandro. Maybe just one more important data point to Gianfranco's comment: loan penetration. If you take constant exchange rates of December 2025, at the end of last quarter, the penetration of loans in Peru was 34% of GDP. In 2019, it was 42% of GDP. So there is still an opportunity even to go back to numbers we have already seen. We think the opportunity is big and we have the capabilities we have developed. We are really confident in midterm loan growth regardless of the short-term hiccup that might come.

Perfect. Very helpful, Gianfranco, César, and Alejandro. Just to follow up: for wholesale and retail, should we expect both portfolios to be at double-digit growth because of private investment and consumption? How should we think about loan growth for both segments? Double digit for both? How are you thinking about it?

Yes. We are expecting—again, without considering the hiccup from El Niño—that both wholesale and retail will see double-digit loan growth. Retail has already been showing it, and we expect wholesale to pick up as private investment momentum continues. The short answer is yes: both portfolios should grow solidly.

Thank you very much. The next question will come from Brian Flores with Citibank. Please go ahead.

Hi, team. Good morning. Congratulations on the results and best of luck to Alejandro and Ignacio on their respective roles. I have a question on asset quality. The cost of risk seems very controlled despite fast growth across SMEs, Yape, and consumer. Do you think analysts are underestimating how much underwriting has improved, or is this more an extraordinary macro tailwind—extra liquidity and good macro conditions? How much is idiosyncratic versus macro tailwind?

Thank you, Brian, for the question. Without a doubt, the positive economic environment is a significant factor. But we have been working very disciplinedly on several parts of risk capabilities: origination models, monitoring, and collections. We have moved from an initial phase of identifying particular improvements into a phase where we are developing higher capabilities and starting to reap the benefits. The approach is disciplined across BCP, Mibanco, and other subsidiaries. These capabilities also help us withstand potential impacts of El Niño. Our long-term vision is to increase our capacity to originate higher-yielding loans with controlled risk while monitoring the risk appetite closely.

Alejandro highlighted collections— we've been more focused on models, origination, and monitoring. Recently, we developed additional collections capabilities that are showing results at BCP. So the short answer is the environment helps, but we are doing our job and improving internally. Brian, one quick comment on top of what César mentioned: we do not manage by cost of risk alone. We manage by risk-adjusted NIM. The cost of risk may increase, but we are convinced that risk-adjusted NIM will increase more because, as we go into new markets, products like the Yape portfolio have higher risk-adjusted NIMs. The cost of risk may be higher, but the return adjusted for risk is also higher.

Super clear. Just a quick follow-up: with the new administration, after initial approaches, do you feel the tone regarding partnerships and growth is more upbeat? Are you more constructive about the outlook, particularly for growth?

Yes. As Alejandro mentioned before, penetration in the financial system is still low, and the environment seems much more proactive regarding financial inclusion and private investment. We have not had specific contacts with the new administration beyond public appointments, but what we observe suggests a more benign environment for growth of the financial system.

The next question will come from Renato Meloni with Autonomous Research. Please go ahead.

Hi, everyone. Good morning. Congrats on the results and thanks for taking the question. I wanted you to expand your comments on the provisions for El Niño and what to expect going forward. First, on the $106 million this quarter, was that done client-specific or more sector-specific in the areas you mentioned? Going forward, is this going to be a recurring level for the next couple of quarters or is this enough for the foreseeable future?

Thank you for the question, Renato. We have conducted a thorough analysis of the portfolio. Specifically on provisioning, we have assessed wholesale client by client and segment by segment. In retail, we used an approach based on geography and client profile. We have several scenarios and are applying the expected-loss logic embedded in IFRS 9. We are constituting provisioning and will likely have a second important assessment at the end of the third quarter or beginning of the fourth quarter, because from our conversations with climatologists, September–October is when we will have a much better assessment of severity. We are moving with the expectation of medium to strong El Niño, and at that point we will reassess and calibrate expected losses that need to be booked this year.

Perfect. So a September–October potential new adjustment, and that would be it for this year. Then in 2027, which you mentioned is when the economy will see the impacts, could there be another adjustment or reversal?

Yes. Our provisioning through IFRS 9 is forward looking, so depending on data and transmission dynamics in September–October, we will make a new assessment. As real impact of El Niño unfolds, we will decide what to book. The models will tell us what the provision should be. Bear in mind our provision system is forward looking and based on expected loss.

The next question will come from Daniel Vaz with Safra. Please go ahead.

Hi, guys. Good morning. Congrats on the results. Alejandro, Ignacio—wishing you success in your new roles. My question is regarding your refreshed midterm ROE guidance. Which companies in your holding carry the most upside right now? Mibanco is already running above 22%; BCP is in the 30s; Pacifico and advisory businesses run below. Should we expect even better ROEs at the ones already running above, or ROEs improving at the ones that are below?

Thank you, Daniel. I'll start with the levers behind the new midterm ROE and then give color on your question. Basically, we believe the new midterm ROE comes from continuing to grow in underpenetrated financial product segments—lending, investment, and insurance—all of which remain underpenetrated even compared to countries like Colombia and Chile, so there is room to increase penetration. We also expect higher risk-adjusted margins supported by pricing, the shift in portfolio mix, and risk capabilities. Increasing fee income and monetization of our innovation portfolio—Yape being the most visible—will also contribute, as will positive operating leverage where income grows faster than expenses. All of these factors support the new midterm ROE of around 22%. Regarding your specific question: both things can be true. There is still space for improvement in ROE in companies performing strongly today, such as BCP and Mibanco, as loan penetration increases. There is also room for improvement in insurance and mutual fund penetration, so we see improvement potential across the board rather than concentrated in 1 or 2 companies.

To add, our disruptive initiatives are already ROE-accretive this year, but they currently have a drag on cost-to-income of around 300 basis points. As these initiatives scale—particularly Yape—we expect them to become more accretive, which is another lever to consider.

The next question will come from Carlos Gomez-Lopez with HSBC. Please go ahead.

Thank you for taking the question. First, congratulations and thanks to Alejandro for his time with us. My question goes back to the ROE target. What is the urgency to increase the midterm ROE? You were at around 17% for a long time, increased last October to 19.5%, and now 22%. At this point, where everything is going right and you are delivering 21%, is this an internal goal or has something changed fundamentally that makes you believe you need to be there? Historically, your ROEs over the last 10–20 years have been around 17.5%–19%, and you are less leveraged now. So why raise the target now? Thank you.

Hi, Carlos. When we mentioned 19.5% in October of last year, we did so while we were entering a big political cycle in Latin America with elections in several countries. We took a conservative stance then and said we would revisit the number after the cycle, which is what we are doing now. When you look at the drivers I explained earlier—our ecosystem, ability to serve clients, and improved fundamentals—our ability to generate returns is higher than when we gave the prior number. Even this year, without El Niño, we would have clearly outperformed the 19.5% and probably been above 20%. So we felt it was the right time to provide a more realistic number of what we can achieve in the coming years. Also, while we are less leveraged than in the past, our risk profile is lower and our capabilities are stronger, supporting the 22% target.

The next question will come from Yuri Fernandes with JPMorgan. Please go ahead.

Hi. Can you hear me? Gianfranco, Milagros, César, Alejandro—everyone. Congrats on the quarter, a pretty good 20% ROE despite the additional provisions. I have a question about other income, especially non-core income, which moved up a lot this quarter—about 10% quarter-over-quarter. You mentioned FX and mark-to-market in the notes. What drove this? Is it client activity? Should this be more recurring or should we expect normalization of the other income line?

Hi, Yuri. It comes from multiple sources as we increase our principalities. There is more transactional fee generation at BCP and Yape. FX has been a driver as well, and the recent volatility produced good returns due to the election-related movements, but we believe strong FX results can continue. In general, as we increase our share of fees in the market through our ecosystem, we expect this trend to continue. That is why we guided to high-teens fee income growth and expect continuation of strong results going forward.

Second question on cost and efficiency: Could we see the midterm cost-to-income improve materially? Expenses and revenues are growing at similar pace now, but you are accelerating growth and confident on risk-adjusted margins. I know the innovation portfolio is a headwind; could expenses start slowing down and efficiency become a powerful tailwind?

Yes. Our midterm target remains unchanged. When we talked in October last year, we discussed a midterm cost-to-income closer to 40%. We are expecting to move in that direction as our innovations scale, which will improve operating leverage.

As I mentioned earlier, the innovation portfolio is ROE-positive today but has about a 300 basis-point drag on cost-to-income. As Yape scales and its cost-to-income declines toward levels more in line with large digital players, we expect operating leverage to improve, with income growing faster than expenses and midterm cost-to-income around 40%.

The next question will come from Tito Labarta with Goldman Sachs. Please go ahead.

Hi, everyone. Thank you for taking my question and congratulations on the results. Quick follow-up on a comment about portfolio changes based on El Niño: could you share a bit more color on whether that would have a mixed impact on NIM and asset quality expectations?

Yes. The change is mainly in origination mix in specific areas. We continue improving overall, but by identifying areas that will be more severely impacted, we are temporarily lowering risk appetite in those regions. So temporarily we may see a less pronounced change in the overall portfolio mix, but the general trend continues.

I will add one thing: we are guiding to around 12% loan growth this year, so it will be a very strong year. We might see a little bit of lower loan growth in 2027 when the full effects of El Niño are expected to take place, so that could moderate growth in that period.

The next question will come from Andres Soto with Santander. Please go ahead.

Good morning, everybody. Thank you for the presentation. First question is a follow-up on El Niño provisions. I understand you will do a new assessment by the end of Q3 or beginning of Q4, but regarding your guidance for the full year, how much of additional provisions are you already considering for El Niño? Is it similar to this quarter—about 30 basis points to the cost of risk—or will it be higher or lower?

Hi, Andres. The main color is that we expect to remain within our guidance even under a severe El Niño case. Given the dynamics we've seen this year, where we were on the lower end of guidance, what would probably happen is that we move toward the middle to higher end of the guidance but stay within guidance even after full provisioning of a severe El Niño. That is the best way to frame it for now.

My second question is on Yape lending. We saw a significant acceleration this quarter. Is this acceleration coming from increasing balances for existing customers as you extend duration, from new customers, or reflecting lending initiatives with SMEs within Yape?

Hi, Andres. It's actually coming from both. We started Yape lending with a single-installment product, and as we observe customer behavior, we move to multi-installment options. We do this for SMEs and individuals. The growth today is primarily among individuals because the SME product is a bit farther behind—started later. We are seeing growth on both sides, with recurrence in customers taking a second and third loan. We are also seeing ticket growth and longer terms, which contribute to portfolio size and NIM. This is gradual but steady growth in both segments.

Thank you. At some point you mentioned potential number of customers Yape could reach through lending. Any update on that number based on recent performance?

Yape has a base of over 16 million users. We have reached over 5.6 million customers through at least one loan and disbursed around 2 million loans. We don't have a fixed target like '50% of users should have a loan,' but given product characteristics and the customer base, we expect large-scale adoption of small, short-term loans. Growth should continue.

The next question will come from Alonso Aramburú, a private investor. Please go ahead.

Thank you for taking my question. You upgraded your medium-term ROE target to 22% driven by structural improvements and digital monetization, but you mentioned the strongest impact of El Niño will likely materialize in Q1 2027 and a severe scenario could pressure loan growth and fee income. Realistically, how much of that 22% ROE guidance is at risk if El Niño shifts from a manageable shock to a severe event later this year? What is the specific cost-of-risk threshold that would force you to walk back this profitability target?

Hi, Alonso. When we talk about the midterm ROE, we mean ROE over the next two to three years, and we believe it's achievable. We're not providing a specific 2027 guidance at this time; a severe El Niño could impact 2027 and could lead to a lower ROE in that year, but it does not change our expectation of achieving a 22% midterm ROE overall. So any short-term impact would be temporary and wouldn't require us to retract the midterm objective.

The next question will come from Alonso Aramburú with BTG. Please go ahead.

Hi. Good morning. Thank you for the call. Following up on El Niño: how are you thinking about dividends—potential extraordinary dividends for the second half of the year? And on provisioning, if it is a severe El Niño, what is the ballpark of provisions you might book this year—500 million soles, 1 billion soles? Any figure would be helpful.

We are not providing a specific provisioning figure at this time because that information will come from our models as we calibrate them with more data. As I mentioned earlier, we expect to remain within guidance even in a severe El Niño scenario. Without giving an exact number, imagine us moving toward the upper side of our guidance if needed; the actual figure will depend on information that comes in the coming weeks and months.

On the dividend question, we believe we are very well capitalized, so potential additional provisions related to El Niño should not affect any extraordinary dividend we may pay this year, since dividends would be paid from profits generated in prior periods.

It appears there are no further questions at this time. I will now turn the call back over to Mr. Gianfranco Ferrari, Chief Executive Officer, for closing remarks.

Thank you. As we close today's call, I want to come back to the main message I shared at the beginning: we have greater confidence in Peru's medium-term outlook and Credicorp is well positioned to capture the opportunities ahead. The results we discussed today, together with the updated medium-term ROE expectation we shared, reflect not only a more constructive operating environment but also the structural progress we have made across our ecosystem. Credicorp today has deeper customer relationships, stronger digital capabilities, disciplined risk management, and a more scalable business model. Importantly, our growth remains anchored in our purpose: improving lives by helping people and businesses thrive. That purpose guides how we invest, expand financial inclusion, and support our customers and communities through changing conditions. We believe in Peru and we believe Credicorp has an important role in shaping its future. Every day, we have the privilege of helping millions of people and businesses move forward, and there is no greater opportunity than that. Before closing, I want to thank Alejandro for his partnership and leadership as CFO. I look forward to continuing to work closely with him in his new role leading our microfinance business and Mibanco Peru. I also want to welcome Ignacio who will join us as CFO and will be with us on next quarter's call. Thank you all for joining us today.

Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect.