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MERRILL LYNCH ROUNDTABLE Lima, March 2004 Walter Bayly Chief Financial Officer Banco de Credito del Peru. PERUVIAN ECONOMY AND FINANCIAL SYSTEM CREDICORP BCP OTHER SUBSIDIARIES CREDICORP OVERVIEW 2003 CREDICORP OUTLOOK 2004. PERUVIAN ECONOMY. 2001200220032004(e) - PowerPoint PPT Presentation
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MERRILL LYNCH ROUNDTABLE
Lima, March 2004
Walter Bayly
Chief Financial Officer Banco de Credito del Peru
PERUVIAN ECONOMY AND FINANCIAL SYSTEM
CREDICORP
BCP
OTHER SUBSIDIARIES
CREDICORP OVERVIEW 2003
CREDICORP OUTLOOK 2004
3
PERUVIAN ECONOMYPERUVIAN ECONOMY
Source : Banco Central de Reserva del Perú, INEI
20012001 20022002 20032003 2004(e)2004(e)
GDP Growth (%)GDP Growth (%) 0.30.3 4.94.9 4.04.0 3.93.9Inflation (%)Inflation (%) -0.1-0.1 1.51.5 2.52.5 2.52.5Devaluation (%)Devaluation (%) -2.3 -2.3 2.02.0 -1.4-1.4 0.50.5Fiscal Deficit *Fiscal Deficit * -2.6-2.6 -2.3-2.3 -1.9-1.9 -1.5-1.5Int’l Reserves (US$Bn)Int’l Reserves (US$Bn) 8.68.6 9.69.6 10.210.2 10.510.5Int’l Reserves/Mthly ImportsInt’l Reserves/Mthly Imports 14.414.4 15.515.5 14.914.9 14.814.8Trade Balance (US$Mn)Trade Balance (US$Mn) -266-266 207207 710710 1,2491,249Country Risk (bps)**Country Risk (bps)** 513513 621621 318318 344344
* As a % of GDP** JP Morgan Index EMBI: Spread of Government Bonds over US Treasury Bonds as of March, 25 2004
4
PERUVIAN ECONOMY YEAR 2004
CAMISEA PROJECT: Begins production phase in August 2004,it will impact the economy as a whole through lower energy costswhile increasing exports. Camisea 2, a US$2 Bn LNG exportproject, in final negotiation steps.
HIGH LEVEL OF COMMODITIES PRICES: The trade balance ispositively impacted and will generate increased tax revenues.
FINANCIAL TRANSACTIONS TAX (ITF): Negative impact ondemand for banking services, market development andpenetration of the formal economy.
FREE TRADE AGREEMENT WITH USA: Goverment is activelyseeking to begin formal negotiations. Trade Balange generated asurplus of US$710 Mn in 2003 and may grow to US$1.4 Bn in2004.
5
PERUVIAN FINANCIAL SYSTEM
20002000 20012001 20022002 20032003
M3/GDP (%)M3/GDP (%) 25.025.0 25.525.5 25.525.5 24.524.5
Loans in US$ (%)Loans in US$ (%) 84.184.1 80.380.3 79.679.6 77.877.8
Deposits in US$ (%)Deposits in US$ (%) 73.473.4 72.172.1 71.571.5 69.869.8
PDL/ Loans (%)PDL/ Loans (%) 9.89.8 9.09.0 7.67.6 5.85.8
Reserves/PDLs (%)Reserves/PDLs (%) 104.2104.2 118.9118.9 133.2133.2 141.1141.1
ROEROE 3.13.1 4.54.5 8.48.4 10.910.9
Bank Deposits (US$Bn)Bank Deposits (US$Bn) 12.912.9 12.912.9 13.713.7 13.213.2
Bank Loans (US$Bn)Bank Loans (US$Bn) 11.911.9 10.710.7 10.910.9 10.310.3
Source: Superintendencia de Banca y Seguros( SBS)
6
PERUVIAN FINANCIAL SYSTEMMARKET SHARE
Source: Superintendencia de Banca y Seguros( SBS)
BCP includes BSCH-Peru’s market share in Loans & Deposits in 2003
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
2000
2001
2002
2003
MARKET SHARE(Deposits)
MARKET SHARE(Loans)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
2000
2001
2002
2003
7
Dec 01 Dec 02 Dec 03 CAGR03/01
BANKS Credit Cards 253 357 474 37.01 Consumer 664 654 722 4.33 Mortgages 1,032 1,150 1,322 13.18 Micro-businesses 269 246 298 5.15 Commercial Loans 8,277 8,201 7,281 -6.21
Total 10,494 10,610 10,097 -1.91
FINANCE Cos.208 253 304 20.89
REGIONAL S&LsCaja Rur+Muni+Edpym 298 414 570 38.30
TOTAL 11,000 11,277 10,971 -0.13
MIVIVIENDA* 34 104 232 160.09
US$ Million
PERUVIAN FINANCIAL SYSTEM - LOAN STRUCTURE
Source: Superintendencia de Banca y Seguros
* Includes: Loans from Banks, Finance Institut. and Regional S&Ls.
8
PRIVATE PENSION FUNDS(US$MM)
0
2,000
4,000
6,000
8,000
10,000
94 95 96 97 98 99 00 01 02 03 04(e)
0
2
4
6
8
10
12
14
% GDPFundsMUTUAL FUNDS
(US$MM)
0
500
1000
1500
2000
2500
97 98 99 00 01 02 03 04(e)
PERUVIAN FINANCIAL SYSTEM
An important disintermediation has taken place
Private Pension Funds reached US$6.4Bn as of Dec 2003. Mutual Funds amounted to US$2.0Bn
Stock prices are back to peak levels
CAPITAL MARKETS(US$ MM)
Corporate Bonds
Market Capitalization
BVL(Lima Stock Exchange)
0
300
600
900
1,200
1,500
1,800
2,100
2,400
91 92 93 94 95 96 97 98 99 00 01 02 03 04(e)
0
3,000
6,000
9,000
12,000
15,000
18,000
21,000
9
10
CREDICORP’S ORGANIZATION
BCP accounts for 85% of Credicorp’s assets
Ic
INV.CREDITO
Ic
INV.CREDITO
Industry Banking Banking Banking Insurance Investments BrokerageCountryship Peru/Bolivia Cayman Colombia Peru Peru USAOwnership 97% 100% 100% 76% 100% 100%Assets(US$Mn) 6,688 776 294 511 51 0.7Equity(US$Mn) 645 113 29 109 41 0.7Funds Adm(US$Mn) 1,034 664 26 NA NA NAN°Employees 5,583 53 306 1,107 NA 12N°Branches 213 1 15 37 NA 1
SECURITIES INC.
11
Credicorp Overview
* Based on 79.8 million net outstanding shares in all periods. The total number of shares is 94.4 million, 14.6 million are held by affiliates as treasury shares
Summary of Results (US$Mn) 12M02 12M03 Growth %
Net Interest Income 335.3 358.9 7.0Provisions 111.6 93.9 -15.9Other Income 374.8 424.7 13.3Claims on Insurance Activities 97.9 99.8 1.9Other Expenses 411.1 438.1 6.6BSCH Peru Merger Costs 1.7 18.6 994.1Translation Results -2.5 -2.7 8.0Earnings before Taxes and Min. Int. 85.3 130.5 53.0Income Tax -32.6 -39.7 21.8Minority Interest -10.3 -10.3 0.0NET INCOME 42.4 80.5 89.9EPS (US$) 0.53 1.01 90.6ROAE 5.27% 9.39% -
12
Credicorp Overview
* Includes transfers from Credicorp and others to Tequendama
**Includes income from ICSA
Earnings Contribution (US$Mn) 12M02 12M03 Growth %
Banco de Credito BCP 59.8 91.3 52.7
Pacifico Peruano Suiza 7.0 3.3 -52.9
Atlantic Security Bank 1.6 7.8 387.5
Tequendama* -17.2 -5.5 68.0
Credicorp & Others** -8.9 -16.3 -83.1
TOTAL INCOME 42.3 80.6 90.5
Total Assets 8619 8299 -3.7
Net Equity 824 911 10.6
13
(US$ Mn) BCP ASH PPS TequenCredicorp and
Others**Total
Net Income 96.2 10.9 10.7 0.1 (6.8) 111.1
Deferred taxes (0.2) (3.1) (0.8) (4.1)
Dividends received from Credicorp (0.5) (0.5)
Headquarters depreciation (0.7) (0.7)
PPS's losses from previous years (6.6)
Credicorp loss from Tequendama loan portfolio* (5.6) (5.6)
Investments Provisions (6.6) (6.6)
BCP's profit 1.1 1.1Net Income after adjusting 94.9 7.8 4.4 (5.5) (13.4) 88.2
(-) Minority Interest (3.6) - (1.1) - - (4.6)
Goodwill Amortization - - - - (2.9) (2.9)
Consol. Earnings Contrib.as of Dec'03 91.3 7.8 3.3 (5.5) (16.3) 80.6
Consol. Earnings Contrib.as of Dec'02 59.8 1.6 7.0 (17.2) (8.9) 42.3
Credicorp Overview, Break down
* Includes transfers from Credicorp and others to Tequendama
**Includes income from ICSA
14
2000 2001 2002 2003
Cash Dividend per share US$ (1) 0.10 0.40 * 0.30 0.40
Total Net Income US$Mn (3) 17.7 54.5 42.4 80.6
Total Outstanding Shares (Mn) (2) 94.4 94.4 94.4 94.4
Treasury Shares (Mn) 14.9 14.3 14.9 14.6
Avge.closing Price per share US$ (4) 8.9 8.2 8.5 10.3
Closing price per share US$ 6.0 8.8 9.4 13.4
Cash Payout (1) * (2) / (3) 53.3% 69.3% 66.8% 46.8%
Dividend Yield (1) / (4) 1.12% 4.90% 3.54% 3.87%
Credicorp - Dividend Payout
* Includes an extraordinary dividend of US$0.20 (Backus & Johnston)
15
16
Demand25%
Savings27% Time
48%
BCP & SubsidiariesBCP & Subsidiaries DEPOSIT & LOAN STRUCTURE DEPOSIT & LOAN STRUCTURE
BCP & SubsidiariesBCP & Subsidiaries DEPOSIT & LOAN STRUCTURE DEPOSIT & LOAN STRUCTURE
Loans
Mortgages14%
Credit Cards4%
Corporate43%
Middle Mkt25% PYME
10%
Consumer5%
Retail32%
US$ 4,102 MnUS$ 5,648 Mn
Deposits
Loans’ Interest Rates US$ S/.
Corporate 3.5% 3.8%Middle Mkt 6.6% 8.3%Mortgages 9.4% - -
PYME 40.0% 52.9%Consumer 15.5% 23.7%Credit Cards 20.9% 35.4%Figures as of Dec. 2003
17
BCP Peru - LOAN PORTFOLIOBCP Peru - LOAN PORTFOLIO
BCP Peru Dec 01 Dec 02 Dec 03 CAGR03/01
Comercial 2,313 2,434 2,477 3.5 Credit Cards 102 107 143 18.5 Consumer 109 87 100 -4.2 Mortgages 240 347 494 43.4 Micro-businesses 71 103 141 40.9Total 2,835 3,078 3,355 8.8
BCP Peru Market Share Dec 01 Dec 02 Dec 03
Credit Cards 40.4% 29.9% 30.2% Consumer 12.0% 9.0% 8.9% Mortgages 23.1% 29.5% 36.2% Micro-businesses 13.5% 18.0% 19.5%Total 20.5% 23.5% 27.9%
US$ Million
Source: Superintendencia de Banca y Seguros
18
349 346 343 323 334
136 143 147 168187
52 6378
5240
0
100
200
300
400
500
600
1999 2000 2001 2002 2003
Financ. Margin FEES Oth non-int
US$Million
BCP & SubsidiariesBCP & SubsidiariesInterest, Fees and Non-interest IncomeInterest, Fees and Non-interest Income
599554
542529537
CA
GR
:8.3
%
19
BCP OVERVIEWBCP OVERVIEW
Key Figures (US$Mn) 12M02 12M03 Growth %Deposits 6,422 5,648 -12.1Loans 4,610 4,102 -11.0Net Interest Income 323.5 334.1 3.3Provisions 108.9 89.6 -17.7Non-Interest Income 231.0 265.1 14.8Operating Expenses 353.9 355.8 0.5Merger Costs 1.7 18.8 1,005.9 Gains/Loss on Inflation Adjustment 4.9 -11.9 -342.9Income Tax 27.7 33.9 22.4NET INCOME 67.2 89.2 32.7OPEX / Income 55.8% 51.9% -CONTRIBUTION 59.8 91.3 52.7ROAE 11.96% 14.86% -
20
8.3
9.1 8.8 8.6
6.1
8.69.5
8.17.6
4.9
1999 2000 2001 2002 2003
BCP cons.
BCP w/o Bolivia
86
94
105109
133
89
98
115119
152
1999 2000 2001 2002 2003
Past due ratio(%)
Past due Coverage(%)
BCP’S LOAN QUALITYBCP’S LOAN QUALITY
21
• Positive trends during year 2003:
- Provisioning requirements declined in line with the improvement in the quality of loan portfolio- Significant growth of non interest income, 14.8% more than in year 2002- Operating cost remained under control
• Merger with BSCH Peru concluded successfully. Results are better than expected.
• Strong recovery of written-off loans in BCP and BSCH-Peru. US$15MM during 2003.
• Market share consolidated with a slight reduction in loans after BSCH-Peru acquisition.
• NIM continued falling due to excess liquidity in the market, increasing competition in middle market and retail segments, and growth in domestic capital market.
• Focus on the informal sector at outskirts of Lima. Large population density, very active in small businesses.
• Acquisition of 45% of Financiera Solucion. Ownership increased to 100%. Merger completed in February 2004.
BCP’S RESULTSBCP’S RESULTS
22
SUBSIDIARIES
23
ATLANTIC SECURITY BANK
Key Figures (US$Mn) 12M02 12M03 Growth %Assets 667 776 16.3Equity 110 113 2.7
Share Capital 40.7 40.7 0.0Unrealized gain/losses on investments -7.4 10.9 247.3Dividends -25.0 -26.7 -6.8Retained Earnings 96.3 77.1 -19.9Net Income 5.8 10.9 87.9
Net Loans 160 152 -5.0Investments 314 430 36.9Deposits 544 629 15.6Managed Funds 521 664 27.4NIM (%) 3.0 2.3 -PDLs/Loans - 2.4 -OPEX / Income (%) 37.9 22.5 -CONTRIBUTION 1.6 7.8 387.5
24
Key Figures (US$Mn) 12M02 12M03 Growth %Assets 475 446 -6.1Equity 57 56 -1.8Deposits 383 362 -5.5
Mkt Share (%) 12.7 12.5 -Loans 313 310 -1.0
Mkt Share (%) 11.7 12.2 -PDLs/Loans (%) 25.3 20.7 -Reserves/PDLs (%) 62.5 77.0 -NET INCOME 0.0 1.5 6,718.2 Losses at BCP -16.0 -12.4 22.5CONTRIBUTION -16.0 -10.9 31.8
25
Key Figures (US$Mn) 12M02 12M03Assets 265 294 10.9Equity 29 29 0.0Deposits 142 183 28.9Mkt Share (%) 0.7 0.8 -
Loans 205 226 10.2Mkt Share (%) 1.5 1.5 -
PDLs/Loans (%) 4.3 1.1 -Reserves/PDLs (%) 69.5 238.2 -NET INCOME -4.4 0.1 102.3Losses at Credicorp -12.8 -5.6 56.3CONTRIBUTION -17.2 -5.5 68.0
Growth %
26
* (Net claims + general expenses and commissions) / Net premiums
Key Figures (US$Mn) 12M02 12M03 Growth %Assets 417 511 22.5Equity 99 109 10.1Investments 245 327 33.5Premiums 253 289 14.3
General Insurance 158 166 5.4Health Insurance 26 24 -7.1Life Insurance 70 99 42.3
Mkt Share (%) 32.2 30.2 -Net Loss Ratio (%) 68.8 67.4 -Combined Ratio* (%) 96.3 100.0 -CONTRIBUTION 7.0 3.3 -52.9
27
Property & Casualty business lines will continue growing following the performance of the economy and experiencing reduced margins as aresult of increased competition
Life Insurance had 42% of growth during 2003. Growth should continue at high rates during 2004.
Acquisition of NovaSalud EPS cost US$6.5Mn. It will consolidate the Health Insurance System. This acquisition will increase premiums toabout US$76Mn annually. Merger cost estimated at US$0.9Mn
Health Insurance business should have attractive growth opportunities in the future to the extent that the government foresees a larger role for theprivate system.
During 2003 the contribution of PPS to Credicorp was lower than that of previous years. The reduction is primarily explained by adjustments forminority interests and reserves related to previous years which had notbeen registered in Credicorp’s books amounting to US$ 5.0 Mn.
28
Credicorp Overview Year 2003
1. Banco de Crédito BCP Continued pressure on financial margin due to increased corporate
funding in local capital market and higher competition in retail segment
Strong recovery of written-off loans contributed significantly to the growth in Non Interest Income.
During 2003 banking services grew by 12% mainly due to fees for debit & credit cards, checking accounts, mutual funds and transfers abroad
2. Banco de Crédito de Bolivia
Break even since 2H2003
Loan portfolio clean-up concluded
Focus on restructure following BCP´s business model
3. Atlantic Security Bank
Improved results in the investment portfolio changing from US$7MM loss to US$11 MM in non- realized gains
Reduction of risk profile of investment portfolio. Investment grade 10% in 2001, 37% in 2003
Growth in administered funds due to increased focus on wealth management
29
Credicorp Overview Year 2003
4. Pacífico Peruano Suiza Results benefitted from lower claims and growth in premiums Increased competition and higher reinsurance costs in property and casualty Attractive growth opportunities in life insurance with short-term
increase on reserves
5. Banco Tequendama Search for alternatives to provide viability for its business
Focus on personal loans, consumer and small businesses with an increase from 13% to 26% of portfolio.
30
Trends
Banco de Crédito BCP - Lower provisioning requirements, better quality of loan portfolio and improved profitability. Tax on financial transactions (ITF) will impact on market and fee income.
Banco de Crédito de Bolivia - Operations to be at break-even during this year. We anticipate that all provisioning requirements have been met.
Atlantic Security - Reduced risk profile, more stable earnings.
Banco Tequendama - Colombian operations at break-even. Focus on personal loans, consumer and small businesses.
Pacífico - Continues to provide positive contributions and improve profitability. 100%Acquisition of NovaSalud EPS. Increase in Life insurance and Life annuaties business.
Credicorp - Debt has been reduced, lower interest expense
Credicorp Outlook Year 2004
31
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.
MERRYL LYNCH ROUNDTABLE
Lima, March 2004
Walter Bayly
Chief Financial Officer Banco de Credito del Peru