Credicorp Ltd.

Good morning, everyone. I would like to welcome all of you to Credit Corp LTD's second quarter 2020 conference call. We now have all of our speakers in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of today's presentation, we will open the floor for questions. At that time, instructions will be given as to the procedure to follow if you would like to ask a question. With us today is Mr. Walter Bailey, Chief Executive Officer of Mr. Gianfranco Ferrari, Deputy Chief Executive Officer. Mr. Alvaro Correa, Deputy Chief Executive Officer. Mr. Renato Loza, Chief Risk Officer. Mr. Cesar Rios, Chief Financial Officer. Ms. Francesca Raffo, Deputy CEO of BCP. And Ms. Milagros Siguenes, Investor Relations Officer. It is now my pleasure to turn the conference over to Credit Corp's Investor Relations Officer, Ms. Milagros Cingüenes. Ms. Cingüenes, you may begin.

Good morning, everyone, and welcome to Credit Corp's conference call. Before our short presentation, I would like to invite you to our Credit Corp Day event, which will be held virtually on October 1, 2020. the same month that we will celebrate the 25th anniversary of the listing of our stock on the New York Stock Exchange. Next week, we will be releasing our formal save the date. But in the meantime, please bear in mind that the event will be at 9.30 a.m. Eastern Time on October 1st, 2020. And we look forward to seeing all of our investors in the news. Thank you very much. Go ahead, Cesar.

Thank you, Milagros. Good morning. Good morning. and welcome to Credit Corp's conference call on our earnings results for the second quarter of 2020. Since our previous conference call, the COVID-19 pandemic has continued to wreck havoc worldwide, and certainty remains regarding the course that COVID-19 will follow. The urban economy activity was severely hit during the second quarter of 2020. In April, economic activity fell 40% year-over-year, and in May declined 33% year-over-year. Our estimates suggest a contraction around 20% year-over-year in June. Nonetheless, there are already clear signs of economic reactivation. First, electricity demand has begun to register a gradual recovery. Last week, demand reflected only a 4% decrease in year-over-year terms after falling around 31% year-over-year in the worst weeks of April and May. Second, our aggregated week indicator, which includes transactional data, suggests that household consumption has recovered 77% of its pre-pandemic level. Third, employment indicators deteriorated notably in the second quarter of 2020. The occupied economically active population in metropolitan Libya registered an uptick in June. All in all, in our opinion, GDP figures for the third quarter of 2020 should show significant improvement compared to the second quarter of 2020. If a new lockdown were necessary, we expect it to be focalized. As such, the world appears to be behind for GDP figures. Next slide, please. In the current context, we expect the economy to show lower levels of year-over-year contraction in the months ahead. Specifically, we foresee upcoming quarter-over-quarter expansion after the decline in the second quarter. Our estimates with available data suggest that GDP may contract between 11% and 15% in 2023. For 2021, we expect that GDP to rebound between 6% and 10%, underpinned by the economic measures adopted. In terms of growth, Peru is positioned to register the highest rebounds in the region, driven by large-scale economic stimulus programs, which represent around 26% of GDP. In our last conference call, economic measures represented approximately 20% of GDP. Since then, additional measures have been announced, most of which focus on economic reactivation. The most recent economic measures include Arranca Perú, a role maintenance and temporary employment program that represents almost 1% of GDP. Importantly, the program aims to create around 1 million temporary jobs in the short term. In addition, The government plans to bolster investment projects through the government-to-government scheme that was used for Lima's 2019 Pan American Games. The scheme will be used to reconstruct the north of the country and to drive investment projects in the health and education sectors. All of these investments are equivalent to seven points of GDP over time. Other new measures, since our last conference call, include the implementation of liquidity provision programs, such as the new PIE, Sponsored Enterprises, and this includes PIE Tourism and PIE Agro, which adds 3.5 billion soles of fresh working capital. We believe that this will lead to a collective recovery in Latin America towards 2021, due to both economic measures implemented and the country's strong macroeconomic fundamentals. Next slide, please. The country's economic reactivation is reflected in the recovery of the financial system. Transactional data for credit and debit cards indicates considerable acceleration from the lows of April and May, both in the financial system and at DCP. This trend is expected to continue in coming months. Additionally, the financial system is currently highly liquid. In this case, highly liquidity has been driven, among other factors, by the implementation of the Reactiva Peru program, which is currently in its second phase. This program consists of two phases of 30 billion solid each to provide working capital loans with government-backed guarantees and liquidity provided by the central bank. The liquidity held in central banks who are in account by the banking sector currently stands around 20 billion soles, where the liquidity indicator stood around 3 billion soles in normal times. The Reactiva Peru program has supported private sector loans, and as of June, total loans of this segment grew around 13% year-over-year, as we exclude Reactiva loans growth drops to around 4% year-over-year. The central bank expects private sector loans to increase around 15% in 2020, spewed by the Reactiva Peru program. Next slide, please. Despite these trying times, our priorities remain unchanged. As a leading organization, we are committed to protecting and supporting all of our stakeholders. Regarding our employees, we are providing personal medical coverage for COVID-19-related illness. At the branch level, we continue to protect occupational health and have balanced performance indicators to monitor service, loan portfolio management, and sales. Finally, 95% of our support functions employees are working remotely and will continue to do so at least through 2020. Productivity remains high during this period. Our focus is on alleviating our clients' financial duress. We have offered medium-term solutions as structural programming facilities and continue to offer skills. We are helping SME clients boost their sales by offering no-cost advertising to our digital channel and providing free business education platforms. In addition, all Pacific Health Insurance clients have been guaranteed 100% coverage for COVID-19-related illness. We have worked to ensure business continuity in this rapidly changing scenario. This has been possible thanks to the commitment of more than 35,000 employees who have worked tirelessly to provide essential services. We have taken target security measures and are bolstering capacity management across channels. Finally, we have actively managed liquidity and solvency to preserve the solid the financial conditions of our businesses. Excuse me for the interruption, Milagros. I think there is some problem with the line. Could you confirm that, please?