Credicorp Ltd.

Good morning, everyone. I would like to welcome all of you to the Credit Corp Limited fourth quarter 2023 conference call. A slide presentation will accompany today's webcast, which is available in the investor section of Credit Corp's website. Today's conference call is being recorded. As a reminder, all participants will be in a 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 star and one on your telephone keypads. If you have connected to the call using the HD web phone on your computer, please use the keypad on your computer screens. If you are using a speaker phone, 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 call over to Credit Corp's IRO, Malagros Siguenes. You may begin.

Thank you and good morning, everyone. Speaking on today's call will be Gianfranco Ferrari, our Chief Executive Officer, and Cesar Rios, our Chief Financial Officer. Participating in the Q&A session will also be Francesca Raffo, Chief Innovation Officer, Reinaldo Llosa, Chief Risk Officer, Diego Cabrera, Head of Universal Banking, Cesar Rivera, Head of Insurance and Pensions, and Carlos Otelo, CFO at MiBanco. Before we proceed, I would like to make the following safe harbor statement. 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. And I refer you to a forward-looking statement section of our earnings release and recent findings 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 start the call commenting on the highlights of our 2023 results and the milestones achieved by our main businesses, followed by Cesar Rios, who will comment on the market environment, our financial performance, and provide our 2024 guidance. Gianfranco, please go ahead.

Thank you, Miragros. Good morning, everyone. Thank you for joining us. We met market expectations for the fourth quarter and achieved resilient full-year results in the face of one of the most challenging environments of the last 25 years, excluding the pandemic. Despite the challenge facing 2023, Peru's current prospects stand considerably stronger than they did just 12 months ago. At the start of 2023, we were navigating disruptive protests and enduring political instability. The first quarter also had an inflation rate of 8% and a high reference rate of 7.75%. Additionally, the country faced Cyclone Yaku and braced for the projected impact of a severe El Niño phenomenon for this summer. However, as the year ended, Peru demonstrated its inherent resilience by effectively managing inflation, maintaining low levels of public debt, and sustaining high levels of international results. The current stable yet fragile political environment improving macro with inflation down to 3.2% and the reference rate at 625, as well as lower probabilities for a severe El Nino, starkly contrasts with the conditions at the beginning of 2023. At Credit Corp., we have strategically built a diverse portfolio of businesses characterized by a robust brand recognition and strong customer loyalty. Our strength is further bolstered by a solid capital base and a prudently managed loan portfolio. Our digital capabilities have been key to enhancing our transactional and funding advantages, enabling us to respond swiftly in volatile environments. As an example, at the onset of the year when we foresaw a challenging trade cycle in 2023, we quickly reassessed our risk appetite and adjusted the pricing of our portfolio accordingly. By providing payment facilities to our clients when they needed it the most, we also fortified our client relationships. We delivered a full-year ROE of 15.8%, which includes a substantial charge in the fourth quarter attributed to expected losses linked to the El Nino phenomenon. This result was underpinned by the strength of our increasing NII. We maintain a resilient risk-adjusted NIMS achieved through disciplined interest rate pass-throughs in the first half of the year. Additionally, we prepared our balance sheet for the declining interest rate cycle by reducing the duration of our liabilities and increasing that of our investment portfolio. Having strengthened our transactional value proposition, we secured the sustainability of our funding advantage. Finally, we leveraged our cost-effective digital platforms to accelerate growth in the retail segment. We reinforced our diligent approach to risk management while maintaining a close connection to customers. These strategic moves not only allowed us to sustain adequate capital levels, but also equipped us to anticipate and minimize headwinds in loan quality throughout the year. We remain committed to advancing innovation and our digital capabilities, which strengthen our competitive position. This approach not only enhanced our existing client relationships, but also paved the way for greater financial inclusion. For 2024, we anticipate an improvement in macroeconomic conditions. Our GDP outlook is now 2.5%, with a potential upside considering the lower risk of a strong El Niño. Moreover, the central bank's reduction of the reference rate lays the foundation for a gradual recovery in domestic demand and consumption. Additionally, we anticipate proactive government initiatives to facilitate the unlocking of macro projects in both the public and private sectors, particularly in mining and infrastructure. Next slide, please. A well-balanced and diversified business portfolio reinforce our results. In universal banking, BCP solidified local market leadership by expanding transactional levels and offering a seamless multi-channel experience. Mobile banking NPS improved with a growing digital client base. Enhanced IT and digital capabilities supported a low cost of funds, risk management, and digital sales. These factors collectively contributed to optimizing efficiency. In microfinance, Nibanco Peru has been negatively influenced by the challenging macro I already described. While we adjusted our risk appetite and implemented stricter origination guidelines in mid-2022, we acknowledged that these efforts were not sufficient. It took us time to fully grasp the impact of this concurrent event on our clients, but we have now made heightened adjustments. The legacy portfolio continues to impact our performance, yet our most recent vintages demonstrate improvement. We continue to assess our risk management capabilities, confident in our tools for further refinement. In the medium term, we aim to diversify our business through increased transactional and fee-based activities. Given the structural challenges in Colombia, we are revaluating the business there and will adjust our strategy to mitigate short-term risk while maintaining focus on its long-term potential. In insurance, an accelerated digital strategy has led to an improved client NPS, increased sales of digital policies, and self-service customer transactions. We optimized distribution channels, notably in retail segments, resulting in the best year in its history. We leveraged bank assurance and YAPE, to strengthen our presence and expect to deliver a long-term sustainable ROE of 20-plus percent. In wealth management and advisory, we've completed the first phase of the restructuring plan, strengthening the business and meeting our 2023 targets. We are on track to achieving our objective of a sustainable ROE in the high teens. At Credit Corp, sustainability is integrated in our strategy, driving us to act as catalysts for positive change in the operating countries. In addition to our achievement in financial inclusion in 2023, we launched our new corporate environmental strategy, communicating it in our first TCFD report in December. We're investing in our innovation portfolio to complement our lines of business, aiming for disruptive initiatives to contribute 10% of Credit Corp's risk-adjusted income by 2025. Now, let's have a look at how we're progressing in our most mature initiatives. Next slide, please. Our approach to disruptive initiatives involves a nuanced perspective, an early-stage plus VC view that guides informed graduation decisions within our portfolio. A mature example is Tempo in Chile, which entered the scaling stage this year with a dedicated focus on revenue growth and monetization. Additionally, IAPE intensifies focus on revenue growth and is on track to break even towards in 2024. Tessa will provide a more detailed update on IAPE, but I would like to shift our attention to the rapidly growing Tempo. We started with a prepaid payment business, achieving exponential growth in monthly active users and engagement. Currently, we're in the second stage, leveraging our recently obtained license to issue credit cards, positioning Tempo as the first fully digital credit card issuer in Chile. We've also filed for a full banking license, with early indicators from stage one and stage two surpassing our expectations, We're optimistic about the strong potential of this new initiative. As we look ahead, our innovation approach will increasingly encompass the area of cognitive AI, where we are already making progress. We're targeting high-impact transformations across internal processes, external engagement, and most notably in customer experience through unique tailored interactions. Focusing first on productivity and customer experience, we're implementing short-term value generation opportunities throughout specific use cases. We're also initiating the development of transformative use cases, envisioning innovation that propels us into sustained progress and evolution. This holistic approach is supported by a comprehensive framework which ensures the responsible and secure implementation of AI. Cesar, please go ahead.