Tags: Credicorp | BAP | financial | stocks

Peru’s Credicorp Eyes Slowdown

By    |   Thursday, 25 Aug 2011 03:14 PM

Peru's largest financial holding company, Credicorp (BAP), is confident that President Ollanta Humala’s cabinet will keep the Peruvian economy on its high growth path, but it is wary of a possible global economic slowdown that could impact demand for Peruvian exports.

Credicorp’s subsidiary, Peru’s largest bank, Banco de Credito (BCP), saw its loan book grow by 27.6 percent in the second quarter compared to a year ago and 10.4 percent from the previous quarter.

Overall, Banco de Credito’s loan growth is expected to reach 18 percent this year, which is three times Peru's expected GDP growth, but the bank could restrict credit growth if a global recession appears likely, Credicorp CEO Walter Bayly said earlier this month.

The bank is securing liquidity to make sure it would be adequately provisioned in case of another global recession. "We always have one eye on growth and the other on the negative scenario," said Bayly.

Despite market uncertainties due to the presidential elections, Credicorp reported better than expected results in the second quarter, posting a net profit of $174 million, up 7.6 percent from the same period in 2010.

Shares of Credicorp plunged after the election along with most Peruvian companies, but President Humala, who took office on July 28, has since moved to reassure investors by naming an orthodox cabinet.

This includes the reappointment of Central Bank President Julio Velarde, who helped Peru successfully navigate the 2008 global financial crisis. "We are extremely confident and relieved by the people leading the central bank and the finance ministry," said Bayly.

While corporate lending may slow in the third quarter as companies wait to see what economic policies the new government will implement, the domestic outlook is positive.

But if the global economy slides into recession, Peru could receive lower prices for the base metals it exports to developed economies. In this scenario, the government's most important job would be to work to secure foreign investment, said Bayly.

Foreign investment

Credicorp offers investors a local partner in Peru’s growing economy. In March, it formed a joint venture with global alternative asset manager The Carlyle Group that will invest primarily in Peruvian companies.

This will include companies in sectors such as retail, healthcare, education, and logistics that have benefitted from the growth of Peru’s middle class and rising consumer demand.

Credicorp has more than $17.5 billion in assets under management and is Peru’s market leader in pension and mutual funds.

In June, equities research analysts at Barclays Capital upgraded Credicorp to equal weight from underweight with a target ADR price of $115, which is around 25 percent higher than its current value.

Bank of America Merrill Lynch and Goldman Sachs both rate Credicorp neutral.

Credicorp is engaged principally in commercial banking, investment banking and insurance. In August, Credicorp’s subsidiary Grupo Credito reached an agreement to buy 49.9 percent of local insurance company Willis Peru. Credicorp reports next on Nov. 3.

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Peru's largest financial holding company, Credicorp (BAP), is confident that President Ollanta Humala s cabinet will keep the Peruvian economy on its high growth path, but it is wary of a possible global economic slowdown that could impact demand for Peruvian...
Credicorp,BAP,financial,stocks
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2011-14-25
Thursday, 25 Aug 2011 03:14 PM
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