Banco de Credito del Peru’s (BCP) historic role in building the country’s financial industry took a step forward last year, as it extended credit into previously untapped parts of the country, while retaining highly impressive profits.
Net earnings increased by 26% to $248 million in 2006, loans to the private sector increased by 14%, while 19 branches and 105 ATMs were opened. This was quite a turnaround after a difficult first half of 2006, when political instability during the presidential election impeded its performance.
Aida Kleffmann, BCP’s investor relations officer, says that Peru enjoys unprecedented financial stability and strong economic fundamentals, so sovereign risk should no longer be a constraint on growth. “The Peruvian financial system is today very stable, solid and healthy, and we do not see a risk of this changing in the foreseeable future. In fact, we think no changes are the best assurance of maintaining this healthy system.”
In practice, the world stands still for no bank, and BCP’s interest margins have been squeezed by intensified rivalry from HSBC and BBVA’s subsidiary Banco Continental. But BCP has maintained an impressively strong asset base and operated with exemplary efficiency. It has also responded with innovation. The bank has launched its ground-breaking branchless distribution channel Agente ViaBCP, which grew by an eye-opening 70% in 2006.
This system is designed to provide financial services to the poor, as well as expanding the bank’s loan portfolio for small and midsize enterprises, galvanizing growth from the bottom up.
“We are now targeting those large sectors of the population that are unbanked and whose economic impact is growing incredibly fast. We believe that by doing this, we are not only contributing to the development of the financial system through increasing the level of bank penetration, but also shifting the structure of our portfolio,” says Kleffmann.
Indeed, with the banking sector serving only 4 million among an economically active population of 13 million, there is plenty of room for organic growth to meet BCP’s target of 50% retail lending in the next couple of years. This should entrench its position as Peru’s predominant financial institution, with one-third control of the country’s banking system.
Such is BCP’s strong profitability and risk profile that in March this year, Standard & Poor’s raised its rating to investment grade BBB-, one notch above the foreign currency sovereign rating on Peru. S&P analyst Federico Rey-Marino cites the bank’s “superior liquidity, traditional stability of its deposit base during past crises, strong retail franchise, strong business and financial diversification, and very solid financial performance” as reasons for the upgrade.
Buoyed by this strong credit rating, BCP successfully weathered market volatility in August to issue a $500 million diversified payment rights securitization. This was only the second 10-year debt deal in the international markets by a Peruvian bank, and the country’s single largest corporate issue to date.