UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM 20-F
¨
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE
SECURITIES
EXCHANGE ACT OF 1934
OR
x ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the
fiscal year ended December 31, 2009
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE
ACT OF 1934
OR
¨ SHELL
COMPANY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
Date of
event requiring this shell company report ______________
For the
transition period from to
Commission
file number 1-14014
CREDICORP
LTD.
|
(Exact
name of registrant as specified in its
charter)
|
BERMUDA
|
(Jurisdiction
of incorporation or
organization)
|
Of
our subsidiary
|
Banco
de Crédito del Perú:
|
Calle
Centenario 156
|
La
Molina
|
Lima
12, Perú
|
(Address
of principal executive
offices)
|
Alvaro
Correa
|
Chief
Financial Officer
|
Credicorp
Ltd
|
Banco
de Crédito del Perú:
|
Calle
Centenario 156
|
La
Molina
|
Lima
12, Perú
|
Phone
(+511) 313 2140
|
Facsimile
(+511) 313 2121
|
(Name,
Telephone, Email and/or Facsimile number and Address of Company Contact
Person)
|
Securities
registered or to be registered pursuant to Section 12(b) of the
Act.
Title of each class
|
Name of each exchange on which registered
|
Common
Shares, par value $5.00 per share
|
New
York Stock Exchange
|
Securities registered or to be
registered pursuant to Section 12(g) of the
Act.
None
Securities for which there is a
reporting obligation pursuant to Section 15(d) of the
Act.
None
Indicate the number of outstanding
shares of each of the issuer’s classes of capital or common stock as of the
close of the period covered by the annual
report. Common Shares, par value $5.00 per
share 94,382,317
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes x No ¨
If
this report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
Yes ¨ No x
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes x No ¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes x No ¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act.
|
Large
accelerated filer x
|
Accelerated
filer ¨
|
Non-accelerated
filer o
|
|
Indicate
by check mark which basis of accounting the registrant has used to prepare the
financial statements included in this filing:
U.S. GAAP ¨
|
International
Financial Reporting Standards as issued
|
Other ¨
|
|
by the International Accounting
Standards Board x
|
|
If
“Other” has been checked in response to the previous question, indicate by check
mark which financial statement item the registrant has elected to
follow.
Item
17 ¨ Item
18 x
If
this is an annual report, indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act).
TABLE
OF CONTENTS
|
|
|
|
PRESENTATION
OF FINANCIAL INFORMATION
|
1
|
CAUTIONARY
STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS
|
2
|
|
|
PART
I
|
|
|
|
|
|
ITEM
1.
|
IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|
3
|
ITEM
2.
|
OFFER
STATISTICS AND EXPECTED TIMETABLE
|
3
|
ITEM
3.
|
KEY
INFORMATION
|
3
|
ITEM
4.
|
INFORMATION
ON THE COMPANY
|
12
|
ITEM
4A.
|
UNRESOLVED
STAFF COMMENTS
|
87
|
ITEM
5.
|
OPERATING
AND FINANCIAL REVIEW AND PROSPECTS
|
87
|
ITEM
6.
|
DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES
|
112
|
ITEM
7.
|
MAJOR
SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
117
|
ITEM
8.
|
FINANCIAL
INFORMATION
|
121
|
ITEM
9.
|
THE
OFFER AND LISTING
|
123
|
ITEM
10.
|
ADDITIONAL
INFORMATION
|
127
|
ITEM
11.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
128
|
ITEM
12.
|
DESCRIPTION
OF SECURITIES OTHER THAN EQUITY SECURITIES
|
138
|
ITEM
13.
|
DEFAULTS,
DIVIDEND ARREARAGES AND DELINQUENCIES
|
139
|
ITEM
14.
|
MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
|
139
|
ITEM
15.
|
CONTROLS
AND PROCEDURES
|
139
|
ITEM
15T.
|
CONTROLS
AND PROCEDURES
|
143
|
ITEM
16A.
|
AUDIT
COMMITTEE FINANCIAL EXPERT
|
143
|
ITEM
16B.
|
CODE
OF ETHICS
|
143
|
ITEM
16C.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
143
|
ITEM
16D.
|
EXEMPTIONS
FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
|
144
|
ITEM
16E.
|
PURCHASES
OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
|
145
|
ITEM
16F.
|
CHANGE
IN REGISTRANT’S CERTIFYING ACCOUNTANT
|
145
|
ITEM
16G.
|
CORPORATE
GOVERNANCE
|
145
|
ITEM
17.
|
FINANCIAL
STATEMENTS
|
149
|
ITEM
18.
|
FINANCIAL
STATEMENTS
|
149
|
ITEM
19.
|
EXHIBITS
|
150
|
PRESENTATION
OF FINANCIAL INFORMATION
Unless
otherwise specified or the context otherwise requires, references in this Form
20-F (also referred to as the Annual Report), to “$,” “US$,” “Dollars,” “foreign
currency” or “U.S. Dollars” are to United States Dollars, and references to
“S/.”, “Nuevo Sol” or “Nuevos Soles” are to Peruvian Nuevos Soles. Each Nuevo
Sol is divided into 100 céntimos (cents).
Credicorp
Ltd. is a Bermuda limited liability company (and is referred to in this Annual
Report as Credicorp, we, or us, and means either Credicorp as a separate entity
or as an entity together with our consolidated subsidiaries, as the context may
require). We maintain our financial books and records in U.S. Dollars and
present our financial statements in accordance with International Financial
Reporting Standards (IFRS), as issued by the International Accounting Standards
Board (IASB). IFRS differ in certain respects from United States Generally
Accepted Accounting Principles (U.S. GAAP).
We
operate primarily through our four operating segments: banking (including
commercial and investment banking), insurance, pension funds, and brokerage and
other. See information about operating segments in “Item 4.-Information on the
Company: (A) History and Development of the Company, and (B) Business
Overview”.
Our four
principal subsidiaries are Banco de Crédito del Perú (which, together with its
consolidated subsidiaries, is referred to as BCP), Atlantic Security Holding
Corporation (which, together with its consolidated subsidiaries, is referred to
as ASHC), El Pacífico-Peruano Suiza Compañía de Seguros y Reaseguros (which,
together with its consolidated subsidiaries, is referred to as Pacífico Peruano
Suiza or PPS) and Grupo Crédito S.A. (which, together with its consolidated
subsidiaries, including the main subsidiary Prima AFP, is referred to as Grupo
Crédito). BCP’s activities include commercial banking, investment banking and
retail banking. As of and for the year ended December 31, 2009, BCP
accounted for 72.8% of our total revenues, 87.2% of our total assets, 84.6% of
our net income and 70.6% of our net equity. Unless otherwise specified, the
individual financial information for BCP, ASHC, PPS and Grupo Crédito included
in this Annual Report has been derived from the audited consolidated financial
statements of each such entity. See “Item 3. Key
Information—(A) Selected Financial Data” and “Item 4. Information on the
Company—(A) History and Development of the Company.”
“Item 3.
Key Information—(A) Selected Financial Data” contains key information related to
our performance. This information was obtained mainly from our consolidated
financial statements as of December 31, 2005, 2006, 2007, 2008 and
2009.
Our
management’s criteria on foreign currency translation, for the purpose of
preparing the Credicorp Consolidated Financial Statements, is described in “Item
5. Operating and Financial Review and Prospects—(A) Operating Results—(1)
Critical Accounting Policies—Foreign Currency Translation.”
Some of
our subsidiaries maintain their operations and balances in Nuevos Soles. As a
result, this Annual Report contains certain Nuevo Sol amounts translated into
U.S. Dollars which is solely for the convenience of the reader. You should not
construe any of these translations as representations that the Nuevo Sol amounts
actually represent such equivalent U.S. Dollar amounts or could be converted
into U.S. Dollars at the rate indicated as of the dates mentioned herein, or at
all. Unless otherwise indicated, these U.S. Dollar amounts have been translated
from Nuevos Soles at an exchange rate of S/.2.89 = US$1.00, which is the
December 31, 2009 exchange rate set by the Peruvian Superintendencia de Banca,
Seguros y AFP (the Superintendency of Banks, Insurance and Pension Funds, or the
SBS). The average of the bid and offered free market exchange rates published by
the SBS for June 14, 2010 was S/.2.843 per US$1.00. Translating amounts
expressed in Nuevos Soles on a specified date (at the prevailing exchange rate
on that date) may result in the presentation of U.S. Dollar amounts that are
different from the U.S. Dollar amounts that would have been obtained by
translating Nuevos Soles on another specified date (at the prevailing exchange
rate on that different specified date). See also “Item 3. Key
Information—(A) Selected Financial Data—Exchange Rates” for information
regarding the average rates of exchange between the Nuevo Sol and the U.S.
Dollar for the periods specified therein. The Federal Reserve Bank of New York
does not publish a noon buying rate for Nuevos Soles.
CAUTIONARY
STATEMENT WITH RESPECT TO
FORWARD-LOOKING
STATEMENTS
Certain
statements contained in this Annual Report are not historical facts, including,
without limitation, certain statements made in the sections entitled “Item 3.
Key Information,” “Item 4. Information on the Company,” “Item 5. Operating and
Financial Review and Prospects” and “Item 11. Quantitative and Qualitative
Disclosures about Market Risk,” which are forward-looking statements within the
meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E
of the U.S. Securities Exchange Act of 1934 (or the Exchange Act). These
forward-looking statements are based on our management’s current views and
assumptions and involve known and unknown risks and uncertainties that could
cause actual results, performance or events to differ materially from those
expressed or implied in the forward-looking statements. Therefore, actual
results, performance or events may be materially different from those in the
forward-looking statements due to, without limitation:
|
·
|
general
economic conditions, including in particular economic conditions in
Peru;
|
|
·
|
performance
of financial markets, including emerging
markets;
|
|
·
|
the
frequency and severity of insured loss
events;
|
|
·
|
currency
exchange rates, including the Nuevo Sol/U.S. Dollar exchange
rate;
|
|
·
|
increasing
levels of competition in Peru and other emerging
markets;
|
|
·
|
changes
in laws and regulations;
|
|
·
|
changes
in the policies of central banks and/or foreign governments;
and
|
|
·
|
general
competitive factors, in each case on a global, regional and/or national
basis.
|
See “Item 3. Key
Information—(D) Risk Factors,” and “Item 5. Operating and Financial Review and
Prospects.”
We are
not under any obligation to, and we expressly disclaim any such obligation to,
update or alter our forward-looking statements, whether as a result of new
information, future events or otherwise.
PART
I
ITEM
1.
|
IDENTITY
OF DIRECTORS, SENIOR MANAGEMENT AND
ADVISERS
|
Not
applicable.
ITEM
2.
|
OFFER
STATISTICS AND EXPECTED TIMETABLE
|
Not
applicable.
(A)
|
Selected
Financial Data
|
The
following table presents a summary of our consolidated financial information at
the dates and for the periods indicated. This selected financial data is
presented in U.S. Dollars. You should read this information in conjunction with,
and qualify this information in its entirety by reference to, the Credicorp
Consolidated Financial Statements, which are also presented in U.S.
Dollars.
The
summary of our consolidated financial data as of, and for the years ended,
December 31, 2005, 2006, 2007, 2008 and 2009 is derived from the Credicorp
Consolidated Financial Statements audited by Medina, Zaldívar, Paredes &
Asociados S.C.R.L, member of Ernst & Young Global, independent registered
public accountants.
The
report of Medina, Zaldívar, Paredes & Asociados S.C.R.L on the Credicorp
Consolidated Financial Statements as of December 31, 2008 and 2009 and for the
years ended December 31, 2007, 2008 and 2009 appears elsewhere in this Annual
Report.
SELECTED
FINANCIAL DATA
|
|
Year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands, except percentages, ratios,
and per common share data)
|
|
INCOME
STATEMENT DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
US$
612,432 |
|
|
US$
782,002 |
|
|
US$
1,065,339 |
|
|
US$
1,382,844 |
|
|
US$
1,312,925 |
|
Interest
expense
|
|
(173,159 |
) |
|
(283,478 |
) |
|
(431,365 |
) |
|
(561,617 |
) |
|
(420,564 |
) |
Net
Interest income
|
|
439,273 |
|
|
498,524 |
|
|
633,974 |
|
|
821,227 |
|
|
892,361 |
|
Provision
for loan losses (1)
|
|
6,356 |
|
|
4,243 |
|
|
(28,439 |
) |
|
(48,760 |
) |
|
(163,392 |
) |
Net
interest income after provision for loan losses
|
|
445,629 |
|
|
502,767 |
|
|
605,535 |
|
|
772,467 |
|
|
728,969 |
|
Fees
and commissions from banking services
|
|
206,163 |
|
|
243,778 |
|
|
324,761 |
|
|
394,247 |
|
|
436,819 |
|
Net
gains (loss) from sales of securities
|
|
8,965 |
|
|
27,281 |
|
|
46,376 |
|
|
51,936 |
|
|
120,932 |
|
Net
gains on foreign exchange
transactions
|
|
29,286 |
|
|
41,638 |
|
|
61,778 |
|
|
108,709 |
|
|
87,944 |
|
Net
premiums earned
|
|
218,955 |
|
|
251,261 |
|
|
297,272 |
|
|
393,903 |
|
|
424,682 |
|
Other
income
|
|
21,571 |
|
|
26,197 |
|
|
90,022 |
|
|
37,672 |
|
|
74,936 |
|
Claims
on insurance activities
|
|
(175,500 |
) |
|
(186,522 |
) |
|
(238,600 |
) |
|
(341,910 |
) |
|
(286,458 |
) |
Operating
expenses
|
|
(477,073 |
) |
|
(585,058 |
) |
|
(747,089 |
) |
|
(920,603 |
) |
|
(957,110 |
) |
Merger
costs
|
|
0 |
|
|
(5,706 |
) |
|
0 |
|
|
0 |
|
|
0 |
|
Income
before translation result and income tax
|
|
277,996 |
|
|
315,636 |
|
|
440,055 |
|
|
496,421 |
|
|
630,714 |
|
Translation
result
|
|
(9,597 |
) |
|
15,216 |
|
|
34,627 |
|
|
(17,650 |
) |
|
12,222 |
|
Income
tax
|
|
(73,546 |
) |
|
(83,587 |
) |
|
(102,287 |
) |
|
(109,508 |
) |
|
(138,500 |
) |
Net
income
|
|
194,853 |
|
|
247,265 |
|
|
372,395 |
|
|
369,263 |
|
|
504,436 |
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income attributable to Credicorp’s equity holders
|
|
181,885 |
|
|
230,013 |
|
|
350,735 |
|
|
357,756 |
|
|
469,785 |
|
Minority
interest
|
|
12,968 |
|
|
17,252 |
|
|
21,660 |
|
|
11,507 |
|
|
34,651 |
|
Number
of shares as adjusted to reflect changes in capital
|
|
79,761,475 |
|
|
79,761,475 |
|
|
79,761,475 |
|
|
79,761,475 |
|
|
79,591,225 |
|
Net
income per common share attributable to Credicorp´s equity holders
(2)
|
|
2.28 |
|
|
2.88 |
|
|
4.40 |
|
|
4.49 |
|
|
5.90 |
|
Diluted
net income per share
|
|
2.28 |
|
|
2.88 |
|
|
4.40 |
|
|
4.49 |
|
|
5.90 |
|
Cash
dividends declared per common share
|
|
1.10 |
|
|
1.30 |
|
|
1.50 |
|
|
1.50 |
|
|
1.70 |
|
BALANCE
SHEET DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IFRS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
11,036,075 |
|
|
12,881,529 |
|
|
17,705,898 |
|
|
20,821,069 |
|
|
22,028,107 |
|
Total
loans (3)
|
|
4,972,975 |
|
|
5,877,361 |
|
|
8,183,845 |
|
|
10,456,284 |
|
|
11,505,319 |
|
Reserves
for loan losses (1)
|
|
(218,636 |
) |
|
(210,586 |
) |
|
(229,700 |
) |
|
(248,063 |
) |
|
(376,049 |
) |
Total
deposits
|
|
7,067,754 |
|
|
8,799,134 |
|
|
11,299,671 |
|
|
13,877,028 |
|
|
14,038,710 |
|
Equity
attributable to Credicorp’s equity holders
|
|
1,190,440 |
|
|
1,396,822 |
|
|
1,676,009 |
|
|
1,689,172 |
|
|
2,316,856 |
|
Minority
interest
|
|
101,515 |
|
|
136,946 |
|
|
139,264 |
|
|
106,933 |
|
|
186,496 |
|
Net
Equity
|
|
1,291,955 |
|
|
1,533,768 |
|
|
1,815,273 |
|
|
1,796,105 |
|
|
2,503,352 |
|
|
|
Year ended December 31,
|
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
|
(U.S. Dollars in thousands, except percentages, ratios,
and per common share data)
|
SELECTED
RATIOS
|
|
|
|
|
|
|
|
|
|
|
IFRS:
|
|
|
|
|
|
|
|
|
|
|
Net
interest margin (4)
|
|
4.90%
|
|
4.64% |
|
4.50% |
|
4.46% |
|
4.70% |
Return
on average total assets (5)
|
|
1.81% |
|
1.92% |
|
2.29% |
|
1.86% |
|
2.19% |
Return
on average equity attributable to Credicorp’s equity holders
(6)
|
|
16.39% |
|
18.44% |
|
22.67% |
|
20.21% |
|
23.72% |
Operating
expenses as a percentage of net interest and non-interest income
(7)
|
|
46.25% |
|
50.26% |
|
50.62% |
|
40.27% |
|
46.18% |
Operating
expenses as a percentage of average assets
|
|
4.74% |
|
4.89% |
|
4.88% |
|
4.78% |
|
4.47% |
Equity
attributable to Credicorp’s equity holders as a percentage of period end
total assets
|
|
10.79% |
|
10.84% |
|
9.47% |
|
8.11% |
|
10.52% |
Regulatory
capital as a percentage of risk weighted assets (8)
|
|
13.10% |
|
11.98% |
|
12.80% |
|
12.33% |
|
14.32% |
Total
past-due loan amounts as a percentage of total loans (9)
|
|
1.93% |
|
1.31% |
|
0.75% |
|
0.79% |
|
1.60% |
Reserves
for loan losses as a percentage of total loans
|
|
3.97% |
|
3.24% |
|
2.58% |
|
2.15% |
|
3.08% |
Reserves
for loan losses as a percentage of total loans and other contingent
credits (10)
|
|
3.19% |
|
2.59% |
|
2.17% |
|
1.84% |
|
2.53% |
Reserves
for loan losses as a percentage of total past-due loans
(11)
|
|
206.22% |
|
247.85% |
|
343.68% |
|
270.72% |
|
191.99% |
Reserves
for loan losses as a percentage of substandard loans (12)
|
|
65.42% |
|
78.24% |
|
100.45% |
|
112.26% |
|
99.45% |
(1)
|
Provision
for loan losses and reserve for loan losses include provisions and
reserves with respect to total loans and contingent credits, net of
write-off recoveries.
|
(2)
|
We
have 100 million authorized common shares. As of December 31, 2009, we had
issued 94.4 million common shares, of which 14.6 million were held by
ASHC. The per common share data given considers net outstanding shares
(common shares net of shares held by BCP, ASHC and PPS) of 79.7 million in
2002 to 2009. See
Notes 16 and 25 to the Credicorp Consolidated Financial
Statements.
|
(3)
|
Net
of unearned interest, but prior to reserve for loan losses. In addition to
loans outstanding, we had contingent loans of US$1,220.9 million,
US$1,455.4 million, US$1,564.5 million, US$1,755.9 million and US$2,528.1
million, as of December 31, 2005, 2006, 2007, 2008 and 2009, respectively.
See Note 19 to
the Credicorp Consolidated Financial
Statements.
|
(4)
|
Net
interest income as a percentage of average interest-earning assets,
computed as the average of period-beginning and period-ending balances on
a monthly basis.
|
(5)
|
Net
income as a percentage of average total assets, computed as the average of
period-beginning and period-ending
balances.
|
(6)
|
Net
income as a percentage of average equity attributable to our equity
holders, computed as the average of period-beginning and period-ending
balances, and calculated on a monthly
basis.
|
(7)
|
Sum
of the salaries and employee’s benefits, administrative expenses,
depreciation and amortization, as a percentage of the sum of net interest
income and non-interest income, less net gains from sales of securities
and other income.
|
(8)
|
Regulatory
capital calculated in accordance with guidelines by the Basel Committee on
Banking Regulations and Supervisory Practices of International Settlements
(or the BIS I Accord) as adopted by the SBS. See “Item 5. Operating
and Financial Review and Prospects—(B) Liquidity and Capital
Resources—Regulatory Capital and Capital Adequacy
Ratios.”
|
(9)
|
BCP
considers loans past due after 90 days for installment loans, which
include mortgage loans but exclude consumer loans. ASHC considers past due
all overdue loans except for consumer loans, which are considered past due
when the scheduled principal and/or interest payments are overdue for more
than 90 days. For IFRS 7 disclosure requirements on past-due loans, See Note 29.1 to the
Credicorp Consolidated Financial Statements. See “Item 4.
Information on the Company—(B) Business Overview—(12) Selected Statistical
Information—(iii) Loan Portfolio—Classification of the Loan Portfolio
Based on the Borrower’s Payment
Performance.”
|
(10)
|
Other
contingent credits primarily consist of guarantees, stand-by letters and
letters of credit. See Note 19 to the
Credicorp Consolidated Financial
Statements.
|
(11)
|
Reserves
for loan and contingent credit losses, as a percentage of all past-due
loans, with no reduction for collateral securing such loans. Reserves for
loan and contingent credit losses include reserves with respect to total
loans and other credits.
|
(12)
|
Reserves
for loan and contingent credit losses as a percentage of loans classified
in categories C, D or E. See “Item 4.
Information on the Company—(B) Business Overview—(12) Selected Statistical
Information—(iii) Loan Portfolio—Classification of Loan
Portfolio.”
|
Exchange
Rates
The
following table sets forth the high and low month-end rates and the average and
end-of-period rates for the sale of Nuevos Soles for U.S. Dollars for the
periods indicated.
Year ended December 31,
|
|
High (1)
|
|
|
Low (1)
|
|
|
Average (2)
|
|
|
Period-end (3)
|
|
|
|
(Nominal Nuevos Soles per U.S. Dollar)
|
|
2005
|
|
3.440 |
|
|
3.249 |
|
|
3.295 |
|
|
3.420 |
|
2006
|
|
3.455 |
|
|
3.195 |
|
|
3.274 |
|
|
3.195 |
|
2007
|
|
3.197 |
|
|
2.998 |
|
|
3.125 |
|
|
2.998 |
|
2008
|
|
3.135 |
|
|
2.751 |
|
|
2.939 |
|
|
3.135 |
|
2009
|
|
3.258 |
|
|
2.853 |
|
|
3.010 |
|
|
2.889 |
|
(1)
|
Highest
and lowest of the 12 month-end exchange rates for each year based on the
offered rate.
|
(2)
|
Average
of month-end exchange rates based on the offered
rate.
|
(3)
|
End-of-period
exchange rates based on the offered
rate.
|
The
following table sets forth the high and low rates for the sale of Nuevos Soles
for U.S. Dollars for the indicated months.
|
|
|
|
|
|
|
|
|
(Nominal Nuevos Soles per U.S. Dollar)
|
|
2009
|
|
|
|
|
|
|
December
|
|
2.889 |
|
|
2.863 |
|
2010
|
|
|
|
|
|
|
January
|
|
2.889 |
|
|
2.845 |
|
February
|
|
2.871 |
|
|
2.845 |
|
March
|
|
2.846 |
|
|
2.837 |
|
April
|
|
2.848 |
|
|
2.836 |
|
May
|
|
2.855 |
|
|
2.836 |
|
June
(through June 14)
|
|
2.851 |
|
|
2.844 |
|
(1) Highest
and lowest of the daily closing exchange rates for each month based on the
offered rate.
The
average of the bid and offered free market exchange rates published by the SBS
for June 14, 2010 was S/. 2.843 per US$1.00.
(B)
|
Capitalization
and Indebtedness
|
Not
applicable.
(C)
|
Reasons
for the Offer and Use of Proceeds
|
Not
applicable.
Our
businesses are affected by many external and other factors in the markets in
which we operate. Different risk factors can impact our businesses, our ability
to effectively operate and our business strategies. You should consider the risk
factors carefully and read them in conjunction with all the information in this
document.
Our
geographic location exposes us to risk related to Peruvian political and
economic conditions.
Most of
BCP’s, PPS’s and Prima AFP’s operations and customers are located in Peru. In
addition, although ASHC is based outside of Peru, most of its customers are
located in Peru. Accordingly, our results of operations and financial conditions
will be dependent on the level of economic activity in Peru. Changes in economic
or other policies of the Peruvian government, which has exercised and continues
to exercise a substantial influence over many aspects of the private sector,
could affect our results of operations and financial condition. Similarly, other
political or economic developments in Peru, including government-induced effects
on inflation, devaluation and economic growth could affect our operations and
financial condition.
For
several decades, Peru had a history of political instability that has included
military coups and a succession of regimes with differing policies and programs.
Past governments have frequently intervened in the nation’s economy and social
structure. Among other actions, past governments have imposed controls on
prices, exchange rates, local and foreign investment, and international trade.
Past governments have also restricted the ability of companies to dismiss
employees, expropriated private sector assets and prohibited the payment of
profits to foreign investors.
During
the 1980s and the early 1990s, the Sendero Luminoso (Shining Path) and the
Movimiento Revolucionario Tupac Amaru (MRTA) terrorist organizations were
particularly active in Peru. Although the Shining Path and MRTA were almost
de-activated in the 1990s, any resumption of activities by these or other
terrorist organizations may adversely affect our operations.
In July
1990, Alberto Fujimori was elected President and implemented a broad-based
reform of Peru’s political system and economic and social conditions. The reform
was aimed at stabilizing the economy, restructuring the national government (by
reducing bureaucracy), privatizing state-owned companies, promoting private
investment, eradicating corruption and bribery in the judicial system,
developing and strengthening free markets, institutionalizing democratic
representation, and enacting programs designed to strengthen basic services
related to education, health, housing and infrastructure. After taking office
for his third term in July 2000, under extreme protest, President Fujimori was
forced to call for general elections when corruption in his government was
exposed to the public. Fujimori later resigned in favor of a transitory
government.
In 2001,
Alejandro Toledo became President, ending two years of political turmoil.
President Toledo retained, for the most part, the economic policies of the
previous government. He focused on promoting private investment, eliminating tax
exemptions, and reducing underemployment and unemployment. President Toledo also
implemented fiscal austerity programs, among other proposals, in order to
stimulate the economy. Despite Peru’s moderate economic growth, the Toledo
administration faced public unrest spurred by high rates of unemployment,
underemployment and poverty.
In the
elections held in April 2006, no presidential candidate received the required
50% or more of the votes. As a result, a second round election between the top
two presidential candidates, Ollanta Humala Tasso from the Partido Unión por el
Peru, or the UPP, and Alan García Pérez of the Partido Alianza Popular
Revolucionaria, or APRA, was held on June 4, 2006. Although Alan García Pérez
was elected and currently serves as President, he has no majority in Congress.
President García had previously served as President of Peru from 1985 to 1990, a
period which was marked by a severe economic crisis. He is following
conservative economic policies and has indicated a desire to avoid the mistakes
of his past government. The García administration has followed economic policies
similar to those of the Toledo administration, which included achieving
sustained economic growth, increasing exports of Peruvian goods, reducing
unemployment, underemployment and poverty, reforming the tax system, fostering
private investment and increasing public investment in education, public health
and other social programs, while reducing overall public
spending.
The
Peruvian government’s economic policies during the last decade have provided the
appropriate fundamentals to support positive performance by the Peruvian
economy. As a result, the international financial crisis did not impact Peru as
severely as other countries. In addition, the current government has also
implemented a US$3 billion anti-crisis program to alleviate any effects from the
crisis. However, while the economic policies of recent Peruvian
governments have been relatively stable, we cannot assure that future
governments will maintain favorable economic policies.
Foreign
exchange fluctuations and exchange controls may adversely affect our financial
condition and results of operations.
Even
though the functional currency of our financial statements is U.S. Dollars and
our dividends are paid in U.S. Dollars, BCP, PPS and Prima AFP for local
statutory purposes, prepare their financial statements and pay dividends in
Nuevos Soles. The Peruvian government does not currently impose restrictions on
a company’s ability to transfer U.S. Dollars from Peru to other countries, to
convert Peruvian currency into U.S. Dollars or to pay dividends abroad.
Nevertheless, Peru has had restrictive exchange controls in the past, and there
can be no assurance that the Peruvian government will continue to permit such
transfers, payments or conversions without any restrictions. See “Item 10. Additional
Information—(D) Exchange Controls.” In addition, depreciation of the Nuevo
Sol against the U.S. Dollar would decrease the U.S. Dollar value of any
dividends BCP, PPS and Prima AFP pay us, which would have a negative impact on
our ability to pay dividends to shareholders.
Although
Peru’s foreign reserves currently compare favorably with those of many other
Latin American countries, we cannot assure you that Peru will be able to
maintain adequate foreign reserves to meet its foreign currency-denominated
obligations. Similarly, we cannot assure you that Peru will not impose exchange
controls should its foreign reserves decline. A decline in Peruvian foreign
reserves to inadequate levels, among other economic circumstances, could lead to
currency devaluation or a volatility of short-term capital inflows. We have
taken steps to manage the gap between our foreign currency-denominated assets
and liabilities in several ways, including closely matching the volumes and
maturities of our Nuevo Sol-denominated assets against our Nuevo Sol-denominated
liabilities. Nevertheless, a sudden and significant devaluation of the Nuevo Sol
could have a material adverse effect on our financial condition and results of
operations. See “Item
11. Quantitative and Qualitative Disclosures about Market Risk—Foreign Exchange
Risk.”
Also, a
significant group of BCP’s borrowers and PPS’s insureds generate Nuevo Sol
revenues from their own clients. Devaluation of the Nuevo Sol against the U.S.
Dollar could negatively impact BCP’s and PPS’s clients’ ability to repay loans
or make premium payments. Despite any devaluation, and absent any change in
foreign exchange regulations, BCP and PPS would be expected to continue to repay
U.S. Dollar-denominated deposits and U.S. Dollar-denominated insurance benefits
in U.S. Dollars. Therefore, any significant devaluation of the Nuevo Sol against
the U.S. Dollar could have a material adverse effect on our results of
operations and financial condition.
It
may be difficult to serve process on or enforce judgments against us or our
principals residing outside of the United States.
A
significant majority of our directors and officers live outside the United
States (principally in Peru). All or most of our assets and those of our
principals are located outside the United States. As a result, it may not be
possible for investors to effect service of process within the United States
upon us or our principals to bring forth a civil suit under the United States
securities laws in United States courts. We have been advised by our Peruvian
counsel that liability under the United States federal securities laws may not
be enforceable in original actions in Peruvian courts. Also, judgments of United
States courts obtained in actions under the United States federal securities
laws may not be enforceable. Similarly, Bermudan counsel advised us that courts
in Bermuda may not enforce judgments obtained in other jurisdictions, or
entertain actions in Bermuda, against us or our directors or officers under the
securities laws of those jurisdictions.
In
addition, our bye-laws contain a broad waiver by shareholders of any claim or
right of action, both individually and on our behalf, against any of our
officers or directors. This waiver limits the rights of shareholders to assert
claims against our officers and directors for any action taken by an officer or
director. It also limits the rights of shareholders to assert claims against
officers for the failure of an officer or director to take any action in the
performance of his or her duties, except with respect to any matter involving
any willful negligence, willful default, fraud or dishonesty on the part of the
officer or director.
Our
ability to pay dividends to shareholders and to pay corporate expenses may be
adversely affected by the ability of our subsidiaries to pay dividends to
us.
As a
holding company, our ability to make dividend payments, if any, and to pay
corporate expenses will depend upon the receipt of dividends and other
distributions from our operating subsidiaries. Our principal subsidiaries are
BCP, PPS, ASHC and Grupo Crédito, which is Prima AFP’s owner. If our
subsidiaries do not have funds available, or are otherwise restricted from
paying us dividends, we may be limited in our ability to pay dividends to
shareholders. Currently, there are no restrictions on the ability of BCP, ASHC,
PPS or Grupo Crédito to pay dividends abroad. In addition, our right to
participate in the distribution of assets of any subsidiary, upon any
subsidiary’s liquidation or reorganization (and thus the ability of holders of
our securities to benefit indirectly from such distribution), is subject to the
prior claims of creditors of that subsidiary, except where we are considered a
creditor of the subsidiary. Accordingly, our securities will effectively be
subordinated to all existing and future liabilities of our subsidiaries, and
holders of our securities should look only to our assets for
payments.
A
deterioration in the quality of our loan portfolio may adversely affect our
results of operations.
Given
that a significant percentage of our revenues are related to banking activities,
a deterioration of loan quality may have an adverse impact on our financial
condition and results of operations. On the one hand, loan portfolio risk
associated with lending to certain economic sectors or clients in certain market
segments can be mitigated through adequate diversification policies. On the
other hand, our pursuit of opportunities in which we can charge higher interest
rates, thereby increasing revenues, may reduce diversification of the loan
portfolio and expose us to greater credit risk. We believe that significant
opportunities exist in middle market, consumer lending and microfinance in Peru.
We also believe that we can, on average, charge higher interest rates on such
loans as compared with interest charged on loans in our core corporate banking
business, made primarily to clients that operate in industrial and commercial
economic sectors.
Accordingly,
our strategy includes a greater emphasis on middle market, consumer loans and
microfinance, as well as continued growth of our loan portfolio in general. An
increase in the portfolio’s exposure to these areas could be accompanied by
greater credit risk. The greater credit risk is not only due to the speed and
magnitude of the increase, but also to the shift to lending to these sectors,
which have higher risk profiles compared with loans to large corporate
customers. Given the changing composition of our loan portfolio, historical loss
experience may not be indicative of future loan loss experience.
Because
we are subject to regulation and supervision in Peru, Bolivia, the Cayman
Islands, the United States and Panama, changes to the regulatory framework in
any of these countries could adversely affect our business.
We are
mainly subject to extensive supervision and regulation through the SBS’s
consolidated supervision regulations, which oversee all of our subsidiaries and
offices including those located outside Peru. The SBS and the Banco Central de
Reserva, or the Central Bank, supervise and regulate BCP’s operations. Peru’s
constitution and the SBS’s statutory charter grant the SBS the authority to
oversee and control banks and other financial institutions. The SBS and the
Central Bank have general administrative responsibilities over BCP, including
designation of capitalization and reserve requirements. In past years, the
Central Bank has, on numerous occasions, changed the deposit reserve
requirements applicable to Peruvian commercial banks as well as the rate of
interest paid on deposit reserves and the amount of deposit reserves on which no
interest is payable by the Central Bank. Such changes in the supervision and
regulation of BCP may adversely affect our results of operations and financial
condition. See
“Item 4. Information on the Company—(B) Business Overview—(11) Supervision
and Regulation—(ii) BCP.” Furthermore, changes in regulation related to consumer
protection may also affect our business.
We are
also regulated by the United States Federal Reserve System, which shares its
regulatory responsibility with the State of Florida Department of Banking and
Finance - Office of Financial Regulation. Similarly, we are regulated by other
governmental entities in other jurisdictions. In the Cayman Islands, we are
subject to the supervision and regulation of the Cayman Islands Monetary
Authority, or CIMA, while in Bolivia, we are subject to the supervision of the
Superintendency of Banks and Financial Entities and regulations established by
the Central Bank of Bolivia. In Panama, we are subject to the supervision of the
Superintendency of Banks and the regulatory framework set forth in the Decree
Law 9 of February 25, 1998. Changes in the supervision and regulation of our
subsidiaries in other countries may adversely affect our results of operations
and financial condition.
Our
banking operations in Bolivia expose us to risk related to Bolivian political
and economic conditions.
Most of
BCP Bolivia’s operations and customers are located in Bolivia. Accordingly, our
results of operations and financial conditions depend on the level of economic
activity in Bolivia. Bolivia’s macroeconomic indicators show positive
performance by the country over the last several years:
|
·
|
Bolivia
has reached a steady GDP growth rate that was not affected by the
international financial crisis;
|
|
·
|
In
2009, Bolivia’s international reserve registered its highest level in
Bolivian history;
|
|
·
|
The
country’s inflation rate decreased to 0.3% and external debt was at its
lowest level in 2009;
|
|
·
|
The
Central Government also maintained a significant fiscal surplus, and
Bolivia’s domestic currency has strengthened, causing an important
de-dollarization of the national
economy.
|
While we
expect this economic stability to continue in the short-term, there is no
assurance of continued stability and Bolivia’s long-term economic performance
remains a concern. Bolivia has a high dependence on commodities exports and
needs to generate larger local and foreign investment. These long-term concerns
could adversely affect BCP Bolivia’s income and results of
operation.
Changes
to insurance regulations in Peru may impact the ability of our insurance
subsidiary to underwrite and price risk effectively, and may adversely affect
our operating performance and financial condition.
Our
insurance business is carried out by our subsidiary PPS. The insurance business
is subject to regulation by the SBS. Insurance regulations in Peru frequently
change. New legislation or regulations may adversely affect PPS’s ability to
underwrite and price risks accurately, which in turn would affect underwriting
results and business profitability. PPS is unable to predict whether and to what
extent new laws and regulations that would affect its business will be adopted
in the future. PPS is also unable to predict the timing of any such adoption and
the effects any new laws or regulations would have on its operations,
profitability and financial condition.
Our
operating performance and financial condition depend on PPS’s ability to
underwrite and set premium rates accurately for a full spectrum of risks. PPS
must generate sufficient premiums to offset losses, loss adjustment expenses and
underwriting expenses to be profitable. To price premium rates accurately, PPS
must:
|
·
|
collect
and analyze a substantial volume of
data;
|
|
·
|
develop,
test and apply appropriate rating
formulae;
|
|
·
|
closely
monitor changes in trends in a timely fashion;
and
|
|
·
|
project
both severity and frequency with reasonable
accuracy.
|
If PPS
fails to assess accurately the risks that it assumes or does not accurately
estimate its retention, it may fail to establish adequate premium rates. Failure
to establish adequate premium rates could reduce income and have a materially
adverse effect on its operating results or financial condition. Moreover, there
is inherent uncertainty in the process of establishing property and casualty
loss reserves. Reserves are estimates based on actuarial and statistical
projections at a given point in time of what PPS ultimately expects to pay out
on claims and the cost of adjusting those claims, based on the facts and
circumstances then known. Factors affecting these projections include, among
others, changes in medical costs, repair costs and regulation. Any negative
effect on PPS could have a material adverse effect on our results of operations
and financial condition.
Regulatory
changes to the private pension fund system in Peru could impact our earnings and
adversely affect our operating performance.
Prima AFP
manages our Pension Fund Administration business. In Peru, private pension fund
managers are closely regulated by the SBS. Under the current regulatory
framework, we collect commissions based on the salary of each subscriber to our
pension funds. This commission-based system could be modified or eliminated by
regulations that require pension fund managers to charge fees based on the
balance of funds under their control. Any regulations requiring us to use a
different methodology to calculate fees could negatively impact our
performance.
We
are facing increased competition that may impede our growth.
BCP has
experienced increased competition, including increased pressure on margins. This
is primarily a result of the presence of the following:
|
·
|
Highly
liquid commercial banks in the
market;
|
|
·
|
Local
and foreign investment banks with substantial capital, technology, and
marketing resources; and
|
|
·
|
Local
pension funds that lend to BCP’s corporate customers through participation
in those customers’ securities
issues.
|
Larger
Peruvian companies have gained access to new sources of capital through local
and international capital markets, and BCP’s existing and new competitors have
increasingly made inroads into the higher margin, middle market and retail
banking sectors. Such increased competition, with entrants who may have greater
access to capital at lower costs, has affected BCP’s loan growth as well as
reduced the average interest rates that BCP can charge its
customers.
Competitors
may also appropriate greater resources to, and be more successful in, the
development of technologically advanced products and services that may compete
directly with BCP’s products and services. Such competition would adversely
affect the acceptance of BCP’s products and/or lead to adverse changes in the
spending and saving habits of BCP’s customer base. If competing entities are
successful in developing products and services that are more effective or less
costly than the products and services developed by BCP, BCP’s products and
services may be unable to compete successfully. BCP may not be able to maintain
its market share if it is not able to match its competitors’ loan pricing or
keep pace with their development of new products and services. Even if BCP’s
products and services prove to be more effective than those developed by other
entities, such other entities may be more successful in marketing their products
and services than BCP because of their greater financial resources, higher sales
and marketing capacity or other similar factors. Any negative impact on BCP
could have a materially adverse effect on our results of operations and
financial condition.
Fluctuation
and volatility of capital markets and interest rates may decrease our net
income.
We may
suffer losses related to the investments by BCP, ASCH, PPS, Grupo Crédito and
other subsidiaries in fixed income and equity securities, and to their
respective positions in currency markets, because of changes in market prices,
defaults, fluctuations in market interest rates or exchange rates or other
reasons. A downturn in capital markets may result in a decline in the value of
our positions and lead us to register net losses. In addition, a downturn in
capital markets could also lead to volatile prices and negative net revenues
from trading positions, even in the absence of a general economic
downturn.
Fluctuations
in market interest rates, or changes in the relative structure between
short-term interest rates and long-term interest rates, could cause a decrease
in interest rates charged on interest-earning assets, relative to interest rates
paid on interest-bearing liabilities. Such an occurrence could adversely affect
our financial condition by causing a decrease in net interest
income.
ITEM
4.
|
INFORMATION
ON THE COMPANY
|
(A)
|
History
and Development of the Company
|
We are a
limited liability company that was incorporated in Bermuda on October 20, 1995
to act as a holding company, coordinate the policy and administration of our
subsidiaries, and engage in investing activities. Our principal activity is to
coordinate and manage the business plans of our subsidiaries in an effort to
implement universal banking services and develop our insurance business,
focusing on Peru and Bolivia along with limited investments in other countries
of the region. Our registered address is Clarendon House, 2 Church Street,
Bermuda. The management and administrative office (i.e., principal place of
business) in Peru of our subsidiary, Banco de Crédito del Perú, is located at
Calle Centenario 156, La Molina, Lima 12, Peru, and the phone number is
51-1-313-2000.
We are
the largest financial services holding company in Peru and are closely
identified with our principal subsidiary, BCP, the country’s largest bank and
the leading supplier of integrated financial services in Peru.
We are
engaged principally in banking (including commercial and investment banking),
insurance (including commercial property, transportation and marine hull,
automobile, life, health and underwriting insurance), pension funds (including
private pension fund management services), and brokerage and other (including
brokerage, trust, custody and securitization services, asset management and
proprietary trading and investment). As of December 31, 2009, our total assets
were US$22.0 billion and our net equity was US$2.5 billion. Our net income
attributable to our equity holders in 2008 and 2009 was US$357.8 million
and US$469.8 million, respectively. See “Item 3. Key
Information—(A) Selected Financial Data” and “Item 5. Operating and Financial
Review and Prospects.”
For
management purposes, the Group is organized into four operating segments based
on products and services. In according to IFRS, an operating segment is a
component of an entity that engages in business activities from which it may
earn revenues and incur expenses; whose operating results are regularly reviewed
by the entity’s chief who makes decisions about resources allocation for the
segment and assesses its performance; and for which discrete financial
information is available. We conduct our financial services business through our
operating segments as follows:
Banking:
principally handling loans, credit facilities, deposits and current accounts,
and providing investment banking services, including corporate finance, both for
corporate and institutional customers. Banking also includes handling
deposits consumer loans and credit cards facilities for individual
customers.
Insurance:
including commercial property, transportation and marine hull, automobile, life,
health and pension fund underwriting insurance.
Pension
funds: providing private pension fund management services to
contributors.
Brokerage
and others: including the structuring and placement of primary market issues and
the execution and trading of secondary market transactions. This segment also
includes offers of local securitization structuring to corporate entities,
management of mutual funds and other services.
The
following table gives certain financial information about us by principal
business segments as of and for the year ended December 31, 2009 (See Note 26 to the Credicorp
Consolidated Financial Statements):
|
|
As of and for the Year ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(U.S. Dollars in millions)
|
|
Banking
|
|
US$
1,820 |
|
|
US$
831 |
|
|
US$
20,120 |
|
Insurance
|
|
518 |
|
|
192 |
|
|
1,457 |
|
Pension
fund
|
|
80 |
|
|
0 |
|
|
237 |
|
Brokerage
and others
|
|
40 |
|
|
8 |
|
|
214 |
|
Credicorp
|
|
US$
2,458 |
|
|
US$
1,031 |
|
|
US$
22,028 |
|
We
conduct our commercial banking and investment banking activities primarily
through BCP, the largest (in terms of total assets, loans, deposits, net equity
and net income) full-service Peruvian commercial bank, and ASHC, a diversified
financial services company. We conduct our pension fund business through Prima
AFP and our insurance activities through PPS, which is the second largest
Peruvian insurance company in terms of premiums, fees and net income. You should
note that the term “Peruvian commercial bank,” “Peruvian insurance company” and
other similar terms used in this Annual Report do not include the assets,
results or operations of any foreign parent company or foreign subsidiary of
such Peruvian company.
We were
formed in 1995 for the purpose of acquiring, through an exchange offer, the
common shares of BCP, ASHC and PPS. Pursuant to this exchange offer, in October
1995 we acquired 90.1% of BCP, 98.2% of ASHC and 75.8% of PPS. We acquired the
remaining 1.8% outstanding shares of ASHC in March 1996, pursuant to another
exchange offer. See
“Item 4. Information on the Company—(C) Organizational Structure.”
In
December 1995, we purchased 99.99% of Inversiones Crédito (whose name has
changed to Grupo de Crédito), a non-financial entity with assets of US$376.9
million as of December 2009. Grupo de Crédito’s main subsidiary is Prima
AFP.
In August
1997, we acquired 39.5% of BCB from BCP for US$9.2 million. In July 1998, we
acquired 94.86% of Banco de La Paz, a Bolivian bank with US$52.1 million in
assets, which we subsequently merged with BCB in January 1999. During this time,
we also increased our beneficial ownership in BCB to 55.79%, which left BCP with
ownership of the remaining 44.21%. In November 2001, however, BCP bought back
55.53% of our interest in BCB for US$31.5 million. As of December 31, 2009, BCB
operated 65 branches and 172 ATMs located throughout Bolivia. BCB’s results have
been consolidated in the BCP financial statements since the date of its
acquisition by BCP in November 1993.
In 1997,
we acquired Banco Tequendama, a Colombian banking enterprise. In 2002, we sold
Banco Tequendama’s Venezuelan branches. In March 2005, we then sold Banco
Tequendama to a Colombian bank. While this sale was publicly announced in
October 2004 and became effective on January 1, 2005, it was not completed until
March 2005 after all required approvals were obtained from the Colombian
authorities. We did not record any significant gain or loss as a result of this
transaction.
In March
2002, we made a tender offer for outstanding BCP shares for S/.1.80 per share,
approximately equal to the book value of such shares, disbursing directly and
through our subsidiary PPS an amount of approximately US$35.3 million. As a
result of the tender offer, our equity stake in BCP increased from 90.6% to
97.0% (including shares held by PPS).
In
December 2002, BCP acquired Banco Santander Central Hispano-Perú (BSCH-Perú) for
US$50.0 million. Since that date, BSCH-Perú has been included in BCP’s
consolidated financial statements. On December 31, 2002, BSCH-Perú had total
assets of US$975.2 million, total loans of US$719.4 million and deposits of
US$659.0 million. BSCH-Perú was merged into BCP on February 28,
2003.
In March
2003, BCP added to its 55% stake by acquiring for US$17.0 million the remaining
45% of the equity shares of Solución Financiera de Crédito del Perú S.A.
(Solución) from Banco de Crédito e Inversiones de Chile (BCI) and other foreign
shareholders. As a result, Solución once again became a BCP wholly-owned
subsidiary. In March 2004, substantially all of Solución’s assets and
liabilities were absorbed into BCP’s Peruvian banking operations. Solución’s net
income in 2003 was US$7.6 million, and it had, as of February 28, 2004, a loan
portfolio of US$88.4 million, with a 3.0% past-due ratio.
In 2003,
BCP converted Banco de Crédito Overseas Limited (BCOL), its offshore bank in the
Bahamas, into a vehicle to conduct investments and sold it to ASHC. ASHC then
consolidated BCOL into its operations during 2004. In accordance with our policy
regarding holdings of equity interests in non-financial companies, we then
caused certain long-term equity interests that were previously held by BCOL to
be transferred to BCP and then in turn transferred to Grupo Crédito. In April
2004, PPS sold substantially all of its holdings of our equity shares to ASHC
(See “Item 7. Major
Shareholders and Related Party Transactions—(A) Major
Shareholders”).
In March
2004, PPS acquired 100% of Novasalud Perú S.A. – Entidad Prestadora de
Salud (Novasalud EPS), which is one of three private health insurance providers
in Peru, for US$6.5 million. PPS then merged Novasalud EPS with Pacífico S.A.
Entidad Prestadora de Salud (Pacífico Salud), a subsidiary of PPS.
In
January 2005, BCP and Bank of America, which is the principal shareholder of
Fleet Boston N.A., agreed to engage in a buy-sale transaction of the loan
portfolio of the Peruvian branch of Bank Boston N.A. BCP paid approximately
US$353.8 million in cash for the loan portfolio, which included commercial
loans, mortgage and leasing operations. The transaction was recorded at
acquisition cost.
In
February 2005, we were authorized by Peruvian regulatory authorities to
establish Prima AFP, of which Grupo Crédito is the main shareholder. Prima AFP
started operations in August 2005.
In August
2006, Prima AFP acquired Unión Vida AFP, which is a pension fund operating in
the Peruvian market. Prima AFP’s acquisition of Unión Vida AFP, which was
formerly held by Grupo Santander Perú S.A., was a strategic move toward
consolidation as part of its efforts to gain a leading position in the pension
fund market. This acquisition enabled Prima AFP to position itself as the second
ranking company in terms of market share terms (defined as the amount of
affiliates and assets under corporate management), with the second highest
returns and the lowest commission for affiliates (who invest a portion of their
salary each month). The merger between Prima AFP and Unión Vida AFP was
consummated in December 2006.
In 2006,
Prima AFP incurred significant merger expenses relative to its size, reaching
the end of the year with losses of US$20.7 million. However, Prima AFP had a net
income of US$20.8 million during 2009, with 1,078,317 affiliates and US$6,583
million of funds under its management.
In
November 2006, we bought PPS’s remaining 1.02% of BCP shares, generating
goodwill, valued at approximately US$7.2 million, from to the minority interest
we acquired (0.25%).
In
October 2009, BCP acquired from the Cooperative for Assistance and Relief
Everywhere Inc. (CARE) – Perú, all the shares that this entity owned of Empresa
Financiera Edyficar S.A. (Edyficar), representing 77.12% of Edyficar’s capital
stock. In accordance with Peruvian legal requirements in effect at the time, BCP
made a public offering to Edyficar’s minority shareholders to acquire the
remaining 22.66% of the company’s stock. At the end of both processes, BCP owned
99.78% of Edyficar. The total purchase price for the acquisition was US$96.1
million, including related direct acquisition costs.
The
following tables show our organization and the organization of our principal
subsidiaries as of December 31, 2009 and their relative percentage contribution
to our total assets, total revenues, net income and net equity at the same date
(see “—(C)
Organizational Structure”):
(1) Includes Prima AFP and others.
|
|
As of and for the Year ended December 31, 2009 (1)
|
|
|
|
Total Assets
|
|
Total Revenue
|
|
Net Income (Loss)
|
|
Net Equity
|
|
Banco
de Crédito del Perú
|
|
87.2% |
|
72.8% |
|
84.6% |
|
70.6% |
|
Atlantic
Security Holding Corporation
|
|
4.6% |
|
2.3% |
|
6.3% |
|
9.3% |
|
El
Pacífico-Peruano Suiza Compañía de Seguros y Reaseguros
(2)
|
|
6.6% |
|
21.3% |
|
10.5% |
|
8.2% |
|
Grupo
Crédito (3)
|
|
1.3% |
|
3.5% |
|
5.7% |
|
9.4% |
|
Others
(4)
|
|
0.3% |
|
0.1% |
|
-7.1% |
|
2.5% |
|
(1) Percentages determined based on the
Credicorp Consolidated Financial Statements.
(2) Includes
PPS and Pacífico Vida.
(3) Includes
Prima AFP and others.
(4) Includes
Credicorp Ltd., CCR Inc., Credicorp Securities Inc. and others.
The
following tables show the organization of BCP and its principal subsidiaries as
of December 31, 2009:
|
|
As of and for the Year ended December 31, 2009 (2)
|
|
|
|
Total
Assets
|
|
Total
Revenue
|
|
Net Income
(Loss)
|
|
Net
Equity
|
|
Banco
de Crédito del Perú
|
|
92.0% |
|
90.6% |
|
86.5% |
|
83.3% |
|
Banco
de Crédito de Bolivia
|
|
5.6% |
|
5.8% |
|
8.9% |
|
6.2% |
|
Empresa
Financiera Edyficar S.A.
|
|
1.4% |
|
1.1% |
|
0.3% |
|
2.4% |
|
Financiera
de Crédito Solución
|
|
0.3% |
|
0.3% |
|
0.3% |
|
0.4% |
|
Credifondo
S.A.
|
|
0.1% |
|
1.2% |
|
3.0% |
|
1.5% |
|
Credibolsa
Sociedad Agente de Bolsa S.A.
|
|
0.1% |
|
0.3% |
|
-0.1% |
|
0.6% |
|
Others
(3)
|
|
0.5% |
|
0.7% |
|
1.1% |
|
5.6% |
|
(1) We hold an additional 4.08%
stake.
(2) Percentages
determined based on BCP’s consolidated financial statements as of and for the
year ended December 31, 2009.
(3) Includes
Creditítulos S.A., Inmobiliaria BCP and others.
(1) Introduction –
Review of 2009
General
We
conduct our business operations through four different operating segments:
Banking (which includes BCP, ASHC, BCB, Edyficar, and other minor financial
subsidiaries), Insurance (which includes Pacífico Peruano Suiza and its
subsidiaries), Pension funds (which includes Prima AFP, main subsidiary of Grupo
Crédito), and Brokerage and other (which include principally Credifondo,
Credibolsa, and others).
Despite
the persistent weakness in global financial markets and the contraction of the
real economy at the beginning of the year, in 2009 we recorded net income after
minority interests of US$469.8 million, which was 31.3% higher than our net
earnings in 2008. This result reflected the strong performance of our
subsidiaries, led by our non-banking, insurance and asset management businesses,
which recovered from the international financial crisis that began in
2007.
Our total
assets grew to US$22.0 billion as of December 31, 2009, a 5.8% increase from the
US$20.8 billion in assets we held as of December 31, 2008. Our increase in total
assets was a result of our modest loan growth. Loans grew by 9.9% in 2009
(compared to 27.8% in 2008 and 39.2% in 2007), following the slowdown of the
Peruvian economy (which had a GDP growth rate of 9.8% in 2008 and a GDP growth
rate of 0.9% in 2009). As a result of the world recession, which had a greater
impact on the Peruvian market than we expected, provision for loan losses net of
recoveries increased by 235.1% to US$163.4 million (compared to US$48.8 million
in 2008). Our past-due and under legal collection loan ratio increased to 1.60%
by the end of 2009 (compared to a ratio of 0.79% at the end of 2008), reflecting
the effects of the international financial crisis on the Peruvian domestic
economy. We had a coverage ratio of 192.0% (i.e., reserves for loans as a
percentage of past-due loans), and our return on average net equity increased to
23.7% in 2009 (compared to 20.2% in 2008).
Banking
segment
BCP
In 2009,
we received an earnings contribution of US$388.5 million resulting from BCP’s
year-end 2009 net profit that totaled US$397.4 million. This earnings
contribution was 5.4% lower than last year’s contribution (US$410.9 million) and
was a product of the general contraction in demand for loans caused by the
global economic downturn. As a result, BCP’s average return on net equity (ROE)
decreased to 26.7%.
Despite
the troubled economy, BCP remained profitable. The main drivers behind the
company’s performance were: i) the 7.4% growth in its operating income that
resulted from strong financial management and a 9.3% increase in banking fees;
ii) the 147.9% increase in income the company realized from the sale of
securities resulting from sound decisions by BCP’s treasury managers,
which identified a profitable opportunity to participate in the purchase-sale of
sovereign and global bonds; and iii) the significant rise in translation gains
from a loss of US$12.2 million in 2008 to a gain of US$7.7 million in
2009.
Performance
in these areas enabled BCP to offset the company’s steep 222% increase in
provisions and 15.6% increase in operating expenses. The higher operating
expenses were a result of BCP’s aggressive network expansion during the previous
two years and the initial cost of its initiatives to improve long-term
efficiency. These higher operating expenses were exacerbated by the 8.0%
appreciation of the Nuevo Sol against the U.S. dollar over the year, as a
significant portion of BCP’s operating expenses are denominated in local
currency.
BCP’s
total assets reached US$19.6 billion at the end of 2009, representing an
increase of 7.1% over the previous year (US$18.3 billion). This increase in
total assets was a result of the 9.8% expansion of BCP’s loan portfolio, which
totaled US$11.2 billion at the end of 2009. The loan portfolio constituted 57.4%
of BCP’s total assets at the end of 2009, up from 55.9% in 2008. BCP’s total
past-due loans reached US$183.8 million (123.9% higher than the US$82.1 million
registered in 2008) while refinanced and restructured loans increased by 7.8%,
from US$53.7 million in 2008 to US$58.2 million at the end of 2009. The
composition of BCP’s loan portfolio in 2009 did not change
significantly—wholesale banking and retail banking accounted for 60% and 40% of
its total portfolio, respectively (similar to the levels registered in 2008 (62%
and 38%)).
The
average daily balances of BCP’s wholesale banking loans grew by 8.3% in 2009,
exceeding our expectations in light of the economic slowdown, the high frequency
of postponed corporate investment plans and the reduced level of corporate
inventories in Peru. As a result, BCP continued to lead the Peruvian financial
system with a market share of 46.0% for the corporate segment and 33.3% for the
middle market.
BCP’s
retail banking portfolio continued its upward trend and grew 17.5% in 2009,
reaching an average daily balance of US$3,985. In terms of growth and yields,
BCP’s consumer loans were its best performing product, reaching 25.9% growth
(measured in average daily balances) to a total volume of US$779 million,
followed by credit cards which grew 17.7% to US$453 million. SME loans grew
16.1% to US$1,309 million, while mortgage credits expanded 14.6%, totaling
US$1,444 million.
On the
liabilities side, BCP’s deposits reached US$14,466 million on December 31, 2009
(a 2.9% increase from the previous year). This increase in deposits not only
continues to reinforce BCP’s funding structure as deposits account for 74.9% of
all funding sources, but it also serves to maintain BCP’s status as an industry
leader with a market share of 34.2%. Time deposits continued to be BCP’s largest
deposit type, totaling US$5,361 million as of December 31, 2009. Demand
deposits, BCP’s second-largest deposit type, reached US$4,495 million. Savings
deposits totaled US$3,540 million while Severance Accounts, or CTS, totaled
US$1,070 million.
BCP’s
bonds gained greater relevance within the funding structure and, at year end,
accounted for 13.8% of the total funds of the bank. In 2009, BCP completed two
successful issues, one debt issue and one capital issue.
A first
issue, in the form of debt, was made through BCP Emisiones LATAM 1 (a subsidiary
of Credicorp) and offered an equivalent of US$107 million (UF 2.7 million) in
five year bonds for sale in Chilean markets. The demand for these bonds was
high, and the offering exceeded our expectations as a cross-section of
institutional investors (including pension fund administration companies, mutual
funds and banks) purchased the bonds. This issue enabled us to not only
diversify our funding sources, but also secure a favorable interest
rate.
The
capital issue was the first of its kind for BCP. It involved the successful
placement of hybrid bonds, instruments possessing equity characteristics that
enable them to be included in the regulatory capital of the bank. The hybrid
bond issue was for US$250 million at 60 years, with a coupon rate of 9.75% per
year. Demand for the hybrid bonds was more than four times the offer. The
purpose of this issue was to strengthen BCP’s regulatory capital, an important
part of BCP’s strategy to absorb the financial growth it anticipates the company
will experience as a result of both increased market penetration and economic
expansion.
BCP has
conservative provisioning and long-term risk management policies, however, its
coverage ratio decreased from 271.98% in 2008 to 192.3% in 2009. Total
cumulative provisions reached US$353.3 million as of December 31, 2009, which is
58.3% higher than provisions in the previous year.
In 2009,
BCP continued to focus its strategy on strengthening its customer service, which
is related to its goal of providing quality and widespread customer access to
the financial system and thereby increasing the company’s penetration into the
market. In following its network expansion plan, BCP focused on cost-efficient
channels, opening ATMs and Agente BCP, which grew 11.9% and 51.3%, respectively.
By the end of 2009, BCP had a total of 996 ATMs and 2,801 Agentes BCP. As a
result of this strategy, BCP’s average number of transactions in 2009 increased
18.3% from 2008 and its transactional business was therefore able to generate
higher income from fees and commissions.
Overall,
BCP’s results met our expectations and remained profitable despite the global
recession.
BCP
Bolivia
In 2009,
Banco de Crédito de Bolivia (BCP Bolivia) had a net income of US$30.4 million, a
29% decline from its 2008 net income of US$42.9 million. The bank’s performance
was the result of its lower net financial income due to smaller loan growth and
a tighter interest margin on investments. BCP Bolivia also incurred higher
operating expenses and generated lower non financial income due to regulatory
changes that increased salaries and eliminated certain banking commissions. The
earnings that BCP Bolivia reported in 2008 were also higher because they
incorporated a translation gain from the appreciation of Bolivia’s domestic
currency against the U.S. Dollar. In contrast, the translation gain for 2009 was
essentially zero, as the exchange rate remained flat.
In 2009,
BCP Bolivia maintained its status as one of the top banks in Bolivia. In each of
the following categories, the bank outperformed the industry average in the
Bolivian banking system: return on equity (30.4%), past-due loan ratio (1.8%)
and coverage ratio (257.9%) (as compared to industry averages of 21.8%, 3.5% and
167.5%, respectively).
BCP
Bolivia’s loan portfolio expanded by 0.8% from 2008, totaling US$460.2 million
in 2009. This expansion was mainly due to a 4.5% growth in retail
banking.
Although
BCP Bolivia made a positive contribution to our results in 2009, the country of
Bolivia still experiences a volatile political environment and shows evidence of
significant stagnation in private investment activity.
Edyficar
Since BCP
acquired Edyficar in October 2009, the consolidation of Edyficar’s results into
BCP’s financial statements resulted in a total contribution of US$1.1 million
(representing Edyficar’s net income from the fourth quarter of 2009). As of
December 31, 2009, Edyficar registered total assets of US$275.3 million which
consisted of US$229.2 million from the company’s net loan portfolio, its main
asset. Total liabilities increased to US$233.9 million, which included US$179.5
million from banking activities. Net shareholders’ equity reached US$41.4
million at the end of 2009.
Edyficar
focuses on SME lending and, together with BCP, it held a 20.0% market share in
terms of loans at the end of 2009 (compared to a market share of 17.9% held by
its closest competitor). As of December 31, 2009, its client base registered 213
thousand clients, a base 17.9% larger than in 2008. The average amount of an
Edyficar loan in 2009 was S/. 3,380 (approximately US$1,170). Edyficar
registered a PDL ratio of 3.9% at the end of 2009, a reflection if its portfolio
quality. In local accounting Edyficar reached a return on equity of 21.7% and an
efficiency ratio of 43.8%.
The
acquisition of Edyficar was part of BCP’s strategy to capture most of the SME
segment’s growth, which is expected to expand significantly over the next
several years. BCP intends to support Edyficar’s growth and development by
improving its funding cost and structure and providing the capital and
technology that Edyficar needs.
ASHC
Of all
our subsidiaries, ASHC experienced the most severe effects from the global
financial crisis. In the year since then, ASHC has recovered substantially. The
company’s net earnings for 2009 amounted to US$54.1 million, reversing the loss
of US$22.4 million reported the previous year. As a result, the contribution of
ASHC to Credicorp, net of dividends received, amounted to US$29.7 million, a
significant improvement over the US$50.4 million loss reported in
2008.
Net
income from interest in 2009 totaled US$52.4 million (including the US$21.9
million dividends received from Credicorp Ltd.), which represented an increase
of 11% from the previous year. This rise in net income was primarily due to the
company’s greater financial margin, which in turn was a result of the company’s
lower funding cost (the 2009 cost was 16% below the cost in 2008). This lower
funding cost reflected the steady decline of LIBOR rates during the year, a
favorable scenario for the bank given the short-term structure of its customers’
deposits and their fast re-pricing, in contrast to assets engaged for longer
terms and at higher interest rates. Non-financial income reached US$20.8 million
and included income from fees, the sale of securities and foreign exchange
operations.
ASHC’s
total assets were US$1,484.8 million as of December 31, 2009, an increase of 2%
from 2008. This increase in total assets was primarily a result of the
appreciation in value of ASHC’s Investments Available for Sale account. That
account recovered approximately US$70 million of its value, which in turn
produced unrealized gains of US$23.3 million in 2009. In contrast, that same
account produced an unrealized loss of US$46.7 million in 2008.
Finally,
at the end of 2009, assets under ASHC’s management totaled US$2,177 million,
compared to US$1,639 million in 2008. This growth was primarily a result of the
increase in the market value of our portfolio that followed the larger recovery
in global financial markets.
Insurance
segment
PPS
In 2009,
PPS, which encompasses Pacífico Seguros, Pacífico Vida and Pacífico Salud EPS,
reported a net income of US$49.2 million (compared to a US$15.0 million net loss
in 2008). As a result, the contribution we received from PPS increased
considerably, from a loss of US$15.9 million in 2008 to a gain of US$37.4
million in 2009. This record high contribution from PPS was primarily
attributable to a significant reduction in the claims rate by customers of
Pacifico General Insurance, a rate which dropped from 87.2% to 53.3%. The lower
claims rate for the year was in turn the result of on-going efforts, which began
in 2006, to improve the company’s risk diversification strategy and lower the
concentration of the company’s portfolio.
The
technical result PPS obtained in 2009, which reflects the company’s core
business performance for the year, was US$79.9 million, a significant
improvement over the 2008 result. This improved technical result followed a
reduction in the overall claims rate, which went from 84.3% in 2008 to 65.2% in
2009, and was the product of changes and improvements that PPS implemented over
the last several years through underwriting management and operating
controls.
In 2010,
PPS will continue to focus on its retail business by developing products to
introduce customers to the advantages of insurance. There is enormous growth
potential in Peru’s insurance market, given the industry’s weak market
penetration. Efficiency and risk management will continue to be key indicators
in measuring PPS’s performance. Efficiently utilizing the BCP network is an
essential component of PPS’s growth strategy for 2010 since capitalizing on
synergies between the insurance business and the distribution channels of the
banking business may lead PPS to greater penetration in the insurance
market.
Pension
fund segment
Prima
AFP
Peruvian
pension funds experienced a better year in 2009. The financial
markets stabilized and continued a trend toward recovery. These favorable
economic conditions led to an increase in the market value of funds under Prima
AFP’s management, a value that reached US$23.9 billion on December 31, 2009 and
represented a 51% year-over-year increase.
Prima AFP
was able to strengthen its position in the market by adjusting its processes and
organization to provide high-quality services and timely and transparent
information to its clients. As a result, the contribution we received from Prima
AFP in 2009 reached US$20.8 million, as compared to US$11.2 million in
2008.
Funds
under management of Prima AFP increased 47.6% from US$4.9 billion in 2008 to
US$6.6 billion as of December 31, 2009. By year-end 2009, Prima AFP’s share of
total funds under management was 30.6%, unchanged from 2008, making Prima AFP
the second largest fund management company in Peru.
Prima
AFP’s revenues from commissions in 2009 reached US$78.8 million, an 11.4%
increase from 2008. This improvement in performance was a result of a stable and
improved portfolio of contributing members that was supported by the increase of
administration fee from 1.50% to 1.75% since January 200. Unlike the revenues
Prima AFP reported in 2008, Prima AFP’s revenues in 2009 included 13, rather
than 14, contribution periods because the Peruvian government, as part of its
anti-crisis plan, exempted affiliates from deductions on additional salaries
that must be paid in July and December under Peruvian labor
law.
In 2010
Prima AFP plans to maximize its contribution to us by obtaining moderate growth
in its client base, a goal consistent with our expectation that the Peruvian
economy will expand over the next year. Prima AFP also plans to continue to
reinforce its position in the market, strengthen its affiliate base and
progressively incorporate independent workers into pension plans designed
specifically for that segment of the labor market.
To
improve its operating results, Prima AFP will continue to focus on increasing
efficiency and reducing costs. Emphasis will also be placed on improving Prima
AFP’s long-term stability through better risk management, one of the company’s
highest priorities.
The
following table sets forth the contribution to the consolidated net income
attributable to our equity holders by each of our principal
subsidiaries:
|
|
2007
|
|
2008
|
|
2009
|
|
Variation
2009/2008
|
|
|
|
(U.S. Dollars in millions, except percentages)
|
|
BCP
(1)
|
|
322.5 |
|
410.9 |
|
388.5 |
|
-5% |
|
ASCH
|
|
20.5 |
|
(50.4) |
|
29.7 |
|
159% |
|
PPS
|
|
9.4 |
|
(15.9) |
|
37.4 |
|
335% |
|
Grupo
Crédito (2)
|
|
(1.7) |
|
13.2 |
|
14.2 |
|
8% |
|
Total
|
|
350.7 |
|
357.8 |
|
469.8 |
|
31% |
|
(1)
|
Includes
Banco de Crédito de Bolivia, which contributed US$30.3 million in 2009,
US$42.9 million in 2008 and US$27.0 million in
2007.
|
(2)
|
Includes
Prima AFP (which recorded a net income of US$20.8 million in 2009, US$11.2
million in 2008 and US$3.0 million in 2007), Credicorp Securities,
Credicorp Ltd. (which mainly includes expenses and the tax withheld in
connection with the estimation of the dividends to be distributed to us by
our Peruvian subsidiaries (BCP and PPS)) and
others.
|
(2) Strategy
Credicorp
was established to create a financial group that would benefit from the
synergies among the group’s companies and would become a leader within each
business market in which the companies operate. In moving steadily toward
achieving these strategic goals, we have become a leading financial group.
However, we do not operate in a static environment and the last two years have
demonstrated how quickly and dramatically the world can change. Peru’s economic
growth slowed significantly in 2009 as a result of the international recession.
This led us to take steps toward improving our long-term sustainability and
positioning our companies for growth as Peru’s needs evolve.
The
Peruvian market offers one of the greatest growth opportunities in South
America. In the banking, insurance and pension fund industries, market
penetration by service providers remains low. Accordingly, we have revisited our
business plans, incorporating strategies that will enable us to reach
underserved segments of the Peruvian population and achieve higher returns on
our capital. As our businesses expand, it becomes increasingly important for us
to maximize efficiencies and control risk. Strength in these areas will be the
cornerstone of a healthy, sustained and profitable growth.
The
growth strategies we have adopted for each of our companies contain a focus on
retail markets. Using our collective resources, we are developing information
systems that can collect commercial sales information and provide us with the
data we need to process scoring models by segment. This will enhance our ability
to assess and control risk.
We also
continue to makes strides toward greater integration of our companies by more
extensively sharing our talents, intelligence, and experience. Two examples of
our most successful integrations, involved gains in our ability to manage assets
and provide insurance products:
Asset
Management
The
success of our growth strategy depends on our ability to effectively manage our
assets and the assets of our clients. In 2009, we undertook a comprehensive
review of our asset management systems. As a result of our review, we adopted a
new asset management strategy, based on international best practices, in all the
areas of the corporation that manage investment funds. We also adopted a unified
set of standards and policies designed to protect the interests of our investors
and ultimately maximize our profitability.
We also
streamlined our asset management systems by making greater use of technology.
Our new tools will allow us to access risk more effectively and tailor our
products to meet the specific needs of our customers. In addition, we adopted
new service models that will enable us to continue to provide quality service as
our company continues to grow.
Insurance
Business
We made
significant changes to our insurance business in 2009. Encouraging our
subsidiaries to work together, we created new distribution channels for our
insurance products. For example, we now offer our insurance products through the
BCP network, which has historically focused on the commercial and retail banking
markets. This more integrated approach has enabled us to expand our insurance
customer base and increase our profitability.
We also
implemented several changes to our managerial structure. We now rotate our
managers among our primary subsidiaries. This practice prevents entrenchment,
giving our managers a better understanding of our operations across markets. We
also established new management committees, comprised of representatives from
each of our primary subsidiaries. These committees have already proven to be a
value resource, offering effective problem-solving strategies and spurring
innovation.
Outlook
for 2010
We expect
economic conditions in Peru to continue to improve in 2010. Throughout the year,
we will continue to take a development-oriented approach, preparing for changes
in the Peruvian market, which is expected to have high growth rates in the
upcoming years. Given the low levels of competition in Peru’s banking and
insurance markets, our subsidiaries will be well positioned to expand. Our high
equity, sound levels of technical and professional expertise, and strong
relationships built on the trust of our customers, are all signals indicating a
positive outlook for the Company.
(3) Credicorp
Operating Segments
Banking
The
majority of our banking business is carried out through BCP, which is our
largest subsidiary and the oldest bank in Peru. A portion of our banking
business is also carried out by ASHC, which principally serves Peruvian private
banking customers through offices in Panama. We conduct banking activities in
Bolivia through BCB, a full service commercial bank and the fourth largest
Bolivian bank in terms of loans and deposits, with 11.8% and 13.0% market share,
respectively.
Our
banking business is organized into wholesale banking activities, which are
carried out by BCP’s wholesale banking group (which includes the corporate
banking operations of ASHC), and retail banking activities, which are carried
out by BCP’s retail banking group. To increase our visibility and raise our
market share in the retail banking industry, BCP bought Edyficar, which is a
scaled, high-growth and highly profitable microfinance business. Edyficar has a
solid risk management strategy and a proven track record in both loan portfolio
growth and social impact. The company provides financial services for low-income
micro-entrepreneurs and unbanked communities.
We apply
uniform credit policies and approval and review procedures, which are based on
conservative criteria adopted by BCP, to all of BCP’s subsidiaries. Our general
manager is in charge of setting the general credit policies for our different
business areas. These policies are set within the guidelines established by
Peruvian financial sector laws and SBS regulations (See “¾(11) Supervision and
Regulation—(ii) BCP”) and the guidelines set forth by our Board of
Directors.
Our
deposit-taking operations are principally managed by BCP’s retail banking group
and ASHC’s private banking group. See “¾(12) Selected
Statistical Information—(iv) Deposits.”
Pension
funds, brokerage and others
The
majority of our trading and brokerage activities are conducted through BCP, ASHC
and Credicorp Securities Inc. (also referred to as Credicorp Securities), which
is one of our wholly-owned subsidiaries. Credicorp Securities is a U.S.
registered broker-dealer with its offices in Miami. Our asset management
business is carried out by BCP in Peru, through its subsidiary Credifondo, by
ASHC and by Prima AFP, the pension fund administrator.
We offer
Brokerage and other services through BCP and ASHC. BCP offers clients a wide
range of such products and services, such as brokerage, mutual funds and custody
services through its branch network in Lima and, on a more limited basis,
throughout the rest of Peru. In addition, we also distribute such products
through ASHC.
In the
last few years, we have consolidated an important line of business, asset
management, for our customers. As of December 31, 2009 our assets under
management totaled US$11.1 billion, an increase of 56.8% from 2008, which was
mainly due to the market recovery after a drastic drop in the market values of
securities caused by the international financial crisis. The majority of our
asset management business is performed through our subsidiary, Prima
AFP.
Mutual
funds represent another important contributor to our asset management business,
carried out through BCP’s mutual funds subsidiary, Credifondo Sociedad
Administradora de Fondos Mutuos (or Credifondo). Credifondo leads the Peruvian
market with a share of 45.2% of the total assets currently under management.
Finally, BCP’s affiliate, Atlantic Security Bank, offers the international
mutual funds and financial advisory services to BCP’s private banking
customers.
We
established a corporate supervision project entitled “Asset Management” due to
the size of these businesses, the importance of the commissions they generate
and, above all, the fiduciary responsibility they entail. The main objectives of
the project are to establish homogeneous risk control and investment policies
based on best international practices. The Asset Management business has four
main components:
|
·
|
Portfolio
Management: We seek to consolidate the good performance of
our portfolios and funds through strict risk control and an appropriate
level of diversification. To achieve this, we focus on improving three key
aspects: investment policies, investment processes and management
metrics.
|
|
·
|
Financial
Management: We focus on providing quality financial advisory
services, building customer loyalty, and encouraging customers to invest
in a diverse combination of securities according to their risk profile.
Our objective is to improve the standards of the advisory services that
our commercial bank offers and to distinguish between the levels of
advisory services provided to different
sectors.
|
|
·
|
Brokerage: We attempt
to provide a timely and high quality service, offering competitive
execution costs, channeling a greater proportion of the assets traded by
our companies to profitable investments and identifying opportunities for
joint action (resulting in better prices), in addition to improving
controls aimed at avoiding possible conflicts of
interest.
|
|
·
|
Risk Analysis: We seek
to identify, quantify, regulate and, ultimately, minimize the risks
associated with operations, credit, market, liquidity, legal
contingencies, conflict of interests and other risks. Another objective of
our risk analysis is setting corporate investment limits, creating a
portfolio investments risk manual, and ensuring strict compliance with
risk control rules.
|
Insurance
We
conduct our insurance operations exclusively through PPS and its subsidiaries,
which provide a broad range of insurance products. PPS focuses on three business
areas, general insurance through Pacífico Seguros, life and pension insurance
through Pacífico Vida, and health care insurance through Pacífico Salud EPS.
PPS, like other major Peruvian insurance companies, sells its products both
directly and through independent brokers and agents. Directly written policies
tend to be for large commercial clients, as well as for life and health
insurance lines.
(4) BCP
and Subsidiaries
(i) General
BCP’s
activities include commercial banking, investment banking and retail banking. As
of December 31, 2009, the consolidated operations of BCP ranked first among
Peruvian banks in terms of total assets of US$19.6 billion, total loans of
US$11.2 billion, deposits of US$14.5 billion and net equity of US$1.7 billion.
At the end of 2009, BCP’s loans, on an unconsolidated basis, represented
approximately 33.4% and the deposits represented approximately 34.2% of the
total Peruvian banking system, respectively.
As of
December 31, 2009, BCP had the largest branch network of any commercial bank in
Peru with 334 branches. BCP operates an agency in Miami and a branch in Panama.
In addition, as of December 31, 2009 Edyficar had 96 offices through which it
serves its clients.
As of and
for the year ended December 31, 2009, BCP accounted for 72.8% of our total
revenues, 87.2% of total assets, 84.6% of net income and 70.6% of net equity.
BCP’s operations are supervised and regulated by the SBS and the Central
Bank.
BCP
groups its client base according to the following criteria:
Client Segmentation
|
Group
|
|
Sales (US$MM)
|
Micro-business
|
|
Up
to 0.5 or total debt of 0.2
|
Small
Business
|
|
From
0.5 to 6.6 or total debt of 1.0
|
Middle
market
|
|
From
6.7 to 30
|
Corporate
|
|
Higher
than
30
|
The
grouping was a result of an analysis which addressed factors beyond the simple
size and volume of activity for each client, such as clients’ affiliation with
other companies or groups, the degree of follow-up required, and their credit
ratings.
Subsidiaries
BCP’s
corporate structure consists of a group of local subsidiaries offering
specialized financial services, which complement BCP’s commercial banking
activities. In addition to its local subsidiaries, BCP has an agency in Miami
and a branch in Panama, a subsidiary in Bolivia and an affiliate bank, Atlantic
Security Bank, in the Cayman Islands.
BCP and
its principal subsidiaries as of December 31, 2009 are as
follows:
|
·
|
Banco
de Crédito de Bolivia, or BCB, is BCP’s commercial bank in Bolivia. BCP
owns 95.92% of BCB and we hold the remaining interest. Currently, BCB is
the fourth largest bank in Bolivia in terms of deposits and loans market
share and has a network of 65 offices located throughout Bolivia. BCB owns
one of Bolivia’s largest brokerage houses, Credibolsa S.A. Agente de
Bolsa, and this subsidiary owns Credifondo SAFI Bolivia, a mutual fund
company. BCP targets middle- and small-sized clients and offers a broad
range of corporate, personal banking and leasing products. BCB’s results
are consolidated in BCP’s financial
statements.
|
|
·
|
Empresa
Financiera Edyficar S.A. was acquired in October 2009 and is 99.78% owned
by BCP. It is engaged in micro finance in
Peru.
|
|
·
|
Credibolsa
Sociedad Agente de Bolsa, or Credibolsa, was established in June 1991 and
is 100% owned by BCP. It is engaged in portfolio advisory and brokerage
activities in the Lima Stock
Exchange.
|
|
·
|
Credifondo
Sociedad Administradora de Fondos Mutuos, or Credifondo, is a mutual fund
management company that was established in 1994. Credifondo is 100% owned
by BCP.
|
|
·
|
Creditítulos
S.A., or Creditítulos was established in 1997 and is 100% owned by BCP.
Creditítulos serves as an asset securitization
entity.
|
|
·
|
Inmobiliaria
BCP is the real estate subsidiary of BCP. It manages and promotes the sale
of real estate that has been foreclosed or received in payment by BCP.
Inmobiliaria BCP is 100% owned by
BCP.
|
|
·
|
Solución
Financiera de Crédito del Perú S.A. was established in 1979 and is 100%
owned by BCP. Its business includes mortgage lending, consumer lending and
SME financing. In the company’s shareholders meeting on November 19, 2009,
Solución Financiera de Crédito del Perú S.A.’s shareholders decided to
change the company from a finance company to a mortgage administrator
company and to change the company’s name to Solución Empresa
Administradora Hipotecaria S.A. These changes were necessary because,
according to Peruvian Law, no person is allowed to be the owner of two
financial institutions of the same type. As a result, the company will
primarily engage in the administration of mortgage portfolios. These
changes were submitted to the SBS for approval and are still under
evaluation.
|
(ii) Wholesale
Banking Group
BCP’s
wholesale banking group (Wholesale Banking
Group), which competes with local and foreign banks, has traditionally
represented the majority of BCP’s loans. BCP’s traditional relationships provide
its Wholesale Banking
Group with a competitive advantage.
In spite of the international
recession, BCP’s Wholesale Banking Group
maintained its positive trend in loan placements, posting average portfolio
levels of US$5,881 million (8.2% higher than in 2008). It also maintained
its leadership in the wholesale banking market with a 40% stake in placements.
BCP has the largest capital base among Peruvian banks, which provides it with
more resources to meet the financing needs of its corporate clients. BCP has
established longstanding client relationships with virtually all of the major
industrial and commercial groups in Peru. The Wholesale Banking Group provides
its customers with short- and medium-term loans in local and foreign currencies,
foreign trade-related financing and lease financing.
The
Wholesale Banking Group is divided into the following areas:
|
·
|
Corporate
Banking, which provides loans and other credit services to companies with
annual revenues in excess of
US$30 million;
|
|
·
|
Middle
Market Banking, which serves mid-sized
companies;
|
|
·
|
International
Banking, which manages BCP’s relationship with financial institutions
locally and abroad, trade products and international operations
services;
|
|
·
|
Corporate
Finance, which provides underwriting and financial advisory services to
corporate and middle market
clients;
|
|
·
|
Business
Finance, which finances business projects and manages the financial
leasing product;
|
|
·
|
Institutional
Banking, which focuses principally on serving profit and non-profit
organizations, state-owned companies and other major institutions;
and
|
|
·
|
Business
Services, which develops transactional
services.
|
Net interest income from the
wholesale banking sector reached US$146 million in 2009
(compared to US$141 million in 2008). This growth was a result of the higher
interest rates BCP charged during the first half of 2009 due to the increased
risks associated with lending to it customers. These higher interest rates
helped to offset the reduction
in business volume BCP experienced in 2009. Income from financial services
accounted for 48% of the total revenue generated by the wholesale banking
sector.
Corporate
Banking
Despite a
difficult financial environment, BCP continued to meet the needs of its
corporate clients, helping them meet their short- and medium-term financing
needs. As a result, BCP’s direct credits grew slightly from US$3,928 million to
US$4,058 million, and income from financial services increased 19%, from US$47
million to US$56 million. These increases, coupled with a very low default ratio
(less than 0.1%), enabled the Corporate Banking Area to meet its financial
targets with a net profit US$94 million, an increase of 38% over the US$68
million achieved in 2008.
Client Profile: The Corporate
Banking Area is focused on serving large-sized companies that have an annual
turnover of over US$30 million, audited financial statements and dominant
market positions in their particular products or brands. Even if they do not
meet the above criteria, BCP may classify other firms in this category if they
belong to very large economic groups from industries that are important to the
country’s economy.
Products: The Corporate
Banking Area offers a broad range of products and tailors its product offerings
to meet each client’s unique requirements. In general, this area is expected to
offer high-value-added products and services, particularly cash management
services, at competitive prices.
The
majority the Corporate Banking Area’s financing is provided to fund sales,
international trade and inventories. In general, the Corporate Banking Area
grants short-term financing. However, it can provide longer term financing for
companies in need of financing capital expenditures and fixed assets, among
other purposes. The Area also offers term financing (in all cases backed by real
guarantees), financial leasing, factoring, and domestic collections and
nationwide fund transfers.
Additionally,
Corporate Banking clients can obtain investment banking, advisory and financing
services through the Corporate Finance Area, which operates as part of the
Wholesale Banking Group and also serves major middle market
clients.
Guarantees
received by this area consist of (i) receivables in the case of sales financing,
(ii) warrants or pledges on inventory in the case of inventory financing and
(iii) real guarantees, in the case of financing for fixed asset acquisitions and
improvements to their infrastructure.
There is
a limited growth prospect in this business due to high market penetration and
competition from capital markets in loans.
Middle
Market Banking
BCP’s
middle market banking area provides banking services tailored to medium-sized
companies located in a variety of markets. The products offered to middle market
clients resemble those offered to corporate banking clients. The three major
types of products are:
|
·
|
Revolving
credit lines to finance inventories and sales, as well as stand-by letters
of credit and international trade
financing;
|
|
·
|
Financing
for short-term requirements such as current account credits and temporary
account advances (overdrafts); and
|
|
·
|
Financing
for medium and long-term requirements using intermediation resources (term
deposits) and various types of financial leasing
financing.
|
BCP has
identified several opportunities to engage middle market companies, particularly
in Peru’s manufacturing, wholesale, retail, fishing and construction industries,
where special emphasis has been placed and specific task areas have been created
to attend to the needs of these economic groups. BCP has a middle market client
portfolio of approximately 7,000 companies, including 1,069 economic groups.
Generally, these clients are not listed on the stock exchange but, in some
cases, are capable of issuing financial obligations or commercial papers. Their
financial information is reliable and audited. These companies are typically
family-controlled but professionally managed.
During
2009, the middle market banking area revised its customer segmentation policies.
The area now includes established (but growing) companies that will eventually
become part of our corporate segment, traditional mid-size companies and a group
of growing small cap companies. Inselecting which small companies are
best suited for service by our middle market banking area, we consider a mix of
different characteristics; such as annual revenues, financial leverage, overall
debt and product penetration and complexity. BCP’s middle market customers are
distributed among nine regional managers nationwide and have annual revenues
that vary from US$1.5 million to US$50 million.
Last
year, the middle market banking area made significant progress toward
implementing its strategic goals by:
|
·
|
Creating
hubs to meet the needs of its customers more
efficiently
|
BCP now
has a customer redistribution hub in Lima, where a new business area was
created;
|
·
|
Streamlining
its lending process to provide middle market customers with prompt
service;
|
|
·
|
Introducing
new electronic financial products to make its services more accessible to
customers;
|
|
·
|
Incorporating
sophisticated technical tools that assist it in analyzing risk-based
pricing and profitability; and
|
|
·
|
Focusing
on risk based financial services revenues, which account for 50% of the
total income generated by the middle market banking
area
|
According
to internal reports, in 2009 net income from the middle market banking area
remained at US$63 million, essentially unchanged from 2008. This business
segment managed to maintain its income base in a difficult economic environment
by actively managing its loan spread, achieving a spread of US$78 million (34%
higher than in 2008). The middle market area’s annual average loan portfolio had
32.4% of market share, (US$1,904 million), making BCP the leading bank in its
segment.
Because
of their size, middle market companies in Peru generally do not have access to
the local or international capital markets or to credit from foreign banks. In
addition, we believe that middle market companies have benefited significantly
from the overall economic improvements in Peru over the past few years. Loan
quality problems have been addressed through procedures and organizational
changes that have focused on improving the loan approval and credit-risk
assessment processes.
Institutional
Banking
BCP’s
Institutional Banking Area serves for-profit and non-profit organizations,
including 600 clients in Lima and 300 clients in provinces. In Lima, a
specialized team in wholesale banking serves governmental entities, educational
institutions, religious organizations, international bodies, non-governmental
organizations, and microfinance institutions. In provinces, a specialized remote
wholesale banking team partners with BCP’s retail banking area to serve
clients.
The
annual average deposit amount in BCP’s Institutional Banking Area (Lima and
Provinces) reached US$1.6 billion in 2009. The Institutional Banking Area is
strategically important because of the opportunities its clients present for
generating income from fees and cross-selling opportunities. BCP’s strategy in
this area is focused on building customer loyalty by offering customized
services at competitive rates and providing outstanding service quality. The
institutional banking clients mainly require remote office banking, collections
and automated payroll payment services
International
Banking
BCP’s
international banking area is focused primarily on providing short-term credit
for international trade, which is funded with internal resources or with credit
lines from foreign banks and institutions. Medium-term lines of credit funded by
international commercial banks and other countries’ governmental institutions
are also provided to clients. In addition, this area earns fees by confirming
guarantees issued by international banks and other fees as a result of the
international payment business. The International Banking Area also promotes
international trade activities with its local clients by structuring trade
products and services, establishing conferences and assessing the customer in a
wide range of trade products.
Since
September 2008, the International Banking Area has also been supervising the
trade Back Office Unit (International Operations). BCP maintains business
relations with correspondent banks, development banks, multilateral and export
credit agencies in countries around the world. At present, BCP manages credit
lines for foreign trade transactions, working capital and medium- and long-term
investment projects.
The
international market volatility during 2009 affected Peruvian trading volume,
which fell 30% compared to volume in 2008. The volume of trades managed by BCP
was similarly affected and its trade fee income fell 12.1%. Although volumes
declined, BCP’s trade market share increased from 36.5% to 41.5% due to a shift
in the usage of trade tools from open accounts to guarantees, were BCP is a
recognized leader.
According
to the Central Bank, in 2009 Peruvian exports decreased 14.6% to
US$26.9 billion (compared to US$31.5 billion in 2008). This result was
principally due to decreased exports of commodities (gold, silver and iron) and
of manufactured goods (textiles, basic metals and chemicals). During the same
year (based on BCP’s internal report), BCP’s exports volume decreased 10.1% to
US$11.6 billion (compared to US$12.9 billion in 2008), which amounted to
43.1% of total Peruvian exports.
Total
Peruvian imports were US$21.0 billion in 2009, decreasing -26.1% from
US$28.4 billion in 2008, which was primarily due to a lower demand for
capital goods (industry, construction and transportation), raw materials for
industry, and consumer goods. BCP’s import letters of credit, collections and
transfers amounted to US$6.5 billion in 2009, increasing 6.6 % from
US$6.1 billion in 2008, which amounted to 31.0% of total Peruvian
imports.
BCP has a
direct presence abroad through its agency in Miami and its branch in Panama. It
has access to a wide network of foreign correspondent banks and can offer
several internationally competitive products to its customers.
BCP has
correspondent banking relationships and uncommitted credit lines with more than
80 banks for foreign trade operations, financing of working capital and
medium- and long-term investment projects.
In line
with trade trends, China has become the second largest trade partner for Peru.
In light of China’s growing influence, BCP has visited several banks and
corporations in China to explore a possible alternative to intermediate trade
flows, assess Peruvian exporters and importers and to facilitate Chinese
investment in Peru through direct investment and trade development.
Corporate
Finance
BCP’s
Corporate Finance Area is a leading advisor to corporate, middle market and
institutional clients in Peru. Our Corporate Finance team composed of over 20
executives based in Peru is the largest team of its kind in the marketplace.
BCP’s Corporate Finance Area provides a wide range of investment banking and
corporate finance advisory services, including structured financings, capital
raisings, initial public offerings, mergers and acquisitions and corporate
restructurings. In 2009, the Corporate Finance Area focused on investment
banking and structured financing for projects in Peruvian economic sectors that
remained strong despite the global financial crisis, such as construction,
energy and mining. The main projects in 2009 included:
|
·
|
A
leasing arrangement for US$162 million for Cemento Andino to expand their
cement plant, representing the largest leasing transaction that has been
structured and paid by a local
bank;
|
|
·
|
A
medium-term leaseback facility to Votorantim Metais Cajamarquilla for
US$120 million to expand their zinc refinery capacity to 320 Tons per
year.
|
|
·
|
A
leaseback facility to Empresa de Generación Huanza for US$119 million to
finance the construction of their 91.2MW hydroelectric
plant.
|
|
·
|
A
syndicated leasing to Compañia Electrica el Platanal, or CELEPSA, for
US$60 million to complete the construction of their 220MW hydroelectric
plant.
|
As the
global economy started showing signs of recovery and the Peruvian capital market
started to open late in the second half of 2009, BCP´s Corporate Finance Area
was in charge of leading the US$200 million bond placement to complete the
financing of Peru LNG’s natural gas liquefaction plant and the US$172 million
bond placement to finance Kallpa Generación’s combined cycle power plant. In
addition, the Corporate Finance Area acted as financial advisor to Credicorp in
its acquisition of 99.34% of the stock of Edyficar.
During
2009, the Corporate Finance Area generated income in excess of US$14.0 million
from structuring, advisory and issuance fees.
Leasing
BCP’s
financial leasing business offers and manages financial leasing operations. It
also carries out medium-term operations, principally for small- and medium-sized
companies. BCP is the leader with a market share of 36% of total
leasing.
The
financial leasing business only grew by 13% during 2009 (as compared to a 54%
growth in the previous year). BCP’s leasing loan balances show a 31% growth in
2009 as a consequence of tax rule stabilization applicable to leasing operations
and the growth of the Peruvian economy.
Growth
during 2009, like growth in 2008, was driven by business loans in sectors
requiring investment in mining, energy generation and manufacturing companies.
Loan demand also increased in the telecommunication sector; however, loans to
small-sized companies grew at a slower pace as a result of the new risk policies
BCP established.
Business
Services
BCP’s
business services area is in charge of developing transactional services that
handle the exchange of information and money transfers to corporations, midsize
companies, institutions and micro-business companies. This area is responsible
for both the development and marketing of transactional (or “cash management”)
services for BCP’s corporate and its institutional clients. The business
services area offers more than 30 products, aimed at strengthening ties with
clients, assuring their loyalty and reciprocity in the business carried out with
BCP, reducing costs using electronic channels, and increasing fee
income.
Services
managed by the business services area include collections (automated trade bill
collection and collection via internet), automated payments (direct credits to
personnel and suppliers accounts and money transfers), electronic office
banking, electronic lending and cash management through checking accounts with
special features.
During
2009, transactional services continued to contribute to BCP’s earnings. The
monthly average number of current accounts increased by 18% and fee revenues
increased by 9.5% compared to those of 2008. This improvement is mainly the
result of the dynamism experienced in the small business sector (also referred
to as SME). Collection services, such as bills and companies’ collections,
generated commissions that increased 6.8% and 21.4%, respectively, over the 2008
collections. This improvement is explained, in part, by BCP’s strategic decision
to offer value to its clients through the implementation of a more efficient
mechanism of information related to these services. The higher demand by clients
for the remote banking service Telecredito also generated 8.6% more transactions
than 2008. Likewise, other commissions generated by remittances abroad grew 9.3%
from those generated in 2008, and the transaction volume generated by electronic
factoring increased 20.6% in 2008. Finally, the electronic service for invoice
financing, recently introduced in the market, grew by 40.5% in volume from
2008.
(iii) Retail
Banking Group
According
to BCP’s internal reports, by the end of 2009, retail banking-related loans
represented 40% of BCP’s total loans, while retail banking-related deposits
accounted for 47% of BCP’s total deposits. Retail income from fees constituted
45% of BCP’s total income from fees.
Between
2006 and 2007, the Retail Banking Group’s loan volumes increased by 45%,
reaching US$2,840 million. During 2008, loans grew again by 30%, reaching
US$3,694 million. Throughout 2009, loan balances grew by US$621 million to
US$4,315 million. This growth was a result of strong consumer lending, which
includes installment loans and credit cards, home mortgages and small and micro
business loans. With respect to deposits, BCP’s retail banking group has also
shown constant growth, by growing 29% between 2006 and 2007, US$1,051 million in
2008 and US$690 million during 2009, reaching a total of US$7,818 million by the
end of 2009.
With the
segmentation of its retail client base, BCP is able to focus on cross-selling
its products and improving per-client profitability. The Retail Banking Group
has undertaken several projects to improve one-on-one marketing techniques and
tools for the sale of its products to all market segments. BCP’s management
expects the retail banking business to be one of the principal growth areas for
BCP’s lending activities.
BCP’s
retail banking serves individuals and small-sized companies with annual sales
levels of up to US$6.6 million. BCP’s objective is to establish profitable
long-term relationships with its broad client base, using segmentation
strategies that satisfy the specific needs of each client type. BCP’s retail
distribution strategy changed at the beginning of 2007, when BCP started using
the branch network as the center for all transactional and commercial
activities. BCP now has a commercial division, in charge of all direct sales
forces and the branches, which in turn are organized on a geographic level. Each
branch is responsible for servicing and selling products to three customers
groups: exclusive banking, small business banking and consumer banking. In
addition, each branch is responsible for coordinating the different channels
offered within the branch, such as account managers, customer service
representatives and tellers.
The
Marketing Division is responsible for product, channel and segment management.
During 2008, BCP saw an unprecedented investment in infrastructure and human
resources to support its “banking the unbanked” strategy. As a result, in 2008
and 2009, BCP experienced an explosive growth in channels, including 1,580 new
customer contact locations (59 branches, 247 ATMs and 1,580 correspondent
banking offices). Demonstrating its leadership in attracting new customers, BCP
now services over three million customers with its network of 334 branch
offices, 996 ATMs and 2,801 correspondent banking offices (these figures do
not include the customer contact locations under Edyficar’s management, which
are counted separately).
Exclusive
Banking
Exclusive
banking is BCP’s upscale retail banking area which manages a select number of
individual customers. These customers are crucial to BCP because of their high
loan and deposit volume and their attractive profitability.
The
exclusive banking customers receive a differentiated value plan which includes
(i) access to innovative products, (ii) dedicated customer services channels
such as specialized account managers and/or expert phone banking, (iii)
privileged preferential service in the branches at the teller window and (iv)
special interest rates on loans. BCP’s exclusive customers, totaling about
160,000, must have a good credit record and at least US$20,000 in outstanding
loans within the banking system or a US$40,000 balance in deposits with BCP.
Approximately 100,000 of the most profitable exclusive clients are serviced
through specialized accounts managers responsible for improving per-client
profitability and achieving long-term relationships through personalized
service, cross-selling and share of wallet strategies. Account managers are also
responsible for new customer acquisition, particularly through mortgage loans.
The higher end of this segment also has access to investment advisors who
prepare customized investment plans consisting of capital market products and
mutual funds. The exclusive banking segment is very profitable, generating 36%
of the retail banking group’s income while managing 5% of the total customer
base, 45% of retail group’s loan volume and 41% of its deposit
volume.
Small
Business Banking
BCP’s
small business segment now accounts for 282,000 clients. Customers are divided
into three groups with different business models, services levels, and products
access. The first group is top-end small business banking, which serves
approximately 7,200 clients with annual sales between US$500,000 and
US$6.6 million. The next group of 100,000 small business clients has annual
sales up to US$500,000 but has debt, and the third group of approximately
210,000 consists of very small business customers who have only deposit product
needs.
In
addition to products, such as revolving credit lines repaid in installments, BCP
also helps the development of the small and micro (SME lending) business
segments, which composed of individuals who primarily derive their income from
small, family-run businesses, in two ways: (i) client training
programs through seminars and presentations and (ii) formalization programs
based upon alliances with government institutions such as Prompyme, the Ministry
of Labor and Social Promotion, municipalities and the Peruvian Center for the
Promotion of Small Business. BCP’s total loans to small businesses as of
December 31, 2009 amounted to US$1,065 million, which represented another year
of consecutive growth.
According
to BCP’s internal reports, the Small Business Banking loan portfolio grew from
US$1,037 million in 2007 to US$1,345 million in 2008 and reached US$1,546
million by the end of 2009. In terms of deposits, this group increased deposits
from US$1,197 million in 2007 to US$1,562 million in 2008 and US$1,698
million by the conclusion of 2009.
Edyficar
also serves the microfinance segment, and as of December 31, 2009, it registered
165,345 SME clients with a total loan portfolio equivalent to US$198.8 million
(S/. 574.6 million in Nuevos Soles), which represented an increase of 15.1%
compared to the level registered at the end of 2008. As of December 31, 2009,
Edyficar had a client market share of 9.7%, making it second in terms of market
share within the SME segment. Edyficar also had a loan market share of 4.6% in
2009, making it fifth in terms of market share within the SME segment. The
aggregate market share of Edyficar and BCP in the SME segment totaled 20.0% at
the end of 2009, and combined, they have the highest market share in the SME
segment.
Consumer
Banking
Consumer
banking is in charge of developing strategies for the retail customers not
included in exclusive banking or small business banking. Its customer base is
approximately 2.7 million medium to low income individuals. Consumer banking
focuses its attention on customers who receive their payroll through BCP (which
represents slightly more than 1 million clients). Its strategies vary from basic
acquisition of new accounts for wage-earners with special terms regarding fees
and interest rates, to more sophisticated, aggressive cross-sell and retention
programs that expand benefits to non-banking products (i.e., access to discounted
products). BCP has continued excelling in expanding its debit card as a form of
payment, maintaining more than half of the market share in withdrawals and
payments with debit cards, which is a year-to-year increase of 400,000 cards.
BCP concluded 2008 with more than 2.7 million cards.
Mortgage
Lending
As of
December 31, 2009, BCP was the largest mortgage lender in Peru with a market
share of 35.5% of total mortgage loans in the Peruvian banking system. This was
largely the result of BCP’s extensive marketing campaigns and its improvements
in the quality of procedures for extending credit and establishing
guarantees.
BCP
expects the mortgage lending business to continue grow because of (i) low levels
of penetration in the financial market, (ii) increasing demand for housing,
(iii) the availability of funds for the Peruvian government’s MiVivienda
low-income housing program and (iv) the current economic outlook for controlled
inflation and economic growth in Peru.
BCP had
US$1,551 million in outstanding mortgage loans as of December 31, 2009 (as
compared to US$1,346 million in 2008, US$1,125 million in 2007 and
US$868 million for year-end 2006).
All
programs of mortgage financing are available to customers with minimum monthly
income of US$400. The MiVivienda program, a program supported by government
resources, placed a limit of US$60,000 on the value of the house to be
purchased. BCP will finance up to 90% of the appraised value of a property where
monthly mortgage payments do not exceed 30% of the client’s stable net income.
The maximum maturity of the mortgage loans BCP offers is 25 years, in U.S.
Dollars, and 25 years, in local currency. Within the mortgage lending business,
BCP offers variable, fixed and Libor-based interest rates on home mortgage loans
denominated in both U.S. Dollars and Nuevos Soles. However, BCP’s mortgage
portfolio is predominantly fixed rate and U.S. Dollar-denominated.
In May
2006, the original MiVivienda program was terminated. However, local banks (with
government’s approval) launched a similar project, known as MiVivienda2, to
which proprietary funds contribute. In addition, in March 2007, BCP created a
new program financed by the government called Mi Hogar, which targeted persons
with a lower income profile. The conditions of the new program are almost
identical to those of the first MiVivienda, except that financing is in local
currency.
Consumer
Lending (Credit Cards and Installment Loans)
Consumer
lending, credit cards and installment loans have grown significantly as
improving economic conditions have led to increased consumer spending. BCP
expects the strong demand for these products to continue. In addition to
interest income, BCP derives fee income from customer application and
maintenance, retailer transactions, and merchant processing, finance and penalty
charges on credit cards.
Peru’s
economic growth has had a huge impact on the consumer credit market, which grew
by a total of 24% during 2008 and 16% between 2008 and 2009. The outstanding
balance is US$1,326 million, consisting of US$503 million in credit card loans
and US$823 million in installment loans. BCP’s market share in consumer lending
has consistently increased since 2007, 2008 and 2009 from 17.9% to 19.2% to
20.0%. This growth in consumer lending was achieved while maintaining a ratio of
delinquent accounts below 5% (over 30 days).
Between
2007 and 2008, installment loans experienced an unprecedented growth of US$214
million in outstanding balances, a 45% increase, and during 2009 installment
loans grew another 19%. This result was due, in part, to BCP’s strategic change
which was designed to broaden its customer base. Fifty percent of BCP’s new
loans came from customers with a monthly gross income of less than
US$400.
In the
credit card business, BCP continued to apply segmented strategies. BCP continues
to offer value to its high-end customers through partnerships with the airline
LAN and with Primax, a chain of gas stations. These programs, coupled with BCP’s
own travel program, enabled it to reach record levels, both in point generation
and point usage (exchanges). To catch the attention of the lower income segment,
BCP worked on streamlining its risk assessment and card delivery
process.
In
addition, BCP has been continuously improving monitoring and optimizing its
scoring models, which includes, among others, behavior, payments and income
forecasting. As a result, BCP has achieved a US$58 million yearly increase in
outstanding balances during each of 2008 and 2009. According to BCP’s internal
records, the number of active credit cards has constantly increased from 325,000
in 2006 to 387,000 in 2007 to 430,000 in 2008 and 446,000 by year end 2009. In
addition, annual purchases have increased from US$592 million in 2006 to
US$868 million in 2007 to US$1,131 million in 2008 and US$1,203 million in
2009.
BCP is
also the largest shareholder of VISANET, holding approximately 40% of its total
shares. The number of VISANET electronic payment terminals grew to approximately
55,000 in 2009, as compared to 28,000 in 2006.
(iv) Capital
Markets Group
In
addition to BCP’s wholesale and retail banking operations, BCP operates a
capital markets group, which currently is the largest capital markets and
brokerage distribution system in Peru. The principal activities of the Capital
Markets Group include currency transactions (both for clients and on a
proprietary basis) as well as treasury, custody and trust, investment advisory
services, and general research activities.
BCP’s
products are distributed through its subsidiaries and branches. BCP’s close
relationship and coordination with its subsidiaries has established BCP as the
market leader in the capital markets business.
Credibolsa
is BCP’s brokerage subsidiary through which BCP offers a wide variety of
variable and fixed-income products and services. Credibolsa’s activities include
the structuring and placement of primary market issues and the execution and
trading of secondary market transactions.
Creditítulos
is BCP’s asset securitization subsidiary through which BCP offers local
securitization structuring to corporate entities.
Credifondo
is BCP’s fund management subsidiary, which offers investment fund products and
services. Fund types offered by Credifondo include short/long term, U.S. Dollar
and local currency and fixed/variable income funds.
Trading
and Brokerage Services
In 2009,
markets recovered strongly after the international financial crisis. The Lima
Stock Exchange General Index (IGBVL) experienced an increase of 100.9%, even
though trading volume (measured in U.S. Dollars) decreased 22% to US$4,007
million, as compared to 2008. Including fixed income and REPO operations, total
trading volume in the Lima Stock Exchange reached US$5,710 million, representing
a 28% decline as compared to 2008.
Credibolsa
maintained its leadership position in the Lima Stock Exchange with a 24.87%
share of the market in equity and 50.77% in fixed income, compared to 19.8% and
49.6% in 2008, respectively. Credibolsa’s trading volume was generated by
domestic customers (both retail and institutional), by foreign institutional
clients and by our proprietary trading. Credibolsa’s total trading volume
reached US$3,158 million in 2009. Credibolsa was also the number one stock
broker for initial offerings, issuing a total of S/. 388 million and US$543
million in fixed income, representing a 46% market share.
BCP’s
management believes that Credibolsa will continue expanding its business based
on its ability to provide appropriate advice to clients while offering various
products that meet their requirements. Furthermore, BCP’s wholesale banking
marketing represents an important strength that allows it to reach main
companies in the local market, while BCP’s branch network helps to expand its
business in the retail banking segment.
Treasury,
Foreign Exchange and Proprietary Trading
BCP’s
treasury and foreign exchange groups are active participants in money market and
foreign exchange trading. These groups manage BCP’s foreign exchange positions
and reserves and are also involved in analyzing liquidity and other
asset/liability matters. The trading desk plays an important role in short-term
money markets in Nuevos Soles and in foreign currencies. It has also been active
in the auctions of certificates of deposit by Peru’s central bank as well as in
financings through certificates of deposit, interbank transactions and
guaranteed negotiable notes, among other instruments.
Since
2007, BCP has adhered to the best international cash management practices. BCP
created the Assets and Liabilities Management Service (or ALM) which is
responsible for managing its balance sheet under the Asset and Liabilities
Committee (or ALCO) oversight. ALM is responsible for managing BCP’s balance
sheet and for accepting reasonable interest rate and liquidity risks through
management of the short- and long-term transfer rates.
BCP’s
proprietary trading consists of trading and short-term investments in
securities, which includes instruments from various countries. These short-term
investments are primarily made to facilitate its treasury management and
corporate finance efforts. This has become an increasingly important part of
BCP’s business, as BCP seeks returns on excess liquidity pending improved
lending conditions. During 2008, the investments were mainly oriented to Nuevo
Soles-denominated instruments such as BCRP certificates of deposits and
government bonds.
Asset
Management
Credifondo
S.A., Sociedad Administradora de Fondos, or Credifondo, provides advice to and
operates mutual funds in Peru. It is the largest mutual fund manager in Peru
based upon data from the Peruvian securities market authority, the Comisión
Nacional Supervisora de Empresas y Valores (CONASEV). As of December 31,
2009, total Peruvian funds in the mutual funds system amounted to
US$4.86 billion, increasing 72.3% from US$2.82 billion in
2008.
According
to CONASEV, as of December 31, 2009, Credifondo managed ten separate funds,
with a total of 102,211 participants (38.9% of total participants) compared to
78,497 in 2008. Among the securities in which the different funds specialize
are: equities, U.S. Dollar-denominated bonds, Nuevo Sol-denominated bonds and
U.S. Dollar-denominated short-term securities. As of December 31, 2009,
Credifondo’s total managed funds amounted to US$1,929 million, increasing from
US$1,273 million – 60.4% – as of December 31, 2008. Because these
funds are subject to certain volatility, there can be no assurance as to their
future performance. As a result, we do not guarantee any return on these
investments.
As of
December 31, 2009, the Bolivian fund administrator managed a total of
US$139.9 million of third-party funds increasing 27.4% as of December 31,
2008.
According
to BCP’s internal reports, BCP holds US$22.7 billion in securities for over
61,189 domestic and foreign clients. BCP provides custody services that include
the physical keeping of securities and the payment of dividends and interest. In
addition, BCP acts as paying agent for securities of which it does not keep
custody. BCP is one of the few banks in Peru qualified to serve as a foreign
custodian for U.S. mutual funds. Trust services include (i) escrow, (ii)
administration and representation services, (iii) supervision of transactions
completed for its clients and (iv) transfer settlement and payment services for
local securities issues. These services allow BCP to adequately represent its
clients’ activities in the local and international securities
markets.
La
Fiduciaria S.A., or Fiduciaria, is an associated entity and the first
specialized trust services company in Peru. We hold a 45% interest in
Fiduciaria. In its eighth year of existence, Fiduciaria has managed trusts for a
majority of the institutions in the national financial system, putting itself at
the forefront of fiduciary services in Peru. Fiduciaria’s operations encompass
sectors including energy, communications, mining, tourism, fishing, education
and construction. Fiduciaria ended 2009 with 185 outstanding
operations.
(v) Lending
Policies and Procedures
BCP’s
uniform credit policies and approval and review procedures are based upon
conservative criteria and are uniformly applied to all of its subsidiaries.
These policies are in accordance with the guidelines established by Peruvian
financial sector laws and SBS regulations. (See “—(11) Supervision and
Regulation—(ii) BCP,” and the guidelines set forth by our board of
directors.)
BCP’s
credit approval process is based primarily on an evaluation of the borrower’s
repayment capacity and on commercial and banking references. BCP determines a
corporate borrower’s repayment capacity by analyzing the historical and
projected financial condition of the company and of the industry in which it
operates. Other important factors that BCP analyzes include the company’s
current management, banking references, past experiences in similar
transactions, and collateral to be provided.
For the
evaluation of BCP’s corporate borrowers, credit officers prepare a risk
assessment report, which analyzes the client’s ability to repay its obligations,
determines the probability of default of the client using an internal risk
rating model, and defines the maximum credit exposure that the BCP wants to hold
with the company.
For BCP’s
individual and small business borrowers, it evaluates credits based on the
client’s capacity for repayment, a documented set of policies (regarding the
client’s financial track record among other issues), and in most cases, credit
scores, which assign loan-loss probabilities that relate to expected returns of
each market segment. Approximately 80% of BCP’s credit card, consumer, mortgage,
and small business loan application decisions are made by automatic systems. The
complement is decided by credit officers reporting to a centralized
unit.
Success
in the small business and personal lending areas depends largely on BCP’s
ability to obtain reliable credit information about prospective borrowers. BCP,
together with several partners, formed a credit research company called Infocorp
in November 1995. In addition, the SBS has expanded its credit exposure database
service to cover all businesses or individuals with any amount borrowed from a
Peruvian financial institution. This database includes information on the loan
risk category in which the borrowers are classified: “Normal,” “Potential
Problem,” “Deficient,” “Doubtful” and “Loss.”
BCP has a
strictly enforced policy with respect to the lending authority of its loan
officers. It also has procedures to ensure that these limits are adhered to
before a loan is disbursed. Under BCP’s credit approval process, the lending
authority for middle market, small business, and personal loans is centralized
into a specialized credit risk analysis area, whose officers have been granted
lending limits. To ensure that loan officers and credit analysis officers are
complying with their lending authority, the credit department and BCP’s internal
auditors regularly examine credit approvals, in addition to the controls built
into the loan approval workflow systems.
The
following table briefly summarizes BCP’s policy on lending limits for loan
officers and credit risk analysis officers. Requests for credit facilities in
excess of the limits set forth below are reviewed by BCP’s general manager,
executive committee or, if the amount of the proposed facility is sufficiently
large, board of directors.
In US$ thousands
|
|
Risk without collateral or with
only personal collateral or
guarantee
|
|
Risk with preferred
guarantees (1)
|
|
Board
of Directors
|
|
Regulatory limit
|
|
Regulatory limit
|
|
Executive
Committee
|
|
US$
191,076 |
|
US$
191,076 |
|
General
Manager
|
|
US$
35,000 |
|
US$
30,000 |
|
Credit
Group Manager
|
|
US$
7,500 |
|
US$
15,000 |
|
Credit
Risk Manager
|
|
US$
4,000 |
|
US$
8,000 |
|
Credit
Risk Chiefs
|
|
US$
2,000 |
|
US$
3,000 |
|
Retail
Credit Risk Manager
|
|
US$
500 |
|
US$
500 |
|
(1)
|
Preferred
guarantees include deposits in cash, stand-by letters, securities and
other liquid assets with market price, mortgages, non-real estate property
guarantees and assets generated by leasing
operations.
|
BCP
believes that an important factor in maintaining the quality of its loan
portfolio is the selection and training of its loan and risk officers. BCP
requires loan officers to have degrees in economics, accounting or business
administration from competitive local or foreign universities. In addition, the
training program consists of a six-month rotation through all of the
business-related areas of BCP and the credit risk analysis area. After the
training period is over, trainees are assigned as assistants to loan officers
for a period of at least one year before they can be promoted to loan officers.
Loan officers also receive additional training throughout their careers at BCP.
Laterally-hired officers are generally required to have previously held
positions as loan officers.
In
general, BCP is a secured lender. As of December 31, 2009, approximately US$6.4
billion of our loan portfolio and contingent credits were secured by collateral,
which represents 47.9% of the total loan portfolio based upon our unconsolidated
figures, as compared to 41.7% in 2008 and 43.8% in 2007. Liquid
collateral is a small portion of the total collateral. In general, if BCP
requires collateral for the extension of credit, it requires collateral valued
at between 10% and 50% above the facilities granted. The appraisal of illiquid
collateral, in particular real estate assets, machinery and equipment, is
performed by independent experts when required for specific
reasons.
The
existence of collateral does not affect the loan classification process
according to regulations in effect as of December 1998. Pursuant to Peruvian
banking law, secured loans, or the portion thereof covered by collateral,
classified in Class “B,” “C,” or “D” risk categories have a lower loan loss
provision requirement for Peruvian accounting purposes. If a borrower is
classified as substandard or below, then BCP’s entire credit exposure to that
borrower is so classified.
BCP
conducts unannounced internal audits on the financial statements, consistent
with local banking regulation of the different jurisdictions in which it
operates.
(vi) Deposits
Deposits
are principally managed by BCP’s retail banking group. The main objective of
BCP’s Retail Banking Group operations has historically been to develop a
diversified and stable deposit base in order to provide a low-cost source of
funding. This deposit base has traditionally been one of BCP’s greatest
strengths. BCP has historically relied on the more traditional, stable, low cost
deposit sources, which it considers to be its core deposits: time, demand
deposits, savings and CTS deposits. CTS deposits, or Severance Indemnity
Deposits, are funded by companies in the name of their employees. CTS deposits
amount to one month’s salary per year and may be withdrawn by the employee only
upon termination of employment or upon transfer to another bank, subject to
certain exceptions. Exceptions include disposing of 50% of the CTS deposit at
any time and disposing of up to 80% at once for home purchase. For the year 2009
and 2010 and as part of the Government program to minimize the impact of the
international crisis, individuals may dispose 100% of their CTS
deposits.
As of
December 31, 2009, deposits represented 74.9% of BCP’s total source
funding. BCP’s extensive branch network facilitates access to this type of
stable and low-cost funding. BCP’s corporate clients are also an important
source of funding for BCP.
(vii) Support
Areas
BCP’s
commercial banking operations are supported by its risk area, which evaluates
and helps administer credit relationships, establishes credit policies and
monitors credit risk. See “—(4) BCP and
Subsidiaries—(v) Lending Policies and Procedures.”
BCP’s
planning and finance area is in charge of planning, accounting and investor
relations functions and is also responsible for analyzing the economic, business
and competitive environment in order to provide the information necessary to
support senior management’s decision-making.
In
addition to the above, BCP’s administration group is generally responsible for
information technology, quality control, institutional and public
relations, human resources, the legal department, security, maintenance and
supplies.
Information
Technology
BCP is a
technology leader in the Peruvian banking sector. All of BCP’s retail banking
group services and a substantial portion of BCP’s corporate banking services are
fully computerized. All of BCP’s points of service, including branches, ATMs and
POS terminals, are linked to BCP’s data processing center, which permits BCP to
monitor and analyze service while allowing most transactions to be executed on a
real-time, online basis.
BCP
considers its technology platform to be one of its main competitive strengths
and has continued to invest in this area to maintain its competitive position in
the banking sector. During 2009, BCP’s expenses on systems totaled US$120.7
million, of which US$96.4 million were recurring expenses and US$24.3 million
were allocated to specific projects. These totals were higher than those of
2008, which were US$97.9 million, US$79.2 million and US$18.7 million,
respectively. BCP’s investments totaled US$50.9 million, of which US$14.9
million were for tactical projects, US$22.2 million for core processes, and
US$13.8 million for subsistence projects. These amounts were lower than those
reported for 2008 (US$60.9 million, US$16.6 million, US$27.5 million and US$16.8
million, respectively).
Furthermore,
to continue with the objective of increasing lending in the Retail Banking
Group, BCP expanded its “Loans Integrated Model”, or MIC, to consumer loans. The
Loans Integrated Model, which was started in 2007 for credit cards, provides
customers instant reply to credit card applications and approved credit lines.
In 2009, the system could be able to mortgage loan screening to give customers
point of contact response. Finally in 2010, the system will have a new function,
enabling it to buy debt from other financial entities.
BCP
continued to align its systems to the technological architecture by building and
implementing shared services. In 2008, two modules of SAP were implemented—human
resources and procurement. Three other important projects were completed: (i)
implementation of the collections management system for retail banking products;
(ii) migration of the IVR (interactive voice response) system to a new platform,
which is more robust, safe and high availability; and (iii) implementation of a
new anti-money laundering system to intercept all suspicious banking
transactions. During 2009, BCP started an accounting module that will be
completed in 2010.
As part
of the “Excellence in Continuous Operations” Program (ECO Program), BCP
completed the construction of a new data center at the La Molina headquarters at
the end of 2008. In June 2009, also as a part of the ECO Program, BCP started
the construction of a world-class data center in Chorrillos to replace its
downtown Lima facility. Operations at the data center in Chorrillos are
scheduled to lunch in November 2010. The La Molina and Chorrillos data centers
will operate in an “active-active” mode, backing-up each other. In parallel, a
third project within the ECO Program called “Out-of-Region Disaster Recovery
Data Center” (OOR) started in July 2009 at IBM’s Brazil Global Delivery Center
located in Hortolandia, Sao Paulo. The main objective of the OOR project is to
provide remote recovery capabilities of the core banking applications and
channels of BCP nationwide in case of a major disruptive event that may affect
both data centers in Lima.
Marketing
BCP
continually works to protect and strengthen the BCP brand. BCP has a proactive
attitude towards competition and is focused on change and innovation. The
company promotes its products and services by constantly improving them. In this
manner, BCP aims to grow and be a leader in every retail market by offering the
highest possible value for its clients and shareholders. In 2009, BCP continued
its strategy which was based on two fronts:
Generating Value: In terms of
generating value, BCP continues to develop strategies to approach different
retail customer groups. BCP’s increasing use of Customer Relation
Management (CRM) tools across all sectors enables it to proactively reach
customers and provide them with personalized offers and terms in a timely
manner. In an effort to build long-term relationships, the BCP has heightened
its development and training activities. These activities include training
programs with small-business owners supported by Universidad del Pacífico, the
ExpoNegocios and the Bodegas y Mercados, as well as exhaustive seminars
conducted in different cities across the country.
Another
key element for BCP to create value is innovation. BCP has launched several
innovative products, including new service products for very wealthy customers,
new benefits for customers whose wages are paid at their BCP accounts, and the
development of the Línea Múltiple de Negocios (Multiple Business Line) that
allows its customers to meet their financial needs with a comprehensive,
easy-to-use product. BCP also innovates by transforming the way it
operates throughout the organization, achieving internally, leaner and more
efficient processes and externally, an enhanced experience for our
customers. During 2009 leaner processes have been accomplished for
branch layout and tellers, ATM cash management and mortgage
lending.
Quality in Service: Quality
in service is a permanent goal for BCP. BCP has progressed in this area by
implementing a new regulation promulgated under the Consumer Protection Law,
which included significant investments toward improving service and keeping
customers informed about BCP’s products and services.
BCP’s
improved processes and supporting tools have enabled it to leverage growing
businesses. BCP successfully implemented its new commercial loan disbursement
process (promissory notes, loans, advances and issuing bank guarantees
nationwide) by using CAPS as a tool. The result was an improvement in BCP’s
customer service timing and to reduction in its business consultants’ and
assistants’ workload.
Operations
Achieving
greater operational efficiency is an essential part of BCP’s s growth strategy,
and BCP is committed to improving efficiency by streamlining its processes. One
of the main initiatives the company advanced in 2009 was “Lean Project”, which
aimed at increasing the satisfaction of BCP’s clients by enhancing
business-origination processes based on the “Lean” methodology. In 2009, the
redesign of the processes occurred in three “waves”:
Wave 1 - New branch
model
The new
model seeks to offer better service to BCP’s clients in each branch, and turn
the branches into commercial points rather than transactional centers. The most
relevant achievements in 2009 included: operating 41 offices under the new
model; reducing the waiting time at BCP offices by 48%; increasing the
productivity of teller promoters by 20%; and migrating 6% of the transactions
handled by tellers to electronic channels. BPC expects that by April 2011,
approximately 279 offices out of a total of 334 will operate under the new
model.
Wave 2 - Post-sales and cash
management
The
purpose of Wave 2 is to improve BCP’s post-sale service and cash logistics
management. On the post-sales side, BCP began by conducting an initial process
review of its claims attention service. The company then extended its review,
examining how it processes requests from current clients (including requests to
update of client information or requests for copies of credit card statements).
The main achievements in this process review included: reducing the claim
response time from 9 days to 2 days; and increasing the company’s productivity
in responding to applications by an average of 160%.
On the
cash management side, BCP sought to improve efficiency in its management of cash
logistics. Cash logistics management includes facilitating the movement of cash
among in and among BCP’s branch offices, vaults and ATMs. The most relevant
achievements in this wave were: reducing the cash transportation expenses
(remittance and pick up) by 24% and reducing expensed for cash processing by
57%. Overall, the office logistics expenses were cut 29%.
Wave 3 - Commercial loans,
mortgage loans and leasing
For Wave
3, BCP undertook an exhaustive review of its commercial lending, mortgage
lending and leasing processes. The review tracked loans from the time a client
submitted a loan application until the loan was disbursed. They examined the
work structure used to handle these loan applications, the quality of customer
service, the information provided to the client and the celerity of the overall
service, in order to propose systems that might enable BCP to better serve its
clients and improve its sales process. The main achievements in Wave 3 were:
reducing the renewal cycle time for credit lines extended through BCP’s
Corporate Banking Area by 47%, reducing the same renewal cycle time for loans
extended through BCP’s Middle Market Banking by 14%, reducing the renewal cycle
time for loans in BCP’s Corporate Finance Area by 15%; increasing productivity
in the risk area by 53% in Corporate Banking Area, increasing productivity in
the risk area by 24% in Middle Market Banking and increasing productivity in the
risk area by 24% in BCP’s Corporate Finance Area. BCP also reduced its mortgage
loan cycle time from 47 days to 14 business days for 75% of its mortgage loans;
and reduced its application-to-disbursement time on leases from more than 21
days to just 15 days for 83% of its leases.
(viii) Anti-Money
Laundering Policies
As part
of our enterprise wide compliance program, BCP and all the companies under our
group have adopted policies and procedures for “know your customer,” “know your
market,” “know your correspondent bank” and “know your employee” as an integral
part of our anti-money laundering program. These policies and procedures are
required to be followed by all employees corporate wide and is under the
responsibility of the Board of Directors, the Chief Executive Officer and the
Corporate Compliance Officer.
Credicorp’s
corporate compliance officer is responsible for the monitoring and oversight of
the program and coordinates with the compliance officers of each of the foreign
branches (BCP Panama and BCP Miami), affiliates (PPS, Atlantic Security Bank and
Credicorp Securities) and foreign subsidiaries (BCP Bolivia). These institutions
must comply with all regulatory laws established in the countries in which they
operate, in addition to corporate policies and procedures and GAFI
recommendations. Under Peruvian law, BCP must notify the SBS if any of its
branches, affiliates or subsidiaries abroad are unable to meet any requirements
imposed by the aforementioned entities.
The
Financial Intelligence Unit is the governmental entity responsible for
receiving, analyzing and disseminating suspicious transaction reports filed by
obligated entities. It was created under Law 27693 in April of 2002, as amended
by Laws 28009 and 28306, and incorporated under Law 29038 in June 2007 as a
specialized unit of the SBS. The Financial Intelligence Unit is autonomous, both
functionally and technically.
One of
the main banking regulations, Law 838-2008, requires that all financial
institutions supervised by the SBS have an anti-money laundering and terrorist
financing compliance program that includes adequate policies, monitoring of
client operations, evaluation of red flags, registration of all cash operations
and a training program for all staff.
(ix) Employees
As of
December 31, 2009, BCP had 16,748 employees (including 1,247 employees from
Edyficar) compared to 15,969 employees as of December 31, 2008 and 12,667
employees as of December 31, 2007. All employees of banks in Peru are given the
option of belonging to an employee union. These employee unions are collectively
represented by the Federación de Empleados Bancarios (Federation of Banking
Employees or FEB).
(5) Atlantic
Security Holding Corporation
ASHC is a
holding corporation that engages in private banking, asset management and
proprietary investment. ASHC was incorporated in December 1981 in the Cayman
Islands and principally serves Peruvian-based customers through Atlantic
Security Bank (ASB), a wholly-owned subsidiary. ASB is a Cayman
Islands licensed bank with offices in Panama through which ASHC conducts all
commercial business. ASHC’s balance sheet is virtually identical to
ASB’s, with the exception of approximately 14.6 million Credicorp shares
directly held by ASHC.
As of
December 31, 2009, ASHC had total assets of US$1,484.8 million
and shareholders’ equity of US$239.8 million (compared with
US$1,454.2 million and US$115.7 million, respectively, as of
December 31, 2008). ASHC reported a net profit of US$54.1 million in
2009, compared with a net loss of US$22.4 million in
2008. Adjusting for dividend income from Credicorp that is not
reflected in consolidated results, ASHC’s net income contribution increased from
a negative US$50.4 million in 2008 to US$29.7 in 2009. All income
other than Credicorp dividends was generated by ASB.
ASB’s
clients have traditionally provided a stable funding source, as many are
long-time clients who roll-over deposits on a permanent basis. As of December
31, 2009, ASB had approximately 4,000 clients, 95% of whom are
Peruvian. ASB deposits at year-end 2009 reached US$1,230.4 million,
down slightly from US$1,283.6 million as of December 31, 2008.
ASB
trades on its own account primarily by making medium-term investments in
investment grade fixed-income securities and sovereign debt. Non-investment
grade fixed-income securities represent a distant second in terms of portfolio
allocation, while equity and hedge-fund positions, though present, are even less
relevant. As of December 31, 2009, ASB had US$797.2 million at fair value,
compared to US$594.9 million in 2008. In addition to ASB’s
portfolio, ASHC also holds an equity investment in Credicorp with a fair value
of approximately US$1,124.2 million as of December 31, 2009 (compared to
US$730.5 million as of December 31, 2008).
Third-party
Asset management is an important activity for ASB. Total assets under
management reached US$2,177.0 million as of December 31, 2009, compared to
US$1,639.4 million as of December 31, 2008. These assets cover
the range from direct unsolicited securities to ASB managed mutual
funds.
ASB also
maintains a sizable loan portfolio. Total loans outstanding were
US$525.5 million and US$560.1 million for 2009 and 2008,
respectively. Between 85% and 95% of these loans were guaranteed by
client’s deposits or investments. For the year-ended 2009, for
example, only US$23.4 million were unsecured loans. This high level
of securitization is reflected in ASB’s low level of non-performing loans,
consistently much less than 1% of total loan portfolio. The
overwhelming majority of ASB’s loans are granted to Peruvian nationals and
companies, while those that are not are directed exclusively to Latin American
borrowers.
ASB’s
overall investment strategy, general profile of its investment portfolio and
specific investment decisions are reviewed on a weekly basis by an investment
committee. Its credit risk by counterparty, including direct and
indirect risk, is evaluated on a consolidated basis and covers all activities
that generate credit exposure such as interbank placements, commercial loans and
securities investment. Market, Liquidity and Operational risks are
monitored by ASB’s Risk Management Unit, which in turn reports to and is
supervised by a Corporate Risk Committee, an Asset-Liability Committee and the
Board of Directors.
(6) Pacífico
Peruano Suiza
We
conduct our insurance activities through Pacifico Peruano Suiza and its
subsidiaries, El Pacifico Vida and Pacifico Salud, which together make up
Pacifico Grupo Asegurador, providing a broad range of insurance products in the
property and casualty, life and health businesses. In 2009, the six most
significant business lines collectively generated 82.9% of total premiums
written by PPS. These business lines consisted of commercial property damage
(including fire, earthquake and allied lines and limited liability risks),
automobile, health, life and pension fund underwriting and life annuities. PPS
is the second leading Peruvian insurance company, including private health
companies, with a market share of 30.9% based on net premiums earned and fees in
2009.
In 2009, we were
attributed a consolidated net gain from PPS of US$37.4 million compared to a net
loss of US$15.9 million in 2008. PPS’s total premiums increased 3.6% to US$608.8
million during 2009 from US$587.6 million in 2008, and net premiums
earned, net of reinsured premiums and of technical reserves (as defined below in
“―(ii) Claims and Reserves”), were US$439.5 million in 2009, increasing 8.3%
compared to 2008.
PPS’s net
underwriting results increased from a loss of US$7.7 million in 2008 to a gain
of US$79.9 million in 2009. This rise in PPS’s underwriting results is primarily
a due to the decrease of net claims paid as a percentage of net premiums written
from 84.3% during 2008 to 65.2% during 2009.
PPS’s
business in property and casualty and private health is highly concentrated,
with a client base of over 28,000 companies and over 417,000 individuals in the
property and casualty and health insurance programs, including individuals
affiliated with group health insurance programs through the companies by which
they are employed. As of December 2009, revenues from policies written for PPS’s
three largest and 20 largest customers represented 7.5% and 21.6% of total
premiums in its property and casualty and health insurance businesses,
respectively. PPS’s property insurance lines are sold through agents and
brokers, while life insurance is sold by its own sales force. The 10 largest
brokers in the property and casualty as well as in the private health segment
accounted for approximately 43.5% of total premiums as of December 31, 2009
(compared to 41.2% as of December 31, 2008).
El
Pacífico Vida (Pacífico Vida), PPS’s life insurance subsidiary, is 38%-owned by
ALICO, a subsidiary of AIG. In 2009, Pacífico Vida reached total premiums of
US$188 million, a 5.9% increase from total premiums of US$178.2 million in
2008.
Pacífico
Vida’s market share was 27% in 2009 versus 27.6% in 2008. Its individual life
and personal accident businesses increased by 14.5%, mainly due to an increase
in sales of the company’s new products, the improved quality of Pacífico Vida’s
sales service and the development of its distribution channels, which includes
its main channel, the agencies, and its part time channels, such as brokers, BCP
(bank-assurance), sponsors, among others. As a result, the market share in
individual life market was 35.7% where Pacifico Vida has positioned as the
leader.
In 2009,
total premiums on Group Life, Group Life Ley and SCTR (limited workers
compensation) increased by 12%. This increase was largely the product of a broad
based national economic recovery, which spurred the formalization of more
companies and the development of the mining and construction sectors. Credit
Life, Pacífico Vida’s most dynamic product, reached an increase of 14.7% in
total premiums over that of 2008 and represented 12% of total direct premiums
(compared to 11.2% in 2008). Credit Life’s increase was primarily a result of
Pacífico Vida’s business with BCP, which involved credit cards and mortgage
loans. Pacífico Vida’s life annuity business decreased 0.3% in total premiums
and fell from 19.9% to 17.9% in its market share. This decrease was mainly
because we did not take part in the VAC bonds’ market (“valor adquisitivo
constante” in Spanish, constant acquisition value).
Pacífico
Vida’s pension fund underwriting business fell 9.9% for the year. This decline
was a result of a government program that prohibited the company from assessing
pension fees on employee bonuses payable in July 2009 and December
2009.
Pacífico
Vida generated financial earnings of US$32.9 million in 2009. Pacífico Salud
reported total revenue of US$125.3 million and net gain of US$2.7 million in
2009 mainly due to a decrease in claims. The net loss ratio decreased to 84.6%
in 2009 from 90.3% in 2008.
(i)
Underwriting,
Clients and Reinsurance
Underwriting
decisions for substantially all of PPS’s insurance (property and casualty) risks
are made through its central underwriting office. PPS’s own risk management
staff inspects most medium and medium-to-large commercial risks prior to their
underwriting, whereas third party surveyors are employed to inspect smaller
risks. Underwriting standards are approved by the Board of Directors on a yearly
basis.
PPS
utilizes reinsurance to limit its maximum aggregate losses and minimize exposure
on large risks. Reinsurance is placed with reinsurance companies based on
evaluation of the financial capacity of the reinsurer, terms of coverage and
price. PPS’s principal reinsurers in 2009 were, among others, Lloyd’s, Allianz
Re, Amlin, Catlin, China Re, Endurance, Everest Re, Flagstone Re, Glacier Re,
GIC, Hannover Re, Mapfre Re, MS Frontier, Munich Re, Odyssey Re, Omega, Partner
Re, Paris Re, QBE Reinsurance Corp., QBE Europe, R+V, Reaseguradora Patria,
Scor, Sirius International, Swiss Re, Validus Re, White Mountain y XL Re.
Premiums ceded to reinsurers represented 16.7% in 2009. PPS acts as a reinsurer
on a very limited basis, providing its excess reinsurance capacity to other
Peruvian insurers who are unable to satisfy their reinsurance
requirements.
As of
December 31, 2009, premiums for reinsurance written by PPS totaled US$4.8
million. Although PPS historically has obtained reinsurance for a substantial
portion of its earthquake-related risks through excess loss contracts, there can
be no assurance that a major catastrophe would not have a material adverse
impact on its results of operations or financial condition. See “—(ii) Claims
and Reserves.”
Net
claims paid by PPS as a percentage of net premiums written (i.e., the net loss
ratio) reached 65.2% in 2009, down from 84.3% in 2008.
The net
loss ratio, in the property and casualty segment, which represented 49.1% of
PPS’s premiums in 2009 (50.5% in 2008), decreased to 53.3% in 2009 from 87.2% in
2008, mainly due to the improved performance of automobile, fire, medical
assistance and allied lines. The net loss ratio from the automobile line, which
represented 24% of property and casualty premiums in 2009 (22% in 2008)
decreased from 80.8% in 2008 to 52.3% in 2009. The net loss ratio from the fire
and allied lines, which represented 19.8% of property and casualty premiums in
2009 (20.1% in 2008) decreased from 105.1% in 2008 to 18.7% in 2009. The net
loss ratio of the medical assistance line, which was 19.5% of property and
casualty premiums in 2009 (16.4% in 2008) decreased from 107.5% in 2008 to 73.7%
in 2009.
The net
loss ratio in the life insurance lines decreased from 84% in 2008 to 77% in
2009, due to the low performance of disability and survivor (pension fund)
insurance and Group Life claims.
The net
loss ratio in the health insurance lines decreased from 90.3% in 2008 to 84.6%
in 2009 and represented 20.6% of PPS’s premiums in 2009 (19.8% in
2008).
PPS is
required to establish (i) claims reserves in respect of pending claims in its
property-casualty business, (ii) reserves for future benefit obligations under
its in-force life and accident insurance policies, and (iii) unearned premium
reserves in respect of that portion of premiums written that is allocable to the
unexpired portion of the related policy periods (collectively, “Technical
Reserves”). PPS establishes claims reserves with respect to claims when
reported, as well as for incurred but not reported (IBNR) claims. Such reserves
are reflected as liabilities in PPS’s financial statements.
PPS
records as liabilities in its financial statements actuarially determined
reserves calculated to meet its obligations under its life and accident policies
and its pension fund underwriting business. These reserves are determined using
mortality tables, morbidity assumptions, interest rates and methods of
calculation in accordance with international practices.
Pursuant
to SBS regulations, PPS establishes pre-event reserves for catastrophic risks
with respect to earthquake coverage. See “—(11) Supervision and Regulation—(v)
PPS—Reserve Requirements.” In accordance with IFRS principles, the pre-event
reserves and income charges for catastrophic reserves are not considered in
Credicorp’s consolidated financial statements.
There can
be no assurance that ultimate claims will not exceed PPS’s
reserves.
(iii) Investment
Portfolio
As of
December 31, 2009, the book value of PPS’s portfolio (which includes Pacífico
Seguros, Pacifico Vida and Pacifico Salud) was US$1,057.2 million, which
included US$77.4 million in equity securities and US$979.7 million in bonds. The
company’s real estate investments’ gross book value reached US$33.8
million.
Pacifico
Seguros had a book value of US$178.2 million in 2009 and mostly included
investments of equity and short-term debt instruments. Pacifico Vida’s book
value was close to US$865.7 million and mainly consisted of long-term debt
instruments. Pacifico Salud, on the other hand, had a small portfolio with a
book value of US$13.3 million and was mainly invested in short-term debt
instruments.
As part
of its improvement process, PPS has been adjusting its investment policy in
order to apply the best international risk management practices and tools. PPS
also incorporated the recommendations of Solvencia II and Basel II, with a view
to developing a better match of terms and currencies with the company’s
liabilities, especially in connection with obligations vis-à-vis PPS’s insured
customers.
PPS
reported financial income in 2009 of US$75.7 million, as compared to US$70.4
million in 2008. This outcome is explained by the growth of PPS’s life and
property and casualty businesses.
PPS’s
2009 financial income grew to US$3.5 million, an increase of 18.3% compared to
2008 and an increase of 81% compared to the company’s 2009 forecast. The better
performance was mainly due to the capital gains that PPS obtained in the equity
market, its use of a barbell strategy in the fixed income portfolio (long-short
position in bonds) and the company’s increased income from rent
fees.
The
equity profits that PPS earned during 2009 were higher than those earned in
previous years because of a strong recovery in international stock markets. The
Peruvian stock market rallied 105% during 2009, as commodities prices recovered
(due to higher demand from emerging markets) and the construction and financial
sectors improved as demand for housing rose. PPS’s portfolio strategy, supported
by the recovery of the stock market, generated capital gains of US$6.8 million
and a return on equity of 77%.
Despite
the strong decline in world interest rates, the company was able to generate US$
11.9 million in fixed income profits, 29% higher than forecast and only 4.5%
below PPS’s 2008 earnings. Revenue in this portfolio was higher than forecast
because PPS applied a “barbell strategy” to the portfolio at the end of 2008 and
the beginning of 2009. The barbell strategy generated a higher return and
provided PPS with enough liquidity to cover its
obligations. Additional income also came from PPS’s real estate
investments as a result of higher rental fees. Overall, earnings increased by
14.8% compared to 2008.
PPS’s
main strategy is to have an appropriate match of currency and term for its
assets and liabilities. In this sense, since a significant portion of its
premiums is denominated, and much of its operations are conducted, in U.S.
Dollars. Most of the company’s assets are also invested in this currency. In
2009, 79.4% of the gross premiums received by PPS were denominated in U.S.
Dollars (86.4% in 2008).
PPS’s
investments are made primarily to meet its solvency equity ratio and to provide
reserves for claims. PPS manages its investments under two distinct portfolios.
The first portfolio is designed to match the liabilities of the company’s
property, automobile and health lines, and the second portfolio is designed to
match the liabilities of the company’s life and annuities lines. Each portfolio
is managed under the authority of its own committee, which reviews portfolio
strategy on a monthly basis. PPS invests in foreign markets, emphasizing
investments in U.S. and European sovereign debt. PPS has adopted strict policies
related to investment decisions. PPS’s investment strategies and policies are
reviewed and approved by PPS Board of Directors. However, senior management also
has investment authority and decision making authority with respect to
investment strategies.
(7) Grupo
Crédito/Prima AFP
Continuing
to pursue its strategy of fast growth and positioning in the market, on August
24, 2006, Prima AFP reached an agreement with Grupo Santander Perú S.A. for the
acquisition of 99.97% of Unión Vida AFP. Prima AFP’s acquisition was completed
for a total of US$141 million, with the final purchase price being determined by
arbitration proceedings between the parties. As a result, we received a
reimbursement in an approximate amount of US$4.5 million. Of the US$141 million
purchase price, US$112 million came from a capital increase and US$29 million
came from a BCP loan. Prima AFP subsequently engaged in a tender offer directed
at minority shareholders.
In 2009,
the pension fund market was stable with less competition for transfers and
increased focus on new recruitments. Prima AFP maintained its leading market
position due to a strong value proposal aimed at providing quality information
and service to its members.
Strong
productivity by Prima AFP’s sales management helped Prima AFP preserve a high
quality portfolio and obtain growth of its monthly insurable remuneration (or
RAM), which is the basis of its revenues. The sales management’s strong
productivity also contributed to Prima AFP maintaining a robust market share.
With regard to contributions collection, Prima AFP maintained the largest market
share (31.9% as of December 2009).
In the
commercial field, Prima AFP focused on recruiting new affiliates, reducing
transfer volumes and maintaining its affiliate portfolio. Pursuant to
in-house estimates based on revenues and taking into account the 1.75%
administration fee, Prima AFP’s basis remuneration for revenues increased in
2009. This increase allowed Prima AFP once again to garner the highest share of
the market (31.8%).
With
respect to investments, during 2009 the financial markets began a slow recovery
process from the losses sustained after the international financial crisis in
2008. As of December 2009, Prima AFP’s funds under management reached US$6.6
billion, a 30.6% market share. Given that pension funds are long-term
investments, it is best to observe their returns over a long period. Over the
last 36 months, Prima AFP’s returns were 21.70%, 31.30% and 35.66% for funds 1,
2 and 3 respectively. In 2009, Prima AFP registered total revenues for US$78.8
million and profits of US$20.8 million (IFRS results) through growth of its
revenue base and a gradual reduction in operative expenses. The revenues
obtained in 2009, unlike those reported in 2008, considered 13 rather than 14
contribution periods. This is due to the fact that the government decided, as
part of its anti-crisis plan, to exempt affiliates from deductions on additional
salaries that, according to Peruvian law, must be paid in July and
December.
Income
from administration fees reached US$78.8 million, 11.4% higher than 2008. This
increase was made possible by a strong contributing client portfolio, which
remained stable throughout 2009, and by Prima AFP’s efforts to recruit new
affiliates. Prima AFP’s personnel expenses reached US$21.3 million, a 17.5%
decrease from 2008. This outcome was a result of lower commercial personnel
charges stemming from steps taken at the beginning of the year to reduce the
sales force.
(8) Competition
The
Peruvian banking sector is currently composed of 15 commercial banking
institutions. As of December 31, 2009, BCP ranked first among all Peruvian
banks in terms of assets, deposits and loans with a market share of 36.6% of
assets, 34.2% of deposits and 33.4% of loans.
Major Peruvian Banks as of December 31, 2009
|
|
|
|
|
|
|
|
BCP
|
|
36.6% |
|
34.2% |
|
33.4% |
|
BBVA
Banco Continental
|
|
20.8% |
|
22.2% |
|
23.4% |
|
Scotiabank
Perú
|
|
15.9% |
|
16.2% |
|
15.2% |
|
Interbank
|
|
11.2% |
|
11.9% |
|
11.4% |
|
Banco
Interamericano de Finanzas
|
|
2.8% |
|
3.4% |
|
3.4% |
|
Source:
SBS
We
believe that the Peruvian banking industry will continue to be a competitive
environment within a generally comfortable liquidity situation. This increased
competition may in the future affect our loan growth and reduce the average
interest rates that we may charge our customers, as well as reduce our fee
income.
Since
1999, excess liquidity at major Peruvian banks has put pressure on margins. We
do not intend to pursue corporate lending opportunities that are unprofitable
solely in order to maintain market share. We expect BCP’s corporate banking to
grow at levels similar to GDP growth. We will seek to maintain our close
relationships with corporate customers, focusing on providing prompt responses
to their requirements and setting competitive prices. To this end, we are
currently updating our information systems to improve customer service and to
allow management to obtain information on customer and business profitability
more efficiently. We also intend to expand the range of BCP’s investment banking
and cash management products.
In its
core corporate lending and trade finance businesses, ASHC principally competes
with larger international institutions. ASHC attributes its ability to compete
effectively with larger lending institutions to its (i) aggressive marketing
efforts, (ii) ability as a smaller, more flexible institution to make decisions
quickly and respond rapidly to customer needs, (iii) association with BCP and
(iv) superior knowledge of the region, particularly the Peruvian
market.
In BCP’s
wholesale banking group, its corporate banking area has experienced increased
competition and pressure on margins over the last few years. This is primarily
the result of new entrants into the market, including foreign and privatized
commercial banks, as well as local and foreign investment banks and non-bank
credit providers, such as pension fund administrators (or AFPs) and mutual fund
companies.
In
addition, Peruvian companies have gained access to new sources of capital
through the local and international capital markets. In recent years, the AFPs
and mutual funds-managed assets have increased at rates over those experienced
by the banking system. The private pension fund assets reached US$23.9 billion
as of December 31, 2009, increasing by 51.0% since December 31, 2008 (when funds
totaled US$15.9 billion), due to the effect of the international financial
crisis on the Peruvian stock market and pension fund system. Total mutual funds
reached US$4.9 billion in 2009, a 72.5% increase from US$2.8 billion in
2008.
(iii) Other
Financial Institutions
Other
institutions in the Peruvian financial system tend to specialize in a given
market sector. These institutions include finance companies, municipal and rural
savings and credit associations, municipal public credit associations and
savings and credit cooperatives. They mainly issue retail loans to small and
micro-businesses and consumer and mortgage loans to individuals. These markets
have shown substantial increases in recent years. BCP is facing strong
competition from these credit providers, primarily with respect to (i)
micro-business loans, where such providers lent US$2.4 billion as of December
31, 2009 (50.1% higher than the US$1.6 billion lent in 2008), representing 54.7%
of the total in the financial system (compared to 47.2% in 2008); and (ii)
consumer loans, where such providers lent US$1.1 billion in 2009 (83.6% higher
than US$623.9 million in 2008), representing 15.2% of the total in the
financial system (compared to 10.6% in 2008). As part of BCP’s strategy to
capture the future growth of these segments in 2009, BCP acquired Edyficar,
which was rated sixth in terms of loan share and whose mono-line model proved to
be successful in the micro finance business.
BCP also
faces strong competition in its credit card operations from credit cards issued
by retail stores.
Peruvian
insurance companies compete principally on the basis of price, as well as on the
basis of name recognition, customer service and product features. PPS believes
that its competitive pricing, solid image, and quality of customer service are
significant aspects of its overall competitiveness. While increased foreign
entry into the Peruvian insurance market may put additional pressure on premium
rates, particularly for commercial coverage, PPS believes that in the long-term
foreign competition will increase the quality and strength of the industry. PPS
believes that its size and its extensive experience in the Peruvian insurance
market provide it with a competitive advantage over foreign
competitors.
However,
competition in the Peruvian insurance industry has increased substantially since
the industry was deregulated in 1991, with particularly strong competition in
the area of large commercial policies, for which rates and coverage typically
are negotiated individually. The loss by PPS to competitors of even a small
number of major customers or brokers could have a material impact on PPS’s
premium levels and market share.
(9) Peruvian
Government and Economy
While we
are incorporated in Bermuda, substantially all of BCP’s and PPS’s operations and
customers are located in Peru. Although ASHC is based outside of Peru, a
substantial number of its customers are also located in Peru. Accordingly, our
results of operations and financial condition could be affected by changes in
economic or other policies of the Peruvian government, which has exercised and
continues to exercise a substantial influence over many aspects of the private
sector. Also, our results of operations and financial condition may be affected
by other political or economic developments in Peru, such as a devaluation of
the Nuevo Sol relative to the U.S. Dollar or the imposition of exchange controls
by the Peruvian government. See “Item 10. Additional Information—(D) Exchange
Controls.” Our results of operations and financial condition are
dependent on the level of economic activity in Peru.
During
the past several decades, Peru has had a history of political instability that
has included military coups d’état and different governmental regimes, which in
the past have frequently intervened in the nation’s economy and social
structure. See “Item 3. Key Information—(D) Risk Factors.” In 1987, the
administration of President Alan García attempted to nationalize the banking
system. Facing an attempt by the state to control BCP, the majority shareholders
of BCP at that time sold a controlling interest in BCP to its employees, which
prevented the government from gaining control of BCP. See “—(C) Organizational
Structure.”
In the
past, Peru experienced significant levels of terrorist activity, which escalated
in the late 1980s and early 1990s. See “Item 3. Key Information—(D) Risk
Factors.” Upon being elected to office in 1990, President Alberto Fujimori’s
government made substantial progress in suppressing Shining Path and MRTA
terrorist activity, including the arrest of the leader and second level of
leadership in each terrorist group, as well as approximately 2,000
others.
Between
1990 and 2000, President Fujimori implemented a broad-based reform of Peru’s
political system, economy and social conditions. See “Item 3. Key
Information—(D) Risk Factors.” President Fujimori resigned in 2000 in favor of a
transitory government due to an outbreak of corruption scandals. President
Toledo then assumed the presidency in 2001 after two years of political turmoil,
facing high unemployment and underemployment, an economic recession and social
need. In 2006, current president Alan García was elected for a five
year-term.
Despite
the economic strides achieved since 1990, poverty remains a persistent problem
in Peru, with almost 40% of the population living below the poverty line, which
the World Bank defines as monthly income of less than US$60 per capita, adjusted
to reflect differences in purchasing power. A significant number of Peruvians
live on an income of less than US$30 per capita per month.
Until the
global crisis, Peru had experienced continuous economic growth since the second
half of 2001. President Toledo retained, for the most part, the economic
policies of the previous government, focusing on achieving sustained economic
growth by: increasing exports, reducing unemployment, reforming the tax system
(primarily by increasing the tax base and improving tax collection), fostering
private investment by promoting concessions, maintaining low inflation and the
floating exchange rate, improving oversight, transparency guidelines and
requirements in regulated sectors of the economy, improving the efficiency of
the public sector, and maintaining open trade policies.
President
Toledo transferred the presidency to Alan García Pérez on July 28, 2006,
following Mr. García’s victory in the run-off of the presidential elections held
on June 4, 2006. Even though Mr. García´s government has mostly retained the
economic policies of the previous government, 2009 showed a severe slowdown, due
to the impact of the global crisis, which translated to a decrease in the GDP
growth rate to 0.9% from 10.0% in the previous year.
At the
beginning of the 1990s, President Fujimori liberalized price and wage controls
in the private sector, eliminated all restrictions on capital flows, instituted
emergency taxes to reduce the fiscal deficit and liberalized interest rates.
Furthermore, his government established an agenda to institute a wide-ranging
privatization plan and re-establish relations with the international financial
community. President Toledo, and now President García, continued these
market-oriented policies but, facing some populist initiatives from Congress and
social pressures from unions and regional movements, they have passed some
interventionist measures.
In the
late 1980s and early 1990s, the Peruvian economy was very volatile. Since 1999,
the Peruvian economy has grown every year. Between 2001 and 2008, each year
Peru’s economic growth was higher than in the previous year, with a 5.9% annual
average. For 2009, the global crisis adversely influenced growth, but within a
global comparison, Peru was among the countries with the highest GDP-growth
rates: 0.9% in a year when global production decreased 1.1%.
In 2009,
despite the impressive growth of public investment (+25.9% after 42.8% in 2008),
the main driver of growth came from foreign markets, since domestic demand
decreased as a consequence of a severe drop in inventories. However, growth
dynamics in the foreign sector was driven not by a growth in exports, but due to
an almost 20% decrease in imports. In 2010, an additional increase in public
investment is expected, as the government’s countercyclical fiscal policy winds
down gradually, and regional and local elections approach. Peru will also have a
presidential election in 2011, making it less likely that public investment will
decline in 2010. However, total economic growth may decline given the status of
the world economy and the level of eternal demand for Peruvian
products.
The
decision by the United States in August 2002 to renew and expand tax benefits
through the ATPDEA for certain Latin American export products benefited the
manufacturing sector because of its inclusion of Peruvian textiles. In May 2004,
negotiations over a free trade agreement with the United States, Colombia and
Ecuador began. During 2007, the Free Trade Agreement (FTA) with the United
States was signed and the trade deal was put into effect on February 1, 2009,
concluding a long process of trade negotiations and goodwill. The FTA made
permanent the special access to the U.S. market enjoyed under the Andean Trade
Promotion and Drug Eradication Act. The current trade between these countries is
about US$11 billion annually (18.5% of total trade). The FTA is expected to
encourage higher export growth and diversification, as well as accelerate
reforms that will further enhance the investment climate in Peru, which is
already benefiting from foreign direct investment at historic highs. During the
2008 APEC Summit, progress was made toward reaching a trade agreement with
China. According to the Ministry of Foreign Trade and Tourism, the other Asian
countries with which Peru is negotiating free trade agreements are Japan and
South Korea, whose negotiations may be closed by mid 2010.
It has
taken almost two decades of continued implementation of sound economic policies
and a strong political commitment to generate a noticeable improvement in Peru’s
economic condition. Peru’s strong macroeconomic performance was underpinned by
wide-ranging structural reforms to improve the functioning of markets, foster
private sector participation, and modernize the role of the state. In the early
1990s, Peru was one of the first emerging countries to undertake a simultaneous
trade and capital account liberalization, accompanied by a flexible exchange
rate regime and a deep reform of the financial system. Among several important
transformations aimed at enhancing external competitiveness and investor
confidence, Peru modernized the civil service and reformed the labor market.
Peru’s authorities remain committed to prudent financial policies to preserve
the macroeconomic stability and a further deepening of structural reforms to
sustain growth and entrench poverty reduction.
Peru’s
trade surplus in 2009 was US$5.9 billion which was well below its 2006 record
(US$9 billion), but it showed signs of a recovery from the US$3.1 billion
balance recorded in 2008. In light of the global financial crisis, Peru’s trade
surplus was based not on a rise in exports, but on a drop in exports. Exports
for 2009 decreased 14.7%, but imports dropped 26.1%. The decline in exports has
the most severe effect on non-traditional exports, despite the sharp decline in
commodity prices. On imports, the most severe impact was on intermediate goods,
specially oil and derivatives, following the contraction in the price of
crude.
Peru has
had a history of high and persistent current account deficits. In 2006, however,
Peru had a record surplus of US$2.9 billion, which is equivalent to 3.1% of its
GDP. This amount decreased in 2007, with a surplus of US$1.4 billion (1.3% of
GDP) and became a deficit again in 2008 (US$4.7 billion, or 3.7% of GDP),
turning back to a small surplus in 2009 following the decrease in imports (due
to a lower domestic demand) and in investment income (due to lower prices of
exported commodities and profits for non-resident companies).
Peru’s
financial account had a surplus of US$0.7 billion in 2006, due mainly to
repayment of external debt made by the public sector. This account grew
substantively in 2007 and reached US$8.3 billion due mainly to higher foreign
direct investment and long-term loans. The decrease in 2008 was concentrated in
the last quarter due mainly to the behavior of foreign direct investment. The
flow of foreign direct investment, or FDI, into Peru was US$3.5 billion in 2006
and US$5.3 billion in 2007. Despite the US$4.0 billion in 2008 FDI, the result
was not necessarily bad news as during the last quarter of 2008, Peruvian
companies increased their participation in other Latin American companies, which
resulted in a US$1 billion net outflow. In 2009, the financial account was about
a fifth of previous years (US$1.7 billion), but it was enough to reverse the
current account deficit. Lower inflows were consequence of outflows in the first
half of the year given global uncertainty, but they recovered in the third and
specially fourth quarter when investors adjusted their risk appetite and
reassessed risks in emerging countries, which demonstrated to have solid
foundations during the crisis.
The
inflation rate in Peru, as measured by the Lima consumer price index, has fallen
from 7,650.0% in 1990 to 1.1% in 2006. However, despite the Peruvian Central
Bank’s 2% inflation goal, with a +/-1% range, inflation was 3.9% in 2007, 6.7%
in 2008, due to higher international commodity prices (with Peru being a net
importer of fuel and food), and 0.3% in 2009. This is, the Central Bank has
breached the inflation bands for three-years-in-a-row (last year on the
downside), but it was a consequence of external shocks. When considering core
inflation, it was within the band already in 2009.
The
average bank market exchange rate for Nuevos Soles in Peru was S/.2.89 per
US$1.00 on December 31, 2009, an 8.0% appreciation considering end-of-year
levels, but 11.1% when considering maxima levels reached in February. The Nuevo
Sol was getting weaker during the first months of 2009 because of a “flight to
quality” process, which favored positions in dollars. This generated an outflow
of dollars in emerging markets, including Peru, which was partially countered by
the Central Bank selling dollars in the market. Therefore, in 1Q09 Central Bank
sold US$1.1 billion, but the gradual recovery of the Peruvian economy, in
conjunction with lower risk aversion globally, made possible a slight positive
position at the end of the year (US$108 MM).
The sound
policy framework put in place in recent years and the build up of international
reserves have contributed to significantly reduce Peru’s economic
vulnerabilities and poverty (even though poverty still affects almost 40% of the
population) and enhance its business environment. Peru’s strong fiscal surpluses
in recent years, the recent moderate deficit due to countercyclical policies
notwithstanding, have also supported a significant reduction in public debt and
improved maturity structure. In the current uncertain global outlook, these are
important fiscal buffers. A sound monetary policy, well-established in a
framework that targets inflation, has also been instrumental in helping to
maintain macroeconomic stability and reduce dollarization. Structural reforms
have reduced Peru’s fiscal and financial vulnerabilities. Free trade agreements
and the search of new markets to open new trade destinations, lower informality,
and improvement in the business climate have helped improve Peru’s long-term
growth prospects, which are reflected in a higher investment and a higher
potential growth.
These
achievements have placed Peru in a strong position to face any future
deterioration in external conditions, should that be the case. Building on
Peru’s strong fundamentals, including a resilient financial system, several
measures have been appropriately implemented by the authorities that will help
to limit spillovers, preserve adequate liquidity conditions in the domestic
markets, and bolster domestic confidence. The Peruvian financial system has
proven to be strong, despite a moderate impact of the crisis. Credit, which
averages a 31.5% growth in 2007 and 2008, lost dynamism, closing 2009 with only
a 9.0% growth, albeit amongst the highest in the region.
Peruvian
authorities have been implementing reforms to further strengthen its financial
system. Large official reserves—currently over US$30 billion, equivalent to 13
months of imports—and strong financial soundness indicators, along with the
banks’ limited financial reliance on external funding, have helped preserve the
system’s stability. Peruvian authorities have recently introduced prudential
measures, including more restrictive rules for consumer credit and new dynamic
provisioning made effective last December, and strengthened banks’ minimum
capital requirements as Basel II is gradually implemented.
On the
fiscal side, Peruvian authorities have announced several measures to shield its
economy from the global crisis and enhance confidence. These measures include
maintaining a program of public investment as well as maintaining support for
construction, micro and small enterprises, exporters, and social programs. To
further boost confidence, the authorities have also lined up access to
contingent credit lines from official creditors. The total amount of these
programs is over US$3 billion, which is financed with the public savings of
previous years. The issue is currently not whether the government has enough
resources to implement its countercyclical policy, but rather the pace at which
it is implementing such policy in the context where central government decisions
have lost importance and resources have been increasingly transferred to local
and regional governments.
As a
result, the near term domestic economic outlook still remains favorable,
although if external risks materialize, their impact on the Peruvian economy
could be strong. The pace of economic growth is expected to be around 5.0% in
2010, reflecting a moderate global recovery, and a more vigorous domestic
demand. With the global demand still contained, inflation should remain around
the 2% (+/- 1%) target range. A more severe and prolonged global slowdown,
including a new global recession, in a framework of an electoral calendar due to
Municipal and Presidential elections in 2010 and 2011, respectively, constitute
downside risks to the growth outlook. Peru’s medium-term prospects are favorable
and require preserving prudent macroeconomic policies and dealing with
long-standing structural challenges.
|
(10)
|
The
Peruvian Financial System
|
As our
activities are conducted primarily through banking and insurance subsidiaries
operating in Peru, a summary of the Peruvian financial system is set forth
below.
On
December 31, 2009, the Peruvian financial system consisted of the following
principal participants: the Central Bank, the SBS, 15 banking
institutions (not including Banco de la Nación, a Peruvian state-owned bank),
six finance companies, and four leasing companies. In addition, Peru has various
mutual mortgage associations, municipal and rural savings and credit
associations, municipal public credit associations and savings and credit
cooperatives, which totaled 34 entities as of December 31, 2009.
The
present text of Law 26702 was passed in December 1996. Law 26702 regulates
Peruvian financial and insurance companies. In general, it provides for tighter
loan loss reserve standards, brings asset risk weighting in line with Basel
Committee on Banking Regulations and Supervisory Practices of International
Settlements (or the Basel Accord) guidelines, broadens supervision of financial
institutions by the SBS to include holding companies, and includes specific
treatment of a series of recently developed products in the capital markets and
derivatives areas. The primary law governing the Peruvian financial system
before the enactment of Law 26702 was Legislative Decree 637, passed in 1991 and
amended by Legislative Decree 770, which substantially reformed the Peruvian
financial system and modified regulations initially issued in 1930.
The
Central Reserve Bank (or the Central Bank) was established in 1922. Pursuant to
the Peruvian Constitution, its primary role is to ensure the stability of the
Peruvian monetary system. The Central Bank regulates Peru’s money supply,
administers international reserves, issues currency, determines Peru’s balance
of payments and other monetary accounts, and furnishes information regarding the
country’s financial situation. It also represents the government of Peru before
the IMF and the Latin American Reserve Fund (a financial institution whose
purpose is to provide balance of payments assistance to its member countries by
granting credits or guaranteeing loans to third parties).
The
highest decision-making authority within the Central Bank is its seven-member
board of directors. Each director serves a five-year term. Of the seven
directors, four are selected by the executive branch and three are selected by
the Congress. The Chairman of the Central Bank is one of the executive branch
nominees but must be approved by Peru’s Congress.
The
Central Bank’s board of directors develops and oversees monetary policy,
establishes reserve requirements for entities within the financial system, and
approves guidelines for the management of international reserves. All entities
within the financial system are required to comply with the decisions of the
Central Bank.
The SBS,
whose authority and activities are discussed in “—(11) Supervision and
Regulation,” is the regulatory authority in charge of implementing and enforcing
Law 26702 and, more generally, supervising and regulating all financial,
insurance and pension fund institutions in Peru.
In June
2008, Law 1028 and 1052 were approved modifying Law 26702 with the following
objectives: (i) to strengthen and to increase competitiveness, (ii)
to implement Basel II and (iii) to adapt the current regulatory framework to the
Agreement of Commercial Promotion, APC, signed between Peru and the United
States.
The main
amendments defined in Law 1028 were aimed to promote the development of Peruvian
capital market by extending the range of financial services that could be
offered by microfinance institutions (i.e., non-banks) without
requiring SBS permission.
Law 1028
also modified the framework in which the Peruvian financial system is to be
harmonized with the new international standards established by the Basel II
Accord (which aims to minimize the issues regarding regulatory arbitrage).
Starting in July 2009, Peruvian financial institutions will apply the
standardized method to calculate their capital requirement related to credit,
market and operational risk. Also, from July 2009, the SBS will start receiving
applications to use Internal Models Methods for any of these three risks.
Meanwhile, if an institution requires lower capital using its internal models
than by using the current approach, it will have to maintain between 80% and 95%
of the higher amount during the first years.
Law 1052
aims to include and synchronize Law 26702 and the APC’s framework, particularly
regarding insurance services. The amendments allow offering cross-border
services and have simplified the process for international institutions to enter
into the Peruvian market by establishing subsidiaries.
|
(iv)
|
Financial
System Institutions
|
Under
Peruvian law, financial system institutions are classified as banks, financing
companies, other non-banking institutions, specialized companies and investment
banks. BCP is classified as a bank.
Banks
A bank is
defined by Law 26702 as an enterprise whose principal business consists of (i)
receiving money from the public, whether by deposits or by any other form of
contract, and (ii) using such money (together with the bank’s own capital and
funds obtained from other sources) to grant loans or discount documents, or in
operations that are subject to market risks.
Banks are
permitted to carry out various types of financial operations, including the
following: (i) receiving demand deposits, time deposits, savings deposits and
deposits in trust; (ii) granting direct loans; (iii) discounting or advancing
funds against bills of exchange, promissory notes and other credit instruments;
(iv) granting mortgage loans and accepting bills of exchange in connection with
the mortgage loans; (v) granting conditional and unconditional guaranties; (vi)
issuing, confirming, receiving and discounting letters of credit; (vii)
acquiring and discounting certificates of deposit, warehouse receipts, bills of
exchange and invoices of commercial transactions; (viii) performing credit
operations with local and foreign banks, as well as making deposits in those
institutions; (ix) issuing and placing local currency and foreign currency
bonds, as well as promissory notes and negotiable certificates of deposits; (x)
issuing certificates in foreign currency and entering into foreign exchange
transactions; (xi) purchasing banks and non-Peruvian institutions which conduct
financial intermediation or securities exchange transactions in order to
maintain an international presence; (xii) purchasing, holding and selling gold
and silver as well as stocks and bonds listed on one of the Peruvian stock
exchanges and issued by companies incorporated in Peru; (xiii) acting as
financial agent for investments in Peru for external parties; (xiv) purchasing,
holding and selling instruments evidencing public debt, whether internal or
external, as well as obligations of the Central Bank; (xv) making collections,
payments and transfers of funds; (xvi) receiving securities and other assets in
trust and leasing safety deposit boxes; and (xvii) issuing and administering
credit cards and accepting and performing trust functions.
In
addition, banks may carry out financial leasing operations by forming separate
departments or subsidiaries. Banks may also promote and direct operations in
foreign commerce, underwrite initial public offerings, and provide financial
advisory services apart from the administration of their clients’ investment
portfolios. By forming a separate department within the bank, banks may also act
as trustees in trust agreements.
Law 26702
authorizes banks to operate, through their subsidiaries, warehouse companies,
securities brokerage companies, and to establish and administer mutual
funds.
Branches
of foreign banks enjoy the same rights and are subject to the same obligations
as Peruvian banks. Multinational banks, with operations in various countries,
may perform the same activities as Peruvian banks, although their foreign
activities are not subject to Peruvian regulations. To carry out banking
operations in the local market, multinational banks must maintain a certain
portion of their capital in Peru, in at least the minimum amount that is
required of Peruvian banks.
Finance
Companies
Under Law
26702, finance companies are authorized to carry out the same operations as
banks, with the exception of (i) issuing loans as overdrafts in checking
accounts and (ii) participating in derivative operations. These operations can
be carried out by finance companies only if they fulfill the requirements stated
by the Peruvian Bank Superintendency.
Other
Financial Institutions
The
Peruvian financial system has a number of less significant entities which may
provide credit, accept deposits or otherwise act as financial intermediaries on
a limited basis. Leasing companies specialize in financial leasing operations
where goods are leased over the term of the contract and in which one party has
the option of purchasing the goods at a predetermined price. Savings and loans
associations or cooperatives may accept certain types of savings deposits and
provide other similar financial services.
Peru also
has numerous mutual housing associations, municipal savings and credit
associations, savings and credit cooperatives and municipal credit bureaus. The
impact of these institutions on the financial system in Peru has not been
significant.
Insurance
Companies
Since the
Peruvian insurance industry was deregulated in 1991, insurance companies have
been authorized to conduct all types of operations and to enter into all forms
of agreements that are needed to offer risk coverage to customers. Insurance
companies may also invest in financial and non-financial assets, although they
are subject to the regulations on investments and reserves established in Law
26702 and the regulations issued by the SBS.
Law 26702
is the principal law governing insurance companies in Peru. The SBS is charged
with the supervision and regulation of all insurance companies. The formation of
an insurance company requires prior authorization of the SBS.
The
insurance industry has experienced consolidation in recent years with the number
of companies decreasing from 19 in 1991 to 14 in 2009.
|
(11)
|
Supervision
and Regulation
|
Currently
there are no applicable regulations under Bermuda law that are likely to
materially impact our operations as they are currently structured. Under Bermuda
law, there is no regulation applicable to us, as a holding company that would
require that we separate the operations of our subsidiaries incorporated and
existing outside Bermuda. Since our activities will be conducted primarily
through our subsidiaries in Peru, the Cayman Islands and Bolivia, a summary of
Peruvian banking and insurance regulations and Cayman Islands banking
regulations is set forth below.
Our
common shares are listed on the New York Stock Exchange (NYSE). We are therefore
subject to regulation by the NYSE and the Securities and Exchange Commission
(SEC) as a “foreign issuer.” We also must comply with the Sarbanes-Oxley Act of
2002.
We are,
along with BCP, subject to certain requirements set forth in Peruvian Law 26702
(“Peruvian Banking Law” or “Law 26702”) as well as certain banking statutes
issued by the Peruvian banking regulator, Superintendencia de Banca y Seguros y
AFP (SBS), including SBS Resolution No.0446-2000, enacted in June 2000 and which
approved the “Regulation of the Consolidated Supervision of Financial and Mixed
Conglomerates.” These regulations affect BCP and us primarily in the areas of
reporting, risk control guidelines, limitations, ratios and capital
requirements.
Since our
common shares are listed on the Lima Stock Exchange in addition to the New York
Stock Exchange, we are subject to certain reporting requirements to CONASEV, the
Peruvian securities market regulator, and the Lima Stock Exchange. See “Item 9.
The Offer and Listing—(C) Markets—The Lima Stock Exchange—(ii) Market
Regulation.”
Overview
BCP’s
operations are regulated by Peruvian law. The regulations for the operation of
the Peruvian financial sector are stated in Law 26702. The SBS periodically
issues resolutions that cause Law 26702 to be developed. See “—(10) The Peruvian
Financial System.” The SBS, under the direction of the Superintendency of Banks
and Insurance Companies, supervises and regulates entities that Law 26702
classifies as financial institutions. These entities include commercial banks,
finance companies, small business finance companies, savings and loan
corporations, financial services companies such as trust companies and
investment banks, and insurance companies. Financial institutions must seek the
SBS’s authorization before beginning operations.
BCP’s
operations are supervised and regulated by the SBS and the Central Bank. Those
who violate Law 26702 and its underlying regulations are subject to
administrative sanctions and criminal penalties. Additionally, the SBS and the
Central Bank have the authority to issue fines to financial institutions and
their directors and officers if they violate the laws or regulations of Peru, or
their own institutions’ bye-laws.
CONASEV
is the Peruvian government institution in charge of (i) promoting the securities
market, (ii) making sure fair competition takes place in the securities markets,
(iii) supervising the management of businesses that trade in the securities
markets and (iv) regulating their activities and accounting practices. BCP must
inform CONASEV of significant events that affect its business and is required to
provide financial statements to it and the Lima Stock Exchange each quarter. BCP
is also regulated by CONASEV through Credibolsa, which is BCP’s wholly-owned
brokerage house, and Credifondo, which is BCP’s wholly-owned mutual fund
administration company. CONASEV examines Credibolsa and Credifondo on a regular
basis.
Under
Peruvian law, banks may conduct brokerage operations and administer mutual funds
but must do so through subsidiaries. However, bank employees may market the
financial products of the bank’s brokerage and mutual fund subsidiaries. Banks
are prohibited from issuing insurance policies, but are not prohibited from
distributing insurance policies issued by insurance companies.
Authority
of the SBS
Peru’s
Constitution and Law 26702 (which contains the statutory charter of the SBS)
grant the SBS the authority to oversee and control banks and financial
institutions (with the exception of brokerage firms), insurance and reinsurance
companies, companies that receive deposits from the general public and other
similar entities as defined by the law. The SBS is also responsible for
supervising the Central Bank to ensure that it abides by its statutory charter
and bye-laws. Law 27328, enacted in July 2000, transferred to the SBS the
supervision and regulation of the pension funds private administrators (“AFPs”)
which were previously supervised and regulated by a specialized
entity.
The SBS
has administrative, financial and operating autonomy. Its objectives include
protecting the public interest, ensuring the financial stability of the
institutions over which it has authority and punishing violators of its
regulations. Its responsibilities include: (i) reviewing and
approving, with the assistance of the Central Bank, the establishment and
organization of subsidiaries of the institutions it regulates; (ii) overseeing
mergers, dissolutions and reorganization of banks, financial institutions and
insurance companies; (iii) supervising financial, insurance and related
companies from which information on an individual or consolidated basis is
required, through changes in ownership and management control (this supervision
also applies to non-bank holding companies, such as us); (iv) reviewing the
bye-laws and amendments of bye-laws of these companies; (v) issuing criteria
governing the transfer of bank shares, when permitted by law, for valuation of
assets and liabilities and for minimum capital requirements; and (vi)
controlling the Central de Riesgos (Bank Risk Assessment Center), to which all
banks are legally required to provide information regarding all businesses and
individuals with whom they deal without regard to the amount of credit risk (the
information provided is made available to all banks to allow them to monitor
individual borrowers’ overall exposure to Peru’s banks). In addition to them,
the SBS is also responsible for stating the criteria relating to the existence
of financial or mixed conglomerates in Peru and their supervising.
As a
consequence of it, despite its supervising to BCP, the SBS also supervises
Credicorp Ltd. on the basis that we are a financial conglomerate conducting the
majority of our operations in Peru.
Management
of Operational Risk
SBS
Resolutions No. 006-2002 and 37-2008 established guidelines for operational risk
management, which includes a broad range of risks and defines operational risks
as those dealing with the possibility of suffering financial losses due to
deficiencies in internal procedures, information technology or personnel, or the
occurrence of adverse external events. Its also establishes responsibilities for
developing policies and procedures to identify, measure, control and report such
risks. Banks are required to adequately manage risks involved in the performance
and continuity of their operations and services in order to minimize possible
financial losses and reputation damage due to inadequate or non-existent
policies or procedures.
Credicorp,
following these SBS guidelines, as well as the guidelines issued by the Basel
Committee on Banking Supervision, and the advice of international consultants,
has appointed a specialized team that is responsible for operational risk
management across our organization. This team reports regularly to our risk
committee, top managers and Board of Directors.
We intend
to be guided by the risk control standards of international financial
institutions that are noted for their leadership in this field. Our overall
objective is to implement an efficient and permanent monitoring system to
control operational risks, while the actual management of risk control
procedures is conducted by the areas that carry out critical
activities.
During
2008 and 2009, we broadened the responsibility of our operational risk team.
First, along with critical processes and new products risk analysis, we are
assessing operational risks related to critical suppliers, critical information
assets, and technological components. Secondly, we have also fully developed the
business continuity management, or BCM, discipline, which involves the
implementation of continuity plans for critical business processes, incident
management and training and testing. Thirdly, we implement procedures to
register, collect, analyze and report risk operational losses looking forward to
advanced models to operational risk capital allocation
requirements. Lastly, we formed the monitoring and reporting team, which main
objective is to follow up the actions plans, monitor the KRI and other
performance indicators.
Pursuant
to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to make
certain certifications regarding our internal controls over financial reporting
as of December 31, 2009. We have developed internal methods to evaluate how
effective our internal controls are over our financial reporting. In addition,
we are implementing computer programs that will allow us to continuously
monitor, assess and document our internal controls. During 2009, we completed
our evaluation of internal controls over financial reporting and are now able to
obtain the attestation of our independent auditors. See “Item 15. Controls and
Procedures.”
Capital
Adequacy Requirements
The
capital adequacy requirements are set forth in the Peruvian Banking Law (Law
26702) and monitored and regulated by the Superintendency of Banks, Insurance
and Private Pension Funds Administrators (the “SBS”). Law 26702 was enacted in
December 1996 and amended in June 2008 through Legislative Decree
1028. The amendment became effective in July 2009 and required the
capital guidelines to conform to the standards established by the second Basel
Accord (Basel II).
Basel II
standards modified the methodology to measure credit, market and operational
risks to permit the use of standardized and internal model-based
methods. Basel II standards also permit Peruvian financial
institutions to request permission from the SBS to implement an internal
ratings-based (“IRB”) methodology.
Financial
institutions that receive approval from the SBS to use the IRB methodology are
subject to regulatory capital floors. The amount of required capital
may not be less than the percentage of capital required under an alternative
methodology.
|
|
First Year
|
|
Second Year
|
|
Third Year
|
|
Basic
IRB and Internal Models of Credit Risk
|
|
95% |
|
90% |
|
80% |
|
Advanced
Models of Credit Risk and/or Operational Risk
|
|
90% |
|
80% |
|
— |
|
Prior to
June 2009, the capital requirements were based upon the guidelines established
by the first Basel Accord (Basel I). Financial institutions were required to
limit risk-weighted assets to 11 times their regulatory capital (“patrimonio
efectivo”), which is equivalent to a minimum capital ratio of 9.09% of
risk-weighted assets. Risk-weighted assets were calculated based upon
five risk categories depending on the perceived risk of each asset
class.
Pursuant
to the Basel II guidelines, financial institutions are required to hold
regulatory capital (“patrimonio efectivo”) that is greater than or equal to the
sum of (i) 10% of credit risk-weighted assets, and (ii) 10 times the amount
required to cover market and operational risks. The new minimum capital
requirements will be implemented as follows.
|
|
Regulatory capital
(% of total weighted
assets)
|
|
Total risk-weighted assets
|
July 1st,
2009
|
|
9.5%
|
|
10.5
times the
regulatory capital needed to cover market risks;
plus
10.5
times regulatory
capital needed to cover operational risks;
plus
Total
amount of credit risk-weighted assets.
|
July
1st,
2010
|
|
9.8%
|
|
10.2
times the
regulatory capital needed to cover market risks;
plus
10.2
times the
regulatory capital needed to cover operational risks;
plus
Total
amount of credit risk-weighted assets.
|
July
1st,
2011
|
|
10%
|
|
10
times the
regulatory capital needed to cover market risks;
plus
10
times the
regulatory capital needed to cover operational risks;
plus
Total
amount of credit risk-weighted
assets.
|
Article
184 of Law 26702, as amended by Legislative Decree 1028, provides that
regulatory capital may be used to cover credit risk, market risk and operational
risk. Regulatory capital is comprised of the sum of basic capital and
supplementary capital, and is calculated as follows:
|
·
|
Basic Capital: Basic
Capital or Tier 1 capital is comprised of: (i) paid-in-capital (which
includes common stock and perpetual non-cumulative preferred stock), legal
reserves, supplementary capital premiums, voluntary reserves distributable
only with prior SBS approval, and retained earnings with capitalization
agreements (earnings that the shareholders or the Board of Directors, as
the case may be, have committed to capitalize as common stock); (ii) other
elements that have characteristics of permanence and loss absorption that
are in compliance with regulations enacted by the SBS; and (iii)
unrealized gains in Subsidiaries. Items deducted from Tier 1
capital include: (i) current and past years’ unrealized losses; (ii)
deficits of loan loss provisions; (iii) goodwill resulting from corporate
reorganizations or acquisitions; and (iv) half of the amount referred to
in “Deductions” below. Absent any Tier 2 capital, 100% of the
amount referred to in “Deductions” below must be deducted from Tier 1
capital. The elements referred to in item (ii) above should not
exceed 17.65% of the amount resulting from adding components (i) and (iii)
of Tier 1 capital net of the deductions in (i), (ii) and (iii) in this
paragraph.
|
|
·
|
Supplementary Capital:
Supplementary capital is comprised of the sum of certain elements from
Tier 2 capital and Tier 3 capital. Tier 2 capital elements include: (i)
voluntary reserves that may be reduced without prior consent from the SBS;
(ii) the eligible portion of redeemable subordinated debt and of any other
components that have characteristics of debt and equity as provided by the
SBS; (iii) for banks using the Standardized Approach Method (SAM), the
generic loan loss provision up to 1.25% of credit risk-weighted assets;
or, alternatively, for banks using the Internal Ratings-Based Method
(IRB), the generic loan loss provision up to 0.6% of total credit
risk-weighted assets (pursuant to article 189 of the Law); and (iv) half
of the amount referred to in “Deductions” below. Tier 3 capital
is comprised of redeemable subordinated debt that is incurred with the
exclusive purpose of covering market risk, as referred to in Article 233
of the Law.
|
|
·
|
Deductions: The
following are deducted from Tier 1 and Tier 2 capital: (i) all investments
in shares and subordinated debt issued by other local or foreign financial
institutions and insurance companies; (ii) all investments in shares and
subordinated debt issued by an affiliate with which the bank consolidates
its financial statements, including its holding company and such
subsidiaries referred to in Articles 34 and 224 of the Law; (iii) the
amount in which an investment in shares issued by a company with which the
bank does not consolidate its financial statements and which is not part
of the bank’s negotiable portfolio, exceeds 15% of the bank’s regulatory
capital; (iv) the aggregate amount of all investments in shares issued by
companies with which the bank does not consolidate its financial
statements and which are not part of the bank’s negotiable portfolio,
exceeds 60% of the regulatory capital; (v) when applicable, the amount
resulting from the formula prescribed in Article 189 of the
Law. For the purposes herein, “regulatory capital” excludes the
amounts referred to in (iii), (iv) and (iv) of this
paragraph.
|
Article
185 of the Law 26702 also provides that the following limits apply when
calculating regulatory capital: (i) the aggregate amount of supplementary
capital must not exceed the aggregate amount of basic capital; (ii) the amount
of redeemable Tier 2 subordinated instruments must be limited to 50% of the
amount resulting from the sum of Tier 1 elements net of the deductions in (i),
(ii), and (iii) in “Basic Capital” above; (iii) the amount of Tier 3 capital
must be limited to 250% of the amount resulting from the sum of Tier 1 elements
net of the deductions (i), (ii), and (iii) in “Basic Capital” above in the
amounts assigned to cover market risk.
As of
December 31, 2009, BCP’s regulatory capital was 14.52% of unconsolidated
risk-weighted assets, which is equivalent to having risk-weighted assets that
are 6.88 times the amount of regulatory capital.
Legal
Reserve Requirements
Pursuant
to Article 67 of Law 26702, all banks must maintain legal
reserves. Each year a bank must allocate 10% of its net income to its
legal reserves until its legal reserves are equal to 35% of its paid-in capital
stock. Any subsequent increase in paid-in capital requires a
corresponding increase in the amount of legal reserves. As of December 31, 2009,
BCP’s consolidated legal reserves were S/.546.5 million (US$189 million),
equivalent to 21.7% of BCP’s paid-in capital as of such date. Paid-in
capital increased by S/.720 million during 2009 due to the capitalization of
2008, and paid-in capital is expected to increase by an additional S/.329.5
million in 2010 as a consequence of the capitalization of 2009
earnings. Consequently, BCP has communicated to the SBS that it
intends to reclassify S/.348.7 million of voluntary reserves into legal reserves
to ensure its legal reserves equal 35% of paid-in capital.
Provisions
for Loan Losses
The SBS
has authority to establish loan reserves and issue guidelines for the provision
of loan losses by Peruvian credit institutions, including commercial
banks. SBS Resolution No. 41-2005, enacted in January 2005, requires
additional provisions for loans subject to foreign exchange risk, which are
recorded for local purposes. Beginning in July 2010, SBS Resolution
No. 11356-2008, enacted in November 2008, will require commercial banks to
implement a new framework for the assessment and classification of
debtors. The SBS Resolution also required the establishment of
pro-cyclical provisions starting December 2008. However, given the good
evolution of Peruvian GDP in 2009, the “procyclical” provisions were canceled in
September 2009. We estimate and record our allowance for loan losses
according to the criteria set out in IAS 39, adjusting the local provisions as
necessary. See Note 3(f)(ii) and 3(i) to the Credicorp Consolidated
Financial Statements.
Provisions
for Country Risk
SBS
Resolution No. 505-2002 requires the establishment of provisions for exposure to
country risk, which includes sovereign risk, transfer risk and expropriation or
nationalization risk that may affect operations with companies or individuals in
foreign countries. The SBS has also established guidelines for the
procedures and responsibilities for the management of country
risk. We estimate and record our allowance for country risk according
to the criteria set out in IAS 39. See Note 3(f)(ii) and 3(i) to the Credicorp
Consolidated Financial Statements.
Central
Bank Reserve Requirements
Under Law
26702, banks and financial institutions are required to maintain legal reserve
requirements for certain obligations. In the case of obligations in local
currency, the Central Bank requires financial institutions only to comply with
the legal reserve requirement. There is no additional reserve for obligations in
local currency. In the case of foreign currency obligations, banks are also
required to have marginal reserve requirements. The exact level and method of
calculation of the reserve requirement is established by the Central Bank. The
reserve requirements in Peru apply to obligations such as demand and time
deposits, savings accounts, securities, certain bonds and funds administered by
the bank. Additionally, the Central Bank requires reserves on amounts due to
subsidiaries, foreign banks and other foreign financial institutions. The
Central Bank exempts the obligations from any institution subject to reserve
requirements in the local financial system. Furthermore, foreign credits with
period equal or older than 2 years and funding from the public sector directed
to the microfinance sector are not subject to the regulation, among other
exemptions
At the
beginning of 2009 and as part of the Central Bank´s monetary stimulus to
alleviate the impact of the international crisis, the legal reserve rate was
reduced to 6.5% in February and then to 6% in April. Since then, the minimum
legal rate requirement has not been changed. The reserve funds can be
constituted by cash and deposits, with a minimum required of 1% held in deposits
in current accounts in the Central Bank. Obligations in foreign currency are
subject to a marginal reserve requirement ratio of 30%. In January 2010, the
Central Bank set a new marginal reserve requirement to foreign credits with a
period less than 2 years, as a way to control the incoming of foreign capital
into the economy. Also, the Central Bank establishes a remuneration rate on the
marginal reserves, those that exceed the minimum legal requirement (6%), only if
it is deposited in its current account. It must be pointed out that foreign
currency can not be used as reserve requirements for liability in domestic
currency, and vice versa. The Central Bank oversees compliance with the reserve
requirements.
The
reference interest rate is periodically revised by the Central Bank in
accordance with its monetary policy objectives. Every first Thursday of each
month the board of directors of the Central Bank approves and announces through
press release the Monetary Program for the month. The reference interest rate
was increased through 2008 reaching a maximum level of 6.5%. During 2009 the
Central Bank started to loose its monetary policy stance as a response to the
deceleration of the private spending and deterioration of the economy. In
February 2009 the Central Bank started easing its monetary policy reducing the
reference interest rate from 6.50% to 6.25%. After that, six consecutive
reductions followed reaching the current rate level of 1.25%. The central Bank
validated the decision based on the low grow of the economy and the sustained
reduction observed in the rate of inflation in the first half of 2009. In its
session on May 6, 2010 the Central Bank increased the reference interest rate to
1.50%.
In the
past few years, the Central Bank has on numerous occasions changed the reserve
requirement rate applicable to Peruvian financial institutions as part of its
monetary policy tool. Changes in the reserve requirement regulation may
adversely affect the bank´s business, financial condition and results of
operations.
Lending
Activities
Law 26702
sets the maximum amount of credit that a financial institution may extend to a
single borrower. A single borrower includes an individual or an economic group.
An economic group constituting a single or common risk includes a person, such
person’s close relatives and the companies in which such person or close
relatives have significant share ownership or decision-making capability.
According to current regulations, shareholders who own or control directly or
indirectly at least one-tenth of a company’s shares are considered significant
shareholders. Significant decision-making capability is deemed to be
present when, among other factors, a person or group can exercise material and
continuous influence upon the decisions of a company, when a person or company
holds seats on the board of directors or has principal officers in another
company, or when it can be assumed that one company or person is the beneficial
recipient of credit facilities granted to another company.
The limit
on credit that may be extended to one borrower vary according to the type of
borrower and the collateral received. The limit applicable to credit
for any Peruvian borrower is 10% of the bank’s regulatory capital, applied to
both unconsolidated and consolidated records, which may be increased to up to
30% if the loan is collateralized in a manner acceptable under Law
26702. If a financial institution exceeds these limits, the SBS may
impose a fine on the institution. As of December 31, 2009, the 10.0%
credit limit per borrower of BCP, unconsolidated, was S/. 545.7 million
(US$188.8 million) for unsecured loans, and the 30.0% limit was S/.1,637.1
million (US$566.5 million) for secured loans.
Pursuant
to Article 52 of the organic law of the Central Bank, in certain circumstances,
the Central Bank has the authority to establish limits on interest rates charged
by commercial banks and other financial institutions. No such limits
are currently in place; however, there can be no assurance that the Central Bank
will not establish such limits on interest rates in the future.
Related
Party Transactions
Law 26702
regulates transactions with related parties and affiliates of financial
institutions. SBS and CONASEV have also enacted regulations that
define indirect ownership, related parties and economic groups, which serve to
limit transactions with related parties and affiliates. These
regulations also provide standards for the supervision of financial and mixed
conglomerates formed by financial institutions.
The total
amount of loans to directors, employees or close relatives of any such persons
may not exceed 7% of a bank’s regulatory capital. All loans made to
any single related party borrower may not exceed 0.35% of such regulatory
capital (i.e., 5% of the overall 7% limit).
Pursuant
to Law 26702, as amended by Law 27102, the aggregate amount of loans to related
party borrowers considered to be part of an economic group (as defined above)
may not exceed 30% (previously 75%) of a bank’s regulatory
capital. For purposes of this test, related party borrowers include
(i) any person holding, directly or indirectly, 4% or more of a bank’s shares,
(ii) directors, (iii) certain principal executive officers of a bank or (iv)
persons affiliated with the administrators of the bank. Loans to
individual related party borrowers are also subject to the limits on lending to
a single borrower described under “—Lending Activities” above. All
loans to related parties must be made on terms no more favorable than the best
terms that BCP offers to the public.
Ownership
Restrictions
Law 26702
establishes certain restrictions on the ownership of a bank’s
shares. Banks must have at least two unrelated shareholders at all
times. Restrictions are placed on the ownership of shares by persons
that have committed certain crimes, as well as by public officials who have
supervisory powers over banks or who are majority shareholders of an enterprise
of a similar nature. All transfers of shares in a bank must be
reported by the bank to the SBS after the transfer. Transfers
involving the acquisition by any individual or corporation, whether directly or
indirectly, of more than 10% of a bank’s capital stock require prior
authorization from the SBS. The SBS may deny authorization to such transfer of
shares if the purchasers (or their shareholders in the case of juridical
persons) are legally disabled, have engaged in illegal activity in the area of
banking, finance, insurance or reinsurance, or if objections are raised on the
basis of the purchaser’s moral fitness or economic solvency. The decision of the
SBS is final, and cannot be overturned by the courts. If a transfer is made
without obtaining the prior approval of the SBS, the purchaser may be fined an
amount equivalent to the value of the securities transferred. In addition, the
purchaser is required to sell the securities within 30 days, or the fine will
double, and the purchaser is disqualified from exercising its voting rights at
shareholders’ meetings. Foreign investors receive the same treatment as Peruvian
nationals and are subject to the limitations described above.
Finally,
under Peruvian law, individuals or corporations that acquire more than 3% of a
bank’s shares or 1% in a period of 12 months are required to provide information
to the SBS upon request.
Risk
Rating
Law 26702
and SBS Resolution No. 672 require that all financial companies be rated by at
least two risk rating companies on a semi-annual basis (in March and September),
in addition to the SBS’s assessment. Criteria to be considered in the
rating include risk management and control procedures, loan quality, financial
strength, profitability, liquidity and financial efficiency. Five risk
categories are assigned, from “A” (lowest risk) to “E” (highest risk), allowing
for sub-categories within each category. As of September 2009, BCP was assigned
the “A+” risk category by its two rating agencies, Equilibrium Clasificadora de
Riesgo and Apoyo and Associates International.
Deposit
Fund
Law 26702
provides for mandatory deposit insurance to protect the deposits of financial
institutions by establishing the Fondo de Seguro de Depósitos (Deposit Insurance
Fund or the Fund) for individuals, associations, not-for-profit companies, and
demand deposits of non-financial companies. Financial institutions must pay an
annual premium calculated on the basis of the type of deposits accepted by the
entity and the risk classification of such entity, made by the SBS and at least
two independent risk-rating agencies. The annual premium begins at
0.45% of total funds on deposit under the coverage of the Fund and increases to
1.45% applicable to banks in the highest risk category. BCP is currently
classified in the lowest risk category. The maximum amount (defined on a monthly
basis) that a customer is entitled to recover from the Fund is S/.83,213 until
the end of May 2010.
Intervention
by the SBS
Pursuant
to Law 26702, as amended by Law 27102, the SBS has the authority to seize the
operations and assets of a bank. These laws provide for three levels
of action by the SBS: a supervisory regime, an intervention regime and the
liquidation of the bank. Any of these actions may be taken if certain events
occur, including if the bank: (i) interrupts payments on its liabilities, (ii)
repeatedly fails to comply with the regulations of the SBS or the Central Bank,
(iii) repeatedly violates the law or the provisions of the bank’s bye-laws, (iv)
repeatedly manages its operations in an unauthorized or unsound manner or (v)
has its regulatory capital fall or be reduced by more than 50%.
During
the intervention regime, rather than seizing the operations and assets of a
bank, the SBS may adopt other measures, including (i) placing additional
requirements on the bank, (ii) ordering it to increase its capital stock or
divest certain or all of its assets, or (iii) imposing a special supervision
regime during which BCP must adhere to a financial restructuring
plan.
The SBS
intervention regime stops a bank’s operations and may last for a maximum of 45
days, which may be extended for an additional 45 days. During this
time, the SBS may institute measures such as: (i) canceling losses by reducing
reserves, capital and subordinated debt, (ii) segregating certain assets and
liabilities for transfer to another financial institution and (iii) merging the
intervened bank with an acquiring institution according to the program
established by Urgent Decree No. 108-2000, enacted in November 2000. After the
intervention, the SBS will liquidate the bank unless it is merged with an
acquiring institution, as described in (iii) above.
Regulation
from the United States Federal Reserve Bank and from the State of Florida
Department of Banking and Finance
Banco de
Credito del Peru, Miami Agency (“BCP Miami Agency”) is licensed to operate as an
International Agency in the State of Florida and was authorized to transact
business by the Comptroller of Florida on September 3, 2002. The
Office of Financial Regulation of the State of Florida shares regulatory
responsibility with the Federal Reserve Bank of Atlanta.
Regulation
from the Superintendency of Banks in Panama
BCP
Panama is a branch of BCP that is registered in the Republic of
Panama. It began operating in June 2002 under an International
License issued by the Panamanian Superintendence of Banks, in accordance with
Law Decree No. 9 of February 26, 1998, as amended. BCP Panama is
subject to an inspection every two (2) years made by auditors and inspectors of
the Panamanian Superintendence of Banks, to determine, among other things, its
compliance with the Decree Law No. 2 and No. 42 Law on the Prevention of Money
Laundering.
General
Atlantic
Security Bank (ASB), a subsidiary of ASHC, is a Cayman Islands bank with a
branch in Panama. ASB is regulated by the regulatory authorities of the Cayman
Islands while its Panama branch is regulated by the banking authorities of
Panama. The supervision of ASB by Cayman Islands and Panamanian regulatory
authorities is less extensive than the supervision and regulation of U.S. banks
by U.S. banking authorities. In particular, ASB does not have a lender of last
resort and its deposits are not guaranteed by any government
agency.
ASB is
registered as an exempt company and is licensed in the Cayman Islands pursuant
to the Banks and Trust Companies Law. ASB holds an unrestricted
Category B Banking and Trust License, as well as a Mutual Fund Administrator
License. As a holder of a Category B License, ASB may not take deposits from any
person residing in the Cayman Islands other than another licensee, an exempt
company or an ordinary non-resident company which is not carrying on business in
the Cayman Islands.
ASB may
not invest in any asset which represents a claim on any person residing in the
Cayman Islands, except a claim resulting from: (i) a loan to an exempt or an
ordinary non-resident company not carrying on business in the Cayman Islands;
(ii) a loan by way of mortgage to a member of its staff or to a person
possessing or being deemed to possess Caymanian status under the immigration
law, for the purchase or construction of a residence in the Cayman Islands to be
owner-occupied; (iii) a transaction with another licensee or (iv) the purchase
of bonds or other securities issued by the government of the Cayman Islands, a
body incorporated by statute, or a company in which the government is the sole
or majority beneficial owner. In addition, ASB may not, without the
written approval of the Cayman Islands Monetary Authority (the “Authority”),
carry on any business in the Cayman Islands other than permitted by the Category
B License.
There are
no ratio or liquidity requirements under the Cayman Banking Law, but the
Authority expects observance of prudent banking practices. As a
matter of general practice, the ratio of liabilities to capital and surplus
should not exceed 40-to-1 and the ratio of risk-weighted assets to capital and
surplus should not exceed 8.33-to-1 (approximately 12%). There is a statutory
minimum net worth requirement of US$480,000, but the Authority generally
requires a bank or trust company to maintain a higher paid-in capital
appropriate to its business. The Authority requires compliance with
the guidelines promulgated by the Basel Accord on Banking Regulations and
Supervisory Practices although, in special circumstances, different gearing
and/or capital risk asset ratios may be negotiated. Compliance with the Cayman
Banking Law is monitored by the Authority.
Continuing
Requirements
Under the
law of the Cayman Islands, ASB is subject to the following continuing
requirements: (i) to remain in good standing under the Cayman Islands Companies
Law, including the filing of annual and other returns and the payment of annual
fees; (ii) to file with the Registrar of Companies any change in the information
or documents required to be provided and to pay annual fees; (iii) to file
certain prescribed forms with the Authority on a quarterly basis; (iv) to file
with the Authority audited accounts within three months of each financial year
(in the case of a locally incorporated bank which is not part of a substantial
international banking group, a senior officer or board member discusses these
accounts each year at a meeting with the Authority) and (v) to file an annual
questionnaire.
ASB is
required by the Cayman Banking Law to have at least two directors. Additionally,
ASB must receive prior approval from the Authority (i) for any proposed change
in the directors or senior officers, though in exceptional cases a waiver can be
obtained enabling changes to be reported after the event or annually in the case
of a branch of a substantial international bank; (ii) for the issue, transfer or
other disposal of shares (it is rare for a waiver to be granted with respect to
shares except in the case of a branch of a substantial international bank and
where the shares are widely held and publicly traded); (iii) for any significant
change in the business plan filed on the original license application or (iv) to
open a subsidiary, branch, agency or representative office outside the Cayman
Islands. Finally, ASB must obtain the prior approval of the Authority to change
its name and must notify the Authority of any change in the principal office and
authorized agent in the Cayman Islands.
Until
March 2010, the Bolivian banking system operated under the Ley de Bancos y
Entidades Financieras (the Law of Banks and Financial Entities) No. 1488,
enacted on April 14, 1993, which was modified by Law 3076 of June 20, 2005,
which granted supervisory powers to the Superintendency of Banks and Financial
Entities (now referred to as the Financial System Supervisory Authority
(Autoridad de Supervición del Sistema Financero), pursuant to Supreme Decree
29894). In addition, the law established that Banco Central de
Bolivia (the Central Bank of Bolivia) would regulate financial intermediation
and deposit activities, determine monetary and foreign exchange policy, and
establish reserve requirements on deposits and capital adequacy, which banks and
financial companies were required to follow. Also, the Autoridad de Supervición
del Sistema Financiero (the Financial System Supervisory Authority) supervised
brokerage activities and mutual fund management that was conducted through BCB’s
subsidiaries Credibolsa S.A. and Credifondo S.A. These subsidiaries operated
under the Ley del Mercado de Valores (the Securities Markets Law) No. 1834,
enacted on March 31, 1998.
The new
constitution of Bolivia, which was approved by referendum in February 2009,
established that the Bolivian financial system is to be regulated as
follows:
(i) The
Central Bank of Bolivia is responsible for maintaining the stability of the
internal monetary value and has authority to regulate monetary policy, control
foreign exchange policies, regulate the payment system, authorize the issuance
of money and administrate international reserves in coordination with the
Economic Policy stated by the Public Sector.
(ii) All
financial entities (banks, mutual funds, securities, insurance and others) are
regulated by the Financial System Supervisory Authority (or FSSA). The FSSA (or
ASFI in Spanish) has assumed all regulatory functions held previously be the
Superintendency of Banks and Financial Entities and the Superintendency of
Pensions, Securities and Insurance.
The
changes to existing laws by the new Bolivian constitution have not materially
impacted BCB’s business.
Overview
PPS’s
operations are regulated by Law 26702 and the SBS. Peruvian insurance
companies must submit regular reports to the SBS regarding their operations. In
addition, the SBS conducts on-sight reviews on an annual basis. The
SBS conducts these reviews primarily to review a company’s compliance with
solvency margin and reserve requirements, investment requirements and rules
governing the recognition of premium income. If the SBS determines that a
company is unable to meet the solvency margin or technical reserve requirements,
or is unable to pay claims as they come due, it may either liquidate the company
or permit it to merge with another insurance company.
Under
Peruvian law, insurance companies may engage in certain credit risk operations,
such as guarantees, bonds and trusteeships, but are prohibited from offering
other banking services, operating mutual funds or offering portfolio management
services. In addition, insurance companies may not conduct brokerage operations
for third parties.
Peruvian
insurance companies are also prohibited from having an ownership interest in
other insurance or reinsurance companies of the same class or in private pension
funds.
Establishment
of an Insurance Company
Insurance
companies must be authorized by the SBS to commence operations. Peruvian law
establishes certain minimum capital requirements for insurance and reinsurance
companies, which must be satisfied by cash investments in the company. The
statutory amounts are expressed in constant value.
Solvency
Requirements
Pursuant
to Law 26702, the SBS regulates the solvency margin of Peruvian insurance
companies. The solvency margin calculations take into account the amount of
premiums written and losses incurred during a specified period prior to the date
of the calculation.
Insurance
companies must also maintain solvency equity, which must be the greater of (i)
the solvency margin and (ii) the minimum capital requirement, as established by
law. The required amount of solvency equity is recalculated at least
quarterly. If an insurance company has outstanding credit risk
operations, part of the solvency equity must be set aside for its
coverage.
Legal
Reserve Requirements
Peruvian
law also requires that all insurance companies establish a legal guarantee
reserve for policyholders by setting aside 10% of income before taxes until the
reserve reaches at least 35% of paid-in capital.
Reserve
Requirements
Pursuant
to Law 26702 and regulations issued by the SBS, Peruvian insurance companies
must establish technical reserves. See “—(6) Pacífico Peruano
Suiza—(ii) Claims and Reserves.” Law 26702 also requires insurance companies to
create a reserve for IBNR claims, which are reflected as a liability, net of
recoveries and reinsurance, in the Credicorp Consolidated Financial Statements.
Reserves for IBNR claims are estimated by using generally accepted actuarial
reserving methods. See
Note 3(e) to the Credicorp Consolidated Financial Statements. Finally, PPS is
required by the SBS to establish pre-event reserves for risk of catastrophes,
which, in accordance with IFRS principles, are not considered in our financial
statements. See “—(6)
Pacífico Peruano Suiza—(ii) Claims and Reserves.”
Investment
Requirements
Pursuant
to Law 26702, the total amount of an insurance company’s solvency equity and
technical reserves must be permanently supported by diversified assets, which
may not be pledged or otherwise encumbered. The investment
regulations further state that deposits in and bonds of one financial
institution together cannot exceed 10% of the total of an insurer’s solvency
equity and technical reserves combined. In general, no more than 20% of an
insurance company’s combined solvency equity and technical reserves may be
invested in instruments (including stocks and bonds) issued by a company or
group of companies. In order for an insurance company to invest in
non-Peruvian securities, the securities must be rated by an internationally
recognized credit rating company and the asset class must be authorized by
Peruvian SBS regulations. Securities owned by insurance companies must be
registered in the Public Registry of Securities of Peru or the comparable
registry of their respective country.
Related
Party Transactions
Law 26702
generally provides that insurance companies may not extend credit to or
guarantee the obligations of employees or members of the board of directors,
except for certain home mortgage loans to employees.
Ownership
Restrictions
Law 26702
sets forth the same types of restrictions regarding the ownership and transfer
of insurance company shares as it does regarding the ownership and transfer of
shares in banks. See
“—(11) Supervision and Regulation—(ii) BCP—Overview.”
|
(12)
|
Selected
Statistical Information
|
In the
following tables, we have set forth certain selected statistical information and
ratios regarding our business for the periods indicated. You should read the
selected statistical information in conjunction with the information included in
“Item 5. Operating and Financial Review and Prospects—(A) Operating Results” and
the Credicorp Consolidated Financial Statements (and the notes that accompany
the financial statements). The statistical information and discussion and
analysis given below for the years 2005, 2006, 2007, 2008 and 2009 reflect our
consolidated financial position as well as that of our subsidiaries, as of
December 31, 2005, 2006, 2007, 2008 and 2009 and our results of operations for
2005, 2006, 2007, 2008 and 2009.
|
(i)
|
Average
Balance Sheets and Income from Interest-Earning
Assets
|
The
tables below set forth selected statistical information based on our average
balance sheets prepared on a consolidated basis. Except as otherwise
indicated, we have classified average balances by currency (Nuevos Soles or
foreign currency (primarily U.S. Dollars)) rather than by the domestic or
international nature of the balance. In addition, except where noted, the
average balances are based on the quarterly ending balances in each
year. Any of these quarter-end balances that were denominated in
Nuevos Soles have been converted into U.S. Dollars using the applicable SBS
exchange rate as of the date of such balance. We have in certain
cases restated nominal average interest rates as real average interest rates
using the formula described below. Our management believes that adjusting
average balances and average interest rates for inflation in this manner
provides more meaningful information for investors than unadjusted average
balances and rates, and does not believe that the stated averages present trends
materially differ from those that would be presented by daily
averages.
Real
Average Interest Rates
We
calculated the real average interest rates set forth in the tables below by
adjusting the nominal average interest rates on Nuevo Sol-denominated assets and
liabilities using the following formula:
Where:
R(s)
|
=
|
real
average interest rate on Nuevo Sol-denominated assets and liabilities for
the period.
|
N(s)
|
=
|
nominal
average interest rate on Nuevo Sol-denominated assets and liabilities for
the period.
|
I
|
=
|
inflation
rate in Peru for the period (based on the Peruvian consumer price
index).
|
Under
this formula, assuming positive nominal average interest rates, the real average
interest rate on a portfolio of Nuevo Sol-denominated assets or liabilities
would be equal to the nominal average interest rate on that portfolio if the
inflation rate were zero. The real average interest rate would be less than the
nominal average interest rate if the inflation rate were positive, and the real
average interest rate would be greater than the nominal average interest rate if
the inflation rate were negative (i.e., becomes a deflation
rate). In addition, the real average interest rate would be negative if the
inflation rate were greater than the average nominal interest rate.
The
following tables show average balances for all of our assets and liabilities,
interest earned and paid amounts, and nominal rates and real rates for our
interest-earning assets and interest-bearing liabilities, all for the years
ended December 31, 2007, 2008 and 2009.
Average
Balance Sheets
Assets,
Interest Earned and Average Interest Rates
|
|
Year ended December 31,
|
|
|
|
|
|
|
|
|
|
ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(U.S.
Dollars in thousands, except percentages)
|
|
Interest-earning
assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
in Central Bank
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
|
|
|
|
1.00 |
% |
2.05 |
% |
|
|
|
|
3.44 |
% |
4.54 |
% |
|
|
US$ 1,425
|
|
1.12 |
% |
2.20 |
% |
Foreign Currency
|
|
1,422,395 |
|
46,582 |
|
3.27 |
|
3.27 |
|
1,737,797 |
|
27,859 |
|
1.60 |
|
1.60 |
|
2,099,395 |
|
3,446 |
|
0.16 |
|
0.16 |
|
Total
|
|
1,438,954 |
|
46,921 |
|
3.25 |
|
3.26 |
|
1,959,282 |
|
37,914 |
|
1.81 |
|
1.94 |
|
2,164,265 |
|
4,871 |
|
0.19 |
|
0.23 |
|
Deposits
in other banks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
30,337 |
|
1,224 |
|
2.96 |
|
4.04 |
|
68,990 |
|
2,821 |
|
2.99 |
|
4.09 |
|
111,006 |
|
5,733 |
|
4.05 |
|
5.16 |
|
Foreign
Currency
|
|
1,002,633 |
|
57,672 |
|
5.75 |
|
5.75 |
|
778,822 |
|
34,531 |
|
4.43 |
|
4.43 |
|
920,030 |
|
5,314 |
|
0.58 |
|
0.58 |
|
Total
|
|
1,032,970 |
|
58,896 |
|
5.67 |
|
5.70 |
|
847,812 |
|
37,352 |
|
4.32 |
|
4.41 |
|
1,031,036 |
|
11,047 |
|
0.95 |
|
1.07 |
|
Investment
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
2,110,943 |
|
138,028 |
|
5.44 |
|
6.54 |
|
2,453,796 |
|
187,156 |
|
6.49 |
|
7.63 |
|
1,536,677 |
|
38,313 |
|
1.41 |
|
2.49 |
|
Foreign
Currency
|
|
2,131,911 |
|
93,734 |
|
4.40 |
|
4.40 |
|
3,355,232 |
|
110,865 |
|
3.30 |
|
3.30 |
|
3,288,724 |
|
148,316 |
|
4.51 |
|
4.51 |
|
Total
|
|
4,242,854 |
|
231,762 |
|
4.92 |
|
5.46 |
|
5,809,028 |
|
298,021 |
|
4.65 |
|
5.13 |
|
4,825,401 |
|
186,629 |
|
3.52 |
|
3.87 |
|
Total
loans (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
1,942,261 |
|
262,401 |
|
12.34 |
|
13.51 |
|
2,987,721 |
|
400,394 |
|
12.20 |
|
13.40 |
|
3,893,475 |
|
537,357 |
|
12.60 |
|
13.80 |
|
Foreign
Currency
|
|
5,101,392 |
|
439,070 |
|
8.61 |
|
8.61 |
|
6,533,987 |
|
563,546 |
|
8.62 |
|
8.62 |
|
6,810,072 |
|
524,689 |
|
7.70 |
|
7.70 |
|
Total
|
|
7,043,653 |
|
701,471 |
|
9.64 |
|
9.96 |
|
9,521,708 |
|
963,940 |
|
9.75 |
|
10.12 |
|
10,703,547 |
|
1,062,046 |
|
9.49 |
|
9.92 |
|
Total
dividend-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
215,100 |
|
5,791 |
|
1.64 |
|
2.69 |
|
174,356 |
|
6,672 |
|
2.73 |
|
3.83 |
|
160,185 |
|
2,057 |
|
0.22 |
|
1.28 |
|
Foreign
Currency
|
|
118,334 |
|
3,079 |
|
2.60 |
|
2.60 |
|
107,567 |
|
5,517 |
|
5.13 |
|
5.13 |
|
114,074 |
|
7,658 |
|
6.71 |
|
6.71 |
|
Total
|
|
333,434 |
|
8,870 |
|
1.98 |
|
2.66 |
|
281,923 |
|
12,189 |
|
3.65 |
|
4.32 |
|
274,259 |
|
9,715 |
|
2.92 |
|
3.54 |
|
Total
interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
4,315,200 |
|
407,783 |
|
8.32 |
|
9.45 |
|
5,906,348 |
|
607,098 |
|
9.12 |
|
10.28 |
|
5,766,213 |
|
584,885 |
|
8.98 |
|
10.14 |
|
Foreign
Currency
|
|
9,776,665 |
|
640,137 |
|
6.55 |
|
6.55 |
|
12,513,405 |
|
742,318 |
|
5.93 |
|
5.93 |
|
13,232,295 |
|
689,423 |
|
5.21 |
|
5.21 |
|
Total
|
|
14,091,865 |
|
1,047,920 |
|
7.09 |
|
7.44 |
|
18,419,753 |
|
1,349,416 |
|
6.95 |
|
7.33 |
|
18,998,508 |
|
1,274,308 |
|
6.35 |
|
6.71 |
|
Noninterest-earning
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
250,118 |
|
|
|
|
|
|
|
308,321 |
|
|
|
|
|
|
|
327,127 |
|
|
|
|
|
|
|
Foreign
Currency
|
|
255,715 |
|
|
|
|
|
|
|
259,761 |
|
|
|
|
|
|
|
275,276 |
|
|
|
|
|
|
|
Total
|
|
505,833 |
|
|
|
|
|
|
|
568,082 |
|
|
|
|
|
|
|
602,403 |
|
|
|
|
|
|
|
Reserves
for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
(37,601 |
) |
|
|
|
|
|
|
(68,072 |
) |
|
|
|
|
|
|
(133,303 |
) |
|
|
|
|
|
|
Foreign
Currency
|
|
(154,917 |
) |
|
|
|
|
|
|
(156,850 |
) |
|
|
|
|
|
|
(156,364 |
) |
|
|
|
|
|
|
Total
|
|
(192,518 |
) |
|
|
|
|
|
|
(224,922 |
) |
|
|
|
|
|
|
(289,667 |
) |
|
|
|
|
|
|
Premises
and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
182,308 |
|
|
|
|
|
|
|
269,221 |
|
|
|
|
|
|
|
303,170 |
|
|
|
|
|
|
|
Foreign
Currency
|
|
73,948 |
|
|
|
|
|
|
|
26,805 |
|
|
|
|
|
|
|
19,242 |
|
|
|
|
|
|
|
Total
|
|
256,256 |
|
|
|
|
|
|
|
296,026 |
|
|
|
|
|
|
|
322,412 |
|
|
|
|
|
|
|
Other
non-interest-earning assets and gain from derivatives instruments and
other interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
334,653 |
|
2,067 |
|
|
|
|
|
527,364 |
|
1,193 |
|
|
|
|
|
820,740 |
|
12,728 |
|
|
|
|
|
Foreign
Currency
|
|
561,477 |
|
15,352 |
|
|
|
|
|
747,978 |
|
32,235 |
|
|
|
|
|
814,175 |
|
25,889 |
|
|
|
|
|
Total
|
|
896,130 |
|
17,419 |
|
|
|
|
|
1,275,342 |
|
33,428 |
|
|
|
|
|
1,634,915 |
|
38,617 |
|
|
|
|
|
Total
non-interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
729,478 |
|
2,067 |
|
|
|
|
|
1,036,834 |
|
1,193 |
|
|
|
|
|
1,317,734 |
|
12,728 |
|
|
|
|
|
Foreign
Currency
|
|
736,223 |
|
15,352 |
|
|
|
|
|
877,694 |
|
32,235 |
|
|
|
|
|
952,329 |
|
25,889 |
|
|
|
|
|
Total
|
|
1,465,701 |
|
17,419 |
|
|
|
|
|
1,914,528 |
|
33,428 |
|
|
|
|
|
2,270,063 |
|
38,617 |
|
|
|
|
|
Total
average assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
5,044,678 |
|
409,850 |
|
7.01 |
|
8.12 |
|
6,943,182 |
|
608,291 |
|
7.61 |
|
8.76 |
|
7,083,947 |
|
597,613 |
|
7.29 |
|
8.44 |
|
Foreign
Currency
|
|
10,512,888 |
|
655,489 |
|
6.24 |
|
6.24 |
|
13,391,099 |
|
774,553 |
|
5.78 |
|
5.78 |
|
14,184,624 |
|
715,312 |
|
5.04 |
|
5.04 |
|
Total
|
|
15,557,566 |
|
1,065,339 |
|
6.49 |
|
6.85 |
|
20,334,281 |
|
1,382,844 |
|
6.41 |
|
6.80 |
|
21,268,571 |
|
1,312,925 |
|
5.79 |
|
6.17 |
|
(1)
|
Figures
for total loans include past-due loans, but do not include accrued but
unpaid interest on such past-due loans in the year in which such loans
became past due. Accrued interest is
included.
|
Average
Balance Sheets
Liabilities,
Interest Paid and Average Interest Rates
|
|
Year ended December 31,
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(U.S.
Dollars in thousands, except percentages)
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles (1)
|
|
US$
|
1,120,416
|
|
US$
|
12,761
|
|
|
0.10 |
% |
|
1.14 |
% |
US$
|
1,685,905
|
|
US$
|
22,986
|
|
|
0.29 |
% |
|
1.36 |
% |
US$
|
1,723,108
|
|
US$
|
15,378
|
|
|
-0.17 |
% |
|
0.89 |
% |
Foreign
Currency (1)
|
|
|
2,206,983 |
|
|
12,362 |
|
|
0.56 |
|
|
0.56 |
|
|
2,603,193 |
|
|
15,099 |
|
|
0.58 |
|
|
0.58 |
|
|
2,685,555 |
|
|
6,036 |
|
|
0.22 |
|
|
0.22 |
|
Total
|
|
|
3,327,399 |
|
|
25,123 |
|
|
0.40 |
|
|
0.76 |
|
|
4,289,098 |
|
|
38,085 |
|
|
0.47 |
|
|
0.89 |
|
|
4,408,663 |
|
|
21,414 |
|
|
0.07 |
|
|
0.49 |
|
Savings
deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles (1)
|
|
|
711,641 |
|
|
8,550 |
|
|
0.16 |
|
|
1.20 |
|
|
1,143,032 |
|
|
13,511 |
|
|
0.11 |
|
|
1.18 |
|
|
1,283,529 |
|
|
8,610 |
|
|
-0.39 |
|
|
0.67 |
|
Foreign
Currency (1)
|
|
|
1,396,318 |
|
|
11,319 |
|
|
0.81 |
|
|
0.81 |
|
|
1,560,084 |
|
|
13,654 |
|
|
0.88 |
|
|
0.88 |
|
|
1,952,183 |
|
|
9,899 |
|
|
0.51 |
|
|
0.51 |
|
Total
|
|
|
2,107,959 |
|
|
19,869 |
|
|
0.59 |
|
|
0.94 |
|
|
2,703,116 |
|
|
27,165 |
|
|
0.55 |
|
|
1.00 |
|
|
3,235,712 |
|
|
18,509 |
|
|
0.15 |
|
|
0.57 |
|
Time
deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles (1)
|
|
|
1,440,081 |
|
|
82,746 |
|
|
4.66 |
|
|
5.75 |
|
|
2,659,712 |
|
|
156,137 |
|
|
4.75 |
|
|
5.87 |
|
|
1,988,784 |
|
|
86,312 |
|
|
3.24 |
|
|
4.34 |
|
Foreign
Currency (1)
|
|
|
3,613,304 |
|
|
180,741 |
|
|
5.00 |
|
|
5.00 |
|
|
3,640,246 |
|
|
154,719 |
|
|
4.25 |
|
|
4.25 |
|
|
4,191,628 |
|
|
119,806 |
|
|
2.86 |
|
|
2.86 |
|
Total
|
|
|
5,053,385 |
|
|
263,487 |
|
|
4.90 |
|
|
5.21 |
|
|
6,299,958 |
|
|
310,856 |
|
|
4.46 |
|
|
4.93 |
|
|
6,180,412 |
|
|
206,118 |
|
|
2.98 |
|
|
3.34 |
|
Due
to banks and correspondents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
|
153,258 |
|
|
6,033 |
|
|
2.87 |
|
|
3.94 |
|
|
190,227 |
|
|
8,763 |
|
|
3.50 |
|
|
4.61 |
|
|
201,718 |
|
|
4,851 |
|
|
1.32 |
|
|
2.40 |
|
Foreign
Currency
|
|
|
1,411,710 |
|
|
77,037 |
|
|
5.46 |
|
|
5.46 |
|
|
2,341,164 |
|
|
96,055 |
|
|
4.10 |
|
|
4.10 |
|
|
1,969,158 |
|
|
46,803 |
|
|
2.38 |
|
|
2.38 |
|
Total
|
|
|
1,564,968 |
|
|
83,070 |
|
|
5.20 |
|
|
5.31 |
|
|
2,531,391 |
|
|
104,818 |
|
|
4.06 |
|
|
4.14 |
|
|
2,170,876 |
|
|
51,654 |
|
|
2.28 |
|
|
2.38 |
|
Bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
|
201,787 |
|
|
12,954 |
|
|
5.33 |
|
|
6.42 |
|
|
468,265 |
|
|
30,864 |
|
|
5.47 |
|
|
6.59 |
|
|
528,565 |
|
|
35,133 |
|
|
5.52 |
|
|
6.65 |
|
Foreign
Currency
|
|
|
341,643 |
|
|
20,638 |
|
|
6.04 |
|
|
6.04 |
|
|
294,716 |
|
|
20,892 |
|
|
7.09 |
|
|
7.09 |
|
|
452,412 |
|
|
31,860 |
|
|
7.04 |
|
|
7.04 |
|
Total
|
|
|
543,430 |
|
|
33,592 |
|
|
5.78 |
|
|
6.18 |
|
|
762,981 |
|
|
51,756 |
|
|
6.09 |
|
|
6.78 |
|
|
980,977 |
|
|
66,993 |
|
|
6.22 |
|
|
6.83 |
|
Total
interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
|
3,627,183 |
|
|
123,044 |
|
|
2.33 |
|
|
3.39 |
|
|
6,147,141 |
|
|
232,261 |
|
|
2.68 |
|
|
3.78 |
|
|
5,725,704 |
|
|
150,284 |
|
|
1.54 |
|
|
2.62 |
|
Foreign
Currency
|
|
|
8,969,958 |
|
|
302,097 |
|
|
3.37 |
|
|
3.37 |
|
|
10,439,403 |
|
|
300,419 |
|
|
2.88 |
|
|
2.88 |
|
|
11,250,936 |
|
|
214,404 |
|
|
1.91 |
|
|
1.91 |
|
Total
|
|
|
12,597,141 |
|
|
425,141 |
|
|
3.07 |
|
|
3.37 |
|
|
16,586,544 |
|
|
532,680 |
|
|
2.81 |
|
|
3.21 |
|
|
16,976,640 |
|
|
364,688 |
|
|
1.78 |
|
|
2.15 |
|
Non-interest-bearing
liabilities and net equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
liabilities and loss from derivatives instruments and other interest
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
|
157,062 |
|
|
2,687 |
|
|
|
|
|
|
|
|
489,502 |
|
|
20,850 |
|
|
|
|
|
|
|
|
676,295 |
|
|
(11,177 |
) |
|
|
|
|
|
|
Foreign
Currency
|
|
|
1,123,751 |
|
|
3,537 |
|
|
|
|
|
|
|
|
1,363,623 |
|
|
8,087 |
|
|
|
|
|
|
|
|
1,489,528 |
|
|
67,053 |
|
|
|
|
|
|
|
Total
|
|
|
1,280,813 |
|
|
6,224 |
|
|
|
|
|
|
|
|
1,853,125 |
|
|
28,937 |
|
|
|
|
|
|
|
|
2,165,823 |
|
|
55,876 |
|
|
|
|
|
|
|
Equity
attributable to Credicorp equity holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency
|
|
|
1,547,283 |
|
|
|
|
|
|
|
|
|
|
|
1,770,400 |
|
|
|
|
|
|
|
|
|
|
|
1,980,856 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,547,283 |
|
|
|
|
|
|
|
|
|
|
|
1,770,400 |
|
|
|
|
|
|
|
|
|
|
|
1,980,856 |
|
|
|
|
|
|
|
|
|
|
Minority
Interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency
|
|
|
132,329 |
|
|
|
|
|
|
|
|
|
|
|
124,212 |
|
|
|
|
|
|
|
|
|
|
|
145,252 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
132,329 |
|
|
|
|
|
|
|
|
|
|
|
124,212 |
|
|
|
|
|
|
|
|
|
|
|
145,252 |
|
|
|
|
|
|
|
|
|
|
Total
non-interest-bearing liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
|
157,062 |
|
|
2,687 |
|
|
|
|
|
|
|
|
489,502 |
|
|
20,850 |
|
|
|
|
|
|
|
|
676,295 |
|
|
(11,177 |
) |
|
|
|
|
|
|
Foreign
Currency
|
|
|
2,803,363 |
|
|
3,537 |
|
|
|
|
|
|
|
|
3,258,235 |
|
|
8,087 |
|
|
|
|
|
|
|
|
3,615,636 |
|
|
67,053 |
|
|
|
|
|
|
|
Total
|
|
|
2,960,425 |
|
|
6,224 |
|
|
|
|
|
|
|
|
3,747,737 |
|
|
28,937 |
|
|
|
|
|
|
|
|
4,291,931 |
|
|
55,876 |
|
|
|
|
|
|
|
Total
average liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
|
3,784,245 |
|
|
125,731 |
|
|
2.26 |
|
|
3.32 |
|
|
6,636,643 |
|
|
253,111 |
|
|
2.72 |
|
|
3.81 |
|
|
6,401,999 |
|
|
139,107 |
|
|
1.09 |
|
|
2.17 |
|
Foreign
Currency
|
|
|
11,773,321 |
|
|
305,634 |
|
|
2.60 |
|
|
2.60 |
|
|
13,697,638 |
|
|
308,506 |
|
|
2.25 |
|
|
2.25 |
|
|
14,866,572 |
|
|
281,457 |
|
|
1.89 |
|
|
1.89 |
|
Total
|
|
|
15,557,566 |
|
|
431,365 |
|
|
2.51 |
|
|
2.77 |
|
|
20,334,281 |
|
|
561,617 |
|
|
2.40 |
|
|
2.76 |
|
|
21,268,571 |
|
|
420,564 |
|
|
1.65 |
|
|
1.98 |
|
(1)
|
Includes
the amount paid to Central Bank for the deposit insurance
fund.
|
Changes
in Net Interest Income and Expense: Volume and Rate Analysis
|
|
2008/2007
|
|
2009/2008
|
|
|
Increase/(Decrease) due to changes in:
|
|
Increase/(Decrease) due to changes in:
|
|
|
Volume
|
|
Rate
|
|
Net Change
|
|
Volume
|
|
Rate
|
|
Net Change
|
|
|
(U.S. Dollars in thousands)
|
Interest
Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-earning
deposits in Central Bank
|
Nuevos
Soles
|
|
4,194 |
|
5,522 |
|
9,716 |
|
(7,110) |
|
(1,520) |
|
(8,630) |
Foreign
Currency
|
|
10,329 |
|
(29,052) |
|
(18,723) |
|
5,797 |
|
(30,210) |
|
(24,413) |
Total
|
|
14,523 |
|
(23,530) |
|
(9,007) |
|
(1,313) |
|
(31,730) |
|
(33,043) |
Deposits
in other banks
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
1,560 |
|
37 |
|
1,597 |
|
1,718 |
|
1,194 |
|
2,912 |
Foreign
Currency
|
|
(12,873) |
|
(10,268) |
|
(23,141) |
|
6,261 |
|
(35,478) |
|
(29,217) |
Total
|
|
(11,313) |
|
(10,231) |
|
(21,544) |
|
7,979 |
|
(34,284) |
|
(26,305) |
Investment
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
22,418 |
|
26,710 |
|
49,128 |
|
(69,951) |
|
(78,892) |
|
(148,843) |
Foreign
Currency
|
|
53,786 |
|
(36,655) |
|
17,131 |
|
(2,198) |
|
39,649 |
|
37,451 |
Total
|
|
76,204 |
|
(9,945) |
|
66,259 |
|
(72,149) |
|
(39,243) |
|
(111,392) |
Total loans(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
141,242 |
|
(3,249) |
|
137,993 |
|
121,383 |
|
15,580 |
|
136,963 |
Foreign
Currency
|
|
123,302 |
|
1,174 |
|
124,476 |
|
23,812 |
|
(62,669) |
|
(38,857) |
Total
|
|
264,544 |
|
(2,075) |
|
262,469 |
|
145,195 |
|
(47,089) |
|
98,106 |
Total
dividend-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
(1,097) |
|
1,978 |
|
881 |
|
(542) |
|
(4,073) |
|
(4,615) |
Foreign
Currency
|
|
(280) |
|
2,718 |
|
2,438 |
|
334 |
|
1,807 |
|
2,141 |
Total
|
|
(1,377) |
|
4,696 |
|
3,319 |
|
(208) |
|
(2,266) |
|
(2,474) |
Total
interest-earning assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
150,362 |
|
48,953 |
|
199,315 |
|
(14,404) |
) |
(7,809) |
|
(22,213) |
Foreign
Currency
|
|
179,191 |
|
(77,010) |
|
102,181 |
|
42,646 |
|
(95,541) |
|
(52,895) |
Total
|
|
329,553 |
|
(28,057) |
|
301,496 |
|
28,242 |
|
(103,350) |
|
(75,108) |
Interest
Expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand
deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
6,441 |
|
3,784 |
|
10,225 |
|
508 |
|
(8,116) |
|
(7,608) |
Foreign
Currency
|
|
2,219 |
|
518 |
|
2,737 |
|
477 |
|
(9,540) |
|
(9,063) |
Total
|
|
8,660 |
|
4,302 |
|
12,962 |
|
985 |
|
(17,656) |
|
(16,671) |
Savings
deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
5,183 |
|
(222) |
|
4,961 |
|
1,660 |
|
(6,561) |
|
(4,901) |
Foreign
Currency
|
|
1,328 |
|
1,007 |
|
2,335 |
|
3,432 |
|
(7,187) |
|
(3,755) |
Total
|
|
6,511 |
|
785 |
|
7,296 |
|
5,092 |
|
(13,748) |
|
(8,656) |
Time
deposits
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
70,079 |
|
3,312 |
|
73,391 |
|
(39,387) |
|
(30,438) |
|
(69,825) |
Foreign
Currency
|
|
1,348 |
|
(27,370) |
|
(26,022) |
|
23,435 |
|
(58,349) |
|
(34,914) |
Total
|
|
71,427 |
|
(24,058) |
|
47,369 |
|
(15,952) |
|
(88,787) |
|
(104,739) |
Due
to banks and correspondents and issued bonds
|
Nuevos
Soles
|
|
1,455 |
|
1,275 |
|
2,730 |
|
529 |
|
(4,441) |
|
(3,912) |
Foreign
Currency
|
|
50,720 |
|
(31,702) |
|
19,018 |
|
(15,263) |
|
(33,989) |
|
(49,252) |
Total
|
|
52,175 |
|
(30,427) |
|
21,748 |
|
(14,734) |
|
(38,430) |
|
(53,164) |
Bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
17,107 |
|
803 |
|
17,910 |
|
3,974 |
|
295 |
|
4,269 |
Foreign
Currency
|
|
(2,835) |
|
3,089 |
|
254 |
|
11,179 |
|
(211) |
|
10,968 |
Total
|
|
14,272 |
|
3,892 |
|
18,164 |
|
15,153 |
|
84 |
|
15,237 |
Total
interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
85,484 |
|
23,733 |
|
109,217 |
|
(15,924) |
|
(66,053) |
|
(81,977) |
Foreign
Currency
|
|
49,489 |
|
(51,167) |
|
(1,678) |
|
23,354 |
|
(109,369) |
|
(86,015) |
Total
|
|
134,973 |
|
(27,434) |
|
107,539 |
|
7,430 |
|
(175,422) |
|
(167,992) |
(1)
|
Figures
for total loans include past-due loans, but do not include accrued but
unpaid interest on such past-due loans in the year in which such loans
became past due. Accrued interest is
included.
|
Interest-Earning
Assets, Net Interest Margin and Yield Spread
The
following table shows for each of the periods indicated, by currency, the levels
of average interest-earning assets, net interest income, gross yield, net
interest margin and yield spread, all on a nominal basis:
|
|
Year ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands, except percentages)
|
|
Average
interest-earning assets
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
|
4,315,200 |
|
|
|
5,906,348 |
|
|
|
5,766,213 |
|
Foreign
Currency
|
|
|
9,776,665 |
|
|
|
12,513,405 |
|
|
|
13,232,295 |
|
Total
|
|
|
14,091,865 |
|
|
|
18,419,753 |
|
|
|
18,998,508 |
|
Net
interest income
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
|
284,739 |
|
|
|
374,837 |
|
|
|
434,601 |
|
Foreign
Currency
|
|
|
338,040 |
|
|
|
441,899 |
|
|
|
475,019 |
|
Total
|
|
|
622,779 |
|
|
|
816,736 |
|
|
|
909,620 |
|
Gross
yield (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
|
9.45 |
% |
|
|
10.28 |
% |
|
|
10.14 |
% |
Foreign
Currency
|
|
|
6.55 |
% |
|
|
5.93 |
% |
|
|
5.21 |
% |
Weighted-average
rate
|
|
|
7.44 |
% |
|
|
7.33 |
% |
|
|
6.71 |
% |
Net
interest margin (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
|
6.60 |
% |
|
|
6.35 |
% |
|
|
7.54 |
% |
Foreign
Currency
|
|
|
3.46 |
% |
|
|
3.53 |
% |
|
|
3.59 |
% |
Weighted-average
rate
|
|
|
4.42 |
% |
|
|
4.43 |
% |
|
|
4.79 |
% |
Yield
spread (3)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevos
Soles
|
|
|
6.06 |
% |
|
|
6.50 |
% |
|
|
7.52 |
% |
Foreign
Currency
|
|
|
3.18 |
% |
|
|
3.05 |
% |
|
|
3.30 |
% |
Weighted-average
rate
|
|
|
4.06 |
% |
|
|
4.11 |
% |
|
|
4.56 |
% |
(1)
|
Gross
yield is interest income divided by average interest-earning
assets.
|
(2)
|
Net
interest margin represents net interest income divided by average
interest-earning assets.
|
(3)
|
Yield
spread, on a nominal basis, represents the difference between gross yield
on average interest-earning assets and average cost of interest-bearing
liabilities.
|
Interest-Earning
Deposits With Other Banks
The
following table shows the short-term funds deposited with other banks. These
deposits are denominated by currency as of the dates indicated. Deposits held in
countries other than Peru are denominated in several currencies; however, the
majority of these deposits are denominated in U.S. Dollars. These currencies
were converted to U.S. Dollars using the applicable SBS exchange rate as of the
dates indicated.
|
|
Year ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Nuevo
Sol-denominated:
|
|
|
|
|
|
|
|
|
|
Peruvian
Central Bank
|
|
|
US$ - |
|
|
|
US$ 1,601,574 |
|
|
|
US$ 56,753 |
|
Commercial
banks
|
|
|
41,826 |
|
|
|
36,184 |
|
|
|
43,982 |
|
Total
Nuevo Sol-denominated
|
|
|
US$ 41,826 |
|
|
|
US$ 1,637,758 |
|
|
|
US$ 100,735 |
|
Foreign
Currency-denominated:
|
|
|
|
|
|
|
|
|
|
|
|
|
Peruvian
Central Bank (U.S. Dollars)
|
|
|
US$ 1,000,000 |
|
|
|
US$ - |
|
|
|
US$ 2,033,290 |
|
U.S.
Dollars, other
|
|
|
1,360,649 |
|
|
|
1,030,665 |
|
|
|
763,631 |
|
Other
|
|
|
50,472 |
|
|
|
40,332 |
|
|
|
516 |
|
Total
Foreign Currency-denominated
|
|
|
US$ 2,411,121 |
|
|
|
US$ 1,070,997 |
|
|
|
US$ 2,797,437 |
|
Total
|
|
|
US$ 2,452,947 |
|
|
|
US$ 2,708,755 |
|
|
|
US$ 2,898,172 |
|
|
(ii)
|
Investment
Portfolio
|
The
following table shows the fair value of our trading and available-for-sale
investment securities designated by type of security at the dates indicated
(see Note 5 to the
Credicorp Consolidated Financial Statements):
|
|
On
December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S.
Dollars in Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Nuevo
Sol-denominated:
|
|
|
|
|
|
|
|
|
|
Peruvian
government bonds
|
|
US$
274,391 |
|
|
US$
244,037 |
|
|
US$
170,811 |
|
Equity
securities
|
|
227,751 |
|
|
119,481 |
|
|
199,410 |
|
Bonds
|
|
110,916 |
|
|
115,232 |
|
|
150,917 |
|
Peruvian
Central Bank certif. notes
|
|
2,407,005 |
|
|
1,138,214 |
|
|
1,548,715 |
|
Other
investments
|
|
132,788 |
|
|
117,766 |
|
|
149,591 |
|
Total
Nuevo Sol-denominated
|
|
3,152,851 |
|
|
1,734,730 |
|
|
2,219,444 |
|
Foreign
Currency-denominated:
|
|
|
|
|
|
|
|
|
|
Equity
securities
|
|
US$
118,313 |
|
|
US$
93,208 |
|
|
US$
131,327 |
|
Bonds
|
|
1,198,073 |
|
|
1,030,151 |
|
|
1,634,708 |
|
Investment
in Peruvian Government Bonds
|
|
362,603 |
|
|
562,438 |
|
|
669,056 |
|
Peruvian
Central Bank certif. notes
|
|
- |
|
|
1,070,728 |
|
|
- |
|
Other
investment
|
|
406,262 |
|
|
452,347 |
|
|
443,493 |
|
Total
Foreign Currency-denominated
|
|
US$
2,085,251 |
|
|
US$
3,208,872 |
|
|
US$
2,878,584 |
|
Total
securities holdings:
|
|
US$
5,238,102 |
|
|
US$
4,943,602 |
|
|
US$
5,098,028 |
|
The
allowance for decline in value of marketable securities is debited from the
value of each individual security.
The
weighted-average yield on our Nuevo Sol-denominated interest-earning investment
securities was 6.5% in 2007, 7.6% in 2008 and 2.5% in 2009. The weighted-average
yield on our foreign currency-denominated portfolio was 4.4% in 2007, 3.3% in
2008 and 4.5% in 2009. The total weighted-average yield of our investment
securities was 5.4% in 2007, 5.1% in 2008 and 3.5% in 2009.
The
weighted-average yield on our Nuevo Sol-denominated dividend-earning assets was
2.7% in 2007, 3.8% in 2008 and 1.2% in 2009. The weighted-average yield on our
foreign currency-denominated portfolio was 2.6% in 2007, 5.1% in 2008 and 6.7%
in 2009. The total weighted-average yield of our dividend-earning assets was
2.7% in 2007, 4.3% in 2008 and 3.5% in 2009.
The
following table shows the maturities of our trading and available-for-sale
investment securities designated by type of security on December 31,
2009:
|
|
Within 1 year
|
|
|
After 1 year
but within 3
years
|
|
|
Maturing
After 3 years
but within 5
years
|
|
|
Maturing
After 5 years
but within 10
years
|
|
|
After 10
years
|
|
|
Total
|
|
|
|
(U.S. Dollars in thousands)
|
|
Nuevo
Sol-denominated: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peruvian
government bonds
|
|
US$
10,782 |
|
|
US$
19,810 |
|
|
US$
18,843 |
|
|
US$
4,961 |
|
|
US$
116,415 |
|
|
US$
170,811 |
|
Equity
securities (1)
|
|
199,410 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
199,410 |
|
Bonds
and debentures
|
|
16,699 |
|
|
17,735 |
|
|
21,722 |
|
|
29,729 |
|
|
65,032 |
|
|
150,917 |
|
Peruvian
Central Bank certif. notes
|
|
1,548,715 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,548,715 |
|
Other
investments
|
|
126,322 |
|
|
- |
|
|
9,661 |
|
|
2,486 |
|
|
11,122 |
|
|
149,591 |
|
Total
Nuevo Sol-denominated
|
|
US$
1,901,928 |
|
|
US$
37,545 |
|
|
US$
50,226 |
|
|
US$
37,176 |
|
|
US$
192,569 |
|
|
US$
2,219,444 |
|
Foreign
Currency-denominated: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peruvian
government bonds
|
|
47,612 |
|
|
24,990 |
|
|
364,413 |
|
|
57,954 |
|
|
174,087 |
|
|
669,056 |
|
Equity
securities
|
|
131,327 |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
131,327 |
|
Bonds
|
|
336,380 |
|
|
457,315 |
|
|
298,994 |
|
|
224,011 |
|
|
318,008 |
|
|
1,634,708 |
|
Peruvian
Central Bank certif. notes
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Other
investments
|
|
357,284 |
|
|
4,288 |
|
|
8,915 |
|
|
3,255 |
|
|
69,751 |
|
|
443,493 |
|
Total
Foreign Currency-denominated
|
|
US$
872,603 |
|
|
US$
486,593 |
|
|
US$
672,322 |
|
|
US$
285,220 |
|
|
US$
561,846 |
|
|
US$
2,878,584 |
|
Total
securities holdings:
|
|
US$
2,774,531 |
|
|
US$
524,138 |
|
|
US$
722,548 |
|
|
US$
322,396 |
|
|
US$
754,415 |
|
|
US$
5,098,028 |
|
Weighted-average
yield
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.49 |
% |
(1)
|
Equity
securities in our account are categorized as maturing within one
year.
|
The
maturities of our investment securities classified by trading and
available-for-sale, as of December 31, 2009, are described in “Item 11.
Quantitative and Qualitative Disclosures about Market Risk.”.
Pursuant
to the criteria described below, our management has determined that the
unrealized losses as of December 31, 2009 and 2008 were temporary and intends to
hold each investment for a sufficient period of time to allow for a potential
recovery in fair value. This holding period will last until the earlier of the
investment’s recovery or maturity.
For
equity investments (shares), management considers the following criteria to
determine whether a loss is temporary:
|
·
|
The
length of time and the extent to which fair value has been below
cost;
|
|
·
|
The
severity of the impairment;
|
|
·
|
The
cause of the impairment and the financial condition and near-term
prospects of the issuer; and
|
|
·
|
Activity
in the market of the issuer which may indicate adverse credit
conditions.
|
For debt
investments (fixed maturity), management considers the following criteria to
determine whether a loss is temporary:
|
·
|
Management
assesses the probability that the company will receive all amounts due
(principal and interest) under the contract of the security. It
considers a number of factors in identifying a credit-impaired security,
including: (i) the nature of the security and the underlying
collateral, (ii) the amount of subordination or credit enhancement
supporting the security, (iii) the published credit rating and (iv) other
analyses of the probable cash flows from the security. If recovery of all
amounts due is not likely, management may determine that credit impairment
exists and record unrealized losses in our consolidated income
statement. The unrealized loss recorded in income represents
the security’s decline in fair value, which includes the decline due to
forecasted cash flow shortfalls as well as widening market
spread.
|
|
·
|
For
securities with unrealized losses not identified as a credit impairment,
management determines whether it is desirable to hold the security for a
period of time to allow for a potential recovery in the security’s
amortized cost. Management estimates a security’s forecasted
recovery period using current estimates of volatility in market interest
rates (including liquidity and risk premiums). Management
considers a number of factors to determine whether to hold an investment,
including (i) a quantitative estimate of the expected recovery period
(which may extend to maturity), (ii) the severity of the impairment and
(iii) its strategy with respect to the security or portfolio. If
management determines it is not desirable to hold the security for a
sufficient period of time to allow for a potential recovery in the
security’s amortized cost, we record the unrealized loss in our
consolidated income statement.
|
Loans
by Type of Loan
The
following table shows our loans by type of loan, at the dates
indicated:
|
|
On December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
Loans
|
|
US$
|
3,865,643 |
|
|
US$
|
4,662,730 |
|
|
US$
|
6,520,116 |
|
|
US$
|
8,179,453 |
|
|
US$
|
8,986,884 |
|
Leasing
transactions
|
|
|
564,575 |
|
|
|
675,804 |
|
|
|
1,118,301 |
|
|
|
1,792,827 |
|
|
|
1,997,562 |
|
Discounted
notes
|
|
|
213,232 |
|
|
|
256,534 |
|
|
|
325,047 |
|
|
|
368,648 |
|
|
|
349,126 |
|
Factoring
|
|
|
87,757 |
|
|
|
89,171 |
|
|
|
109,928 |
|
|
|
124,537 |
|
|
|
163,443 |
|
Advances
and overdrafts
|
|
|
49,283 |
|
|
|
84,262 |
|
|
|
127,486 |
|
|
|
102,687 |
|
|
|
47,147 |
|
Refinanced
loans
|
|
|
175,211 |
|
|
|
126,006 |
|
|
|
88,451 |
|
|
|
55,179 |
|
|
|
59,459 |
|
Past-due
loans
|
|
|
95,769 |
|
|
|
76,770 |
|
|
|
61,488 |
|
|
|
82,867 |
|
|
|
184,567 |
|
Unearned
interest
|
|
|
(78,495 |
) |
|
|
(93,916 |
) |
|
|
(166,972 |
) |
|
|
(249,914 |
) |
|
|
(282,869 |
) |
Total
loans:
|
|
US$
|
4,972,975 |
|
|
US$
|
5,877,361 |
|
|
US$
|
8,183,845 |
|
|
US$
|
10,456,284 |
|
|
US$
|
11,505,319 |
|
Total
past-due loans amounts
|
|
|
(95,769 |
) |
|
|
(76,770 |
) |
|
|
(61,488 |
) |
|
|
(82,867 |
) |
|
|
(184,567 |
) |
Total
performing loans
|
|
US$
|
4,877,206 |
|
|
US$
|
5,800,591 |
|
|
US$
|
8,122,357 |
|
|
US$
|
10,373,417 |
|
|
US$
|
11,320,752 |
|
The loan
portfolio categories set forth in the table above are based on SBS regulations,
which apply to loans generated by BCP and ASHC. Pursuant to SBS
guidelines, we categorize loans as follows:
|
·
|
Loans: Basic
term loans documented by promissory notes and other extensions of credit,
such as mortgage loans, credit cards and other consumer loans in various
forms, including trade finance loans to importers and exporters on
specialized terms adapted to the needs of the international trade
transaction.
|
|
·
|
Leasing Transactions:
Transactions that involve our acquisition of an asset and the leasing of
that asset to a client.
|
|
·
|
Discounted Notes: Loans
discounted at the outset (the client signs a promissory note or other
evidence of indebtedness for the principal amount payable at a future
date). Discounted loans also include discounting of drafts, where we make
a loan supported by a draft signed by one party and discounted by another
party, with recourse to both
parties.
|
|
·
|
Factoring: The sale of
title to a company’s accounts receivables to a bank (or financial
company). The receivables are sold without recourse, and the
bank cannot recover from the seller in the event that the accounts are
uncollectible. Under factoring loans, the seller receives funds
from the bank prior to the average maturity date based on the invoice
amount of the receivable, less cash discounts and allowances for estimated
claims and returns, among other
items.
|
|
·
|
Advances and
Overdrafts: Extensions of credit to clients by way of an overdraft
facility in the client’s checking account. This category also includes
secured short-term advances.
|
|
·
|
Refinanced Loans: Loans
that were refinanced because the client was unable to pay at maturity. A
loan is categorized as a refinanced loan when a debtor is experiencing
payment problems, unless the debtor is current on all interest payments
and pays down at least 20% of the principal amount of the original loan.
We have distinguished a sub-group titled “Restructured Loans,” which is
defined as loans extended under the bankruptcy protection procedures
established in the Equity Restructuring
Law.
|
|
·
|
Past-Due Loans:
Includes overdue loans. See “—Past-Due Loan
Portfolio” for further detail.
|
Loans
by Economic Activity
The
following table shows our total loan portfolio composition, net of unearned
interest, based on the borrower’s principal economic activity:
|
|
At December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(U.S. Dollars in thousands, except percentages)
|
|
|
|
Amount
|
|
|
% Total
|
|
|
Amount
|
|
|
% Total
|
|
|
Amount
|
|
|
% Total
|
|
Economic
Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
US$
1,430,559 |
|
|
28.77% |
|
|
US$
1,624,765 |
|
|
27.64% |
|
|
US$
2,204,481 |
|
|
26.94% |
|
Consumer
Loans (1)
|
|
1,364,910 |
|
|
27.45 |
|
|
1,729,682 |
|
|
29.43 |
|
|
2,480,916 |
|
|
30.31 |
|
Commerce
|
|
625,908 |
|
|
12.59 |
|
|
686,291 |
|
|
11.68 |
|
|
884,253 |
|
|
10.80 |
|
Realty
Business and Leasing Services
|
|
216,095 |
|
|
4.35 |
|
|
236,445 |
|
|
4.02 |
|
|
387,180 |
|
|
4.73 |
|
Mining
|
|
223,156 |
|
|
4.49 |
|
|
303,238 |
|
|
5.16 |
|
|
463,577 |
|
|
5.66 |
|
Communication,
Storage and Transportation
|
|
210,002 |
|
|
4.22 |
|
|
255,730 |
|
|
4.35 |
|
|
394,986 |
|
|
4.83 |
|
Electricity,
Gas and Water
|
|
192,096 |
|
|
3.86 |
|
|
256,541 |
|
|
4.36 |
|
|
341,718 |
|
|
4.18 |
|
Agriculture
|
|
153,410 |
|
|
3.08 |
|
|
150,020 |
|
|
2.55 |
|
|
179,509 |
|
|
2.19 |
|
Fishing
|
|
117,104 |
|
|
2.35 |
|
|
152,538 |
|
|
2.60 |
|
|
134,235 |
|
|
1.64 |
|
Financial
Services
|
|
105,484 |
|
|
2.12 |
|
|
163,946 |
|
|
2.79 |
|
|
219,850 |
|
|
2.69 |
|
Education,
Health and Other Services
|
|
69,468 |
|
|
1.40 |
|
|
75,376 |
|
|
1.28 |
|
|
106,423 |
|
|
1.30 |
|
Construction
|
|
68,217 |
|
|
1.37 |
|
|
74,482 |
|
|
1.27 |
|
|
201,298 |
|
|
2.46 |
|
Others
(2)
|
|
275,061 |
|
|
5.53 |
|
|
262,223 |
|
|
4.46 |
|
|
352,391 |
|
|
4.31 |
|
Sub
total
|
|
5,051,470 |
|
|
101.58 |
|
|
5,971,277 |
|
|
101.59 |
|
|
8,350,817 |
|
|
102.04 |
|
Unearned
interest
|
|
(78,495) |
|
|
(1.58) |
|
|
(93,916) |
|
|
(1.59) |
|
|
(166,972) |
|
|
(2.04) |
|
Total
|
|
US$
4,972,975 |
|
|
100.00% |
|
|
US$
5,877,361 |
|
|
100.00% |
|
|
US$
8,183,845 |
|
|
100.00% |
|
(1)
|
Includes
credit card and mortgage loans, other consumer loans and small
business.
|
(2)
|
Includes
personal banking and small business loans and other
sectors.
|
|
|
At December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands, except percentages)
|
|
|
|
Amount
|
|
|
% Total
|
|
|
Amount
|
|
|
% Total
|
|
Economic Activity
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
US$ 2,535,326
|
|
|
24.25% |
|
|
US$ 2,557,847
|
|
|
22.23% |
|
Consumer
Loans (1)
|
|
3,146,698
|
|
|
30.09 |
|
|
3,963,449
|
|
|
34.45 |
|
Commerce
|
|
1,344,921
|
|
|
12.86 |
|
|
1,330,023
|
|
|
11.56 |
|
Realty
Business and Leasing Services
|
|
488,202
|
|
|
4.67 |
|
|
489,614
|
|
|
4.26 |
|
Mining
|
|
675,460
|
|
|
6.46 |
|
|
692,579
|
|
|
6.02 |
|
Communication,
Storage and Transportation
|
|
515,412
|
|
|
4.93 |
|
|
559,025
|
|
|
4.86 |
|
Electricity,
Gas and Water
|
|
546,014
|
|
|
5.22 |
|
|
782,289
|
|
|
6.80 |
|
Agriculture
|
|
228,623
|
|
|
2.19 |
|
|
271,912
|
|
|
2.36 |
|
Fishing
|
|
77,060
|
|
|
0.74 |
|
|
121,162
|
|
|
1.05 |
|
Financial
Services
|
|
439,234
|
|
|
4.20 |
|
|
175,071
|
|
|
1.52 |
|
Education,
Health and Other Services
|
|
128,527
|
|
|
1.23 |
|
|
156,496
|
|
|
1.36 |
|
Construction
|
|
229,667
|
|
|
2.20 |
|
|
175,508
|
|
|
1.53 |
|
Others
(2)
|
|
351,054
|
|
|
3.36 |
|
|
513,213
|
|
|
4.46 |
|
Sub
total
|
|
10,706,198
|
|
|
102.40 |
|
|
11,788,188
|
|
|
102.46 |
|
Unearned
interest
|
|
(249,914
|
)
|
|
(2.40) |
|
|
(282,869
|
)
|
|
(2.46) |
|
Total
|
|
US$ 10,456,284
|
|
|
100.00% |
|
|
US$ 11,505,319
|
|
|
100.00% |
|
(1)
|
Includes
credit card and mortgage loans, other consumer loans and small
business.
|
(2)
|
Includes
personal banking and small business loans and other
sectors.
|
As of
December 31, 2009, 71.6% of the loan portfolio was concentrated in Lima, 93.40%
was concentrated in Peru, and 4.1% of the loan portfolio was concentrated in
Bolivia.
Concentrations
of Loan Portfolio and Lending Limits
We have
loans and other contingent credits with 20 customers (considered economic
groups), which, as of December 31, 2009, was US$2,549.5 million. The
amount of outstanding loans, US$2,549.5 million, represents 23.2% of the total
loan portfolio. See
“—(11) Supervision and Regulation—(ii) BCP—Lending Activities” for the
definition of “economic group.” Our total loans and other contingent
credits outstanding to these customers ranged from US$260.9 million to US$85.1
million, including 18 customers with over US$90.2 million. Total loans and other
contingent credits outstanding to our 20 largest customers were ranked in the
following risk categories as of December 31, 2009: Class A (normal)—99.8%; Class
B (potential problems)—0.2%; Class C (substandard)—0%; Class D (doubtful)—0%;
and Class E (loss)—0%. See “—Classification of the
Loan Portfolio.”
BCP’s
loans to a single borrower are subject to lending limits imposed by Law 26702.
See “—(11) Supervision
and Regulation—(ii) BCP—Lending Activities.” The lending limits
depend on the nature of the borrower involved and the type of collateral
received. The sum of BCP’s loans to and deposits in either another
Peruvian universal bank or Peruvian financial institution, plus any guarantees
of third party performance received by BCP from such institution, may not exceed
30% of BCP’s regulatory capital (as defined by the SBS). The sum of BCP’s loans
to and deposits in non-Peruvian financial institutions, plus any guarantees of
third party performance received by BCP from such institutions, are limited to
5%, 10% or 30% of BCP’s regulatory capital, depending upon the level of
government supervision of the institution and whether the institution is
recognized by the Central Bank as an international bank of prime credit quality.
The limits on lending to non-Peruvian financial institutions increases to 50% of
BCP’s regulatory capital if the amount by which such loans exceed the 5%, 10% or
30% limits is backed by certain letters of credit.
BCP’s
loans to directors and employees and their relatives have a global limit of 7%
of capital stock and reserves and an individual limit of 5% of such global
limit.
Loans to
non-Peruvian individuals or companies that are not financial institutions have a
limit of 5% of BCP’s regulatory capital. However, this limit
increases to 10% if the additional 5% is guaranteed by a mortgage or certain
publicly-traded securities. The limit rises to 30% if the additional amount is
guaranteed by certain banks or by cash deposits in BCP. Lending on an
unsecured basis to individuals or companies residing in Peru that are not
financial institutions is limited to 10% of BCP’s regulatory capital. This limit
rises to 15% if the additional 5% is guaranteed by a mortgage, certain
securities, equipment or other collateral, and to 20% if the additional amount
is either backed by certain debt instruments guaranteed by other local banks or
a foreign bank determined by the Central Bank to be of prime credit quality, or
by other highly liquid securities at market value. The single
borrower lending limit for loans backed by a cash deposit at BCP or by debt
obligations of the Central Bank is 30% of BCP’s regulatory capital.
With an
unconsolidated regulatory capital of S/.5,457.1 million (US$1,888.3 million) on
December 31, 2009, BCP’s legal lending limits varied from S/.545.7 million
(US$188.8 million) to S/.2,728.6 million (US$944.1 million). Our consolidated
lending limits, based on its regulatory capital on a consolidated basis of
US$2,221.1 million on December 31, 2009, ranged from US$111.1 million to
US$1,110.6 million. As of December 31, 2009, BCP was in compliance with Law
26702 lending limits.
As of
December 31, 2009, we complied with the applicable legal lending limits in each
of the jurisdictions in which we operate. These limits are calculated
quarterly based upon our consolidated equity plus reserves for impaired loans
not specifically identified at quarter-end. A limited number of
exceptions to our internal limits have been authorized by our board of directors
based on the credit quality of the borrower, the term of the loan, and the
amount and quality of collateral provided. We may, in appropriate and limited
circumstances, increase or choose to exceed this limit.
We may
experience an adverse impact on our financial condition and results of
operations if (i) customers to which we have significant credit exposure are not
able to satisfy their obligations to us, and any related collateral is not
sufficient to cover these obligations, or (ii) a reclassification of one or more
of these loans or other contingent credits results in an increase in provisions
for loan losses.
Loan
Portfolio Denomination
The
following table presents our Nuevo Sol and foreign currency-denominated loan
portfolio at the dates indicated:
|
|
At December 31,
|
|
|
2005
|
|
|
2006
|
|
2007
|
|
|
(U.S. Dollars in thousands, except percentages)
|
Total
loan portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevo
Sol-denominated
|
|
US$
1,032,481 |
|
|
20.76 |
% |
|
US$
1,503,306 |
|
|
25.58 |
% |
|
US$
2,461,787 |
|
|
30.08 |
% |
Foreign
Currency-denominated
|
|
3,940,494 |
|
|
79.24 |
% |
|
4,374,055 |
|
|
74.42 |
% |
|
5,722,058 |
|
|
69.92 |
% |
Total
loans (1)
|
|
US$
4,972,975 |
|
|
100.00 |
% |
|
US$
5,877,361 |
|
|
100.00 |
% |
|
US$
8,183,845 |
|
|
100.00 |
% |
|
|
At December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands, except percentages)
|
|
Total
loan portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevo
Sol-denominated
|
|
US$
3,351,720 |
|
|
32.05 |
% |
|
US$
4,385,965 |
|
|
38.12 |
% |
Foreign
Currency-denominated
|
|
7,104,564 |
|
|
67.95 |
% |
|
7,119,354 |
|
|
61.88 |
% |
Total
loans (1)
|
|
US$
10,456,284 |
|
|
100.00 |
% |
|
US$
11,505,319 |
|
|
100.00 |
% |
(1)
|
Net
of unearned interest.
|
Maturity
Composition of the Performing Loan Portfolio
The
following table sets forth an analysis of our performing loan portfolio on
December 31, 2009, by type and by time remaining to maturity. Loans are stated
before deduction of the reserves for loan losses.
|
|
Maturing
|
|
|
|
|
Amount at
December 31,
2009
|
|
|
Within
3 months
|
|
|
After 3
months
but within
12 months
|
|
|
After 1 year
but within
3 years
|
|
|
After 3 years
but within
5 years
|
|
|
After
5 years
|
|
|
(U.S. Dollars in thousands, except percentages)
|
Loans
|
|
US$ |
8,986,884 |
|
|
US$ |
2,476,635 |
|
|
US$ |
2,159,197 |
|
|
US$ |
1,456,366 |
|
|
US$ |
922,486 |
|
|
US$ |
1,972,200 |
|
Leasing
transactions
|
|
|
1,997,562 |
|
|
|
398,187 |
|
|
|
651,697 |
|
|
|
609,942 |
|
|
|
286,742 |
|
|
|
50,994 |
|
Discounted
notes
|
|
|
349,126 |
|
|
|
331,771 |
|
|
|
17,316 |
|
|
|
13 |
|
|
|
9 |
|
|
|
17 |
|
Refinanced
loans
|
|
|
59,459 |
|
|
|
10,675 |
|
|
|
13,742 |
|
|
|
11,629 |
|
|
|
9,003 |
|
|
|
14,410 |
|
Factoring
|
|
|
163,443 |
|
|
|
140,530 |
|
|
|
22,913 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Advances
and overdrafts
|
|
|
47,147 |
|
|
|
47,147 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Total.
|
|
US$ |
11,603,621 |
|
|
US$ |
3,404,945 |
|
|
US$ |
2,864,865 |
|
|
US$ |
2,077,950 |
|
|
US$ |
1,218,240 |
|
|
US$ |
2,037,621 |
|
% of
total performing loan portfolio
|
|
|
100.00 |
% |
|
|
29.34 |
% |
|
|
24.69 |
% |
|
|
17.91 |
% |
|
|
10.50 |
% |
|
|
17.56 |
% |
Interest
Rate Sensitivity of the Loan Portfolio
The
following table sets forth the interest rate sensitivity of our loan portfolio
on December 31, 2009, by currency and by the time remaining to maturity over one
year:
|
|
Amount at
December 31, 2009
|
|
|
Maturing After 1 year
|
|
|
|
(U.S. Dollars in thousands)
|
|
Variable
Rate
|
|
|
|
|
|
|
Nuevo
Sol-denominated
|
|
US$
|
624,400 |
|
|
US$
|
595,639 |
|
Foreign
Currency-denominated
|
|
|
991,712 |
|
|
|
637,874 |
|
Total
|
|
|
1,616,112 |
|
|
|
1,233,513 |
|
|
|
|
|
|
|
|
|
|
Fixed Rate
(2)
|
|
|
|
|
|
|
|
|
Nuevo
Sol-denominated
|
|
|
3,761,565 |
|
|
|
1,211,264 |
|
Foreign
Currency-denominated
|
|
|
6,127,642 |
|
|
|
2,889,032 |
|
Total
|
|
|
9,889,207 |
|
|
|
4,100,296 |
|
|
|
|
|
|
|
|
|
|
Total
(1)
|
|
US$
|
11,505,319 |
|
|
US$
|
5,333,809 |
|
|
(1)
|
Net
of unearned interest.
|
|
(2)
|
Most
of the financial products with fixed rates can be switched to variable
rates according to market conditions as specified on the contracts with
clients.
|
|
Classification
of the Loan Portfolio
|
We
classify BCP’s loan portfolio (which includes the loan portfolio of BCB) and
ASHC’s loan portfolio in accordance with SBS regulations. According
to SBS Resolution No. 808-2003, banks must classify all loans and other credits
into one of four categories based upon the purpose of the loan. These
categories are commercial, micro-business, consumer and residential mortgage.
Commercial loans are generally those that finance the production and sale of
goods and services, including commercial leases, as well as credit card debt on
cards held by business entities. Micro-business loans, which are
exclusively targeted for the production and sale of goods and services, are made
to individuals or companies with no more than S/.300,000 in total loans received
from the financial system (excluding mortgage loans). Consumer loans are
generally loans granted to individuals, including credit card transactions,
overdrafts on personal demand deposit accounts, leases, and financing goods or
services not related to a business activity. Residential mortgage
loans are all loans to individuals for the purchase, construction, remodeling,
subdivision or improvement of the individual’s home, in each case backed by a
mortgage. Mortgage loans made to directors and employees of a company are also
considered residential mortgage loans. Mortgage-backed loans are considered
commercial loans. The classification of the loan determines the amount the bank
is required to reserve should the borrower fail to make payments as they become
due.
Regulations
promulgated by the SBS also require Peruvian banks to classify all loans into
one of five categories depending upon each loan’s degree of risk of
nonpayment. We review our loan portfolio on a continuing basis, while
the SBS reviews our portfolio as it deems necessary or prudent. In compliance
with SBS guidelines, we classify our loans based upon risk of nonpayment by
assessing the following factors: (i) the payment history of the
particular loans, (ii) the history of our dealings with the borrower, (iii) the
borrower’s management, (iv) the borrower’s operating history, (v) the borrower’s
repayment capability, (vi) the borrower’s availability of funds, (vii) the
status of any collateral or guarantee, (viii) the borrower’s financial
statements, (iv) the general risk of the sector in which the borrower operates,
(x) the borrower’s risk classification made by other financial institutions and
(xi) other relevant factors. The classification of the loan determines the
amount of the required loan loss provision.
The
following table sets forth our loan portfolio by class at the date
indicated.
|
|
At December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
Commercial
loans
|
|
US$
|
3,771,488
|
|
|
US$
|
4,390,547 |
|
|
US$
|
6,055,206 |
|
|
US$
|
7,808,671 |
|
|
US$
|
8,283,790 |
|
Consumer
loans
|
|
|
356,595 |
|
|
|
506,184 |
|
|
|
874,804 |
|
|
|
1,162,399 |
|
|
|
1,467,793 |
|
Residential
mortgage loans
|
|
|
844,892 |
|
|
|
980,630 |
|
|
|
1,253,835 |
|
|
|
1,485,214 |
|
|
|
1,753,736 |
|
Total
performing loans (1)
|
|
US$
|
4,972,975 |
|
|
US$
|
5,877,361 |
|
|
US$
|
8,183,845 |
|
|
US$
|
10,456,284 |
|
|
US$
|
11,505,319 |
|
(1)
|
Net
of unearned interest.
|
We employ
a range of policies and practices to mitigate credit risk. Our most traditional
practice is taking security for fund advances. We implement guidelines on the
acceptability of specific classes of collateral or credit risk mitigation. The
principal collateral types for loans and advances are mortgages over residential
properties, liens over business assets (such as premises, inventory and accounts
receivable), and liens over financial instruments (such as debt securities and
equities).
Long term
finance and lending to corporate entities are generally secured, while revolving
individual credit facilities are generally unsecured. In order to minimize
credit loss, we seek additional collateral as soon as impairment indicators
become apparent.
We
determine the appropriate collateral to hold as security for financial assets
(other than loans) according to the nature of the instrument. Debt
securities, treasury and other eligible bills are generally unsecured, with the
exception of asset-backed securities and other similar instruments, which are
secured by portfolios of financial instruments.
Our
management monitors the market value of collateral, requests additional
collateral in accordance with the underlying agreement, and monitors the market
value of the additional collateral obtained during its review of the allowance
for impairment losses. Our policy is to dispose of repossessed
properties in an orderly manner. We use the proceeds to reduce or
repay the outstanding claim. In general, we do not use repossessed properties
for our own business.
We
classify our loan portfolio into one of five risk categories, depending upon the
degree of risk of non-payment of each debtor. These categories are: (i) normal,
(ii) potential problems, (iii) substandard, (iv) doubtful and (v)
loss. The categories have the following characteristics:
Normal (Class A): Debtors
with commercial loans in this category have complied on a timely basis with
their obligations under the loan. At the time of evaluation, there is
no reason to doubt the debtor’s ability to repay interest and principal on the
agreed dates, and there is no reason to believe that the status will change
before the next evaluation. Before we place a loan in Class A, we
must have a clear understanding of the use of the funds and the origin of the
cash flows to be used by the debtor to repay the loan. Consumer loans
are categorized as Class A when payments are current or up to eight days past
due. Residential mortgage loans are categorized as Class A when
payments are current or up to 30 days past due.
Potential problems (Class B):
Debtors with commercial loans in this category demonstrate certain deficiencies
at the time of evaluation, which, if not corrected in a timely manner, imply
risks regarding the recovery of the loan. Common characteristics of
loans or credits in this category include: (i) delays in loan payments which are
promptly covered, (ii) a general lack of information required to analyze the
credit, (iii) out-of-date financial information, (iv) temporary economic or
financial imbalances on the part of the debtor which could affect its ability to
repay the loan, (v) market conditions that could affect the economic sector in
which the debtor is active. Consumer loans are categorized as Class B when
payments are between nine and 30 days past due. Residential mortgage
loans are categorized as Class B when payments are between 31 and 90 days past
due.
Substandard (Class C):
Debtors with commercial loans in this category demonstrate serious financial
weakness. They often do not have sufficient operating results or
available income to cover their financial obligations, and do not have
reasonable short-term prospects for strengthening their financial
capacity. Debtors demonstrating the same deficiencies that warrant
Class B classification will warrant Class C classification if those deficiencies
are such that if not corrected in the near term, they could impede the recovery
of principal and interest on the loan on the agreed-upon
terms. Commercial loans are classified in this category when payments
are between 61 and 120 days past due. Consumer loans are categorized as Class C
when payments are between 31 and 60 days past due. Residential mortgage loans
are categorized as Class C when payments are between 91 and 120 days past
due.
Doubtful (Class D): Debtors
with commercial loans in this category demonstrate characteristics that make it
doubtful that the loan will be recovered. Although recovery is
doubtful, if there is a reasonable possibility that the creditworthiness of the
debtor might improve in the near future, it is appropriate to categorize the
loan as Class D. These loans are distinguished from Class E loans by
the requirement that the debtor remain in operation, generate cash flow, and
make payments on the loan, even if the payments are less than those required by
the contract. Commercial loans are categorized as Class D if payments
are between 121 and 365 days past due. Consumer loans are categorized as Class D
when payments are between 61 and 120 days past due. Residential
mortgage loans are categorized as Class D when payments are between 121 and 365
days past due.
Loss credits (Class E):
Commercial loans or credits are categorized as Class E if the loans are
considered unrecoverable or for any other reason the loans should not appear on
our books as an asset based on the originally contracted
terms. Commercial loans are categorized as Class E when payments are
more than 365 days past due. Consumer loans are categorized as Class
E when payments are more than 120 days past due. Residential mortgage loans are
categorized as Class E when payments are more than 365 days past
due.
We
continually review our loan portfolio to assess the completion and accuracy of
the grades awarded.
All loans
considered impaired (those classified as substandard, doubtful or loss) are
analyzed by management. Management will address the impairment in two
areas, individually assessed allowances and collectively assessed allowances, as
follows:
Individually
Assessed Allowance
We
determine the appropriate allowances for each individually significant loan or
advance on an individual basis. In determining the allowance, we consider items
such as (i) the sustainability of the party’s business plan, (ii) its ability to
improve performance once a financial difficulty has arisen, (iii) projected
receipts and the expected dividend payout should bankruptcy ensue, (iv) the
availability of other financial support and the potential realized value of
collateral, and (v) the timing of the expected cash flows. Impairment
losses are evaluated at each reporting date, unless unforeseen circumstances
require more attention.
Collectively
Assessed Allowance
We assess
allowances collectively for (i) losses on loans and advances that are not
individually significant (including consumer and residential mortgages) and (ii)
individually significant loans and advances where there is not yet objective
evidence of individual impairment (the Class A and B loans). We evaluate
allowances on each reporting date, and each portfolio receives a separate
review.
Our
collective assessment takes into account an impairment that is likely to be
present in the portfolio even though there is no objective evidence of the
impairment in an individual assessment. We estimate impairment losses
by considering the following information: (i) historical losses on the
portfolio, (ii) current economic conditions, (iii) the approximate delay between
the time a loss is likely to be incurred and the time it will be identified as
requiring an individually assessed impairment allowance and (iv) expected
receipts and recoveries once the impairment occurs. Local management
is responsible for deciding the appropriate length of time, which can extend as
long as one year. The impairment allowance is then reviewed by credit management
to ensure it aligns with our overall policy.
We assess
financial guarantees and letters of credit in the same way we assess
loans.
When the
borrower is located in a country where there is an increased risk of difficulty
servicing external debt, we assess the political and economic situation, and an
additional country risk provision is provided.
When we
determine a loan is uncollectible, it is written off against the provision for
loan impairment. We write off these loans after all necessary
procedures are completed and the amount of the loss is determined. Subsequent
recoveries of amounts previously written off decrease the amount of the
provision for loan impairment in our consolidated income
statements.
The
following table shows our direct loan portfolio at the dates
indicated:
|
|
At December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
(U.S. Dollars in thousands, except percentages)
|
|
Level
of Risk
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification
|
|
Amount
|
|
|
%
Total
|
|
|
Amount
|
|
|
%
Total
|
|
|
Amount
|
|
|
%
Total
|
|
A:
Normal
|
|
US$
|
4,273,719 |
|
|
|
85.9 |
% |
|
US$
|
5,296,653 |
|
|
|
90.1 |
% |
|
US$
|
7,602,347 |
|
|
|
92.9 |
% |
B:
Potential Problems
|
|
US$
|
397,387 |
|
|
|
8.0 |
% |
|
US$
|
337,497 |
|
|
|
5.7 |
% |
|
US$
|
371,119 |
|
|
|
4.5 |
% |
C:
Substandard
|
|
US$
|
82,858 |
|
|
|
1.7 |
% |
|
US$
|
62,192 |
|
|
|
1.1 |
% |
|
US$
|
71,340 |
|
|
|
0.9 |
% |
D:
Doubtful
|
|
US$
|
146,898 |
|
|
|
3.0 |
% |
|
US$
|
122,215 |
|
|
|
2.1 |
% |
|
US$
|
88,540 |
|
|
|
1.1 |
% |
E:
Loss
|
|
US$
|
72,113 |
|
|
|
1.4 |
% |
|
US$
|
58,804 |
|
|
|
1.0 |
% |
|
US$
|
50,499 |
|
|
|
0.6 |
% |
Total
(1)
|
|
US$
|
4,972,975 |
|
|
|
100.0 |
% |
|
US$
|
5,877,361 |
|
|
|
100.0 |
% |
|
US$
|
8,183,845 |
|
|
|
100.0 |
% |
C+D+E
|
|
US$
|
301,869 |
|
|
|
6.1 |
% |
|
US$
|
243,211 |
|
|
|
4.2 |
% |
|
US$
|
210,379 |
|
|
|
2.6 |
% |
|
|
At December
31,
|
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands, except
percentages)
|
|
Level
of Risk
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification
|
|
Amount
|
|
|
%
Total
|
|
|
Amount
|
|
|
%
Total
|
|
A:
Normal
|
|
US$
|
9,991,559 |
|
|
|
95.5 |
% |
|
US$
|
10,717,658 |
|
|
|
93.2 |
% |
B:
Potential Problems
|
|
US$
|
264,890 |
|
|
|
2.5 |
% |
|
US$
|
431,356 |
|
|
|
3.7 |
% |
C:
Substandard
|
|
US$
|
70,268 |
|
|
|
0.7 |
% |
|
US$
|
115,629 |
|
|
|
1.0 |
% |
D:
Doubtful
|
|
US$
|
79,394 |
|
|
|
0.8 |
% |
|
US$
|
139,389 |
|
|
|
1.2 |
% |
E:
Loss
|
|
US$
|
50,173 |
|
|
|
0.5 |
% |
|
US$
|
101,287 |
|
|
|
0.9 |
% |
Total
(1)
|
|
US$
|
10,456,284 |
|
|
|
100.0 |
% |
|
US$
|
11,505,319 |
|
|
|
100.0 |
% |
C+D+E
|
|
US$
|
199,835 |
|
|
|
2.0 |
% |
|
US$
|
356,305 |
|
|
|
3.1 |
% |
(1)
|
Net
of unearned interest.
|
All of
our Class E loans and substantially all of our Class D loans are past due. Class
C loans, although generally not past due, have demonstrated credit deterioration
such that management has serious doubts as to the ability of the borrower to
comply with the loan repayment terms. The majority of our Class C loans are to
companies in the Peruvian manufacturing sector and, to a lesser extent, the
agricultural sector. Our manufacturing sector loans are primarily
secured by warrants and liens on goods or by mortgages, and our agricultural
loans tend to be secured by trade bills and marketable securities. The Class C
loans reflect the financial weakness of the individual borrower rather than any
trend in the Peruvian manufacturing or agricultural industries in
general.
Classification
of the Loan Portfolio Based on the Borrower’s Payment Performance
We
consider loans to be past due depending on their type. BCP considers loans past
due for consumer mortgage, leasing loans, and loans to micro-businesses after 90
days. On January 1, 2001, the SBS issued accounting rules that
require Peruvian banks to consider overdrafts past due after 30
days. ASHC considers all overdue loans past due, except for consumer
loans, which are considered past due when the scheduled principal and/or
interest payments are overdue for more than 90 days. BCB considers
loans past due after 30 days. For IFRS 7 disclosure requirements on past-due
loans, see Note 29.1 to the Credicorp Consolidated Financial
Statements.
Interest
income is suspended when the collection of loans is doubtful, such as when
overdue by more than 90 days. When a borrower or securities issuer
defaults earlier than 90 days, the income is excluded from interest income until
it is received. Uncollected income on these loans is applied against
income. When management determines that the debtor’s financial
condition has improved, we continue recording interest on an accrual basis.
Therefore, we do not accrue interest on past-due loans, but interest on past-due
loans is recognized only when and to the extent received.
Over the
past five years, we have recognized interest income on these loans of US$5.5
million in 2005, US$4.8 million in 2006, US$3.6 million in 2007, US$5.2 million
in 2008 and US$7.2 million in 2009. With the exception of discounted notes and
overdrafts, accrued but unpaid interest is reversed for past-due
loans.
The
following table sets forth the repayment status of our loan portfolio as of the
date indicated.
|
|
At December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands, except percentages)
|
|
Current
|
|
US$
|
4,877,206 |
|
|
US$
|
5,800,591 |
|
|
US$
|
8,122,357 |
|
|
US$
|
10,373,417 |
|
|
US$
|
11,320,752 |
|
Past
due:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Overdue
16 - 119 days
|
|
|
10,860 |
|
|
|
20,655 |
|
|
|
20,825 |
|
|
|
34,955 |
|
|
|
70,602 |
|
Overdue
120 days or more
|
|
|
84,909 |
|
|
|
56,115 |
|
|
|
40,663 |
|
|
|
47,912 |
|
|
|
113,965 |
|
Subtotal
|
|
US$
|
95,769 |
|
|
US$
|
76,770 |
|
|
US$
|
61,488 |
|
|
US$
|
82,867 |
|
|
US$
|
184,567 |
|
Total
loans
|
|
US$
|
4,972,975 |
|
|
US$
|
5,877,361 |
|
|
US$
|
8,183,845 |
|
|
US$
|
10,456,284 |
|
|
US$
|
11,505,319 |
|
Past-due
loan amounts as % of total loans
|
|
|
1.93 |
% |
|
|
1.31 |
% |
|
|
0.75 |
% |
|
|
0.79 |
% |
|
|
1.60 |
% |
With
respect to consumer, mortgage and leasing loans, BCP (in accordance with SBS
regulations) only recognizes payments as past-due installments if the loan is
less than 90 days past due. The entire amount of the loans is considered past
due if any amount is past due more than 90 days. For IFRS 7 disclosure
requirements on past-due loans, see Note 29.1 to the Credicorp Consolidated
Financial Statements.
Past-Due
Loan Portfolio
The
following table analyzes our past-due loan portfolio by the type of loan at the
dates indicated.
|
|
At
December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
Past-due
loan amounts:
|
|
(U.S.
Dollars in thousands)
|
|
Loans
|
|
US$
|
63,889 |
|
|
US$
|
57,345 |
|
|
US$
|
48,088 |
|
|
US$
|
65,947 |
|
|
US$
|
153,112 |
|
Discounted
notes
|
|
|
1,124 |
|
|
|
596 |
|
|
|
636 |
|
|
|
1,242 |
|
|
|
2,151 |
|
Advances
and overdrafts in demand deposits
|
|
|
3,412 |
|
|
|
1,844 |
|
|
|
3,974 |
|
|
|
2,112 |
|
|
|
4,015 |
|
Leasing
transactions
|
|
|
6,412 |
|
|
|
5,237 |
|
|
|
2,110 |
|
|
|
3,468 |
|
|
|
9,653 |
|
Refinanced
loans
|
|
|
20,932 |
|
|
|
11,748 |
|
|
|
6,680 |
|
|
|
10,098 |
|
|
|
15,636 |
|
Total
past-due portfolio
|
|
US$
|
95,769 |
|
|
US$
|
76,770 |
|
|
US$
|
61,488 |
|
|
US$
|
82,867 |
|
|
US$
|
184,567 |
|
Less:
Reserves for loan losses (1)
|
|
US$
|
218,636 |
|
|
US$
|
210,586 |
|
|
US$
|
229,700 |
|
|
US$
|
248,063 |
|
|
US$
|
376,049 |
|
Total
past-due portfolio net of reserves
|
|
US$
|
(122,867 |
) |
|
US$
|
(133,816 |
) |
|
US$
|
(168,212 |
) |
|
US$
|
(165,196 |
) |
|
US$
|
(191,482 |
) |
(1)
|
Includes
reserves for indirect credits (see “—Loan Loss
Reserves”).
|
We
recognize interest on past-due loans and loans in legal collection when the
loans are collected. The interest income that would have been
recorded for these credits in accordance with the terms of the original contract
is approximately US$27.9 million and US$17.0 million as of
December 31, 2009 and 2008, respectively.
Loan
Loss Reserves
The
following table shows the changes in our reserves for loan losses and movements
at the dates indicated.
|
|
Year ended December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
Reserves
for loan losses at the beginning of the year
|
|
US$
|
271,873 |
|
|
US$
|
218,636 |
|
|
US$
|
210,586 |
|
|
US$ |
229,700 |
|
|
US$ |
248,063 |
|
Additional
provisions (reversals)
|
|
|
(6,356 |
) |
|
|
(4,243 |
) |
|
|
28,439 |
|
|
|
48,760 |
|
|
|
163,392 |
|
Acquisitions
and transfers
|
|
|
(9,024 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20,905 |
|
Recoveries
of write-offs
|
|
|
35,032 |
|
|
|
44,284 |
|
|
|
34,084 |
|
|
|
31,279 |
|
|
|
23,928 |
|
Write-offs
|
|
|
(71,405 |
) |
|
|
(49,859 |
) |
|
|
(47,266 |
) |
|
|
(59,308 |
) |
|
|
(87,927 |
) |
Monetary
correction and other
|
|
|
(1,484 |
) |
|
|
1,768 |
|
|
|
3,857 |
|
|
|
(2,368 |
) |
|
|
7,688 |
|
Total
reserves for loan losses at the end of the year
|
|
US$
|
218,636 |
|
|
US$
|
210,586 |
|
|
US$
|
229,700 |
|
|
US$ |
248,063 |
|
|
US$ |
376,049 |
|
For a
discussion of the risk elements in the loan portfolio and the factors considered
in determining the amount of specific reserves, See “—Classification of the
Loan Portfolio.” Also, as required by IFRS 7, the balance of the reserve for
loan losses for the years 2007, 2008 and 2009 are included in Note 6(d) to the
Credicorp Consolidated Financial Statements.
Our
reserves for loan losses, as of December 31, 2009, included US$354.4 million for
credit losses and US$21.7 million for indirect or contingent credit losses
(US$224.3 million and US$23.7 million as of December 31, 2008, respectively).
Our reserves for indirect credit losses are included in the “Other liabilities”
caption of our consolidated balance sheet (see Notes 6(d) and 11(a) to
the Credicorp Consolidated Financial Statements).
The
charge-off process is performed with prior approval of our board of directors
and the SBS. Potential charge-offs are considered by the board of
directors and the SBS on a case-by-case basis.
We sell
some of our fully provisioned past-due loans to wholly-owned subsidiaries
(Soluciónes en Procesamiento) for a nominal amount with the same effect as if
the loans had been charged off. Accordingly, we believe that our past-due loan
amounts are not materially different from what they would be if we were
permitted to charge-off loans prior to demonstrating the absolute
non-collectability of the loan. BCP also sells employees’ mortgage
loans to its subsidiary Financiera de Crédito Solución.
Allocation
of Loan Loss Reserves
The
following table sets forth the amounts of our reserves for loan losses
attributable to commercial, consumer and residential mortgage loans at the dates
indicated (see also
Note 6(d) to the Credicorp Consolidated Financial Statements):
|
|
At December 31,
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
Commercial
loans
|
|
US$ |
195,699 |
|
|
US$
|
183,374 |
|
|
US$
|
184,584 |
|
|
US$
|
161,170 |
|
|
US$
|
243,796 |
|
Consumer
loans
|
|
|
14,409 |
|
|
|
17,959 |
|
|
|
30,662 |
|
|
|
56,061 |
|
|
|
90,782 |
|
Residential
mortgage loans
|
|
|
8,528 |
|
|
|
9,253 |
|
|
|
14,454 |
|
|
|
30,832 |
|
|
|
41,471 |
|
Total
reserves
|
|
US$
|
218,636 |
|
|
US$
|
210,586 |
|
|
US$
|
229,700 |
|
|
US$
|
248,063 |
|
|
US$
|
376,049 |
|
The
following table presents the components of our deposit base at the dates
indicated:
|
|
At December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
Demand
deposits:
|
|
|
|
|
|
|
|
|
|
Nuevo
Sol-denominated
|
|
US$ |
1,457,155 |
|
|
US$ |
1,735,869 |
|
|
US$ |
1,944,404 |
|
Foreign
Currency-denominated
|
|
|
2,507,346 |
|
|
|
3,136,408 |
|
|
|
2,612,342 |
|
Total
|
|
US$ |
3,964,501 |
|
|
US$ |
4,872,277 |
|
|
US$ |
4,556,746 |
|
Savings
deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevo
Sol-denominated
|
|
US$ |
877,205 |
|
|
US$ |
1,193,639 |
|
|
US$ |
1,505,994 |
|
Foreign
Currency-denominated
|
|
|
1,503,699 |
|
|
|
1,775,100 |
|
|
|
2,033,671 |
|
Total
|
|
US$ |
2,380,904 |
|
|
US$ |
2,968,739 |
|
|
US$ |
3,539,665 |
|
Time
deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevo
Sol-denominated
|
|
US$ |
1,391,008 |
|
|
US$ |
1,768,893 |
|
|
US$ |
1,662,941 |
|
Foreign
Currency-denominated
|
|
|
2,576,856 |
|
|
|
3,087,219 |
|
|
|
3,088,920 |
|
Total
|
|
US$ |
3,967,864 |
|
|
US$ |
4,856,112 |
|
|
US$ |
4,751,861 |
|
Foreign
Currency Bank Certificates
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency-denominated
|
|
US$ |
90,119 |
|
|
US$ |
140,013 |
|
|
US$ |
120,932 |
|
Severance
Indemnity Deposits (CTS):
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevo
Sol-denominated
|
|
US$ |
149,308 |
|
|
US$ |
229,716 |
|
|
US$ |
256,761 |
|
Foreign
Currency-denominated
|
|
|
746,975 |
|
|
|
810,171 |
|
|
|
812,745 |
|
Total
|
|
US$ |
896,283 |
|
|
US$ |
1,039,887 |
|
|
US$ |
1,069,506 |
|
Total
deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
Nuevo
Sol-denominated
|
|
US$ |
3,874,676 |
|
|
US$ |
4,928,117 |
|
|
US$ |
5,370,100 |
|
Foreign
Currency-denominated
|
|
|
7,424,995 |
|
|
|
8,948,911 |
|
|
|
8,668,610 |
|
Total
|
|
US$ |
11,299,671 |
|
|
US$ |
13,877,028 |
|
|
US$ |
14,038,710 |
|
The
following table sets forth information regarding the maturity of our time
deposits in denominations of US$100,000 or more on December 31,
2009:
|
|
At December 31, 2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
Certificates
of deposit:
|
|
|
|
Maturing
within 30 days
|
|
US$
|
714 |
|
Maturing
after 30 but within 60 days
|
|
|
2,165 |
|
Maturing
after 60 but within 90 days
|
|
|
- |
|
Maturing
after 90 but within 180 days
|
|
|
5,146 |
|
Maturing
after 180 but within 360 days
|
|
|
173 |
|
Maturing
after 360 days
|
|
|
21,558 |
|
Total
certificates of deposits
|
|
US$
|
29,756 |
|
Time
deposits:
|
|
|
|
|
Maturing
within 30 days
|
|
US$
|
2,397,794 |
|
Maturing
after 30 but within 60 days
|
|
|
329,612 |
|
Maturing
after 60 but within 90 days
|
|
|
232,021 |
|
Maturing
after 90 but within 180 days
|
|
|
453,219 |
|
Maturing
after 180 but within 360 days
|
|
|
381,610 |
|
Maturing
after 360 days
|
|
|
234,768 |
|
Total
time deposits
|
|
|
4,029,024 |
|
Total
|
|
US$
|
4,058,780 |
|
|
(v)
|
Return
on Equity and Assets
|
|
|
At December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Return
on assets (1)
|
|
|
2.29 |
% |
|
|
1.86 |
% |
|
|
2.19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
on equity (2)
|
|
|
22.87 |
% |
|
|
22.31 |
% |
|
|
24.07 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
payout ratio (3)
|
|
|
34.11 |
% |
|
|
33.44 |
% |
|
|
28.81 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
to assets ratio (4)
|
|
|
10.80 |
% |
|
|
9.32 |
% |
|
|
10.00 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity to assets ratio (5)
|
|
|
9.95 |
% |
|
|
8.71 |
% |
|
|
9.31 |
% |
(1)
|
Net
income attributable to our equity holders as a percentage of average total
assets, computed as the average of period beginning and period ending
balances.
|
(2)
|
Net
income attributable to our equity holders as a percentage of average net
equity attributable to our equity holders, computed as the average of
monthly balances.
|
(3)
|
Dividends
declared per share divided by net income attributable to our equity
holders per share.
|
(4)
|
Average
equity attributable to our equity holders divided by average total assets,
both averages computed as the average of month-ending
balances.
|
(5)
|
Average
equity attributable to our equity shareholders divided by average total
assets, both averages computed as the average of month-ending
balances.
|
|
(vi)
|
Short-Term
Borrowing
|
Our
short-term borrowing, other than deposits, amounted to US$878.2 million and
US$601.5 million and US$673.2 million as of December 31, 2007, 2008 and 2009,
respectively. Our average balances of borrowed amounts decreased in 2008 due to
receiving smaller promotional credit lines. As of December 31, 2007, 2008 and
2009, no BCRP-Repo transactions exist in the outstanding balance.
The
following table sets forth our short-term borrowing:
|
|
At December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Year-end
balance
|
|
|
878,183 |
|
|
|
601,464 |
|
|
|
673,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
balance
|
|
|
742,310 |
|
|
|
935,460 |
|
|
|
641,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
quarter-end balance
|
|
|
1,105,704 |
|
|
|
1,197,637 |
|
|
|
1,141,131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
nominal year-end interest rate
|
|
|
4.70 |
% |
|
|
4.47 |
% |
|
|
2.83 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
nominal interest rate
|
|
|
4.72 |
% |
|
|
4.22 |
% |
|
|
3.40 |
% |
(C)
|
Organizational
Structure
|
Historically,
the shareholders of BCP, ASHC and PPS have overlapped. Due to reasons related to
the regulatory, political and economic environment in Peru, however, they have
been managed independently from one another. We were formed in 1995 by the
management of BCP of a potential exchange offer for the purpose of acquiring the
common shares of BCP, ASHC and PPS. In the exchange offer in October
1995, we acquired 90.1% of BCP (391,973,951 shares), 98.2% of ASHC (39,346,169
shares), and 75.8% of PPS (5,537,474 shares) in exchange for 60,815,152 of our
common shares at a ratio of 0.10401, 0.33708 and 1.2249 of our common shares per
common share of BCP, ASHC and PPS, respectively. Our common shares commenced
trading on the New York Stock Exchange immediately upon consummation of the
exchange offer, with a closing price on that day of US$11.61 (adjusted to
reflect stock dividends through May 1999).
On March
19, 1996, pursuant to an exchange offer, we acquired the remaining 1.8% of the
outstanding shares of ASHC (702,674 shares) in exchange for 237,859 of our
common shares at a ratio of 0.33708 of our common shares per common share of
ASHC. The closing price of our common shares on the New York Stock
Exchange on the date that exchange offer was completed was US$10.98 (adjusted to
reflect stock dividends). See “Item 9. The Offer and
Listing—(A) Offer and Listing Details—Price History of Credicorp’s Stock” and
“Item 8. Financial Information—Consolidated Statements and Other Financial
Information—Dividend Policy.”
Our
management consists of certain principal executive officers of BCP, ASHC and
PPS. It believes that a unified financial group with a coordinated strategy is
best able to take advantage of growth in the Peruvian economy and deregulation
of the financial services sector as well as to achieve synergies from
cross-selling financial services and products (e.g., through BCP’s extensive
branch network). Through our subsidiaries, we are the largest Peruvian provider
of financial services in Peru.
BCP began
operations in 1889 as Banco Italiano and changed its name to Banco de Crédito
del Perú in 1941. BCP has been the largest commercial bank in Peru
since the 1920s. Members of the Romero family have been shareholders of BCP
since 1918 and became the controlling shareholders in
1979. Mr. Dionisio Romero Seminario, who was our Chairman of the
Board of Directors and Chief Executive Officer, was a member of the Board of
Directors of BCP from 1966 to 1987, becoming BCP’s Chairman in 1979. In response
to former President Alan García’s attempt to nationalize the Peruvian banking
industry in 1987, the majority shareholders of BCP, including Mr. Romero
S., sold a controlling interest in BCP and transferred management to its
employees. The sale successfully prevented the government from
gaining control of BCP. Upon the election of Alberto Fujimori as President of
Peru in 1990 and the introduction of market reforms, the Romero family
reestablished its holdings in BCP, and Mr. Romero S. and several former key
managers returned to BCP. See “—(9) Peruvian Government
and Economy—(i) Peruvian Government.” Members of the Romero family exchanged
their BCP shares in the October 1995 exchange offer, and now hold 15.85% of our
common shares. As of December 31, 2008, we hold 97.41% of BCP’s total shares.
See “Item 7. Major
Shareholders and Related Party Transactions—(A) Major
Shareholders.”
ASHC was
incorporated in the Cayman Islands in December 1981 as a wholly-owned subsidiary
of BCP, under the name Crédito del Perú Holding Corporation or BCP
International. It became the first Peruvian bank to establish an offshore
banking presence to serve its Peruvian customers. In 1983, BCP
distributed its shares of BCP International to its shareholders as dividends to
protect its privately held status in the event that BCP was
nationalized. BCP International established its first physical
presence offshore (previously having been operated through BCP’s corporate
offices) by opening an office in Panama in 1984, and opening an agency in Miami
in 1986. In 1986, BCP International changed its name to ASCH. As a
result of the attempted expropriation by the government in 1987, ASHC’s
operations and management were made independent of BCP. In 2002, ASHC closed its
Miami agency at the same time that BCP opened its Miami agency. Also, Credicorp
Securities was established in Miami as our wholly-owned subsidiary and began
operating in early 2003 serviced by former ASHC personnel.
We own
75.98% of PPS, which was formed in 1992 as a result of the merger between El
Pacífico Compañía de Seguros y Reaseguros S.A. and Compañía de Seguros y
Reaseguros Peruano-Suiza S.A. PPS is the second largest Peruvian insurance
company in terms of premium sold and health fees. PPS’s major subsidiaries
include Pacífico Vida, which specializes in life and pension fund insurance, and
Pacífico Salud, which provides health insurance as an alternative to public
social security.
We own
99.99% of Grupo Crédito S.A., which is the principal shareholder in Prima AFP.
We also hold equity shares in Peruvian electric utilities and other
non-financial companies.
BCB
(formerly Banco Popular S.A., Bolivia) is a subsidiary that we acquired for
US$6.2 million in November 1993. Since we transferred to BCP a 55.79% stake in
November 2001, we have directly held 2.7% of BCB’s equity while holding the rest
through BCP. In December 2002, BCP acquired BSCH-Perú, which was merged into BCP
on February 28, 2003.
In 2003,
BCP converted BCOL, its offshore bank in the Bahamas, into an investment
vehicle, and then sold it to ASHC. ASHC subsequently consolidated BCOL into its
operations in 2004. BCOL’s business, which is receiving offshore U.S.
Dollar deposits and making U.S. Dollar-denominated loans to large Peruvian
customers, was taken over by both BCP’s Panama branch and ASHC.
Solución
was spun off into two companies. The first company retained only cash and
equity. The second company became a wholly-owned subsidiary of BCP in March 2003
as a result of BCP’s acquisition of the remaining 45% of Solución’s equity
interests. Solución was merged into BCP’s Peruvian banking operations
in March 2004.
Although
the transaction had an effective date of January 1, 2005, in March 2005, we sold
Banco Tequendama to a Colombian bank. We did not record a material
gain as a result of the sale. On December 31, 2004, Banco Tequendama had
US$306.7 million in loans and US$290.5 million in deposits. We acquired Banco
Tequendama in January 1997 from the Fondo de Garantía de
Depósitos y Protección Bancaria, or FOGADE, the Venezuelan government entity
responsible for the re-privatization of government-seized assets in connection
with the widespread Venezuelan banking problems that began in 1994. We, along
with FOGADE and FOGADE’s financial adviser, were sued in Aruba by the former
owners of Banco Tequendama. The judge in Aruba dismissed the claim, and the
plaintiff appealed. In April 2004, the Court of Appeals in Aruba
rejected all of the plaintiff’s claims. The lawsuit followed a
previous unsuccessful lawsuit brought by the former owners in
Colombia.
On August
24, 2006, through our subsidiary Prima AFP, we acquired 99.97% of the capital
stock of AFP Unión Vida S.A., a pension fund management company that operates in
Peru, from Grupo Santander Perú S.A. We also made a tender offer to
the minority shareholders in order to acquire the remaining 0.03% of capital
stock. The total purchase price was approximately US$141.5 million. At the September 6, 2006
general shareholder’s meeting of Prima AFP, the merger with AFP Unión Vida S.A.
was approved, with an effective date of December 1, 2006.
In
October 2009, through our subsidiary BCP, we acquired Empresa Financiera
Edyficar S.A., a financial entity specialized in micro lending. As of
December 31, 2009 we held 99.79% of the capital stock of Edyficar.
(D)
|
Property,
Plants and Equipment
|
On
December 31, 2009, we had 439 branches, of which 334 were branch offices of BCP
in Peru. Our principal properties include the headquarters of BCP, at Calle
Centenario 156, La Molina, Lima 12, Perú, and the headquarters of PPS at Juan de
Arona 830, Lima, Perú. There are no material encumbrances on any of
our properties.
ITEM
4A.
|
UNRESOLVED
STAFF COMMENTS
|
Not
applicable.
ITEM
5.
|
OPERATING
AND FINANCIAL REVIEW AND PROSPECTS
|
|
(1)
|
Critical
Accounting Policies
|
Foreign
currency translation
Credicorp’s
functional and presentation currency is the United States Dollar (U.S. Dollar or
US$) because it reflects the economic substance of the underlying events and
circumstances relevant to the Company. In addition, Credicorp’s main operations
and transactions in the different countries where it operates are established
and settled in U.S. Dollars.
Financial
statements of each of Credicorp’s subsidiaries are measured using the currency
of the country in which each entity operates and converted into U.S. Dollars
(functional and presentation currency) as follows:
- Monetary
assets and liabilities are converted at the free market exchange rate at the
date of the consolidated statements of financial position.
- Non-monetary
accounts are converted at the free market exchange rate prevailing at the date
of the transaction.
- Income
and expenses, except for those related to non-monetary assets which are
converted at the free market exchange rate prevailing at the date of the
transaction, are converted monthly at the average monthly exchange
rate.
All
resulting conversion differences are recognized in the consolidated income
statement.
Income
and expense recognition from banking activities
Interest
income and expense for all interest-bearing financial instruments, including
those related to financial instruments classified as held for trading or
designated at fair value through profit or loss, are recognized within “Interest
and dividend income” and “Interest expense” in the consolidated income statement
using the effective interest rate, which is the rate that discounts estimated
future cash payments or receipts through the expected life of the financial
instrument or a shorter period, where appropriate, to the net carrying amount of
the financial asset or financial liability.
Interest
income is suspended when collection of loans become doubtful, i.e. when loans
are overdue more than 90 days or when the borrower or securities’ issuer
defaults, if earlier than 90 days; such income is excluded from interest income
until collected. Uncollected income on such loans is provisioned.
When management determines that the debtor’s financial condition has improved,
the recording of interest thereon is reestablished on an accrual
basis.
Interest
income includes coupons earned on fixed income investment and trading securities
and the accrued discount and premium on financial
instruments. Dividends are recognized as income when they are
declared.
Fees and
commission income are recognized on an accrual basis when
earned. Contingent credit fees for loans that are likely to be drawn
down and other credit related fees are deferred (together with any direct
incremental costs) and recognized as an adjustment to the effective interest
rate on the loan.
All other
revenues and expenses are recognized on an accrual basis.
Insurance
activities
Insurance
contracts are those contracts where we (the insurer) have accepted significant
insurance risk from another party (the policyholder) by agreeing to compensate
the policyholder if a specified uncertain future event (the insured event)
adversely affects the policyholder. This definition also includes reinsurance
contracts that we hold. As a general guideline, we determine whether
it has significant insurance risk by comparing benefits paid with the benefits
payable if the insured event does not occur. Insurance contracts can also
transfer financial risk.
Once a
contract has been classified as an insurance contract, it remains so for the
remainder of its lifetime, even if the insurance risk reduces significantly
during this period, unless all rights and obligations extinguish or expire.
Investment contracts can, however, be reclassified as insurance contracts after
inception if the insurance risk becomes significant.
We also
cede insurance risk in the normal course of business for all of our businesses.
Reinsurance assets represent balances due from reinsurance companies. Amounts
recoverable from reinsurers are estimated in a manner consistent with the
outstanding claims provision or settled claims associated with the reinsurer’s
policies and are in accordance with the related reinsurance
contract.
Reinsurance
assets are reviewed for impairment at each reporting date or more frequently
when an indication of impairment arises during the reporting
year. Impairment occurs when there is objective evidence resulting
from an event that occurred after initial recognition of the reinsurance asset
that we may not receive all outstanding amounts due under the terms of the
contract and the event has a reliably measureable impact on the amounts that we
can recover from the reinsurer. The impairment loss is recorded in
the consolidated income statement.
Gains or
losses on buying reinsurance are recognized in the consolidated income statement
immediately at the date of purchase and are not amortized.
Ceded
reinsurance arrangements do not relieve us from our obligations to a
policyholder.
When
applicable, we also assume reinsurance risk in the normal course of business for
non-life insurance contracts. Premiums and claims on assumed
reinsurance are recognized as revenue or expenses in the same manner as they
would be if the reinsurance were considered direct business, taking into account
the product classification of the reinsured business.
Reinsurance
liabilities represent balances due to reinsurance companies. Amounts
payable are estimated in a manner consistent with the related reinsurance
contract.
Financial
Instruments: Initial recognition and subsequent measurement:
We
classify our financial instruments in one of the categories defined by IAS
39: financial assets and financial liabilities at fair value through
profit or loss; loans and receivables; available-for-sale financial investments
and other financial liabilities. We determine the classification of
our financial instruments at the initial recognition.
Classification
of financial instruments at the initial recognition depends on the purpose and
the intention for which the financial instruments were acquired as well as their
characteristics. All financial instruments are measured initially at
their fair value plus any directly attributable incremental cost of acquisition
or issue, except in the case of financial assets and financial liabilities
recorded at fair value through profit or loss.
Purchases
or sales of financial assets that require delivery of assets within a time frame
established by regulation or convention in the marketplace (regular way trades)
are recognized on the trade date, i.e. the date that we commit to purchase or
sell the asset. Derivatives are recognized on a trade date
basis.
|
(i)
|
Financial
assets and financial liabilities at fair value through profit or
loss
|
Financial
assets at fair value through profit or loss include financial assets held for
trading and financial assets designated at fair value through profit or loss,
which such designation is upon initial recognition and in an instrument by
instrument basis. Derivatives are also categorized as held for
trading unless they are designated as hedging instruments.
Financial
assets are classified as held for trading if they are acquired for purposes of
selling or repurchasing short term and are presented in the caption “Trading
securities” of the consolidated statements of financial position.
Management
may designate an instrument at fair value through profit or loss upon initial
recognition so long as the following conditions are met:
- the
designation eliminates or significantly reduces the inconsistent treatment that
would otherwise arise from measuring assets or liabilities or recognizing gains
or losses on them on a different basis; or
- the
assets and liabilities are part of a group of financial assets, financial
liabilities or both which are managed and their performance evaluated on a fair
value basis, in accordance with a documented risk management or investment
strategy; or
- the
financial instrument contains one or more embedded derivatives, which
significantly modify the cash flow that would otherwise be required by the
contract.
Changes
in fair value of designated financial assets through profit or loss are recorded
in the consolidated income statement captioned “Net gain on financial assets and
liabilities designated at fair value through profit and
loss”. Interest earned or incurred is accrued in the consolidated
income statement under the captions “Interest and dividend income” or “Interest
expense”, respectively, according to the terms of the
contract. Dividend income is recorded once right to collect has been
established.
|
(ii)
|
Loans
and receivables
|
Loans and
receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market, other than: (1) those that the
entity intend to sell immediately or in the short term, those that the entity
upon initial recognition designates as available for sale; or (2) those for
which the holder may not recover all or substantially all of its initial
investment, other than credit deterioration.
After
initial measurement, loans and receivables are subsequently measured at
amortized cost using the effective interest rate method, less any allowances for
impairment. Amortized cost is calculated by taking into account any
discount or premium on acquisition and fees and costs that are an integral part
of the effective interest rate. The effective interest rate
amortization is recognized in the consolidated income statement in the caption
“Interest and dividend income”. Losses from impairment are recognized in the
consolidated income statement in the caption “Provision for loan
losses”.
Direct
loans are recorded when disbursement of funds to the clients are
made. Indirect (off-balance sheet) loans are recorded when documents
supporting such facilities are issued. Likewise, Credicorp considers
as refinanced or restructured those loans that change their payment schedules
due to difficulties in the debtor’s ability to repay the loan.
An
allowance for loan losses is established if there is objective evidence that we
will not be able to collect all amounts due according to the original
contractual terms of the loan. The allowance for loan losses is
established based in an internal risk classification and in consideration of any
guarantees and collaterals received, note 3(i) and 29.1 to the Consolidated
Financial Statements.
|
(iii)
|
Available-for-sale
financial investments
|
Available-for-sale
financial investments are non-derivative financial assets that are designated as
available-for-sale (to be held for an indefinite period, which may be sold in
response to liquidity needs or changes in the interest rates, exchange rates or
equity price); or are not classified as (a) financial assets and financial
liabilities at fair value through profit or loss, (b) held-to-maturity or (c)
loans and receivables.
After the
initial recognition, available-for-sale financial investments are measured at
fair value plus unrealized gains or losses recognized as other comprehensive
income in the available-for-sale reserve, net of its corresponding deferred tax
and minority interest, until the investment is no longer recognized, at which
time the cumulative gain or loss is recognized in the consolidated income
statement in the caption “Net gain on sale of securities”, or determined to be
impaired, at which time the cumulative loss is recognized in the consolidated
income statement in the caption “Impairment loss on available–for–sale
investments” and removed from the available-for-sale reserve.
Interest
and dividends earned are recognized in the consolidated income statement in the
caption “Interest and dividend income”. Interest earned is reported
as interest income using the effective interest rate and dividends earned are
recognized when collection rights are established.
Estimated
fair values are based primarily on quoted prices or, if quoted market prices are
not available, discounted expected cash flows using market rates commensurate
with the credit quality and maturity of the investment.
We may
elect to reclassify these financial assets only in rare circumstances, such as
when we are unable to sell the financial assets due to market inactivity and
management’s intent to sell the assets in the foreseeable future has
changed. Reclassification to loans and receivables is permitted when
the financial asset meets the definition of loans and receivables and has the
intent and ability to hold these assets for the foreseeable future or until
maturity. The reclassification to held to maturity category is
permitted only when the entity has the ability and intent to hold the financial
asset until maturity.
As of
December, 31, 2009 and 2008, we did not reclassify any of our available-for-sale
financial investments.
|
(iv)
|
Other
financial liabilities
|
After the
initial measurement, other financial liabilities are subsequently measured at
amortized cost using the effective interest rate method. Amortized
cost is calculated by taking into account any issuance discount or premium and
costs that are an integral part of the effective interest rate.
De-recognition
of financial assets and financial liabilities
Financial
assets:
A
financial asset (or, where applicable, a part of a financial asset or a part of
a group of similar financial assets) is not recognized when: (i) the rights to
receive cash flows from the asset have expired; or (ii) we have transferred its
rights to receive cash flows from the asset or has assumed an obligation to pay
the received cash flows in full without material delay to a third party under a
“pass-through” arrangement; and (iii) either we have transferred substantially
all the risks and rewards of the asset, or we have neither transferred nor
retained substantially all the risks and rewards of the asset, but have
transferred control of the asset.
Financial
liabilities:
A
financial liability is not recognized when the obligation under the liability is
discharged, cancelled or expires. When an existing financial
liability is replaced by another from the same lender on substantially different
terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as un-recognized of the original liability
and the recognition of a new liability, any resulting difference in the
respective carrying amount is recognized as profit or loss.
Offsetting
financial instruments:
Financial
assets and liabilities are offset and the net amount is reported in the
consolidated statements of financial position when there is a legally
enforceable right to offset the recognized amounts and management has the
intention to settle on a net basis, or realize the assets and settle the
liability simultaneously.
Impairment
of financial assets:
We assess
at each date of the consolidated statements of financial position date whether
there is any objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial assets
is deemed to be impaired if, and only if, there is objective evidence of
impairment as a result of one or more events that has occurred after the initial
recognition of the asset (an incurred loss event) and such loss event, or
events, have an impact on the estimated future cash flows of the financial asset
or the group of financial assets that can be reliably
estimated. Evidence of impairment may include indications that the
borrower or a group of borrowers is experiencing significant financial
difficulty, default or delinquency in interest or principal payments, the
probability that they will go bankrupt or other legal financial reorganization
process and where observable data indicate that there is a measurable decrease
in the estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults. Criteria used for each
category of financial assets are as follows:
|
(i)
|
Loans
and receivables
|
For loans
and receivables that are carried at amortized cost, we first assess whether
objective evidence of impairment exists for financial assets that are
individually significant, or collectively, for financial assets that are not
individually significant. If we determine that no objective evidence
of impairment exists for an individually assessed financial asset, whether
significant or not, it includes the asset in a group of financial assets with
similar credit risk characteristics and collectively assesses them for
impairment. Assets that are individually assessed for impairment and
for which an impairment loss is recognized, or continues to be recognized, are
not included in a collective assessment of impairment.
If there
is objective evidence that an impairment loss has been incurred, the amount of
the loss is measured as the difference between the asset carrying amount and the
present value of estimated future cash flows (excluding future expected credit
losses that have not yet been incurred). The carrying amount of the
asset is reduced through the use of an allowance account and the amount of the
loss is recognized in the consolidated income statement. Interest
income, if applicable, is accrued on the reduced carrying amount based on the
original effective interest rate of the asset. Loans, together with
the associated allowance, are written off when there is no realistic prospect of
future recovery and all collateral has been realized or has been transferred to
us. If in a subsequent year the amount of the estimated impairment
loss increases or decreases because an event occurring after the impairment was
recognized, the previously recognized impairment loss is increased or reduced by
adjusting the allowance account. If in the future a write-off is
later recovered, the recovery is recognized in the consolidated income
statements, as a credit to the caption “Provision for loan losses”.
The
present value of the estimated future cash flows is discounted at the financial
asset’s original effective interest rate. If a loan has a variable
interest rate, the discount rate for measuring any impairment loss is the
current effective interest rate. The calculation of the present value
of the estimated future cash flows of a collateralized financial asset reflects
the cash flows that may result from foreclosure less costs for obtaining and
selling the collateral, whether or not foreclosure is probable.
For a
collective evaluation impairment, financial assets are grouped considering our
internal credit grading system, which considers credit risk characteristics;
i.e. asset type, industry, geographical location, collateral type and past-due
status.
Future
cash flows from a group of financial assets that are collectively evaluated for
impairment are estimated on the basis of historical loss experience for assets
with similar credit risk characteristics to those in the
group. Historical loss experience is adjusted on the basis of current
observable data to reflect the effects of current conditions that did not affect
the years on which the historical loss experience is based and to remove the
effects of conditions in the historical period that do not currently
exists. The methodology and assumptions used are reviewed regularly
to reduce any differences between loss estimates and actual loss
experience.
|
(ii)
|
Available-for-sale
financial investments
|
For
available-for-sale financial investments, we assess, during each date of the
consolidated statements of financial position, whether there is objective
evidence that an investment or a group of investments is
impaired.
In the
case of equity investments, objective evidence includes a significant or
prolonged decline in the fair value of the investment below its
cost. “Significant” is evaluated against the original cost of the
investment and “prolonged” against the period in which the fair value has been
below its original cost. Where there is evidence of impairment, the
cumulative loss (measured as the difference between the acquisition cost and the
current fair value, less any previously recognized impairment loss) is removed
from available-for-sale reserve and recognized in the consolidated income
statement. Impairment losses on equity investments are not reversed
through the consolidated income statement; increases in their fair value after
impairment are recognized directly in the consolidated statements of
comprehensive income.
In the
case of debt instruments, impairment is assessed based on the same criteria as
financial assets carried at amortized cost (loans and
receivables). However, the amount recorded for impairment is the
cumulative loss measured as the difference between the amortized cost and the
current fair value, less any impairment loss that was previously recognized on
that investment in the consolidated income statement. Future interest
income is based on the reduced carrying amount and is accrued using the interest
rate that is used to discount the future cash flows for the purpose of measuring
the impairment loss. Interest income is recorded as part of “Interest
and dividend income”. If in a subsequent year, the fair value of a
debt instrument increases and the increase can be objectively measured by using
an event that occurred after the impairment loss was recognized in the
consolidated income statement, the impairment loss is reversed through the
consolidated income statement.
Where
possible, we seek to refinance or restructure loans rather than to take
possession of collateral. This may involve extending the payment
arrangements and the agreement of new loan conditions. Once the terms
have been renegotiated, the loan is no longer considered past
due. Management continuously reviews refinanced and restructured
loans to ensure that all criteria are met and that future payments are likely to
occur. Renegotiated loans continue to be subject to an individual or
collective impairment assessment, calculated using the loan’s original effective
interest rate.
Goodwill:
Goodwill
represents the excess of the acquisition cost of a subsidiary over the fair
value of the net identifiable assets of the acquired subsidiary at the date of
acquisition. Goodwill is tested annually for impairment to assess
whether the carrying amount is fully recoverable. An impairment loss
is recognized if the carrying amount exceeds the recoverable
amount. Goodwill is allocated to cash-generating units for impairment
testing purposes.
Impairment
of non-financial assets:
We assess
at each reporting date or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired, whether there is an indication
that a non-financial asset may be impaired. If any such indication
exists, we estimate the asset’s recoverable amount. Where the
carrying amount of an asset (or cash-generating unit) exceeds its recoverable
amount, the asset (or cash-generating unit) is considered impaired and is
written down to its recoverable amount.
For
non-financial assets, excluding goodwill, an assessment is made at each
reporting date as to whether there is any indication that previously recognized
impairment losses may no longer exist or may have decreased. If such
indication exists, the recoverable amount is estimated. A previously
recognized impairment loss is reversed only if there has been a change in the
estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognized; if that is the case, the carrying amount of the
asset is increased to its recoverable amount. Impairment losses
relating to goodwill cannot be reversed for subsequent increases in its
recoverable amount in future periods.
Due from
customers on acceptances:
Due from
customers on acceptances corresponds to accounts receivable from customers for
import and export transactions, whose obligations have been accepted by
Credicorp. The obligations that we must assume for such transactions
are recorded as liabilities.
Financial
guarantees:
In the
ordinary course of our business, Credicorp’s banking subsidiaries grant
financial guarantees, such as letters of credit, guarantees and
acceptances. Financial guarantees are initially recognized at fair
value (which is equivalent in that moment to the fee received), as “Other
liabilities” in the consolidated statements of financial
position. Subsequent to initial recognition, our liability under each
guarantee is measured as the higher of the amortized fee and the best estimate
of expenditure required to settle any financial obligation arising as a result
of the financial guarantee.
Any
increase in the liability relating to a financial guarantee is included in the
consolidated statement of income. The fee received is recognized in
the consolidated statement of income in the caption “Banking services
commissions” on a straight line basis over the life of the granted financial
guarantee.
Provisions:
Provisions
are recognized when we have a present obligation (legal or constructive) as a
result of a past event, it is probable that an outflow or resources embodying
economic benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. The expense
relating to any provision is presented in the income statement net of any
reimbursement. If the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate that reflects, where
appropriate, the risks specific to the liability. Where discounting
is used, the increase in the provision due to the passage of time is recognized
as a finance cost.
Contingencies:
Contingent
liabilities are not recognized in the consolidated financial
statements. They are disclosed in notes unless the possibility of an
outflow of resources is remote.
Share-based
payment transactions
(i) Cash-settled
transactions
As
explained in note 18(a) to the Consolidated Financial Statements, until April
2008 we granted a supplementary remuneration plan to certain employees who had
been employed at least one year with Credicorp or any of our Subsidiaries, in
the form of stock appreciation rights (SARs) over a certain number of Credicorp
shares. SARs were granted at a fixed price and are exercisable at
that price, allowing the employee to obtain a gain in cash (“cash-settled
transaction”) arising from the difference between the fixed exercise price and
the market price at the date the SARs are executed.
The SARs
fair value is expensed over the period up to the vesting date, along with the
corresponding liability. The liability is measured to fair value at each
reporting date, up to and including the settlement date, with changes in fair
value recognized in the “Salaries and employee benefits” line. When the price or
term of the SARs are modified, any additional expense is also recorded. For more
details about significant factors, assumptions and the methodology used in
determining the fair value of SARs, see note 18 to the Credicorp Consolidated
Financial Statements.
(ii) Equity-settled
transactions
As
explain in note 18(b) to the Consolidated Financial Statements, as of April
2009, a new supplementary remuneration plan was implemented to replace the SAR
plan (see (i) above). The grant date was April 28, 2009, and the
granted awards vest 33.3% every 12 months.
The cost
of this equity-settled plan is recognized, together with a corresponding
increase in equity, over the period in which the service conditions are
fulfilled, ending on the date on which the respective employees become fully
entitled to the award (‘the vesting date”). The cumulative expense recognized
for equity-settled transactions from each reporting date until the vesting date
reflects the extent to which the vesting period has expired and Credicorp’s best
estimate of the number of equity instruments that will ultimately
vest.
The
expense is recorded in the “Salaries and employees benefits” line of the
consolidated income statement. When the terms of an equity-settled award are
modified, the minimum expense recognized in the “Salaries and employees
benefits” line is the expense as if the terms had not been modified. An
additional expense is recognized for any modification which increases the total
fair value of the share-based payment arrangement, or is otherwise beneficial to
the employee as measured at the date of modification.
The
dilutive effect of outstanding stock awards is reflected as a share dilution in
the computation of diluted earnings per share.
Derivative
financial instruments:
Trading:
Part of
transactions with derivatives, while providing effective economic hedges under
Group’s risk management positions, do not qualify for hedge accounting under the
specific rules of IAS 39 and are, therefore, treated as trading
derivatives.
Derivative
financial instruments are initially recognized in the consolidated statements of
financial position at cost and subsequently are re-measured at their fair
value. Fair values are estimated based on the market exchange and
interest rates. All derivatives are carried as assets when fair value
is positive and as liabilities when fair value is negative. Gain and
losses for changes in their fair value are recorded in the consolidated income
statement.
Hedge:
We use
derivative instruments to manage exposures to interest rate and foreign
currency. In order to manage particular risks, we apply hedge
accounting for transactions which meet the specified criteria.
At
inception of the hedge relationship, we formally document the relationship
between the hedged item and the hedging instrument, including the nature of the
risk, the objective and strategy for undertaking the hedge and the method that
will be used to assess the effectiveness of the hedging
relationship.
Also, at
the inception of the hedge relationship, a formal assessment is undertaken to
ensure the hedging instrument is expected to be highly effective in offsetting
the designated risk in the hedged item. Hedges are formally assessed
at each reporting date. A hedge is regarded as highly effective if
changes in fair value or cash flows attributable to the hedged risk during the
period for which the hedge is designated is expected to offset in a range
between 80 percent and 125 percent.
The
accounting treatment is established according to the nature of the hedged item
and compliance with the hedge criteria.
(i) Cash
flow hedges
The
effective portion of the gain or loss on the hedging instrument is recognized
directly as other comprehensive income in the cash flow hedge reserve, while any
ineffective portion is recognized in the consolidated income statement in
finance costs.
Amounts
recognized as other comprehensive income are transferred to the consolidated
income statement when the hedged transaction affects profit or loss, such as
when the hedged financial income or financial expense is recognized or when a
forecast sale occurs. Where the hedged item is the cost of a non-financial asset
or non-financial liability, the amounts recognized as other comprehensive income
are transferred to the initial carrying amount of the non-financial asset or
liability.
If the
forecast transaction or firm commitment is no longer expected to occur, the
cumulative gain or loss previously recognized in the cash flow hedge reserve are
transferred to the consolidated income statement. If the hedging instrument
expires or is sold, terminated or exercised without replacement or rollover, or
if its designation as a hedge is revoked, any cumulative gain or loss previously
recognized in the cash flow hedge reserve remains in the cash flow hedge reserve
until the forecast transaction or firm commitment affects profit or
loss.
(ii) Fair
value hedges
The
change in the fair value of an interest rate hedging derivative is recognized in
the consolidated income statement in finance costs. The change in the
fair value of the hedged item attributable to the risk hedged is recorded as a
part of the carrying value of the hedged item and is also recognized in the
consolidated income statement in finance costs.
For fair
value hedges relating to consolidated items carried at amortized cost, the
adjustment to carrying value is amortized through the consolidated income
statement over the remaining maturity term. Effective interest rate amortization
may begin as soon as an adjustment exists and shall begin no later than when the
hedged item ceases to be adjusted for changes in its fair value attributable to
the risk being hedged.
If the
hedge item is no longer recognized, the unamortized fair value is recognized
immediately in the consolidated income statement.
When an
unrecognized firm commitment is designated as a hedged item, the subsequent
cumulative change in the fair value of the firm commitment attributable to the
hedged risk is recognized as an asset or liability with a corresponding gain or
loss recognized in the consolidated income statement.
Embedded
derivates:
Derivatives
embedded in host contracts are accounted for as separate derivatives and
recorded at fair value if their economic characteristics and risks are not
closely related to those of the host contracts, and the host contracts are not
held for trading or designated at fair value through profit or
loss.
We have
certificates indexed to the price of Credicorp Ltd. shares that will be settled
in cash, and investments indexed to certain life insurance contracts
liabilities, denominated “Unit-Link”. We classified these instruments
at inception as “Financial instruments at fair value though profit or loss”, see
3(f)(i), and note 7 to the Consolidated Financial Statements.
Fiduciary
activities, management of funds and pension funds:
We
provide custody, trustee, investment management and advisory services to third
parties that result in the holding of assets on their behalf. These
assets and income arising thereon are excluded from these consolidated financial
statements, as they are not our assets.
Commissions
generated for these activities are included in the caption “Other income” of the
consolidated income statements.
(2) Historical
Discussion and Analysis
The Group
monitors the results of its operating segments separately for the purpose of
making decisions about resource allocation and performance
assessment. Regarding the Group’s segments, total revenues from
banking segment amounted to 74% or more of the Group’s total revenue in 2009,
2008, and 2007, therefore, the following historical discussion and analysis is
presented principally for banking segment, except when otherwise indicated; and
is based upon information contained in our Consolidated Financial Statements and
should be read in conjunction therewith. The discussion in this section
regarding interest rates is based on nominal interest rates.
For a
comparison of nominal interest rates with real interest rates, see “Item 4.
Information on the Company—(B) Business Overview—(12) Selected Statistical
Information—(i) Average Balance Sheets and Income from Interest-Earning
Assets—Real Average Interest Rates.”
The
financial information and discussion and analysis presented below for 2007, 2008
and 2009 reflect the financial position and results of operations for 2007, 2008
and 2009 of our subsidiaries. See “Item 3. Key
Information—(A) Selected Financial Data.”
On
December 31, 2009, approximately 57.9% of our deposits and 60.1% of our loans
were U.S. Dollar-denominated. Despite these high proportions, U.S.
Dollar-denominated deposits and loans have decreased from the previous year
(61.7% and 67.1%, respectively) due to a reduction in the rate of inflation.
Nevertheless, we expect the majority of our deposits and loans to continue to be
denominated in U.S. Dollars.
Results
of Operations for the Three Years Ended December 31, 2009
The
following table sets forth, for the years 2007, 2008 and 2009, the principal
components of our net income:
|
|
Year ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
Interest
income
|
|
US$
|
1,065,339 |
|
|
US$
|
1,382,844 |
|
|
US$
|
1,312,925 |
|
Interest
expense
|
|
|
(431,365 |
) |
|
|
(561,617 |
) |
|
|
(420,564 |
) |
Net
interest income
|
|
US$
|
633,974 |
|
|
US$
|
821,227 |
|
|
US$
|
892,361 |
|
Provision
for loan losses
|
|
|
(28,439 |
) |
|
|
(48,760 |
) |
|
|
(163,392 |
) |
Net
interest income after Provision
|
|
US$
|
605,535 |
|
|
US$
|
772,467 |
|
|
US$
|
728,969 |
|
Noninterest
income
|
|
|
522,937 |
|
|
|
592,564 |
|
|
|
720,631 |
|
Insurance
premiums earned net of claims on insurance activities
|
|
|
58,672 |
|
|
|
51,993 |
|
|
|
138,224 |
|
Other
expenses
|
|
|
(747,089 |
) |
|
|
(920,603 |
) |
|
|
(957,110 |
) |
Merger
costs
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Income
before translation result and income tax
|
|
US$
|
440,055 |
|
|
US$
|
496,421 |
|
|
US$
|
630,714 |
|
Translation
result (loss) gain
|
|
US$
|
34,627 |
|
|
US$
|
( 17,650 |
) |
|
US$
|
12,222 |
|
Income
tax
|
|
|
(102,287 |
) |
|
|
(109,508 |
) |
|
|
(138,500 |
) |
Net
income
|
|
US$
|
372,395 |
|
|
US$
|
369,263 |
|
|
US$
|
504,436 |
|
Net
income attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
holders
|
|
|
350,735 |
|
|
|
357,756 |
|
|
|
469,785 |
|
Minority
interests
|
|
|
21,660 |
|
|
|
11,507 |
|
|
|
34,651 |
|
Net
income
|
|
US$
|
372,395 |
|
|
US$
|
369,263 |
|
|
US$
|
504,436 |
|
Net
income attributable to our equity holders increased from US$357.8 million in
2008 to US$469.8 million in 2009. Our net income increased from 2008 to 2009 due
to the significant charges recorded during 2008, but not recorded during 2009,
for approximately US$163.9 million (recorded as “other expenses”), which
included (i) US$60.4 million to impair a deteriorated investment portfolio
caused by declining stock prices, (ii) US$36.4 million for a provision by ASHC
for potential losses and contingencies related to an ASHC-managed fund that had
been invested with Bernard L. Madoff Investment Securities LLC, or Madoff
Securities, on behalf of its clients, (iii) US$67.1 million of expense to hedge
SAR Program. In addition increases the commission for loans, net gain on
securities net of the provision for loan.
Net
income attributable to our equity holders increased from US$350.7 million in
2007 to US$357.8 million in 2008, which represented an increased of 2.0% from
2007 to 2008, despite of the charges recorded during 2008, which are explained
in the paragraph below.
On the
other hand, non interest income increased 21.6% in 2009 to US$720.6 million,
primarily due to (i) a net gains from sales of securities of US$120.9 million,
(ii) fees and commissions income from banking services of US$436.8 million, and
(iii) net gains on foreign exchange transactions of US$87.9 million. Non
interest income increased 13.3% in 2008 to US$592.6 million, which represented
an increased of 13.3% not significant to the consolidated results of
operations.
Net
Interest Income
Net
interest income represents the difference between interest income on
interest-earning assets and the interest paid on interest-bearing liabilities.
The following table sets forth the components of net interest
income:
|
|
Year ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
Loans
|
|
US$
|
701,471 |
|
|
US$
|
963,940 |
|
|
US$
|
1,062,046 |
|
Deposits
in banks
|
|
|
58,896 |
|
|
|
37,352 |
|
|
|
13,731 |
|
Deposits
in Central Bank
|
|
|
46,921 |
|
|
|
37,914 |
|
|
|
2,187 |
|
Investment
securities and others
|
|
|
231,762 |
|
|
|
298,021 |
|
|
|
186,629 |
|
Dividends
|
|
|
8,870 |
|
|
|
12,189 |
|
|
|
9,715 |
|
Gain
from derivatives instruments and other interest
income
|
|
|
17,419 |
|
|
|
33,428 |
|
|
|
38,617 |
|
Total
interest income
|
|
US$
|
1,065,339 |
|
|
US$
|
1,382,844 |
|
|
US$
|
1,312,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Saving
deposits
|
|
US$
|
19,869 |
|
|
US$
|
27,165 |
|
|
US$
|
18,509 |
|
Time
deposits
|
|
|
263,487 |
|
|
|
310,856 |
|
|
|
206,118 |
|
Issued
bonds
|
|
|
33,592 |
|
|
|
51,756 |
|
|
|
66,993 |
|
Borrowing
from other financial institutions and others
|
|
|
83,070 |
|
|
|
104,818 |
|
|
|
51,654 |
|
Demand
deposits
|
|
|
25,123 |
|
|
|
38,085 |
|
|
|
21,414 |
|
Loss
from derivatives instruments and other interest
expenses
|
|
|
6,224 |
|
|
|
28,937 |
|
|
|
55,876 |
|
Total
interest expense
|
|
US$
|
431,365 |
|
|
US$
|
561,617 |
|
|
US$
|
420,564 |
|
Net
interest income
|
|
US$
|
633,974 |
|
|
US$
|
821,227 |
|
|
US$
|
892,361 |
|
Our net
interest income increased 8.7% in 2009 compared to 2008, and increased 29.5% in
2008 compared to 2007.
Interest Income: Interest
income decreased 5.1% in 2009 compared to 2008, after increasing 29.8% in 2008
compared to 2007. The decrease in 2009 was primarily due to lower average volume
in investments securities and others and loans. The decrease in investments
securities was primarily due to a lower volume average throughout the year and
lower rates. The increase in 2008 compared to 2007 was principally due to higher
average volume in loans and investments available for sale. The loan
increase was mainly related to retail and corporate banking growth, while the
investments securities increase was due to gains related to BCRP certificates of
deposits.
Our
average nominal interest rates earned on loans decreased to 9.9% in 2009 from
10.1% in 2008 and from 10.0% in 2007. The average nominal interest rate for
foreign currency-denominated loans decreased from 8.6% in 2007 and 2008 to 7.7%
in 2009, explained by fall in interest rates in the international market.
Interest rates for Nuevo Sol-denominated loans decreased from 13.5% in 2007 to
13.4% in 2008 and further to 13.8% in 2009, which represented minor fluctuations
in interest rates in Nuevo Sol for loans.
The
average balance of our foreign currency-denominated loan portfolio increased
4.2% to US$6,810.1 million in 2009, as compared to US$6,534.0 million in
2008. In 2008, the average balance of our foreign
currency-denominated loan portfolio increased 28.1% as compared to 2007, from
US$5,101.4 million. The average balance of our Nuevo Sol-denominated loan
portfolio increased 53.8% from US$1,942.3 million in 2007 to US$2,987.7 million
in 2008, and by 30.3% to US$3,893.5 million in 2009. The average balance
increased in 2009 respect to 2008, due to recovery of the Peruvian economy and
Peruvian financial system after the international crisis, especially in the
fourth quarter, however, our foreign currency-denominated loan portfolio
increased at a lower rate due to the volatility in foreign currency during
2009.
On the
other hand, the significant increase in 2008 was related primarily to the growth
in the Peruvian economy (GDP growth rate of 9.8%) during that year (prior to the
international crisis). In addition, in 2008 an increasing proportion of loans
went to commerce, mortgage, manufacturing and financial intermediation sectors
presenting higher risk, but these sectors also yielded higher margins. See “Item 4. Information on
the Company—(B) Business Overview—(12) Selected Statistical
Information.”
Interest Expense: Interest
expense decreased in 2009 by 25.1% as compared to 2008, and by 30.2% in 2008 as
compared to 2007. The decrease in interest expense during 2009 was principally
due to the lower interest rate in foreign currency and in Nuevo Sol. On the
other hand, the higher interest expense in 2008 and 2007 was principally due to
increases in the volume of deposits and variable market rates on
deposits.
Average
nominal interest rates paid on foreign currency-denominated deposits decreased
from 2.8% in 2007 to 2.4% in 2008, and to 1.5% in 2009. Average nominal interest
paid on Nuevo Sol-denominated deposits increased from 3.2% in 2007 to 3.5% in
2008, and decreased to 2.2% in 2009. This rate decrease was a commercial
decision that followed the market trend of interest rates observed in 2009.
See “Item 4.
Information on the Company—(B) Business Overview—(8) Competition” and “—(12)
Selected Statistical Information.”
Our
average foreign currency-denominated deposits increased 13.1% to US$8,829.4
million in 2009 from US$7,803.5 million in 2008, and increased 8.1% from
US$7,216.6 million in 2007. Our average Nuevo Sol-denominated deposits decreased
9.0% in 2009 to US$4,995.4 million from US$5,488.6 million in 2008, and
increased 67.7% from US$3,272.1 million in 2007. See “Item 4. Information on
the Company—(B) Business Overview—(12) Selected Statistical
Information.”
Net Interest Margin: Our net
interest margin (net interest income divided by average interest-earning assets)
was 4.7% in 2009 and did not change significantly compared to 2008 and 2007,
when the margin stayed in 4.5% as in 2007 returns declined on interest-earning
assets (mainly securities and Nuevo Sol-denominated loans) while funding costs
remained relatively unchanged. See “Item 4. Information on
the Company—(B) Business Overview—(12) Selected Statistical
Information.”
Provision
for Loan Losses
We
classify all of our loans and other credits by risk category. We establish our
loan loss reserves based on criteria established by IAS 39 (see “Item 4. Information on
the Company—(B) Business Overview—(12) Selected Statistical Information—(iii)
Loan Portfolio—Classification of the Loan Portfolio”). We do not anticipate that
the expansion of our loan portfolio or the consolidation of the activities of
our subsidiaries will require a change in our reserve policy.
The
following table sets forth the changes in our reserve for loan
losses:
|
|
Year ended December 31
|
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
Reserves
for loan losses at the beginning of the year
|
|
US$
|
271,873 |
|
|
US$
|
218,636 |
|
|
US$
|
210,586 |
|
|
US$
|
229,700 |
|
|
US$
|
248,063 |
|
Additional
provisions (reversals)
|
|
|
(6,356 |
) |
|
|
(4,243 |
) |
|
|
28,439 |
|
|
|
48,760 |
|
|
|
163,392 |
|
Acquisitions
and sales
|
|
|
(9,024 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
20,905 |
|
Recoveries
of write-offs
|
|
|
35,032 |
|
|
|
44,284 |
|
|
|
34,084 |
|
|
|
31,279 |
|
|
|
23,928 |
|
Write-offs
|
|
|
(71,405 |
) |
|
|
(49,859 |
) |
|
|
(47,266 |
) |
|
|
(59,308 |
) |
|
|
(87,927 |
) |
Monetary
correction and other
|
|
|
(1,484 |
) |
|
|
1,768 |
|
|
|
3,857 |
|
|
|
(2,368 |
) |
|
|
7,688 |
|
Reserves
for loan losses at the End of the year
|
|
US$
|
218,636 |
|
|
US$
|
210,586 |
|
|
US$
|
229,700 |
|
|
US$
|
248,063 |
|
|
US$
|
376,049 |
|
We
recorded US$163.4 million of loan loss provision in 2009, and US$48.8 million in
2008. Total write-offs amounted to US$87.9 million in 2009 and US$59.3 million
in 2008. Total recoveries of write-offs reached US$23.9 million in 2009 and
US$31.3 million in 2008, decreasing 23.5% in 2009. Provision expense in 2009
included US$5.6 million required by BCB (compared to US$7.5 million in 2008).
Recoveries of previously charged-off accounts in 2009 amounted to US$23.9
million (compared to US$31.3 million in 2008). In 2008, the Peruvian financial
system reached minimum delinquency levels in the loans portfolio, however,
during 2009, as a result of recession (due to the international financial
crisis) the ability of companies to repay loans was affected, and the
delinquency levels increased. Provisions made in 2009 were mainly related to
commercial loans. In 2008, the increased loan loss provision was not significant
compared to 2007, and was mainly related to consumer loans.
The
middle market and small business sectors continued to require a majority of the
provisions made during 2009 and 2008. Provisions net of recoveries for middle
market and small businesses were US$29.1 million in 2008 and US$13.4 million in
2007 (see also Note 6
to the Consolidated Financial Statements).
Total
reserves, which amounted to US$376.0 million in 2009, include the allowance for
direct and indirect credits of approximately US$354.4 million and US$21.7
million, respectively.
Non-Interest
Income
The
following table reflects the components of our non-interest income:
|
|
Year ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
Fees
and commissions from banking services
|
|
US$
|
324,761 |
|
|
US$
|
394,247 |
|
|
US$
|
436,819 |
|
Net
gains from sales of securities
|
|
|
46,376 |
|
|
|
51,936 |
|
|
|
120,932 |
|
Net
gains on foreign exchange transactions
|
|
|
61,778 |
|
|
|
108,709 |
|
|
|
87,944 |
|
Other
income
|
|
|
90,022 |
|
|
|
37,672 |
|
|
|
74,936 |
|
Total
non-interest income
|
|
US$
|
522,937 |
|
|
US$
|
592,564 |
|
|
US$
|
720,631 |
|
Our
non-interest income, without including net premiums earned, increased 21.6% to
US$720.6 million in 2009 as compared to US$592.6 million in 2008, and increased
13.3% as compared to US$522.9 million in 2007. The revenue increase in 2009 was
primarily due to an increase in gains from sales of securities and commissions
from banking services, and a decrease in net gains on foreign exchange
transactions.
Fees and
commissions income from banking services increased 10.8% to US$436.8 million in
2009 from US$394.2 million in 2008, following a 21.4% increase in 2008 from
US$324.8 million in 2007. The increase in fees and commissions income from
banking services in 2009 was primarily due to an increase in transfer and
collections fees, increased commissions from credit/debit card services,
increased in fees from trust services and improved property leasing service,
while the increase in 2008 was due to growth in account maintenance, funds
administration and commissions for collection, and the increase in 2007 was due
to growth in account maintenance, money transfers and funds administration
commissions for collections.
Net gains
from sales of securities increased 132.8% to US$120.9 million in 2009 as
compared to US$51.9 million in 2008, following an increase from US$46.4 million
in 2007, which represented an increase of 12.0%. The increase in 2009 was
primarily due to the increased volatility observed in capital markets, which
caused the appreciation of stock prices in our investment
portfolio. The increase in 2008 was principally due to gain from
market value fluctuation on sales of investments.
Net gains
on foreign exchange transactions decreased 19.1% to US$87.9 million in 2009 as
compared to US$108.7 million in 2008, following an increase of 75.9% from
US$61.8 million in 2007. Net gains from foreign exchange transactions are not
attributable to proprietary trading on our part. Higher gains in 2009 and 2008
were primarily due to the lower transaction volumes that resulted primarily from
the decreased volatility in the foreign exchange market.
Other
income increased 98.9% to US$74.9 million in 2009 as compared to US$37.7 million
in 2008, after decreasing 58.2% from US$90.0 million in 2007. Other income
principally consists of valuation of assets and liabilities designated at fair
value, sales of seized assets, leasing income, recoveries of other accounts
receivable and other assets and other income. The increase in other income in
2009 was primarily due to a proprietary position in indexed certificates issued
by Citigroup and Calyon to mitigate the volatility in operating expenses caused
by stock appreciation rights granted to our executives. The indexed
certificates are in the form of warrants issued by Citigroup and Calyon also are
settled exclusively in cash. These instruments do not qualify for hedge
accounting. Gains on these indexed certificates are reported as other
income while losses are reported under operating expenses. See note 7(b) to the
Credicorp Consolidated Financial Statements.
Conversely,
in 2008 compared to 2007, the decrease produced a loss resulting from the
difference between cost and estimated market value of the certificates indexed
to the performance of Credicorp Ltd. (BAP) shares in connection with the SAR
program, which was included in other expenses and amounted to approximately
US$67.1 million as of December 31, 2008.
Insurance
Premiums and Claims on Insurance Activities
The
following table reflects the premiums earned and claims incurred in connection
with our insurance activities:
|
|
Year ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
Net
premiums earned
|
|
US$
|
297,272 |
|
|
US$
|
393,903 |
|
|
US$
|
424,682 |
|
Net
claims incurred
|
|
|
(67,689 |
) |
|
|
(101,890 |
) |
|
|
(59,248 |
) |
Increase
in costs for future benefits for life and health
policies
|
|
|
(170,911 |
) |
|
|
(240,020 |
) |
|
|
(227,210 |
) |
Total
net premiums and claims
|
|
US$
|
58,672 |
|
|
US$
|
51,993 |
|
|
US$
|
138,224 |
|
Net
premiums increased 7.8% to US$424.7 million in 2009 from US$393.9 million in
2008. Gross premiums (including premium transfer and reserve adjustments)
increased 3.6% to US$608.8 in 2009 from US$587.6 in 2008.
Premiums
for general insurance lines, which accounted for 49.1% of
total premiums, increased 0.7% in 2009, mainly by automobiles which
represented 24% of general insurance premiums in 2009 (22% in 2008) and which
increased 6.6% from 2008. Other property and casualty premiums, which
represented 53% (57% in 2008), decreased 5.4% from 2008; and medical assistance
which represented 20% (16% in 2008), increased 19.8% from 2008.
Premiums
for general insurance lines, which accounted for 50.5% of total premiums,
increased 23.5% in 2008, mainly due to automobiles which represented 22% of
general insurance premiums in 2008 (15.3% in 2007) and which increased 80% from
2007. Other property and casualty premiums, which represented 56.8% (64.2% in
2007), increased 9.2% from 2007; and medical assistance which represented 16.4%
(17.1% in 2007), increased 18.5% from 2007. We also note the increase
in premiums from the mandatory automobile line, SOAT, which represented 4.5%
(3.4% in 2007) and increased 62.2% from 2007.
In the
Life Insurance lines, Total Direct Premiums increased 5.9% as compared to 2008,
with a market share of 27%. This growth is in line with the Life insurance
industry average growth. All lines of business increased as compared to 2008
except Annuities and Pension. This 5.9% increase in Total Direct
Premiums was mainly due to a better performance in Life products which
represented 26% of total premiums (23.7% in 2008) and closed 14.5% above
2008. Group Life products increased premiums in 12% with as compared
to 2008, and represented 18% of total premiums. Credit Life increased
14.7% as compared to 2008 and represented 12% of total premiums. The
Pension fund products, which represented 17% of life insurance premiums (19.8%
in 2008) decreased 9% as compared to 2008. Finally, the annuities line of
business decreased 0.3% as compared to 2008.
Total
direct premiums increased 31.8% as compared to 2007, mainly due to a better
performance in the life products which represented 23.7% of life insurance
premiums (23.7% in 2007) and which increased 31.3% from 2007. The Pension fund
products, which represented 19.8% of life insurance premiums (19.6% in 2007),
increased by 33% from 2007. In addition, credit life increased by 102% from
2007.
Health
insurance lines (20.6% of total premiums in 2009) increased by 7.6% from 2008,
primarily due to an 8.2% increase in Regular insurance premiums, representing
88.8% of health insurance premiums (88.2% in 2008).
Health
insurance lines (19.8% of total premiums in 2008) increased by 27.4% from 2007,
mainly due to a 28.2% increase in regular insurance premiums, representing 88.2%
of health insurance premiums (87.7% in 2007).
During
2009, net claims on insurance activities decreased by 16.2% to US$286.5 million
from US$341.9 million in 2008, mainly as a consequence of the business growth
and the decrease in the net loss ratio on P&C, health and life
businesses.
During
2008, net claims on insurance activities increased by 43.3% to US$341.9 million
from US$238.6 million in 2007, mainly as a consequence of the business growth
and the increase in the net loss ratio on P&C, health and life
businesses
Other
Expenses
The
following table reflects the components of our other expenses:
|
|
Year ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
Salaries
and employee benefits
|
|
US$
|
409,037 |
|
|
US$
|
365,201 |
|
|
US$
|
467,116 |
|
General
and administrative
|
|
|
206,966 |
|
|
|
269,291 |
|
|
|
312,256 |
|
Depreciation
and amortization
|
|
|
51,013 |
|
|
|
57,369 |
|
|
|
71,099 |
|
Provision
for assets seized
|
|
|
3,057 |
|
|
|
1,067 |
|
|
|
64 |
|
Other
|
|
|
77,016 |
|
|
|
227,675 |
|
|
|
106,575 |
|
Total
other expenses and merger costs
|
|
US$
|
747,089 |
|
|
US$
|
920,603 |
|
|
US$
|
957,110 |
|
Personnel
expenses increased 27.9% in 2009 as compared to 2008, after a 10.7% decrease in
2008 as compared to 2007. The number of our personnel increased to 20,148
employees in 2009 from 19,896 in 2008, and increased from 16,160 in 2007.
Considering only BCP, the number of personnel increased to 16,748 employees in
2009 from 15,969 in 2008, and increased from 12,667 in 2007. The increase in
other expenses during 2009 was due to significant increases in personnel
expenses (salaries and employee benefits), and due to increase in depreciation
and amortization expenses, principally for the acquisition of
assets.
Our
general and administrative expenses (which include taxes other than income
taxes) increased 16.0% in 2009 compared to 2008, after increasing 30.1% compared
to 2007. Higher expenses in 2008 were principally the result of increases in
marketing expenses for ad campaigns and customer loyalty-building programs,
system expenses such as licenses and projects, and transportation expenses.
Higher expenses were also incurred in 2009 from increases in professional fees
and system expenses such as licenses and projects.
Depreciation
and Amortization increased 23.9% to US$71.1 million in 2009 from US$57.4 million
in 2008. The increase in 2009 was primarily due to the acquisition of new
buildings.
Provision
for seized assets decreased 94.0% to US$0.1 million in 2009 from US$1.1 million
in 2008. This decrease was due to higher rotation in seizing and sales of
assets. The decrease in 2009 and 2008 of provisions is directly related to a
higher volume of seized assets sales.
Other
expenses decreased 53.2% to US$106.6 million in 2009, after an increase of
195.6% in 2008, compared to 2007. The increase in Other expenses during 2008 was
primarily due to commissions in insurance (US$42.7 million in 2009 compared to
US$39.4 million in 2008) and provision for diverse risks (US$14.4 million in
2009 compared to US$37.5 million in 2008), which primarily included a provision
related to Bernard L. Madoff Investments Securities LLC of US$36.4 million as of
December 31, 2008, net of the effect of the higher provisions in BCP
Bank.
Translation
Result
The
translation result reflects exposure to devaluation of net monetary positions in
Nuevo Soles. We recognized a US$12.2 million translation gain in 2009, US$17.7
million translation loss in 2008, and a US$34.6 million translation gain in
2007. In 2008, translation losses were primarily due to gains recorded from
exposure to the Nuevo Sol which weakened against the U.S. Dollar.
Income
Taxes
We are
not subject to income taxes or taxes on capital gains, capital transfers or
equity or estate duty under Bermuda law. However, some of our subsidiaries are
subject to income tax and taxes on dividends paid to us, depending on the
legislation of the jurisdictions in which they generate income.
Our
Peruvian subsidiaries, including BCP, are subject to corporate taxation on
income under Peruvian tax law. The statutory income tax rate payable in Peru
since 2004 is 30% of taxable income, which includes the result of exposure to
inflation. An additional 4.1% withholding tax is applied on dividends, which we
register as income tax based on the liquid amount received from BCP and
PPS.
Peruvian
tax legislation is applicable to legal entities established in Peru, and on an
individual (not consolidated) basis. Our non-Peruvian subsidiaries are not
subject to taxation in Peru and their assets are not included in the calculation
of the Peruvian extraordinary tax on net assets.
ASHC is
not subject to taxation in Panama since its operations are undertaken offshore.
The Cayman Islands currently have no income, corporation or capital gains tax
and no estate, duty, inheritance or gift tax. Prior to 1995, there was no
corporate income tax in Bolivia. Although there is corporate income tax in
Bolivia, due to BCB’s ability to offset taxes paid other than income taxes from
any income tax liability, no Bolivian income taxes have been
payable.
Tax
expense paid by the subsidiaries increased to US$138.5 million in 2009 from
US$109.5 million in 2008, which increased from US$102.3 million in 2007. Income
tax growth in these periods reflects increases in our taxable income. Since
1994, we have paid the Peruvian income tax at the statutory rate. The effective
tax rates in 2007, 2008 and 2009 were 21.55%, 22.87%, and 21.54%,
respectively.
Total
Assets
As of
December 31, 2009, Credicorp had total assets of US$22.0 billion, increasing
5.8% compared to total assets of US$20.8 billion as of December 31, 2008, with
cash and due from banks increasing 1.9% due to higher amounts maintained with
BCRP in US$0.2 million, investments increasing 3.3% due to market volatility,
and loans, net of provisions, increasing 8.8% due to corporate banking growth.
From December 31, 2008 through December 31, 2009, the Peruvian financial system
grew 0.6% in terms of total loans, comparing balances translated to U.S.
Dollars, while GDP grew 0.9%.
Improved
finances among companies and individuals were supported by a favorable economic
environment during 2006, 2007 and 2008 which sustained increases in loan
placements resulted in significant improvements in loan portfolio quality in
those years (from 1.3% in 2006 to 0.8% in 2007 and further to 0.8% in 2008).
Nevertheless the impact of the international crisis on the Peruvian economy
caused a strong deceleration in the economic activity, slowing down loan growth
and therefore, increasing the past-due loan ratio to 1.6%.
As of
December 31, 2009, our total loans were US$11,585.6 million, which represented
52.6% of total assets, and net of reserves for loan losses, loans were
US$11,231.3 million. As of December 31, 2008, our total loans were US$10,546.4
million, which represented 50.7% of total assets, and net of reserves for loan
losses, loans were US$10,322.0 million. From December 31, 2008 to December 31,
2009 our total loans increased by 9.9%, and net of loan loss reserves increased
by 8.8%.
Our total
deposits with the Central Bank increased from US$2,107.6 million as of December
31, 2009 to US$1,953.0 million as of December 31, 2008. Our securities holdings
(which include marketable securities and investments) increased 3.3% to
US$5,150.4 million on December 31, 2009 from US$4,986.8 million on December 31,
2008. The securities portfolio increase in 2009 was primarily due to higher
investments in corporate, leasing and subordinated bonds and Treasury
bonds.
Total
Liabilities
As of
December 31, 2009, we had total liabilities of US$19.5 billion, a 2.6% increase
from US$19.0 billion as of December 31, 2008. As of December 31, 2009, we had
total deposits of US$14,091.8 million, a 1.0% increase from US$13,950.4 million
on December 31, 2008.
We have
structured our funding strategy around maintaining a diversified deposit base.
As of December 31, 2009, through BCP unconsolidated, we had 41.3% of total
savings deposits in the Peruvian banking system, 40.5% of demand deposits and
34.2% of total deposits, the highest of any Peruvian bank in all three
categories, according to the SBS. An important characteristic of our deposit
base is that, as of December 31, 2009, it included 50.7% of the entire Peruvian
banking system’s CTS deposits, decreasing from 51.9% as of December 31, 2008,
according to our own estimates. We believe that we have traditionally attracted
a high percentage of the savings and CTS deposit market because of our
reputation as a sound institution, an extensive branch network and the quality
of our service. The decrease is due to the fact that new financial institutions
have taken a small market share from BCP for this type of deposit.
(B)
|
Liquidity
and Capital Resources
|
Regulatory
Capital and Capital Adequacy Ratios
|
|
As of December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands, except percentages)
|
|
Capital
stock
|
|
US$
|
539,498 |
|
|
US$
|
539,498 |
|
|
US$
|
528,011 |
|
Legal
and other reserves
|
|
|
587,218 |
|
|
|
770,216 |
|
|
|
1,053,494 |
|
Capital
stock, reserves and retained earnings of minority interest
|
|
|
38,929 |
|
|
|
45,894 |
|
|
|
104,052 |
|
Accepted
provisions for loan losses
|
|
|
82,261 |
|
|
|
104,635 |
|
|
|
114,104 |
|
Subordinated
debt
|
|
|
294,648 |
|
|
|
278,688 |
|
|
|
683,222 |
|
Total
|
|
|
1,542,554 |
|
|
|
1,738,931 |
|
|
|
2,482,883 |
|
Less:
investment in multilateral organizations, banks and insurance companies
and goodwill
|
|
|
(122,387 |
) |
|
|
(134,216 |
) |
|
|
(261,749 |
) |
Total
Regulatory Capital (1)
|
|
|
1,420,167 |
|
|
|
1,604,715 |
|
|
|
2,221,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Entities Capital Ratio
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory
Capital attributable to Financial Entities (1)
|
|
|
1,320,068 |
|
|
|
1,520,318 |
|
|
|
2,033,401 |
|
Risk-Weighted
Assets From Financial Entities (3)
|
|
|
10,313,188 |
|
|
|
12,335,063 |
|
|
|
14,200,280 |
|
Capital
Ratio for Financial Entities (1) / (3)
|
|
|
12.80 |
% |
|
|
12.33 |
% |
|
|
14.32 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum
Regulatory Capital Required (MRCR)(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
MRCR
for Financial Entities (3)
|
|
|
890,643 |
|
|
|
1,122,464 |
|
|
|
1,266,502 |
|
MRCR
for Insurance Entities (3)
|
|
|
112,261 |
|
|
|
137,766 |
|
|
|
149,808 |
|
MRCR
for Other Entities (3)
|
|
|
66,849 |
|
|
|
80,921 |
|
|
|
144,494 |
|
Total
Minimum Regulatory Capital Required
|
|
US$
|
1,069,753 |
|
|
US$
|
1,341,151 |
|
|
US$
|
1,560,804 |
|
Regulatory
capital as percentage of Minimum Regulatory Capital
Required
|
|
|
132.76 |
% |
|
|
119.65 |
% |
|
|
142.31 |
% |
(1)
|
Total
Regulatory Capital and Financial Entities Regulatory Capital is prepared
under the guidelines of the BIS I Accord (by the Basel Committee) as
adopted by the SBS.
|
(2)
|
The
Minimum Regulatory Capital Required, or MRCR, is prepared under the
guidelines of the BIS I Accord (by the Basel Committee) as adopted by the
SBS, and must not exceed from the Total Regulatory Capital calculated. The
consolidated MRCR is calculated by the addition of the MRCR of each one of
the entities.
|
(3)
|
Peruvian
financial entities (BCP, Credileasing and Solución) have a MRCR of 9.5% of
the Risk-Weighted Assets (or RWA). For ASHC (Cayman Islands), the MRCR is
12% of the RWA. For BCB (Bolivia), the MRCR is 10% of the RWA. For the
insurance companies, MRCR is calculated on the basis of the solvency
margin, the guarantee funds and the credit risk. Other entities, with no
MRCR, must be considered by the sum of the capital, reserves and retained
earnings.
|
Liquidity
Risk
We manage
our assets and liabilities to ensure that we have sufficient liquidity to meet
our present and future financial obligations and to be able to take advantage of
appropriate business opportunities as they arise. Liquidity risk represents the
potential for loss as a result of limitations on our ability to adjust future
cash flows to meet the needs of depositors and borrowers and to fund operations
on a timely and cost-effective basis. Financial obligations arise from
withdrawals of deposits, repayment on maturity of purchased funds, extensions of
loans or other forms of credit, and working capital needs.
The
growth of our deposit base over the years has enabled us to significantly
increase our lending activity. BCP is subject to SBS Resolution No. 472-2001,
enacted in June 2001, which made its market risk area responsible for liquidity
management, and by which minimum liquidity ratios were established. The ratio of
liquid assets as a percentage of short-term liabilities, as strictly defined by
the SBS, must exceed 8% for Nuevos Soles-based transactions, and 20% for foreign
exchange-based transactions. BCP’s average daily ratios during the month of
December 2009 were 33.96% and 59.55% for Nuevos Soles and foreign exchange-based
transactions, respectively, demonstrating our continuing excess liquidity. We
have never defaulted on any of our debt or been forced to reschedule any of our
obligations. Even during the early 1980s, when the government of Peru and many
Peruvian companies and banks were forced to restructure their debt as a result
of the Latin American debt crisis and government restrictions, BCP and PPS
complied with all of their payment obligations.
The
capability of replacing interest-bearing deposits at their maturity is a key
factor in determining liquidity requirements, as well as the exposure to
interest and exchange rate risks. Our principal source of funding is customer
deposits with BCP’s retail banking group and ASHC’s private banking group, and
premiums and amounts earned on invested assets at PPS. We believe that funds
from our deposit-taking operations generally will continue to meet our liquidity
needs for the foreseeable future.
BCP’s
retail banking group has developed a diversified and stable deposit base and its
private banking group has developed a stable deposit base that, in each case,
provides us with a low-cost source of funding. This deposit base has
traditionally been one of our greatest strengths. The deposit gathering strategy
has focused on products considered as BCP’s core deposits: demand deposits,
savings, time deposits and CTS deposits. Other sources of funds and liquidity,
which are mostly short- and long-term borrowings from correspondent banks and
other financial institutions, issued bonds, and subordinated debt, are of a
considerably lower significance compared to our core deposits. See Notes 12 and 13 to the
Credicorp Consolidated Financial Statements.
The
following table presents our core deposits, other deposits and other sources of
funds:
|
|
At December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
Core
Deposits:
|
|
|
|
|
|
|
|
|
|
Demand
deposits
|
|
US$
|
3,964,501 |
|
|
US$
|
4,872,277 |
|
|
US$
|
4,556,746 |
|
Savings
deposits
|
|
|
2,380,904 |
|
|
|
2,968,739 |
|
|
|
3,539,665 |
|
Severance
indemnity deposits
|
|
|
896,283 |
|
|
|
1,039,887 |
|
|
|
1,069,506 |
|
Total
core deposits
|
|
US$
|
7,241,688 |
|
|
US$
|
8,880,903 |
|
|
US$
|
9,165,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Deposits:
|
|
|
|
|
|
|
|
|
|
|
|
|
Time
deposits
|
|
|
3,967,864 |
|
|
|
4,856,112 |
|
|
|
4,751,861 |
|
Bank
certificates
|
|
|
90,119 |
|
|
|
140,013 |
|
|
|
120,932 |
|
Total
deposits
|
|
US$
|
11,299,671 |
|
|
US$
|
13,877,028 |
|
|
US$
|
14,038,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
to banks and correspondents
|
|
US$
|
2,314,418 |
|
|
US$
|
2,316,594 |
|
|
US$
|
2,251,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued
bonds
|
|
|
694,982 |
|
|
|
777,390 |
|
|
|
1,273,731 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
sources of funds
|
|
US$
|
14,309,071 |
|
|
US$
|
16,971,012 |
|
|
US$
|
17,563,982 |
|
Core
deposits as a percent of total deposits
|
|
|
64.1 |
% |
|
|
64.0 |
% |
|
|
65.3 |
% |
Core
deposits as a percent of total sources of liquid
funds
|
|
|
50.6 |
% |
|
|
52.3 |
% |
|
|
52.2 |
% |
BCP is
required to keep deposits with the Central Bank as legal reserves, determined as
a percentage of the deposits and other liabilities owed to its clients. The
requirement is currently approximately 6.0% of Nuevos Sole-denominated deposits
and U.S. Dollar-denominated deposits, and an additional reserve requirement of
30% for the U.S. Dollar-denominated deposits. See “Item 4. Information on
the Company—(B) Business Overview—(11) Supervision and Regulation—(ii)
BCP—Central Bank Reserve Requirements.” Legal reserves are meant to ensure the
availability of liquid funds to cover withdrawals of deposits. Additionally, we
have significant investments of excess liquid funds in short-term Central Bank
certificates of deposits.
The
following table presents our deposits at the Central Bank and our investments in
Central Bank certificates:
|
|
At December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
Funds
at Central Bank
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
US$
|
1,798,581 |
|
|
US$
|
1,952,952 |
|
|
US$
|
2,107,635 |
|
Certificates
of deposits
|
|
|
2,164,188 |
|
|
|
1,914,707 |
|
|
|
1,548,715 |
|
BCRP-Repo
Transactions
|
|
|
242,817 |
|
|
|
294,235 |
|
|
|
0 |
|
Total
funds at Central Bank
|
|
US$
|
4,205,586 |
|
|
US$
|
4,161,894 |
|
|
US$
|
3,656,350 |
|
Total
funds at Central Bank of Perú as a percent of total
deposits
|
|
|
37.2 |
% |
|
|
30.0 |
% |
|
|
26.0 |
% |
BCP at
times has accessed Peru’s short-term interbank deposit market, although it is
generally a lender in this market. The Central Bank’s discount window, which
makes short-term loans to banks at premium rates, is also available as a
short-term funding source, but has been used infrequently by BCP. ASHC also has
the ability to borrow from correspondent banks on an overnight basis at
rates tied to the federal funds rate as well as funding lines from international
financial institutions.
On
December 31, 2009, we had uncommitted credit lines with various banks, including
long-term facilities that are mainly used for project financing, of which no
significant amount was drawn down. The long-term facilities include funding from
COFIDE, Corporación Andina de Fomento (or CAF), syndicated loans, and other
international lenders. The transactions relating to these credit lines include
import and export transactions and average annual rates (including Libor) vary
from 0.73% to 12.0%. As of December 31, 2009, we maintain US$1,812.2 million in
such credit lines, secured by the collection of BCP (including its foreign
branches) future inflows from electronic messages sent through the Society for
Worldwide Interbank Financial Telecommunications (SWIFT) network and utilized
within the network to instruct correspondent banks to make a payment of a
certain amount to a beneficiary that is not a financial institution. These funds
have maturities of up to seven years. See Note 13(a) and (b) to the
Credicorp Consolidated Financial Statements. As of December 31, 2009, borrowed
funds due to banks and correspondents amounted to US$2,256.6 million (includes
US$1,089.2 million and US$1,167.4 million, respectively) as compared to
US$2,330.7 million in 2008 (includes US$1,150.7 million and US$1,180.0 million,
respectively) and US$2,323.7 million in 2007 (US$870 million and US$1,453
million, respectively).
In
addition, mortgage loans may be funded by mortgage funding notes and, since
2001, mortgage bonds that are sold by BCP in the market. Mortgage funding notes
are instruments sold by BCP with payment terms that are matched to the related
mortgage loans, thereby reducing BCP’s exposure to interest rate fluctuations
and inflation. Mortgage bonds are mainly U.S. Dollar-denominated and have been
issued with ten-year terms, with collateral established by real estate acquired
through funded home mortgage loans. As of December 31, 2009, BCP had US$10.5
million of outstanding mortgage bonds and notes (US$15.3 million in 2008 and
US$20.7 million in 2007). A source of funds specific to leasing operations are
leasing bonds issued by lease financing companies, the terms of which are
specified in the Peruvian leasing regulations. As of December 31, 2009, BCP had
US$188.3 million of outstanding leasing bonds (US$217.9 million in 2008 and
US$167.3 million in 2007). These bonds have maturities of up to nine years and
bear higher interest than 360-day time deposits (7.11% versus 5.96%). See Note 15 to the Credicorp
Consolidated Financial Statements for a detailed breakdown of our issued
bonds.
The
following table presents our issued bonds:
|
|
Years ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in millions)
|
|
Issued
bonds
|
|
|
|
|
|
|
|
|
|
Corporate
bonds
|
|
US$
|
50.1 |
|
|
US$
|
130.6 |
|
|
US$
|
192.3 |
|
Leasing
bonds
|
|
|
39.6 |
|
|
|
228.4 |
|
|
|
0.0 |
|
Subordinated
bonds
|
|
|
5.0 |
|
|
|
0.0 |
|
|
|
113.8 |
|
Subordinated
debt
|
|
|
161.3 |
|
|
|
0.0 |
|
|
|
250.0 |
|
Total
issuance
|
|
US$
|
256.0 |
|
|
US$
|
359.0 |
|
|
US$
|
556.1 |
|
In
November 2006 and October 2007, BCP, through its Panama branch, issued on the
international market subordinated negotiable certificates notes in the aggregate
amount of US$120.0 million due 2021 and US$161.3 million due 2022. These notes
accrue at a fixed annual interest rate of 6.95% and 7.17%, respectively, for the
first 10 years with interest payments every six months. After the first 10
years, the interest rate will change to a variable interest rate of Libor plus
2.79% and as established by the market interest rate of the Peruvian
government-issued sovereign bonds maturing in 2037 plus 150 basis points,
respectively, with quarterly and semi-annual payments. At the end of the first
10 years, the Bank may redeem 100% of the debt without penalty. These
subordinated debt certificates include certain financial and operating
covenants. In our management’s opinion, BCP is not in violation of any of these
covenants as of the date of the consolidated balance sheet
date.
In
November 2009, BCP through its Panama branch issued Junior Subordinated Notes
for US$250.0 million in the international market with principal maturity on
2069. This debt accrues a fixed annual interest rate of 9.75 percent, for
the first 10 years, with semiannual payments. After the first ten (10)
years, in November 2019, interest rate will become variable, Libor 3 months plus
816.7 basis points, with quarterly payments; at that date and on any interest
payment date, BCP can redeem 100 percent of the notes, without penalties and
after fulfilling certain requirements.
Interest
payments are non-cumulative such that, if an interest payment is not made in
full or cancelled as set forth due to BCP’s rights to cancel interest payments,
a mandatory prohibitions established by SBS, or if determines that BCP is in
non-compliance with applicable minimum regulatory capital; the unpaid interest
will not accrue or be due and payable at any time and shall not constitute an
acceleration event. In those cases, BCP will not, and will not cause its
majority owned subsidiaries to declare, pay or distribute a dividend for a
period of time established since the interest payments are not cancelled. This
debt does not have collateral and qualifies as Tier 1 capital for SBS
regulations.
BCP
Emisiones Latam 1 S.A. issued corporate bonds (Series A) for 2.7 million
“Chilean Unidades de Fomento - UF”. We can redeem 100 percent of the bonds
only if the legal reserve funds legislation and tax law, related to income tax
and value added tax, change in Peru, Panama or Chile. This debt, subject
to foreign exchange risk, has been hedged through CCS; as a result, these bonds
were economically converted to US Dollars
Among the
policies that we follow to ensure sufficient liquidity are the active management
of interest rates and the active monitoring of market trends, in order to
identify and provide for changes in the supply of deposits or the demand for
loans.
The
principal sources of funds for PPS’s insurance operations are premiums and
amounts earned on invested assets. The major uses of these funds are the payment
of policyholder claims, benefits and related expenses, reinsurance costs,
commissions and other operating costs. In general, PPS’s insurance operations
generate substantial cash flow because most premiums are received in advance of
the time when claim payments are required. Positive operating cash flows, along
with that portion of the investment portfolio that is held in cash and highly
liquid securities, historically have met the liquidity requirements of PPS’s
insurance operations.
(C)
|
Research
and Development, Patents and Licenses,
Etc.
|
Not
applicable.
We expect
that 2010 will resume a positive economic trend; however, the international
environment still suggests some uncertainty. In particular, we expect that
financial income will increase, mainly as a result of prioritizing retail
operations with individuals and small companies, as well as improving strategies
followed in 2009. In addition, credit risk is expected to remain low despite
planned positive loan evolution and higher provision due to higher volume of
loan portfolio. Furthermore, we plan to invest mainly in systems in order to
improve our bank’s network to serve clients and optimize processes.
Other
important factors to consider are the pressure on consumer protection regulation
and elections in local, regional and central government authorities, which could
impact our business in Peru.
In
Bolivia, we expect that BCB will maintain its profitability although the
political and economic environment, which involves a high level of uncertainty,
is an important factor in this expectation.
We expect
that in 2010, ASHC will maintain its low-risk investment strategy and overall
good performance as that achieved in 2009. We expect continued growth of the
assets under management, given the high quality service we
offer.
In our
insurance business, we expect to raise the profitability of each product sell in
branches, especially in the retail business. The insurance business continues to
grow and is supported by the continued decrease in loss ratio experienced in the
industry.
(E)
|
Off-Balance
Sheet Arrangements
|
We record
various contractual obligations as liabilities in our financial statements. We
do not recognize other contractual arrangements, such as contingent credits
contracts, as liabilities in our financial statements. These other contractual
arrangements are required to be registered in off-balance sheet accounts. We
enter into these off-balance sheet arrangements in the ordinary course of
business in order to provide support to our clients and hedge some risks in our
balance sheet and use guarantees, letters of credit, derivatives and
swaps.
The
following table reflects our off-balance sheet arrangements as of December 31,
2007, 2008 and 2009:
|
|
Year ended December 31,
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
Contingent
Credits
|
|
|
|
|
|
|
|
|
|
Guarantees
and stand by letters
|
|
US$
|
1,133,476 |
|
|
US$
|
1,506,506 |
|
|
US$
|
2,108,761 |
|
Import
and export letters of credit
|
|
|
431,049 |
|
|
|
249,396 |
|
|
|
419,374 |
|
Sub
Total
|
|
|
1,564,525 |
|
|
|
1,755,902 |
|
|
|
2,528,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Responsibilities
under credit line agreements
|
|
|
1,082,115 |
|
|
|
1,234,964 |
|
|
|
1,557,674 |
|
Forward
and options, net
|
|
|
(331,117 |
) |
|
|
627,600 |
|
|
|
(54,011 |
) |
Swap
contracts (notional amount)
|
|
|
1,446,813 |
|
|
|
2,670,332 |
|
|
|
3,156,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
US$
|
3,762,336 |
|
|
US$
|
6,288,798 |
|
|
US$
|
7,187,811 |
|
In the
normal course of its business, our banking subsidiaries are party to
transactions with off-balance sheet risk. These transactions expose them to
additional credit risks than those amounts recognized in the consolidated
balance sheets.
Credit
risk for off-balance sheet financial instruments is defined as the possibility
of sustaining a loss because any other party to a financial instrument fails to
perform in accordance with the terms of the contract. The exposures to losses
are represented by the contractual amount specified in the related contracts. We
apply the same credit policies in making commitments and conditional obligations
as we do for on-balance sheet instruments (see note 6(a) to the
Credicorp Consolidated Financial Statement), including the requirement to obtain
collateral when necessary. The collateral held varies, but may include deposits
in financial institutions, securities or other assets. Many of the contingent
transactions are expected to expire without any performance being required.
Therefore the total committed amounts do not necessarily represent future cash
requirements.
Credicorp
has currency-forwards derivatives. Currency-forwards are commitments to buy or
sell currency at a future date at a contracted price. Risk arises from the
possibility that the counterparty to the transaction will not perform as agreed
and from the changes in the prices of the underlying currencies. As of December
31, 2009 and 2008, the nominal amounts for forward currency purchase and sale
agreements were approximately US$2,614.4 million and US$2,478.2 million,
respectively, which in general have maturities of less than a year.
These
agreements are entered into to satisfy client requirements and are recognized in
the consolidated financial statements at their fair value. As of December 31,
2009, the forward contracts net position is an overbuy of U.S. Dollars of
approximately US$78.4 million (oversell of approximately US$627.6 million as of
December 31, 2008).
Interest
rate and currency swaps are derivatives contracts, where counterparties exchange
variable interest rates for fixed interest rates or different currencies,
respectively, in the terms and conditions established at the contract inception.
The risk arises each time the projected level of the variable rate during the
term of the contract is higher than the swap rate, as well as from
non-compliance with contractual terms by one of the parties. As of December 31,
2009, the notional amount of open interest rate and currency swap contracts was
approximately US$2,597.1 million (approximately US$2,353.3 million as of
December 31, 2008).
Cross-currency
swap derivative contracts involve the exchange of interest payments based on two
different currency principal balances and referenced interest rates. They
generally also include the exchange of principal amounts at the start and/or end
of the contract. As of December 31, 2009, the notional amount of cross-currency
swap contracts were approximately US$558.9 million (approximately US$317.0
million as of December 31, 2008).
As of
December 31, 2009, the fair values of the asset and liability forward-exchange
contracts and interest rate and cross-currency swaps amounted approximately to
US$97.3 million and US$167.8 million, respectively (approximately US$79.3
million and US$256.8 million as of December 31, 2008) and are included under the
caption “Other assets and other liabilities” of the consolidated balance sheets,
respectively. See Note
11(b) to the Credicorp Consolidated Financial Statements.
Responsibilities
under credit lines agreements include credit lines and other consumer loans
facilities (credit card) and are cancelable upon notification to the
client.
(F)
|
Tabular
Disclosure of Contractual
Obligations
|
Credicorp
enters into various contractual obligations that may require future cash
payments. The following table summarizes our contractual obligations by
remaining maturity as of December 31, 2009. See “Item 4. Information on
the Company—(B) Business Overview—(1) Introduction – Review of
2009.”
|
|
|
|
|
Payments due by period
|
|
|
|
Total at
December 31,
2009
|
|
|
Less than
1 year
|
|
|
1–3 years
|
|
|
3–5 years
|
|
|
More than
5 years
|
|
|
|
(U.S. Dollars in thousands)
|
|
Borrowed
funds
|
|
US$
|
2,140,960 |
|
|
US$
|
938,262 |
|
|
US$
|
588,593 |
|
|
US$
|
330,755 |
|
|
US$
|
283,350 |
|
Promotional
credit lines
|
|
|
81,550 |
|
|
|
4,819 |
|
|
|
16,291 |
|
|
|
12,590 |
|
|
|
47,850 |
|
Interbank
funds
|
|
|
29,031 |
|
|
|
29,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Time
deposits
|
|
|
4,751,861 |
|
|
|
4,519,104 |
|
|
|
147,135 |
|
|
|
82,088 |
|
|
|
3,534 |
|
Operating
lease obligations
|
|
|
62,380 |
|
|
|
12,305 |
|
|
|
18,714 |
|
|
|
13,323 |
|
|
|
18,038 |
|
Total
|
|
US$
|
7,065,782 |
|
|
US$
|
5,503,521 |
|
|
US$
|
770,733 |
|
|
US$
|
438,756 |
|
|
US$
|
352,772 |
|
Borrowed
funds include US$1,089.2 million secured by the collection of BCP’s (including
its foreign branches) future inflows from electronic messages sent through the
Society for Worldwide Interbank Financial Telecommunications network and
utilized within the network to instruct correspondent banks to make a payment of
a certain amount to a beneficiary that is not a financial
institution.
Borrowed
funds also include US$410.0 million obtained from diverse international
financial entities, with maturity due within three years and an interest rate of
Libor plus 0.70% during the first year, Libor plus 0.75% during the second year
and Libor plus 0.85% during the third year. The syndicated loan, subject to
variable interest rate risk, has been hedged through interest rate swap
operations for a notional amount of US$410.0 million with the same
maturities.
Loans
obtained include the obligation to comply with certain covenants which, in our
management’s opinion, are being fulfilled at the consolidated balance sheet
dates.
BCP has
signed an insurance policy with AMBAC Assurance Corporation, which guarantees
the timely payment of scheduled principal and certain accrued interest of all of
the 2006 and 2007 issuances.
Some of
international funds include standard covenants related to financial ratios, use
of funds and other administrative matters. In our management’s opinion, these
covenants do not limit our operations and we have fully complied with them as of
the consolidated balance sheet dates.
Promotional
credit lines include standard covenants related to financial ratios, use of
funds and other administrative matters. In our management’s opinion, these
covenants do not limit our operations and we have fully complied with them as of
the consolidated balance sheet dates.
Our
deposits and obligations are widely diversified with no significant
concentrations.
ITEM
6.
|
DIRECTORS,
SENIOR MANAGEMENT AND EMPLOYEES
|
(A)
|
Directors
and Senior Management
|
Board
of Directors
The
following table sets forth our current directors:
Name
|
|
Position
|
|
Years served as a Director(1)
|
Dionisio
Romero Paoletti
|
|
Chairman
|
|
6
|
Raimundo
Morales
|
|
Vice
Chairman
|
|
2
|
Fernando
Fort
|
|
Director
|
|
28
|
Reynaldo
Llosa
|
|
Director
|
|
27
|
Juan
Carlos Verme
|
|
Director
|
|
20
|
Luis
Enrique Yarur
|
|
Director
|
|
14
|
Felipe
Ortiz de Zevallos
|
|
Director
|
|
5
|
Germán
Suárez
|
|
Director
|
|
5
|
(1)
|
Of
Credicorp, our subsidiaries and their predecessors as of December 31,
2009.
|
Dionisio Romero Paoletti is
the Chairman of the Board of Directors and Chief Executive Officer. He is an
economist from Brown University with a Master’s degree in Business
Administration from Stanford University. Mr. Romero P. has served as a board
member of Banco de Crédito since 2003 and was appointed Vice Chairman in 2008.
Mr. Romero P. has also been the Chairman of Grupo Romero’s companies and has
been Vice Chairman of the Board of Inversiones Centenario and Director of
Cementos Pacasmayo since March 2005. Mr. Romero P. was appointed as Chairman of
our Board and of the Board of Banco de Crédito in March 2009. He is the son of
Mr. Dionisio Romero Seminario.
Raimundo Morales has been the
Vice Chairman of the Board of Directors since April 2008. Prior to being elected
to the Board of Directors, he served as our Chief Operating Officer and General
Manager of BCP, having joined BCP in 1980. Previously, Mr. Morales held various
positions during his ten years at Wells Fargo Bank in its San Francisco, São
Paulo, Caracas, Miami and Buenos Aires offices. His last position was Vice
President for the Southern Region of Wells Fargo. From 1980 to 1987, Mr. Morales
was Executive Vice President in charge of BCP’s wholesale banking group. From
1987 to 1990, he was the General Manager of ASB in Miami. He rejoined BCP as the
General Manager in 1990. Mr. Morales received his Master’s degree in Finance
from the Wharton School of Business in the United States.
Fernando Fort is a lawyer and
partner at the law firm of Fort Bertorini Godoy Pollari & Carcelen Abogados
S.A. Mr. Fort served as a director of Banco de Crédito del Perú from 1979
to 1987 and from March 1990 to the present. Since March 2009, he has served on
our Board of Directors and on the board of directors of ASB, BCB and BCP’s
subsidiaries. Mr. Fort also serves as a director on the Board of
Inversiones Centenario and the boards of various other companies.
Reynaldo Llosa is a business
manager and since August 1995 has been a director on our board of directors and
on the boards of ASB, BCB and BCP’s subsidiaries. He has also been a director of
BCP from 1980 to October 1987 and from March 1990 to the present. Mr. Llosa
is the main partner and general manager of F.N. Jones S.R. Ltda. and serves as a
Director on the boards of various other companies.
Juan Carlos Verme is a
businessman and has served on the Board of Directors since August 1995. He has
served on the board directors of BCP since March 1990 and is also on the board
of directors of ASB, BCB and BCP’s subsidiaries. Mr. Verme is Chairman of
Inversiones Centenario and also serves as a director on the boards of various
other companies. He is a director of the Asamblea General de Asociados del
Patronato del Museo de Arte de Lima.
Luis Enrique Yarur is a
businessman with an undergraduate degree in law and graduate degrees in
economics and management. He has served on the Board of Directors since October
2002 as well as the board of directors of BCP since February 1995. Mr. Yarur is
Chairman of the Board of Empresas Juan Yarur S. A. C., Banco de Crédito e
Inversiones, of Chile, and member of the boards of various other Chilean
companies. He is Vice-President of the Asociación de Bancos e Instituciones
Financieras A. G., a member of the International Advisory Board IESE, España and
director of the Bolsa de Comercio de Santiago.
Felipe Ortiz de Zevallos is
an industrial engineer with a Master’s degree in Management Science from
Rochester University and a degree in Management from Harvard Business School.
Mr. Ortiz de Zevallos has served on the Board of Directors since March 2005. He
also serves as a director on the boards of various other companies, among which
are Grupo Apoyo (where he is the Chairman), Compañía de Minas Buenaventura S.A.
and Universia. From September 2006 until March 2009, Felipe Ortiz de Zevallos
was Peru’s Ambassador to the United States. Prior to becoming Peru’s Ambassador
to the United States, Mr. Zevallos served as the President of Universidad del
Pacífico in Lima (elected for the period 2004-2009).
Germán Suárez is an economist
with a Master’s degree in Economics from Columbia University. Mr. Suárez was
elected to the Board of Directors in March 2005. Mr. Suárez was President and
Chairman of the Board of Banco Central de Reserva del Perú from 1992 to 2001,
and serves as a director on the boards of various other companies, including
Compañía de Minas Buenaventura S.A.
Dawna L.
Ferguson is Credicorp’s Secretary. Fernando Palao was our Assistant Secretary
until December 31, 2009 and Mario Ferrari was appointed as the new Assistant
Secretary. Credicorp’s resident representative in Bermuda is Nicholas G.
Trollope.
Executive
Officers
Pursuant
to Credicorp’s bye-laws, the Board of Directors has the power to delegate its
power over day-to-day management to one or more directors, officers, employees
or agents. The following table sets forth information concerning our principal
executive officers.
Name
|
|
Position
|
|
Years Served as
an Officer(1)
|
Dionisio
Romero P.
|
|
Chief
Executive Officer
|
|
1
|
Walter
Bayly
|
|
General
Manager
|
|
17
|
Alvaro
Correa
|
|
Chief
Financial Officer
|
|
13
|
David
Saettone
|
|
Chief
Insurance Officer
|
|
12
|
|
(1)
|
Of
Credicorp, our subsidiaries and their predecessors as of December 31,
2009.
|
Walter Bayly was named
General Manager of Credicorp and BCP in October 2007, effective April 2008.
Since April 2004, he was Chief Financial Officer and the Executive Vice
President of Planning and Finance of BCP. Previously, Mr. Bayly held various
other management positions within BCP, which included managing the Wholesale
Banking Group as well as other areas of BCP. Mr. Bayly joined BCP in 1993, after
three years at Casa Bolsa México where he was Partner and Managing Director in
Corporate Finance. Prior to that, he was with Citibank in Lima, New York,
México, and Caracas for a period of ten years, where he worked primarily in the
corporate finance and loan syndication groups. Mr. Bayly received a Bachelor’s
degree in Business Administration from Universidad del Pacífico in Lima, Peru,
and a Master’s degree in Management from Arthur D. Little Management in
Cambridge, Massachusetts.
Alvaro Correa was named Chief
Financial Officer and the Executive Vice President of Planning and Finance of
BCP in October 2007, effective April 2008. Mr. Correa is an industrial engineer
from the Pontificia Universidad Católica del Perú. He also holds a Master’s
degree in Business Administration from Harvard Business School. In 1997, he
joined BCP as Retail Risk Manager, later serving as IT Solution Manager under
the Systems and Organization Division. During the last three years, Mr. Correa
served as General Manager of ASB, Credicorp Securities and BCP’s Miami
agency.
David Saettone is Chief
Insurance Officer and the Chief Executive Officer of PPS. He is an economist
with a Master’s degree and Ph.D from Princeton University. He was the General
Manager of BCB and Chief of the Gabinete de Asesores y Unidad de Coordinación de
Préstamos Sectoriales of the Economy and Finance Office, Perú. Mr. Saettone was
also Manager of the BCP’s corporate finance area.
The
aggregate amount of compensation paid to all directors and executive officers
(including our executive officers listed above and four additional executive
officers of BCP) for 2009 was US$12.6 million. We do not disclose to our
shareholders or otherwise make available to the public information as to the
compensation of its individual directors or executive officers.
As
indicated in note 3(w) to the Credicorp Consolidated Financial Statements,
Credicorp has granted stock appreciation rights (SARs) to certain key executives
and employees who have at least one year service to Credicorp or any of our
subsidiaries. At the grant date and in each one of the subsequent three years,
the granted SARs may be exercised up to 25% of all SARs granted in the plan. The
SARs expire after eight years.
The number of outstanding SARs and its
exercise price are as follows:
Year
|
|
Number of Outstanding SARs granted
|
|
|
Exercise price in US$
|
|
2002
|
|
|
52,500 |
|
|
|
5.98 |
|
2003
|
|
|
96,900 |
|
|
|
7.17 |
|
2004
|
|
|
118,750 |
|
|
|
9.99 |
|
2005
|
|
|
155,000 |
|
|
|
15.00 |
|
2006
|
|
|
226,250 |
|
|
|
24.32 |
|
2007
|
|
|
235,785 |
|
|
|
24.32 |
|
2008
|
|
|
262,278 |
|
|
|
24.32 |
|
Credicorp
assumes the payment of the related income tax on behalf of our executives and
employees, which corresponds to 30% of the benefit. Credicorp estimates this
income tax over the basis of the liability recorded for the vested
benefits.
The
liabilities recorded for this plan, including the above-mentioned income tax,
are included in the consolidated balance sheet caption “Other liabilities –
Payroll taxes, salaries and other personnel expenses.” See Note 11(a) to the
Credicorp Consolidated Financial Statements. The expenses are recorded in the
consolidated income statement caption “Personnel expenses.”
During
2007, 2008 and 2009, Credicorp signed several contracts with Citigroup by which
it acquired certificates linked to the yield of our shares See Note 7(b) to the
Credicorp Consolidated Financial Statements.
The
following table sets forth the movement of the SARs for the periods
indicated:
|
|
2009
|
|
|
2008
|
|
|
|
Outstanding
SARs
|
|
|
Vested SARs
|
|
|
Outstanding
SARs
|
|
|
Vested SARs
|
|
|
|
Number
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Number
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
US$(000)
|
|
Balance
as of January 1st
|
|
|
2,215,225 |
|
|
|
1,617,818 |
|
|
|
42,987 |
|
|
|
2,134,650 |
|
|
|
1,537,119 |
|
|
|
89,602 |
|
SAR´s
modification
|
|
|
(451,143) |
|
|
|
(451,143) |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Granted
and vested
|
|
|
- |
|
|
|
366,845 |
|
|
|
19,333 |
|
|
|
665,500 |
|
|
|
576,874 |
|
|
|
9,498 |
|
Exercised
|
|
|
(495,244) |
|
|
|
(495,244) |
|
|
|
(17,761) |
|
|
|
(496,175) |
|
|
|
(496,175) |
|
|
|
(19,734) |
|
Decrease
|
|
|
(121,375) |
|
|
|
- |
|
|
|
- |
|
|
|
(88,750) |
|
|
|
- |
|
|
|
- |
|
Increase
in the option fair value
|
|
|
- |
|
|
|
- |
|
|
|
15,929 |
|
|
|
- |
|
|
|
- |
|
|
|
(36,379) |
|
Balance
as of December 31
|
|
|
1,147,463 |
|
|
|
1,038,276 |
|
|
|
60,488 |
|
|
|
2,215,225 |
|
|
|
1,617,818 |
|
|
|
42,987 |
|
The
following table sets forth the number of SARs vested and the price of such SARs
for the periods indicated:
|
|
Number
of outstanding SARs
as of
December 31, 2009
|
|
|
Number of Vested SARs
as of December 31
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
- |
|
|
|
- |
|
|
|
60,000 |
|
|
|
US$
4.30
|
|
|
|
US$
4.80
|
|
2002
|
|
|
52,500 |
|
|
|
52,500 |
|
|
|
60,000 |
|
|
|
5.98 |
|
|
|
6.48 |
|
2003
|
|
|
96,900 |
|
|
|
96,900 |
|
|
|
134,900 |
|
|
|
7.17 |
|
|
|
7.67 |
|
2004
|
|
|
118,750 |
|
|
|
118,750 |
|
|
|
185,950 |
|
|
|
9.99 |
|
|
|
10.49 |
|
2005
|
|
|
155,000 |
|
|
|
155,000 |
|
|
|
241,700 |
|
|
|
15.00 |
|
|
|
15.50 |
|
2006
|
|
|
226,250 |
|
|
|
226,250 |
|
|
|
327,784 |
|
|
|
24.32 |
|
|
|
24.82 |
|
2007
|
|
|
235,785 |
|
|
|
214,831 |
|
|
|
320,859 |
|
|
|
24.32 |
|
|
|
48.00 |
|
2008
|
|
|
262,278 |
|
|
|
174,045 |
|
|
|
286,625 |
|
|
|
24.32 |
|
|
|
72.04 |
|
|
|
|
1,147,463 |
|
|
|
1,038,276 |
|
|
|
1,617,818 |
|
|
|
|
|
|
|
|
|
On April,
2009, Credicorp implemented a new share base payment plan for certain key
executives and employees. Under the new plan, Credicorp shares will be granted
to certain key executives and employees who have at least one year of service to
Credicorp or any of our subsidiaries. Beginning on April 28, 2009, and in
each of the subsequent three years thereafter, granted shares will be vested up
to 33.3% of all granted shares. Credicorp also determined that SARs
granted until December 2008 under the prior SARs program (as explained above)
will remain in force, with certain modifications, until they
expire.
Credicorp’s
management is the responsibility of its Board of Directors, which, pursuant to
Credicorp’s bye-laws, is comprised of eight members. Directors need not be
shareholders. Directors are elected and their remuneration is determined at
Annual General Shareholders’ Meetings. Directors hold office for three-year
terms. The date of expiration of our current Board of Directors is March 31,
2011. Our current directors have no benefits in addition to the remuneration
agreed at the Annual General Shareholders’ Meetings. They also do not have any
benefits that could be enjoyed at the termination of their service
terms.
Pursuant
to Credicorp’s bye-laws, the required quorum for business to take place during a
Board meeting shall be a majority of the Directors of the Company. The Board has
the power to appoint any person as Director to fill a vacancy on the Board for
the remainder of the period as a result of the death, disability,
disqualification or resignation of any Director. A resolution in writing signed
by all Directors shall be as valid as if had been passed at a meeting duly
called and constituted
Credicorp’s
audit committee is responsible for assisting in the recommendation of
independent auditors to be appointed at the Annual General Shareholders’ Meeting
and reviewing the scope of internal and external audits. The Audit Committee
also reviews compliance with internal control systems, reviews our annual and
quarterly financial statements before their presentation to regulatory bodies
and maintains the integrity of the preparation of audits. The current members of
the Audit Committee are Mr. Reynaldo Llosa (Chairman) and Mr. Germán Suárez
(financial expert), who designated Mr. Benedicto Cigüeñas as
advisor.
The Audit
Committee has also been assigned by the Board of Directors to oversee the
internal audit departments at all its subsidiaries.
On
December 31, 2009, Credicorp had 20,148 full time employees, distributed as set
forth in the following table:
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(Full-time employees)
|
|
BCP
|
|
|
9,593 |
|
|
|
11,654 |
|
|
|
16,748 |
|
PPS
|
|
|
1,665 |
|
|
|
2,306 |
|
|
|
2,567 |
|
ASHC
|
|
|
65 |
|
|
|
73 |
|
|
|
74 |
|
Prima
AFP
|
|
|
1,464 |
|
|
|
1,015 |
|
|
|
750 |
|
Others
|
|
|
350 |
|
|
|
430 |
|
|
|
9 |
|
Total
Credicorp
|
|
|
13,137 |
|
|
|
15,478 |
|
|
|
20,148 |
|
All bank
employees in Peru are given the option of belonging to an employee union. These
employee unions are collectively represented by the Federación de Empleados
Bancarios (the Federation of Banking Employees or FEB). In order to negotiate a
collective agreement on behalf of its members, FEB must have as members over 50%
of all Peruvian banking employees. Because the representation of banking
employees members of FEB declined to below 50%, the most recent collective
bargaining agreement, which expired on June 30, 1995, was not
renewed.
BCP was
granted permission by the Peruvian Ministry of Labor to cancel the registration
of BCP’s union in 1996 due to limited participation. As of December 31, 2009, no
BCP employees belonged to a union. The last strike by union employees occurred
in 1991 and did not interfere with BCP’s operations.
As of
February 5, 2010, the Romero family owned 14.17 million (15.01%) of our common
shares. While Mr. Luis Enrique Yarur does not individually own in excess of 1%
of Credicorp's shares, he is a controlling shareholder of Banco de Chile e
Inversiones (BCI), which owns 1.67 million ( 1.77%) of Credicorp’s common
shares. None of our other directors or executive officers beneficially own more
than 1% of our common shares. See “Item 7. Major
Shareholders and Related Party Transactions—(A) Major Shareholders.” Other
members of the Board of Directors that own our common shares are Mr. Raimundo
Morales, Mr. Fernando Fort, Mr. Reynaldo Llosa, Mr. Juan Carlos Verme, Mr.
Felipe Ortiz de Zevallos and Mr. Germán Suárez. Each of these directors own less
than 1% of our total outstanding common shares.
ITEM
7.
|
MAJOR
SHAREHOLDERS AND RELATED PARTY
TRANSACTIONS
|
As of
December 31, 2009, Credicorp had issued 94,382,317 common shares, of which
14,620,845 were held by ASHC. Under Bermuda law, ASHC has the right to vote the
common shares it owns. In order to restructure long term holdings, substantially
all of our common shares held by BCP and PPS were transferred to ASHC in April
2004.
The table
below provides details about the percentage of Credicorp’s common shares owned
by holders of 5% or more of our total common shares, as of February 5,
2010.
Owner
|
|
Common Shares
|
|
|
Percent of Class(1)
|
|
Atlantic
Security Holding Corporation (2)
|
|
|
14,620,845 |
|
|
|
15.49% |
|
Romero
family (3)
|
|
|
14,167,331 |
|
|
|
15.01% |
|
AFP
Integra
|
|
|
6,635,516 |
|
|
|
7.03% |
|
Prima
AFP
|
|
|
5,657,373 |
|
|
|
5.99% |
|
(1)
As a percentage of issued and outstanding shares (including shares held by
ASHC).
(2)
As of February 5, 2010, Atlantic Security Bank (a subsidiary of ASHC) held
4,398,289 shares of Credicorp on behalf of clients as part of the Private
Banking Services that ASB provides, and which shares are purchased or sold based
on client instruction. Clients can decide at any time to exercise their voting
power in any Shareholders’ Meeting. ASB does not have the power to dispose
of these shares. Because the shares are held by ASB on behalf of clients,
which have the power to vote the shares, ASHC disclaims beneficial ownership of
the shares
(3)
Includes common shares directly or indirectly owned by Dionisio Romero Paoletti
and his family or companies owned or controlled by him. Mr. Romero P. is the
Chairman of the Board.
Approximately
18.19% of Credicorp’s total issued and outstanding common shares are currently
held in 2,774 individual accounts with Cavali, a Peruvian securities clearing
company.
As of
February 5, 2010, 79,761,472 of common shares of Credicorp (excluding the
14,620,845 shares held by ASHC) were outstanding, of which approximately 64.48%
were held in the United States. There were approximately 78 registered holders
of Credicorp’s common shares in the United States. Because many of these common
shares were held by brokers or other nominees, and because of the
impracticability of obtaining accurate residence information for all beneficial
shareholders, the number of registered holders in the United States is not a
representative figure of the beneficial holders or of the residence of
beneficial holders. Credicorp is neither directly nor indirectly controlled by
another corporation or by any foreign government.
(B)
|
Related
Party Transactions
|
Under
Bermuda law, Credicorp is not subject to any restrictions on transactions with
affiliates, other than such restrictions as are applicable to Bermuda companies
generally. Credicorp’s bye-laws provide that a director may not vote with
respect to any contract or proposed contract or arrangement in which that
director has an interest or a conflict of interest. Credicorp has not engaged in
any transactions with related parties except through our
subsidiaries.
Credicorp’s
consolidated financial statements as of December 31, 2007, 2008 and 2009 include
transactions with related parties. For its 2007, 2008 and 2009 consolidated
financial statements, Credicorp defines related parties as (i) related
companies, (ii) its Board of Directors, (iii) its key executives (defined as the
management of our holdings) and (iv) enterprises that are controlled by these
individuals or entities through majority shareholding or their role as chairman
or principal executive officer in those companies.
The
following table shows Credicorp’s main transactions with related companies as of
December 31, 2007, 2008 and 2009.
|
|
Related companies
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
(U.S. Dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
loans
|
|
US$
|
94,102 |
|
|
US$
|
143,855 |
|
|
US$
|
214,182 |
|
Investments
available-for-sale
|
|
|
90,396 |
|
|
|
63,782 |
|
|
|
92,747 |
|
Deposits
|
|
|
31,689 |
|
|
|
34,669 |
|
|
|
82,051 |
|
Contingent
credits
|
|
|
14,026 |
|
|
|
23,574 |
|
|
|
20,122 |
|
Interest
income related to loans
|
|
|
2,288 |
|
|
|
2,889 |
|
|
|
4,896 |
|
Interest
expense related to deposits
|
|
|
2,009 |
|
|
|
2,669 |
|
|
|
1,680 |
|
Trading
securities
|
|
|
1,673 |
|
|
|
1 |
|
|
|
2 |
|
Derivatives
at fair value
|
|
|
386 |
|
|
|
4,179 |
|
|
|
(283 |
) |
Other
income
|
|
US$
|
1,192 |
|
|
US$
|
2,533 |
|
|
US$
|
1,196 |
|
Credicorp
made these loans, contingent operations and derivative contracts with related
parties in the ordinary course of business and in accordance with the normal
market terms available to other customers. Outstanding loan balances at the
year-end are granted by collateral given by the related party. The loans to
related companies as of December 31, 2009 have maturity dates ranging between
January 2010 and November 2018 and an accrued annual interest average of 5.5%
(and as of December 31, 2008 had a maturity between February 2009 and July 2017
and an accrued annual interest average of 7.98%). As of December 31, 2009, there
was no provision for doubtful debts due to related parties (US$1.2 million as of
December 31, 2008 and US$0.2 million as of December 31, 2007). This amount is
established based on an assessment performed on a continuous basis on the
financial position of the related party and the market in which it operates. The
increase registered in 2009 in relation to the level of direct loans in 2008 was
mainly explained by additional financing granted to five entities Agrícola del
Chira S.A., Centro Empresarial El Derby S.A., Inversiones Centenario S.A.,
Alicorp S.A. y Sucroalcolera del Chira S.A.
As of
December 31, 2007, 2008 and 2009, Credicorp’s directors, officers and employees
had been involved, directly and indirectly, in credit transactions with certain
subsidiaries, as permitted by Peruvian Law No. 26702. This law regulates and
limits certain transactions with employees, directors and officers of banks and
insurance companies in Peru. As of December 31, 2007, 2008 and 2009, direct
loans to employees, directors and key management of Credicorp amounted to
US$85.1 million, US$116.3 million and US$133.3 million, respectively. These
loans are paid monthly and earn interest at rates that are similar to market
rates for comparable loans.
Credicorp
does not grant directors or key personnel loans that are guaranteed with its
shares or shares of its other companies.
Credicorp’s
key executives’ compensation as of December 31, 2007, 2008 and 2009 was
comprised of the following:
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
|
|
|
(U.S. Dollars in
thousands)
|
|
|
|
|
Stock
appreciation rights
|
|
|
27,113 |
|
|
|
27,362 |
|
|
|
4,720 |
|
Salaries
|
|
|
5,535 |
|
|
|
5,625 |
|
|
|
4,717 |
|
Director
compensation
|
|
|
1,162 |
|
|
|
1,303 |
|
|
|
1,698 |
|
Other
|
|
|
12,947 |
|
|
|
8,209 |
|
|
|
1,415 |
|
Total
|
|
|
46,757 |
|
|
|
42,499 |
|
|
|
12,550 |
|
Our key
executives’ compensation comprises all the payments received by them, including
the taxes that we assumed.
(C)
|
Interests
of Experts and Counsel
|
Not
applicable.
ITEM
8.
|
FINANCIAL
INFORMATION
|
(A)
|
Consolidated
Statements and Other Financial
Information
|
Consolidated
Financial Statements
See “Item 18. Financial
Statements.”
Legal
Proceedings
We, along
with our subsidiaries, are involved in certain legal proceedings that arise in
the normal course of conducting business. We do not believe that any liabilities
that may result from such proceedings would have a material adverse effect on
our financial condition or results of operations, or on the financial condition
or results of operations of any of our subsidiaries.
Government
Investigations
Neither
we, nor any of our subsidiaries, are involved in any government
investigation.
Pursuant
to Bermuda law, we may declare and pay dividends from time to time so long as
after payment of the dividends: (i) we are able to pay our liabilities as they
become due, and (ii) the realizable value of our assets is not less than the
aggregate value of our liabilities, issued share capital, and share premium
accounts. We cannot make any assurances as to the amount of any dividends or as
to whether any dividends will be paid at all, although we currently intend to
declare and pay dividends annually, and our Board of Directors currently expects
to authorize the payment of an annual dividend to the shareholders of no less
than 25% of our consolidated net profits. However, our payment of dividends is
subject to Bermuda law and to the discretion of our Board of Directors. The
Board’s decision will depend on (i) general business conditions, (ii) our
financial performance, (iii) the availability of dividends from our subsidiaries
and any restrictions on their payment, and (iv) other factors that the Board may
deem relevant.
We rely
almost exclusively on dividends from our subsidiaries for the payment of our
corporate expenses and for the distribution of dividends to holders of our
common shares. Subject to certain reserve and capital adequacy requirements
under applicable banking and insurance regulations, we are able to cause our
subsidiaries to declare dividends. To the extent our subsidiaries do not have
funds available or are otherwise restricted from paying us dividends, our
ability to pay dividends on our common shares will be adversely affected.
Currently, there are no restrictions on the ability of BCP, ASHC, PPS, or any of
our other subsidiaries to pay dividends abroad. In addition, BCP and PPS intend
to declare and pay dividends in Nuevos Soles, while we intend to declare and pay
dividends in U.S. Dollars. If the value of the Nuevo Sol falls relative to the
U.S. Dollar between the date of declaration and the date of payment of
dividends, the value of the dividends we pay would be adversely affected. See “Item 3. Key
Information—(A) Selected Financial Data—Exchange Rates.”
The
following table shows cash and stock dividends that we paid in the periods
indicated:
|
|
Number of Shares Entitled
to Dividends
|
|
|
|
|
|
Stock
Dividends
Per Share
|
|
1999
|
|
|
94,382,317 |
|
|
|
US$
0.20
|
|
|
|
0.00
|
|
2000
|
|
|
94,382,317 |
|
|
|
US$
0.10
|
|
|
|
0.00
|
|
2001
|
|
|
94,382,317 |
|
|
|
US$
0.10
|
|
|
|
0.00
|
|
2002
|
|
|
94,382,317 |
|
|
|
US$
0.40
|
|
|
|
0.00
|
|
2003
|
|
|
94,382,317 |
|
|
|
US$
0.30
|
|
|
|
0.00
|
|
2004
|
|
|
94,382,317 |
|
|
|
US$
0.40
|
|
|
|
0.00
|
|
2005
|
|
|
94,382,317 |
|
|
|
US$
0.80 |
|
|
|
0.00
|
|
2006
|
|
|
94,382,317 |
|
|
|
US$
1.10 |
|
|
|
0.00
|
|
2007
|
|
|
94,382,317 |
|
|
|
US$
1.30 |
|
|
|
0.00
|
|
2008
|
|
|
94,382,317 |
|
|
|
US$
1.50 |
|
|
|
0.00
|
|
2009
|
|
|
94,382,317 |
|
|
|
US$
1.70 |
|
|
|
0.00
|
|
On
February 24, 2010, our Board of Directors declared a cash dividend of US$1.70
per common share held at the close of business on April 16, 2010. This dividend
was distributed on May 11, 2010.
ITEM
9.
|
THE
OFFER AND LISTING
|
(A)
|
Offer
and Listing Details
|
Price
History of Credicorp’s Stock
Our
common shares have been traded on the New York Stock Exchange since
October 25, 1995 under the symbol BAP. Our common shares also trade on the
Lima Stock Exchange. They are quoted in U.S. Dollars on both the New York Stock
Exchange and the Lima Stock Exchange. The table below sets forth, for the
periods indicated, the reported high and low closing prices and average daily
trading volume for our common shares on the New York Stock
Exchange.
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
US$
28.81 |
|
|
|
US$
14.41 |
|
|
|
82,338 |
|
2006
|
|
|
US$
45.42 |
|
|
|
US$
21.88 |
|
|
|
176,388 |
|
2007
|
|
|
US$
76.81 |
|
|
|
US$
38.04 |
|
|
|
279,602 |
|
2008
|
|
|
US$
86.19 |
|
|
|
US$
30.23 |
|
|
|
399,661 |
|
2009
|
|
|
US$
78.35 |
|
|
|
US$
32.91 |
|
|
|
359,807 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
First
quarter
|
|
|
US$
80.25 |
|
|
|
US$
69.99 |
|
|
|
366,249 |
|
Second
quarter
|
|
|
US$
86.19 |
|
|
|
US$
75.01 |
|
|
|
340,571 |
|
Third
quarter
|
|
|
US$
81.33 |
|
|
|
US$
55.64 |
|
|
|
421,241 |
|
Fourth
quarter
|
|
|
US$
60.68 |
|
|
|
US$
30.23 |
|
|
|
469,019 |
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
First
quarter
|
|
|
US$
53.02 |
|
|
|
US$
34.58 |
|
|
|
503,904 |
|
Second
quarter
|
|
|
US$
61.52 |
|
|
|
US$
45.83 |
|
|
|
408,861 |
|
Third
quarter
|
|
|
US$
76.26 |
|
|
|
US$
54.81 |
|
|
|
264,382 |
|
Fourth
quarter
|
|
|
US$
78.35 |
|
|
|
US$
66.70 |
|
|
|
269,604 |
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
First
quarter
|
|
|
US$
86.48 |
|
|
|
US$
70.46 |
|
|
|
205,535 |
|
Second
quarter (through June 14)
|
|
|
US$
93.22 |
|
|
|
US$
78.39 |
|
|
|
225,722 |
|
The table
below sets forth, for the periods indicated, the reported high and low closing
prices and average daily trading volume for our common shares on the Lima Stock
Exchange.
|
|
|
|
|
|
|
|
|
|
|
|
(U.S. Dollars)
|
|
2005
|
|
|
28.99 |
|
|
|
14.33 |
|
|
|
15,744 |
|
2006
|
|
|
45.58 |
|
|
|
38.27 |
|
|
|
16,950 |
|
2007
|
|
|
76.48 |
|
|
|
38.24 |
|
|
|
22,553 |
|
2008
|
|
|
86.00 |
|
|
|
31.01 |
|
|
|
15,386 |
|
2009
|
|
|
77.95 |
|
|
|
33.21 |
|
|
|
11,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
First
quarter
|
|
|
80.12 |
|
|
|
70.00 |
|
|
|
10,460 |
|
Second
quarter
|
|
|
84.80 |
|
|
|
73.54 |
|
|
|
12,763 |
|
Third
quarter
|
|
|
81.50 |
|
|
|
56.20 |
|
|
|
17,033 |
|
Fourth
quarter
|
|
|
60.40 |
|
|
|
31.01 |
|
|
|
20,598 |
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
First
quarter
|
|
|
53.10 |
|
|
|
34.90 |
|
|
|
16,530 |
|
Second
quarter
|
|
|
61.59 |
|
|
|
45.75 |
|
|
|
12,652 |
|
Third
quarter
|
|
|
75.71 |
|
|
|
54.54 |
|
|
|
7,704 |
|
Fourth
quarter
|
|
|
77.95 |
|
|
|
67.41 |
|
|
|
10,599 |
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
First
quarter
|
|
|
86.60 |
|
|
|
70.86 |
|
|
|
10,624 |
|
Second
quarter (through June 14)
|
|
|
93.00 |
|
|
|
78.50 |
|
|
|
5,535 |
|
The table
below sets forth, for the indicated months, the reported high and low closing
prices for our common shares on the New York Stock Exchange.
|
|
|
|
|
|
|
|
|
(U.S. Dollars)
|
|
2009
|
|
|
|
|
|
|
December
|
|
|
75.53 |
|
|
|
71.25 |
|
2010
|
|
|
|
|
|
|
|
|
January
|
|
|
77.08 |
|
|
|
70.46 |
|
February
|
|
|
77.47 |
|
|
|
71.41 |
|
March
|
|
|
86.48 |
|
|
|
77.03 |
|
April
|
|
|
90.37 |
|
|
|
85.93 |
|
May
|
|
|
89.40 |
|
|
|
78.39 |
|
June
(through June 14)
|
|
|
93.22 |
|
|
|
87.58 |
|
The table
below sets forth, for the indicated months, the reported high and low closing
prices for our common shares on the Lima Stock Exchange.
|
|
|
|
|
|
|
|
|
(U.S. Dollars)
|
|
2009
|
|
|
|
|
|
|
December
|
|
|
74.92 |
|
|
|
70.95 |
|
2010
|
|
|
|
|
|
|
|
|
January
|
|
|
76.76 |
|
|
|
70.86 |
|
February
|
|
|
77.33 |
|
|
|
71.83 |
|
March
|
|
|
86.60 |
|
|
|
76.99 |
|
April
|
|
|
90.00 |
|
|
|
85.45 |
|
May
|
|
|
88.60 |
|
|
|
78.50 |
|
June
(through June 14)
|
|
|
93.00 |
|
|
|
87.60 |
|
On June
14 2010, the last sale price of our common shares on the New York Stock Exchange
was US$92.95 per share. On June 14, 2010, the closing price of our common shares
on the Lima Stock Exchange was US$93.00.
Not
applicable.
The
Lima Stock Exchange
As of
December 2009, there were 257 companies listed on the Bolsa de Valores de Lima
(Lima Stock Exchange). The Lima Stock Exchange is Peru’s only securities
exchange and was established in 1970. Trading on the Lima Stock Exchange is
primarily done on an electronic trading system that became operational in August
1995. Trading hours are Monday through Friday as follows:
9:00 a.m.-9:30 a.m. (pre-market ordering);
9:30 a.m.-1:30 p.m. (trading); and 1:30 p.m.-2:00 p.m. (after
market sales). Equity securities may also be traded in an open outcry auction
floor session, which was the exclusive method of trading equity securities prior
to the introduction of electronic trading. Nearly 100% of all transactions on
the Lima Stock Exchange currently take place on the electronic
system.
Transactions
during both the open outcry and the electronic sessions are executed through
brokerage firms and stock brokers on behalf of their clients. Brokers submit
their orders in strict accordance with written instructions, following the
chronological order in which they were received. The orders specify the type of
security ordered or offered as well as the amounts and the price of the sale or
purchase. In general, share prices are permitted to increase or decrease up to
15% for Peruvian companies, and up to 30% for foreign companies, within a single
trading day.
The
Peruvian stock market capitalization increased, in U.S. Dollar terms, by 80.0%
in 2005, 65.8% in 2006, and 80.3% in 2007. It decreased by 47.1% in 2008
as a result of the global economic crisis. It rebounded in 2009, growing by
87.5%, although it did not return to the record highs set in October 2007.
Traded
volume in 2009 was considerably lower than in 2007-2008, and was quite close to
the 2006 figure. The accumulated total for 2009 was US$5,710 million, with 70.1%
relating to cash trading in equity securities, 18.6% to cash trading in
fixed-income securities, 11.0% to repo transactions, 0.1% to primary placements,
and the remaining 0.1%, to securities lending.
The
Indice General de la Bolsa de Valores de Lima (the General Index of the Lima
Stock Exchange or IGBVL) increased, in U.S. dollar terms, 60.5% in 2004, 24.6%
in 2005, 186.9% in 2006, and 45.6% in 2007. It decreased 61.5% in 2008, but
increased 101.0% in 2009.
The
Securities Market Law (Legislative Decree 861) addresses matters such as
transparency and disclosure, takeovers and corporate actions, capital market
instruments and operations, the securities markets and broker-dealers, and risk
rating agencies. CONASEV, a governmental entity reporting to Peru’s Ministry of
Economy and Finance, was given additional responsibilities relating to the
supervision, regulation, and development of the securities market, while the
Lima Stock Exchange and its member firms were given the status of
self-regulatory organizations. Additionally, a unified system of guarantees and
capital requirements was established for the Lima Stock Exchange and its member
firms.
CONASEV
is governed by a nine-member board appointed by the government. CONASEV has
broad regulatory powers. These powers include studying, promoting, and making
rules for the securities market, supervising its participants, and approving the
registration of public offerings of securities.
CONASEV
supervises the securities markets and the dissemination of information to
investors. It also (i) governs the operations of the Public Registry of
Securities and Brokers, (ii) regulates mutual funds and their management
companies, (iii) monitors compliance with accounting regulations by companies
under its supervision as well as the accuracy of financial statements and (iv)
registers and supervises auditors who provide accounting services to those
companies under CONASEV’s supervision.
On August
22, 1995, CONASEV approved regulations governing the public offering of
securities in Peru by entities organized outside of Peru and, for the first
time, authorized foreign companies to be listed on the Lima Stock Exchange. On
October 25, 1995, we became the first non-Peruvian company to list our shares on
the Lima Stock Exchange. See “Item 4. Information on
the Company—(B) Business Overview—(11) Supervision and Regulation.”
Pursuant
to the Securities Market Law, the Lima Stock Exchange must maintain a guarantee
fund that is funded by its member firms. The actual contributions to be made by
the 21 member firms of the Lima Stock Exchange are based on volume traded over
the exchange. At present, the fund has approximately S/.28 million (US$9.75
million). In addition to the guarantee fund managed by the Lima Stock Exchange,
each member firm is required to maintain a guarantee for operations carried on
outside the exchange in favor of CONASEV. Such guarantees are generally
established through stand-by letters of credit issued by local
banks.
Not
applicable.
Not
applicable.
(F)
|
Expenses
of the issue
|
Not
applicable.
ITEM
10.
|
ADDITIONAL
INFORMATION
|
Not
applicable.
(B)
|
Memorandum
and Articles of Association
|
“Item 10.
Additional Information—Memorandum and Articles of Incorporation” from our Annual
Report on Form 20-F dated June 27, 2003 is incorporated herein by
reference.
At our
Annual General Shareholders’ Meeting held on March 31, 2005, we adopted an
amendment to our bye-laws that increased the number of our directors from six to
eight. In addition, we also removed provisions that established a classified
board structure with staggered terms, adopting instead fixed three-year terms to
be served until the end of the Annual General Shareholders’ Meeting for the year
in which the three-year period expires. These amendments were primarily adopted
to give more stability to our administration and to give AFPs, whose ownership
of our common shares has steadily increased (see “Item 7. Major
Shareholders and Related Party Transactions—(A) Major Shareholders”), direct
representation on our Board of Directors. Directors were also elected to two
newly created directorships to represent pension funds.
As of the
date hereof, we have not, nor have our subsidiaries, entered into any material
contracts.
We have
been designated as a non-resident for Bermuda exchange control purposes, and
therefore, there are no restrictions on our ability to transfer non-Bermuda
funds in and out of Bermuda or to pay dividends to United States residents who
are holders of our common shares.
We rely
almost exclusively on dividends from BCP, ASHC, PPS, and our other subsidiaries
for the payment of dividends to holders of our common shares. To the extent our
subsidiaries are restricted by law from paying us dividends, our ability to pay
dividends on our common shares will be adversely affected.
In
addition, we present our financial statements and pay dividends in U.S. Dollars.
BCP and PPS prepare their financial statements and pay dividends in Nuevos
Soles. If the value of the Nuevo Sol were to fall relative to the U.S. Dollar
between the date of declaration and the date of payment of dividends, the value
of the dividends we receive from our subsidiaries would be adversely affected.
On an overall basis, the Peruvian currency has appreciated against the US.
Dollar during the last decade.
Although
substantially all of the customers of BCP, ASHC and PPS are located in Peru, as
of December 31, 2009, approximately 59% of BCP’s loan portfolio, 100% of
ASHC’s loan portfolio, and 88.6% of PPS’s premiums were denominated in U.S.
Dollars. Most of the borrowers or insureds of these three companies use Nuevo
Soles. Therefore, a devaluation of the Nuevo Sol would effectively increase the
cost to the borrower of repaying its loans and the cost to the insured of making
its premium payments. As a result, devaluation could lead to more nonperforming
loans or unpaid premiums for BCP, ASHC and PPS.
One
circumstance that could lead to a devaluation is a decline in Peruvian foreign
reserves to inadequate levels. Although the current level of Peru’s foreign
reserves compares favorably with those of other Latin American countries, there
can be no assurance that Peru will be able to maintain adequate foreign reserves
to meet its foreign currency-denominated obligations or that Peru will not
devalue its currency should its foreign reserves decline. See “Item 4. Information on
the Company—(B) Business Overview—(9) Peruvian Government and
Economy.”
Since
March 1991, there have been no exchange rate controls in Peru and all foreign
exchange transactions are based on free market exchange rates. Current Peruvian
regulations on foreign investment allow the foreign holders of equity shares of
Peruvian companies to receive and repatriate 100% of the cash dividends
distributed by the company. These investors are allowed to purchase foreign
exchange at free market exchange rates through any member of the Peruvian
banking system.
At the
present time, there is no Bermuda income or profits tax, withholding tax,
capital gains tax, capital transfer tax, estate duty, or inheritance tax that we
must pay or our shareholders must pay with respect to their shares. We have
obtained an assurance from the Minister of Finance of Bermuda under the Exempted
Undertakings Tax Protection Act 1966 that, in the event that any legislation is
enacted in Bermuda imposing any tax on profits or income, or on any capital
asset, gain, or appreciation or any tax in the nature of an estate duty or
inheritance tax, such tax shall not, until March 28, 2016, be applicable to us
or to any of our operations or to our shares, debentures, or other obligations.
This assurance, however, does not cover any tax applicable to persons ordinarily
resident in Bermuda or to any taxes that we must pay with respect to real
property that we own or lease in Bermuda.
As an
exempted company, we are liable to pay in Bermuda an annual government fee based
upon our authorized share capital and the premium on our issued common shares,
which amounted to approximately US$18,670 in 2009.
(F)
|
Dividends
and Paying Agents
|
Not
applicable.
Not
applicable.
The
documents referred to in this Annual Report are available for inspection at our
registered office.
(I)
|
Subsidiary
Information
|
Not
applicable.
ITEM
11.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
By their
nature, our activities involve principally the use of financial instruments,
including derivatives. We accept deposits from customers at both fixed and
floating rates for various periods and seek to earn above-average interest
margins by investing these funds in high-quality assets. We seek to
increase these margins by consolidating short-term funds and lending for longer
periods at higher rates, while maintaining sufficient liquidity to meet all
claims that might fall due.
We also
seek to raise interest margins by obtaining above-average market margins, net of
allowances, through lending to commercial and retail borrowers with a range of
credit products. Such exposures involve not only on-balance sheet loans
and advances; the Group also enters into guarantees and other commitments such
as letters of credit and performance.
We also
take positions in traded and over-the-counter instruments, including
derivatives, to take advantage of short-term market movements in equities,
bonds, currency and interest rates.
In this
sense, risk is inherent in our activities but it is managed through a process of
ongoing identification, measurement, and monitoring, subject to risk limits and
other controls. This process of risk management is critical to our
continuing profitability, and each individual within our company is accountable
for the risk exposures relating to his or her responsibilities. We are
exposed to operating risk, credit risk, liquidity risk, and market risk, the
latter being subdivided into trading and non-trading risk.
The
independent risk control process does not include business risks such as changes
in the environment, technology, or industry. These risks are monitored
through our strategic planning process.
Risk
Management Structure
Our board
of directors and the boards of each subsidiary are ultimately responsible for
identifying and controlling risks; however, there are separate independent
bodies in the major subsidiaries (BCP, PPS, and ASHC) responsible for managing
and monitoring risks, as further explained bellow:
Board of Directors: The board
of directors of each major subsidiary is responsible for the overall risk
management approach and for the approval of the policies and strategies
currently in place. The Board provides written principles for overall risk
management, as well as written policies covering specific areas, such as foreign
exchange risk, interest rate risk, credit risk, and risk relating to the use of
derivative and non-derivative financial instruments.
Risk Management Committee:
The Risk Management Committee of each major subsidiary is responsible for the
strategy used for mitigating risks as well as setting forth the overall
principles, policies, and limits for the different types of risks; it is also
responsible for monitoring fundamental risk issues and for managing and
monitoring the relevant risk decisions.
Risk Management Department:
The Risk Management Department of each major subsidiary is responsible for
developing, implementing, and improving, on a continuous basis, our risk
management infrastructure by adopting and incorporating global best practices
and following established policies.
Internal Audit: Risk
management processes throughout our organization are monitored by the internal
audit function, which examines both the adequacy of the procedures and our
compliance with them. Internal Audit discusses the results of all
assessments with management, and reports its findings and recommendations to our
Audit Committee and Board of Directors.
Treasury and Foreign Exchange
Departments: Our Treasury Department is responsible for managing our
assets and liabilities and our overall financial structure. It is also
primarily responsible for managing funding and liquidity risks and for managing
the investment, forward, and spot portfolios. It also assumes the related
liquidity, interest rate, and exchange rate risks, under the policies and limits
that are in effect.
Risk
Measurement and Reporting Systems
Our risks
are measured using a method which reflects both the expected losses likely to
arise in normal circumstances and the unexpected losses, which are an estimate
of the ultimate actual loss based on statistical models. The models make
use of probabilities derived from historical experience, adjusted to reflect the
economic environment. We also examine worst-case scenarios that might
arise in the event that extreme and unlikely events do, in fact,
occur.
Monitoring
and controlling risks are primarily performed based on limits that we
establish. These limits reflect our business strategy, the market
environment, and the level of risk that we are willing to accept. In
addition, we monitor and measure our overall risk-bearing capacity relative to
our aggregate risk exposure across all risk types and activities.
Information
compiled from all our subsidiaries is examined and processed in order to
analyze, control, and identify risks early on. This information is
presented and explained to the Board of Directors, the Risk Management
Committee, and all of our other relevant members. The report typically
includes aggregate credit exposure, credit metric forecasts, hold limit
exceptions, VaR (Value at Risk), liquidity ratios, and risk profile
changes. Our senior management periodically assesses the fair value of our
investments and the appropriateness of the allowance for credit
losses.
Risk
Mitigation
As part
of our overall risk management, we use derivatives and other instruments to
manage exposures resulting from interest rates, foreign currencies, equity risk,
and credit risk.
The risk
profile is assessed before entering into hedge transactions, which are
authorized by the appropriate level of seniority within the Group. The
effectiveness of hedges is assessed by the Risk Management Department (based on
economic considerations rather than the IFRS hedge accounting
regulations). The effectiveness of all the hedge relationships is
monitored by the unit monthly. When a hedge is found to be ineffective, we
will enter into a new hedge relationship to mitigate risk on a continuous
basis.
We
actively use collateral to reduce credit risks.
Excessive
Risk Concentration
Concentrations
arise when a number of counterparties are engaged in similar business
activities, or activities in the same geographic region or regions that have
similar economic, political or other conditions. Concentrations indicate
the relative sensitivity of the Group’s performance to developments affecting a
particular industry or geographical location.
In order
to avoid excessive concentrations of risk, Credicorp’s policies and procedures
include specific guidelines to focus on maintaining a diversified
portfolio. Identified concentrations of credit risks are controlled and
managed accordingly.
Market
Risk
We take
on exposure to market risks, which is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of changes in market
prices. Market risks arise from open positions in interest rates,
currency, commodities, or equity products—all of which are exposed to general
and specific market movements and changes in the level of volatility of prices
such as interest rates, credit spreads, foreign exchange rates, and equity
prices. Due to the nature of our current activities, commodity price risk
is not applicable.
We
separate exposures to market risk into two groups: (i) those that arise from
value fluctuation of trading portfolios due to movements of market rates or
prices (Trading Book) and (ii) those that arise from changes in the structural
positions of non-trading portfolios due to movements of the interest rates,
prices, and foreign exchange ratios (ALM Book).
Trading
portfolios include those liquid positions arising from market-making
transactions where Credicorp acts as principal with clients or with the
market. Non-trading portfolios consist of relatively illiquid positions,
mainly banking assets and liabilities (deposits and loans) and non-trading
investments (available-for-sale).
The risks
that trading portfolios face are managed through VaR historical simulation
techniques; while non-trading portfolios are managed using Asset Liability
Management (ALM).
Trading
Book
The
trading book is made up of liquid investment instruments. The trading book
is characterized for having liquid positions in equities, bonds, foreign
currencies and derivatives. Some limits have been set in order to control
and monitor the risks undertaken. These risks arise from the size of the
positions and/or from the volatility of the risk factors embedded in each
financial instrument. Regular reports are prepared for the Risk Management
Committees and top management. The major measurement technique used to
measure and control market risk is Value at Risk (VaR).
We apply
VaR to trading portfolios to estimate the market risk of positions held and the
maximum losses that are expected, based upon a number of assumptions for various
changes in market conditions. Our Risk Management Committee sets limits on
the level of risk that may be accepted and reviews these levels
daily.
VaR is a
statistically-based estimate of the potential loss on the current portfolio due
to adverse market movements. It expresses the “maximum” amount we might
lose, but only to a certain level of confidence (99 percent). There is
therefore a specified statistical probability (1 percent) that actual loss could
be greater than the VaR estimate. The VaR model assumes a certain “holding
period” until positions can be closed (1 day - 10 days). The time horizon
used to calculate VaR is one day; however, the one-day VAR is amplified to a
10-day time frame and calculated multiplying the one-day VaR by the square root
of 10. Results are presented in the tables below. The
assessment of past movements is based on historical one-year data. We
apply these historical changes in rates directly to our current positions (a
method known as historical simulation).
The use
of this approach does not prevent losses outside of these limits in the event of
more significant market movements.
As of
December 31, 2009 and 2008, our VaR by type of asset was as
follows:
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
Equity
securities
|
|
|
2 |
|
|
|
55 |
|
Mutual
funds
|
|
|
- |
|
|
|
1,034 |
|
Fixed
income
|
|
|
1,142 |
|
|
|
1,116 |
|
Derivatives
|
|
|
2,541 |
|
|
|
- |
|
Consolidated
VaR by type of asset
|
|
|
2,269 |
|
|
|
1,064 |
|
As of
December 31, 2009 and 2008, our VaR by risk type is as follows:
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
Foreign
exchange risk
|
|
|
985 |
|
|
|
579 |
|
Interest
rate risk
|
|
|
1,802 |
|
|
|
1,063 |
|
Equity
risk
|
|
|
1 |
|
|
|
850 |
|
Consolidated
VaR by risk type
|
|
|
2,269 |
|
|
|
1,604 |
|
ALM
Book
The
management of risks associated with long-term and structural positions is called
Asset and Liability Management (ALM). Non-trading portfolios which
comprise the ALM Book are exposed to different sensitivities that can
deteriorate the value of our assets relative to our liabilities and hence can
reduce our net worth.
Interest
rate risk arises from the possibility that changes in interest rates will affect
future cash flows or the fair value of financial instruments. Cash
flow interest rate risk is the risk that the future cash flows of a financial
instrument will fluctuate because of changes in market interest
rates. Fair value interest rate risk is the risk that the value of a
financial instrument will fluctuate because of changes in market interest
rates. We are exposed to both fair value interest rate risk and cash
flow interest rate risk. Interest margins may increase as a result of
such changes but may also decrease in the event that unexpected movements
arise. The Board sets limits on the level of mismatch of interest
rate re-pricing that may be undertaken. This level is monitored daily
by Treasury Department.
Re-pricing
Gap
Gap
analysis comprises aggregating re-pricing timeframes into buckets and checking
if each bucket nets to zero. Different bucketing schemes may be
used. An interest rate gap is simply a positive or negative net
re-pricing timeframe for one of the buckets.
The table
below summarizes our exposure to interest rate risks. It includes our financial
instruments at carrying amounts, categorized by the earlier of contractual
re-pricing or maturity dates:
|
|
As of December 31, 2009
|
|
|
|
Up to 1
month
|
|
1 to 3
months
|
|
3 to 12
months
|
|
1 to 5 years
|
|
More than 5
years
|
|
Non-interest
bearing
|
|
Total
|
|
|
|
US$(000)
|
|
US$(000)
|
|
US$(000)
|
|
US$(000)
|
|
US$(000)
|
|
US$(000)
|
|
US$(000)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
2,745,587 |
|
|
70,616 |
|
|
81,969 |
|
|
- |
|
|
- |
|
|
938,486 |
|
|
3,836,658 |
|
Investments
|
|
|
494,937 |
|
|
1,009,295 |
|
|
1,009,704 |
|
|
1,254,765 |
|
|
928,562 |
|
|
453,117 |
|
|
5,150,380 |
|
Loans
|
|
|
1,739,632 |
|
|
3,144,271 |
|
|
2,142,219 |
|
|
3,176,243 |
|
|
1,028,915 |
|
|
- |
|
|
11,231,280 |
|
Assets
designated at fair value through profit and loss
|
|
|
- |
|
|
258 |
|
|
310 |
|
|
1,657 |
|
|
3,565 |
|
|
129,880 |
|
|
135,670 |
|
Premiums
and other policies receivables
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
121,338 |
|
|
121,338 |
|
Accounts
receivable from re-insurers and co-insurers
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
137,098 |
|
|
137,098 |
|
Other
assets
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,415,683 |
|
|
1,415,683 |
|
Total
assets
|
|
|
4,890,156 |
|
|
4,224,440 |
|
|
3,234,202 |
|
|
4,432,665 |
|
|
1,961,042 |
|
|
3,195,602 |
|
|
22,028,107 |
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
and obligations
|
|
|
4,025,133 |
|
|
3,716,882 |
|
|
2,711,965 |
|
|
311,252 |
|
|
28,601 |
|
|
3,297,995 |
|
|
14,091,828 |
|
Due
to banks and correspondents
|
|
|
310,694 |
|
|
633,874 |
|
|
10,208 |
|
|
128,643 |
|
|
57,835 |
|
|
26,184 |
|
|
1,167,438 |
|
Liabilities
designated at fair value through profit or loss
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
48,009 |
|
|
48,009 |
|
Technical,
insurance claims reserves and reserves for unearned premiums
|
|
|
39,932 |
|
|
24,949 |
|
|
112,373 |
|
|
164,216 |
|
|
367,552 |
|
|
309,769 |
|
|
1,018,791 |
|
Borrowed
funds
|
|
|
953,461 |
|
|
2,815 |
|
|
13,385 |
|
|
93,177 |
|
|
26,383 |
|
|
- |
|
|
1,089,221 |
|
Bonds
and subordinated notes issued
|
|
|
5,880 |
|
|
18,768 |
|
|
71,627 |
|
|
448,803 |
|
|
728,653 |
|
|
13,291 |
|
|
1,287,022 |
|
Other
liabilities
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
822,446 |
|
|
822,446 |
|
Equity
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
2,503,352 |
|
|
2,503,352 |
|
Total
liabilities and equity
|
|
|
5,335,100 |
|
|
4,397,288 |
|
|
2,919,558 |
|
|
1,146,091 |
|
|
1,209,024 |
|
|
7,021,046 |
|
|
22,028,107 |
|
Off-Balance
sheet items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
assets
|
|
|
2,094,179 |
|
|
1,574,953 |
|
|
976,153 |
|
|
1,152,853 |
|
|
67,810 |
|
|
- |
|
|
5,865,948 |
|
Derivatives
liabilities
|
|
|
957,368 |
|
|
1,238,661 |
|
|
1,221,097 |
|
|
2,042,343 |
|
|
406,479 |
|
|
- |
|
|
5,865,948 |
|
|
|
|
1,136,811 |
|
|
336,292 |
|
|
(244,944 |
) |
|
(889,490 |
) |
|
(338,669 |
) |
|
- |
|
|
- |
|
Marginal
gap
|
|
|
781,867 |
|
|
163,444 |
|
|
69,700 |
|
|
2,397,084 |
|
|
413,349 |
|
|
(3,825,444 |
) |
|
- |
|
Accumulated
gap
|
|
|
781,867 |
|
|
945,311 |
|
|
1,015,011 |
|
|
3,412,095 |
|
|
3,825,444 |
|
|
- |
|
|
- |
|
|
|
As of December 31, 2008
|
|
|
|
Up to 1
month
|
|
1 to 3
months
|
|
3 to 12
months
|
|
1 to 5 years
|
|
More than 5
years
|
|
Non-interest
bearing
|
|
Total
|
|
|
|
US$(000)
|
|
US$(000)
|
|
US$(000)
|
|
US$(000)
|
|
US$(000)
|
|
US$(000)
|
|
US$(000)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
2,455,413 |
|
|
196,588 |
|
|
46,536 |
|
|
10,218 |
|
|
- |
|
|
1,057,416 |
|
|
3,766,171 |
|
Investments
|
|
|
818,153 |
|
|
1,208,344 |
|
|
988,796 |
|
|
542,759 |
|
|
1,139,201 |
|
|
289,585 |
|
|
4,986,838 |
|
Loans
|
|
|
2,038,457 |
|
|
2,412,234 |
|
|
2,274,854 |
|
|
2,992,480 |
|
|
604,016 |
|
|
- |
|
|
10,322,041 |
|
Assets
designated at fair value through profit and loss
|
|
|
- |
|
|
249 |
|
|
329 |
|
|
790 |
|
|
1,954 |
|
|
134,623 |
|
|
137,945 |
|
Premiums
and other policies receivables
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
111,561 |
|
|
111,561 |
|
Accounts
receivable from re-insurers and co-insurers
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
165,144 |
|
|
165,144 |
|
Other
assets
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,331,369 |
|
|
1,331,369 |
|
Total
assets
|
|
|
5,312,023 |
|
|
3,817,415 |
|
|
3,310,515 |
|
|
3,546,247 |
|
|
1,745,171 |
|
|
3,089,698 |
|
|
20,821,069 |
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
and obligations
|
|
|
4,114,430 |
|
|
3,268,610 |
|
|
2,991,905 |
|
|
321,984 |
|
|
39,979 |
|
|
3,213,529 |
|
|
13,950,437 |
|
Due
to banks and correspondents
|
|
|
178,539 |
|
|
745,155 |
|
|
197,935 |
|
|
11,705 |
|
|
32,544 |
|
|
14,113 |
|
|
1,179,991 |
|
Accounts
payable to re-insurers and co-insurers
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
55,841 |
|
|
55,841 |
|
Technical,
insurance claims reserves and reserves for unearned
premiums
|
|
|
31,254 |
|
|
19,357 |
|
|
86,935 |
|
|
148,437 |
|
|
331,697 |
|
|
350,090 |
|
|
967,770 |
|
Borrowed
funds
|
|
|
1,008,997 |
|
|
2,474 |
|
|
11,762 |
|
|
81,871 |
|
|
45,612 |
|
|
- |
|
|
1,150,716 |
|
Bonds
and subordinated notes issued
|
|
|
817 |
|
|
- |
|
|
63,208 |
|
|
284,577 |
|
|
428,788 |
|
|
7,840 |
|
|
785,230 |
|
Other
liabilities
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
934,979 |
|
|
934,979 |
|
Equity
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
1,796,105 |
|
|
1,796,105 |
|
Total
liabilities and equity
|
|
|
5,334,037 |
|
|
4,035,596 |
|
|
3,351,745 |
|
|
848,574 |
|
|
878,620 |
|
|
6,372,497 |
|
|
20,821,069 |
|
Off-Balance
sheet items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
assets
|
|
|
2,499,906 |
|
|
1,295,838 |
|
|
590,446 |
|
|
469,276 |
|
|
293,100 |
|
|
- |
|
|
5,148,566 |
|
Derivatives
liabilities
|
|
|
1,618,002 |
|
|
788,307 |
|
|
834,589 |
|
|
1,471,042 |
|
|
436,626 |
|
|
- |
|
|
5,148,566 |
|
|
|
|
881,904 |
|
|
507,531 |
|
|
(244,143) |
|
|
(1,001,766) |
|
|
(143,526) |
|
|
- |
|
|
- |
|
Marginal
gap
|
|
|
859,890 |
|
|
289,350 |
|
|
(285,373) |
|
|
1,695,907 |
|
|
723,025 |
|
|
(3,282,799) |
|
|
- |
|
Accumulated
gap
|
|
|
859,890 |
|
|
1,149,240 |
|
|
863,867 |
|
|
2,559,774 |
|
|
3,282,799 |
|
|
- |
|
|
- |
|
Sensitivity
to Changes in Interest Rates
The
following table presents the sensitivity of our consolidated income statement
and consolidated statement of comprehensive income (before income tax and
minority interest) to a reasonable possible change in interest rates, with all
other variables held constant,.
The
sensitivity of the consolidated income statement reflects the effect of the
assumed changes in interest rates on the net interest income for one year,
before income tax and minority interest, based on the floating rate of
non-trading financial assets and financial liabilities held at December 31, 2009
and 2008, including the effect of derivatives instruments. The
sensitivity of consolidated comprehensive income is calculated by revaluing at
various interest rates our fixed rate available-for-sale financial assets,
before income tax and minority interest. This analysis includes the
effect of any associated hedges and derivatives instruments designated as cash
flow hedges:
|
|
As of December 31, 2009
|
|
Currency
|
|
Changes in
basis points
|
|
|
Sensitivity of
net income
|
|
|
Sensitivity of
comprehensive
income
|
|
|
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
U.S.
Dollar
|
|
+/- |
50 |
|
|
+/- |
10,484 |
|
|
-/+ |
43,174 |
|
U.S.
Dollar
|
|
+/- |
75 |
|
|
+/- |
15,727 |
|
|
-/+ |
64,762 |
|
U.S.
Dollar
|
|
+/- |
100 |
|
|
+/- |
20,969 |
|
|
-/+ |
86,349 |
|
U.S.
Dollar
|
|
+/- |
150 |
|
|
+/- |
31,453 |
|
|
-/+ |
129,523 |
|
Peruvian
Currency
|
|
+/- |
50 |
|
|
-/+ |
3,446 |
|
|
-/+ |
24,856 |
|
Peruvian
Currency
|
|
+/- |
75 |
|
|
-/+ |
5,169 |
|
|
-/+ |
37,284 |
|
Peruvian
Currency
|
|
+/- |
100 |
|
|
-/+ |
6,892 |
|
|
-/+ |
49,711 |
|
Peruvian
Currency
|
|
+/- |
150 |
|
|
-/+ |
10,339 |
|
|
-/+ |
74,567 |
|
The
interest rate sensitivities set out in the table above are illustrative only and
are based on simplified scenarios. The figures represent the effect
of the pro-forma movements in the net interest income based on the projected
yield curve scenarios and our current interest rate risk
profile. This effect, however, does not incorporate actions that
would be taken by our management to mitigate the impact of this interest rate
risk. In addition, we seek proactively to change the interest rate
risk profile to minimize losses and optimize net revenues. The
projections above also assume that interest rate of all maturities move by the
same amount and, therefore, do not reflect the potential impact on net interest
income of some rates changing while others remain unchanged. The
projections make other simplifying assumptions as well, including an assumption
that all positions run to maturity.
Available-for-sale
investments, securities, and mutual funds are not considered part of the
investment securities for purposes of this sensitivity calculation; however,
presented below is a table of how the expected unrealized gain or loss on equity
securities and mutual funds responds to changes in market prices of these
securities, at the 10%, 25%, and 30% levels:
Market price sensitivity
|
|
Changes in market prices
|
|
|
As of December 31, 2009
|
|
|
|
%
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Equity
securities
|
|
+/- |
10 |
|
|
+/- |
33,073 |
|
Equity
securities
|
|
+/- |
25 |
|
|
+/- |
82,683 |
|
Equity
securities
|
|
+/- |
30 |
|
|
+/- |
99,220 |
|
Mutual
funds
|
|
+/- |
10 |
|
|
+/- |
17,454 |
|
Mutual
funds
|
|
+/- |
25 |
|
|
+/- |
43,635 |
|
Mutual
funds
|
|
+/- |
30 |
|
|
+/- |
52,361 |
|
Our
financial position and cash flows are exposed to foreign currency exchange
rates. Management sets limits on the acceptable level of exposure to individual
currencies and in total for both overnight and intra-day positions, which are
monitored daily.
Foreign
currency transactions are made at the free market exchange rates of the
countries where our subsidiaries are established. As of December 31, 2009 and
2008, our assets and liabilities by currencies were as follows:
2009
|
|
U.S. Dollars
|
|
|
Peruvian
currency
|
|
|
Other
currencies
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monetary
assets -
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
3,094,366 |
|
|
|
501,769 |
|
|
|
240,523 |
|
|
|
3,836,658 |
|
Trading
securities
|
|
|
13,982 |
|
|
|
8,920 |
|
|
|
47,872 |
|
|
|
70,774 |
|
Available-for-sale
investments
|
|
|
2,354,804 |
|
|
|
2,034,768 |
|
|
|
690,034 |
|
|
|
5,079,606 |
|
Loans,
net
|
|
|
6,755,563 |
|
|
|
4,285,076 |
|
|
|
190,641 |
|
|
|
11,231,280 |
|
Financial
assets designated to fair value through profit and loss
|
|
|
135,670 |
|
|
|
- |
|
|
|
- |
|
|
|
135,670 |
|
Other
assets
|
|
|
507,057 |
|
|
|
563,065 |
|
|
|
22,977 |
|
|
|
1,093,099 |
|
|
|
|
12,861,442 |
|
|
|
7,393,598 |
|
|
|
1,192,047 |
|
|
|
21,447,087 |
|
Monetary
liabilities -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
and obligations
|
|
|
(8,156,869 |
) |
|
|
(5,398,780 |
) |
|
|
(536,179 |
) |
|
|
(14,091,828 |
) |
Due
to bank and correspondents and borrowed funds
|
|
|
(2,126,963 |
) |
|
|
(128,800 |
) |
|
|
(896 |
) |
|
|
(2,256,659 |
) |
Financial
liabilities designated at fair value through profits and
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Bonds
and subordinated notes issued
|
|
|
(612,098 |
) |
|
|
(562,739 |
) |
|
|
(112,185 |
) |
|
|
(1,287,022 |
) |
Other
liabilities
|
|
|
(1,187,739 |
) |
|
|
(651,365 |
) |
|
|
(50,142 |
) |
|
|
(1,889,246 |
) |
|
|
|
(12,083,669 |
) |
|
|
(6,741,684 |
) |
|
|
(699,402 |
) |
|
|
(19,524,755 |
) |
|
|
|
777,773 |
|
|
|
651,914 |
|
|
|
492,645 |
|
|
|
1,922,332 |
|
Forwards
position, net
|
|
|
265,114 |
|
|
|
(198,637 |
) |
|
|
(66,477 |
) |
|
|
- |
|
Currency
swaps position, net
|
|
|
(142,015 |
) |
|
|
183,598 |
|
|
|
(41,583 |
) |
|
|
- |
|
Cross-currency
swaps position, net and interest rate swaps position, net
|
|
|
77,768 |
|
|
|
129,049 |
|
|
|
(206,817 |
) |
|
|
- |
|
Options
|
|
|
(3,711 |
) |
|
|
3,711 |
|
|
|
- |
|
|
|
- |
|
Net
monetary position
|
|
|
974,929 |
|
|
|
769,635 |
|
|
|
177,768 |
|
|
|
1,922,332 |
|
2008
|
|
U.S. Dollars
|
|
|
Peruvian
currency
|
|
|
Other
currencies
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monetary
assets -
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
3,156,279 |
|
|
|
495,550 |
|
|
|
114,342 |
|
|
|
3,766,171 |
|
Trading
securities
|
|
|
23,220 |
|
|
|
11,523 |
|
|
|
1,341 |
|
|
|
36,084 |
|
Available-for-sale
investments
|
|
|
2,890,978 |
|
|
|
1,734,526 |
|
|
|
325,250 |
|
|
|
4,950,754 |
|
Loans,
net
|
|
|
6,930,125 |
|
|
|
3,298,579 |
|
|
|
93,337 |
|
|
|
10,322,041 |
|
Financial
assets designated to fair value through profit and loss
|
|
|
136,311 |
|
|
|
1,634 |
|
|
|
- |
|
|
|
137,945 |
|
Other
assets
|
|
|
594,107 |
|
|
|
255,476 |
|
|
|
12,383 |
|
|
|
861,966 |
|
|
|
|
13,731,020 |
|
|
|
5,797,288 |
|
|
|
546,653 |
|
|
|
20,074,961 |
|
Monetary
liabilities -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
and obligations
|
|
|
(8,614,042 |
) |
|
|
(4,963,932 |
) |
|
|
(372,463 |
) |
|
|
(13,950,437 |
) |
Due
to bank and correspondents and borrowed funds
|
|
|
(2,189,114 |
) |
|
|
(140,155 |
) |
|
|
(1,438 |
) |
|
|
(2,330,707 |
) |
Bonds
and subordinated notes issued
|
|
|
(311,860 |
) |
|
|
(473,370 |
) |
|
|
- |
|
|
|
(785,230 |
) |
Other
liabilities
|
|
|
(1,425,817 |
) |
|
|
(508,063 |
) |
|
|
(24,710 |
) |
|
|
(1,958,590 |
) |
|
|
|
(12,540,833 |
) |
|
|
(6,085,520 |
) |
|
|
(398,611 |
) |
|
|
(19,024,964 |
) |
|
|
|
1,190,187 |
|
|
|
(288,232 |
) |
|
|
148,042 |
|
|
|
1,049,997 |
|
Forwards
position, net
|
|
|
(627,600 |
) |
|
|
591,628 |
|
|
|
35,972 |
|
|
|
- |
|
Currency
swaps position, net
|
|
|
71,154 |
|
|
|
(71,154 |
) |
|
|
- |
|
|
|
- |
|
Cross-currency
swaps position, net and interest rate swaps position, net
|
|
|
(317,043 |
) |
|
|
317,043 |
|
|
|
- |
|
|
|
- |
|
Net
monetary position
|
|
|
316,698 |
|
|
|
549,285 |
|
|
|
184,014 |
|
|
|
1,049,997 |
|
We manage
foreign exchange risk by monitoring exchange rates and adjusting the position
values based on changes in exchange rates. We measure our performance
in U.S. Dollars, so if the net foreign exchange position (e.g. Peruvian
currency) is an asset, any depreciation of the U.S. Dollar with respect to this
currency would affect positively our consolidated statements of financial
position. The current position in a foreign currency comprises
exchange rate-linked assets and liabilities in that currency. An
institution’s open position in individual currencies comprises assets,
liabilities, and off-balance sheet items denominated in the respective foreign
currency for which the institution itself bears the risk; any appreciation or
depreciation of the foreign exchange rate would affect the consolidated income
statement.
Our net
foreign exchange balance is the sum of its positive open non-U.S. Dollar
positions (net long position) less the sum of its negative open non-U.S. Dollar
positions (net short position); any devaluation or revaluation of the foreign
exchange position would affect the consolidated income statement. A
currency mismatch would leave our consolidated statements of financial position
vulnerable to a fluctuation of the foreign currency (exchange rate
shock).
The
sensitivity analysis in the table below shows the effect of the Peruvian
Currency, the currency to which we had significant exposure as of December 31,
2009 and 2008, on its non-trading monetary assets and liabilities and its
forecasted cash flows. The analysis calculates the effect of a
reasonably possible movement of the currency rate against the U.S. Dollar, with
all other variables held constant on the consolidated income statement, before
income tax. A negative amount in the table reflects a potential net
reduction in the consolidated income statement, while a positive amount reflects
a net potential increase:
Sensitivity Analysis
|
|
Change in Currency Rates
|
|
|
2009
|
|
|
2008
|
|
|
|
%
|
|
|
US$(000)
|
|
|
US$(000)
|
|
Devaluation
-
|
|
|
|
|
|
|
|
|
|
Peruvian
Currency
|
|
|
5
|
|
|
|
(40,507 |
) |
|
|
(28,910 |
) |
Peruvian
Currency
|
|
|
10
|
|
|
|
(85,515 |
) |
|
|
(61,032 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revaluation
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Peruvian
Currency
|
|
|
5
|
|
|
|
36,649 |
|
|
|
26,156 |
|
Peruvian
Currency
|
|
|
10
|
|
|
|
69,967 |
|
|
|
49,935 |
|
ITEM
12.
|
DESCRIPTION
OF SECURITIES OTHER THAN EQUITY
SECURITIES
|
Not
applicable.
PART
II
ITEM
13.
|
DEFAULTS,
DIVIDEND ARREARAGES AND
DELINQUENCIES
|
We, along
with our subsidiaries, have never defaulted on any of our debt or have been
forced to reschedule any of our obligations.
(B)
|
Dividend
Arrearages and Delinquencies
|
None.
ITEM
14.
|
MATERIAL
MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
PROCEEDS
|
None.
ITEM
15.
|
CONTROLS
AND PROCEDURES
|
(A)
|
Disclosure
Controls and Procedures
|
Our
management, with the participation of and under the supervision of our principal
executive officer and principal financial officer, has evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of
December 31, 2009. Based on this evaluation, our management, principal executive
officer, and principal financial officer have concluded that our disclosure
controls and procedures are effective in ensuring that information that we are
required to disclose in reports that we file or submit under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified
in U.S. Securities and Exchange Commission (SEC) rules and forms.
(B)
|
Management’s
Annual Report on Internal Control over Financial
Reporting
|
Our Board
of Directors and management are responsible for establishing and maintaining
adequate internal control over financial reporting. Our internal control over
financial reporting is designed to provide reasonable assurance regarding the
preparation and fair presentation of published financial statements in
accordance with International Financial Reporting Standards, or IFRS, as issued
by the International Accounting Standards Board, the IASB.
Our
internal control over financial reporting includes those policies and procedures
that:
|
·
|
Pertain
to the maintenance of records that, in reasonable detail, accurately and
fairly reflect transactions and dispositions of
assets;
|
|
·
|
Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation and fair presentation of financial statements, and our
receipts and expenditures are being made only in accordance with
authorizations of our management;
and
|
|
·
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of our assets that could
have a material effect on our financial
statements.
|
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of compliance
with the policies or procedures may deteriorate.
Our
management assessed the effectiveness of our internal control over financial
reporting as of December 31, 2009 based on the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in
Internal Control-Integrated Framework. Based on this assessment, our management
believes that, as of December 31, 2009, our internal control over financial
reporting was effective. Our management also found no material weaknesses in our
internal control over financial reporting and therefore no corrective actions
were taken.
The
effectiveness of our internal control over financial reporting as of December
31, 2009 has been audited by Medina, Zaldívar, Paredes & Asociados (member
firm of Ernst & Young Global), our independent registered public accounting
firm, as stated in their report included herein, and it has expressed an
unqualified opinion on the effectiveness of our internal control over financial
reporting as of December 31, 2009.
By:
|
/s/ DIONISIO ROMERO
P.
|
|
By:
|
/s/ ALVARO CORREA
|
|
Name:
|
Dionisio
Romero
|
|
Name:
|
Alvaro
Correa
|
|
Title:
|
Chief
Executive Officer
|
|
Title:
|
Chief
Financial Officer
|
|
June 15,
2010
(C)
|
Attestation
Report of the Registered Public Accounting
Firm
|
Report of
Independent Registered Public Accounting Firm on Internal Control Over Financial
Reporting
To the
Shareholders and Board of Directors of Credicorp Ltd.
We have
audited Credicorp Ltd. and Subsidiaries' (hereinafter “Credicorp”) internal
control over financial reporting as of December 31, 2009, based on criteria
established in Internal Control- Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria).
Credicorp's Management is responsible for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our
responsibility is to express an opinion on Credicorp's internal control over
financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis
for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the company’s
assets that could have a material effect on the financial
statements.
Report of
Independent Registered Public Accounting Firm on Internal Control Over Financial
Reporting (continued)
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our
opinion, Credicorp maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2009, based on the COSO
criteria.
We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States of America), the consolidated statement of
financial position as of December 31, 2009 and 2008, and the consolidated
statements of income, comprehensive income, changes in equity and cash flows for
each of the three years in the period ended December 31, 2009 and our
report dated June 15, 2010, expresses an unqualified opinion
thereon.
Countersigned
by:
|
|
|
|
|
Cristian
Emmerich
|
|
|
C.P.C.C.
Register Nº19-289
|
|
|
Lima,
Peru,
|
|
|
June
15, 2010
|
|
|
(D)
|
Changes
in Internal Control over Financial
Reporting
|
During
the period covered by this Annual Report, no changes were made to our internal
control over financial reporting that have materially affected, or are likely to
materially affect, internal control over financial reporting.
ITEM
15T.
|
CONTROLS
AND PROCEDURES
|
Not
applicable.
ITEM
16A.
|
AUDIT
COMMITTEE FINANCIAL EXPERT
|
In its
session held on March 31, 2009, our Board of Directors elected Germán Suárez and
Reynaldo Llosa as members of the Audit Committee. The Board elected Mr. Reynaldo
Llosa as the Chairman, Mr. Suárez as the Audit Committee Financial Expert, as
that term is defined in the instructions to Item 16A of Form 20-F, and Mr.
Benedicto Cigüeñas, Director of BCP as an advisor. Our board of directors also
determined that Mr. Suárez is “independent” as defined in Rule 10A-3 under the
Exchange Act and in Section 303A.02 of The NYSE Listed Company Manual. Mr.
Suárez is an economist, and received his Masters degree in economics from
Columbia University. Mr. Suárez became a director on March 31, 2005. Mr. Suárez
was President and Chairman of the Board of Banco Central de Reserva del Perú
from 1992 to 2001, and serves as director on the board of directors of various
other companies, among which is Compañía de Minas Buenaventura S.A.
We have
adopted a code of ethics (Código de Etica) that is
applicable to our Board of Directors, including our chief executive officer,
chief financial officer, and our other principal executive officers, as well as
to all other employees. In addition, we have adopted a code of ethics for
professionals with financial responsibility (Código de Etica Para Profesionales
con Responsibilidad Financiera) applicable to employees with financial
management responsibilities. Our code of ethics and code of ethics for
professionals with financial responsibility are available on the corporate
governance section of our web site at http://www.credicorpnet.com.
ITEM
16C.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
The
following table sets forth for each of the years indicated the fees paid to our
independent auditor, Medina, Zaldívar, Paredes & Asociados, member of Ernst
& Young Global, for the audit of our financial statements for the years
ended December 31, 2007, 2008, and 2009, respectively. The Audit Committee
recommends the appointment of the independent auditor every fiscal year, which
is done at the Annual General Shareholders’ Meeting.
At our
Annual General Shareholders’ Meeting held on March 26, 2010, Medina, Zaldívar,
Paredes y Asociados was reelected as our external auditor for the financial year
2010. This designation was made in accordance with the proposal and
recommendation of the Audit Committee and authorization by the Board of
Directors. The Board has also designated the duty of approving the auditor’s
fees to the Audit Committee.
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
|
(U.S. Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Audit
|
|
US$
|
2,264 |
|
|
US$
|
2,005 |
|
|
US$
|
2,436 |
|
Audit –
Related
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Tax
|
|
|
28 |
|
|
|
31 |
|
|
|
69 |
|
All
Other
|
|
|
32 |
|
|
|
203 |
|
|
|
287 |
|
Total
|
|
US$
|
2,323 |
|
|
US$
|
2,239 |
|
|
US$
|
2,792 |
|
Audit Fees correspond to
audit services performed (i) reviewing of Credicorp’s consolidated financial
statements and its subsidiaries, (ii) establishing the procedures that the
independent auditor needs to perform in order to form an opinion about
Credicorp’s consolidated financial statements, and (iii) complying with the
statutory requirements applicable to Credicorp’s subsidiaries. Audit fees also
include expenses related to the audit work in connection with reviews of interim
financial information and the comfort letter issued. All fees were
approved by the Audit Committee.
Audit-Related Fees elate to
services that are similar to the execution of an audit or a review of
Credicorp’s financial statements and which are traditionally performed by the
independent auditor. Such audit-related services include: assistance in the
understanding of new accounting and financial rules established by regulatory
entities; audit-related procedures on accounting matters previously agreed with
Credicorp management; due diligence and special audit reviews of internal
control procedures. There were no audit-related fees during
2009.
Tax Fees relate to tax
services which include all services performed by Credicorp’s independent
auditor’s tax personnel, except those services specifically related to the
review and preparation of Credicorp’s financial statements, and consisting
principally of tax compliance and advisory services approved by the Audit
Committee.
All Other Fees mainly include
expenses related to derivative operations consultancy, training courses for the
Accounting department of PPS prepared by the independent auditors, and permitted
advisory services related to BCP IT systems.
Audit
Committee Pre-Approval Policies and Procedures
Our audit
committee must approve all of the services the independent auditors provide as
part of its responsibility in supervising their work. There are two types of
approvals. The Audit Committee grants a “general approval” in advance to a list
of services that the independent auditor may provide without further approval
required by the Audit Committee. A general approval is valid for 12 months from
the date of approval unless the Audit Committee determines a different period of
validity should apply. The Audit Committee also grants “specific approval” for
services that do not have general approval on a case-by-case basis. All of the
services that do not have general approval need specific approval from the Audit
Committee before any agreement is signed with the independent auditor to provide
such services. Any service that exceeds approved costs or budgets will need
specific approval from the Audit Committee. When considering granting any type
of approval, the Audit Committee considers whether the requested services are
consistent with the SEC’s rules regarding the independence of the independent
auditors.
Our audit
committee supervises the execution of the independent audit services as
necessary. It approves, when necessary, any modification in the terms,
conditions, fees, and extent of the audit services. The Audit Committee may give
a general approval for other audit services where the independent auditor is in
the best position to provide those services. Such services typically include:
audit services required by regulations, financial audits for our subsidiaries or
affiliates, and services associated with the presentation of documents to the
SEC or other documents published in relation to the trading of our
shares.
The Audit
Committee may award a general approval to audit-related services if its members
consider that these services do not negatively affect the integrity of the
independent auditor and are consistent with the rules of the SEC.
Following
the rules promulgated by the SEC, our audit committee requires that all tax
services provided by the independent auditors be subject to its approval. The
Audit Committee may grant a specific approval to other services provided by the
independent auditor so long as they do not impair the integrity of the
independent auditor and are allowed by rules issued by the SEC concerning
auditor independence.
ITEM
16D.
|
EXEMPTIONS
FROM THE LISTING STANDARDS FOR AUDIT
COMMITTEES
|
Not
applicable.
ITEM
16E.
|
PURCHASES
OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
PURCHASERS
|
During
2009, we did not make any purchase of Credicorp shares for our own portfolio.
Our affiliates, Prima AFP, Atlantic Security Bank, Credifondo, and Credibolsa
did make purchases in open-market transactions on behalf of our clients as part
of their core businesses.
ITEM
16F.
|
CHANGE
IN REGISTRANT’S CERTIFYING
ACCOUNTANT
|
Not
applicable.
ITEM
16G.
|
CORPORATE
GOVERNANCE
|
(A)
|
New
York Stock Exchange – Corporate
Governance
|
The
NYSE’s corporate governance rules, codified in Section 303A of the NYSE’s Listed
Company Manual, apply, with certain limited exceptions, in full to companies
listing common equity securities. Among the corporate governance issues
addressed by Section 303A are the following:
|
·
|
The
role of non-management directors;
|
|
·
|
Nominating/corporate
governance committee;
|
|
·
|
Compensation
committees;
|
|
·
|
Disclosure
of corporate governance guidelines, including those in relation to (i)
director qualification standards, (ii) director responsibilities, (iii)
director access to management and, as necessary and appropriate,
independent advisors, (iv) director compensation, (v) director orientation
and continuing education, (vi) management succession and (vii) annual
performance evaluation of the Board of
Directors;
|
|
·
|
Code
of business conduct and ethics for directors, officers and employees
addressing, at a minimum, (i) conflicts of interest, (ii) corporate
opportunities, (iii) confidentiality, (iv) fair dealing, (v) protection
and proper use of company assets, (v) compliance with laws, rules and
regulations (including insider trading laws) and (vi) encouraging the
reporting of any illegal or unethical
behavior;
|
|
·
|
Disclosure
by foreign private issuers of differences between their corporate
governance practices and those of U.S. domestic companies under NYSE’s
listing standards;
|
|
·
|
Certification
of compliance with the NYSE’s corporate governance standards and
disclosure of violations of Section 303A;
and
|
|
·
|
NYSE
actions resulting from violations of the NYSE’s listing
standards.
|
(B)
|
Bermuda
Law – Corporate Governance
|
We are a
company incorporated under the laws of Bermuda and are subject to Bermuda laws
related to corporate governance. Under Bermuda law, there are no requirements
with respect to the independence of our board of directors, meetings of
non-management directors, the establishment and composition of certain
committees or the adoption and disclosure of corporate governance guidelines or
codes of business conduct and ethics. Certain Bermuda common law and statutory
provisions, however, relate to duties and obligations of a company and its
directors that are similar to some of the duties and obligations arising from
the provisions of Section 303A.
(1) Fiduciary
Duties and Duties of Skill and Care Under Bermuda Law
Under
section 97(1) of the Companies Act 1981 of Bermuda, as amended (also referred to
as the Companies Act), every director and officer of a company must act honestly
and in good faith with a view to the best interests of the company (often
referred to as a “fiduciary duty”) and must exercise the care, diligence and
skill that a reasonably prudent person would exercise in comparable
circumstances (often referred to as a “duty of skill and care”).
Fiduciary
Duty
Under the
common law, the fiduciary duty of directors has four aspects which may be
briefly summarized as follows:
|
·
|
A
duty to act honestly and in good faith. A director has a duty to act
honestly and in good faith in what he considers are the best interests of
the company and not for any collateral purpose. The courts allow the
director wide discretion in determining this, interfering only if no
reasonable director could have believed that a course of action was in the
best interests of the company. However, a director acting honestly, but
not in the best interests of the company, is in breach of such
duty.
|
|
·
|
A
duty to exercise powers for a proper purpose. Directors must act within
the powers set out in the company’s memorandum of association and bye-laws
and exercise their powers in the company’s interests and for the purposes
for which those powers were conferred. Even if the directors are acting in
good faith in the interests of the company as a whole, they must still use
their powers for the purposes for which they were intended. For example,
in general directors are not allowed to exercise their powers in such a
way as to prevent a majority of the members from exercising their
rights.
|
|
·
|
A
duty to avoid conflicts of interest. A director must not put himself in a
position where there is an actual or potential conflict between a personal
interest and his duty to the company. However, a director may enter into a
contract where a conflict of interest might arise if the bye-laws allow it
or the company gives its approval in a general meeting. Our blaws do not
prohibit a director from entering into a contract where a conflict of
interest may arise, but they do prohibit a director from voting with
respect to any contract or proposed contract or arrangement in which such
director is interested or with which such director has a conflict of
interest. In addition, section 97(4) of the Companies Act requires our
directors and officers to disclose at the first opportunity any interest
in a material contract, proposed material contract or person that is a
party to a material contract or proposed material contract with us or any
of our subsidiaries.
|
|
·
|
A
duty not to appropriate, divert or personally profit from corporate
opportunities. Unless the bye-laws specifically provide otherwise, a
director’s fiduciary position precludes him from appropriating, diverting
or taking a personal profit from any opportunities that result from the
directorship. Our bye-laws do provide an exception to this rule. They
provide that any director, any director’s firm or partner, or any company
with which any director is associated may act for us in a professional
capacity. Such director, firm, partner or company will be entitled to
compensation for professional services as if the director were not a
member of our board of directors. However, such director, firm, partner or
company may not act as our
auditor.
|
Duty
of Skill and Care
Under the
common law, the duty of skill and care has three aspects which may be briefly
summarized as follows:
|
·
|
Degree
of Skill. A director need not exhibit in the performance of his duties a
greater degree of skill than may reasonably be expected from a person of
like knowledge and experience.
|
A
director is not expected to exercise a level of skill he does not have. The
level of skill required of a director is subjective, in that the director is not
expected, merely by virtue of the office, to possess any particular skills.
Performance must be judged by the way the director applies any skills which he
actually has. However, directors ought to acquire and maintain a sufficient
knowledge and understanding of the company’s business to enable them to properly
discharge their duties as directors.
|
·
|
Attention
to the Business. A director must diligently attend to the affairs of the
company. In the performance of this duty, a director must at a minimum
display the reasonable care an ordinary person would be expected to take
in the same circumstances on his own behalf. Mere errors of judgment have
been held not to breach the duty of skill and care. A director, as such,
is not bound to give continuous attention to the affairs of the company,
as his or her duties are of an intermittent
nature.
|
|
·
|
Reliance
on Others. A director is not liable for the acts of co-directors or other
company officers solely by virtue of the position. A director is entitled
to rely on his co-directors or company officers as well as subordinates
who are expressly put in charge of attending to the detail of management,
provided such reliance is honest and reasonable (although a director
cannot absolve himself entirely of responsibility by delegation to
others). As a general rule, before delegating responsibility to others,
the directors in question should satisfy themselves that the delegates
have the requisite skills to discharge the functions delegated to them. In
addition, the directors must ensure that there is set up an adequate
system of monitoring such delegates (e.g., managers). The
directors must, on a regular basis, ensure that their delegates have
fulfilled their obligations. The directors should require a regular flow
of information from the delegates to ensure that they are carrying out
their duties satisfactorily. In addition, section 97(5A) of the Companies
Act provides that a director shall not have breached the fiduciary duty or
duty of skill and care required by section 97(1) if he relies in good
faith upon financial statements of the company represented to him by
another director or officer of the company or a report of an attorney,
accountant, engineer, appraiser or other person whose profession lends
credibility to a statement made by
him.
|
(2) Other
Statutory Duties and Obligations
The
Companies Act imposes certain specific duties and obligations on companies and
directors, both directly and indirectly, including duties and obligations with
respect to (i) loans to directors and related persons, (ii) limits on
indemnities for directors and officers and (iii) the keeping of proper books of
account.
Loans
to Directors and Related Persons
It is not
lawful for a company to make a loan or to enter into a guarantee or provide
security in connection with a loan to a director or certain persons related to a
director without the consent of the members of the company holding in the
aggregate not less than 90% of the total voting rights of all the members having
the right to vote at any meeting of the members of the company, except in
certain specific circumstances.
Limits
on Indemnity for Directors
Section
98 of the Companies Act provides generally that a Bermuda company may indemnify
its directors, officers and auditors against any liability which, by virtue of
any rule of law, would otherwise be imposed on them with respect to any
negligence, default, breach of duty or breach of trust. However, this rule does
not apply in cases where such liability arises from fraud or dishonesty of which
such director, officer or auditor may be guilty in relation to the company or
any of its subsidiaries. Any provision, whether contained in the bye-laws of a
company or in any contract or arrangement between the company and one of its
directors which would exempt such director from, or indemnify him against, any
liability that would otherwise attach to him with respect to his fraud or
dishonesty in relation to the company will be void. Section 98 further provides
that a Bermuda company may indemnify its directors, officers and auditors
against any liability incurred by them in defending any proceedings, whether
civil or criminal, in which judgment is awarded in their favor or in which they
are acquitted or granted relief by the Supreme Court of Bermuda pursuant to
section 281 of the Companies Act. In the event that an allegation of fraud or
dishonesty is made out, the director is obliged to disgorge any money provided
for his defense.
Books
of Account
It is the
duty of the directors to cause to be kept proper books of account with respect
to all sums of money received and expended by the company and the matters with
respect to which the receipts and expenditures take place, all sales and
purchases by the company, and the assets and liabilities of the
company.
(C)
|
Peruvian
Law – Corporate Governance
|
Although
we are a holding company whose principal subsidiaries (BCP and PPS) are
incorporated under and subject to the laws of Peru, we are registered in Peru as
a foreign issuer and are consequently only subject to Peruvian regulations
applicable to foreign issuers. There are no corporate governance provisions
under Peruvian law applicable to us that are similar to the provisions of
Section 303A.
PART
III
ITEM
17.
|
FINANCIAL
STATEMENTS
|
Not
applicable.
ITEM
18.
|
FINANCIAL
STATEMENTS
|
Credicorp
Consolidated Financial Statements and the report of the independent public
accounting firm in connection therewith are filed as part of this Annual Report
on Form 20-F, as noted below:
|
|
Page
|
Index
to Credicorp Consolidated Financial Statements
|
|
F-2
|
|
|
|
Report
of Medina, Zaldívar, Paredes & Asociados, members of Ernst & Young
Global, Independent Public Accountants
|
|
F-3
|
|
|
|
Consolidated
Balance Sheets as of December 31, 2009 and 2008
|
|
F-5
|
|
|
|
Consolidated
Income Statements for the Three Years in the Period Ended
December 31, 2009
|
|
F-6
|
|
|
|
Consolidated
Statements of Changes in Equity for the Three Years in the Period Ended
December 31, 2009
|
|
F-9
|
|
|
|
Consolidated
Cash Flow Statements for the Three Years in the Period Ended
December 31, 2009
|
|
F-10
|
|
|
|
Notes
to Consolidated Financial Statements
|
|
F-12
|
All
supplementary schedules relating to the registrant are omitted because they are
not required or because the required information, where material, is contained
in the consolidated financial statements or notes thereto.
Credicorp
Ltd. and Subsidiaries
Consolidated
financial statements as of December 31, 2009 and 2008 together with the Report
of Independent Registered Public Accounting Firm
Credicorp
Ltd. and Subsidiaries
Consolidated
financial statements as of December 31, 2009 and 2008
Content
Report
of Independent Registered Public Accounting Firm
|
|
|
|
|
|
|
|
|
|
Consolidated
financial statements
|
|
|
|
|
|
|
|
|
|
Consolidated
statements of financial position
|
|
|
F-5 |
|
Consolidated
statements of income
|
|
|
F-6 |
|
Consolidated
statements of comprehensive income
|
|
|
F-8 |
|
Consolidated
statements of changes in equity
|
|
|
F-9 |
|
Consolidated
statements of cash flows
|
|
|
F-10 |
|
Notes
to the consolidated financial statements
|
|
|
F-12 |
|
Report of
Independent Registered Public Accounting Firm
To the
shareholders and Board of Directors of Credicorp Ltd.
We have
audited the accompanying consolidated statement of financial position of
Credicorp Ltd. and Subsidiaries as of December 31, 2009 and 2008, and the
related consolidated statements of income, comprehensive income, changes in
equity, and cash flows for each of the three years in the period ended December
31, 2009. These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Credicorp Ltd.
and Subsidiaries as of December 31, 2009 and 2008, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2009, in conformity with International Financial
Reporting Standards as issued by the International Accounting Standards
Board.
Report of Independent Registered Public
Accounting Firm (continued)
We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States of America), Credicorp Ltd and subsidiaries’
internal control over financial reporting as of December 31, 2009, based on
criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission and our report
dated June 15, 2010, expressed an unqualified opinion thereon.
Lima,
Peru,
June 15,
2010
Countersigned
by:
|
|
|
|
Cristian
Emmerich
|
|
C.P.C.
Register Nº19-289
|
|
Consolidated
statements of financial position
As of
December 31, 2009 and 2008
|
|
Note
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks:
|
|
4
|
|
|
|
|
|
|
|
Non-interest
bearing
|
|
|
|
|
|
938,486 |
|
|
|
1,057,416 |
|
Interest
bearing
|
|
|
|
|
|
2,898,172 |
|
|
|
2,708,755 |
|
|
|
|
|
|
|
3,836,658 |
|
|
|
3,766,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
Trading
securities
|
|
|
|
|
|
70,774 |
|
|
|
36,084 |
|
Investments
available-for-sale
|
|
5
|
|
|
|
5,079,606 |
|
|
|
4,950,754 |
|
|
|
|
|
|
|
5,150,380 |
|
|
|
4,986,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans,
net:
|
|
6
|
|
|
|
|
|
|
|
|
|
Loans,
net of unearned income
|
|
|
|
|
|
11,585,635 |
|
|
|
10,546,378 |
|
Allowance
for loan losses
|
|
|
|
|
|
(354,355 |
) |
|
|
(224,337 |
) |
|
|
|
|
|
|
11,231,280 |
|
|
|
10,322,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
assets designated at fair value through profit or loss
|
|
7
|
|
|
|
135,670 |
|
|
|
137,945 |
|
Premiums
and other policies receivable
|
|
8(a)
|
|
|
|
121,338 |
|
|
|
111,561 |
|
Accounts
receivable from reinsurers and coinsurers
|
|
8(b)
|
|
|
|
137,098 |
|
|
|
165,144 |
|
Property,
furniture and equipment, net
|
|
9
|
|
|
|
338,535 |
|
|
|
329,458 |
|
Due
from customers on acceptances
|
|
|
|
|
|
96,423 |
|
|
|
232,580 |
|
Seized
assets, net
|
|
|
|
|
|
11,233 |
|
|
|
11,454 |
|
Intangible
assets and goodwill, net
|
|
10
|
|
|
|
341,951 |
|
|
|
246,957 |
|
Other
assets
|
|
11
|
|
|
|
627,541 |
|
|
|
510,920 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
|
|
|
22,028,107 |
|
|
|
20,821,069 |
|
|
|
Note
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and equity
|
|
|
|
|
|
|
|
|
|
Deposits
and obligations:
|
|
12
|
|
|
|
|
|
|
|
Non-interest
bearing
|
|
|
|
|
|
3,297,995 |
|
|
|
3,213,529 |
|
Interest
bearing
|
|
|
|
|
|
10,793,833 |
|
|
|
10,736,908 |
|
|
|
|
|
|
|
14,091,828 |
|
|
|
13,950,437 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Due
to banks and correspondents
|
|
13(a)
|
|
|
|
1,167,438 |
|
|
|
1,179,991 |
|
Bankers’
acceptances outstanding
|
|
|
|
|
|
96,423 |
|
|
|
232,580 |
|
Accounts
payable to reinsurers and coinsurers
|
|
8(b)
|
|
|
|
48,009 |
|
|
|
55,841 |
|
Technical
reserves, insurance claims reserves and reserves for unearned
premiums
|
|
14
|
|
|
|
1,018,791 |
|
|
|
967,770 |
|
Borrowed
funds
|
|
13(b)
|
|
|
|
1,089,221 |
|
|
|
1,150,716 |
|
Bonds
and subordinated notes issued
|
|
15
|
|
|
|
1,287,022 |
|
|
|
785,230 |
|
Other
liabilities
|
|
11
|
|
|
|
726,023 |
|
|
|
702,399 |
|
Total
liabilities
|
|
|
|
|
|
19,524,755 |
|
|
|
19,024,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
16
|
|
|
|
|
|
|
|
|
|
Capital
and reserves attributable to Credicorp’s equity holders:
|
|
|
|
|
|
|
|
|
|
|
|
Capital
stock
|
|
|
|
|
|
471,912 |
|
|
|
471,912 |
|
Treasury
stock
|
|
|
|
|
|
(74,242 |
) |
|
|
(73,107 |
) |
Capital
surplus
|
|
|
|
|
|
130,341 |
|
|
|
140,693 |
|
Reserves
|
|
|
|
|
|
1,059,344 |
|
|
|
815,387 |
|
Other
reserves
|
|
|
|
|
|
237,446 |
|
|
|
(45,393 |
) |
Retained
earnings
|
|
|
|
|
|
492,055 |
|
|
|
379,680 |
|
|
|
|
|
|
|
2,316,856 |
|
|
|
1,689,172 |
|
Minority
interest
|
|
|
|
|
|
186,496 |
|
|
|
106,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
equity
|
|
|
|
|
|
2,503,352 |
|
|
|
1,796,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and equity
|
|
|
|
|
|
22,028,107 |
|
|
|
20,821,069 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
Credicorp
Ltd. and Subsidiaries
Consolidated
statements of income
For the
years ended December 31, 2009, 2008 and 2007
|
|
Note
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and dividend income
|
|
20
|
|
|
|
1,312,925 |
|
|
|
1,382,844 |
|
|
|
1,065,339 |
|
Interest
expense
|
|
20
|
|
|
|
(420,564 |
) |
|
|
(561,617 |
) |
|
|
(431,365 |
) |
Net
interest and dividend income
|
|
|
|
|
|
892,361 |
|
|
|
821,227 |
|
|
|
633,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for loan losses, net of recoveries
|
|
6(d)
|
|
|
|
(163,392 |
) |
|
|
(48,760 |
) |
|
|
(28,439 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest and dividend income after provision for loan
losses
|
|
|
|
|
|
728,969 |
|
|
|
772,467 |
|
|
|
605,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking
services commissions
|
|
21
|
|
|
|
436,819 |
|
|
|
394,247 |
|
|
|
324,761 |
|
Net
gain on foreign exchange transactions
|
|
|
|
|
|
87,944 |
|
|
|
108,709 |
|
|
|
61,778 |
|
Net
gain on sale of securities
|
|
|
|
|
|
120,932 |
|
|
|
51,936 |
|
|
|
46,376 |
|
Net
gain on financial assets and liabilities designated at fair value through
profit or loss
|
|
7
|
|
|
|
42,792 |
|
|
|
- |
|
|
|
65,088 |
|
Other
|
|
24
|
|
|
|
32,144 |
|
|
|
37,672 |
|
|
|
24,934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income
|
|
|
|
|
|
720,631 |
|
|
|
592,564 |
|
|
|
522,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance
premiums and claims
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
premiums earned
|
|
22
|
|
|
|
424,682 |
|
|
|
393,903 |
|
|
|
297,272 |
|
Net
claims incurred for life, property and casualty and health insurance
contracts
|
|
23
|
|
|
|
(286,458 |
) |
|
|
(341,910 |
) |
|
|
(238,600 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
premiums earned less claims
|
|
|
|
|
|
138,224 |
|
|
|
51,993 |
|
|
|
58,672 |
|
Consolidated
statements of income (continued)
|
|
Note
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and employees benefits
|
|
|
|
|
|
(467,116 |
) |
|
|
(365,201 |
) |
|
|
(409,037 |
) |
Administrative
expenses
|
|
|
|
|
|
(312,256 |
) |
|
|
(269,291 |
) |
|
|
(206,966 |
) |
Net
loss on financial assets and liabilities designated at fair value through
profit or loss
|
|
7
|
|
|
|
- |
|
|
|
(65,364 |
) |
|
|
- |
|
Depreciation
and amortization
|
|
9(a) and 10(a)
|
|
|
|
(71,099 |
) |
|
|
(57,369 |
) |
|
|
(51,013 |
) |
Provision
for seized assets
|
|
|
|
|
|
(64 |
) |
|
|
(1,067 |
) |
|
|
(3,057 |
) |
Impairment
loss on available-for-sale investments
|
|
5(c)
|
|
|
|
(9,825 |
) |
|
|
(60,435 |
) |
|
|
(5,017 |
) |
Other
|
|
24
|
|
|
|
(96,750 |
) |
|
|
(101,876 |
) |
|
|
(71,999 |
) |
Total
other expenses
|
|
|
|
|
|
(957,110 |
) |
|
|
(920,603 |
) |
|
|
(747,089 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before translation result and income tax
|
|
|
|
|
|
630,714 |
|
|
|
496,421 |
|
|
|
440,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation
result
|
|
|
|
|
|
12,222 |
|
|
|
(17,650 |
) |
|
|
34,627 |
|
Income
tax
|
|
17(b)
|
|
|
|
(138,500 |
) |
|
|
(109,508 |
) |
|
|
(102,287 |
) |
Net
income
|
|
|
|
|
|
504,436 |
|
|
|
369,263 |
|
|
|
372,395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
holders of Credicorp Ltd.
|
|
|
|
|
|
469,785 |
|
|
|
357,756 |
|
|
|
350,735 |
|
Minority
interest
|
|
|
|
|
|
34,651 |
|
|
|
11,507 |
|
|
|
21,660 |
|
|
|
|
|
|
|
504,436 |
|
|
|
369,263 |
|
|
|
372,395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share for net income attributable to equity holders of Credicorp Ltd.
(in United States dollars):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
25
|
|
|
|
5.90 |
|
|
|
4.49 |
|
|
|
4.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
25
|
|
|
|
5.90 |
|
|
|
4.49 |
|
|
|
4.40 |
|
The accompanying notes are an integral part of these consolidated financial
statements.
Credicorp
Ltd. and Subsidiaries
Consolidated
statements of comprehensive income
For the
years ended December 31, 2009, 2008 and 2007
|
|
Note
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
504,436 |
|
|
|
369,263 |
|
|
|
372,395 |
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
gain (loss) on investments available–for-sale
|
|
16(d)
|
|
|
|
268,550 |
|
|
|
(198,646 |
) |
|
|
83,132 |
|
Net
movement of cash flow hedge
|
|
16(d)
|
|
|
|
66,024 |
|
|
|
(81,293 |
) |
|
|
(40,371 |
) |
Income
tax
|
|
16(d)
|
|
|
|
(5,841 |
) |
|
|
21,516 |
|
|
|
(11,046 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income for the year, net of income tax
|
|
|
|
|
|
328,733 |
|
|
|
(258,423 |
) |
|
|
31,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income for the year, net of income tax
|
|
|
|
|
|
833,169 |
|
|
|
110,840 |
|
|
|
404,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
holders of Credicorp Ltd.
|
|
|
|
|
|
752,624 |
|
|
|
132,813 |
|
|
|
382,876 |
|
Minority
interest
|
|
|
|
|
|
80,545 |
|
|
|
(21,973 |
) |
|
|
21,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
833,169 |
|
|
|
110,840 |
|
|
|
404,110 |
|
The accompanying notes are an integral part of these consolidated financial
statements.
Credicorp
Ltd. and Subsidiaries
Consolidated
statements of changes in equity
For the
years ended December 31, 2009, 2008 and 2007
|
|
Attributable to Credicorp´s equity holders
|
|
|
|
Number of shares
issued,
note 25
|
|
|
Capital
stock
|
|
|
Treasury
stock
|
|
|
Capital
surplus
|
|
|
Reserves
|
|
|
Available-for- sale
investments
reserve
|
|
|
Cash flow hedge
reserve
|
|
|
Retained earnings
|
|
|
Total
|
|
|
Minority
interest
|
|
|
Total
net equity
|
|
|
|
(In
thousands of units)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
as of January 1, 2007
|
|
|
94,382 |
|
|
|
471,912 |
|
|
|
(73,107 |
) |
|
|
140,693 |
|
|
|
479,902 |
|
|
|
144,471 |
|
|
|
2,938 |
|
|
|
230,013 |
|
|
|
1,396,822 |
|
|
|
136,946 |
|
|
|
1,533,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in equity for 2007 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
350,735 |
|
|
|
350,735 |
|
|
|
21,660 |
|
|
|
372,395 |
|
Other
comprehensive income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
72,512 |
|
|
|
(40,371 |
) |
|
|
- |
|
|
|
32,141 |
|
|
|
(426 |
) |
|
|
31,715 |
|
Total
comprehensive income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
72,512 |
|
|
|
(40,371 |
) |
|
|
350,735 |
|
|
|
382,876 |
|
|
|
21,234 |
|
|
|
404,110 |
|
Transfer
of retained earnings to reserves, note 16(c)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
107,316 |
|
|
|
- |
|
|
|
- |
|
|
|
(107,316 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Cash
dividends, note 16(e)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(103,690 |
) |
|
|
(103,690 |
) |
|
|
- |
|
|
|
(103,690 |
) |
Dividends
of subsidiaries and other
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1 |
|
|
|
1 |
|
|
|
(18,916 |
) |
|
|
(18,915 |
) |
Balances
as of December 31, 2007
|
|
|
94,382 |
|
|
|
471,912 |
|
|
|
(73,107 |
) |
|
|
140,693 |
|
|
|
587,218 |
|
|
|
216,983 |
|
|
|
(37,433 |
) |
|
|
369,743 |
|
|
|
1,676,009 |
|
|
|
139,264 |
|
|
|
1,815,273 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in equity for 2008 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
357,756 |
|
|
|
357,756 |
|
|
|
11,507 |
|
|
|
369,263 |
|
Other
comprehensive income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(144,254 |
) |
|
|
(80,689 |
) |
|
|
- |
|
|
|
(224,943 |
) |
|
|
(33,480 |
) |
|
|
(258,423 |
) |
Total
comprehensive income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(144,254 |
) |
|
|
(80,689 |
) |
|
|
357,756 |
|
|
|
132,813 |
|
|
|
(21,973 |
) |
|
|
110,840 |
|
Transfers
of retained earnings to reserves, note 16(c)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
228,169 |
|
|
|
- |
|
|
|
- |
|
|
|
(228,169 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Cash
dividends, note 16(e)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(119,648 |
) |
|
|
(119,648 |
) |
|
|
- |
|
|
|
(119,648 |
) |
Dividends
of subsidiaries and other
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(10,358 |
) |
|
|
(10,360 |
) |
Balances
as of December 31, 2008
|
|
|
94,382 |
|
|
|
471,912 |
|
|
|
(73,107 |
) |
|
|
140,693 |
|
|
|
815,387 |
|
|
|
72,729 |
|
|
|
(118,122 |
) |
|
|
379,680 |
|
|
|
1,689,172 |
|
|
|
106,933 |
|
|
|
1,796,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in equity for 2009 -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
469,785 |
|
|
|
469,785 |
|
|
|
34,651 |
|
|
|
504,436 |
|
Other
comprehensive income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
216,248 |
|
|
|
66,591 |
|
|
|
- |
|
|
|
282,839 |
|
|
|
45,894 |
|
|
|
328,733 |
|
Total
comprehensive income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
216,248 |
|
|
|
66,591 |
|
|
|
469,785 |
|
|
|
752,624 |
|
|
|
80,545 |
|
|
|
833,169 |
|
Transfer
of retained earnings to reserves, note 16(c)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
238,107 |
|
|
|
- |
|
|
|
- |
|
|
|
(238,107 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Cash
dividends, note 16(e)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(119,303 |
) |
|
|
(119,303 |
) |
|
|
- |
|
|
|
(119,303 |
) |
Purchase
of treasury stock
|
|
|
- |
|
|
|
- |
|
|
|
(1,135 |
) |
|
|
(10,352 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(11,487 |
) |
|
|
- |
|
|
|
(11,487 |
) |
Share-based
payments transactions, note 18(b)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,850 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,850 |
|
|
|
- |
|
|
|
5,850 |
|
Dividends
of subsidiaries and other
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(982 |
) |
|
|
(982 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
as of December 31, 2009
|
|
|
94,382 |
|
|
|
471,912 |
|
|
|
(74,242 |
) |
|
|
130,341 |
|
|
|
1,059,344 |
|
|
|
288,977 |
|
|
|
(51,531 |
) |
|
|
492,055 |
|
|
|
2,316,856 |
|
|
|
186,496 |
|
|
|
2,503,352 |
|
The accompanying notes are an integral part of these consolidated
financial statements.
Credicorp
Ltd. and Subsidiaries
Consolidated
statements of cash flows
For the
years ended December 2009, 2008 and 2007
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
504,436 |
|
|
|
369,263 |
|
|
|
372,395 |
|
Add
(deduct)
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for
loan losses
|
|
|
163,392 |
|
|
|
48,760 |
|
|
|
28,439 |
|
Depreciation
and amortization
|
|
|
71,099 |
|
|
|
57,369 |
|
|
|
51,013 |
|
Provision
for seized assets
|
|
|
64 |
|
|
|
1,067 |
|
|
|
3,057 |
|
Provision
for sundry risks
|
|
|
14,425 |
|
|
|
37,549 |
|
|
|
8,096 |
|
Deferred
income tax
|
|
|
(8,552 |
) |
|
|
(4,394 |
) |
|
|
(14,921 |
) |
Net
gain on sales of securities available-for-sale
|
|
|
(120,932 |
) |
|
|
(51,936 |
) |
|
|
(46,376 |
) |
Impairment
loss on available-for-sale investments
|
|
|
9,825 |
|
|
|
60,435 |
|
|
|
5,017 |
|
Net
(gain) loss on financial assets and liabilities designated at
fair value through profit and loss
|
|
|
(42,792 |
) |
|
|
65,364 |
|
|
|
(65,088 |
) |
Gain
on sales of property, furniture and equipment
|
|
|
(388 |
) |
|
|
(979 |
) |
|
|
(42 |
) |
Translation
result
|
|
|
(12,222 |
) |
|
|
17,650 |
|
|
|
(34,627 |
) |
Loss
(gain) for shared-based compensation plan
|
|
|
56,338 |
|
|
|
(27,402 |
) |
|
|
68,332 |
|
(Sale)
purchase of trading securities, net
|
|
|
(34,690 |
) |
|
|
14,911 |
|
|
|
(5,859 |
) |
Net
changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in loans
|
|
|
(944,021 |
) |
|
|
(2,339,675 |
) |
|
|
(2,172,418 |
) |
Decrease
(Increase) in other assets
|
|
|
8,186 |
|
|
|
(463,273 |
) |
|
|
(404,175 |
) |
Increase
in deposits and obligations
|
|
|
139,929 |
|
|
|
2,614,020 |
|
|
|
2,269,568 |
|
(Decrease)
increase in due to banks and correspondents
|
|
|
(151,781 |
) |
|
|
(274,714 |
) |
|
|
875,447 |
|
Increase
(decrease) in other liabilities
|
|
|
(141,027 |
) |
|
|
328,204 |
|
|
|
402,631 |
|
Net
cash (used in) provided by operating activities
|
|
|
(488,711 |
) |
|
|
452,219 |
|
|
|
1,340,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
of subsidiary net of cash received, note
2
|
|
|
(92,329 |
) |
|
|
- |
|
|
|
- |
|
Net
sale (purchase) of investments available-for-sale
|
|
|
284,371 |
|
|
|
125,416 |
|
|
|
(1,541,621 |
) |
Purchase
of property, furniture and equipment
|
|
|
(45,051 |
) |
|
|
(91,353 |
) |
|
|
(53,901 |
) |
Sales
of property, furniture and equipment
|
|
|
2,745 |
|
|
|
1,775 |
|
|
|
951 |
|
Net
cash provided by (used in) investing activities
|
|
|
149,736 |
|
|
|
35,838 |
|
|
|
(1,594,571 |
) |
Consolidated statements of
cash flow (continued)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
Issuance
of bonds and subordinated debt
|
|
|
564,170 |
|
|
|
257,509 |
|
|
|
256,014 |
|
Redemption
of bonds and subordinated debt
|
|
|
(53,396 |
) |
|
|
(190,402 |
) |
|
|
(75,728 |
) |
Increase
in borrowed funds
|
|
|
- |
|
|
|
300,000 |
|
|
|
499,792 |
|
Payments
of borrowed funds
|
|
|
(61,495 |
) |
|
|
(19,688 |
) |
|
|
- |
|
Acquisition
of Credicorp’s shares
|
|
|
(11,487 |
) |
|
|
- |
|
|
|
- |
|
Cash
dividends
|
|
|
(119,303 |
) |
|
|
(119,648 |
) |
|
|
(103,690 |
) |
Net
cash provided by financing activities
|
|
|
318,489 |
|
|
|
227,771 |
|
|
|
576,388 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash and cash equivalents
|
|
|
(20,486 |
) |
|
|
715,828 |
|
|
|
322,306 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation
(loss) gain on cash and cash equivalents
|
|
|
90,973 |
|
|
|
(23,522 |
) |
|
|
18,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at the beginning of the year
|
|
|
3,766,171 |
|
|
|
3,073,865 |
|
|
|
2,733,530 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at the end of the year
|
|
|
3,836,658 |
|
|
|
3,766,171 |
|
|
|
3,073,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary
cash flows information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid during the year for -
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
444,398 |
|
|
|
533,861 |
|
|
|
415,157 |
|
Income
tax
|
|
|
142,516 |
|
|
|
124,754 |
|
|
|
86,754 |
|
Cash
received during the year for -
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
1,315,704 |
|
|
|
1,361,143 |
|
|
|
1,106,972 |
|
The accompanying notes are an integral part of these consolidated financial
statements.
Credicorp
Ltd. and Subsidiaries
Notes to
the consolidated financial statements
As of
December 31, 2009 and 2008
Credicorp
Ltd. (hereinafter “Credicorp” or “the Group”) is a limited liability company
incorporated in Bermuda in 1995 to act as a holding company and to coordinate
the policies and administration of its subsidiaries. It is also
engaged in investing activities.
Credicorp
Ltd., through its banking and non-banking subsidiaries, provides a wide range of
financial services and products throughout Peru and in certain other countries
(Bolivia and Panama). Its major subsidiary is Banco de Crédito del
Perú (hereinafter “BCP” or the “Bank”), a Peruvian universal
bank. Credicorp’s address is Claredon House 2 Church Street Hamilton,
Bermuda; likewise, administration offices of its representative in Peru are
located in Calle Centenario Nº156, La Molina, Lima, Peru.
Credicorp
is listed in Lima and New York stock exchanges.
The
consolidated financial statements as of and for the year ended December 31, 2008
were approved in the General Shareholders’ meeting held on March 31,
2009. The accompanying consolidated financial statements as of and
for the year ended December 31, 2009, were approved by the Board of Directors
Meeting of February 24, 2010 and by the General Shareholders’ Meeting of March
31, 2010, without modifications.
2.
|
Acquisition
of Empresa Financiera Edyficar S.A.
|
During
October and November 2009, Credicorp, through its subsidiary BCP, acquired
99.78% of the capital stock of Empresa Financiera Edyficar S.A. (a Peruvian
financial entity, serving micro and small size entrepreneurs) for approximately
US$96.1 million in cash.
Notes to the consolidated financial
statements (continued)
The
acquisition of Edyficar was recorded using the purchase method, as required by
IFRS 3, “Business Combinations”. Assets and liabilities were recorded
at their estimated fair values at the acquisition date, including the identified
intangible assets unrecorded in Edyficar balance sheet. Book value and fair
value of the identified assets and liabilities were as follows:
|
|
Book value
|
|
|
Fair value
adjustments
|
|
|
Fair value of the
entity acquired
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
Assets
-
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
3,810 |
|
|
|
- |
|
|
|
3,810 |
|
Loans,
net
|
|
|
218,218 |
|
|
|
(10,295 |
) |
|
|
207,923 |
|
Client
relationships, note 10(a)
|
|
|
- |
|
|
|
6,574 |
|
|
|
6,574 |
|
Fixed
assets, net
|
|
|
8,255 |
|
|
|
- |
|
|
|
8,255 |
|
Brand
name, note 10(a)
|
|
|
- |
|
|
|
13,159 |
|
|
|
13,159 |
|
Goodwill,
note 10(b)
|
|
|
- |
|
|
|
50,696 |
|
|
|
50,696 |
|
Other
assets
|
|
|
11,802 |
|
|
|
3,263 |
|
|
|
15,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
|
|
|
38,590 |
|
|
|
- |
|
|
|
38,590 |
|
Due
to banks
|
|
|
138,257 |
|
|
|
- |
|
|
|
138,257 |
|
Deferred
income tax liability
|
|
|
- |
|
|
|
6,611 |
|
|
|
6,611 |
|
Other
liabilities
|
|
|
25,054 |
|
|
|
831 |
|
|
|
25,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
acquired assets
|
|
|
40,184 |
|
|
|
55,955 |
|
|
|
96,139 |
|
3.
|
Significant
accounting policies
|
Significant
accounting principles used in the preparation of Credicorp’s consolidated
financial statements are set out below and were consistently applied to all of
the years presented.
|
(a)
|
Basis
of presentation and use of estimates
-
|
The
consolidated financial statements were prepared in accordance with International
Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB). The consolidated financial statements
were prepared on a historical cost basis, except for available-for-sale
investments, derivative financial instruments, share-based payment liability and
financial assets and financial liabilities designated at fair value through
profit or loss, which were measured at fair value. The consolidated
financial statements are presented in United States Dollars (US$), and all
values are rounded to the nearest US$ thousand, except when otherwise
indicated.
Notes to the consolidated financial
statements (continued)
The
preparation of the consolidated financial statements in conformity with IFRS
requires Management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses and the disclosure of
significant events in notes to the consolidated financial
statements.
Estimates
and judgments are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to
be reasonable under the current circumstances. Actual results could
differ from those estimates. The most significant estimates comprised
in the accompanying consolidated financial statements are related to the
computation of the allowance for loan losses, the measurement of financial
instruments, the technical reserves for claims and premiums, the provision for
seized assets, the valuation of derivatives, and the deferred tax assets and
liabilities. The accounting criteria used for each of these items are
described in this note.
The
accounting policies adopted are consistent with those of the previous year,
except that the Group has adopted those new IFRS and revised IAS mandatory for
years beginning on or after January 1, 2009. The adoption of the new
and revised standards did not have a significant effect on the accompanying
consolidated financial statements; therefore, it has not been necessary to amend
the comparative figures. In summary:
|
-
|
IFRS
2 “Share-based Payments - Vesting conditions and cancellations”, the
standard restricts the definition of “vesting condition” to a condition
that includes an explicit or implicit requirement to provide services. The
indicated definition does not impact the accounting for the Group’s
share-based payment agreements.
|
|
-
|
IFRS
7 “Financial Instruments: Disclosures” (Amendments). The amended standard
requires additional disclosures covering fair value measurement and
liquidity risk. Fair value measurements related to items
recorded at fair value are to be disclosed by source of inputs using a
three level fair value hierarchy, by class, for all financial instrument
recognized at fair value. In addition, reconciliation between
the beginning and ending balance for level 3 fair value measurements is
now required, as well as significant transfers between levels in the fair
value hierarchy. The amendments also clarify the requirements
for liquidity risk disclosures with respect to derivative transactions and
assets used for liquidity management. The fair value
measurement disclosures are presented in Note 29.7. The
liquidity risk disclosures are not significantly impacted by the
amendments and are presented in Note
29.3.
|
|
-
|
IFRS
8 “Operating Segments”, the standard adopts a full management approach
identifying, measuring and disclosing the results of its operating
segments. The Group concluded that operating segments determined in
accordance with IFRS 8 are the same as the business segments previously
identified under IAS 14. IFRS 8 disclosures are shown in Note
26.
|
|
-
|
IAS
1 (Revised) “Presentation of Financial Statements”. The revised standard
separates owner and non-owner changes in equity. The statement of changes
in equity includes only details of transactions with owners, with
non-owner changes in equity presented in a reconciliation of each
component of equity. In addition, the standard introduces the
statement of comprehensive income: it presents all items of recognized
income and expense, either in one single statement, or in two linked
statements. The Group has elected to present two
statements.
|
Notes to the consolidated financial
statements (continued)
|
-
|
IAS
23 (Amendment) “Borrowing Costs”. The revised standard eliminates the
option of expensing all borrowing costs and requires borrowing costs to be
capitalized if they are directly attributable to the acquisition,
construction or production of a qualifying
asset.
|
This
amendment did not have any impact on the Group´s consolidated financial
statement.
|
-
|
IAS
32 “Financial Instruments: Presentation” and IAS 1 “Puttable Financial
Instruments and Obligations Arising on Liquidation”. The
standards have been amended to allow a limited scope exception for
puttable financial instruments to be classified as equity if they fulfill
a number of specified criteria. These amendments did not have any impact
on the Group’s financial position or
performance.
|
|
-
|
IFRIC
9 “Reassessment of embedded derivatives and IAS 39 Financial Instruments:
Recognition and Measurement - Embedded Derivatives”
(Amendments). This amendment requires an entity to assess
whether an embedded derivative must be separated from a host contract when
the entity reclassifies a hybrid financial asset out of the fair value
through profit or loss category. This assessment is to be made
based on circumstances that existed on the later of the date the entity
first became a party to the contract and the date of any contract
amendments that significantly change the cash flows of the
contract. IAS 39 now states that if an embedded derivative
cannot be reliably measured, the entire hybrid instrument must remain
classified as at fair value through profit or loss. This
interpretation did not have any impact in the Group’s consolidated
financial statement.
|
|
-
|
IFRIC
13 “Customer Loyalty Programs”. The interpretation requires
loyalty award credits granted to customers in connection with a sales
transaction to be accounted for as a separate component of the sales
transaction. This interpretation did not have any significant
impact on the Group’s consolidated financial
statement.
|
|
-
|
IFRIC
15 “Agreement for the Construction of Real State”. It clarifies
when and how revenue and related expenses from the sale of a real estate
unit should be recognized if an agreement between a developer and a buyer
is reached before the construction of the real estate is completed. This
interpretation did not have any impact on the Group’s consolidated
financial statements.
|
|
-
|
IFRIC
16 “Hedges of a Net Investment in a Foreign Operation”. This
interpretation provides guidance on the accounting for a hedge of a net
investment. This interpretation did not have any impact on the Group’s
consolidated financial statements.
|
In May
2008 the IABS issued its first omnibus of amendments to its standards, primarily
with a view to removing inconsistencies and clarifying wording. There
are separate transitional provisions for each standard. The adoption of the new
amendments resulted in minor changes to accounting policies, but did not have
any impact on the financial position or performance of the Group.
Notes to the consolidated financial
statements (continued)
Subsidiaries
are all entities (including special purpose entities) in which the Group has the
power to govern their financial and operating policies. This
situation is generally evidenced by controlling more than one half of the voting
rights.
Subsidiaries
are fully consolidated from the date on which effective control is transferred
to the Group and are no longer consolidated from the date control
ceases. The consolidated financial statements include the assets,
liabilities, income and expenses of Credicorp and its
Subsidiaries. Transactions between the Group’s entities, including
balances, gains or losses are eliminated.
Acquisition
of a subsidiary is recorded using the purchase method of
accounting. The cost of an acquisition is measured as the fair value
of the assets received, equity instruments issued and liabilities incurred or
assumed at the date of acquisition, plus directly attributable
cost. The excess of the cost of acquisition over the fair value of
the Group’s share of the identifiable net assets and intangible assets acquired
is recorded as goodwill.
Assets in
custody or managed by the Group, such as investment funds and private pension
funds (AFP funds), are not part of the group’s consolidated financial
statements, note 3(z).
Net
equity attributable to the minority interest is presented in the consolidated
statements of financial position. Income attributable to the minority
interest is presented separately in the consolidated income statements and the
consolidated statements of comprehensive income.
Notes to
the consolidated financial statements (continued)
Associates:
An
associate is an entity over which the Group has significant influence but not
control. Investments in these entities represent shareholding between
20 and 50 percent of the voting rights; and are recognized initially at cost and
then are accounted for by the “equity method”. The Group does not
have significant investments in associates; therefore, they are included in the
caption “Other assets” in the consolidated statements of financial position;
gains resulting from the use of the equity method of accounting are included in
the caption “Other income” of the consolidated income statement.
Minority
interest:
Transactions
with minority interests are treated as transactions with third
parties. Disposals of minority interests result in gains or losses
which are recorded in the consolidated income statement. Purchases
from minority interests result in goodwill, which is the difference between any
consideration paid and the carrying value of the subsidiary’s net
assets.
Notes to the
consolidated financial statements (continued)
As of
December 31, 2009 and 2008, the following entities comprise the Group
(individual financial statements data is presented in accordance with IFRS and
before eliminations for consolidation purposes, except for the elimination of
Credicorp´s treasury stock and its related dividends):
Entity
|
|
Percentage of participation (direct
and indirect)
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Equity
|
|
|
Net income (loss)
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
%
|
|
|
%
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banco
de Crédito del Perú and Subsidiaries (i)
|
|
|
97.41
|
|
|
|
97.41
|
|
|
|
19,563,309 |
|
|
|
18,514,133 |
|
|
|
17,886,706 |
|
|
|
17,112,683 |
|
|
|
1,676,603 |
|
|
|
1,401,450 |
|
|
|
397,378 |
|
|
|
423,529 |
|
Atlantic
Security Holding Corporation and Subsidiaries (ii)
|
|
|
100.00
|
|
|
|
100.00
|
|
|
|
1,483,811 |
|
|
|
1,453,915 |
|
|
|
1,269,175 |
|
|
|
1,360,471 |
|
|
|
214,636 |
|
|
|
93,444 |
|
|
|
29,716 |
|
|
|
(50,395 |
) |
El
Pacífico Peruano-Suiza Compañía de Seguros y Reaseguros and Subsidiaries
(iii)
|
|
|
75.98
|
|
|
|
75.74
|
|
|
|
1,496,709 |
|
|
|
1,307,547 |
|
|
|
1,190,799 |
|
|
|
1,155,405 |
|
|
|
305,910 |
|
|
|
152,142 |
|
|
|
49,192 |
|
|
|
(20,994 |
) |
Grupo
Crédito S.A. and Subsidiaries (iv)
|
|
|
99.99
|
|
|
|
100.00
|
|
|
|
376,949 |
|
|
|
335,854 |
|
|
|
159,767 |
|
|
|
101,748 |
|
|
|
217,182 |
|
|
|
234,106 |
|
|
|
26,556 |
|
|
|
18,271 |
|
CCR
Inc. (v)
|
|
|
99.99
|
|
|
|
99.99
|
|
|
|
1,089,659 |
|
|
|
1,152,336 |
|
|
|
1,152,537 |
|
|
|
1,247,465 |
|
|
|
(62,878 |
) |
|
|
(95,129 |
) |
|
|
(1,289 |
) |
|
|
138 |
|
Credicorp
Securities Inc. (vi)
|
|
|
99.99
|
|
|
|
99.99
|
|
|
|
4,639 |
|
|
|
2,851 |
|
|
|
402 |
|
|
|
470 |
|
|
|
4,237 |
|
|
|
2,381 |
|
|
|
1,867 |
|
|
|
549 |
|
BCP
Emisiones Latam 1 S.A. (vii)
|
|
|
100.00
|
|
|
|
-
|
|
|
|
115,127 |
|
|
|
- |
|
|
|
114,356 |
|
|
|
- |
|
|
|
771 |
|
|
|
- |
|
|
|
(329 |
) |
|
|
- |
|
|
(i)
|
Banco
de Crédito (BCP) is a universal bank incorporated in Peru in
1889. Its activities are supervised by the Superintendence of
Banking, Insurance and AFP (the Peruvian banking, insurance and AFP
authority, hereafter “the SBS” for its Spanish acronym). During
2009 and 2008, Credicorp acquired 0.002 percent and 0.08 percent of BCP
shares, respectively, owned by minority interest. The consolidated
financial statements of Banco de Crédito del Perú and Subsidiaries as of
December 31, 2009, include the financial statement of Edyficar, see note
2. BCP and Subsidiaries hold as of December 31, 2009 and 2008,
95.92 percent of the capital stock of Banco de Crédito de Bolivia (BCB), a
universal bank operating in Bolivia (Credicorp holds 4.08
percent). As of December 31, 2009, BCB´s assets, liabilities,
equity, income and net income amounted to US$1,097.8, US$991.2, US$106.6,
US$108.3 and US$28.7 million, respectively (US$939.8, US$831.6, US$108.2,
US$117.7 and US$44.5 million, respectively, as of December 31,
2008).
|
|
(ii)
|
Atlantic
Security Holding Corporation (ASHC) is incorporated in the Cayman Islands;
its main activity is to invest in capital stock. Its most
significant subsidiary is Atlantic Security Bank (ASB), which is
incorporated in the Cayman Islands, and operates through branches and
offices in Grand Cayman and the Republic of Panama; its main activity is
private and institutional banking services and trustee
administration.
|
|
(iii)
|
El
Pacífico Peruano-Suiza Compañía de Seguros y Reaseguros (PPS) is
incorporated in Peru, provides property, casualty, life, health and
personal insurance. Its main subsidiaries are El Pacífico Vida
Compañía de Seguros y Reaseguros S.A. and Pacífico S.A. Entidad
Prestadora de Salud (EPS), holding 62.0 percent and 100.00 percent,
respectively, of their capital stock. PPS and its subsidiaries
activities are supervised by the
SBS.
|
|
(iv)
|
Grupo
Crédito S.A. is incorporated in Peru, its main activity is to invest in
listed and not listed securities in Peru. Its main subsidiary
is Prima AFP, a private pension fund administrator incorporated in Perú,
whose activities are supervised by the SBS. As of December 31,
2009, Prima AFP total assets, liabilities and net income amounted to
US$249.8, US$87.9, and U$20.8 million, respectively (US$225.6 million,
US$96.3 million and US$ 11.2 million, respectively, as of December 31,
2008).
|
|
(v)
|
CCR
Inc., is a special purposes entity incorporated in The Bahamas in 2001,
its main activity is to manage certain loans granted to BCP by foreign
financial entities, note 13(b). These loans are collateralized
by transactions performed by BCP. As of December 31, 2009 and
2008, the negative equity is generated by unrealized losses of cash flow
hedge derivatives, as it is explained in notes 11(b)(ii) and 16(c)
.
|
|
(vi)
|
Credicorp
Securities Inc., is incorporated in the United States of America and began
operations on January, 2003; it provides securities brokerage services,
mainly to retail customers in Latin
America.
|
|
(vii)
|
BCP
Emisiones Latam 1 S.A., is a special purposes entity incorporated in Chile
in 2009, through which the Group issued corporate bonds, see note
15(a)(i).
|
Notes to the
consolidated financial statements (continued)
|
(c)
|
Foreign
currency translation -
|
The Group
has determined that its functional and presentation currency is the United
States Dollar (U.S. Dollar or US$), because it reflects the economic substance
of the underlying events and circumstances relevant to the Group; insofar as its
main operations and/or transactions in the different countries where the Group
operates; such as: loans granted, financing obtained, sale of insurance
premiums, interest income and expense, and that an important percentage of wages
and purchases are established and settled in U.S. Dollars.
Financial
statements of each of Credicorp’s subsidiaries are measured using the currency
of the country in which each entity operates and are translated into U.S.
Dollars (functional and presentation currency) as follows:
|
-
|
Monetary
assets and liabilities are translated at the free market exchange rate at
the date of the consolidated statements of financial
position.
|
|
-
|
Non-monetary
accounts are translated at the free market exchange rate prevailing at the
transaction date.
|
|
-
|
Income
and expenses, except for those related to non-monetary assets which are
translated at the free market exchange rate prevailing at the transaction
date, are translated monthly at the average monthly exchange
rate.
|
All
resulting translation differences are recognized in the consolidated income
statement.
|
(d)
|
Income
and expense recognition from banking activities
-
|
Interest
income and expense for all interest-bearing financial instruments, including
those related to financial instruments classified as held for trading or
designated at fair value through profit or loss, are recognized within “Interest
and dividend income” and “Interest expense” in the consolidated income statement
using the effective interest rate, which is the rate that discounts estimated
future cash payments or receipts through the expected life of the financial
instrument or a shorter period, where appropriate, to the net carrying amount of
the financial asset or financial liability.
Interest
income is suspended when collection of loans become doubtful, i.e. when loans
are overdue more than 90 days or when the borrower or securities’ issuer
defaults, if earlier than 90 days; such income is excluded from interest income
until collected. Uncollected income on such loans is provisioned.
When Management determines that the debtor’s financial condition has improved,
the recording of interest thereon is reestablished on an accrual
basis.
Interest
income includes coupons earned on fixed income investment and trading securities
and the accrued discount and premium on financial
instruments. Dividends are recognized as income when they are
declared.
Notes to the consolidated
financial statements (continued)
Fees and
commission income are recognized on an accrual basis when
earned. Contingent credit fees for loans that are likely to be drawn
down and other credit related fees are deferred (together with any direct
incremental costs) and recognized as an adjustment to the effective interest
rate on the loan.
All other
revenues and expenses are recognized on an accrual basis.
|
(e)
|
Insurance
activities -
|
Product
classification:
Insurance
contracts are those contracts when the Group (the insurer) has accepted
significant insurance risk from another party (the policyholder) by agreeing to
compensate the policyholder if a specified uncertain future event (the insured
event) adversely affects the policyholder. This definition also includes
reinsurance contracts that the Group holds. As a general guideline,
the Group determines whether it has significant insurance risk by comparing
benefits paid with benefits payable if the insured event did not occur.
Insurance contracts can also transfer financial risk.
Once a
contract has been classified as an insurance contract, it remains an insurance
contract for the remainder of its lifetime, even if the insurance risk reduces
significantly during this period, unless all rights and obligations are
extinguished or expire. Investment contracts can however be reclassified as
insurance contracts after inception if insurance risk becomes
significant.
Reinsurance:
The Group
cedes insurance risk in the normal course of business for all of its businesses.
Reinsurance assets represent balances due from reinsurance companies. Amounts
recoverable from reinsurers are estimated in a manner consistent with the
outstanding claims provision or settled claims associated with the reinsurer’s
policies and are in accordance with the related reinsurance
contract.
Reinsurance
assets are reviewed for impairment at each reporting date or more frequently
when an indication of impairment arises during the reporting
year. Impairment occurs when there is objective evidence as a result
of an event that occurred after initial recognition of the reinsurance asset
that the Group may not receive all outstanding amounts due under the terms of
the contract and the event has a reliably measureable impact on the amounts that
the Group will receive from the reinsurer. The impairment loss is
recorded in the consolidated income statement.
Gains or
losses on buying reinsurance are recognized in the consolidated income statement
immediately at the date of purchase and are not amortized.
Ceded
reinsurance arrangements do not relieve the Group from its obligations to a
policyholder.
The Group
also assumes reinsurance risk in the normal course of business for non-life
insurance contracts when applicable. Premiums and claims on assumed
reinsurance are recognized as revenue or expenses in the same manner as they
would be if the reinsurance were considered direct business, taking into account
the product classification of the reinsured business.
Notes to the consolidated financial
statements (continued)
Reinsurance
liabilities represent balances due to reinsurance companies. Amounts
payable are estimated in a manner consistent with the related reinsurance
contract.
Premiums
and claims are presented on a gross basis for both ceded and assumed
reinsurance, see note 22 and 23. Reinsurance assets or liabilities
are derecognized when the contractual rights are extinguished or expire or when
the contract is transferred to another party.
Insurance
receivables
Insurance
receivables are recognized when due and measured on initial recognition at the
fair value of the consideration received or receivable. Subsequent to initial
recognition, insurance receivables are measured at amortized cost. As of
December 31, 2009 and 2008, the carrying value of the insurance receivables is
similar to its fair value due to its liquidity and its short
term. The carrying value of insurance receivables is reviewed for
impairment whenever events or circumstances indicate that the carrying amount
may not be recoverable, with the impairment loss recorded in the consolidated
income statement. Insurance receivables are derecognized when the derecognition
criteria for financial assets, as described in Note 3(g), has been
met.
“Unit-
Linked” investment
“Unit-
Linked” investment represent assets held for purposes of funding life and
insurance contracts and for which investment income and investment gains and
losses accrue directly to the policyholders who bear the investment
risk. Each account has specific objectives, and the assets are
carried at fair value. The balance of each account is legally
segregated and is not subject to claims that arise out of any other business of
the Group. The liabilities for these accounts are equal to the
account assets.
Deferred
acquisition costs (DAC):
Those
direct and indirect costs incurred during the financial period arising from the
writing or renewing of insurance contracts, are deferred to the extent that
these costs are recoverable out of future premiums. All other
acquisition costs are recognized as an expense when incurred.
Subsequent
to initial recognition, these costs are amortized on a straight line basis based
on the term of expected future premiums, which typically varies between 5 and 11
years for life insurance contracts and is normally 1 year for non-life insurance
contracts. Amortization is recorded in the consolidated income
statement.
Changes
in the expected useful life or the expected pattern of consumption of future
economic benefits embodied in the asset are accounted for by changing the
amortization period and are treated as a change in an accounting
estimate.
Notes to the consolidated financial
statements (continued)
An
impairment review is performed at each reporting date or more frequently when an
indication of impairment arises. When the recoverable amounts is less
than the carrying value an impairment loss is recognized in the consolidated
income statement. DAC is also considered in the liability adequacy
test for each reporting period.
DAC are
derecognized when the related contracts are either settled or disposed
of.
Reinsurance
commissions:
Commissions
receivable on outwards reinsurance contracts are deferred and amortized on a
straight line basis over the term of the expected premiums payable.
Insurance
contract liabilities:
|
(i)
|
Life
insurance contracts liabilities
|
Life
insurance liabilities are recognized when contracts are entered into and
premiums are charged. These liabilities are measured by using the net premium
method. The liability is determined as the sum of the discounted value of the
expected future benefits, claims handling and policy administration expenses,
policyholder options and guarantees and investment income from assets backing
such liabilities, which are directly related to the contract, less the
discounted value of the expected theoretical premiums that would be required to
meet the future cash outflows based on the valuation assumptions used. The
liability is either based on current assumptions or calculated using the
assumptions established at the time the contract was issued, in which case a
margin for risk and adverse deviation is generally included. A
separate reserve for longevity may be established and included in the
measurement of the liability. Furthermore, the liability for life insurance
contracts comprises the provision for unearned premiums and unexpired risks, as
well as for claims outstanding, which includes an estimate of the incurred
claims that have not yet been reported to the Group. Adjustments to
the liabilities at each reporting date are recorded in the consolidated income
statement. Profits originated from margins of adverse deviations on
run-off contracts, are recognized in the consolidated income statement over the
life of the contract, whereas losses are fully recognized in the consolidated
income statement during the first year of run-off. The liability is derecognized
when the contract expires, is discharged or is cancelled.
At each
reporting date, an assessment is made of whether the recognized life insurance
liabilities are adequate, net of related DAC, by using an existing liability
adequacy test as laid out under IFRS 4.
|
(ii)
|
Non-life
insurance (which comprises general insurance and healthcare) contract
liabilities
|
Non-life
insurance contract liabilities are recognized when contracts are entered into
and premiums are charged. These liabilities are known as the
outstanding claims provision, which are based on the estimated ultimate cost of
all claims incurred but not settled at the date of the consolidated statements
of financial position, whether reported or not, together with related claims
handling costs and reduction for the expected value of salvage and other
recoveries. Delays can be experienced in the notification and
settlement of certain types of claims, therefore the ultimate cost of these
cannot be known with certainty at the date of the consolidated statements of
financial position. Incurred but non-reported claims (hereafter
“IBNR”) are estimated and included in the provision
(liabilities). IBNR reserves as of December 31, 2009 and 2008, were
determined on the basis of the Bornhuetter - Ferguson methodology – BF (a
generally accepted actuarial method), which considers a statistical analysis of
the recorded loss history, the use of projection methods and, when appropriate,
qualitative factors that reflect present conditions or trends that could affect
historical data. No provision for equalization or catastrophe reserves is
recognized. The liabilities are derecognized when the contract expires, is
discharged or is cancelled.
Notes to the consolidated financial
statements (continued)
The
provision for unearned premiums represents premiums received for risks that have
not yet expired. Generally the reserve is released over the term of
the contract and is recognized as premium income.
At each
reporting date the Group reviews its unexpired risk and a liability adequacy
test is performed as laid out under IFRS 4 to determine whether there is any
overall excess of expected claims and DAC over unearned premiums. This
calculation uses current estimates of future contractual cash flows after taking
account of the investment return expected to arise on assets relating to the
relevant nonlife insurance technical provisions. If these estimates show that
the carrying amount of the unearned premiums (less related deferred acquisition
costs) is inadequate the deficiency is recognized in the consolidated income
statement by setting up a provision for liability adequacy.
Income
recognition:
Gross
recurring premiums on life contracts are recognized as revenue when payable by
the policyholder. For single premium business revenue is recognized on the date
on which the policy is effective.
Gross
general insurance written premiums comprise the total premiums receivable for
the whole period of cover provided by contracts entered into during the
accounting period and are recognized on the date on which the policy incepts.
Premiums include any adjustments arising in the accounting period for premiums
receivable in respect of business written in prior accounting
periods.
Unearned
premiums are those proportions of premiums written in a year that relate to
periods of risk after the date of the consolidated statements of financial
position. Unearned premiums are calculated on a daily pro rata basis. The
proportion attributable to subsequent periods is deferred as a provision for
unearned premiums.
|
(ii)
|
Reinsurance
premiums
|
Gross
reinsurance premiums on life contracts are recognized as an expense when payable
or on the date on which the policy is effective.
Gross
general reinsurance premiums written comprise the total premiums payable for the
whole cover provided by contracts entered into the period and are recognized on
the date on which the policy incepts. Premiums include any adjustments arising
in the accounting period in respect of reinsurance contracts incepting in prior
accounting periods.
Notes to the consolidated financial
statements (continued)
Unearned
reinsurance premiums are those proportions of premiums written in a year that
relate to periods of risk after the date of the consolidated statements of
financial position. Unearned reinsurance premiums are deferred over the term of
the underlying direct insurance policies for risks-attaching contracts and over
the term of the reinsurance contract for losses-occurring
contracts.
|
(iii)
|
Fees
and commission income
|
Insurance
contract policyholders are charged for policy administration services,
investment
management
services, surrenders and other contract fees. These fees are recognized as
revenue over the period in which the related services are performed. If the fees
are for services provided in future periods then they are deferred and
recognized over those future periods.
Benefits,
claims and expenses recognition:
|
(i)
|
Gross
benefits and claims
|
Gross
benefits and claims for life insurance contracts include the cost of all claims
arising during the year including internal and external claims handling costs
that are directly related to the processing and settlement of
claims. Death claims and surrenders are recorded on the basis of
notifications received. Maturities and annuity payments are recorded when
due.
General
insurance and health claims includes all claims occurring during the year,
whether reported or not, related internal and external claims handling costs
that are directly related to the processing and settlement of claims, a
reduction for the value of salvage and other recoveries, and any adjustments to
claims outstanding from previous years.
Reinsurance
claims are recognized when the related gross insurance claim is recognized
according to the terms of the relevant contract.
|
(f)
|
Financial
Instruments: Initial recognition and subsequent measurement
-
|
The Group
classifies its financial instruments in one of the categories defined by IAS
39: financial assets and financial liabilities at fair value through
profit or loss; loans and receivables; available-for-sale financial investments
and other financial liabilities. The Group determines the
classification of its financial instruments at initial recognition.
The
classification of financial instruments at initial recognition depends on the
purpose and the management intention for which the financial instruments were
acquired and their characteristics. All financial instruments are
measured initially at their fair value plus, any directly attributable
incremental cost of acquisition or issue, except in the case of financial assets
and financial liabilities recorded at fair value through profit or
loss.
Notes to the consolidated financial
statements (continued)
Purchases
or sales of financial assets that require delivery of assets within a time frame
established by regulation or convention in the marketplace (regular way trades)
are recognized on the trade date, i.e. the date that the Group commits to
purchase or sell the asset. Derivatives are recognized on a trade
date basis.
|
(i)
|
Financial
assets and financial liabilities at fair value through profit or
loss:
|
Financial
assets at fair value through profit or loss includes financial assets held for
trading and financial assets designated at fair value through profit or loss,
which designation is upon initial recognition and in an instrument by instrument
basis. Derivatives are also categorized as held for trading
unless they are designated as hedging instruments.
Financial
assets are classified as held for trading if they are acquired for the purpose
of selling or repurchasing in the near term, and are presented in the caption
“Trading securities” of the consolidated statements of financial
position.
Management
may only designate an instrument at fair value through profit or loss upon
initial recognition when the following criteria are met:
|
-
|
the
designation eliminates or significantly reduces the inconsistent treatment
that would otherwise arise from measuring assets or liabilities or
recognizing gains or losses on them on a different basis;
or
|
|
-
|
the
assets and liabilities are part of a group of financial assets, financial
liabilities or both which are managed and their performance evaluated on a
fair value basis, in accordance with a documented risk management or
investment strategy; or
|
|
-
|
the
financial instrument contains one or more embedded derivatives, which
significantly modify the cash flows that otherwise would be required by
the contract.
|
Changes
in fair value of designated financial assets through profit or loss are recorded
in the consolidated income statement caption “Net gain on financial assets and
liabilities designated at fair value through profit and
loss”. Interest earned or incurred is accrued in the consolidated
income statement in the captions “Interest and dividend income” or “Interest
expense”, respectively, according to the terms of the
contract. Dividend income is recorded when the collection right has
been established.
|
(ii)
|
Loans
and receivables:
|
Loans and
receivables are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market, other than: those that the
entity intend to sell immediately or in the short term, those that the entity
upon initial recognition designates as available for sale; or those for which
the holder may not recover substantially all of its initial investment, other
than because of credit deterioration.
Notes to the consolidated financial
statements (continued)
After
initial measurement, loans and receivables are subsequently measured at
amortized cost using the effective interest rate method, less any allowance for
impairment. Amortized cost is calculated by taking into account any
discount or premium on acquisition and fees and costs that are an integral part
of the effective interest rate. The effective interest rate
amortization is recognized in the consolidated income statement in the caption
“Interest and dividend income”. Losses from impairment are recognized in the
consolidated income statement in the caption “Provision for loan
losses”.
Direct
loans are recorded when disbursement of funds to the clients are
made. Indirect (off-balance sheet) loans are recorded when documents
supporting such facilities are issued. Likewise, Credicorp considers
as refinanced or restructured those loans that change their payment schedules
due to difficulties in the debtor’s ability to repay the loan.
An
allowance for loan losses is established if there is objective evidence that the
Group will not be able to collect all amounts due according to the original
contractual terms of the loan. The allowance for loan losses is
established based in the internal risk classification and considering any
guarantees and collaterals received, note 3(i) and
29.1.
Notes to the consolidated financial
statements (continued)
|
(iii)
|
Available-for-sale
financial investments:
|
Available-for-sale
financial investments are non derivative financial assets that are designated as
available-for-sale (to be held for an indefinite period, which may be sold in
response to liquidity needs or changes in the interest rates, exchange rates or
equity price); or are not classified as (a) financial assets and financial
liabilities at fair value through profit or loss, (b) held-to-maturity or (c)
loans and receivables.
After
initial recognition, available-for-sale financial investments are measured at
fair value with unrealized gains or losses recognized as other comprehensive
income in the available-for-sale reserve, net of its corresponding deferred tax
and minority interest, until the investment is derecognized, at which time the
cumulative gain or loss is recognized in the consolidated income statement in
the caption “Net gain on sale of securities”, or determined to be impaired, at
which time the cumulative loss is recognized in the consolidated income
statement in the caption “Impairment loss on available–for–sale investments” and
removed from the available-for-sale reserve.
Interest
and dividends earned are recognized in the consolidated income statement in the
caption “Interest and dividend income”. Interest earned is reported
as interest income using the effective interest rate and dividends earned are
recognized when collection rights are established.
Estimated
fair values are based primarily on quoted prices or, if quoted market prices are
not available, discounted expected cash flows using market rates commensurate
with the credit quality and maturity of the investment.
When the
Group is unable to sell these financial assets due to inactive markets and
Management’s intent to sell them in the foreseeable future significantly
changes, the Group may elect to reclassify these financial assets only in rare
circumstances. Reclassification to loans and receivables is permitted
when the financial asset meets the definition of loans and receivables and has
the intent and ability to hold these assets for the foreseeable future or until
maturity. The reclassification to held to maturity category is
permitted only when the entity has the ability and intent to hold the financial
asset until maturity.
As of
December, 31, 2009 and 2008, the Group did not reclassify any of its
available-for- sale financial investments.
|
(iv)
|
Other
financial liabilities:
|
After
initial measurement, other financial liabilities are subsequently measured at
amortized cost using the effective interest rate method. Amortized
cost is calculated by taking into account any issuance discount or premium and
costs that are an integral part of the effective interest rate.
Notes to the consolidated financial
statements (continued)
|
(g)
|
Derecognition
of financial assets and financial liabilities
-
|
Financial
assets:
A
financial asset (or, where applicable a part of a financial asset or a part of a
group of similar financial assets) is derecognized when: (i) the rights to
receive cash flows from the asset have expired; or (ii) the Group has
transferred its rights to receive cash flows from the asset or has assumed an
obligation to pay the received cash flows in full without material delay to a
third party under a “pass-through” arrangement; and (iii) either the Group has
transferred substantially all the risks and rewards of the asset, or the Group
has neither transferred nor retained substantially all the risks and rewards of
the asset, but has transferred control of the asset.
Financial
liabilities:
A
financial liability is derecognized when the obligation under the liability is
discharged, cancelled or expires. When an existing financial
liability is replaced by another from the same lender on substantially different
terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as a derecognition of the original liability
and the recognition of a new liability, any resulting difference in the
respective carrying amount is recognized as profit or loss.
|
(h)
|
Offsetting
financial instruments -
|
Financial
assets and liabilities are offset and the net amount is reported in the
consolidated statements of financial position when there is a legally
enforceable right to offset the recognized amounts and Management has the
intention to settle on a net basis, or realize the assets and settle the
liability simultaneously.
|
(i)
|
Impairment
of financial assets -
|
The Group
assesses at each date of the consolidated statements of financial position date
whether there is any objective evidence that a financial asset or a group of
financial assets is impaired. A financial asset or a group of
financial assets is deemed to be impaired if, and only if, there is objective
evidence of impairment as a result of one or more events that has occurred after
the initial recognition of the asset (an incurred loss event) and that loss
event (or events) has an impact on the estimated future cash flows of the
financial asset or the group of financial assets that can be reliably
estimated. Evidence of impairment may include indications that the
borrower or a group of borrowers is experiencing significant financial
difficulty, default or delinquency in interest or principal payments, the
probability that they will go bankrupt or other legal financial reorganization
process and where observable data indicate that there is a measurable decrease
in the estimated future cash flows, such as changes in arrears or economic
conditions that correlate with defaults. Criteria used for each
category of financial assets is as follows:
Notes to the consolidated financial
statements (continued)
|
(i)
|
Loans
and receivables:
|
For loans
and receivables that are carried at amortized cost, the Group first assesses
whether objective evidence of impairment exists for financial assets that are
individually significant, or collectively, for financial assets that are not
individually significant. If the Group determines that no objective
evidence of impairment exists for an individually assessed financial asset,
whether significant or not, it includes the asset in a group of financial assets
with similar credit risk characteristics and collectively assesses them for
impairment. Assets that are individually assessed for impairment and
for which an impairment loss is, or continues to be, recognized are not included
in a collective assessment of impairment.
If there
is objective evidence that an impairment loss has been incurred, the amount of
the loss is measured as the difference between the asset carrying amount and the
present value of estimated future cash flows (excluding future expected credit
losses that have not yet been incurred). The carrying amount of the
asset is reduced through the use of an allowance account and the amount of the
loss is recognized in the consolidated income statement. Interest
income, if applicable, is accrued on the reduced carrying amount based on the
original effective interest rate of the asset. Loans, together with
the associated allowance, are written off when there is no realistic prospect of
future recovery and all collateral has been realized or has been transferred to
the Group. If in a subsequent year, the amount of the estimated
impairment loss increases or decreases because of an event occurring after the
impairment was recognized, the previously recognized impairment loss is
increased or reduced by adjusting the allowance account. If in the
future a write-off is later recovered, the recovery is recognized in the
consolidated income statements, as a credit to the caption “Provision for loan
losses”.
The
present value of the estimated future cash flows is discounted at the financial
asset’s original effective interest rate. If a loan has a variable
interest rate, the discount rate for measuring any impairment loss is the
current effective interest rate. The calculation of the present value
of the estimated future cash flows of a collateralized financial asset reflects
the cash flows that may result from foreclosure less costs for obtaining and
selling the collateral, whether or not foreclosure is probable.
For a
collective evaluation impairment, financial assets are grouped considering the
Group’s internal credit grading system, which considers credit risk
characteristics; i.e. asset type, industry, geographical location, collateral
type and past-due status.
Future
cash flows from a group of financial assets that are collectively evaluated for
impairment are estimated on the basis of historical loss experience for assets
with similar credit risk characteristics to those in the
group. Historical loss experience is adjusted on the basis of current
observable data to reflect the effects of current conditions that did not affect
the years on which the historical loss experience is based and to remove the
effects of conditions in the historical period that do not currently
exists. The methodology and assumptions used are reviewed regularly
to reduce any differences between loss estimates and actual loss
experience.
Notes to the consolidated financial
statements (continued)
|
(ii)
|
Available-for-sale
financial investments:
|
For
available-for-sale financial investments, the Group assesses at each date of the
consolidated statements of financial position whether there is objective
evidence that an investment or a group of investments is impaired.
In the
case of equity investments, objective evidence would include a significant or
prolonged decline in the fair value of the investment below its
cost. “Significant” is to be evaluated against the original cost of
the investment and “prolonged” against the period in which the fair value has
been below its original cost. Where there is evidence of impairment,
the cumulative loss (measured as the difference between the acquisition cost and
the current fair value, less any previously recognized impairment loss) is
removed from available-for-sale reserve and recognized in the consolidated
income statement. Impairment losses on equity investments are not
reversed through the consolidated income statement; increases in their fair
value after impairment are recognized directly in the consolidated statements of
comprehensive income.
In the
case of debt instruments, impairment is assessed based on the same criteria as
financial assets carried at amortized cost (loans and
receivables). However, the amount recorded for impairment is the
cumulative loss measured as the difference between the amortized cost and the
current fair value, less any impairment loss on that investment previously
recognized in the consolidated income statement. Future interest
income is based on the reduced carrying amount and is accrued using the interest
rate used to discount the future cash flows for the purpose of measuring the
impairment loss. Interest income is recorded as part of “Interest and
dividend income”. If in a subsequent year, the fair value of a debt
instrument increases and the increase can be objectively related to an event
occurring after the impairment loss was recognized in the consolidated income
statement, the impairment loss is reversed through the consolidated income
statement.
|
(iii)
|
Renegotiated
loans:
|
Where
possible, the Group seeks to refinance or restructure loans rather than to take
possession of collateral. This may involve extending the payment
arrangements and the agreement of new loan conditions. Once the terms
have been renegotiated, the loan is no longer considered past
due. Management continuously reviews refinanced and restructured
loans to ensure that all criteria are met and that future payments are likely to
occur. Renegotiated loans continue to be subject to an individual or
collective impairment assessment, calculated using the loan’s original effective
interest rate.
The
determination of whether an arrangement is, or contains, a lease is based in the
substance of the arrangement at inception date: whether fulfillment of the
arrangement is dependent on the use of a specific asset or assets on the
arrangement conveys a right to use the asset.
Notes to the consolidated financial
statements (continued)
Operating
leases:
Leases in
which a significant portion of the risks and benefits of the asset are hold by
the lessor are classified as operating leases. Under this concept the
Group has mainly leases used as BCP’s branches.
When an
operating lease is terminated before the lease period has expired, any penalty
payment to the lessor is recognized as an expense in the period in which
termination takes place.
Finance
leases:
Finance
leases are recognized as granted loans at the present value of the lease
collections. The difference between the gross receivable amount and
the present value of the loan is recognized as unearned
interest. Lease income is recognized over the term of the lease
agreement using the effective interest method, which reflects a constant
periodic rate of return.
|
(k)
|
Property,
furniture and equipment -
|
Land and
buildings comprise mainly branches and offices. All property,
furniture and equipment are stated at historical acquisition cost less
depreciation and impairment, if applicable. Historical acquisition
costs include expenditures that are directly attributable to the acquired
property, furniture or equipment. Maintenance and repair costs are
charged to the consolidated income statement, and significant renewals and
improvements are capitalized when it is probable that future economic benefits,
in excess of the originally assessed standard of performance, will flow from the
use of the acquired property, furniture or equipment.
Land is
not depreciated. Depreciation of other assets in this caption is calculated
using the straight-line method over their estimated useful life, as
follows:
|
|
Years
|
|
Buildings
and other construction
|
|
|
33 |
|
Installations
|
|
|
10 |
|
Furniture
and fixtures
|
|
|
10 |
|
Computer
hardware
|
|
|
4 |
|
Vehicles
and equipment
|
|
|
5 |
|
An item
of property, furniture and equipment and any significant part initially
recognized is derecognized upon disposal or when no future economic benefits are
expected from its use or disposal. Any gain or loss arising on
derecognizing of the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset) is included in the
income statement when the asset is derecognized.
Asset’s
residual value, useful life and the selected depreciation method are
periodically reviewed to ensure that they are consistent with actual economic
benefits and life expectations.
Notes to the consolidated financial
statements (continued)
Seized
assets are recorded at the lower of cost or estimated market value, which is
obtained from valuations made by independent appraisals. Reductions
in book values are recorded in the consolidated income statements.
Comprise
internal developed and acquired software licenses used by the
Group. Acquired software licenses are measured on initial recognition
at cost. These intangible assets are amortized using the
straight-line method over their estimated useful life (between 3 and 5
years).
Intangible
assets identified as a consequence of the acquisition of Edyficar and AFP Unión
Vida, note 10 (“Client relationships” and “Brand name”) and other intangible
assets, are recognized on the consolidated statements of financial position at
their fair values determined on the acquisition date and are amortized using the
straight line method over their estimated useful life; as follows:
|
|
Years
|
|
Client
relationships – AFP Unión Vida
|
|
|
20 |
|
Client
relationships – Edyficar
|
|
|
10 |
|
Brand
name – Edyficar
|
|
|
20 |
|
Other
|
|
|
5 |
|
Gains or
losses arising from derecognition of an intangible asset are measured as the
difference between the net disposal proceeds and the carrying amount of the
asset and are recognized in the consolidated income statement when the asset is
derecognized.
Goodwill
represents the excess of the acquisition cost of a subsidiary over the fair
value of the net identifiable assets of the acquired subsidiary at the date of
acquisition. Goodwill is tested annually for impairment to assess
whether the carrying amount is fully recoverable. An impairment loss
is recognized if the carrying amount exceeds the recoverable
amount. Goodwill is allocated to cash-generating units for impairment
testing purposes. See also paragraph (o)
below.
Notes to the consolidated financial
statements (continued)
|
(o)
|
Impairment
of non-financial assets -
|
The Group
assesses at each reporting date or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired, whether there is
an indication that a non-financial asset may be impaired. If any such
indication exists, the Group estimates the asset’s recoverable
amount. Where the carrying amount of an asset (or cash-generating
unit) exceeds its recoverable amount, the asset (or cash-generating unit) is
considered impaired and is written down to its recoverable amount.
For
non-financial assets, excluding goodwill, an assessment is made at each
reporting date as to whether there is any indication that previously recognized
impairment losses may no longer exist or may have decreased. If such
indication exists, the recoverable amount is estimated. A previously
recognized impairment loss is reversed only if there has been a change in the
estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognized; if that is the case, the carrying amount of the
asset is increased to its recoverable amount. Impairment losses
relating to goodwill cannot be reversed for subsequent increases in its
recoverable amount in future periods.
|
(p)
|
Due
from customers on acceptances -
|
Due from
customers on acceptances corresponds to accounts receivable from customers for
import and export transactions, whose obligations have been accepted by the
Group. The obligations that must be assumed by the Group for such
transactions are recorded as liabilities.
|
(q)
|
Financial
guarantees -
|
In the
ordinary course of business, the Group grants financial guarantees, such as
letters of credit, guarantees and acceptances. Financial guarantees
are initially recognized at fair value (which is equivalent in that moment to
the fee received), as “Other liabilities” in the consolidated statements of
financial position. Subsequent to initial recognition, the Group’s
liability under each guarantee is measured as the higher of the amortized fee
and the best estimate of expenditure required to settle any financial obligation
arising as a result of the financial guarantee.
Any
increase in the liability relating to a financial guarantee is included in the
consolidated statement of income. The fee received is recognized in
the consolidated statement of income in the caption “Banking services
commissions” on a straight line basis over the life of the granted financial
guarantee.
|
(r)
|
Defined
contribution pension plan -
|
The Group
only operates a defined contribution pension plan. The contribution
payable to a defined contribution pension plan is in proportion to the services
rendered to the Group by the employees and; it is recorded as an expense in the
caption “Salaries and employees benefits” of the consolidated income
statement. Unpaid contributions are recorded as a
liability.
Notes to the consolidated financial
statements (continued)
Provisions
are recognized when the Group has a present obligation (legal or constructive)
as a result of a past event, it is probable that an outflow or resources
embodying economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation. The
expense relating to any provision is presented in the income statement net of
any reimbursement. If the effect of the time value of money is
material, provisions are discounted using a current pre-tax rate that reflects,
where appropriate, the risks specific to the liability. Where
discounting is used, the increase in the provision due to the passage of time is
recognized as a finance cost.
Contingent
liabilities are not recognized in the consolidated financial
statements. They are disclosed in notes unless the possibility of an
outflow of resources is remote.
|
(u)
|
Income
tax and workers’ profit sharing -
|
Income
tax and workers’ profit sharing are computed based on individual financial
statements of Credicorp and each one of its Subsidiaries.
Deferred
income tax and deferred workers’ profit sharing reflect the effects of temporary
differences between the carrying amounts of assets and liabilities for
accounting purposes and the amounts determined for tax
purposes. Deferred assets and liabilities are measured using the tax
rates expected to be applied to taxable income in the years in which temporary
differences are expected to be recovered or eliminated. The
measurement of deferred assets and deferred liabilities reflects the tax
consequences that arise from the manner in which Credicorp and its Subsidiaries
expect, at the date of the consolidated statements of financial position, to
recover or settle the carrying amount of its assets and
liabilities.
Deferred
tax assets and liabilities are recognized regardless of when the timing
differences are likely to reverse. Deferred tax assets are recognized
when it is more likely than not that future taxable profit will be available
against which the temporary difference can be utilized. At the date
of the consolidated statements of financial position, Credicorp and its
Subsidiaries assess unrecognized deferred assets and the carrying amount of
recognized deferred assets.
Credicorp
and its Subsidiaries determine the deferred income tax considering the tax rate
applicable to its undistributed earnings; any additional tax on dividends
distribution is recorded on the date a liability is recognized.
Notes to the consolidated financial
statements (continued)
Basic
earnings per share is calculated by dividing the net profit for the year
attributable to Credicorp’s equity holders by the weighted average number of
ordinary shares outstanding during the year, excluding the average number of
ordinary shares purchased and held as treasury stock.
Diluted
earnings per share is calculated by dividing the net profit attributable to
Credicorp’s equity holders by the weighted average number of ordinary shares
outstanding during the year, excluding the average number of ordinary shares
purchased and held as treasury stock, plus the weighted average number of
ordinary shares that would be issued on the conversion of all the dilutive
potential ordinary shares into ordinary shares.
|
(w)
|
Share-based
payment transactions -
|
(i) Cash-settled
transactions
As
explained in note 18(a), until April 2008 the Group granted a supplementary
remuneration plan to certain employees who had at least one year serving
Credicorp or any of its Subsidiaries, in the form of stock appreciation rights
(SARs) over a certain number of Credicorp shares. SARs were granted
at a fixed price and are exercisable at that price, allowing the employee to
obtain a gain in cash (“cash-settled transaction”) arising from the difference
between the fixed exercise price and the market price at the date the SARs are
executed.
The SARs
fair value is expensed over the period up to the vesting date, with recognition
of a corresponding liability. The liability is remeasured to fair value at each
reporting date up to and including the settlement date, with changes in fair
value recognized in the caption “Salaries and employee benefits”. When the price
or term of the SARs are modified, any additional expense is
recorded.
(ii) Equity-settled
transactions
As
explain in note 18(b), since April 2009, a new supplementary remuneration plan
was implemented to replace the SARs plan (see (i) above). The grant
date was April 28, 2009, and the granted awards vest 33.3 percent every 12
months.
The cost
of this equity-settled plan is recognized, together with a corresponding
increase in equity, over the period in which the service conditions are
fulfilled, ending on the date on which the relevant employees become fully
entitled to the award (‘the vesting date”). The cumulative expense recognized
for equity-settled transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired and the Group’s best
estimate of the number of equity instruments that will ultimately
vest.
Notes to the consolidated financial
statements (continued)
The
expense is recorded in the caption “Salaries and employees benefits” of the
consolidated income statement. When the terms of an equity-settled award are
modified, the minimum expense recognized in “Salaries and employees benefits” is
the expense as if the terms had not been modified. An additional expense is
recognized for any modification which increases the total fair value of the
share-based payment arrangement, or is otherwise beneficial to the employee as
measured at the date of modification.
The
dilutive effect of outstanding stock awards is reflected as a share dilution in
the computation of diluted earnings per share, see Note 3(v).
|
(x)
|
Derivative
financial instruments -
|
|
|
Trading:
|
Part of
transactions with derivatives, while providing effective economic hedges under
Group’s risk management positions, do not qualify for hedge accounting under the
specific rules of IAS 39 and are, therefore, treated as trading
derivatives.
Derivative
financial instruments are initially recognized in the consolidated statements of
financial position at cost and subsequently are re-measured at their fair
value. Fair values are estimated based on the market exchange and
interest rates. All derivatives are carried as assets when fair value
is positive and as liabilities when fair value is negative. Gain and
losses for changes in their fair value are recorded in the consolidated income
statement.
Hedge:
The Group
uses derivative instruments to manage exposures to interest rate and foreign
currency. In order to manage particular risks, the Group applies
hedge accounting for transactions which meet the specified
criteria.
At
inception of the hedge relationship, the Group formally documents the
relationship between the hedged item and the hedging instrument, including the
nature of the risk, the objective and strategy for undertaking the hedge and the
method that will be used to assess the effectiveness of the hedging
relationship.
Also, at
the inception of the hedge relationship, a formal assessment is undertaken to
ensure the hedging instrument is expected to be highly effective in offsetting
the designated risk in the hedged item. Hedges are formally assessed
at each reporting date. A hedge is regarded as highly effective if
changes in fair value or cash flows attributable to the hedged risk during the
period for which the hedge is designated is expected to offset in a range
between 80 percent and 125 percent.
The
accounting treatment is established according to the nature of the hedged item
and compliance with the hedge criteria.
Notes to the consolidated financial
statements (continued)
The
effective portion of the gain or loss on the hedging instrument is recognized
directly as other comprehensive income in the cash flow hedge reserve, while any
ineffective portion is recognized immediately in the consolidated income
statement in finance costs.
Amounts
recognized as other comprehensive income are transferred to the consolidated
income statement when the hedged transaction affects profit or loss, such as
when the hedged financial income or financial expense is recognized or when a
forecast sale occurs. Where the hedged item is the cost of a non-financial asset
or non-financial liability, the amounts recognized as other comprehensive income
are transferred to the initial carrying amount of the non-financial asset or
liability.
If the
forecast transaction or firm commitment is no longer expected to occur, the
cumulative gain or loss previously recognized in the cash flow hedge reserve are
transferred to the consolidated income statement. If the hedging instrument
expires or is sold, terminated or exercised without replacement or rollover, or
if its designation as a hedge is revoked, any cumulative gain or loss previously
recognized in the cash flow hedge reserve remains in the cash flow hedge reserve
until the forecast transaction or firm commitment affects profit or
loss.
The
change in the fair value of an interest rate hedging derivative is recognized in
the consolidated income statement in finance costs. The change in the
fair value of the hedged item attributable to the risk hedged is recorded as a
part of the carrying value of the hedged item and is also recognized in the
consolidated income statement in finance costs.
For fair
value hedges relating to consolidated items carried at amortized cost, the
adjustment to carrying value is amortized through the consolidated income
statement over the remaining maturity term. Effective interest rate amortization
may begin as soon as an adjustment exists and shall begin no later than when the
hedged item ceases to be adjusted for changes in its fair value attributable to
the risk being hedged.
If the
hedge item is derecognized, the unamortized fair value is recognized immediately
in the consolidated income statement.
When an
unrecognized firm commitment is designated as a hedged item, the subsequent
cumulative change in the fair value of the firm commitment attributable to the
hedged risk is recognized as an asset or liability with a corresponding gain or
loss recognized in the consolidated income statement.
Notes to the consolidated financial
statements (continued)
|
(iii)
|
Embedded
derivates:
|
Derivatives
embedded in host contracts are accounted for as separate derivatives and
recorded at fair value if their economic characteristics and risks are not
closely related to those of the host contracts, and the host contracts are not
held for trading or designated at fair value through profit or
loss.
The Group
has certificates indexed to the price of Credicorp Ltd. shares that will be
settled in cash, and investments indexed to certain life insurance contracts
liabilities, denominated “Unit Link”. These instruments have been
classified at inception by the Group as “Financial instruments at fair value
though profit or loss”, see 3(f)(i), and note 7.
The Group
reports financial and descriptive information about its reportable
segments. Reportable segments are operating segments or aggregations
of operating segments that meet specified criteria. Operating
segments are a component of an entity for which separate financial information
is available that is evaluated regularly by the entity’s Chief Operating
Decision maker (“CODM”) in making decisions about how to allocate resources and
is assessing performance. Generally, financial information is
required to be reported on the same basis as it is used internally for
evaluating operating segment performance and deciding how to allocate resources
to segments, note 26.
|
(z)
|
Fiduciary
activities, management of funds and pension funds
-
|
The Group
provides custody, trustee, investment management and advisory services to third
parties that result in the holding of assets on their behalf. These
assets and income arising thereon are excluded from these consolidated financial
statements, as they are not assets of the Group, note 29.8.
Commissions
generated for these activities are included in the caption “Other income” of the
consolidated income statements.
|
(aa)
|
Sale
and repurchase agreements -
|
Securities
sold subject to repurchase agreements (‘Repos’) are presented as pledged assets
when the counterparty has the right to sell or repledge the collateral; the
counterparty liability is included in the caption “Due to banks and
correspondents” or “Deposits and obligations”, as appropriate, in the
consolidated statements of financial position.
The
difference between sale and repurchase price is considered as interest and is
accrued over the life of the related agreement using the effective interest
method.
Notes to the consolidated financial
statements (continued)
|
(ab)
|
Cash
and cash equivalents -
|
For the
purposes of the consolidated cash flow statement, cash and cash equivalents
comprise balances of cash and balances with central banks, overnight deposits
and amounts due from banks with original maturities of three months or
less.
When it
is necessary, the comparative figures have been reclassified to conform to the
current year presentation. Certain transactions were reclassified in
the current year presentation; in Management’s opinion those reclassifications
are not significant to the consolidated financial statement as of December 31,
2009 and 2008.
|
(ad)
|
Recently
issued International Financial Reporting Standards but not yet effective
-
|
The Group
decided not to early adopt the following standards and interpretations that were
issued but not effective as December 31, 2009:
|
-
|
IFRS
2 “Share-based Payment (Revised): Group Cash-settled Share-based Payment”,
effective for periods beginning on or after January 1, 2010, with
retrospective application. This amendment provides guidance on
how to account for cash-settled share-based payment transactions in the
separate financial statements of an entity. This amendment will not have
any impact on the Group´s consolidated financial
statements.
|
|
-
|
IFRS
9 “Financial Instruments “, the IASB issued this IFRS as the first step in
its project to replace IAS 39 “Financial Instruments: Recognition and
Measurement”. IFRS 9 introduces new requirements for
classifying and measuring financial assets that must be applied starting
on January 1, 2013, with early adoption permitted. The IASB
intends to expand IFRS 9 during 2010 to add new requirements for
classifying and measuring financial liabilities, derecognition of
financial instruments, impairment, and hedge
accounting.
|
|
-
|
IFRS
3 (Revised) “Business Combination and Consolidation” and IAS 27 (Revised)
“Separated Financial Statements Consolidation”, effective modifications
for periods beginning on or after July 1, 2009. Changes in IFRS 3
(Revised) affect the valuation of non-controlling interest, the accounting
for transactions costs, the initial recognition and subsequent measurement
of a contingent consideration and business combination achieved in stages.
IAS 27 (amended) requires that a change in the ownership interest of a
subsidiary (without loss of control) is accounted for as a transaction
with owners in their capacity as
owners.
|
Notes to the consolidated financial
statements (continued)
|
-
|
IAS
24 “Related Party Disclosures” (Revised), effective for periods beginning
on or after January 1, 2011. The amendment simplifies the
identification of related party relationships, particularly in relation to
significant influence and joint control. In addition, a partial
exemption from the disclosures has been included for government-related
entities.
|
|
-
|
IAS
32 “Financial Instruments: Presentation – Classification of Rights Issues”
(Amendment), effective for periods beginning on or after February 1,
2010. The definition of a financial liability has been amended
to classify rights issues (and certain options or warrants) as equity
instruments if, the rights are given pro rata to all of the existing
owners of the same class of an entity’s non-derivative equity instruments,
and they are used to acquire a fixed number of the entity’s own equity
instruments for a fixed amount in any
currency.
|
|
-
|
IAS
39 “Financial Instruments: Recognition and Measurement – Eligible Hedged
Items”, effective for periods beginning on or after July 1,
2009, the amendment addresses the designation of a one-sided risk in a
hedged item, and the designation of inflation as a hedged risk or portion
in particular situations.
|
|
-
|
IFRIC
14 “Prepayments of a Minimum Funding Requirement” (Amendment), effective
for periods beginning on or after January 1, 2011. The IFRIC
permits an entity to treat the prepayment of a minimum funding requirement
as an asset.
|
|
-
|
IFRIC
17, “Distributions of Non-Cash Assets to owners”, effective for periods
beginning on or after July 1, 2009. Early application is
permitted. This interpretation provides guidance in the
accounting treatment of distribution of - non cash assets to
owners.
|
|
-
|
IFRIC
18, “Transfer of Assets from Customers”, effective for periods beginning
on or after July 1, 2009. This interpretation clarifies the requirements
of IFRS for agreements in which an entity receives from a customer an item
of property, plant and equipment that the entity must then use either to
connect the customer to a network or to provide the customer with ongoing
access to a supply of goods or
services.
|
|
-
|
IFRIC
19 “Extinguishing Financial Liabilities with Equity Instruments”,
effective for periods beginning on or after July 1, 2010. The
interpretation clarifies that equity instruments issued to a creditor to
extinguish a financial liability are consideration paid in accordance with
paragraph 41 of IAS 39 “Financial Instruments; Recognition and
Measurement”.
|
Notes to the consolidated financial
statements (continued)
In April
2009 the IASB issued “Improvements to IFRSs”, its second omnibus of amendments
to its standards and the related basis for conclusion. There are
separate effective date and transitional provisions for each
standard. The improvement project is an annual project that provides
a mechanism for making necessary but non-urgent or significant
amendments.
The Group
is in process of assessing the impact, if any, that the application of these
standards may have on their financial statements.
4.
|
Cash
and due from banks
|
|
(a)
|
This
item is made up as follows:
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Cash
and clearing
|
|
|
679,694 |
|
|
|
625,954 |
|
Deposits
in Peruvian Central Bank - BCRP
|
|
|
2,107,635 |
|
|
|
1,952,952 |
|
Deposits
in banks
|
|
|
1,047,830 |
|
|
|
1,184,729 |
|
|
|
|
3,835,159 |
|
|
|
3,763,635 |
|
Accrued
interest
|
|
|
1,499 |
|
|
|
2,536 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,836,658 |
|
|
|
3,766,171 |
|
|
(b)
|
As
of December 31, 2009 and 2008, cash and due from banks balances include
approximately US$2,605.1 and US$2,488.7 million, respectively, mainly from
Banco de Crédito del Perú (BCP), which represent the legal reserve that
Peruvian banks must maintain for its obligations with the public, and are
within the limits established by prevailing Peruvian legislation at those
dates.
|
The legal
reserve funds maintained with BCRP are not interest-bearing, except for the part
of the mandatory reserve in U.S. Dollars that exceeds the minimum legal
reserve. As of December 31, 2009, this excess amounts to
approximately US$1,790.8 million and bears interest in U.S. Dollars at an
average annual interest rate of 0.14 percent (approximately US$1,601.6 million
and 0.4 percent, respectively as of December 31, 2008).
Notes to the consolidated financial
statements (continued)
5.
|
Investments
available-for-sale
|
|
(a)
|
This
item is made up as follows:
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
Unrealized
gross amount
|
|
|
|
|
|
|
|
|
Unrealized
gross amount
|
|
|
|
|
|
|
Amortized
cost
|
|
|
Gains
|
|
|
Losses
(b)
|
|
|
Estimated
fair
value
|
|
|
Amortized
cost
|
|
|
Gains
|
|
|
Losses
(b)
|
|
|
Estimated
fair
value
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed
maturity -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BCRP
certificates of deposit (d)
|
|
|
1,545,343 |
|
|
|
386 |
|
|
|
(24 |
) |
|
|
1,545,705 |
|
|
|
2,209,460 |
|
|
|
2,939 |
|
|
|
(3,457 |
) |
|
|
2,208,942 |
|
Corporate,
leasing and subordinated bonds (e)
|
|
|
1,440,006 |
|
|
|
54,932 |
|
|
|
(9,302 |
) |
|
|
1,485,636 |
|
|
|
947,991 |
|
|
|
16,015 |
|
|
|
(58,109 |
) |
|
|
905,897 |
|
Government’s
treasury bonds (f)
|
|
|
904,424 |
|
|
|
103,787 |
|
|
|
(438 |
) |
|
|
1,007,773 |
|
|
|
833,153 |
|
|
|
57,678 |
|
|
|
(10,231 |
) |
|
|
880,600 |
|
Central
Bank of Bolivia certificates of deposit (g)
|
|
|
111,102 |
|
|
|
793 |
|
|
|
- |
|
|
|
111,895 |
|
|
|
217,516 |
|
|
|
115 |
|
|
|
(81 |
) |
|
|
217,550 |
|
Participations
in mutual funds
|
|
|
167,052 |
|
|
|
7,726 |
|
|
|
(240 |
) |
|
|
174,538 |
|
|
|
97,234 |
|
|
|
2,189 |
|
|
|
(2,479 |
) |
|
|
96,944 |
|
Collateralized
mortgage obligations (CMO) (h)
|
|
|
67,810 |
|
|
|
15 |
|
|
|
(5,092 |
) |
|
|
62,733 |
|
|
|
96,256 |
|
|
|
46 |
|
|
|
(22,375 |
) |
|
|
73,927 |
|
US
Government – Agencies and Sponsored Enterprises (i)
|
|
|
16,824 |
|
|
|
540 |
|
|
|
- |
|
|
|
17,364 |
|
|
|
41,000 |
|
|
|
3,718 |
|
|
|
(67 |
) |
|
|
44,651 |
|
Restricted
mutual funds (j)
|
|
|
53,104 |
|
|
|
18,976 |
|
|
|
- |
|
|
|
72,080 |
|
|
|
49,775 |
|
|
|
1,887 |
|
|
|
- |
|
|
|
51,662 |
|
Participation
in RAL’s funds (k)
|
|
|
83,898 |
|
|
|
- |
|
|
|
- |
|
|
|
83,898 |
|
|
|
73,268 |
|
|
|
- |
|
|
|
- |
|
|
|
73,268 |
|
Negotiable
certificates of deposit
|
|
|
24,126 |
|
|
|
2,337 |
|
|
|
- |
|
|
|
26,463 |
|
|
|
41,628 |
|
|
|
1,003 |
|
|
|
(76 |
) |
|
|
42,555 |
|
Hedge
funds
|
|
|
10,811 |
|
|
|
3,691 |
|
|
|
- |
|
|
|
14,502 |
|
|
|
31,742 |
|
|
|
2,920 |
|
|
|
(284 |
) |
|
|
34,378 |
|
Bonds
of international financial entities
|
|
|
66,267 |
|
|
|
2,811 |
|
|
|
- |
|
|
|
69,078 |
|
|
|
34,799 |
|
|
|
116 |
|
|
|
(587 |
) |
|
|
34,328 |
|
Other
|
|
|
24,933 |
|
|
|
674 |
|
|
|
(9 |
) |
|
|
25,598 |
|
|
|
30,892 |
|
|
|
5 |
|
|
|
(770 |
) |
|
|
30,127 |
|
|
|
|
4,515,700 |
|
|
|
196,668 |
|
|
|
(15,105 |
) |
|
|
4,697,263 |
|
|
|
4,704,714 |
|
|
|
88,631 |
|
|
|
(98,516 |
) |
|
|
4,694,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Listed
securities (l)
|
|
|
106,071 |
|
|
|
185,412 |
|
|
|
(1,304 |
) |
|
|
290,179 |
|
|
|
101,593 |
|
|
|
109,032 |
|
|
|
(5,936 |
) |
|
|
204,689 |
|
Not-listed
securities
|
|
|
35,464 |
|
|
|
5,284 |
|
|
|
(194 |
) |
|
|
40,554 |
|
|
|
6,242 |
|
|
|
1,761 |
|
|
|
(3 |
) |
|
|
8,000 |
|
|
|
|
141,535 |
|
|
|
190,696 |
|
|
|
(1,498 |
) |
|
|
330,733 |
|
|
|
107,835 |
|
|
|
110,793 |
|
|
|
(5,939 |
) |
|
|
212,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,657,235 |
|
|
|
387,364 |
|
|
|
(16,603 |
) |
|
|
5,027,996 |
|
|
|
4,812,549 |
|
|
|
199,424 |
|
|
|
(104,455 |
) |
|
|
4,907,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued
interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,079,606 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,950,754 |
|
Notes to the consolidated financial
statements (continued)
|
(b)
|
Credicorp’s
Management has determined that the unrealized losses as of December 31,
2009 and 2008 are of temporary nature. Management intents and
has the ability to hold each investment for a period of time sufficient to
allow for an anticipated recovery in fair value, until the earlier of its
anticipated recovery or maturity.
|
Credicorp’s
Management has considered the following criteria in determining whether a loss
is temporary or not for equity investments (shares):
|
-
|
the
length of time and the extent to which fair value has been below
cost;
|
|
-
|
the
severity of the impairment;
|
|
|
the
cause of the impairment and the financial condition and near-term
prospects of the issuer; and
|
|
-
|
activity
in the market of the issuer which may indicate adverse credit
conditions.
|
Credicorp’s
Management has considered the following criteria in determining whether a loss
is temporary or not for debt investments (fixed maturity):
|
-
|
Assess
whether it is probable that the Group will receive all amounts due
according to the contractual terms (principal and interest). The
identification of credit-impaired debt investments considers a number of
factors, including the nature of the debt investment and the underlying
collateral, the amount of subordination or credit enhancement, published
credit rating and other information, and other evidential data of the
probable cash flows from the debt investment. If recovery of all amounts
due is not probable; a “credit impairment” is deemed to exist, and the
unrealized loss is recorded directly in the consolidated income
statement. This unrealized loss recorded in income represents
the debt investment decline in fair value, including the decline due to
forecasted cash flow shortfalls as well as general market spread
widening.
|
|
-
|
For
debt investments with unrealized losses but not identified as impairment,
Credicorp’s Management determines whether it has the positive intent and
ability to hold each investment for a period of time sufficient to allow
for an anticipated recovery in its amortized cost. Credicorp’s
Management estimates the forecasted recovery period using current
estimates of volatility in market interest rates (including liquidity and
risk premiums). Management’s assertion regarding its intent and
ability to hold investments considers a number of factors, including a
quantitative estimate of the expected recovery period and the length of
that period (which may extend to maturity), the severity of the
impairment, and Credicorp’s Management intended strategy. If Credicorp’s
Management does not have the intent and ability to hold the security for a
sufficient time period, the unrealized loss is recorded directly in the
consolidated income statement.
|
|
(c)
|
For
the year ended December 31, 2009, as a result of the impairment assessment
of its investments available-for-sale, the Group recorded an impairment
amounting to US$9.8 million (US$60.4 million of gross impairment, and
US$55.7 million net of deferred taxes and minority interest as of December
31, 2008), which is presented in the consolidated income statement caption
“Impairment loss on available-for-sale
investments”.
|
Notes to the consolidated financial
statements (continued)
The
movement of “Available-for-sale investments reserves”, net of deferred income
tax and minority interest is presented in note 16(c).
|
(d)
|
BCRP
certificates of deposit are discounted Nuevo Sol instruments with
maturities due within one year and are acquired in public
auctions. Annual effective interest rates in Peruvian currency
range between 1.13 and 1.39 percent as of December 31, 2009 (between 6.55
and 7.06 annual percent as of December 31,
2008).
|
As of
December 31, 2008, this amount also included BCRP certificates of deposit in US$
Dollars amounting to US$1,070.7 million, with maturities between January and
April 2009. These
certificates accrued interests at annual effective rates that range between 0.34
and 1.55 percent.
As of
December 31, 2008, the Group entered into BCRP - Repo transactions in Peruvian
currency with its clients using these securities for approximately US$294.2
million. At that date, these transactions earned an annual effective
interest rate between 6.75 and 7.00 percent and with maturities between February
and November 2009.
|
(e)
|
As
of December 31, 2009 and 2008, comprise mainly corporate bonds for
US$1,460.9 and US$898.4 million, respectively, with maturities between
January 2010 and November 2066 (between January 2009 and November 2066 as
of December 31, 2008). These bonds accrue interests at annual
effective rates that range between 0.67 and 7.47 percent for the bonds
denominated in Peruvian currency (between 2.81 and 8.80 percent as of
December 31, 2008), and between 0.38 and 13.93 percent for the bonds
denominated in U.S. Dollars (between 1.58 and 18.4 percent as of December
31, 2008). The unrealized losses on these investments as of
December 31, 2008, corresponded to 178 items of which the highest
individual unrealized loss amounts to approximately US$2
million.
|
Notes to the consolidated financial
statements (continued)
|
(f)
|
Includes
principally debt instruments issued by the Peruvian Government in Euros
for an equivalent of US$364.4 million, in U.S. dollars for US$257.0
million and in Nuevo Sol for an equivalent of US$165.3 million, the
Colombian Government in U.S. dollars for US$89.5 million and Colombian
Peso for an equivalent of US$64.3 million, and the Government of Brazil in
U.S. dollars for US$19.1 million, as of December 31, 2009 (US$795.2,
US$67.7 and US$4.9 million, issued by the Peruvian Government, the
Colombian Government and El Salvador Government, respectively, as of
December 31, 2008). Their maturities are between March 2010 and
August 2046 (between January 2009 and August 2046 as of December 31, 2008)
and earned interests at annual effective rates that range between 1.06 and
9.50 percent (between 2.85 and 9.15 percent as of December 31,
2008).
|
|
(g)
|
As
of December 31, 2009 and 2008, certificates of deposit issued by the
Central Bank of Bolivia are denominated in Pesos Bolivianos, had
maturities between January and December 2010 and between January and July
2009, respectively, and accrued interest at annual effective rates that
ranges between 1.50 and 11.77 percent and between 7.42 and 11.45 percent,
respectively.
|
As of
December 31, 2009, the Group entered into Repo transactions in Pesos Bolivianos
with its clients for an equivalent of US$35.0 million using these
securities. At that date, these transactions earned interest at
current market rates in Bolivia and with maturities in February
2010.
|
(h)
|
Collaterized
mortgage obligations are not related with “sub prime mortgages”, they
correspond to senior tranches and have maturities between May 2033 and
January 2047 (between December 2015 and January 2047 as of December 31,
2008) and accrues interest at annual effective rates that ranges between
3.43 and 13.70 percent (between 3.80 and 14.20 percent as of December 31,
2008). The unrealized losses on these instruments as of
December 31, 2009 correspond to 21 items of which the highest individual
unrealized loss amounts to approximately US$1.8 million (23 items and
US$1.5 million, respectively, as of December 31,
2008).
|
|
(i)
|
Corresponds
to debt instruments issued by US Government – Agencies and Sponsored
Enterprises. Their maturities are between January 2010 and
August 2038 (between April 2009 and August 2038 as of December 31, 2008)
and earned interest at annual effective rates between 3.98 and 5.77
percent (between 4.05 and 6.30 percent as of December 31,
2008).
|
|
(j)
|
Restricted
mutual funds comprise participation quotas on the private pension funds
managed by the Group as required by Peruvian regulations. They
have a restricted disposal and their profitability is the same as the one
obtained by the private pension funds
managed.
|
|
(k)
|
The
participation quotas in the Fund “Requirement of Cash Assets” (RAL for its
Spanish acronym) are denominated in Pesos Bolivianos and comprise
investments made by the Group in the Central Bank of Bolivia as collateral
for the deposits maintained with the public. Such fund has
restrictions for its use and it is required for all banks established in
Bolivia. The fund accrues interest at an average annual
effective rate of 8.58 and 5.48 percent as of December 31, 2009 and 2008,
respectively.
|
Notes to the consolidated financial
statements (continued)
|
(l)
|
As
of December 31, 2009, the unrealized gains on listed securities arises
mainly from shares in Banco de Crédito e Inversiones de Chile - BCI Chile,
Inversiones Centenario S.A., Alicorp S.A.A. and Edelnor S.A., which
amounted to US$70.9, US$41.2, US$25.6 and US$22.8 million, respectively
(US$18.2, US$28.8, US$8.8 y US$14.9 million, respectively, as of December
31, 2008).
|
|
(m)
|
As
of December 31, 2009, the Group has cash flow hedges and fair value hedges
over investments available for sale for a notional amount of US$71.1
million and US$373.3 million, respectively. These investment
under cash flow hedges were economically converted to US$ Dollars with
fixed rate; and investment under fair value hedges were economically
converted to US$ Dollars with variable rate (global bonds in Euros), and
variable rate (fixed bonds in US$), see note
11(b).
|
|
(n)
|
Amortized
cost and estimated fair value of investments available-for-sale classified
by maturity are as follows:
|
|
|
2009
|
|
|
2008
|
|
|
|
Amortized
cost
|
|
|
Fair
value
|
|
|
Amortized
cost
|
|
|
Fair
value
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Up
to 3 months
|
|
|
1,419,936 |
|
|
|
1,451,352 |
|
|
|
2,021,269 |
|
|
|
2,023,679 |
|
From
3 months to 1 year
|
|
|
919,290 |
|
|
|
922,408 |
|
|
|
950,129 |
|
|
|
946,040 |
|
From
1 to 3 years
|
|
|
505,941 |
|
|
|
524,139 |
|
|
|
284,307 |
|
|
|
279,245 |
|
From
3 to 5 years
|
|
|
677,097 |
|
|
|
722,548 |
|
|
|
262,785 |
|
|
|
258,791 |
|
Over
5 years
|
|
|
993,436 |
|
|
|
1,076,816 |
|
|
|
1,186,224 |
|
|
|
1,187,074 |
|
Without
maturity (shares)
|
|
|
141,535 |
|
|
|
330,733 |
|
|
|
107,835 |
|
|
|
212,689 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,657,235 |
|
|
|
5,027,996 |
|
|
|
4,812,549 |
|
|
|
4,907,518 |
|
Notes to the consolidated financial
statements (continued)
|
(a)
|
This
item is made up as follows:
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
Direct
loans -
|
|
|
|
|
|
|
Loans
|
|
|
7,927,451 |
|
|
|
7,324,485 |
|
Leasing
receivables
|
|
|
1,997,562 |
|
|
|
1,792,827 |
|
Credit
card receivables
|
|
|
1,059,433 |
|
|
|
854,968 |
|
Discounted
notes
|
|
|
349,126 |
|
|
|
368,648 |
|
Advances
and overdrafts
|
|
|
47,147 |
|
|
|
102,687 |
|
Factoring
receivables
|
|
|
163,443 |
|
|
|
124,537 |
|
Refinanced
and restructured loans
|
|
|
59,459 |
|
|
|
55,179 |
|
Past
due and under legal collection loans
|
|
|
184,567 |
|
|
|
82,867 |
|
|
|
|
11,788,188 |
|
|
|
10,706,198 |
|
Add
(less) -
|
|
|
|
|
|
|
|
|
Accrued
interest
|
|
|
80,316 |
|
|
|
90,094 |
|
Unearned
interest
|
|
|
(282,869 |
) |
|
|
(249,914 |
) |
Allowance
for loan losses (d)
|
|
|
(354,355 |
) |
|
|
(224,337 |
) |
|
|
|
|
|
|
|
|
|
Total
direct loans, net
|
|
|
11,231,280 |
|
|
|
10,322,041 |
|
|
|
|
|
|
|
|
|
|
Indirect
loans, note 19(a)
|
|
|
2,528,135 |
|
|
|
1,755,902 |
|
|
(b)
|
Loans
by class, are as follows:
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Commercial
loans
|
|
|
8,566,659 |
|
|
|
8,058,585 |
|
Residential
mortgage loans
|
|
|
1,753,736 |
|
|
|
1,485,214 |
|
Consumer
loans
|
|
|
1,467,793 |
|
|
|
1,162,399 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11,788,188 |
|
|
|
10,706,198 |
|
|
(c)
|
Interest
rates on loans are set considering the rates prevailing in the markets
where the Group’s subsidiaries
operate.
|
Notes to the consolidated financial
statements (continued)
|
(d)
|
The
movement in the allowance for loan losses (direct and indirect loans) is
shown below:
|
|
|
2009
|
|
|
|
Commercial
loans
|
|
|
Residential
mortgage loans
|
|
|
Consumer
loans
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balances
|
|
|
161,170 |
|
|
|
30,832 |
|
|
|
56,061 |
|
|
|
248,063 |
|
Provision
|
|
|
79,551 |
|
|
|
9,781 |
|
|
|
74,060 |
|
|
|
163,392 |
|
Recoveries
of written-off loans
|
|
|
12,984 |
|
|
|
939 |
|
|
|
10,005 |
|
|
|
23,928 |
|
Acquisition
of Edyficar, note 2
|
|
|
19,443 |
|
|
|
106 |
|
|
|
1,356 |
|
|
|
20,905 |
|
Loan
portfolio written-off
|
|
|
(32,364 |
) |
|
|
(958 |
) |
|
|
(54,605 |
) |
|
|
(87,927 |
) |
Translation
result
|
|
|
3,012 |
|
|
|
771 |
|
|
|
3,905 |
|
|
|
7,688 |
|
Ending
balances (*)
|
|
|
243,796 |
|
|
|
41,471 |
|
|
|
90,782 |
|
|
|
376,049 |
|
|
|
2008
|
|
|
|
Commercial
loans
|
|
|
Residential
mortgage loans
|
|
|
Consumer
loans
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balances
|
|
|
184,584 |
|
|
|
14,454 |
|
|
|
30,662 |
|
|
|
229,700 |
|
Provision
(recoveries)
|
|
|
(10,667 |
) |
|
|
16,024 |
|
|
|
43,403 |
|
|
|
48,760 |
|
Recoveries
of written-off loans
|
|
|
19,956 |
|
|
|
808 |
|
|
|
10,515 |
|
|
|
31,279 |
|
Loan
portfolio written-off
|
|
|
(31,595 |
) |
|
|
(291 |
) |
|
|
(27,422 |
) |
|
|
(59,308 |
) |
Translation
result
|
|
|
(1,108 |
) |
|
|
(163 |
) |
|
|
(1,097 |
) |
|
|
(2,368 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balances (*)
|
|
|
161,170 |
|
|
|
30,832 |
|
|
|
56,061 |
|
|
|
248,063 |
|
Notes to the consolidated financial
statements (continued)
|
|
2007
|
|
|
|
Commercial
loans
|
|
|
Residential
mortgage
loans
|
|
|
Consumer
loans
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balances
|
|
|
183,374 |
|
|
|
9,253 |
|
|
|
17,959 |
|
|
|
210,586 |
|
Provision
(recoveries)
|
|
|
(5,591 |
) |
|
|
4,884 |
|
|
|
29,146 |
|
|
|
28,439 |
|
Recoveries
of written-off loans
|
|
|
26,016 |
|
|
|
2,587 |
|
|
|
5,481 |
|
|
|
34,084 |
|
Loan
portfolio written-off
|
|
|
(22,079 |
) |
|
|
(2,395 |
) |
|
|
(22,792 |
) |
|
|
(47,266 |
) |
Translation
result
|
|
|
2,864 |
|
|
|
125 |
|
|
|
868 |
|
|
|
3,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balances (*)
|
|
|
184,584 |
|
|
|
14,454 |
|
|
|
30,662 |
|
|
|
229,700 |
|
|
(*)
|
The
movement in the allowance for loan losses includes the allowance for
direct and indirect loans for approximately US$354.4 and
US$21.7 million, respectively, as of December 31, 2009 (approximately
US$224.3 and US$23.7 million; and US$211.3 and US$18.4 million, as of
December 31, 2008 and 2007, respectively). The allowance for
indirect loan losses is included in the caption “Other liabilities” of the
consolidated statements of financial position, note
11(a).
|
In
Management’s opinion, the allowance for loan losses recorded as of December 31,
2009 and 2008 and 2007 has been established in accordance with IAS 39 and is
sufficient to cover the losses on the loan portfolio, note 3(i).
|
(e)
|
Part
of the loan portfolio is collateralized with guarantees received from
clients, which mainly consist of mortgages, trust assignments, financial
instruments and industrial and mercantile
pledges.
|
|
(f)
|
Interest
on past due and under legal collection loans are recognized when
collected.
|
Interest
income that would have been recorded for these loans in accordance with their
original contract terms amounts to approximately US$ 27.9, US$17.0 and US$18.7
million as of December 31, 2009, 2008 and 2007,
respectively.
Notes to the consolidated financial
statements (continued)
|
(g)
|
As
of December 31, 2009 and 2008, the direct gross loan portfolio classified
by maturity, based on the remaining period to repayment date is as
follows:
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Outstanding
loans -
|
|
|
|
|
|
|
Up
to 1 year
|
|
|
6,269,810 |
|
|
|
6,307,197 |
|
From
1 to 3 years
|
|
|
2,077,950 |
|
|
|
1,648,821 |
|
From
3 to 5 years
|
|
|
1,218,240 |
|
|
|
1,033,375 |
|
Over
5 years
|
|
|
2,037,621 |
|
|
|
1,633,938 |
|
|
|
|
|
|
|
|
|
|
Past
due loans -
|
|
|
|
|
|
|
|
|
Up
to 4 months
|
|
|
70,602 |
|
|
|
34,955 |
|
Over
4 months
|
|
|
64,105 |
|
|
|
22,569 |
|
Under
legal collection loans
|
|
|
49,860 |
|
|
|
25,343 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11,788,188 |
|
|
|
10,706,198 |
|
7.
|
Financial
assets designated at fair value through profit or
loss
|
|
(a)
|
This
item is made up as follows:
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Citigroup
indexed certificates (b)
|
|
|
115,007 |
|
|
|
129,631 |
|
Investment
– Unit Link (c)
|
|
|
20,663 |
|
|
|
8,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
135,670 |
|
|
|
137,945 |
|
|
(b)
|
In
connection with the liabilities that result from Credicorp´s stock
appreciation rights (SARs), (note 18), BCP signed several contracts with
Citigroup Global Markets Holdings Inc., Citigroup Capital Limited,
Citigroup Capital Market Inc (hereinafter “Citigroup”) and Calyon
Financial Products (Guernsey) Limited (hereinafter
“Calyon”).
|
These
contracts consist of the purchase of certificates indexed to the performance of
Credicorp Ltd. (BAP) shares, in the form of “warrants” issued by Citigroup and
Calyon, which the same number of Credicorp Ltd. shares. These
certificates are cash settled and, at their maturity, they pay an amount equal
to the final settlement price minus the strike price (US$ 0.0000001) plus the
accrued dividends, less the annual fee multiplied by the number of warrants
underlying the certificate. The final settlement price is equivalent
to the daily volume-weighted average of the per share price for BAP shares on
each business day, on which Citigroup or any of its affiliates or Calyon effects
any transactions with respect to BAP shares in order to unwind its position
established and maintained to hedge its price and market risk with respect to
the issued certificates.
Notes to the consolidated financial
statements (continued)
The
certificates have a maturity of 5 years but can be settled anytime before their
maturity, partially or totally. As of December 31, 2009 and 2008, the
Group had acquired 1,472,414 and 2,487,414 certificates, respectively, at a
total cost of US$87.8 and US$129.1 million, respectively (US$67.8 and US$51.9
per certificate on average, respectively). At those dates, the
estimated market value amounted to US$115.0 million and US$129.6 million,
respectively (US$78.1 and US$52.1 per certificate on average, as of December 31,
2009 and 2008, respectively). For the year 2009, the gain resulting from the
difference between cost and estimated market value amounting to approximately
US$37.3 million (loss of US$67.1 million for the year 2008) has been recorded in
the caption “Net gain (loss) on financial assets and liabilities designated at
fair value through profit and loss” of the consolidated statement of income,
according to the accounting principle described in note 3(x).
|
(c)
|
The
Group issues unit-linked investment policies whereby the policyholder
bears the investment risk on the assets held in the unit-linked funds as
the policy benefits are directly linked to the value of the assets in the
fund. The Group’s exposure to market risk on this business is limited to
the extent that income arising from asset management charges is based on
the value of assets in the fund. For the year 2009, the gain
recorded for these investment amounting to approximately US$5.5 million
(gain of US$1.7 million for the year 2008) are presented in the caption
“Net gain (loss) on financial assets and liabilities designated at fair
value through profit and loss” of the consolidated statement of income,
according to the accounting principles described in note
3(x).
|
8.
|
Receivable
and payable accounts from insurance
contracts
|
|
(a)
|
As
of December 31, 2009 and 2008, the caption “Premiums and other policies
receivable” includes balances which primarily due in a current period,
have no collaterals and present no material past due
balances.
|
|
(b)
|
The
movements of the captions “Accounts receivable and payable to reinsurers
and coinsurers” are as follows:
|
Notes to the consolidated financial
statements (continued)
Accounts
receivable:
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Beginning
balances
|
|
|
165,144 |
|
|
|
116,141 |
|
Reported
claims of premiums ceded
|
|
|
51,895 |
|
|
|
64,787 |
|
Premiums
ceded unearned during the year
|
|
|
(15,381 |
) |
|
|
1,054 |
|
Premiums
assumed
|
|
|
8,304 |
|
|
|
22,664 |
|
Settled
claims of premiums ceded by facultative contracts
|
|
|
18,713 |
|
|
|
14,885 |
|
Collections
and other
|
|
|
(91,577 |
) |
|
|
(54,387 |
) |
|
|
|
|
|
|
|
|
|
Ending
balances
|
|
|
137,098 |
|
|
|
165,144 |
|
Accounts
receivable as of December 31, 2009 and 2008, include US$16.6 million and US$32.0
million, respectively which correspond to the unearned portion of the ceded
premiums to the reinsurers.
Accounts
payable:
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Beginning
balances
|
|
|
55,841 |
|
|
|
33,963 |
|
Premiums
ceded to reinsurers by facultative contracts
|
|
|
72,925 |
|
|
|
85,355 |
|
Coinsurance
granted
|
|
|
12,171 |
|
|
|
2,531 |
|
Payments
and other
|
|
|
(92,928 |
) |
|
|
(66,008 |
) |
|
|
|
|
|
|
|
|
|
Ending
balances
|
|
|
48,009 |
|
|
|
55,841 |
|
Accounts
payable to reinsurers are primarily related to the proportional facultative
contracts for ceded premiums, automatic non-proportional contracts (excess of
loss) and reinstallation premiums. For facultative contracts the
Group transfers to the reinsurers a percentage or an amount of an insurance
contract or individual risk, based on the premium and the covered
period. The net movement of the accounts payable of
non-proportioned contracts (excess of loss) as well as installation premiums of
the years 2009 and 2008 are included in the concept “Payments
and other” for US$24.8 million and U$26.4 million,
respectively.
Notes to the consolidated financial
statements (continued)
9.
|
Property,
furniture and equipment, net
|
|
(a)
|
The
movement of property, furniture and equipment and accumulated
depreciation, for the years ended December 31, 2009 and 2008, is as
follows:
|
|
|
Land
|
|
|
Buildings and other
construction
|
|
|
Installations
|
|
|
Furniture
and fixtures
|
|
|
Computer hardware
|
|
|
Vehicles
and equipment
|
|
|
Work
in progress
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1st
|
|
|
38,367 |
|
|
|
277,825 |
|
|
|
110,758 |
|
|
|
81,099 |
|
|
|
219,112 |
|
|
|
29,066 |
|
|
|
28,766 |
|
|
|
784,993 |
|
|
|
708,483 |
|
Additions
|
|
|
1,271 |
|
|
|
2,203 |
|
|
|
2,068 |
|
|
|
4,714 |
|
|
|
18,554 |
|
|
|
1,537 |
|
|
|
14,704 |
|
|
|
45,051 |
|
|
|
91,353 |
|
Acquisition
of Edyficar, note 2
|
|
|
2,000 |
|
|
|
2,733 |
|
|
|
- |
|
|
|
2,662 |
|
|
|
2,640 |
|
|
|
1,771 |
|
|
|
- |
|
|
|
11,806 |
|
|
|
- |
|
Transfers
|
|
|
- |
|
|
|
11,978 |
|
|
|
5,268 |
|
|
|
1,397 |
|
|
|
767 |
|
|
|
642 |
|
|
|
(20,052 |
) |
|
|
- |
|
|
|
- |
|
Sales
and other
|
|
|
(1,348 |
) |
|
|
(66 |
) |
|
|
(493 |
) |
|
|
(862 |
) |
|
|
(6,213 |
) |
|
|
(4,275 |
) |
|
|
1,296 |
|
|
|
(11,961 |
) |
|
|
(14,843 |
) |
Balance
as of December 31
|
|
|
40,290 |
|
|
|
294,673 |
|
|
|
117,601 |
|
|
|
89,010 |
|
|
|
234,860 |
|
|
|
28,741 |
|
|
|
24,714 |
|
|
|
829,889 |
|
|
|
784,993 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
depreciation -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1st
|
|
|
- |
|
|
|
145,950 |
|
|
|
70,116 |
|
|
|
60,515 |
|
|
|
169,398 |
|
|
|
9,556 |
|
|
|
- |
|
|
|
455,535 |
|
|
|
433,548 |
|
Depreciation
for the year
|
|
|
- |
|
|
|
7,193 |
|
|
|
7,249 |
|
|
|
3,684 |
|
|
|
21,060 |
|
|
|
2,686 |
|
|
|
- |
|
|
|
41,872 |
|
|
|
36,034 |
|
Acquisition
of Edyficar, note 2
|
|
|
- |
|
|
|
151 |
|
|
|
- |
|
|
|
759 |
|
|
|
1,801 |
|
|
|
840 |
|
|
|
- |
|
|
|
3,551 |
|
|
|
- |
|
Sales
and other
|
|
|
- |
|
|
|
78 |
|
|
|
(472 |
) |
|
|
(878 |
) |
|
|
(6,123 |
) |
|
|
(2,209 |
) |
|
|
- |
|
|
|
(9,604 |
) |
|
|
(14,047 |
) |
Balance
as of December 31
|
|
|
- |
|
|
|
153,372 |
|
|
|
76,893 |
|
|
|
64,080 |
|
|
|
186,136 |
|
|
|
10,873 |
|
|
|
- |
|
|
|
491,354 |
|
|
|
455,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
book value
|
|
|
40,290 |
|
|
|
141,301 |
|
|
|
40,708 |
|
|
|
24,930 |
|
|
|
48,724 |
|
|
|
17,868 |
|
|
|
24,714 |
|
|
|
338,535 |
|
|
|
329,458 |
|
|
(b)
|
Banks,
financial institutions and insurance entities operating in Peru are not
allowed to pledge their fixed
assets.
|
|
(c)
|
As
of December 31, 2009, Credicorp and its Subsidiaries have property
available for sale for approximately US$24.2 million, net of its
accumulated depreciation amounting to approximately US$9.6 million
(US$25.0 and US$8.8 million, respectively, as of December 31,
2008).
|
|
(d)
|
Management
periodically reviews the residual value, useful life and method of
depreciation of the Group’s property, furniture and equipment to ensure
that they are consistent with their actual economic benefits and life
expectations. In Management’s opinion, as of December 31, 2009
and 2008 there is no evidence of impairment of the Group’s property,
furniture and equipment.
|
Notes to the consolidated financial
statements (continued)
10.
|
Intangibles
assets and goodwill, net
|
The
movement of intangible assets for the years ended December 31, 2009 and 2008 is
as follows:
Description
|
|
Client
Relationships
|
|
|
Brand name
|
|
|
Software
|
|
|
Developments
|
|
|
Other
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January
1st
|
|
|
88,378 |
|
|
|
- |
|
|
|
69,160 |
|
|
|
54,926 |
|
|
|
11,598 |
|
|
|
224,062 |
|
|
|
187,237 |
|
Additions
|
|
|
- |
|
|
|
- |
|
|
|
12,128 |
|
|
|
935 |
|
|
|
39,612 |
|
|
|
52,675 |
|
|
|
39,261 |
|
Acquisition
of Edyficar, note 2
|
|
|
6,574 |
|
|
|
13,159 |
|
|
|
2,951 |
|
|
|
- |
|
|
|
- |
|
|
|
22,684 |
|
|
|
- |
|
Transfers
|
|
|
- |
|
|
|
- |
|
|
|
4 |
|
|
|
19,767 |
|
|
|
(19,771 |
) |
|
|
- |
|
|
|
- |
|
Withdrawls
and other
|
|
|
- |
|
|
|
- |
|
|
|
(349 |
) |
|
|
(619 |
) |
|
|
(1,375 |
) |
|
|
(2,343 |
) |
|
|
(2,436 |
) |
Balance
as of December 31
|
|
|
94,952 |
|
|
|
13,159 |
|
|
|
83,894 |
|
|
|
75,009 |
|
|
|
30,064 |
|
|
|
297,078 |
|
|
|
224,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
amortization -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January
1st
|
|
|
9,436 |
|
|
|
- |
|
|
|
29,483 |
|
|
|
21,461 |
|
|
|
7,339 |
|
|
|
67,719 |
|
|
|
47,552 |
|
Amortization
of the year
|
|
|
4,500 |
|
|
|
105 |
|
|
|
12,483 |
|
|
|
9,952 |
|
|
|
2,187 |
|
|
|
29,227 |
|
|
|
21,335 |
|
Acquisition
of Edyficar, note 2
|
|
|
- |
|
|
|
- |
|
|
|
1,072 |
|
|
|
- |
|
|
|
- |
|
|
|
1,072 |
|
|
|
- |
|
Withdrawls
and other
|
|
|
23 |
|
|
|
- |
|
|
|
(353 |
) |
|
|
(512 |
) |
|
|
(615 |
) |
|
|
(1,457 |
) |
|
|
(1,168 |
) |
Balance
as of December 31
|
|
|
13,959 |
|
|
|
105 |
|
|
|
42,685 |
|
|
|
30,901 |
|
|
|
8,911 |
|
|
|
96,561 |
|
|
|
67,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
book value
|
|
|
80,993 |
|
|
|
13,054 |
|
|
|
41,209 |
|
|
|
44,108 |
|
|
|
21,153 |
|
|
|
200,517 |
|
|
|
156,343 |
|
During
the years ended December 31, 2009
and 2008, Credicorp capitalized disbursements related to the implementation and
development of sundry computer systems in BCP (mainly
SAP-ERP).
Notes to the consolidated financial
statements (continued)
This item
is made up as follows:
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Goodwill
-
|
|
|
|
|
|
|
Edyficar,
note 2
|
|
|
50,696 |
|
|
|
- |
|
Prima
AFP
|
|
|
44,594 |
|
|
|
44,594 |
|
Banco
de Crédito del Perú
|
|
|
18,733 |
|
|
|
18,609 |
|
El
Pacífico Peruano – Suiza Compañía de Seguros y Reaseguros
|
|
|
13,007 |
|
|
|
13,007 |
|
Atlantic
Security Holding Corporation
|
|
|
10,660 |
|
|
|
10,660 |
|
Coporación
Novasalud Perú S.A. EPS
|
|
|
3,744 |
|
|
|
3,744 |
|
|
|
|
|
|
|
|
|
|
Book
value, net
|
|
|
141,434 |
|
|
|
90,614 |
|
Management
annually assesses goodwill to identify any impairment; assumptions used are
consistent with previous years. As of December 31, 2009 and 2008,
Management concluded that there is no impairment in the recorded
goodwill.
Notes to the consolidated financial
statements (continued)
11.
|
Other
assets and other liabilities
|
|
(a)
|
These
items are made up as follows:
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Other
assets -
|
|
|
|
|
|
|
Financial
instruments:
|
|
|
|
|
|
|
Value
added tax credit
|
|
|
152,548 |
|
|
|
124,880 |
|
Derivatives
receivable (b)
|
|
|
97,341 |
|
|
|
79,275 |
|
Accounts
receivable
|
|
|
61,086 |
|
|
|
56,886 |
|
Income
tax prepayments, net
|
|
|
59,175 |
|
|
|
27,417 |
|
Operations
in process (c)
|
|
|
50,072 |
|
|
|
38,282 |
|
|
|
|
420,222 |
|
|
|
326,740 |
|
Non-financial
instruments:
|
|
|
|
|
|
|
|
|
Deferred
income tax asset, note 17(c)
|
|
|
84,070 |
|
|
|
67,173 |
|
Prepaid
expenses
|
|
|
66,213 |
|
|
|
56,252 |
|
Deferred
fees
|
|
|
30,130 |
|
|
|
36,526 |
|
Investments
in associates
|
|
|
8,541 |
|
|
|
8,474 |
|
Other
|
|
|
18,365 |
|
|
|
15,755 |
|
|
|
|
207,319 |
|
|
|
184,180 |
|
Total
|
|
|
627,541 |
|
|
|
510,920 |
|
|
|
|
|
|
|
|
|
|
Other
liabilities -
|
|
|
|
|
|
|
|
|
Financial
instruments:
|
|
|
|
|
|
|
|
|
Payroll,
taxes, salaries and other personnel expenses
|
|
|
173,953 |
|
|
|
126,295 |
|
Derivatives
payable (b)
|
|
|
167,849 |
|
|
|
256,792 |
|
Accounts
payable
|
|
|
156,032 |
|
|
|
126,421 |
|
Operations
in process (c)
|
|
|
51,187 |
|
|
|
36,996 |
|
Contributions
|
|
|
25,874 |
|
|
|
4,882 |
|
Allowance
for indirect loan losses, note 6(d)
|
|
|
21,694 |
|
|
|
23,726 |
|
|
|
|
596,589 |
|
|
|
575,112 |
|
Non-financial
instruments:
|
|
|
|
|
|
|
|
|
Deferred
income tax liability, note 17(c)
|
|
|
89,406 |
|
|
|
66,133 |
|
Provision
for sundry risks (d)
|
|
|
27,225 |
|
|
|
47,512 |
|
Other
|
|
|
12,803 |
|
|
|
13,642 |
|
|
|
|
129,434 |
|
|
|
127,287 |
|
Total
|
|
|
726,023 |
|
|
|
702,399 |
|
Notes to the consolidated financial
statements (continued)
|
(b)
|
The
table below presents the fair value of derivative financial instruments,
recorded as an asset or a liability, together with their notional
amounts. The notional amount, recorded gross, is the amount of
a derivative’s underlying asset and is the basis upon which changes in the
value of derivatives are measured. The notional amounts
indicate the volume of transactions outstanding at year end and are not
indicative of market risk on credit risk, note
19(c).
|
|
|
|
|
|
2009
|
|
|
|
Note
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Notional amount
|
|
|
Hedged
instrument
|
|
|
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
held for trading (i) -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward
exchange contracts
|
|
|
|
|
|
39,611 |
|
|
|
19,138 |
|
|
|
2,614,381 |
|
|
|
-
|
|
Interest
rate swaps
|
|
|
|
|
|
29,023 |
|
|
|
31,695 |
|
|
|
618,006 |
|
|
|
-
|
|
Currency
swaps
|
|
|
|
|
|
14,245 |
|
|
|
12,025 |
|
|
|
435,518 |
|
|
|
-
|
|
Options
|
|
|
|
|
|
198 |
|
|
|
161 |
|
|
|
24,374 |
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
held as hedges -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow hedge (ii) :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward
exchange contracts
|
|
5(m)
|
|
|
|
- |
|
|
|
13,532 |
|
|
|
71,180 |
|
|
Investments
available for-sale
|
|
Interest
rate swaps
|
|
12(a)
|
|
|
|
1,706 |
|
|
|
1,614 |
|
|
|
316,021 |
|
|
Deposits
|
|
Interest
rate swaps
|
|
13(a)(i)(*)
|
|
|
|
- |
|
|
|
11,395 |
|
|
|
410,000 |
|
|
Due
to banks
|
|
Interest
rate swaps
|
|
13(b)
|
|
|
|
- |
|
|
|
63,629 |
|
|
|
649,177 |
|
|
Borrowed
funds
|
|
Cross
currency swaps
|
|
15(a)(i)(*)
|
|
|
|
1,737 |
|
|
|
- |
|
|
|
111,508 |
|
|
Bonds
issued
|
|
Cross
currency swaps
|
|
15(a)(i)
|
|
|
|
24 |
|
|
|
106 |
|
|
|
15,687 |
|
|
Bonds
issued
|
|
Cross
currency swaps and interest rate swaps (iii)
|
|
15(a)(i)
|
|
|
|
7,761 |
|
|
|
2,855 |
|
|
|
113,362 |
|
|
Bonds
issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value hedge (iv) :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross
currency swaps
|
|
5(m)
|
|
|
|
2,464 |
|
|
|
11,646 |
|
|
|
318,325 |
|
|
Investments
available-for-sale
|
|
Interest
rate swaps
|
|
5(m)
|
|
|
|
572 |
|
|
|
53 |
|
|
|
55,047 |
|
|
Investments
available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
97,341 |
|
|
|
167,849 |
|
|
|
5,752,586 |
|
|
|
|
|
Notes to the consolidated financial
statements (continued)
|
|
|
|
|
2008
|
|
|
|
Note
|
|
|
Assets
|
|
|
Liabilities
|
|
|
Notional amount
|
|
|
Hedgee
instruments
|
|
|
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
held for trading (i) -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward
exchange contracts
|
|
|
|
|
|
33,427 |
|
|
|
49,979 |
|
|
|
2,478,234 |
|
|
-
|
|
Interest
rate swaps
|
|
|
|
|
|
32,918 |
|
|
|
38,181 |
|
|
|
763,126 |
|
|
-
|
|
Currency
swaps
|
|
|
|
|
|
12,904 |
|
|
|
9,675 |
|
|
|
192,899 |
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
held as hedges -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow hedge (ii) :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps
|
|
12(a)
|
|
|
|
- |
|
|
|
4,558 |
|
|
|
177,902 |
|
|
Deposits
|
|
Interest
rate swaps
|
|
13(a)(i)(*)
|
|
|
|
- |
|
|
|
13,038 |
|
|
|
410,000 |
|
|
Due
to banks
|
|
Interest
rate swaps
|
|
13(b)
|
|
|
|
- |
|
|
|
95,382 |
|
|
|
696,000 |
|
|
Borrowed
funds
|
|
Cross
currency swaps
|
|
|
|
|
|
- |
|
|
|
3,126 |
|
|
|
24,009 |
|
|
Due
to banks
|
|
Cross
currency swaps
|
|
15(a)(i)
|
|
|
|
- |
|
|
|
2,866 |
|
|
|
15,687 |
|
|
Bonds
issued
|
|
Cross
currency swaps and interest rate swaps (iii)
|
|
15(a)(i)
|
|
|
|
26 |
|
|
|
19,389 |
|
|
|
113,362 |
|
|
Bonds
issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value hedge (v) :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross
currency swaps
|
|
15(a)(iii)
|
|
|
|
- |
|
|
|
20,598 |
|
|
|
163,985 |
|
|
Subordinated
notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79,275 |
|
|
|
256,792 |
|
|
|
5,035,204 |
|
|
|
|
|
(i)
|
The
Group’s derivative trading activities mainly relate to transactions with
customers. The Group may also take positions with the
expectation of profiting from favorable movements in prices, rates or
indexes. Also included under this caption are any derivatives
which do not meet IAS 39 hedging
requirements.
|
|
(ii)
|
The
Group is exposed to variability in future interest cash flows on assets
and liabilities in foreign currency and/or which bear interest at variable
rates. The Group uses interest rate swaps - IRS, cross currency
swaps - CCS and forward exchange contract as cash flow hedges of these
risks.
|
A
schedule indicating as of December 31, 2009 the periods when the cash flows
hedges are expected to occur and when they are expected to affect the
consolidated income statement is as follows:
Notes to the consolidated financial
statements (continued)
|
|
Up to 1 year
|
|
|
From 1 to 3
years
|
|
|
From 3 to 5
years
|
|
|
Over 5 years
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
outflows (liabilities)
|
|
|
(508,574 |
) |
|
|
(683,522 |
) |
|
|
(466,844 |
) |
|
|
(224,984 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
income statement
|
|
|
(65,449 |
) |
|
|
(35,232 |
) |
|
|
29,488 |
|
|
|
615 |
|
|
As
of December 31, 2009 and 2008, the accumulated balance of unrealized loss
on cash flow hedges recorded as other comprehensive income in the cash
flow hedge reserve amounted to US$51.5 and US$118.1 million, respectively,
see note 16(c). The transfer of net loss on cash flow hedges to
the consolidated income statement is presented in note
16(c).
|
|
(iii)
|
On
December 2007 and during the first months of 2008, the Group entered into
three CCS contracts which were initially designated as fair value hedges
as they reduced the Group’s exposure to changes in the fair value of three
fixed-rate corporate bonds issued in Peruvian currency, see note 15
(a)(i); arising from changes in the exchange rate and interest
rates.
|
During
2008, given the international context, the Group entered into three IRS
contracts aimed at mitigating the inherent risks in having a variable interest
rate (Libor) for the hedged corporate bonds indicated in the previous paragraph;
fixing again their respective interest rates. Therefore, in
accordance with IAS 39, the initial designations of fair value hedges were
revoked and the combined CCS and IRS were redesignated as cash flow hedges from
the date of entering into the IRS contracts.
|
(iv)
|
The
Group maintains CCS and IRS designated as fair value hedge of certain
investments available for sale. CCS reduce the exposure to
changes in the fair value of fixed rate global bonds denominated in Euros,
related to variations in the foreign currency exchange and interest
rates. Furthermore, IRS reduce the exposure to changes in the
fair value of fixed bonds in US$ issued by the Peruvian Government,
corporative entities, and international financial entities related to
variations in the interest rates, see note
5(m).
|
|
(v)
|
On
January 2008, the Group entered into a CCS contract, initially designated
as fair value hedges as it reduced the Group’s exposure to changes in the
fair value of fixed-rate subordinated notes issued by BCP in Peruvian
currency, see note 15 (a)(iii); arising from changes in the exchange rate
and interest rates (Libor).
|
On
January 2009, the Group entered into an IRS contract aimed at mitigating the
inherent risks in having a variable interest rate (Libor) for the hedged
subordinated notes indicated in the previous paragraph; fixing their respective
interest rates. The initial designation of fair value hedges was revoked and the
combined CCS and IRS were redesignated as cash flow hedges from the date of
entering into the IRS contracts. Therefore, net loss on these cash
flow hedges was recognized directly in the consolidated statements of
comprehensive income.
Notes to the consolidated financial
statements (continued)
Subsequently,
in October 2009, the Group discontinued prospectively the combined cash flow
hedge of CCS and IRS through the unwinding of these instruments. The
cumulative gain from the fair value of these hedging instruments amounting to
US$5.9 and US$7.7 million, respectively, previously recognized in the
consolidated statements of comprehensive income, will be recognized in the
consolidated income statement during the remaining term of the underlying
liability (subordinated notes), 8 years.
|
(c)
|
Operations
in process include deposits received, loans disbursed, loans collected,
funds transferred and other similar types of transactions, which are made
at the end of the month and not reclassified to their final consolidated
statements of financial position account until the first days of the
following month. These transactions do not affect the Group’s
net consolidated income.
|
|
(d)
|
The
movement of the provision for sundry risks for the years ended on December
31, 2009, 2008 and 2007 is as
follows:
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
|
|
47,512 |
|
|
|
24,038 |
|
|
|
17,179 |
|
Provision
(i), note 24
|
|
|
14,425 |
|
|
|
37,549 |
|
|
|
8,096 |
|
Decreases
|
|
|
(34,712 |
) |
|
|
(14,075 |
) |
|
|
(1,237 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending
balance
|
|
|
27,225 |
|
|
|
47,512 |
|
|
|
24,038 |
|
|
(i)
|
The
year 2008 provision include US$36.4 million related to the estimated
liability arising from a fund managed by ASHC, which had invested with
Bernard L. Madoff Investment Securities LLC (Madoff Securities) on behalf
of its clients. The Group disbursed most part of this liability during
2009. In Management’s opinion, based in the information available up to
date, it is not expected that any additional liability will be
incurred.
|
Due to
the nature of its business, the Group has some pending legal claims for which it
records a provision when, in Management’s and its legal advisor’s opinion, they
will result in an additional liability and such amount can be reliably
estimated. Regarding any legal claim against the Group which has not
been provided for, in Management’s and its legal advisor’s opinion, they will
not have a material effect on the Group’s consolidated financial
statements.
Notes to the consolidated financial
statements (continued)
12.
|
Deposits
and obligations
|
|
(a)
|
This
item is made up as follows:
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Time
deposits
|
|
|
4,751,861 |
|
|
|
4,856,112 |
|
Demand
deposits
|
|
|
4,521,746 |
|
|
|
4,578,247 |
|
Saving
deposits
|
|
|
3,539,665 |
|
|
|
2,968,739 |
|
Severance
indemnity deposits
|
|
|
1,069,506 |
|
|
|
1,039,887 |
|
Client
- Repurchase agreements
|
|
|
35,000 |
|
|
|
294,030 |
|
Bank’s
negotiable certificates
|
|
|
120,932 |
|
|
|
140,013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
14,038,710 |
|
|
|
13,877,028 |
|
|
|
|
|
|
|
|
|
|
Interest
payable
|
|
|
53,118 |
|
|
|
73,409 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
14,091,828 |
|
|
|
13,950,437 |
|
The Group
has established a policy to remunerate demand deposits and savings accounts
according to an interest rate scale, based on their average balance; on the
other hand balances that are lower than a specified amount, do not bear
interest.
Interest
rates are determined by the Group considering interest rates prevailing in the
market in which each of the Group’s subsidiaries operates. As of
December 31, 2009, the Group has hedged time deposits with variable interest
rates through interest rate swaps for a notional amount of US$316.0 million
(US$177.9 million, as of December 31, 2008); as a result, these time deposits
were economically converted to fixed rate, see note 11(b).
Notes to the consolidated financial
statements (continued)
|
(b)
|
The
amounts of non-interest and interest bearing deposits and obligations are
made up as follows:
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
Non-interest
bearing deposits and obligations -
|
|
|
|
|
|
|
In
Peru
|
|
|
2,613,118 |
|
|
|
2,710,770 |
|
In
other countries
|
|
|
684,877 |
|
|
|
502,759 |
|
|
|
|
3,297,995 |
|
|
|
3,213,529 |
|
Interest
bearing deposits and obligations -
|
|
|
|
|
|
|
|
|
In
Peru
|
|
|
8,778,750 |
|
|
|
8,689,977 |
|
In
other countries
|
|
|
1,961,965 |
|
|
|
1,973,522 |
|
|
|
|
10,740,715 |
|
|
|
10,663,499 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
14,038,710 |
|
|
|
13,877,028 |
|
|
(c)
|
Time
deposits balance classified by maturity is as
follows:
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Up
to 3 months
|
|
|
3,384,624 |
|
|
|
3,039,029 |
|
From
3 months to 1 year
|
|
|
1,134,480 |
|
|
|
1,578,258 |
|
From
1 to 3 years
|
|
|
147,135 |
|
|
|
147,008 |
|
From
3 to 5 years
|
|
|
82,088 |
|
|
|
51,876 |
|
More
than 5 years
|
|
|
3,534 |
|
|
|
39,941 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
4,751,861 |
|
|
|
4,856,112 |
|
As of
December 31, 2009 and 2008, in Management’s opinion the Group’s deposits and
obligations are widely diversified with no significant
concentrations.
Notes to the consolidated financial
statements (continued)
13.
|
Due
to banks and correspondents and borrowed
funds
|
|
(a)
|
Due
to bank and correspondents
-
|
This item
is made up as follows:
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
International
funds and others (i)
|
|
|
1,051,739 |
|
|
|
1,016,932 |
|
Promotional
credit lines (ii)
|
|
|
81,550 |
|
|
|
109,730 |
|
Inter-bank
funds
|
|
|
29,031 |
|
|
|
39,216 |
|
|
|
|
1,162,320 |
|
|
|
1,165,878 |
|
Interest
payable
|
|
|
5,118 |
|
|
|
14,113 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,167,438 |
|
|
|
1,179,991 |
|
|
(i)
|
This
item is made up as follows:
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Syndicated
loan (*)
|
|
|
410,000 |
|
|
|
410,000 |
|
Corporación
Andina de Fomento - CAF
|
|
|
202,941 |
|
|
|
180,000 |
|
Citibank
N.A.
|
|
|
71,552 |
|
|
|
20,000 |
|
Wells
Fargo & Co.
|
|
|
60,000 |
|
|
|
60,326 |
|
Standard
Chartered Bank
|
|
|
51,030 |
|
|
|
2,730 |
|
Bank
of America
|
|
|
45,000 |
|
|
|
- |
|
Commercebank
N.A.
|
|
|
39,000 |
|
|
|
20,000 |
|
Chase
Manhattan Bank
|
|
|
30,000 |
|
|
|
- |
|
Bank
of New York
|
|
|
30,000 |
|
|
|
20,000 |
|
Toronto
Dominion Bank
|
|
|
- |
|
|
|
47,000 |
|
Dresdner
Bank AG. Frankfurt
|
|
|
- |
|
|
|
45,000 |
|
JP
Morgan Chase & Co.
|
|
|
- |
|
|
|
32,000 |
|
Other
|
|
|
112,216 |
|
|
|
179,876 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,051,739 |
|
|
|
1,016,932 |
|
|
(*)
|
As
of December 31, 2009 and 2008, this amount was related to a syndicated
loan amounting to US$ 410.0 million obtained from several international
financial entities, with maturity due within three years and an interest
rate of Libor plus 0.70 percent during the first year, Libor plus 0.75
percent during the second year and Libor plus 0.85 percent during the
third year. The syndicated loan, subject to variable interest
rate risk, has been hedged through interest rate swap operations for a
notional amount of US$410.0 million with the same maturities; as a result,
this loan was economically converted to fixed rate, see note
11(b).
|
Notes to the consolidated financial
statements (continued)
As of
December 31, 2009, these loans have maturities between January 2010 and February
2019 (between January 2009 and March 2011 as of December 31, 2008) and their
annual interest rate is between 0.73 and 12.00 percent (between 3.11 and 7.77
percent as of December 2008).
Some of
these borrowings include standard covenants related to financial ratios, use of
funds and other administrative matters, which in Management’s opinion, do not
limit the Group’s operations and it has fully complied with as of the
consolidated statements of financial position.
|
(ii)
|
Promotional
credit lines represent loans granted to BCP by Corporación Financiera de
Desarrollo (COFIDE) to promote the development of Peru, they have
maturities between January 2010 and December 2029 and their annual
interest rates are between 6.25 and 7.75 percent (between October 2009 and
December 2028 and annual interest rate between 6.20 and 7.75 percent as of
December 31, 2008). These credit lines are secured by a loan portfolio
amounting to US$81.6 and US$109.7 million as of December 31, 2009 and
2008, respectively.
|
Promotional
credit lines include standard covenants related to financial ratios, use of
funds and other administrative matters, which in Management’s opinion, do not
limit the Group’s operations and it has fully complied with as of the
consolidated statements of financial position.
This item
is made up as follows:
|
|
Interest
|
|
Maturity
|
|
2009
|
|
|
2008
|
|
|
|
%
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
CCR
Inc. MT-100, Payment rights master
Trust -
|
|
|
|
|
|
|
|
|
|
|
2005
Series A Floating Rate Certificates
|
|
Libor
1m + 21 bps
|
|
10/10/2012
|
|
|
213,110 |
|
|
|
221,079 |
|
2005
Series B Floating Rate Certificates
|
|
Libor
1m + 60 bps
|
|
12/10/2009
|
|
|
- |
|
|
|
37,918 |
|
2006
Series A Floating Rate Certificates
|
|
Libor
1m + 24 bps
|
|
10/03/2016
|
|
|
100,000 |
|
|
|
100,000 |
|
2007
Series A Floating Rate Certificates
|
|
Libor
1m + 28 bps
|
|
10/07/2017
|
|
|
350,000 |
|
|
|
350,000 |
|
2007
Series B Floating Rate Certificates
|
|
Libor
1m + 25 bps
|
|
10/07/2014
|
|
|
150,000 |
|
|
|
150,000 |
|
2008
Series A Fixed Rate Certificates
|
|
6.27
|
|
10/06/2015
|
|
|
126,111 |
|
|
|
141,719 |
|
2008
Series B Floating Rate Certificates
|
|
Libor
1m + 225 bps
|
|
10/12/2015
|
|
|
150,000 |
|
|
|
150,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
1,089,221 |
|
|
|
1,150,716 |
|
All
issuances are secured by the collection of BCP’s (including its foreign
branches) future inflows from electronic messages sent through the Society for
Worldwide Interbank Financial Telecommunications network and utilized within the
network to instruct correspondent banks to make a payment of a certain amount to
a beneficiary that is not a financial institution.
Notes to the consolidated financial
statements (continued)
Loans
obtained include the obligation to comply with certain covenants which, in
Management’s opinion, are being fulfilled at the date of the consolidated
statements of financial position.
BCP has
signed an insurance policy with AMBAC Assurance Corporation, which guarantees
the timely payment of scheduled principal and certain accrued interest of all of
the 2007 and 2006 issuances (Series A y B).
As of
December 31, 2009 and 2008, Series 2007 (A and B) and a portion (70 percent) of
the 2005 total issuance (Series A and B), subject to variable interest rate
risk, are hedged through an interest rate swap operation; as a result, these
issuance were economically converted to fixed rate, see note 11(b).
|
(c)
|
As
of December 31, 2009 and 2008, maturities of due to bank and
correspondents and borrowed funds are shown below, based on the remaining
period to the repayment date:
|
Due
to bank and correspondents
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Up
to 3 months
|
|
|
622,342 |
|
|
|
369,483 |
|
From
3 months to 1 year
|
|
|
235,913 |
|
|
|
256,884 |
|
From
1 to 3 years
|
|
|
210,125 |
|
|
|
502,039 |
|
From
3 to 5 years
|
|
|
31,048 |
|
|
|
6,468 |
|
More
than 5 years
|
|
|
62,892 |
|
|
|
31,004 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,162,320 |
|
|
|
1,165,878 |
|
|
|
|
|
|
|
|
|
|
Borrowed
funds
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
Up
to 1 year
|
|
|
113,857 |
|
|
|
63,324 |
|
From
1 to 3 years
|
|
|
394,759 |
|
|
|
317,541 |
|
From
3 to 5 years
|
|
|
312,297 |
|
|
|
362,374 |
|
More
than 5 years
|
|
|
268,308 |
|
|
|
407,477 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,089,221 |
|
|
|
1,150,716 |
|
|
(d)
|
As
of December 31, 2009 and 2008, credit lines granted by several local and
foreign financial institutions, available for future operating activities
or to settle capital commitments amounted to US$1,812.2 million
(US$1,617.0 million as of December 31,
2008).
|
Notes to the consolidated financial
statements (continued)
14.
|
Technical
reserves, insurance claims reserves and reserves for unearned
premiums
|
|
(a)
|
This
item is made up as
follows:
|
|
|
2009
|
|
|
|
Reserves for
direct claims
|
|
|
Claims assumed
|
|
|
Technical
reserves
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life
insurance
|
|
|
70,960 |
|
|
|
- |
|
|
|
630,183 |
|
|
|
701,143 |
|
General
insurance
|
|
|
139,539 |
|
|
|
2,828 |
|
|
|
112,804 |
|
|
|
255,171 |
|
Health
insurance
|
|
|
38,625 |
|
|
|
8 |
|
|
|
23,844 |
|
|
|
62,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
249,124 |
|
|
|
2,836 |
|
|
|
766,831 |
|
|
|
1,018,791 |
|
|
|
2008
|
|
|
|
Reserves for
direct claims
|
|
|
Claims assumed
|
|
|
Technical
reserves
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life
insurance
|
|
|
64,553 |
|
|
|
- |
|
|
|
553,127 |
|
|
|
617,680 |
|
General
insurance
|
|
|
137,297 |
|
|
|
32,812 |
|
|
|
124,846 |
|
|
|
294,955 |
|
Health
insurance
|
|
|
37,741 |
|
|
|
27 |
|
|
|
17,367 |
|
|
|
55,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
239,591 |
|
|
|
32,839 |
|
|
|
695,340 |
|
|
|
967,770 |
|
Insurance
claims reserves represent reported claims and an estimation for incurred but non
reported claims (IBNR). Reported claims are adjusted on the basis of
technical reports received from independent adjusters. Claims to be
paid by the reinsurers and coinsurers are shown as ceded claims, which are
presented in the caption “Accounts receivable from reinsurers and
coinsurers”.
As of
December 31, 2009, the reserves for direct claims include reserves for IBNR for
life, general and health insurance for an amount of US$20.2 million, US$4.3
million and US$19.3 million, respectively (US$15.2, US$4.7 and US$20.1 millions,
respectively, as of December 31, 2008).
During
2009 and previous years, the differences between the estimations for the
incurred and non-reported claims and the settled and pending liquidation claims
have not been significant. In the case of general and health risks,
retrospective analysis indicate that the amounts provisioned are greater than
the settled claims and those pending liquidation by a percentage that does not
exceed 10 percent of the provisioned amounts. Management believes
that the estimated IBNR reserve is sufficient to cover any liability as of
December 31, 2009 and 2008.
The
movement for the years ended December 31, 2009 and 2008 of insurance claims and
technical reserves is as follows:
Notes to
the consolidated financial statements (continued)
|
(b)
|
Insurance
claims reserves (direct and
assumed):
|
|
|
2009
|
|
|
|
Life insurance
|
|
|
General insurance
|
|
|
Health insurance
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial
balance
|
|
|
64,553 |
|
|
|
170,109 |
|
|
|
37,768 |
|
|
|
272,430 |
|
Claims
|
|
|
80,970 |
|
|
|
108,397 |
|
|
|
148,985 |
|
|
|
338,352 |
|
Payments
|
|
|
(76,301 |
) |
|
|
(136,315 |
) |
|
|
(149,731 |
) |
|
|
(362,347 |
) |
Translation
result
|
|
|
1,738 |
|
|
|
176 |
|
|
|
1,611 |
|
|
|
3,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final
balance
|
|
|
70,960 |
|
|
|
142,367 |
|
|
|
38,633 |
|
|
|
251,960 |
|
|
|
2008
|
|
|
|
Life insurance
|
|
|
General insurance
|
|
|
Health insurance
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial
balance
|
|
|
50,046 |
|
|
|
114,144 |
|
|
|
25,108 |
|
|
|
189,298 |
|
Claims
|
|
|
88,059 |
|
|
|
163,251 |
|
|
|
155,387 |
|
|
|
406,697 |
|
Payments
|
|
|
(72,676 |
) |
|
|
(107,197 |
) |
|
|
(141,470 |
) |
|
|
(321,343 |
) |
Translation
result
|
|
|
(876 |
) |
|
|
(89 |
) |
|
|
(1,257 |
) |
|
|
(2,222 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final
balance
|
|
|
64,553 |
|
|
|
170,109 |
|
|
|
37,768 |
|
|
|
272,430 |
|
Notes to the consolidated financial
statements (continued)
|
|
2009
|
|
|
|
Life
insurance
|
|
|
General insurance
|
|
|
Health
insurance
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial
balance
|
|
|
553,127 |
|
|
|
124,846 |
|
|
|
17,367 |
|
|
|
695,340 |
|
Accretion
expenses and other
|
|
|
16,384 |
|
|
|
- |
|
|
|
- |
|
|
|
16,384 |
|
Unearned
premium reserves and annual variation, net
|
|
|
3,393 |
|
|
|
(14,016 |
) |
|
|
6,580 |
|
|
|
(4,043 |
) |
Insurance
subscriptions
|
|
|
79,990 |
|
|
|
- |
|
|
|
- |
|
|
|
79,990 |
|
Payments
|
|
|
(8,122 |
) |
|
|
- |
|
|
|
- |
|
|
|
(8,122 |
) |
Translation
result
|
|
|
(14,589 |
) |
|
|
1,974 |
|
|
|
(103 |
) |
|
|
(12,718 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final
balance
|
|
|
630,183 |
|
|
|
112,804 |
|
|
|
23,844 |
|
|
|
766,831 |
|
|
|
2008
|
|
|
|
Life
insurance
|
|
|
General insurance
|
|
|
Health
insurance
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial
balance
|
|
|
500,768 |
|
|
|
97,646 |
|
|
|
15,766 |
|
|
|
614,180 |
|
Accretion
expenses and other
|
|
|
14,808 |
|
|
|
- |
|
|
|
- |
|
|
|
14,808 |
|
Unearned
premium reserves and annual variation, net
|
|
|
1,433 |
|
|
|
27,200 |
|
|
|
1,601 |
|
|
|
30,234 |
|
Insurance
subscriptions
|
|
|
70,311 |
|
|
|
- |
|
|
|
- |
|
|
|
70,311 |
|
Payments
|
|
|
(26,732 |
) |
|
|
- |
|
|
|
- |
|
|
|
(26,732 |
) |
Translation
result
|
|
|
(7,461 |
) |
|
|
- |
|
|
|
- |
|
|
|
(7,461 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Final
balance
|
|
|
553,127 |
|
|
|
124,846 |
|
|
|
17,367 |
|
|
|
695,340 |
|
As of
December 31, 2009 and 2008, no additional reserves were needed as a result of
the liability adequacy test. The main assumptions used in estimation
of annuities, disability and survivor reserves as of those dates, were the
following:
Modality
|
|
Mortality Table
|
|
Technical rates
|
|
|
|
|
|
Life
Immediate Annuity
|
|
RV–2004,
B-85 and MI-85
|
|
4.90%
- 5.22% in US$ and 3.20% in S/
|
Survorship
and Disability Pension
|
|
RV-85,
B-85 and MI-85
|
|
Old
regime 3.00%
|
Individual
Life
|
|
CSO
80 adjustable
|
|
4.00%
- 5.00%
|
Notes to the
consolidated financial statements (continued)
The mortality tables used are those recommended
by the Peruvian regulator (SBS).
The
sensitivity of the estimates used by the Group to measure its insurance risks is
represented primarily by the life insurance risks; the main variables as of
December 31, 2009, are the interest rates and the mortality tables
used. The Group has evaluated the changes of the reserves related to
its most significant life insurance (Life immediate annuities) of +/- 100 bps of
the interest rates and of +/- 5 bps of the mortality factors, being the results
as follows:
|
|
|
|
|
Variation of the reserve
|
|
Variables
|
|
Amount of the
reserve
|
|
|
Amount
|
|
|
Percentage
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio
in US$ - Basis amount
|
|
|
340,580 |
|
|
|
|
|
|
|
Changes
in interest rates: + 100 bps
|
|
|
310,604 |
|
|
|
(29,976 |
) |
|
|
(8.80 |
) |
Changes
in interest rates: - 100 bps
|
|
|
376,083 |
|
|
|
35,503 |
|
|
|
10.42 |
|
Changes
in Mortality tables to 105%
|
|
|
336,740 |
|
|
|
(3,840 |
) |
|
|
(1.13 |
) |
Changes
in Mortality tables to 95%
|
|
|
344,631 |
|
|
|
4,051 |
|
|
|
1.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variation of the reserve
|
|
Variables
|
|
Amount
of the
reserve
|
|
|
Amount
|
|
|
Percentage
|
|
|
|
US$
(000)
|
|
|
US$
(000)
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio
in S/ - Basis amount
|
|
|
24,386 |
|
|
|
|
|
|
|
|
|
Changes
in interest rates: + 100 bps
|
|
|
21,700 |
|
|
|
(2,686 |
) |
|
|
(11.01 |
) |
Changes
in interest rates: - 100 bps
|
|
|
27,728 |
|
|
|
3,342 |
|
|
|
13.70 |
|
Changes
in Mortality tables to 105%
|
|
|
24,205 |
|
|
|
(181 |
) |
|
|
(0.74 |
) |
Changes
in Mortality tables to 95%
|
|
|
24,577 |
|
|
|
191 |
|
|
|
0.78 |
|
Notes to the
consolidated financial statements (continued)
15.
|
Bonds
and subordinated notes issued
|
|
(a)
|
This
item is made up as follows:
|
|
|
Weighted
average annual interest rate
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
Maturity
|
|
2009
|
|
|
2008
|
|
|
|
%
|
|
|
%
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
bonds (i)
|
|
|
6.04 |
|
|
|
6.91 |
|
Between
September 2010 and July 2018
|
|
|
440,092 |
|
|
|
227,902 |
|
Leasing
bonds (i)
|
|
|
7.11 |
|
|
|
6.87 |
|
Between
February 2010 and August 2018
|
|
|
188,265 |
|
|
|
217,863 |
|
Subordinated
bonds (i)
|
|
|
7.35 |
|
|
|
6.71 |
|
Between
October 2010 and May 2027
|
|
|
113,281 |
|
|
|
61,074 |
|
Mortgage
bonds
|
|
|
7.67 |
|
|
|
7.69 |
|
Between
January 2011 and April 2012
|
|
|
10,504 |
|
|
|
15,278 |
|
Subordinated
negotiable certificates notes (ii)
|
|
|
6.95 |
|
|
|
6.95 |
|
November
2021
|
|
|
117,560 |
|
|
|
117,512 |
|
Subordinated
notes (iii)
|
|
|
7.17 |
|
|
|
7.17 |
|
October
2017
|
|
|
154,329 |
|
|
|
137,761 |
|
Junior
subordinated notes (iv)
|
|
|
9.75 |
|
|
|
- |
|
November
2069
|
|
|
249,700 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,273,731 |
|
|
|
777,390 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
payable
|
|
|
|
|
|
|
|
|
|
|
|
13,291 |
|
|
|
7,840 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
1,287,022 |
|
|
|
785,230 |
|
Notes to the
consolidated financial statements (continued)
|
(i)
|
During
2009 y 2008, the Group issued corporate, subordinated and leasing bonds
for the following amounts:
|
Issuances 2009
|
|
Amount
|
|
Currency
|
|
Maturity
|
|
Rate
|
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
Bonds BCP -
|
|
|
|
|
|
|
|
|
|
Fourth
issuance - Series A, B, C and D
|
|
|
63,465 |
|
Nuevo
sol
|
|
2014
|
|
6.31
- 6.88 |
|
Fifth
issuance – Series A
|
|
|
17,301 |
|
Nuevo
sol
|
|
2013
|
|
5.31
|
|
|
|
|
80,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated Bonds BCP
-
|
|
|
|
|
|
|
|
|
|
|
Fourth
issuance Series A, B, C and D
|
|
|
113,822 |
|
US$
|
|
2016
|
|
6.53
– 8.50
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
Bonds BCP Emisiones Latam 1 S.A.
|
|
|
|
|
|
|
|
|
|
|
First
issuance – Series A (*)
|
|
|
111,508 |
|
UF
|
|
2014
|
|
3.50
|
|
|
(*)
|
BCP
Emisiones Latam 1 S.A. issued corporate bonds (Series A) for 2.7 million
“Chilean Unidades de Fomento - UF”. The Group can redeem 100
percent of the bonds only if the legal reserve funds legislation and tax
law, related to income tax and value added tax, change in Peru, Panama or
Chile. This debt, subject to foreign exchange risk, has been
hedged through CCS, as a result, these bonds were economically converted
to US$ Dollars, see note 11(b).
|
Issuances 2008
|
|
Amount
|
|
Currency
|
|
Maturity
|
|
Rate
|
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate
Bonds BCP -
|
|
|
|
|
|
|
|
|
|
Second
issuance - Series A
|
|
|
25,932 |
|
Nuevo
sol
|
|
2011
|
|
5.78 |
|
First
issuance - Series B
|
|
|
38,152 |
|
Nuevo
sol
|
|
2015
|
|
6.81
|
|
Third
issuance - Series A and B
|
|
|
63,694 |
|
Nuevo
sol
|
|
2018
|
|
7.47
– 8.50
|
|
|
|
|
127,778 |
|
|
|
|
|
|
|
Notes to the consolidated
financial statements (continued)
Issuances 2008
|
|
Amount
|
|
Currency
|
|
Maturity
|
|
Rate
|
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasing
Bonds BCP -
|
|
|
|
|
|
|
|
|
|
Fourth
issuance - Series A, B, C y D
|
|
|
83,492 |
|
US$
|
|
2011
|
|
5.47
– 6.25 |
|
Fourth
issuance - Series
A y B
|
|
|
14,392 |
|
Nuevo
sol
|
|
2011
|
|
5.72
– 6.06
|
|
Sixth
issuance - Series A
|
|
|
31,487 |
|
Nuevo
sol
|
|
2018
|
|
8.72
|
|
|
|
|
129,371 |
|
|
|
|
|
|
|
During
2009, redeemed corporate, leasing and subordinate bonds amounted to US$6.9
million, US$34.6 million and US$17.3 million, respectively (US$23.9 million,
US$84.8 million and US$40.3 million, respectively, during 2008).
As of
December 31, 2009 and 2008, the Group has hedged fixed corporate and leasing
bonds issued in Peruvian currency for a notional amount of US$ US$113.4 million
and US$15.7 million, respectively, subjects to foreign exchange and interest
rate risk through CCS and IRS; these bonds were economically converted to US
Dollars with fixed rate, see note 11(b).
Leasing
and mortgages bonds are collateralized by the fixed assets financed by the
Group.
|
(ii)
|
These
certificates were issued in US dollars and accrue a fixed annual interest
rate of 6.95 percent for the first 10 years (November 2016), with payment
each six months. After the first 10 years, the interest rate
will change to a variable interest rate, established as Libor plus 2.79
percent, with semiannual payments. At the end of the first 10 years, the
Group can redeem 100 percent of the debt, without
penalties.
|
|
(iii)
|
In
October 2007, BCP through its Panama branch, issued Subordinated Notes for
S/483.3 million in the international market with principal maturity on
2022. This debt accrues a fixed annual interest rate of 7.17
percent for the first 10 years, with semiannual payments. After
the first 10 years, interest rate will be the market interest rate for
sovereign bonds issued by the Peruvian Government with maturity on 2037,
plus 150 basis points, with semiannual payments. At that date,
BCP can redeem 100 percent of the notes, without
penalties. This debt, subject to foreign exchange risk and
interest rate risk, was hedged until October 2009, see note
11(b)(v).
|
|
(iv)
|
In
November 2009, BCP through its Panama branch issued Junior Subordinated
Notes for US$250.0 million in the international market with principal
maturity on 2069. This debt accrues a fixed annual interest
rate of 9.75 percent, for the first 10 years, with semiannual
payments. After the first 10 years, in November 2019, interest
rate will be variable, Libor 3 months plus 816.7 basis points, with
quarterly payments; at that date and or any interest payment date, BCP can
redeem 100 percent of the notes, without penalties and after full filing
certain requirements.
|
Notes to the consolidated
financial statements (continued)
Interest
payments are non-cumulative such that, if an interest payment is not made in
full or cancelled as set forth due to BCP’s rights to cancel interest payments,
a mandatory prohibitions established by SBS, or if determines that BCP is in
non-compliance with applicable minimum regulatory capital; the unpaid interest
will not accrue or be due and payable at any time and shall not constitute an
acceleration event. In those cases, BCP will not, and will not cause
its majority owned subsidiaries to declare, pay or distribute a dividend for a
period of time established since the interest payments are not
cancelled.
This debt
does not have collateral and qualifies as Tier 1 capital for SBS
regulations.
|
(b)
|
Bonds
and subordinated notes, classified by maturity are shown
below:
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Up
to 3 months
|
|
|
26,076 |
|
|
|
1,717 |
|
From
3 months to 1 year
|
|
|
74,413 |
|
|
|
64,190 |
|
From
1 to 3 years
|
|
|
191,344 |
|
|
|
235,867 |
|
From
3 to 5 years
|
|
|
274,781 |
|
|
|
75,398 |
|
Over
5 years
|
|
|
707,117 |
|
|
|
400,218 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,273,731 |
|
|
|
777,390 |
|
Bonds and
subordinated notes issued have has certain financial and operating covenants
which, in Credicorp Management’s opinion, the Group is in compliance at the date
of the consolidated statements of financial position.
Notes to the
consolidated financial statements (continued)
As of
December 31, 2009, 2008 and 2007, 94,382,317 shares of capital stock were issued
at US$5 per share.
As of
December 31, 2009, treasury stock comprises the par value of 14,847,842
Credicorp’s shares (14,620,842 Credicorp’s shares as of December, 31, 2008 and
2007) owned by the Group’s companies.
The
difference between their acquisition cost of US$198.0 million and their par
value of US$74.2 million, (acquisition cost of US$ 186.5 million and their par
value of US$ 73.1 million as of December 31, 2008 and 2007) is presented as a
reduction of the “Capital surplus”.
In
accordance with Peruvian regulation, a reserve of up to at least 35 percent of
paid-in capital of the Group’s subsidiaries operating in Peru is required to be
established through annual transfers of at least 10 percent of their net
income. In accordance with Bolivian regulation, a reserve of up to at
least 50 percent of paid-in capital of the Group’s subsidiaries operating in
Bolivia is required to be established through annual transfers of at least 10
percent of their net income. As of December 31, 2009, 2008 and 2007,
these reserves amounted to approximately US$ 242.9, US$231.7 and US$222.7
million, respectively.
The
Shareholders’ meetings held on March 31, 2009, March 28, 2008 and February 28,
2007 agreed to transfer from “Retained earnings” to “Reserves” an amount of
US$238.1, US$228.2 and US$107.3 million, respectively.
The
caption “Other reserves” includes the unrealized net gain (loss) from
available-for-sale investments and from derivatives instruments used as cash
flows hedge net of its corresponding deferred income tax, and minority interest;
its movement is as follows:
Notes to the consolidated
financial statements (continued)
|
|
Unrealized net gain (loss) of:
|
|
|
|
Available-for-sale investments
reserve
|
|
|
Cash flow hedge
reserve
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
Balances
as of January 1, 2007
|
|
|
144,471 |
|
|
|
2,938 |
|
|
|
147,409 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
unrealized gain from available-for-sale investments
|
|
|
85,129 |
|
|
|
- |
|
|
|
85,129 |
|
Transfer
of net realized gain from investments available-for-sale to the income
statement, net of realized loss
|
|
|
(17,634 |
) |
|
|
- |
|
|
|
(17,634 |
) |
Transfer
of impairment on investment available-for-sale to income
statement
|
|
|
5,017 |
|
|
|
- |
|
|
|
5,017 |
|
Net
unrealized loss on cash flow hedge
|
|
|
- |
|
|
|
(39,385 |
) |
|
|
(39,385 |
) |
Transfer
of net realized gain from cash flow hedge to the income
statement
|
|
|
- |
|
|
|
(986 |
) |
|
|
(986 |
) |
Balances
as of December 31, 2007
|
|
|
216,983 |
|
|
|
(37,433 |
) |
|
|
179,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
unrealized loss from available-for-sale investments
|
|
|
(164,302 |
) |
|
|
- |
|
|
|
(164,302 |
) |
Transfer
of net realized gain from investments available-for-sale to the income
statement, net of realized loss
|
|
|
(35,684 |
) |
|
|
- |
|
|
|
(35,684 |
) |
Transfer
of impairment on investment available-for-sale to income statement, note
5(c)
|
|
|
55,732 |
|
|
|
- |
|
|
|
55,732 |
|
Net
unrealized loss on cash flow hedge, note 11(b)(ii)
|
|
|
- |
|
|
|
(94,937 |
) |
|
|
(94,937 |
) |
Transfer
of net realized loss from cash flow hedge to the income statement, note
11(b)(ii)
|
|
|
- |
|
|
|
14,248 |
|
|
|
14,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
as of December 31, 2008
|
|
|
72,729 |
|
|
|
(118,122 |
) |
|
|
(45,393 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
unrealized gain from available-for-sale investments
|
|
|
319,041 |
|
|
|
- |
|
|
|
319,041 |
|
Transfer
of net realized gain from investments available-for-sale to the income
statement, net of realized loss
|
|
|
(112,618 |
) |
|
|
- |
|
|
|
(112,618 |
) |
Transfer
of impairment on investment available-for-sale to income statement, note
5(c)
|
|
|
9,825 |
|
|
|
- |
|
|
|
9,825 |
|
Net
unrealized gain from cash flow hedge, note 11(b)(ii)
|
|
|
- |
|
|
|
30,317 |
|
|
|
30,317 |
|
Transfer
of net realized loss from cash flow hedge to the income statement, note
11(b)(ii)
|
|
|
- |
|
|
|
36,274 |
|
|
|
36,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances
as of December 31, 2009
|
|
|
288,977 |
|
|
|
(51,531 |
) |
|
|
237,446 |
|
Notes to the
consolidated financial statements (continued)
|
(d)
|
Components
of other comprehensive income -
|
The
consolidated statement of comprehensive income includes other comprehensive
income from available-for-sale investments and from derivatives instruments used
as cash flows hedges; its movement is as follows:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale
investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
unrealized gain (loss) from available-for-sale investments
|
|
|
319,041 |
|
|
|
(164,302 |
) |
|
|
85,129 |
|
Transfer
of net realized gain from investments available-for-sale to the income
statement, net of realized loss
|
|
|
(112,618 |
) |
|
|
(35,684 |
) |
|
|
(17,634 |
) |
Transfer
of impairment on investment available-for-sale to income
statement
|
|
|
9,825 |
|
|
|
55,732 |
|
|
|
5,017 |
|
Sub
total
|
|
|
216,248 |
|
|
|
(144,254 |
) |
|
|
72,512 |
|
Minority
interest of available-for-sale
|
|
|
45,019 |
|
|
|
(32,876 |
) |
|
|
(426 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax
|
|
|
7,283 |
|
|
|
(21,516 |
) |
|
|
11,046 |
|
|
|
|
268,550 |
|
|
|
(198,646 |
) |
|
|
83,132 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow hedge:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
unrealized gain (loss) on cash flow hedge
|
|
|
30,317 |
|
|
|
(94,937 |
) |
|
|
(39,385 |
) |
Transfer
of net realized loss (gain) from cash flow hedge to the income
statement
|
|
|
36,274 |
|
|
|
14,248 |
|
|
|
(986 |
) |
Sub
total
|
|
|
66,591 |
|
|
|
(80,689 |
) |
|
|
(40,371 |
) |
Minority
interest of cash flow hedge
|
|
|
875 |
|
|
|
(604 |
) |
|
|
- |
|
Income
tax
|
|
|
(1,442 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66,024 |
|
|
|
(81,293 |
) |
|
|
(40,371 |
) |
|
(e)
|
Dividend
distribution -
|
During
2009, 2008 and 2007, Credicorp paid cash dividends, net of the effect of
treasury shares, for approximately US$119.3, US$119.6 and US$103.7 million,
respectively.
The
Shareholders Meeting dated on March 31, 2010 agreed to declare a cash dividend
of US$1.70 per Common Share for a total amount of approximately US$160.4
million, corresponding to the results of 2009, which was paid in cash on May 11,
2010.
In
accordance with current Peruvian legislation, there is no restriction for
overseas remittance of dividends or the repatriation of foreign
investment. Dividends paid by the Peruvian subsidiaries to Credicorp
are subject to a withholding tax of 4.1 percent.
Notes to the consolidated
financial statements (continued)
|
(f)
|
Equity
for legal purposes (Regulatory capital)
-
|
As of
December 31, 2009 and 2008, the regulatory capital for Credicorp’s subsidiaries
engaged in financial and insurance activities in Peru calculated following SBS
regulations amounted to approximately US$ 2,221.1 and US$1,604.7 million,
respectively. On the other hand, the consolidated regulatory capital
for Credicorp exceeds by approximately US$660.3 million the minimum regulatory
capital required as of December 31, 2009 (approximately US$263.6 million as of
December 31, 2008).
|
(a)
|
Credicorp
is not subject to income tax or any taxes on capital gains, equity or
property. Credicorp’s Peruvian subsidiaries are subject to
corporate taxation on income under the Peruvian Tax system. The
statutory Income Tax rate is 30 percent on taxable income after
calculating the workers’ profit sharing, which in accordance with current
legislation is determined using a 5 percent
rate.
|
Credicorp´s
Bolivian subsidiaries are subject to corporate taxation on income under the
Bolivian Tax system. The statutory income tax rate is 25
percent.
ASHC and
its Subsidiaries are not subject to taxes in the Cayman Islands or
Panama. For the three years ended December 31, 2009, 2008 and 2007,
no taxable income was generated from its operations in the United States of
America.
The
reconciliation between the statutory income tax rate and the effective tax rate
for the Group is as follows:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Peruvian
statutory income tax rate
|
|
|
30.00 |
|
|
|
30.00 |
|
|
|
30.00 |
|
Increase
(decrease) in the statutory tax rate due to:
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) Increase
arising from net income of subsidiaries not domiciled in
Peru
|
|
|
0.26 |
|
|
|
4.39 |
|
|
|
0.46 |
|
(ii)
Non-taxable income, net
|
|
|
(3.98 |
) |
|
|
(14.90 |
) |
|
|
(5.76 |
) |
(iii)
Translation results not considered for tax purposes
|
|
|
(4.74 |
) |
|
|
3.38 |
|
|
|
(3.15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
income tax rate
|
|
|
21.54 |
|
|
|
22.87 |
|
|
|
21.55 |
|
Notes to the consolidated
financial statements (continued)
|
(b)
|
Income
tax expense as of December 31, 2009, 2008 and 2007
comprises:
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
Current
-
|
|
|
|
|
|
|
|
|
|
In
Peru
|
|
|
143,925 |
|
|
|
110,365 |
|
|
|
114,496 |
|
In
other countries
|
|
|
3,127 |
|
|
|
3,537 |
|
|
|
2,712 |
|
|
|
|
147,052 |
|
|
|
113,902 |
|
|
|
117,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
-
|
|
|
|
|
|
|
|
|
|
|
|
|
In
Peru
|
|
|
(8,552 |
) |
|
|
(4,394 |
) |
|
|
(14,921 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
138,500 |
|
|
|
109,508 |
|
|
|
102,287 |
|
The
deferred income tax has been calculated on all temporary differences considering
an income tax rate of 30 percent.
|
(c)
|
The
following table presents a summary of the Group’s deferred income
tax:
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Allowance
for loan losses, net
|
|
|
40,830 |
|
|
|
28,337 |
|
Share-based
compensation rights provision
|
|
|
14,539 |
|
|
|
11,578 |
|
Reserve
for sundry risks, net
|
|
|
11,369 |
|
|
|
9,709 |
|
Non-accrued
interest
|
|
|
1,763 |
|
|
|
1,713 |
|
Tax
loss carry-forward –PPS
|
|
|
251 |
|
|
|
6,013 |
|
Other
|
|
|
15,318 |
|
|
|
9,823 |
|
Deferred
income tax asset
|
|
|
84,070 |
|
|
|
67,173 |
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Unrealized
net gains on investments
|
|
|
(28,771 |
) |
|
|
(13,494 |
) |
Intangibles
assets, net
|
|
|
(24,960 |
) |
|
|
(23,128 |
) |
Deferred
commissions
|
|
|
(7,996 |
) |
|
|
(6,926 |
) |
Indexed
certificates
|
|
|
(7,388 |
) |
|
|
(815 |
) |
Leasing
operations, net
|
|
|
(2,303 |
) |
|
|
(1,862 |
) |
Gain
for difference tax exchange
|
|
|
(1,434 |
) |
|
|
(5,502 |
) |
Other
|
|
|
(16,554 |
) |
|
|
(14,406 |
) |
Deferred
income tax liability
|
|
|
(89,406 |
) |
|
|
(66,133 |
) |
|
|
|
|
|
|
|
|
|
Net
deferred income tax asset (liability)
|
|
|
(5,336 |
) |
|
|
1,040 |
|
Notes to the
consolidated financial statements (continued)
Credicorp
and its subsidiaries have recorded a deferred income tax as part of the equity
caption “Other reserves” for US$14.1, US$19.6, and US$10.1 million,
as of December 31, 2009, 2008, and 2007, respectively, related to the income tax
effects of unrealized gains and losses on investments available for sale and
cash flow hedges. Likewise, the Group recognized the deferred tax
liability arising from the acquisition of Edyficar (Note 2) and AFP Unión Vida
(year 2006) for approximately US$24.3 million as of December 31, 2009 (US$23.4
million as of December 31, 2008).
|
(d)
|
The
Peruvian Tax Authority has the right to review and, if necessary, amend
the annual tax returns of the Peruvian subsidiaries up to four years after
their filing. BCP’s tax returns for years 2001-2005 and PPS’s
tax returns for years 2001-2006, were reviewed by the Tax Authority; no
significant additional taxes arose from said
reviews. Management of each subsidiary has filed an appeal in
the applicable cases.
|
The
annual tax returns 2006 to 2008 for BCP and 2007 to 2008 for PPS, are pending
review. Any additional tax arising as a result of the Tax Authority
review will be charged to income in the year when such additional tax is
determined. At present, it is not possible to estimate the
adjustments that the Tax Authority may determine; however, in Management’s
opinion, it is not expected that any additional tax will be determined in
amounts considered significant to the consolidated financial statements as of
December 31, 2009 and 2008.
18.
|
Share-based
compensation plans
|
|
(a)
|
Stock
appreciation rights -
|
As
indicated in note 3(w), Credicorp has granted stock appreciation rights (SARs)
to certain key employees who have at least one year serving Credicorp or any of
its subsidiaries. At the grant date and in each one of the subsequent
three years, the granted SARs may be exercised up to 25 percent of all SARs
granted in the plan. The SARs expire up to 2014.
Notes to the consolidated financial
statements (continued)
The
number of outstanding SARs and their exercise prices are as
follows:
Year of
Issuance
|
|
Number of outstanding SARs
issued as of December 31
|
|
|
Number of Vested SARs
as of December 31
|
|
|
Exercise price
|
|
|
|
2009
|
|
|
|
2008(*)
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2001
|
|
|
- |
|
|
|
60,000 |
|
|
|
- |
|
|
|
60,000 |
|
|
|
4.30 |
|
|
|
4.80 |
|
2002
|
|
|
52,500 |
|
|
|
60,000 |
|
|
|
52,500 |
|
|
|
60,000 |
|
|
|
5.98 |
|
|
|
6.48 |
|
2003
|
|
|
96,900 |
|
|
|
134,900 |
|
|
|
96,900 |
|
|
|
134,900 |
|
|
|
7.17 |
|
|
|
7.67 |
|
2004
|
|
|
118,750 |
|
|
|
185,950 |
|
|
|
118,750 |
|
|
|
185,950 |
|
|
|
9.99 |
|
|
|
10.49 |
|
2005
|
|
|
155,000 |
|
|
|
241,700 |
|
|
|
155,000 |
|
|
|
241,700 |
|
|
|
15.00 |
|
|
|
15.50 |
|
2006
|
|
|
226,250 |
|
|
|
362,800 |
|
|
|
226,250 |
|
|
|
327,784 |
|
|
|
24.32 |
|
|
|
24.82 |
|
2007
|
|
|
235,785 |
|
|
|
513,125 |
|
|
|
214,831 |
|
|
|
320,859 |
|
|
|
24.32 |
|
|
|
48.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
262,278 |
|
|
|
656,750 |
|
|
|
174,045 |
|
|
|
286,625 |
|
|
|
24.32 |
|
|
|
72.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,147,463 |
|
|
|
2,215,225 |
|
|
|
1,038,276 |
|
|
|
1,617,818 |
|
|
|
|
|
|
|
|
|
|
(*)
|
On
April 2009, the number of outstanding SARs and their exercise prices were
modified; these changes did not have an impact on the recorded liability.
Also, since that date, no more SARs are granted and a new supplementary
plan was implemented to benefit the same employees in the form of stock
awards, see (b).
|
Credicorp’s
Management has estimated the SARs´ fair value as of December 31, 2009 and 2008,
using the binomial option pricing model, considering the following market
information:
Key
assumptions
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Expected
volatility
|
|
|
37.48 |
% |
|
|
34.98 |
% |
Risk
free interest rate
|
|
|
4.23 |
% |
|
|
6.25 |
% |
Expected
lifetime
|
|
3.93
years
|
|
|
4.84
years
|
|
Quoted
price of Credicorp shares at year-end
|
|
US$ |
77.02 |
|
|
US$ |
49.96 |
|
The
expected life of the SARs is based on historical data and current expectations
and is not necessarily indicative of exercise patterns that may occur. The
expected volatility reflects the assumption that the historical volatility over
a period similar to the life of the SARs is indicative of future trends, which
may also not necessarily be the actual outcome.
Notes to the consolidated financial
statements (continued)
The
movement of SARs for the years ended December 31, 2009 and 2008 is as
follows:
|
|
2009
|
|
|
2008
|
|
|
|
Outstanding
SARs
|
|
|
Vested
SARs
|
|
|
Outstanding
SARs
|
|
|
Vested
SARs
|
|
|
|
Number
|
|
|
Number
|
|
|
Amount
|
|
|
Number
|
|
|
Number
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1st
|
|
|
2,215,225 |
|
|
|
1,617,818 |
|
|
|
42,987 |
|
|
|
2,134,650 |
|
|
|
1,537,119 |
|
|
|
89,602 |
|
SARs
modification
|
|
|
(451,143 |
) |
|
|
(451,143 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Granted
and vested
|
|
|
- |
|
|
|
366,845 |
|
|
|
19,333 |
|
|
|
665,500 |
|
|
|
576,874 |
|
|
|
9,498 |
|
Exercised
|
|
|
(495,244 |
) |
|
|
(495,244 |
) |
|
|
(17,761 |
) |
|
|
(496,175 |
) |
|
|
(496,175 |
) |
|
|
(19,734 |
) |
Decrease
|
|
|
(121,375 |
) |
|
|
- |
|
|
|
- |
|
|
|
(88,750 |
) |
|
|
- |
|
|
|
- |
|
Increase
(decrease) in the option fair value
|
|
|
- |
|
|
|
- |
|
|
|
15,929 |
|
|
|
- |
|
|
|
- |
|
|
|
(36,379 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31
|
|
|
1,147,463 |
|
|
|
1,038,276 |
|
|
|
60,488 |
|
|
|
2,215,225 |
|
|
|
1,617,818 |
|
|
|
42,987 |
|
Credicorp
assumes the payment of the related income tax on behalf of its employees, which
corresponds to 30 percent of the benefit. Credicorp estimates said
income tax over the basis of the liability recorded for the vested
benefits.
The
liabilities, including the above mentioned income tax, recorded for this plan
are included in the consolidated statements of financial position caption “Other
liabilities – Payroll taxes, salaries and other personnel expenses”, note 11(a),
and the expenses in the consolidated income statement caption “Salaries and
employees benefits”. In 2009, 2008 and 2007, SARs prices were
modified and informed to the Group’s employees.
During
2009, 2008 and 2007, the Group signed several contracts by which it acquired
certificates linked to the yield of Credicorp’s shares, see note
7(b).
|
(b)
|
Stock
awards (“equity-settled
transaction”)
|
Under
this new plan, Credicorp granted approximately 227,000 of its own shares to the
plan beneficiaries. Shares granted will vest up to 33.3 percent of
all granted shares in each one of the subsequent three years to the grant date
(April 28, 2009).
Notes to the consolidated financial
statements (continued)
The fair
value of stock awards granted was estimated at the grant date using a binomial
pricing model with similar key assumptions as those used for the valuation of
SARs (see paragraph (a) above), taking into account the terms and conditions
upon which the shares were granted. As a result, the total fair value
of the stocks awarded at the grant date amounted to US$11.5
million.
As of
December 31, 2009, the number of vested stock awards amounts to 104,042 shares,
and the recognized expense amounts to US$5.8 million for the year
2009. Credicorp assumes the payment of the related income tax on
behalf of employees, which corresponds to 30 percent of the
benefit. Credicorp estimates said income tax over the basis of the
fair value of the shares granted at the grant date.
19.
|
Off-balance
sheet accounts
|
|
(a)
|
This
item is made up as follows:
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Contingent
credits - indirect loans (b)
|
|
|
|
|
|
|
Guarantees
and standby letters
|
|
|
2,108,761 |
|
|
|
1,506,506 |
|
Import
and export letters of credit
|
|
|
419,374 |
|
|
|
249,396 |
|
|
|
|
2,528,135 |
|
|
|
1,755,902 |
|
|
|
|
|
|
|
|
|
|
Responsibilities
under credit lines agreements (d)
|
|
|
1,557,674 |
|
|
|
1,234,964 |
|
Forward
currency contracts - sell (c)
|
|
|
1,303,588 |
|
|
|
1,552,917 |
|
Forward
currency contracts - buy (c)
|
|
|
(1,381,973 |
) |
|
|
(925,317 |
) |
Options
|
|
|
24,374 |
|
|
|
- |
|
Swaps
Contracts (c)
|
|
|
|
|
|
|
|
|
Interest
rate swaps
|
|
|
2,161,613 |
|
|
|
2,160,390 |
|
Currency
swaps
|
|
|
435,518 |
|
|
|
192,899 |
|
Cross
currency swaps
|
|
|
558,882 |
|
|
|
317,043 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,187,811 |
|
|
|
6,288,798 |
|
|
(b)
|
In
the normal course of its business, the Group’s banking subsidiaries are
party to transactions with off-balance sheet risk. These
transactions expose them to credit risk in addition to the amounts
recognized in the consolidated statements of financial
position.
|
Notes to the consolidated financial
statements (continued)
Credit
risk for off-balance sheet financial instruments is defined as the possibility
of sustaining a loss because any other party to a financial instrument fails to
perform in accordance with the terms of the contract. The exposures to losses
are represented by the contractual amounts specified in the related contracts.
The Group applies the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments (note 6(a)), including
the requirement to obtain collateral when it is deemed necessary. Collateral
held varies, but may include deposits in financial institutions, securities or
other assets. Many of the contingent transactions are expected to expire without
any performance being required; therefore, the total committed amounts do not
necessarily represent future cash requirements.
|
(c)
|
As
explained in note 11(b), as of December 31, 2009 and 2008, Credicorp has
signed different contracts related to derivative financial instruments as
follows:
|
Currency
forwards are commitments to buy or sell currency at a future date at a
contracted price. Risk arises from the possibility that the
counter-party to the transaction does not perform as agreed and from the changes
in the prices of the underlying currencies.
Interest
rate and currency swaps are derivatives contracts where counter parties exchange
variable interest rates for fixed interest rates or different currencies,
respectively, in the terms and conditions established at the contract
inception. The risk arises each time the projected level of the
variable rate during the term of the contract is higher than the swap rate, as
well as from non-compliance with contractual terms by one of the
parties.
Cross
currency swap derivative contract involves the exchange of interest payments
based on two different currency principal balances and reference interest rate,
generally also includes the exchange of principal amounts at the start and / or
end of the contract.
|
(d)
|
Responsibilities
under credit lines agreements include credit lines and other consumer
loans facilities (credit card) and are cancelable upon notification to the
client.
|
Notes to the consolidated financial
statements (continued)
20.
|
Interest
and dividend income and interest
expenses
|
These
items are made up as follow:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
Interest
and dividend income
|
|
|
|
|
|
|
|
|
|
Interest
on loans
|
|
|
1,062,046 |
|
|
|
963,940 |
|
|
|
701,471 |
|
Interest
on investments available-for-sale
|
|
|
183,309 |
|
|
|
296,853 |
|
|
|
228,473 |
|
Interest
on due from banks
|
|
|
15,918 |
|
|
|
75,266 |
|
|
|
105,817 |
|
Dividends
from investments available-for-sale and trading securities
|
|
|
9,715 |
|
|
|
12,189 |
|
|
|
8,870 |
|
Interest
on trading securities
|
|
|
3,320 |
|
|
|
1,168 |
|
|
|
3,289 |
|
Other
interest income
|
|
|
38,617 |
|
|
|
33,428 |
|
|
|
17,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,312,925 |
|
|
|
1,382,844 |
|
|
|
1,065,339 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
on deposits and obligations
|
|
|
(226,875 |
) |
|
|
(360,238 |
) |
|
|
(295,750 |
) |
Interest
on bonds and subordinated notes issued
|
|
|
(66,993 |
) |
|
|
(51,756 |
) |
|
|
(33,592 |
) |
Interest
on due to banks and correspondents and borrowed funds
|
|
|
(51,654 |
) |
|
|
(104,818 |
) |
|
|
(83,070 |
) |
Loss
from hedging derivatives instruments
|
|
|
(10,593 |
) |
|
|
(502 |
) |
|
|
- |
|
Other
interest expenses
|
|
|
(64,449 |
) |
|
|
(44,303 |
) |
|
|
(18,953 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
(420,564 |
) |
|
|
(561,617 |
) |
|
|
(431,365 |
) |
During
2009, 2008 and 2007, the interest income accrued on impaired financial
instrument recognized in the consolidated income statement amounted to US$5.0,
US$4.7 and US$3.5 million, respectively.
Notes to the consolidated financial
statements (continued)
21.
|
Banking
services commissions
|
This item
is made up as follows:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
Maintenance
of accounts and transfers and credit and debit card
services
|
|
|
196,642 |
|
|
|
180,512 |
|
|
|
152,626 |
|
Funds
management
|
|
|
100,160 |
|
|
|
102,760 |
|
|
|
83,726 |
|
Collection
services
|
|
|
42,841 |
|
|
|
26,795 |
|
|
|
27,163 |
|
Contingent
credits
|
|
|
33,339 |
|
|
|
30,174 |
|
|
|
23,819 |
|
Commissions
for banking services
|
|
|
14,657 |
|
|
|
12,851 |
|
|
|
9,468 |
|
Brokerage
and custody services
|
|
|
10,130 |
|
|
|
10,075 |
|
|
|
13,708 |
|
Other
|
|
|
39,050 |
|
|
|
31,080 |
|
|
|
14,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
436,819 |
|
|
|
394,247 |
|
|
|
324,761 |
|
This item
is made up as follows:
|
|
Gross
premiums (*)
|
|
|
Premiums
ceded to
reinsurers, net
(**)
|
|
|
Assumed
from other
companies, net
|
|
|
Net premiums
earned
|
|
|
Percentage
of assumed net
premiums
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life
insurance
|
|
|
121,449 |
|
|
|
- |
|
|
|
- |
|
|
|
121,449 |
|
|
|
- |
|
Health
insurance
|
|
|
174,396 |
|
|
|
(2,536 |
) |
|
|
2,967 |
|
|
|
174,827 |
|
|
|
1.70 |
|
General
insurance
|
|
|
232,369 |
|
|
|
(110,613 |
) |
|
|
6,650 |
|
|
|
128,406 |
|
|
|
5.18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
528,214 |
|
|
|
(113,149 |
) |
|
|
9,617 |
|
|
|
424,682 |
|
|
|
2.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life
insurance
|
|
|
110,730 |
|
|
|
(2,484 |
) |
|
|
6 |
|
|
|
108,252 |
|
|
|
- |
|
Health
insurance
|
|
|
169,410 |
|
|
|
(2,692 |
) |
|
|
- |
|
|
|
166,718 |
|
|
|
- |
|
General
insurance
|
|
|
218,563 |
|
|
|
(105,431 |
) |
|
|
5,801 |
|
|
|
118,933 |
|
|
|
4.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
498,703 |
|
|
|
(110,607 |
) |
|
|
5,807 |
|
|
|
393,903 |
|
|
|
1.47 |
|
Notes to the consolidated financial
statements (continued)
|
|
Gross
premiums (*)
|
|
|
Premiums
ceded to
reinsurers, net
(**)
|
|
|
Assumed
from other
companies, net
|
|
|
Net premiums
earned
|
|
|
Percentage
of assumed net
premiums
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life
insurance
|
|
|
89,598 |
|
|
|
(2,658 |
) |
|
|
1,408 |
|
|
|
88,348 |
|
|
|
1.59 |
|
Health
insurance
|
|
|
129,306 |
|
|
|
(2,488 |
) |
|
|
116 |
|
|
|
126,934 |
|
|
|
0.09 |
|
General
insurance
|
|
|
146,331 |
|
|
|
(71,759 |
) |
|
|
7,418 |
|
|
|
81,990 |
|
|
|
9.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
365,235 |
|
|
|
(76,905 |
) |
|
|
8,942 |
|
|
|
297,272 |
|
|
|
3.01 |
|
|
(*)
|
Includes
the annual variation of the technical and unearned premiums
reserves.
|
|
(**)
|
“Premiums
ceded to reinsurers, net” include:
|
|
(i)
|
US$20.8
million for non- proportional automatic contracts (excess of loss)
(US$22.6 million in the year 2008),
|
|
(ii)
|
US$4.0
million for reinstallation premiums (US$3.7 million in the year 2008)
and
|
|
(iii)
|
US$72.9
million for facultative contracts and US$15.4 for not accrual premiums
ceded reserves (US$85.4 y US$(1.1) million in the year
2008).
|
23.
|
Net
claims incurred for life, general and health insurance
contracts
|
This item
is made up as follows:
|
|
2009
|
|
|
|
Life insurance
|
|
|
General insurance
|
|
|
Health insurance
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
insurance claims
|
|
|
80,971 |
|
|
|
108,397 |
|
|
|
148,985 |
|
|
|
338,353 |
|
Ceded
claims
|
|
|
(1,762 |
) |
|
|
(49,149 |
) |
|
|
(984 |
) |
|
|
(51,895 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
insurance claims
|
|
|
79,209 |
|
|
|
59,248 |
|
|
|
148,001 |
|
|
|
286,458 |
|
Notes to the consolidated financial
statements (continued)
|
|
2008
|
|
|
|
Life insurance
|
|
|
General insurance
|
|
|
Health insurance
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
insurance claims
|
|
|
88,059 |
|
|
|
163,251 |
|
|
|
155,387 |
|
|
|
406,697 |
|
Ceded
claims
|
|
|
(1,693 |
) |
|
|
(61,361 |
) |
|
|
(1,733 |
) |
|
|
(64,787 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
insurance claims
|
|
|
86,366 |
|
|
|
101,890 |
|
|
|
153,654 |
|
|
|
341,910 |
|
|
|
2007
|
|
|
|
Life insurance
|
|
|
General insurance
|
|
|
Health
insurance
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
insurance claims
|
|
|
63,744 |
|
|
|
152,351 |
|
|
|
108,767 |
|
|
|
324,862 |
|
Ceded
claims
|
|
|
(52 |
) |
|
|
(84,662 |
) |
|
|
(1,548 |
) |
|
|
(86,262 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
insurance claims
|
|
|
63,692 |
|
|
|
67,689 |
|
|
|
107,219 |
|
|
|
238,600 |
|
24.
|
Other
income and expenses
|
These
items are made up as follow:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
|
|
|
|
|
|
|
Recoveries
of other accounts receivable and other assets
|
|
|
8,520 |
|
|
|
2,859 |
|
|
|
3,113 |
|
Income
from the sale of seized assets
|
|
|
4,092 |
|
|
|
12,895 |
|
|
|
10,689 |
|
Real
estate rental income
|
|
|
4,035 |
|
|
|
7,743 |
|
|
|
3,519 |
|
Other
|
|
|
15,497 |
|
|
|
14,175 |
|
|
|
7,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income
|
|
|
32,144 |
|
|
|
37,672 |
|
|
|
24,934 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Commissions
from insurance activities
|
|
|
42,701 |
|
|
|
39,364 |
|
|
|
29,135 |
|
Provision
for sundry risks, note 11(d)
|
|
|
14,425 |
|
|
|
37,549 |
|
|
|
8,096 |
|
Sundry
technical insurance expenses
|
|
|
13,574 |
|
|
|
9,158 |
|
|
|
21,929 |
|
Provision
for other accounts receivables
|
|
|
9,590 |
|
|
|
3,288 |
|
|
|
2,836 |
|
Other
|
|
|
16,460 |
|
|
|
12,517 |
|
|
|
10,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other expenses
|
|
|
96,750 |
|
|
|
101,876 |
|
|
|
71,999 |
|
Notes to the consolidated financial
statements (continued)
The net
earnings per ordinary share has been determined over the net income attributable
to equity holders of Credicorp as follows:
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
Net
income attributable to equity holders of Credicorp (in thousands of U.S.
dollars)
|
|
|
469,785 |
|
|
|
357,756 |
|
|
|
350,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary
shares, note 16(a)
|
|
|
94,382,317 |
|
|
|
94,382,317 |
|
|
|
94,382,317 |
|
Less
- treasury shares, note 16(b)
|
|
|
(14,620,842 |
) |
|
|
(14,620,842 |
) |
|
|
(14,620,842 |
) |
Acquisition of
treasury shares
|
|
|
(170,250 |
) |
|
|
- |
|
|
|
- |
|
Weighted
average number of ordinary shares for basic earnings
|
|
|
79,591,225 |
|
|
|
79,761,475 |
|
|
|
79,761,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus
- effect of dilution:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
awards
|
|
|
72,243 |
|
|
|
- |
|
|
|
- |
|
Weighted
average number of ordinary shares adjusted for the effect of
dilution
|
|
|
79,663,468 |
|
|
|
79,761,475 |
|
|
|
79,761,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share (in U.S. Dollars)
|
|
|
5.90 |
|
|
|
4.49 |
|
|
|
4.40 |
|
Diluted
earnings per share (in U.S. Dollars)
|
|
|
5.90 |
|
|
|
4.49 |
|
|
|
4.40 |
|
For
management purposes, the Group is organized into four operating segments based
on products and services as follows:
Banking:
Principally
handling loans, credit facilities, deposits and current accounts, and providing
investment banking services, including corporate finance, both for corporate and
institutional customers. Furthermore, handling deposits consumer
loans and credit cards facilities for individual customers.
Insurance:
Including
commercial property, transportation and marine hull, automobile, life, health
and pension fund underwriting insurance.
Pension
funds:
Providing
private pension fund management services to contributors.
Notes to the consolidated financial
statements (continued)
Brokerage
and other:
Including
the structuring and placement of primary market issues and the execution and
trading of secondary market transactions. In addition, offers local
securitization structuring to corporate entities, management of mutual funds,
and other services.
Certain
operating segments have been aggregated to form the above reportable operating
segments.
The Group
monitors the operating results of its business units separately for the purpose
of making decisions about resource allocation and performance
assessment. Segment performance is evaluated based on operating
profit or loss and is measured consistently with operating profit or loss in the
consolidated financial statements.
Transfer
prices between operating segments are on an arm’s length basis in a manner
similar to transactions with third parties.
No
revenue from transactions with a single external customer or counterparty
amounted to 10 percent or more of the Group’s total revenue in 2009, 2008, and
2007.
Notes to the consolidated financial
statements (continued)
|
(i)
|
The
following table presents income and certain asset information recording
the Group´s operating segments (in millions of U.S. Dollars) for the years
ended 31 December 2009, 2008, and
2007:
|
|
|
External
income
|
|
|
Income from
other
segments
|
|
|
Eliminations
|
|
|
Total
income (*)
|
|
|
Operating
income (**)
|
|
|
Provision for
loan losses, net
of
recoveries
|
|
|
Depreciation
and
amortization
|
|
|
Impairment of
available–for–sale investments
|
|
|
Income before
translation result
and income tax
|
|
|
Translation
result and
income tax
|
|
|
Net
income
|
|
|
Capital
expenditures,
intangible
assets and
goodwill
|
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking
|
|
|
1,820 |
|
|
|
66 |
|
|
|
(66 |
) |
|
|
1,820 |
|
|
|
831 |
|
|
|
(167 |
) |
|
|
(57 |
) |
|
|
(10 |
) |
|
|
502 |
|
|
|
(96 |
) |
|
|
406 |
|
|
|
163 |
|
|
|
20,120 |
|
Insurance
|
|
|
518 |
|
|
|
15 |
|
|
|
(15 |
) |
|
|
518 |
|
|
|
192 |
|
|
|
- |
|
|
|
(5 |
) |
|
|
- |
|
|
|
68 |
|
|
|
(4 |
) |
|
|
64 |
|
|
|
17 |
|
|
|
1,457 |
|
Pension
funds
|
|
|
80 |
|
|
|
- |
|
|
|
- |
|
|
|
80 |
|
|
|
- |
|
|
|
- |
|
|
|
(9 |
) |
|
|
- |
|
|
|
35 |
|
|
|
(10 |
) |
|
|
25 |
|
|
|
2 |
|
|
|
237 |
|
Brokerage
and other
|
|
|
40 |
|
|
|
65 |
|
|
|
(65 |
) |
|
|
40 |
|
|
|
8 |
|
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
25 |
|
|
|
(16 |
) |
|
|
9 |
|
|
|
1 |
|
|
|
214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
consolidated
|
|
|
2,458 |
|
|
|
146 |
|
|
|
(146 |
) |
|
|
2,458 |
|
|
|
1,031 |
|
|
|
(163 |
) |
|
|
(71 |
) |
|
|
(10 |
) |
|
|
630 |
|
|
|
(126 |
) |
|
|
504 |
|
|
|
183 |
|
|
|
22,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking
|
|
|
1,794 |
|
|
|
83 |
|
|
|
(83 |
) |
|
|
1,794 |
|
|
|
749 |
|
|
|
(53 |
) |
|
|
(44 |
) |
|
|
(44 |
) |
|
|
457 |
|
|
|
(114 |
) |
|
|
343 |
|
|
|
114 |
|
|
|
19,168 |
|
Insurance
|
|
|
454 |
|
|
|
15 |
|
|
|
(15 |
) |
|
|
454 |
|
|
|
116 |
|
|
|
- |
|
|
|
(4 |
) |
|
|
(11 |
) |
|
|
(6 |
) |
|
|
6 |
|
|
|
- |
|
|
|
14 |
|
|
|
1,231 |
|
Pension
funds
|
|
|
71 |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
71 |
|
|
|
- |
|
|
|
- |
|
|
|
(9 |
) |
|
|
- |
|
|
|
20 |
|
|
|
(5 |
) |
|
|
15 |
|
|
|
3 |
|
|
|
224 |
|
Brokerage
and other
|
|
|
50 |
|
|
|
62 |
|
|
|
(62 |
) |
|
|
50 |
|
|
|
8 |
|
|
|
4 |
|
|
|
- |
|
|
|
(5 |
) |
|
|
25 |
|
|
|
(14 |
) |
|
|
11 |
|
|
|
3 |
|
|
|
198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
consolidated
|
|
|
2,369 |
|
|
|
161 |
|
|
|
(161 |
) |
|
|
2,369 |
|
|
|
873 |
|
|
|
(49 |
) |
|
|
(57 |
) |
|
|
(60 |
) |
|
|
496 |
|
|
|
(127 |
) |
|
|
369 |
|
|
|
134 |
|
|
|
20,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Banking
|
|
|
1,407 |
|
|
|
65 |
|
|
|
(65 |
) |
|
|
1,407 |
|
|
|
578 |
|
|
|
(33 |
) |
|
|
(39 |
) |
|
|
(5 |
) |
|
|
391 |
|
|
|
(53 |
) |
|
|
338 |
|
|
|
76 |
|
|
|
16,245 |
|
Insurance
|
|
|
377 |
|
|
|
13 |
|
|
|
(13 |
) |
|
|
377 |
|
|
|
110 |
|
|
|
- |
|
|
|
(4 |
) |
|
|
- |
|
|
|
18 |
|
|
|
- |
|
|
|
18 |
|
|
|
4 |
|
|
|
1,138 |
|
Pension
funds
|
|
|
55 |
|
|
|
(4 |
) |
|
|
4 |
|
|
|
55 |
|
|
|
(1 |
) |
|
|
- |
|
|
|
(8 |
) |
|
|
- |
|
|
|
7 |
|
|
|
(1 |
) |
|
|
6 |
|
|
|
5 |
|
|
|
244 |
|
Brokerage
and other
|
|
|
47 |
|
|
|
7 |
|
|
|
(7 |
) |
|
|
47 |
|
|
|
6 |
|
|
|
5 |
|
|
|
- |
|
|
|
- |
|
|
|
24 |
|
|
|
(14 |
) |
|
|
10 |
|
|
|
3 |
|
|
|
79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
consolidated
|
|
|
1,886 |
|
|
|
81 |
|
|
|
(81 |
) |
|
|
1,886 |
|
|
|
693 |
|
|
|
(28 |
) |
|
|
(51 |
) |
|
|
(5 |
) |
|
|
440 |
|
|
|
(68 |
) |
|
|
372 |
|
|
|
88 |
|
|
|
17,706 |
|
Notes to the consolidated financial
statements (continued)
|
(ii)
|
The
following tables show the distribution of the Group’s external income,
operating income, and non-current assets all allocated based on the
location of the customers and assets respectively for the years ended 31
December 2009, 2008, and 2007:
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
Total
external
income (*)
|
|
|
Operating
income (**)
|
|
|
Non-current
assets (***)
|
|
|
Total
income (*)
|
|
|
Operating
income (**)
|
|
|
Non-current
assets (***)
|
|
|
Total
income (*)
|
|
|
Operating
income (**)
|
|
|
Non-current
assets (***)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peru
|
|
|
2,226 |
|
|
|
958 |
|
|
|
651 |
|
|
|
2,020 |
|
|
|
803 |
|
|
|
547 |
|
|
|
1,573 |
|
|
|
625 |
|
|
|
475 |
|
Panama
|
|
|
46 |
|
|
|
13 |
|
|
|
- |
|
|
|
204 |
|
|
|
19 |
|
|
|
- |
|
|
|
107 |
|
|
|
10 |
|
|
|
- |
|
Cayman
Islands
|
|
|
66 |
|
|
|
1 |
|
|
|
10 |
|
|
|
21 |
|
|
|
(4 |
) |
|
|
10 |
|
|
|
100 |
|
|
|
19 |
|
|
|
11 |
|
Bolivia
|
|
|
107 |
|
|
|
50 |
|
|
|
17 |
|
|
|
112 |
|
|
|
52 |
|
|
|
17 |
|
|
|
78 |
|
|
|
38 |
|
|
|
16 |
|
United
States of America
|
|
|
10 |
|
|
|
7 |
|
|
|
2 |
|
|
|
12 |
|
|
|
3 |
|
|
|
2 |
|
|
|
28 |
|
|
|
1 |
|
|
|
- |
|
Chile
|
|
|
3 |
|
|
|
2 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
consolidated
|
|
|
2,458 |
|
|
|
1,031 |
|
|
|
680 |
|
|
|
2,369 |
|
|
|
873 |
|
|
|
576 |
|
|
|
1,886 |
|
|
|
693 |
|
|
|
502 |
|
|
(*)
|
Includes
total interest and dividend income, other income and net premiums earned
from insurance activities.
|
|
(**)
|
Operating
income includes the net interest income from banking activities and the
amount of the net premiums earned, less insurance
claims.
|
|
(***)
|
Non-current
assets consist of property, furniture and equipment, intangible assets,
and goodwill, net.
|
Notes to the consolidated financial
statements (continued)
27.
|
Transactions
with related parties
|
|
(a)
|
The
Group’s consolidated financial statements as of December 31, 2009 and 2008
include transactions with related companies, the Board of Directors, the
Group’s key executives (defined as the Management of Credicorp’s ) and
enterprises which are controlled by these individuals through their
majority shareholding or their role as chairman or
CEO.
|
|
(b)
|
The
following table shows the main transactions with related parties as of
December 31, 2009 and 2008.
|
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Direct
loans
|
|
|
214,182 |
|
|
|
143,855 |
|
Investments
available-for-sale and trading securities
|
|
|
92,749 |
|
|
|
63,782 |
|
Deposits
|
|
|
82,051 |
|
|
|
34,669 |
|
Contingent
credits
|
|
|
20,122 |
|
|
|
23,574 |
|
Derivatives
at fair value
|
|
|
(283 |
) |
|
|
4,179 |
|
Interest
income related to loans – income
|
|
|
4,896 |
|
|
|
2,889 |
|
Interest
expense related to deposits - expense
|
|
|
1,680 |
|
|
|
2,669 |
|
Other
income
|
|
|
1,196 |
|
|
|
2,533 |
|
|
(c)
|
All
transactions with related parties are made in accordance with normal
market conditions available to other customers. As of December
31, 2009, direct loans to related companies are secured by collaterals,
and had maturities between January 2010 and November 2018 and accrued an
annual average interest rate of 5.50 percent (as of December 31, 2008 had
maturities between February 2009 and July 2017 and accrued an annual
average interest rate of 7.98 percent). Likewise, as of
December 31, 2009, the Group does not maintain an allowance for loan
losses to related parties (allowance for US$1.2 million as of December 31,
2008).
|
|
(d)
|
As
of December 31, 2009 and 2008, directors, officers and employees of the
Group have been involved, directly and indirectly, in credit transactions
with certain subsidiaries of the Group, as permitted by Peruvian Banking
and Insurance Law Nº26702, which regulates and limits certain transactions
with employees, directors and officers of a bank or an insurance
company. As of December 31, 2009 and 2008, direct loans to
employees, directors and key Management amounts to US$133.3 and US$116.3
million, respectively and are paid monthly and earn interest at market
rates.
|
There are
no loans to the Group’s directors and key personnel guaranteed with Credicorp or
any of its Subsidiaries’ shares.
Notes to the consolidated financial
statements (continued)
|
(e)
|
The
Group’s key executives’ compensation (including the related income taxes
assumed by the Group) as of December 31, 2009, 2008 and 2007, comprised
the following:
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
|
|
|
4,720 |
|
|
|
5,625 |
|
|
|
5,535 |
|
Share-based
compensation plans, note 18
|
|
|
4,717 |
|
|
|
27,362 |
|
|
|
27,113 |
|
Directors’
compensations
|
|
|
1,698 |
|
|
|
1,303 |
|
|
|
1,162 |
|
Other
|
|
|
1,415 |
|
|
|
8,209 |
|
|
|
12,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
12,550 |
|
|
|
42,499 |
|
|
|
46,757 |
|
|
(f)
|
As
of December 31, 2009 and 2008, the Group has participations in different
mutual funds and hedge funds managed by certain Group’s Subsidiaries,
which are classified as trading securities or Investments
available-for-sale for a total amount of US$62.4 million and US$94.7
million, respectively.
|
Notes to the consolidated financial
statements (continued)
28.
|
Financial
instruments classification
|
The
following are the carrying amounts of the financial assets and liabilities
captions in the consolidated statements of financial position, by categories as
defined under IAS 39:
|
|
As of December 31, 2009
|
|
|
As of December 31, 2008
|
|
|
|
Financial assets/liabilities designated
at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets/liabilities designated
at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held for trading
or hedging
|
|
|
At inception
|
|
|
Loans and
receivables
|
|
|
Investments
available-for-sale
|
|
|
Liabilities at
amortized cost
|
|
|
Total
|
|
|
Held for trading
|
|
|
At inception
|
|
|
Loans and
receivables
|
|
|
Investments
available-for-sale
|
|
|
Liabilities at amortized
cost
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
- |
|
|
|
- |
|
|
|
3,836,658 |
|
|
|
- |
|
|
|
- |
|
|
|
3,836,658 |
|
|
|
- |
|
|
|
- |
|
|
|
3,766,171 |
|
|
|
- |
|
|
|
- |
|
|
|
3,766,171 |
|
Trading
securities
|
|
|
70,774 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
70,774 |
|
|
|
36,084 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
36,084 |
|
Investments
available-for-sale
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,079,606 |
|
|
|
- |
|
|
|
5,079,606 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,950,754 |
|
|
|
- |
|
|
|
4,950,754 |
|
Loans,
net
|
|
|
- |
|
|
|
- |
|
|
|
11,231,280 |
|
|
|
- |
|
|
|
- |
|
|
|
11,231,280 |
|
|
|
- |
|
|
|
- |
|
|
|
10,322,041 |
|
|
|
- |
|
|
|
- |
|
|
|
10,322,041 |
|
Financial
assets designated at fair value through profit or loss
|
|
|
- |
|
|
|
135,670 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
135,670 |
|
|
|
- |
|
|
|
137,945 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
137,945 |
|
Premiums
and other policies receivable
|
|
|
- |
|
|
|
- |
|
|
|
121,338 |
|
|
|
- |
|
|
|
- |
|
|
|
121,338 |
|
|
|
- |
|
|
|
- |
|
|
|
111,561 |
|
|
|
- |
|
|
|
- |
|
|
|
111,561 |
|
Accounts
receivable from reinsurers and coinsurers
|
|
|
- |
|
|
|
- |
|
|
|
137,098 |
|
|
|
- |
|
|
|
- |
|
|
|
137,098 |
|
|
|
- |
|
|
|
- |
|
|
|
165,144 |
|
|
|
- |
|
|
|
- |
|
|
|
165,144 |
|
Due
from customers on acceptances
|
|
|
|
|
|
|
|
|
|
|
96,423 |
|
|
|
- |
|
|
|
- |
|
|
|
96,423 |
|
|
|
- |
|
|
|
- |
|
|
|
232,580 |
|
|
|
- |
|
|
|
- |
|
|
|
232,580 |
|
Other
assets, note 11
|
|
|
97,341 |
|
|
|
- |
|
|
|
322,881 |
|
|
|
- |
|
|
|
|
|
|
|
420,222 |
|
|
|
79,275 |
|
|
|
- |
|
|
|
247,465 |
|
|
|
- |
|
|
|
- |
|
|
|
326,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168,115 |
|
|
|
135,670 |
|
|
|
15,745,678 |
|
|
|
5,079,606 |
|
|
|
- |
|
|
|
21,129,069 |
|
|
|
115,359 |
|
|
|
137,945 |
|
|
|
14,844,962 |
|
|
|
4,950,754 |
|
|
|
- |
|
|
|
20,049,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
and obligation
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
14,091,828 |
|
|
|
14,091,828 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
13,950,437 |
|
|
|
13,950,437 |
|
Due
to banks and correspondents
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,167,438 |
|
|
|
1,167,438 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,179,991 |
|
|
|
1,179,991 |
|
Due
from customers on acceptances
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
96,423 |
|
|
|
96,423 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
232,580 |
|
|
|
232,580 |
|
Accounts
payable to reinsurers and coinsurers
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
48,009 |
|
|
|
48,009 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
55,841 |
|
|
|
55,841 |
|
Borrowed
funds
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,089,221 |
|
|
|
1,089,221 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,150,716 |
|
|
|
1,150,716 |
|
Bonds
and subordinated notes issued
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,287,022 |
|
|
|
1,287,022 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
785,230 |
|
|
|
785,230 |
|
Other
liabilities, note 11
|
|
|
167,849 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
428,740 |
|
|
|
596,589 |
|
|
|
256,792 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
318,320 |
|
|
|
575,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
167,849 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
18,208,681 |
|
|
|
18,376,530 |
|
|
|
256,792 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
17,673,115 |
|
|
|
17,929,907 |
|
Notes to the consolidated financial
statements (continued)
29.
|
Financial
risk management
|
By their
nature, the Group’s activities involve principally the use of financial
instruments, including derivatives. The Group accepts deposits from
customers at both fixed and floating rates, for various periods, and seeks to
earn above-average interest margins by investing these funds in high-quality
assets. The Group seeks to increase these margins by consolidating
short-term funds and lending for longer periods at higher rates, while
maintaining sufficient liquidity to meet all claims that might fall
due.
The Group
also seeks to raise its interest margins by obtaining above-average market
margins, net of allowances, through lending to commercial and retail borrowers
with a range of credit products. Such exposures involve not just
on-balance sheet loans and advances; the Group also enters into guarantees and
other commitments such as letters of credit and performance.
The Group
also trades in financial instruments where it takes positions in traded and
over-the-counter instruments, including derivatives, to take advantage of
short-term market movements in equities, bonds, currency and interest
rates.
In this
sense, risk is inherent in the Group’s activities but it is managed through a
process of ongoing identification, measurement and monitoring, subject to risk
limits and other controls. This process of risk management is
critical to the Group’s continuing profitability and each individual within the
Group is accountable for the risk exposures relating to his or her
responsibilities. The Group is exposed to operating risk, credit
risk, liquidity risk and market risk, the latter being subdivided into trading
and non-trading risks.
The
independent risk control process does not include business risks such as changes
in the environment, technology and industry. They are monitored
through the Group’s strategic planning process.
|
(a)
|
Risk
management structure-
|
The
Group’s Board of Directors and of each subsidiary is ultimately responsible for
identifying and controlling risks; however, there are separate independent
bodies in the major subsidiaries (BCP, PPS and ASHC) responsible for managing
and monitoring risks, as further explained bellow:
The Board
of Directors of each major subsidiary is responsible for the overall risk
management approach and responsible for the approval of the policies and
strategies currently in place. The Board provides written principles
for overall risk management, as well as written policies covering specific
areas, such as foreign exchange risk, interest rate risk, credit risk, use of
derivative financial instruments and non-derivative financial
instruments.
Notes to the consolidated financial
statements (continued)
|
(ii)
|
Risk
Management Committee
|
The Risk
Management Committee of each major subsidiary is responsible for the strategy
used for mitigating risks as well as setting forth the overall principles,
policies and limits for the different types of risks; it is also responsible for
monitoring fundamental risk issues and manages and monitors the relevant risk
decisions.
|
(iii)
|
Risk
Management Department
|
The Risk
Management Department of each major subsidiary is responsible for developing,
implementing and improving, on a continuous basis, the Group’s risk management
infrastructure by adopting and incorporating global best practices and following
established policies.
Risk
management processes throughout the Group are monitored by the internal audit
function, which examines both the adequacy of the procedures and the compliance
of them. Internal Audit discusses the results of all assessments with
Management, and reports its findings and recommendations to Credicorp’s Audit
Committee and Board of Directors.
|
(v)
|
Treasury
and Foreign Exchange Departments
|
Treasury
Department is responsible for managing the Group’s assets and liabilities and
the overall financial structure. It is also primarily responsible for
the Group’s management of funding and liquidity risks; as well as the
investment, forward and spot portfolios, assuming the related liquidity,
interest rate and exchange rate risks, under the policies and limits currently
effective.
|
(b)
|
Risk
measurement and reporting systems-
|
The
Group's risks are measured using a method which reflects both the expected loss
likely to arise in normal circumstances and unexpected losses, which are an
estimate of the ultimate actual loss based on statistical models. The
models make use of probabilities derived from historical experience, adjusted to
reflect the economic environment. The Group also runs worse case
scenarios that would arise in the event that extreme events which are unlikely
to occur do, in fact, occur.
Monitoring
and controlling risks are primarily performed based on limits established by the
Group. These limits reflect the business strategy and market
environment of the Group as well as the level of risk that the Group is willing
to accept. In addition, the Group monitors and measures the overall
risk bearing capacity in relation to the aggregate risk exposure across all risk
types and activities.
Notes to the consolidated financial
statements (continued)
Information
compiled from all the Group’s subsidiaries is examined and processed in order to
analyze, control and identify early risks. This information is
presented and explained to the Board of Directors, the Risk Management
Committee, and all relevant members of the Group. The report includes
aggregate credit exposure, credit metric forecasts, hold limit exceptions, VaR
(Value at Risk), liquidity ratios and risk profile changes. Senior
management assesses the fair value of the investments and the appropriateness of
the allowance for credit losses periodically.
As part
of its overall risk management, the Group uses derivatives and other instruments
to manage exposures resulting from changes in interest rates, foreign
currencies, equity risk and credit risk.
The risk
profile is assessed before entering into hedge transactions, which are
authorized by the appropriate level of seniority within the
Group. The effectiveness of hedges is assessed by the Risk Management
Department (based on economic considerations rather than the IFRS hedge
accounting regulations). The effectiveness of all the hedge
relationships is monitored by the unit monthly. In situations of
ineffectiveness, the Group will enter into a new hedge relationship to mitigate
risk on a continuous basis.
The Group
actively uses collateral to reduce its credit risks.
|
(d)
|
Excessive
risk concentration-
|
Concentrations
arise when a number of counterparties are engaged in similar business
activities, or activities in the same geographic region, or have similar
economic, political or other conditions. Concentrations indicate the
relative sensitivity of the Group’s performance to developments affecting a
particular industry or geographical location.
In order
to avoid excessive concentrations of risk, the Group’s policies and procedures
include specific guidelines to focus on maintaining a diversified
portfolio. Identified concentrations of credit risks are controlled
and managed accordingly.
|
(a)
|
The
Group takes on exposure to credit risk, which is the risk that a
counterparty will cause a financial loss by failing to discharge an
obligation. Credit risk is the most important risk for the
Group’s business; Management therefore carefully manages its exposure to
credit risk. Credit exposures arise principally in lending
activities that lead to loans, and investment activities that bring debt
securities and other bills into the Group’s asset
portfolio. There is also credit risk in off-balance sheet
financial instruments, such as contingent credits, which expose the Group
to similar risks to loans and these are mitigated by the same control
processes and policies. Likewise, credit risk arising from
derivative financial instruments is, at any time, limited to those with
positive fair values, as recorded in the consolidated statements of
financial position.
|
Notes to the consolidated financial
statements (continued)
Impairment
provisions are provided for losses that have been incurred at the date of the
consolidated statements of financial position. Significant changes in
the economy or in the particular situation of an industry segment that
represents a concentration in the Group’s portfolio could result in losses that
are different from those provided for at the date of the consolidated statements
of financial position.
The Group
structures the levels of credit risk it undertakes by placing limits on the
amount of risk accepted in relation to one borrower or groups of borrowers, and
to geographical and industry segments. Such risks are monitored on a
revolving basis and subject to a frequent review. Limits in the level
of credit risk by product, industry sector and by geographic segment are
approved by the Board of Directors.
Exposure
to credit risk is managed through regular analysis of the ability of borrowers
and potential borrowers to meet interest and principal repayment obligations and
by changing these lending limits where appropriate. Some other
specific control and mitigation measures are outlined below:
The Group
employs a range of policies and practices to mitigate credit
risk. The most traditional of these is the taking of security for
funds advances, which is common practice. The Group implements
guidelines on the acceptability of specific classes of collateral or credit risk
mitigation. The principal collateral types for loans and advances are
mortgages over residential properties; liens over business assets such as
premises, inventory and accounts receivable; liens over financial instruments
such as debt securities and equities.
Longer-term
finance and lending to corporate entities are generally secured; revolving
individual credit facilities are generally unsecured. In addition, in
order to minimize credit loss the Group will seek additional collateral from the
counterparty as soon as impairment indicators arise.
Collateral
held as security for financial assets other than loans is determined by the
nature of the instrument. Debt securities, treasury and other
eligible bills are generally unsecured, with the exception of asset-backed
securities and similar instruments, which are secured by portfolios of financial
instruments.
Management
monitors the market value of collateral, requests additional collateral in
accordance with the underlying agreement, and monitors the market value of
collateral obtained during its review of the adequacy of the allowance for
impairment losses. It is the Group’s policy to dispose of repossessed
properties in an orderly manner. The proceeds are used to reduce or
repay the outstanding claim. In general, the Group does not use
repossessed properties for its business own.
Notes to the consolidated financial
statements (continued)
The Group
maintains strict control limits on net open derivative positions (i.e., the
difference between purchase and sale contracts), by both amount and
term. The amount subject to credit risk is limited to the current
fair value of instruments that are favorable to the Group (i.e., an asset when
fair value is positive), which in relation to derivatives is only a small
fraction of the contract, or notional values used to express the volume of
instruments outstanding. This credit risk exposure is managed as part
of the overall lending limits with customers, together with potential exposures
from market movements. Collateral or other security is not usually
obtained for credit risk exposures on these instruments.
Settlement
risk arises in any situation where a payment in cash, securities or equities is
made in the expectation of a corresponding receipt in cash, securities or
equities. Daily settlement limits are established for each
counterparty in order to cover the aggregate of all settlement risk arising from
the Group’s market transactions on any single day.
|
(iii)
|
Credit-related
commitments
|
The
primary purpose of these instruments is to ensure that funds are available to a
customer as required. Guarantees and standby letters of credit have
the same credit risk as loans. Documentary and commercial letters of
credit - which are written undertakings by the Group on behalf of a customer
authorizing a third party to draw drafts on the Group up to a stipulated amount
under specific terms and conditions - are collateralized by the underlying
shipments of goods to which they relate and therefore have less risk than a
direct loan. The Group has no mandatory commitments to extend
credit.
In order
to manage credit risk, as part of the Risk Management Department of the Group,
see note 29(a), there is a Risk Management Service Unit whose major functions
are implementing methodologies and statistical models for measuring credit risk
exposures, developing and applying methodologies for the calculation of
risk-ratings, both at the corporate and business unit levels, performing
analysis of credit concentrations, verifying that credit exposures are within
the established limits and suggesting global risk exposures by economic sector,
time term, among others.
Also, a
Risk Assessment Committee has been established comprising 3 directors, the Chief
Executive Officer, the Chief Financial Officer, the Deputy Chief Executive
Officer and the Risk Management Department Manager. Each of the
financial indicators prepared by the Risk Management Service Unit are analyzed
by this committee on a quarterly basis to subsequently evaluate the policies,
procedures and limits currently effective at the Group to ensure that an
efficient and effective risk management is always in place.
Notes to the consolidated financial
statements (continued)
At the
same time, the Group has a Credit Division, which establishes the overall credit
policies for each and all the businesses in which the Group decides to take
part. These policies are set forth based on the guidelines
established by the Board of Directors and keeping in mind the statutory
financial laws and regulations. The main activities of this function
are to establish the client credit standards and guidelines (evaluation,
authorization and control), to follow the guidelines established by
the Board of Directors and General Management as well as those established by
governmental regulatory bodies, to review and authorize credit applications, up
to the limit within the scope of its responsibilities and to submit
to upper hierarchies those credit applications exceeding the established limits,
to monitor credit-granting activities within the different autonomous
bodies, among others.
|
(b)
|
The
maximum exposure to credit risk as of December 31, 2009 and 2008, before
the effect of mitigation through any collateral, is the book value of each
class of financial assets indicated in note 29.7 and the contingent
credits detailed in note 19(a).
|
Management
is confident in its ability to continue to control and sustain minimal exposure
of credit risk to the Group resulting from both its loan portfolio and
investments based on the following:
|
-
|
97
percent of the gross loan portfolio is categorized in the top two grades
of the internal rating system as of December 31, 2009 (98 percent as of
December 31, 2008);
|
|
-
|
94
percent of the loan portfolio is considered to be neither past due nor
impaired as of December 31, 2009 (95 percent as of December 31,
2008);
|
|
-
|
77
percent of the investments have at least investment credit rating (BBB- or
higher) or are debt securities issued by BCRP (not rated) as of December
31, 2009 (83 percent as of December 31, 2008);
and
|
|
-
|
18
percent and 55 percent of the cash and due from banks represent amounts
deposited in the Group’s vaults or in the BCRP (including overnight
operations), respectively, as of December 31, 2009 (17 percent and 52
percent, respectively, as of December 31,
2008).
|
|
(c)
|
Credit
risk management for loans -
|
Credicorp
classifies its loan portfolio into one of five risk categories, depending upon
the degree of risk of non-payment of each debtor. The grades used by
Credicorp are: (i) normal, (ii) potential problems, (iii) substandard, (iv)
doubtful and (v) loss, and have the following characteristics:
Notes to the consolidated financial
statements (continued)
Normal
(Class A): Debtors of commercial loans that fall into this category have
complied on a timely basis with their obligations and at the time of evaluation
do not present any reason for doubt with respect to repayment of interest and
principal on the agreed dates, and there is no reason to believe that the status
will change before the next evaluation. To place a loan in Class A, a
clear understanding of the use to be made of the funds and the origin of the
cash flows to be used by the debtor to repay the loan is
required. Consumer loans are categorized as Class A if payments are
current or up to eight days past-due. Residential mortgage loans
warrant Class A classification if payments are current or up to thirty days
past-due.
Potential
problems (Class B): Debtors of commercial loans included in this category are
those that at the time of the evaluation demonstrate certain deficiencies,
which, if not corrected on a timely manner, imply risks with respect to the
recovery of the loan. Certain common characteristics of loans or
credits in the category include: delays in loan payments which are promptly
covered, a general lack of information required to analyze the credit,
out-of-date financial information, temporary economic or financial imbalances on
the part of the debtor which could affect its ability to repay the loan, and
market conditions that could affect the economic sector in which the debtor is
active. Consumer loans are categorized as Class B if payments are
between 9 and 30 days late. Residential mortgage loans become Class B
when payments are between 31 and 90 days late.
Substandard
(Class C): Debtors of commercial loans included in this category demonstrate
serious financial weakness, often with operating results or available income
insufficient to cover financial obligations on agreed upon terms, with no
reasonable short-term prospects for a strengthening of their financial
capacity. Debtors demonstrating the same deficiencies that warrant
classification as category B warrant classification as Class C if those
deficiencies are such that if they are not corrected in the near term, they
could impede the recovery of principal and interest on the loan on the
originally agreed terms. In addition, commercial loans are classified
in this category when payments are between 61 and 120 days
late. Consumer loan are categorized as Class C if payments are
between 31 and 60 days late. Residential mortgage loans are
classified as Class C when payments are between 91 and 120 days
late.
Notes to the consolidated financial
statements (continued)
Doubtful
(Class D): Debtors of commercial loans included in this category present
characteristics that make doubtful the recovery of the loan. Although
the loan recovery is doubtful, if there is a reasonable possibility that in the
near future the creditworthiness of the debtor might improve, a Class D
categorization is appropriate. These credits are distinguished from
Class E credits by the requirement that the debtor remain in operation, generate
cash flow, and make payments on the loan, although at a rate less than that
specified in its contractual obligations. In addition, commercial
loans are classified in this category when payments are between 121 and 365 days
late. Consumer loans are categorized as Class D if payments are
between 61 and 120 days late. Residential mortgage loans are Class D
when payments are between 121 and 365 days late.
Loss
credits (Class E): Commercial loans or credits which are considered
unrecoverable or which for any other reason should not appear on Group’s books
as an asset based on the originally contracted terms fall into this
category. In addition, commercial loans are classified in this
category when payments are more than 365 days late. Consumer loans
are categorized as Class E if payments are more than 120 days
late. Residential mortgage loans are Class E when payments are more
than 365 days late.
The Group
reviews its loan portfolio on a continuing basis in order to assess the
completion and accuracy of its grades.
All loans
considered impaired (the ones classified as substandard, doubtful and loss) are
analyzed by the Group’s Management, which addresses impairment in two areas:
individually assessed allowances and collectively assessed allowances, as
follows:
|
-
|
Individually
assessed allowance -
|
The Group
determines the allowances appropriate for each individually significant loan or
advance on an individual basis. Items considered when determining
allowance amounts include the sustainability of the counterparty’s business
plan, its ability to improve performance once a financial difficulty has arisen,
projected receipts and the expected dividend payout should bankruptcy ensue, the
availability of other financial support including the realizable value of
collateral, and the timing of the expected cash flows. Impairment
losses are evaluated at each reporting date, unless unforeseen circumstances
require more careful attention.
Notes to the consolidated financial
statements (continued)
The
methodology and assumptions used for estimating future cash flows are reviewed
regularly by the Group in order to reduce any differences between loss estimates
and actual loss experience.
|
-
|
Collectively
assessed allowance -
|
Allowances
are assessed collectively for losses on loans and advances that are not
individually significant (including consumer and residential mortgages) and for
individually significant loans and advances where there is not yet objective
evidence of individual impairment (included in categories A and
B). Allowances are evaluated on each reporting date with each
portfolio receiving a separate review.
The
collective assessment takes account of impairment that is likely to be present
in the portfolio even though there is not yet objective evidence of the
impairment in an individual assessment. Impairment losses are
estimated by taking into consideration of the following information: historical
losses on the portfolio, current economic conditions, the approximate delay
between the time a loss is likely to have been incurred and the time it will be
identified as requiring an individually assessed impairment allowance, and
expected receipts and recoveries once impaired. Local management is
responsible for deciding the length of this period which can extend for as long
as one year. The impairment allowance is then reviewed by credit
Management to ensure alignment with the Group’s overall policy.
Financial
guarantees and letter of credit are assessed and a provision estimated following
a similar procedure as for loans.
In the
case of borrowers in countries where there is an increased risk of difficulties
in servicing external debt, an assessment of the political and economic
situation is made, and an additional country risk provision is
recorded.
When a
loan is uncollectible, it is written off against the related provision for loan
impairment. Such loans are written off after all the necessary
procedures have been completed and the amount of the loss has been
determined. Subsequent recoveries of amounts previously written off
decrease the amount of the provision for loan impairment in the consolidated
income statements.
Notes to the consolidated financial
statements (continued)
The
following is a summary of the direct loans classified in three major groups: i)
Loans neither past due nor impaired, comprising those direct loans having
presently no delinquency characteristics and related to clients ranked as normal
or potential problems; ii) Past due but not impaired loans comprising past due
loans of clients classified as normal or with potential problems and iii)
Impaired loans, or those past due loans of clients classified as
substandard, doubtful or loss; presented net of the provision for loan losses
for each of the loan grades:
|
|
As
of December 31, 2009
|
|
|
|
Commercial
loans
|
|
|
Residential
mortgage
loans
|
|
|
Consumer
loans
|
|
|
Total
|
|
|
%
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
Neither
past due nor impaired -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal
|
|
|
7,853,574 |
|
|
|
1,585,761 |
|
|
|
1,254,928 |
|
|
|
10,694,263 |
|
|
|
94 |
|
Potential
problem
|
|
|
321,864 |
|
|
|
26,962 |
|
|
|
11,437 |
|
|
|
360,263 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past
due but not impaired -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal
|
|
|
154,075 |
|
|
|
74,621 |
|
|
|
76,312 |
|
|
|
305,008 |
|
|
|
3 |
|
Potential
problem
|
|
|
36,525 |
|
|
|
17,690 |
|
|
|
18,091 |
|
|
|
72,306 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substandard
|
|
|
65,122 |
|
|
|
15,809 |
|
|
|
34,741 |
|
|
|
115,672 |
|
|
|
1 |
|
Doubtful
|
|
|
78,475 |
|
|
|
19,050 |
|
|
|
41,864 |
|
|
|
139,389 |
|
|
|
1 |
|
Loss
|
|
|
57,024 |
|
|
|
13,843 |
|
|
|
30,420 |
|
|
|
101,287 |
|
|
|
1 |
|
Gross
|
|
|
8,566,659 |
|
|
|
1,753,736 |
|
|
|
1,467,793 |
|
|
|
11,788,188 |
|
|
|
103 |
|
Less:
Allowance for loan losses
|
|
|
222,104 |
|
|
|
41,470 |
|
|
|
90,781 |
|
|
|
354,355 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total,
net
|
|
|
8,344,555 |
|
|
|
1,712,266 |
|
|
|
1,377,012 |
|
|
|
11,433,833 |
|
|
|
100 |
|
Notes to the consolidated financial
statements (continued)
|
|
As
of December 31, 2008
|
|
|
|
Commercial
loans
|
|
|
Residential
mortgage
loans
|
|
|
Consumer
loans
|
|
|
Total
|
|
|
%
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neither
past due nor impaired -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal
|
|
|
7,526,355 |
|
|
|
1,350,793 |
|
|
|
1,020,352 |
|
|
|
9,897,500 |
|
|
|
94 |
|
Potential
problem
|
|
|
214,040 |
|
|
|
18,348 |
|
|
|
8,932 |
|
|
|
241,320 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past
due but not impaired -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Normal
|
|
|
186,887 |
|
|
|
83,757 |
|
|
|
78,629 |
|
|
|
349,273 |
|
|
|
3 |
|
Potential
problem
|
|
|
14,231 |
|
|
|
387 |
|
|
|
1,027 |
|
|
|
15,645 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substandard
|
|
|
41,570 |
|
|
|
11,337 |
|
|
|
18,982 |
|
|
|
71,889 |
|
|
|
1 |
|
Doubtful
|
|
|
46,309 |
|
|
|
12,630 |
|
|
|
21,146 |
|
|
|
80,085 |
|
|
|
1 |
|
Loss
|
|
|
29,193 |
|
|
|
7,962 |
|
|
|
13,331 |
|
|
|
50,486 |
|
|
|
1 |
|
Gross
|
|
|
8,058,585 |
|
|
|
1,485,214 |
|
|
|
1,162,399 |
|
|
|
10,706,198 |
|
|
|
102 |
|
Less:
Allowance for loan losses
|
|
|
137,444 |
|
|
|
30,832 |
|
|
|
56,061 |
|
|
|
224,337 |
|
|
|
2 |
|
Total,
net
|
|
|
7,921,141 |
|
|
|
1,454,382 |
|
|
|
1,106,338 |
|
|
|
10,481,861 |
|
|
|
100 |
|
As of
December 31, 2009 and 2008, loans that are neither past-due nor impaired whose
terms have been renegotiated amounts to US$6.5 and US$10.3 million,
respectively.
As of
December 31, 2009 and 2008, loans amounting to approximately US$354.7 and
US$349.3 million, respectively, were past due for less than 30 days and were not
impaired.
Notes to the consolidated financial
statements (continued)
The
breakdown of the gross amount of impaired loans by class, along with the fair
value of related collateral and the amounts of their allowance for loan losses,
is as follows:
|
|
As
of December 31, 2009
|
|
|
|
Commercial
loans
|
|
|
Residential
mortgage
loans
|
|
|
Consumer
loans
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans
|
|
|
200,621 |
|
|
|
48,702 |
|
|
|
107,025 |
|
|
|
356,348 |
|
Fair
value of collateral
|
|
|
97,265 |
|
|
|
34,378 |
|
|
|
12,113 |
|
|
|
143,756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for loan losses
|
|
|
86,749 |
|
|
|
11,551 |
|
|
|
64,361 |
|
|
|
162,661 |
|
|
|
As of December 31, 2008
|
|
|
|
Commercial
loans
|
|
|
Residential
mortgage
loans
|
|
|
Consumer
loans
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired
loans
|
|
|
117,072 |
|
|
|
31,929 |
|
|
|
53,459 |
|
|
|
202,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
value of collateral
|
|
|
49,254 |
|
|
|
18,742 |
|
|
|
4,386 |
|
|
|
72,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for loan losses
|
|
|
50,782 |
|
|
|
11,395 |
|
|
|
29,722 |
|
|
|
91,899 |
|
|
(d)
|
Credit
risk management on investments in trading securities and
available-for-sale -
|
The Group
evaluates the credit risk identified of each of the financial instruments in
these categories, considering the risk rating granted to them by a risk rating
agency. For investments traded in Peru, the risk ratings use are
those provided by Apoyo & Asociados Internacionales S.A.C. (a Peruvian
rating agency authorized by the Peruvian government regulator and associated to
Fitch Rating) and for investments traded abroad, the risk-ratings used are those
provided by Standard & Poor’s. In the event any subsidiary use a
risk-rating prepared by any other risk rating agency, such risk-ratings are
standardized with those provided by the afore-mentioned institutions for
consolidation purposes.
Notes to the consolidated financial
statements (continued)
The
following table shows the analysis of the risk-rating of available-for-sale
investments, provided by the institutions referred to above:
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
|
US$(000)
|
|
|
%
|
|
|
US$(000)
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Instruments
rated in Peru and abroad
|
|
|
|
|
|
|
|
|
|
|
|
|
AAA
|
|
|
341,344 |
|
|
|
7 |
|
|
|
530,132 |
|
|
|
11 |
|
AA-
to AA+
|
|
|
283,103 |
|
|
|
6 |
|
|
|
165,050 |
|
|
|
3 |
|
A-
to A+
|
|
|
470,347 |
|
|
|
9 |
|
|
|
428,319 |
|
|
|
9 |
|
BBB-
to BBB+
|
|
|
1,284,826 |
|
|
|
25 |
|
|
|
785,250 |
|
|
|
16 |
|
BB-
to BB+
|
|
|
324,118 |
|
|
|
6 |
|
|
|
326,398 |
|
|
|
7 |
|
Lower
than B-
|
|
|
243,199 |
|
|
|
5 |
|
|
|
20,394 |
|
|
|
- |
|
Unrated
(*)
|
|
|
2,132,669 |
|
|
|
42 |
|
|
|
2,695,211 |
|
|
|
54 |
|
Total
|
|
|
5,079,606 |
|
|
|
100.0 |
|
|
|
4,950,754 |
|
|
|
100.0 |
|
|
(*)
|
As
of December 31, 2009, includes principally US$1,545.7 million of Peruvian
Central Bank Certificates of Deposit, which represent 30.43 percent of the
investments available-for-sale balance (US$2,209 million, which represent
44.62 percent as of December 31, 2008). It also includes
US$330.7 and US$102.1 million of listed and non-listed equity securities
and mutual funds, respectively (US$212.7 and US$96.9 million as of
December 31, 2008,
respectively).
|
Notes to the consolidated financial
statements (continued)
|
(e)
|
Concentration
of financial instruments exposed to credit
risk:
|
As of
December 31, 2009 and 2008, financial instruments with exposure to credit risk
were distributed considering the following economic sectors:
|
|
2009
|
|
|
2008
|
|
|
|
Designated at fair value through
profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
Designated at fair value through
profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Held
for trading and
hedging
|
|
|
At
inception
|
|
|
Loans
and
receivables
|
|
|
Investments
available-for-sale
|
|
|
Total
|
|
|
Held
for trading and
hedging
|
|
|
At
inception
|
|
|
Loans
and
receivables
|
|
|
Investments
available-for-sale
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Central
Reserve Bank of Perú
|
|
|
- |
|
|
|
- |
|
|
|
2,107,635 |
|
|
|
1,545,705 |
|
|
|
3,653,340 |
|
|
|
- |
|
|
|
- |
|
|
|
1,952,952 |
|
|
|
2,208,942 |
|
|
|
4,161,894 |
|
Financial
services
|
|
|
114,185 |
|
|
|
125,912 |
|
|
|
2,058,327 |
|
|
|
1,243,021 |
|
|
|
3,541,445 |
|
|
|
101,126 |
|
|
|
134,385 |
|
|
|
1,944,796 |
|
|
|
1,031,463 |
|
|
|
3,211,770 |
|
Government
and public administration
|
|
|
53,874 |
|
|
|
642 |
|
|
|
233,446 |
|
|
|
1,034,479 |
|
|
|
1,322,441 |
|
|
|
13,466 |
|
|
|
595 |
|
|
|
273,506 |
|
|
|
931,632 |
|
|
|
1,219,199 |
|
Manufacturing
|
|
|
4 |
|
|
|
2,161 |
|
|
|
2,462,733 |
|
|
|
266,048 |
|
|
|
2,730,946 |
|
|
|
44 |
|
|
|
507 |
|
|
|
2,536,277 |
|
|
|
156,418 |
|
|
|
2,693,246 |
|
Commerce
|
|
|
1 |
|
|
|
- |
|
|
|
1,282,188 |
|
|
|
68,740 |
|
|
|
1,350,929 |
|
|
|
5 |
|
|
|
- |
|
|
|
1,484,431 |
|
|
|
64,595 |
|
|
|
1,549,031 |
|
Mortgage
loans
|
|
|
- |
|
|
|
- |
|
|
|
1,673,089 |
|
|
|
- |
|
|
|
1,673,089 |
|
|
|
- |
|
|
|
- |
|
|
|
1,401,296 |
|
|
|
- |
|
|
|
1,401,296 |
|
Consumer
loans
|
|
|
- |
|
|
|
- |
|
|
|
1,402,422 |
|
|
|
- |
|
|
|
1,402,422 |
|
|
|
- |
|
|
|
- |
|
|
|
1,126,301 |
|
|
|
- |
|
|
|
1,126,301 |
|
Electricity,
gas and water
|
|
|
47 |
|
|
|
2,564 |
|
|
|
745,613 |
|
|
|
376,496 |
|
|
|
1,124,720 |
|
|
|
523 |
|
|
|
879 |
|
|
|
556,937 |
|
|
|
202,716 |
|
|
|
761,055 |
|
Communications,
storage and transportation
|
|
|
2 |
|
|
|
- |
|
|
|
554,944 |
|
|
|
154,305 |
|
|
|
709,251 |
|
|
|
- |
|
|
|
- |
|
|
|
632,895 |
|
|
|
117,103 |
|
|
|
749,998 |
|
Mining
|
|
|
2 |
|
|
|
3,781 |
|
|
|
667,970 |
|
|
|
109,351 |
|
|
|
781,104 |
|
|
|
130 |
|
|
|
1,058 |
|
|
|
660,855 |
|
|
|
77,358 |
|
|
|
739,401 |
|
Leaseholds
and real estate activities
|
|
|
- |
|
|
|
- |
|
|
|
468,229 |
|
|
|
49,401 |
|
|
|
517,630 |
|
|
|
- |
|
|
|
- |
|
|
|
608,651 |
|
|
|
47,321 |
|
|
|
655,972 |
|
Micro-business
loans
|
|
|
- |
|
|
|
- |
|
|
|
703,651 |
|
|
|
- |
|
|
|
703,651 |
|
|
|
- |
|
|
|
- |
|
|
|
619,680 |
|
|
|
- |
|
|
|
619,680 |
|
Community
services
|
|
|
- |
|
|
|
- |
|
|
|
322,429 |
|
|
|
- |
|
|
|
322,429 |
|
|
|
- |
|
|
|
- |
|
|
|
247,144 |
|
|
|
- |
|
|
|
247,144 |
|
Construction
|
|
|
- |
|
|
|
307 |
|
|
|
186,397 |
|
|
|
5,250 |
|
|
|
191,954 |
|
|
|
- |
|
|
|
57 |
|
|
|
236,163 |
|
|
|
2,226 |
|
|
|
238,446 |
|
Agriculture
|
|
|
- |
|
|
|
- |
|
|
|
269,882 |
|
|
|
8,002 |
|
|
|
277,884 |
|
|
|
- |
|
|
|
68 |
|
|
|
224,417 |
|
|
|
7,693 |
|
|
|
232,178 |
|
Education,
health and other services
|
|
|
|
|
|
|
|
|
|
|
151,569 |
|
|
|
119,006 |
|
|
|
270,575 |
|
|
|
- |
|
|
|
- |
|
|
|
127,670 |
|
|
|
29,699 |
|
|
|
157,369 |
|
Fishing
|
|
|
- |
|
|
|
- |
|
|
|
119,123 |
|
|
|
291 |
|
|
|
119,414 |
|
|
|
2 |
|
|
|
- |
|
|
|
80,277 |
|
|
|
159 |
|
|
|
80,438 |
|
Insurance
|
|
|
- |
|
|
|
- |
|
|
|
167,101 |
|
|
|
- |
|
|
|
167,101 |
|
|
|
- |
|
|
|
- |
|
|
|
27,430 |
|
|
|
- |
|
|
|
27,430 |
|
Other
|
|
|
- |
|
|
|
303 |
|
|
|
168,930 |
|
|
|
99,511 |
|
|
|
268,744 |
|
|
|
63 |
|
|
|
396 |
|
|
|
103,284 |
|
|
|
73,429 |
|
|
|
177,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
168,115 |
|
|
|
135,670 |
|
|
|
15,745,678 |
|
|
|
5,079,606 |
|
|
|
21,129,069 |
|
|
|
115,359 |
|
|
|
137,945 |
|
|
|
14,844,962 |
|
|
|
4,950,754 |
|
|
|
20,049,020 |
|
Notes to the consolidated financial
statements (continued)
As of
December 31, 2009 and 2008, the financial instruments with exposure to credit
risk were distributed by the following geographical areas:
|
|
2009
|
|
|
|
Designated at fair value through
profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Held for
trading and
hedging
|
|
|
At inception
|
|
|
Loans and
receivables
|
|
|
Investments
available-for-sale
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peru
|
|
|
133,292 |
|
|
|
11,231 |
|
|
|
13,749,305 |
|
|
|
3,156,355 |
|
|
|
17,050,183 |
|
United
States of America
|
|
|
23,596 |
|
|
|
123,570 |
|
|
|
806,511 |
|
|
|
943,922 |
|
|
|
1,897,599 |
|
Bolivia
|
|
|
21 |
|
|
|
- |
|
|
|
727,883 |
|
|
|
216,016 |
|
|
|
943,920 |
|
Europe
|
|
|
4,276 |
|
|
|
- |
|
|
|
154,131 |
|
|
|
122,527 |
|
|
|
280,934 |
|
Colombia
|
|
|
- |
|
|
|
- |
|
|
|
25,502 |
|
|
|
191,036 |
|
|
|
216,538 |
|
Chile
|
|
|
104 |
|
|
|
- |
|
|
|
45,457 |
|
|
|
165,856 |
|
|
|
211,417 |
|
Other
|
|
|
6,826 |
|
|
|
869 |
|
|
|
236,889 |
|
|
|
283,894 |
|
|
|
528,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
168,115 |
|
|
|
135,670 |
|
|
|
15,745,678 |
|
|
|
5,079,606 |
|
|
|
21,129,069 |
|
|
|
2008
|
|
|
|
Designated at fair value through
profit or loss
|
|
|
|
|
|
|
|
|
|
|
|
|
Held for trading
and hedging
|
|
|
At inception
|
|
|
Loans and
receivables
|
|
|
Investments
available-for-sale
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peru
|
|
|
113,015 |
|
|
|
4,497 |
|
|
|
12,565,873 |
|
|
|
3,566,716 |
|
|
|
16,250,101 |
|
United
States of America
|
|
|
109 |
|
|
|
132,722 |
|
|
|
871,859 |
|
|
|
678,093 |
|
|
|
1,682,783 |
|
Bolivia
|
|
|
2,224 |
|
|
|
- |
|
|
|
566,170 |
|
|
|
309,530 |
|
|
|
877,924 |
|
Europe
|
|
|
- |
|
|
|
- |
|
|
|
307,533 |
|
|
|
84,445 |
|
|
|
391,978 |
|
Chile
|
|
|
- |
|
|
|
- |
|
|
|
115,883 |
|
|
|
90,587 |
|
|
|
206,470 |
|
Colombia
|
|
|
- |
|
|
|
- |
|
|
|
101,173 |
|
|
|
72,178 |
|
|
|
173,351 |
|
Other
|
|
|
11 |
|
|
|
726 |
|
|
|
316,471 |
|
|
|
149,205 |
|
|
|
466,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
115,359 |
|
|
|
137,945 |
|
|
|
14,844,962 |
|
|
|
4,950,754 |
|
|
|
20,049,020 |
|
Notes to the consolidated financial
statements (continued)
The Group
takes on exposure to market risks, which is the risk that the fair value or
future cash flows of a financial instrument will fluctuate because of changes in
market prices. Market risks arise from open positions in interest
rates, currency, commodities and equity products; all of which are exposed to
general and specific market movements and changes in the level of volatility of
prices such as interest rates, credit spreads, foreign exchange rates and equity
prices. Due to the nature of the Group’s current activities,
commodity price risk is not applicable.
The Group
separates exposures to market risk into two groups: (i) those that arise from
value fluctuation of trading portfolios due to movements of market rates or
prices (Trading Book) and (ii) those that arise from changes in the structural
positions of non-trading portfolios due to movements of the interest rates,
prices and foreign exchange ratios (ALM Book).
Trading
portfolios include those liquid positions arising from market-making
transactions where the Group acts as principal with clients or with the
market. Non-trading portfolios consist of relatively illiquid
positions, mainly banking assets and liabilities (deposits and loans) and
non-trading investments (available-for-sale).
The risks
that trading portfolios face are managed through VaR historical simulation
techniques; while non-trading portfolios are managed using Asset Liability
Management (ALM).
The
trading book is made up of liquid investment instruments. The trading
book is characterized for having liquid positions in equities, bonds, foreign
currencies and derivatives. Some limits have been set in order to
control and monitor the risks undertaken. These risks arise from the
size of the positions and/or from the volatility of the risk factors embedded in
each financial instrument. Regular reports are prepared for the Risk
Management Committees and top management. The major measurement
technique used to measure and control market risk is Value at Risk
(VaR).
The Group
applies VaR to its trading portfolios to estimate the market risk of positions
held and the maximum losses that are expected, based upon a number of
assumptions for various changes in market conditions. The Risk
Management Committee set limits on the level of risk that may be accepted and
review of daily.
VaR is a
statistically-based estimate of the potential loss on the current portfolio from
adverse market movements. It expresses the “maximum” amount the Group
might lose, but only to a certain level of confidence (99
percent). There is therefore a specified statistical probability (1
percent) that actual loss could be greater than the VaR estimate. The
VaR model assumes a certain “holding period” until positions can be closed (1
day - 10 days). The time horizon used to calculate VaR is one day;
however, the one-day VAR is amplified to a 10-day time frame and calculated
multiplying the one-day VaR times the square root of 10 - results are presented
in the tables below. The assessment of past movements has been based
on historical one-year data. The Group applies these historical
changes in rates directly to its current positions (a method known as historical
simulation).
Notes to the consolidated financial
statements (continued)
The use
of this approach does not prevent losses outside of these limits in the event of
more significant market movements.
As of
December 31, 2009 and 2008, the Group’s VaR by type of asset was as follows:
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Equity
securities
|
|
|
2 |
|
|
|
55 |
|
Mutual
funds
|
|
|
- |
|
|
|
1,034 |
|
Fixed
income
|
|
|
1,142 |
|
|
|
1,116 |
|
Derivatives
|
|
|
2,541 |
|
|
|
- |
|
Consolidated
VaR by type of asset
|
|
|
2,269 |
|
|
|
1,604 |
|
As of
December 31, 2009 and 2008, the Group’s VaR by risk type is as follows:
|
|
2009
|
|
|
2008
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
Foreign
exchange risk
|
|
|
985 |
|
|
|
579 |
|
Interest
rate risk
|
|
|
1,802 |
|
|
|
1,063 |
|
Equity
risk
|
|
|
1 |
|
|
|
850 |
|
Consolidated
VaR by risk type
|
|
|
2,269 |
|
|
|
1,604 |
|
The
management of the risks associated with long-term and structural positions is
called Asset and Liability Management (ALM). Non-trading portfolios
which comprise the ALM Book are exposed to different sensitivities that can
bring about a deterioration in the value of the assets compared to its
liabilities and hence to a reduction of its net worth.
Notes to the consolidated financial
statements (continued)
Interest
rate risk arises from the possibility that changes in interest rates will affect
future cash flows or the fair values of financial instruments. Cash
flow interest rate risk is the risk that the future cash flows of a financial
instrument will fluctuate because of changes in market interest
rates. Fair value interest rate risk is the risk that the value of a
financial instrument will fluctuate because of changes in market interest
rates. The Group takes on exposure to the effects of fluctuations in
the prevailing levels of market interest rates on both its fair value and cash
flow risks. Interest margins may increase as a result of such changes
but may also decrease in the event that unexpected movements
arise. The Board sets limits on the level of mismatch of interest
rate re-pricing that may be undertaken, which is monitored daily by Treasury
Department.
Re-pricing
gap -
Gap
analysis comprises aggregating re-pricing timeframes into buckets and checking
if each bucket nets to zero. Different bucketing schemes might be
used. An interest rate gap is simply a positive or negative net
re-pricing timeframe for one of the buckets.
Notes to the consolidated financial
statements (continued)
The table
below summarizes the Group’s exposure to interest rate risks. It
includes the Group’s financial instruments at carrying amounts, categorized by
the earlier
of contractual re-pricing or maturity dates:
|
|
As of December 31, 2009
|
|
|
|
Up to 1 month
|
|
|
1 to 3 months
|
|
|
3 to 12 months
|
|
|
1 to 5 years
|
|
|
More than 5
years
|
|
|
Non-interest
bearing
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
2,745,587 |
|
|
|
70,616 |
|
|
|
81,969 |
|
|
|
- |
|
|
|
- |
|
|
|
938,486 |
|
|
|
3,836,658 |
|
Investments
|
|
|
494,937 |
|
|
|
1,009,295 |
|
|
|
1,009,704 |
|
|
|
1,254,765 |
|
|
|
928,562 |
|
|
|
453,117 |
|
|
|
5,150,380 |
|
Loans
|
|
|
1,739,632 |
|
|
|
3,144,271 |
|
|
|
2,142,219 |
|
|
|
3,176,243 |
|
|
|
1,028,915 |
|
|
|
- |
|
|
|
11,231,280 |
|
Assets
designated at fair value through profit or loss
|
|
|
- |
|
|
|
258 |
|
|
|
310 |
|
|
|
1,657 |
|
|
|
3,565 |
|
|
|
129,880 |
|
|
|
135,670 |
|
Premiums
and other policies receivables
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
121,338 |
|
|
|
121,338 |
|
Accounts
receivable from reinsurers and coinsurers
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
137,098 |
|
|
|
137,098 |
|
Other
assets
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,415,683 |
|
|
|
1,415,683 |
|
Total
assets
|
|
|
4,980,156 |
|
|
|
4,224,440 |
|
|
|
3,234,202 |
|
|
|
4,432,665 |
|
|
|
1,961,042 |
|
|
|
3,195,602 |
|
|
|
22,028,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
and obligations
|
|
|
4,025,133 |
|
|
|
3,716,882 |
|
|
|
2,711,965 |
|
|
|
311,252 |
|
|
|
28,601 |
|
|
|
3,297,995 |
|
|
|
14,091,828 |
|
Due
to banks and correspondents
|
|
|
310,694 |
|
|
|
633,874 |
|
|
|
10,208 |
|
|
|
128,643 |
|
|
|
57,835 |
|
|
|
26,184 |
|
|
|
1,167,438 |
|
Accounts
payable to reinsurers and coinsurers
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
48,009 |
|
|
|
48,009 |
|
Technical,
insurance claims reserves and reserves for unearned
premiums
|
|
|
39,932 |
|
|
|
24,949 |
|
|
|
112,373 |
|
|
|
164,216 |
|
|
|
367,552 |
|
|
|
309,769 |
|
|
|
1,018,791 |
|
Borrowed
funds
|
|
|
953,461 |
|
|
|
2,815 |
|
|
|
13,385 |
|
|
|
93,177 |
|
|
|
26,383 |
|
|
|
- |
|
|
|
1,089,221 |
|
Bonds
and subordinated notes issued
|
|
|
5,880 |
|
|
|
18,768 |
|
|
|
71,627 |
|
|
|
448,803 |
|
|
|
728,653 |
|
|
|
13,291 |
|
|
|
1,287,022 |
|
Other
liabilities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
822,446 |
|
|
|
822,446 |
|
Equity
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,503,352 |
|
|
|
2,503,352 |
|
Total
liabilities and equity
|
|
|
5,335,100 |
|
|
|
4,397,288 |
|
|
|
2,919,558 |
|
|
|
1,146,091 |
|
|
|
1,209,024 |
|
|
|
7,021,046 |
|
|
|
22,028,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-Balance
sheet items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
assets
|
|
|
2,094,179 |
|
|
|
1,574,953 |
|
|
|
976,153 |
|
|
|
1,152,853 |
|
|
|
67,810 |
|
|
|
- |
|
|
|
5,865,948 |
|
Derivatives
liabilities
|
|
|
957,368 |
|
|
|
1,238,661 |
|
|
|
1,221,097 |
|
|
|
2,042,343 |
|
|
|
406,479 |
|
|
|
- |
|
|
|
5,865,948 |
|
|
|
|
1,136,811 |
|
|
|
336,292 |
|
|
|
(244,944 |
) |
|
|
(889,490 |
) |
|
|
(338,669 |
) |
|
|
- |
|
|
|
- |
|
Marginal
gap
|
|
|
781,867 |
|
|
|
163,444 |
|
|
|
69,700 |
|
|
|
2,397,084 |
|
|
|
413,349 |
|
|
|
(3,825,444 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
gap
|
|
|
781,867 |
|
|
|
945,311 |
|
|
|
1,015,011 |
|
|
|
3,412,095 |
|
|
|
3,825,444 |
|
|
|
- |
|
|
|
- |
|
Notes to the consolidated financial
statements (continued)
|
|
As of December 31, 2008
|
|
|
|
Up to 1 month
|
|
|
1 to 3 months
|
|
|
3 to 12 months
|
|
|
1 to 5 years
|
|
|
More than 5
years
|
|
|
Non-interest
bearing
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
2,455,413 |
|
|
|
196,588 |
|
|
|
46,536 |
|
|
|
10,218 |
|
|
|
- |
|
|
|
1,057,416 |
|
|
|
3,766,171 |
|
Investments
|
|
|
818,153 |
|
|
|
1,208,344 |
|
|
|
988,796 |
|
|
|
542,759 |
|
|
|
1,139,201 |
|
|
|
289,585 |
|
|
|
4,986,838 |
|
Loans
|
|
|
2,038,457 |
|
|
|
2,412,234 |
|
|
|
2,274,854 |
|
|
|
2,992,480 |
|
|
|
604,016 |
|
|
|
- |
|
|
|
10,322,041 |
|
Assets
designated at fair value through profit or loss
|
|
|
- |
|
|
|
249 |
|
|
|
329 |
|
|
|
790 |
|
|
|
1,954 |
|
|
|
134,623 |
|
|
|
137,945 |
|
Premiums
and other policies receivables
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
111,561 |
|
|
|
111,561 |
|
Accounts
receivable from reinsurers and coinsurers
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
165,144 |
|
|
|
165,144 |
|
Other
assets
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,331,369 |
|
|
|
1,331,369 |
|
Total
assets
|
|
|
5,312,023 |
|
|
|
3,817,415 |
|
|
|
3,310,515 |
|
|
|
3,546,247 |
|
|
|
1,745,171 |
|
|
|
3,089,698 |
|
|
|
20,821,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
and obligations
|
|
|
4,114,430 |
|
|
|
3,268,610 |
|
|
|
2,991,905 |
|
|
|
321,984 |
|
|
|
39,979 |
|
|
|
3,213,529 |
|
|
|
13,950,437 |
|
Due
to banks and correspondents
|
|
|
178,539 |
|
|
|
745,155 |
|
|
|
197,935 |
|
|
|
11,705 |
|
|
|
32,544 |
|
|
|
14,113 |
|
|
|
1,179,991 |
|
Accounts
payable to reinsurers and coinsurers
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
55,841 |
|
|
|
55,841 |
|
Technical,
insurance claims reserves and reserves for unearned
premiums
|
|
|
31,254 |
|
|
|
19,357 |
|
|
|
86,935 |
|
|
|
148,437 |
|
|
|
331,697 |
|
|
|
350,090 |
|
|
|
967,770 |
|
Borrowed
funds
|
|
|
1,008,997 |
|
|
|
2,474 |
|
|
|
11,762 |
|
|
|
81,871 |
|
|
|
45,612 |
|
|
|
- |
|
|
|
1,150,716 |
|
Bonds
and subordinated notes issued
|
|
|
817 |
|
|
|
- |
|
|
|
63,208 |
|
|
|
284,577 |
|
|
|
428,788 |
|
|
|
7,840 |
|
|
|
785,230 |
|
Other
liabilities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
934,979 |
|
|
|
934,979 |
|
Equity
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,796,105 |
|
|
|
1,796,105 |
|
Total
liabilities and equity
|
|
|
5,334,037 |
|
|
|
4,035,596 |
|
|
|
3,351,745 |
|
|
|
848,574 |
|
|
|
878,620 |
|
|
|
6,372,497 |
|
|
|
20,821,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Off-Balance
sheet items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
assets
|
|
|
2,499,906 |
|
|
|
1,295,838 |
|
|
|
590,446 |
|
|
|
469,276 |
|
|
|
293,100 |
|
|
|
- |
|
|
|
5,148,566 |
|
Derivatives
liabilities
|
|
|
1,618,002 |
|
|
|
788,307 |
|
|
|
834,589 |
|
|
|
1,471,042 |
|
|
|
436,626 |
|
|
|
- |
|
|
|
5,148,566 |
|
|
|
|
881,904 |
|
|
|
507,531 |
|
|
|
(244,143 |
) |
|
|
(1,001,766 |
) |
|
|
(143,526 |
) |
|
|
- |
|
|
|
- |
|
Marginal
gap
|
|
|
859,890 |
|
|
|
289,350 |
|
|
|
(285,373 |
) |
|
|
1,695,907 |
|
|
|
723,025 |
|
|
|
(3,282,799 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
gap
|
|
|
859,890 |
|
|
|
1,149,240 |
|
|
|
863,867 |
|
|
|
2,559,774 |
|
|
|
3,282,799 |
|
|
|
- |
|
|
|
- |
|
Notes to the consolidated financial
statements (continued)
Sensitivity
to changes in interest rates -
The
following table presents the sensitivity to a reasonable possible change in
interest rates, with all other variables held constant, of the Group’s
consolidated income statement and consolidated statements of comprehensive
income; before income tax and minority interest.
The
sensitivity of the consolidated income statement is the effect of the assumed
changes in interest rates on the net interest income for one year before income
tax and minority interest, based on the floating rate of non-trading financial
assets and financial liabilities held at December 31, 2009 and 2008, including
the effect of derivatives instruments. The sensitivity of
consolidated comprehensive income is calculated by revaluing fixed rate
available-for-sale financial assets, before income tax and minority interest,
including the effect of any associated hedges, and derivatives instruments
designated as cash flow hedges, as of December 31, 2009 and 2008 for the effects
of the assumed changes in interest rates:
|
|
As of December 31, 2009
|
|
Currency
|
|
Changes in basis
points
|
|
|
Sensitivity of net
income
|
|
|
Sensitivity of
comprehensive
income
|
|
|
|
|
|
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Dollar
|
|
|
+/- |
|
|
|
50 |
|
|
|
+/- |
|
|
|
10,484 |
|
|
|
-/ |
+ |
|
|
43,174 |
|
U.S.
Dollar
|
|
|
+/- |
|
|
|
75 |
|
|
|
+/- |
|
|
|
15,727 |
|
|
|
-/ |
+ |
|
|
64,762 |
|
U.S.
Dollar
|
|
|
+/- |
|
|
|
100 |
|
|
|
+/- |
|
|
|
20,969 |
|
|
|
-/ |
+ |
|
|
86,349 |
|
U.S.
Dollar
|
|
|
+/- |
|
|
|
150 |
|
|
|
+/- |
|
|
|
31,453 |
|
|
|
-/ |
+ |
|
|
129,523 |
|
Peruvian
Currency
|
|
|
+/- |
|
|
|
50 |
|
|
|
-/+ |
|
|
|
3,446 |
|
|
|
-/ |
+ |
|
|
24,856 |
|
Peruvian
Currency
|
|
|
+/- |
|
|
|
75 |
|
|
|
-/+ |
|
|
|
5,169 |
|
|
|
-/ |
+ |
|
|
37,284 |
|
Peruvian
Currency
|
|
|
+/- |
|
|
|
100 |
|
|
|
-/+ |
|
|
|
6,892 |
|
|
|
-/ |
+ |
|
|
49,711 |
|
Peruvian
Currency
|
|
|
+/- |
|
|
|
150 |
|
|
|
-/+ |
|
|
|
10,339 |
|
|
|
-/ |
+ |
|
|
74,567 |
|
|
|
As of December 31, 2008
|
|
Currency
|
|
Changes in basis
points
|
|
|
Sensitivity of net
income
|
|
|
Sensitivity of
comprehensive
income
|
|
|
|
|
|
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Dollar
|
|
|
+/- |
|
|
|
50 |
|
|
|
+/- |
|
|
|
6,842 |
|
|
|
-/ |
+ |
|
|
16,709 |
|
U.S.
Dollar
|
|
|
+/- |
|
|
|
100 |
|
|
|
+/- |
|
|
|
13,684 |
|
|
|
-/ |
+ |
|
|
33,417 |
|
U.S.
Dollar
|
|
|
+/- |
|
|
|
200 |
|
|
|
+/- |
|
|
|
27,368 |
|
|
|
-/ |
+ |
|
|
66,834 |
|
U.S.
Dollar
|
|
|
+/- |
|
|
|
300 |
|
|
|
+/- |
|
|
|
41,052 |
|
|
|
-/ |
+ |
|
|
100,251 |
|
Peruvian
Currency
|
|
|
+/- |
|
|
|
50 |
|
|
|
-/+ |
|
|
|
12,227 |
|
|
|
-/ |
+ |
|
|
16,791 |
|
Peruvian
Currency
|
|
|
+/- |
|
|
|
100 |
|
|
|
-/+ |
|
|
|
24,454 |
|
|
|
-/ |
+ |
|
|
33,581 |
|
Peruvian
Currency
|
|
|
+/- |
|
|
|
200 |
|
|
|
-/+ |
|
|
|
48,908 |
|
|
|
-/ |
+ |
|
|
67,162 |
|
Peruvian
Currency
|
|
|
+/- |
|
|
|
300 |
|
|
|
-/+ |
|
|
|
73,362 |
|
|
|
-/ |
+ |
|
|
100,743 |
|
Notes to the consolidated financial
statements (continued)
The
interest rate sensitivities set out in the table above are illustrative only and
are based on simplified scenarios. The figures represent the effect
of the pro-forma movements in the net interest income based on the projected
yield curve scenarios and the Group’s current interest rate risk
profile. This effect, however, does not incorporate actions that
would be taken by Management to mitigate the impact of this interest rate
risk. In addition, the Group seeks proactively to change the interest
rate risk profile to minimize losses and optimize net revenues. The
projections above also assume that interest rate of all maturities move by the
same amount and, therefore, do not reflect the potential impact on net interest
income of some rates changing while others remain unchanged. The
projections make other simplifying assumptions too, including that all positions
run to maturity.
Available-for-sale
investments securities and mutual funds are not considered as part of the
investment securities for sensitivity calculation purposes; however, a 10, 25
and 30 percent for equity and mutual funds changes in market prices is conducted
to these price-sensitivity securities and the expected unrealized gain or loss,
before income tax, is presented below:
Market price sensitivity
|
|
Changes in
market prices
|
|
|
As of December 31,
2009
|
|
|
Changes in
market
prices
|
As of December
31, 2008
|
|
|
|
%
|
|
|
US$(000)
|
|
|
%
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
securities
|
|
+/- |
|
|
|
10 |
|
|
|
33,073 |
|
|
+/- |
|
|
|
10 |
|
|
|
21,762 |
|
Equity
securities
|
|
+/- |
|
|
|
25 |
|
|
|
82,683 |
|
|
+/- |
|
|
|
30 |
|
|
|
65,285 |
|
Equity
securities
|
|
+/- |
|
|
|
30 |
|
|
|
99,220 |
|
|
+/- |
|
|
|
50 |
|
|
|
108,809 |
|
Mutual
funds
|
|
+/- |
|
|
|
10 |
|
|
|
17,454 |
|
|
+/- |
|
|
|
10 |
|
|
|
13,132 |
|
Mutual
funds
|
|
+/- |
|
|
|
25 |
|
|
|
43,635 |
|
|
+/- |
|
|
|
20 |
|
|
|
26,264 |
|
Mutual
funds
|
|
+/- |
|
|
|
30 |
|
|
|
52,361 |
|
|
+/- |
|
|
|
30 |
|
|
|
39,397 |
|
Notes to the consolidated financial
statements (continued)
|
(ii)
|
Foreign
exchange risk -
|
The Group
is exposed to foreign currency exchange rates on its financial position and cash
flows. Management sets limits on the level of exposure by currency
and in total for both overnight and intra-day positions, which are monitored
daily.
Foreign
currency transactions are made at the free market exchange rates of the
countries where Credicorp’s Subsidiaries are established. As of
December 31, 2009 and 2008, the Group’s assets and liabilities by currencies
were as follows:
|
|
2009
|
|
|
2008
|
|
|
|
U.S. Dollars
|
|
|
Peruvian
currency
|
|
|
Other
currencies
|
|
|
Total
|
|
|
U.S. Dollars
|
|
|
Peruvian
currency
|
|
|
Other
currencies
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monetary
assets -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
3,094,366 |
|
|
|
501,769 |
|
|
|
240,523 |
|
|
|
3,836,658 |
|
|
|
3,156,279 |
|
|
|
495,550 |
|
|
|
114,342 |
|
|
|
3,766,171 |
|
Trading
securities
|
|
|
13,982 |
|
|
|
8,920 |
|
|
|
47,872 |
|
|
|
70,774 |
|
|
|
23,220 |
|
|
|
11,523 |
|
|
|
1,341 |
|
|
|
36,084 |
|
Available-for-sale
investments
|
|
|
2,354,804 |
|
|
|
2,034,768 |
|
|
|
690,034 |
|
|
|
5,079,606 |
|
|
|
2,890,978 |
|
|
|
1,734,526 |
|
|
|
325,250 |
|
|
|
4,950,754 |
|
Loans,
net
|
|
|
6,755,563 |
|
|
|
4,285,076 |
|
|
|
190,641 |
|
|
|
11,231,280 |
|
|
|
6,930,125 |
|
|
|
3,298,579 |
|
|
|
93,337 |
|
|
|
10,322,041 |
|
Financial
assets designated to fair value through profit or loss
|
|
|
135,670 |
|
|
|
- |
|
|
|
- |
|
|
|
135,670 |
|
|
|
136,311 |
|
|
|
1,634 |
|
|
|
- |
|
|
|
137,945 |
|
Other
assets
|
|
|
507,057 |
|
|
|
563,065 |
|
|
|
22,977 |
|
|
|
1,093,099 |
|
|
|
594,107 |
|
|
|
255,476 |
|
|
|
12,383 |
|
|
|
861,966 |
|
|
|
|
12,861,442 |
|
|
|
7,393,598 |
|
|
|
1,192,047 |
|
|
|
21,447,087 |
|
|
|
13,731,020 |
|
|
|
5,797,288 |
|
|
|
546,653 |
|
|
|
20,074,961 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monetary
liabilities -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
and obligations
|
|
|
(8,156,869 |
) |
|
|
(5,398,780 |
) |
|
|
(536,179 |
) |
|
|
(14,091,828 |
) |
|
|
(8,614,042 |
) |
|
|
(4,963,932 |
) |
|
|
(372,463 |
) |
|
|
(13,950,437 |
) |
Due
to bank and correspondents and borrowed funds
|
|
|
(2,126,963 |
) |
|
|
(128,800 |
) |
|
|
(896 |
) |
|
|
(2,256,659 |
) |
|
|
(2,189,114 |
) |
|
|
(140,155 |
) |
|
|
(1,438 |
) |
|
|
(2,330,707 |
) |
Technical
reserves, insurance claims reserves and reserves for unearned
premiums
|
|
|
(744,393 |
) |
|
|
(274,398 |
) |
|
|
- |
|
|
|
(1,018,791 |
) |
|
|
(734,537 |
) |
|
|
(233,233 |
) |
|
|
- |
|
|
|
(967,770 |
) |
Bonds
and subordinated notes issued
|
|
|
(612,098 |
) |
|
|
(562,739 |
) |
|
|
(112,185 |
) |
|
|
(1,287,022 |
) |
|
|
(311,860 |
) |
|
|
(473,370 |
) |
|
|
- |
|
|
|
(785,230 |
) |
Other
liabilities
|
|
|
(443,346 |
) |
|
|
(376,967 |
) |
|
|
(50,142 |
) |
|
|
(870,455 |
) |
|
|
(691,280 |
) |
|
|
(274,830 |
) |
|
|
(24,710 |
) |
|
|
(990,820 |
) |
|
|
|
(12,083,669 |
) |
|
|
(6,741,684 |
) |
|
|
(699,402 |
) |
|
|
(19,524,755 |
) |
|
|
(12,540,833 |
) |
|
|
(6,085,520 |
) |
|
|
(398,611 |
) |
|
|
(19,024,964 |
) |
|
|
|
777,773 |
|
|
|
651,914 |
|
|
|
492,645 |
|
|
|
1,922,332 |
|
|
|
1,190,187 |
|
|
|
(288,232 |
) |
|
|
148,042 |
|
|
|
1,049,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forwards
position, net
|
|
|
265,114 |
|
|
|
(198,637 |
) |
|
|
(66,477 |
) |
|
|
- |
|
|
|
(627,600 |
) |
|
|
591,628 |
|
|
|
35,972 |
|
|
|
- |
|
Currency
swaps position, net
|
|
|
(142,015 |
) |
|
|
183,598 |
|
|
|
(41,583 |
) |
|
|
- |
|
|
|
71,154 |
|
|
|
(71,154 |
) |
|
|
- |
|
|
|
- |
|
Cross
currency swaps position, net
|
|
|
77,768 |
|
|
|
129,049 |
|
|
|
(206,817 |
) |
|
|
- |
|
|
|
(317,043 |
) |
|
|
317,043 |
|
|
|
- |
|
|
|
- |
|
Options,
net
|
|
|
(3,711 |
) |
|
|
3,711 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
monetary position
|
|
|
974,929 |
|
|
|
769,635 |
|
|
|
177,768 |
|
|
|
1,922,332 |
|
|
|
316,698 |
|
|
|
549,285 |
|
|
|
184,014 |
|
|
|
1,049,997 |
|
Notes to the consolidated financial
statements (continued)
The Group
manages foreign exchange risk by monitoring and controlling the position values
due to changes in exchange rates. The Group measures its performance
in U.S. Dollar, so if the net foreign exchange position (e.g. Peruvian currency)
is an asset, any depreciation of the U.S. Dollar with respect to this currency
would affect positively the Group’s consolidated statements of financial
position. The current position in a foreign currency comprises
exchange rate-linked assets and liabilities in that currency. An
institution’s open position in individual currencies comprises assets,
liabilities and off-balance sheet items denominated in the respective foreign
currency for which the institution itself bears the risk; any
appreciation/depreciation of the foreign exchange would affect the consolidated
income statement.
The
Group’s net foreign exchange balance is the sum of its positive open non-U.S.
Dollar positions (net long position) less the sum of its negative open non-U.S.
Dollar positions (net short position); and any devaluation/revaluation of the
foreign exchange position would affect the consolidated income
statement. A currency mismatch would leave the Group’s consolidated
statements of financial position vulnerable to a fluctuation of the foreign
currency (exchange rate shock).
The table
below shows the sensitivity analysis of the Peruvian Currency, the currency to
which the Group had significant exposure as of December 31, 2009 and 2008 on its
non-trading monetary assets and liabilities and its forecast cash
flows. The analysis calculates the effect of a reasonably possible
movement of the currency rate against the U.S. Dollar, with all other variables
held constant on the consolidated income statement, before income
tax. A negative amount in the table reflects a potential net
reduction in consolidated income statement, while a positive amount reflects a
net potential increase:
Sensitivity Analysis
|
|
Change in currency
rates
|
|
|
2009
|
|
|
2008
|
|
|
|
%
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
Devaluation
-
|
|
|
|
|
|
|
|
|
|
Peruvian
Currency
|
|
|
5 |
|
|
|
(40,507 |
) |
|
|
(28,910 |
) |
Peruvian
Currency
|
|
|
10 |
|
|
|
(85,515 |
) |
|
|
(61,032 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revaluation
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Peruvian
Currency
|
|
|
5 |
|
|
|
36,649 |
|
|
|
26,156 |
|
Peruvian
Currency
|
|
|
10 |
|
|
|
69,967 |
|
|
|
49,935 |
|
Notes to the consolidated financial
statements (continued)
Liquidity
risk is the risk that the Group is unable to meet its payment obligations
associated with its financial liabilities when they fall due and to replace
funds when they are withdrawn. The consequence may be the failure to
meet obligations to repay depositors, fulfill commitments to lend or meet other
operating cash needs.
The Group
is exposed to daily calls on its available cash resources from overnight
deposits, current accounts, maturing deposits, loans draw-downs, guarantees and
other calls. The Group does not maintain cash resources to meet all
of these needs, as experience shows that a minimum level of reinvestment of
maturing funds can be predicted with a high level of certainty. The
Management of the Group’s subsidiaries sets limits on the minimum proportion of
funds available to meet such calls and on the minimum level of inter-bank and
other borrowing facilities that should be in place to cover withdrawals at
unexpected levels of demands. Sources of liquidity are regularly
reviewed by a separate team in Group Treasury Department to maintain a wide
diversification by currency, geography, provider, product and term.
The
matching and controlled mismatching of the maturities and interest rates of
assets and liabilities is fundamental to the management of the
Group. It is unusual for banks to be completely matched, as
transacted business is often based on uncertain terms and of different
types. An unmatched position potentially enhances profitability, but
also increases the risk of losses.
The
maturities of assets and liabilities and the ability to replace, at an
acceptable cost, interest-bearing liabilities as they mature are important
factors in assessing the liquidity of the Group and its exposure to changes in
interest rates and exchange rates.
Liquidity
requirements to support calls under guarantees and standby letters of credit are
considerably less than the amount of the commitment, because the Group does not
generally expect the third party to draw funds under the
agreement. The total outstanding contractual amount of commitments to
extend credit does not necessarily represent future cash requirements, as many
of these commitments will expire or terminate without being funded.
A
maturity mismatch, long-term illiquid assets against short-term liabilities,
exposes a consolidated statements of financial position to risks related both to
rollover and to interest rates. If liquid assets do not cover
maturing debts; a consolidated statements of financial position is vulnerable to
a rollover risk. Furthermore, a sharp increase in interest rates can
dramatically increase the cost of rolling over short-term liabilities, leading
to a rapid increase in debt service. The contractual-maturity gap
report is useful in showing liquidity characteristics.
Notes to the consolidated financial
statements (continued)
The table
below presents the cash flows payable by the Group by remaining contractual
maturities (including future interest payments) at the date of the consolidated
statements of financial position. The amounts disclosed in the table
are the contractual undiscounted cash flows:
|
|
As of December 31, 2009
|
|
|
As of December 31, 2008
|
|
|
|
Up to a month
|
|
|
From 1 to 3
months
|
|
|
From 3 to 12
months
|
|
|
From 1 to 5 years
|
|
|
Over 5 years
|
|
|
Total
|
|
|
Up to a month
|
|
|
From 1 to 3
months
|
|
|
From 3 to 12
months
|
|
|
From 1 to 5 years
|
|
|
Over 5 years
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
and obligations
|
|
|
4,100,737 |
|
|
|
1,589,588 |
|
|
|
6,382,365 |
|
|
|
2,071,812 |
|
|
|
119,360 |
|
|
|
14,263,862 |
|
|
|
4,200,202 |
|
|
|
1,573,685 |
|
|
|
6,727,731 |
|
|
|
1,485,233 |
|
|
|
381,475 |
|
|
|
14,368,326 |
|
Due
to bank and correspondents and Borrowed funds
|
|
|
382,789 |
|
|
|
364,018 |
|
|
|
418,620 |
|
|
|
1,285,930 |
|
|
|
368,271 |
|
|
|
2,819,628 |
|
|
|
222,667 |
|
|
|
262,027 |
|
|
|
355,464 |
|
|
|
1,226,162 |
|
|
|
564,212 |
|
|
|
2,630,532 |
|
Accounts
payable to reinsurer and coinsurers
|
|
|
7,058 |
|
|
|
31,974 |
|
|
|
10,119 |
|
|
|
- |
|
|
|
- |
|
|
|
49,151 |
|
|
|
16,232 |
|
|
|
13,663 |
|
|
|
25,946 |
|
|
|
- |
|
|
|
- |
|
|
|
55,841 |
|
Technical,
insurance claims reserves and reserves for unearned
premiums
|
|
|
61,464 |
|
|
|
112,548 |
|
|
|
266,121 |
|
|
|
210,524 |
|
|
|
630,396 |
|
|
|
1,281,053 |
|
|
|
57,470 |
|
|
|
117,509 |
|
|
|
280,424 |
|
|
|
200,023 |
|
|
|
606,096 |
|
|
|
1,261,522 |
|
Bonds
and subordinates notes issued
|
|
|
13,078 |
|
|
|
27,855 |
|
|
|
154,433 |
|
|
|
749,497 |
|
|
|
1,004,251 |
|
|
|
1,949,114 |
|
|
|
6,635 |
|
|
|
5,883 |
|
|
|
110,975 |
|
|
|
444,563 |
|
|
|
589,016 |
|
|
|
1,157,072 |
|
Other
liabilities
|
|
|
454,405 |
|
|
|
26,387 |
|
|
|
89,225 |
|
|
|
102,950 |
|
|
|
20,045 |
|
|
|
693,012 |
|
|
|
122,619 |
|
|
|
155,032 |
|
|
|
379,563 |
|
|
|
90,430 |
|
|
|
60,048 |
|
|
|
807,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
5,019,531 |
|
|
|
2,152,370 |
|
|
|
7,320,883 |
|
|
|
4,420,713 |
|
|
|
2,142,323 |
|
|
|
21,055,820 |
|
|
|
4,625,825 |
|
|
|
2,127,799 |
|
|
|
7,880,103 |
|
|
|
3,446,411 |
|
|
|
2,200,847 |
|
|
|
20,280,985 |
|
The table
below shows the contractual maturity of the Group’s contingent credits at the
date of the consolidated statements of financial position:
|
|
As of December 31, 2009
|
|
|
As of December 31, 2008
|
|
|
|
Up to a month
|
|
|
From 1 to 3
months
|
|
|
From 3 to 12
months
|
|
|
From 1 to 5 years
|
|
|
Over 5 years
|
|
|
Total
|
|
|
Up to a month
|
|
|
From 1 to 3
months
|
|
|
From 1 to 12
months
|
|
|
From 1 to 5 years
|
|
|
Over 5 years
|
|
|
Total
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent
credits
|
|
|
283,051 |
|
|
|
798,222 |
|
|
|
1,019,234 |
|
|
|
303,597 |
|
|
|
124,031 |
|
|
|
2,528,135 |
|
|
|
208,248 |
|
|
|
541,900 |
|
|
|
705,150 |
|
|
|
279,693 |
|
|
|
20,911 |
|
|
|
1,755,902 |
|
The group
expects that not all of the contingent liabilities or commitments will be drawn
before expiration of the commitments.
Notes to the consolidated financial
statements (continued)
Operational
risk is the risk of loss arising from systems failure, human error, fraud or
external events. When controls fail to perform, operational risks can
cause damage to reputation, have legal or regulatory implications, or lead to
financial loss. The Group cannot expect to eliminate all operational
risks, but through a control framework and by monitoring and responding to
potential risks, the Group is able to manage the risks. Controls
include effective segregation of duties, access, authorization and
reconciliation procedures, staff education and assessment processes, including
the use of Internal Audit.
29.5
|
Risk
of the insurance activity -
|
The
principal risk the Group faces under insurance contracts is that the actual
claims and benefit payments or the timing thereof, differ from expectations.
This is influenced by the frequency of claims, severity of claims, actual
benefits paid and subsequent development of long-term claims. Therefore the
objective of the Group is to ensure that sufficient reserves are available to
cover these liabilities.
The above
risk exposure is mitigated by diversification across a large portfolio of
insurance contracts and geographical areas. The variability of risks is also
improved by careful selection and implementation of underwriting strategy
guidelines, as well as the use of reinsurance arrangements. The Group’s
placement of reinsurance is diversified such that it is neither dependent on a
single reinsurer nor are the operations of the Group substantially dependent
upon any single reinsurance contract.
Life
insurance contracts
Life
insurance contracts offered by the Group include whole life, term assurance,
unitized pensions, guaranteed annuity pensions, pure endowment pensions and
mortgage endowments.
Whole
life and term assurance are conventional regular premium products where lump sum
benefits are payable on death or permanent disability. Few contracts have a
surrender value.
The main
risks that the Group is exposed are mortality, morbidity, longevity, investment
return, expense of loss arising from expense experience being different than
expected, and policyholder decision, all of which, do not vary significantly in
relation to the location of the risk insured by the Group, type of risk insured
or industry.
The
Group’s underwriting strategy is designed to ensure that risks are well
diversified in terms of type of risk and level of insured benefits. This is
largely achieved through diversification across industry sectors and geography,
the use of medical screening in order to ensure that pricing takes account of
current health conditions and family medical history, regular review of actual
claims experience and product pricing, as well as detailed claims handling
procedures. Underwriting limits are in place to enforce appropriate risk
selection criteria. For example, the Group has the right not to renew individual
policies, it can impose deductibles and it has the right to reject the payment
of fraudulent claims. Insurance contracts also entitle the Group to pursue third
parties for payment of some or all costs. The Group further enforces a policy of
actively managing and prompt pursuing of claims, in order to reduce its exposure
to unpredictable future developments that can negatively impact the
Group.
For
contracts when death or disability is the insured risk, the significant factors
that could increase the overall frequency of claims are epidemics, widespread
changes in lifestyle and natural disasters, resulting in earlier or more claims
than expected. Group wide reinsurance limits of US$50,000 on any
single life insured and on all high risk individuals insured are in
place.
Notes to the consolidated financial
statements (continued)
For
annuity contracts, the most significant factor is continuing improvement in
medical science and social conditions that would increase
longevity.
Management
has made a sensitivity analysis of the estimates of the technical reserves, note
14(c).
Non-life
insurance contracts (general insurance and healthcare)
The Group
principally issues the following types of general insurance contracts: motor,
household and commercial. Healthcare contracts provide medical expense cover to
policyholders. Risks under non-life insurance policies usually cover 12
months.
For
general insurance contracts the most significant risks arise from climate
changes, natural disasters and other type of damages. For healthcare contracts
the most significant risks arise from lifestyle changes, epidemics and medical
science and technology improvements.
These
risks do not vary significantly in relation to the location of the risk insured
by the Group, type of risk insured or industry.
The above
risks exposures are mitigated by diversification across a large portfolio of
insurance contracts. The variability of risk is improved by careful selection
and implementation of underwriting strategies, which are designed to ensure that
risks are diversified in terms of risks type and level of insured benefits. This
is largely achieved through diversification across industry sectors and
geography. Further, strict claim review policies to assess all new and ongoing
claims, regular detailed review of claims handling procedures and frequent
investigation of possible fraudulent claims are all policies and procedures put
in place to reduce the Group´s risk exposure. Also, the Group actively manages
and promptly pursues claims, in order to reduce its exposure to unpredictable
future developments that can negatively impact the Group.
The Group
has also limited its exposure by imposing maximum claim amounts on certain
contracts as well as the use of reinsurance arrangements in order to limit its
exposure to catastrophic events.
Notes to the consolidated financial
statements (continued)
In the
following paragraphs the Group has segregated some risk information related to
its insurance business, which has been already included in the Group’s
consolidated risk information; in order to provide more specific insight about
this particular business.
|
(a)
|
Sensitivity
to changes in interest rates -
|
The
following tables demonstrate the sensitivity to a reasonably possible change in
interest rates, with all other variables held constant, in consolidated income
statement and consolidated statements of comprehensive income of the insurance
activity, before income tax:
|
|
As of December 31, 2009
|
|
Currency
|
|
Changes in basis
points
|
|
|
Sensitivity of net
income
|
|
|
Sensitivity of
comprehensive
income
|
|
|
|
|
|
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Dollar
|
|
+/- |
|
|
|
50 |
|
|
-/+ |
|
|
|
164 |
|
|
-/ |
+ |
|
|
15,967 |
|
U.S.
Dollar
|
|
+/- |
|
|
|
75 |
|
|
-/+ |
|
|
|
246 |
|
|
-/ |
+ |
|
|
23,951 |
|
U.S.
Dollar
|
|
+/- |
|
|
|
100 |
|
|
-/+ |
|
|
|
328 |
|
|
-/ |
+ |
|
|
31,935 |
|
U.S.
Dollar
|
|
+/- |
|
|
|
150 |
|
|
-/+ |
|
|
|
493 |
|
|
-/ |
+ |
|
|
47,902 |
|
Peruvian
Currency
|
|
+/- |
|
|
|
50 |
|
|
+/- |
|
|
|
35 |
|
|
-/ |
+ |
|
|
3,469 |
|
Peruvian
Currency
|
|
+/- |
|
|
|
75 |
|
|
+/- |
|
|
|
52 |
|
|
-/ |
+ |
|
|
5,204 |
|
Peruvian
Currency
|
|
+/- |
|
|
|
100 |
|
|
+/- |
|
|
|
69 |
|
|
-/ |
+ |
|
|
6,939 |
|
Peruvian
Currency
|
|
+/- |
|
|
|
150 |
|
|
+/- |
|
|
|
104 |
|
|
-/ |
+ |
|
|
10,408 |
|
|
|
As of December 31, 2008
|
|
Currency
|
|
Changes in basis
points
|
|
|
Sensitivity of net
income
|
|
|
Sensitivity of
comprehensive
income
|
|
|
|
|
|
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S.
Dollar
|
|
+/- |
|
|
|
50 |
|
|
-/+ |
|
|
|
201 |
|
|
-/ |
+ |
|
|
6,734 |
|
U.S.
Dollar
|
|
+/- |
|
|
|
100 |
|
|
-/+ |
|
|
|
402 |
|
|
-/ |
+ |
|
|
13,468 |
|
U.S.
Dollar
|
|
+/- |
|
|
|
200 |
|
|
-/+ |
|
|
|
805 |
|
|
-/ |
+ |
|
|
26,935 |
|
U.S.
Dollar
|
|
+/- |
|
|
|
300 |
|
|
-/+ |
|
|
|
1,207 |
|
|
-/ |
+ |
|
|
40,403 |
|
Peruvian
Currency
|
|
+/- |
|
|
|
50 |
|
|
+/- |
|
|
|
58 |
|
|
-/ |
+ |
|
|
2,597 |
|
Peruvian
Currency
|
|
+/- |
|
|
|
100 |
|
|
+/- |
|
|
|
117 |
|
|
-/ |
+ |
|
|
5,193 |
|
Peruvian
Currency
|
|
+/- |
|
|
|
200 |
|
|
+/- |
|
|
|
234 |
|
|
-/ |
+ |
|
|
10,386 |
|
Peruvian
Currency
|
|
+/- |
|
|
|
300 |
|
|
+/- |
|
|
|
351 |
|
|
-/ |
+ |
|
|
15,579 |
|
Notes to the consolidated financial
statements (continued)
The
interest rate sensitivities set out in the table above are illustrative only and
employ simplified scenarios. It should be noted that the effects may not be
linear and therefore the results cannot be extrapolated. The sensitivities do
not incorporate actions that could be taken by Management to mitigate the effect
of the interest rate movements, nor any changes in policyholders´
behaviors.
|
(b)
|
Liquidity
risk of the insurance activity
-
|
The
Group´s insurance companies are exposed to requirements of cash available,
mainly for contracts of insurance claims of short term. The Group holds the
available funds for covering its liabilities according to their maturity and
estimated unexpected claims.
The
Group´s insurance companies control liquidity risk through the exposure of the
maturity of their liabilities. Therefore, the investment plan has been
structured considering the maturities in order to manage the risk of fund
requirements to cover insurance claims and others, in addition to the Group
support.
The
undiscounted cash flows payable by the Group for technical, insurance claims
reserves and reserves for unearned premiums by their remaining contractual
maturities, including future interest payments, are presented in note
29.3.
Other
non-derivative financial liabilities are related to the balances presented in
the consolidated statements of financial position and include mainly accounts
payable to reinsurers and coinsurers and other liabilities with contractual
maturities of less than one year, see also note 29.3.
Unit
linked liabilities are repayable or transferable on demand and are included in
the up to a year column.
|
(c)
|
Credit
risk of the insurance activity
-
|
Credit
risk is the risk that one party to a financial instrument will cause a financial
loss to the other party by failing to discharge an obligation.
The
following policies and procedures are in place to mitigate the Group’s exposure
to credit risk:
|
-
|
The
Group sets the maximum amounts and limits that may be advanced to
corporate counterparties by reference to their long- term credit
ratings.
|
|
-
|
Credit
risk from customer balances, will only persist during the grace period
specified in the policy document or trust deed until the policy is paid up
or terminated. Commissions paid to intermediaries are netted off against
amounts receivable from them in order to reduce the risk of doubtful
accounts.
|
|
-
|
Reinsurance
is placed with counterparties that have a good credit rating and
concentration of risk is avoided by following guidelines in respect of
counterparties’ limits which are set each year by the Board of Directors
and are subject to regular reviews. At each reporting date, Management
performs an assessment of creditworthiness of reinsurers and updates the
reinsurance purchase strategy, ascertaining suitable allowance for
impairment.
|
Notes to the consolidated financial
statements (continued)
|
-
|
A
Group policy setting out the assessment and determination of what
constitutes credit risk for the Group is in place, its compliance is
monitored and exposures and breaches are reported to the Group risk
committee. The policy is regularly reviewed for pertinence and
for changes in the risk
environment.
|
|
-
|
The
Group issues unit-linked investment policies whereby the policyholder
bears the investment risk on the assets held in the unit-linked funds as
the policy benefits are directly linked to the value of the assets in the
fund. Therefore, the Group has no material credit risk on unit-linked
financial assets.
|
|
-
|
The
Group has not provided the credit risk analysis for the financial assets
of the unit-linked business. This is due to the fact that, in unit-linked
business, the liability to policyholders is linked to the performance and
value of the assets that back those liabilities and the shareholders have
no direct exposure to any credit risk in those
assets.
|
The Group
maintains an actively managed capital base to cover risks inherent in its
business. The adequacy of the Group’s capital is monitored using,
among other measures, the rules and ratios established by the SBS, the
supervising authority of its major subsidiaries and for consolidation
purposes.
The
Group’s objectives when managing capital, which is a broader concept than the
“Equity” on the face of the consolidated statements of financial position, are:
(i) to comply with the capital requirements set by the regulators of the banking
markets where the entities within the Group operate; (ii) to safeguard the
Group’s ability to continue as a going concern so that it can continue to
provide returns for shareholders and benefits for other stakeholders; and (iii)
to maintain a strong capital base to support the development of its
business.
Capital
adequacy and the use of regulatory capital are monitored daily by the Group’s
Management, employing techniques based on the guidelines developed by the Basel
Committee, as implemented by the SBS for supervisory purposes. The
required information is filed with the SBS on a quarterly basis. The
SBS requires each bank or banking group to: (a) hold the minimum level of the
regulatory capital, and (b) maintain a ratio of total regulatory capital to the
risk-weighted asset at maximum level of 11. On June 2008, through
Legislative Decree 1028, the ratio indicated in (b) above was modified,
requiring that starting July 1, 2011, the regulatory capital be at least 10
percent of the assets and contingent credits weighed by credit risk plus 10
times the required regulatory capital for operational and market risk (9.5
percent starting July 1, 2009 and 9.8 percent starting July 1,
2010). In addition, those individual banking subsidiaries or similar
financial institutions not incorporated in Peru are directly regulated and
supervised by their local banking supervisor, whose regulatory capital
requirements may differ from country to country.
The
risk-weighted assets are measured by means of a hierarchy of five risk weights
classified according to the nature and reflecting an estimate of credit, market
and other risks associated with each asset and counterparty, taking into account
any eligible collateral or guarantees. A similar treatment is adopted
for off-balance sheet exposure, with some adjustments to reflect the more
contingent nature of the potential losses.
Notes to the consolidated financial
statements (continued)
According
to the SBS regulations, the Junior Subordinated Notes issued by BCP through its
Panama branch for US$250.0 million are computable to determinate the Group’s
regulatory capital, see note 15(a)(iii).
As of
December 31, 2009 and 2008, the regulatory capital for the subsidiaries engaged
in financial and insurance activities amounted to approximately US$2,221.1 and
US$1,604.7 million, respectively. This regulatory capital has been
determined in accordance with SBS regulations in force as of such
dates. According to the SBS regulations, the Group’s regulatory
capital exceeds in approximately US$660.3 million the minimum regulatory capital
required as of December 31, 2009 (approximately US$263.6 million as of December
31, 2008).
|
(a)
|
Fair
value is defined as the amount for which an asset could be exchanged or a
liability settled, between knowledgeable, willing parties in an arm’s
length transaction, assuming an on-going
enterprise.
|
When a
financial instrument is traded in an active and liquid market, its quoted market
price in an actual transaction provides the best evidence of its fair
value. When a quoted market price is not available, or may not be
indicative of the fair value of the instrument, to determine such fair value,
the current market value of another instrument that is substantially similar,
discounted cash flow analysis or other estimation techniques may be used, all of
which are significantly affected by assumptions used. Although
Management uses its best judgment in estimating the fair value of these
financial instruments, there are inherent weaknesses in any estimation
technique. As a result, the fair value may not be indicative of the
net realizable or liquidation value.
Notes to the consolidated financial
statements (continued)
The
methodologies and assumptions used to determine fair values depend on the terms
and risk characteristics of the various financial instruments and include the
following:
|
(i)
|
Assets
for which fair value approximates carrying value - For financial assets
and financial liabilities that are liquid or having a short term maturity
(less than three months) it is assumed that the carrying amounts
approximate to their fair value. This assumption is also
applied to demand deposits, savings accounts without a specific maturity
and variable rate financial
instruments.
|
|
(ii)
|
Fixed
rate financial instruments - The fair value of fixed rate financial assets
and liabilities carried at amortized cost are estimated by comparing
market interest rates when they were first recognized with current market
rates offered for similar financial instruments. The estimated
fair value of fixed interest bearing deposits is based on discounted cash
flows using prevailing money-market interest rates for debts with similar
credit risk and maturity. For quoted debt issued the fair
values are calculated based on quoted market prices. For those
notes issued where quoted market prices are not available, a discounted
cash flow model is used based on a current interest rate yield curve
appropriate for the remaining term to
maturity.
|
|
(iii)
|
Financial
instrument recorded at fair value - The fair value for financial
instruments traded in active markets at the dates of the consolidated
statements of financial position is based on their quoted market price or
dealer price quotations (bid price for long positions and ask price for
short positions), without any deduction for transaction
costs. For all other financial instruments not listed in an
active market, the fair value is determined by using appropriate valuation
techniques. Valuation techniques include net present value
techniques and comparison to similar instruments for which market
observable prices exist, see
(b).
|
Notes to the consolidated financial
statements (continued)
Based in
the aforementioned, set out below is a comparison of the carrying amounts and
fair values of the Group’s financial instruments that are carried in the
consolidated statements of financial position. The table does not
include the fair values of non-financial assets and non-financial
liabilities:
|
|
2009
|
|
|
2008
|
|
|
|
Book
value
|
|
|
Fair
value
|
|
|
Book
value
|
|
|
Fair
value
|
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and due from banks
|
|
|
3,836,658 |
|
|
|
3,836,658 |
|
|
|
3,766,171 |
|
|
|
3,766,171 |
|
Trading
securities
|
|
|
70,774 |
|
|
|
70,774 |
|
|
|
36,084 |
|
|
|
36,084 |
|
Investments
available-for-sale
|
|
|
5,079,606 |
|
|
|
5,079,606 |
|
|
|
4,950,754 |
|
|
|
4,950,754 |
|
Loans,
net
|
|
|
11,231,280 |
|
|
|
11,253,024 |
|
|
|
10,322,041 |
|
|
|
10,330,518 |
|
Financial
assets designated at fair value through profit or loss
|
|
|
135,670 |
|
|
|
135,670 |
|
|
|
137,945 |
|
|
|
137,945 |
|
Premiums
and other policies receivable
|
|
|
121,338 |
|
|
|
121,338 |
|
|
|
111,561 |
|
|
|
111,561 |
|
Accounts
receivable from reinsurers and coinsurers
|
|
|
137,098 |
|
|
|
137,098 |
|
|
|
165,144 |
|
|
|
165,144 |
|
Due
from customers on acceptances
|
|
|
96,423 |
|
|
|
96,423 |
|
|
|
232,580 |
|
|
|
232,580 |
|
Other
assets
|
|
|
420,222 |
|
|
|
420,222 |
|
|
|
326,740 |
|
|
|
326,740 |
|
Total
|
|
|
21,129,069 |
|
|
|
21,150,813 |
|
|
|
20,049,020 |
|
|
|
20,057,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
and obligation
|
|
|
14,091,828 |
|
|
|
14,091,828 |
|
|
|
13,950,437 |
|
|
|
13,950,437 |
|
Due
to banks and correspondents
|
|
|
1,167,438 |
|
|
|
1,167,502 |
|
|
|
1,179,991 |
|
|
|
1,180,404 |
|
Banker’s
acceptances outstanding
|
|
|
96,423 |
|
|
|
96,423 |
|
|
|
232,580 |
|
|
|
232,580 |
|
Accounts
payable to reinsurers and coinsurers
|
|
|
48,009 |
|
|
|
48,009 |
|
|
|
55,841 |
|
|
|
55,841 |
|
Borrowed
funds
|
|
|
1,089,221 |
|
|
|
1,093,215 |
|
|
|
1,150,716 |
|
|
|
1,153,108 |
|
Bonds
and subordinated notes issued
|
|
|
1,287,022 |
|
|
|
1,321,004 |
|
|
|
785,230 |
|
|
|
773,652 |
|
Other
liabilities
|
|
|
596,589 |
|
|
|
596,589 |
|
|
|
575,112 |
|
|
|
575,112 |
|
Total
|
|
|
18,376,530 |
|
|
|
18,414,570 |
|
|
|
17,929,907 |
|
|
|
17,921,134 |
|
Notes to the consolidated financial
statements (continued)
|
(b)
|
Determination
of fair value and fair values hierarchy
-
|
The
following table shows an analysis of financial instruments recorded at fair
value by level of the fair value hierarchy:
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
December
31, 2009
|
|
Note
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
US$(000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held
for trading
|
|
|
|
|
|
- |
|
|
|
83,077 |
|
|
|
- |
|
|
|
83,077 |
|
Held
as hedges
|
|
|
|
|
|
- |
|
|
|
14,264 |
|
|
|
- |
|
|
|
14,264 |
|
|
|
11(b)
|
|
|
|
- |
|
|
|
97,341 |
|
|
|
- |
|
|
|
97,341 |
|
Trading
securities
|
|
|
|
|
|
53,716 |
|
|
|
17,058 |
|
|
|
- |
|
|
|
70,774 |
|
Financial
assets designated at fair value through profit or loss
|
|
7
|
|
|
|
135,670 |
|
|
|
- |
|
|
|
- |
|
|
|
135,670 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
securities
|
|
|
|
|
|
1,490,567 |
|
|
|
3,164,273 |
|
|
|
42,423 |
|
|
|
4,697,263 |
|
Equity
securities
|
|
|
|
|
|
301,420 |
|
|
|
22,058 |
|
|
|
7,255 |
|
|
|
330,733 |
|
|
|
5(a)
|
|
|
|
1,791,987 |
|
|
|
3,186,331 |
|
|
|
49,678 |
|
|
|
5,027,996 |
|
Total
financial assets
|
|
|
|
|
|
1,981,373 |
|
|
|
3,300,730 |
|
|
|
49,678 |
|
|
|
5,331,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
financial instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held
for trading
|
|
|
|
|
|
- |
|
|
|
63,019 |
|
|
|
- |
|
|
|
63,019 |
|
Held
as hedges
|
|
|
|
|
|
- |
|
|
|
104,830 |
|
|
|
- |
|
|
|
104,830 |
|
Total
financial liabilities
|
|
11(b)
|
|
|
|
- |
|
|
|
167,849 |
|
|
|
- |
|
|
|
167,849 |
|
Notes to the consolidated financial
statements (continued)
Included
in the Level 1 category are financial assets that are measured in whole or in
part by reference to published quotes in an active market. A financial
instrument is regarded as quoted in an active market if quoted prices are
readily and regularly available from an exchange, dealer, broker, industry
group, pricing service or regulatory agency and those prices represent actual
and regularly occurring market transactions on an arm’s length
basis.
The Level
2 category are financial assets and liabilities measured using a valuation
technique based on assumptions that are supported by prices from observable
current market transactions, are assets and liabilities for which pricing is
obtained via pricing services, but where prices have not been determined in an
active market, financial assets with fair values based on broker quotes,
investments in private equity funds with fair values obtained via fund managers
and assets that are valued using the Group’s own models whereby the majority of
assumptions are market observable.
The Level
3 category are financial assets measured using a valuation technique (model)
based on assumptions that are neither supported by prices from observable
current market transactions in the same instrument nor are they based on
available market data.
Level 3
financial instruments measured at fair value amounting to US$49.7
million. The net unrealized gains of these instruments amount to
US$3.6 million, and the gross impairment recorded for these investments
amounting to US$7.8 million as of December 31, 2009.
During
2009, there were not transfer from Level 3 to Level 1 and Level 2 of financial
instruments measured at fair value.
29.8
|
Fiduciary
activities, management of funds and pension funds
-
|
The Group
provides custody, trustee, investment management and advisory services to third
parties. The Group makes allocations and purchase and sale decisions
in relation to a wide range of financial instruments. Those assets
that are held in a fiduciary capacity are not included in these consolidated
financial statements. These services give rise to the risk that the
Group will be accused of poor administration or
under-performance.
Notes to the consolidated financial
statements (continued)
As of
December 31, 2009 and 2008, the assigned value of the financial assets under
administration (in millions of U.S. Dollars) is as follows:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
Investments
funds
|
|
|
1,997.2 |
|
|
|
1,394.6 |
|
Pension
funds
|
|
|
6,582.8 |
|
|
|
4,199.0 |
|
Equity
managed
|
|
|
2,534.4 |
|
|
|
1,966.8 |
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11,114.4 |
|
|
|
7,560.4 |
|
(a)
Index to Exhibits
|
|
1.1
|
Bye-laws
of Credicorp Ltd., incorporated herein by reference to Exhibit 1.1 to
Credicorp’s Annual Report on Form 20-F dated June 30,
2005
|
|
|
1.2
|
Memorandum
of Association of Credicorp Ltd., incorporated herein by reference to
Exhibit 1.2 to Credicorp’s Annual Report on Form 20-F dated June 27,
2003
|
|
|
8
|
List
of Subsidiaries, incorporated herein by reference to Exhibit 8 to
Credicorp’s Annual Report on Form 20-F dated June 27,
2003
|
|
|
12.1
|
Certification
by the Chief Executive Officer Pursuant to Section 302 of the U.S.
Sarbanes-Oxley Act of 2002
|
|
|
12.2
|
Certification
by the Chief Financial Officer Pursuant to Section 302 of the U.S.
Sarbanes-Oxley Act of 2002
|
|
|
13.1
|
Certification
by the Chief Executive Officer Pursuant to Section 906 of the U.S.
Sarbanes-Oxley Act of 2002
|
|
|
13.2
|
Certification
by the Chief Financial Officer Pursuant to Section 906 of the U.S.
Sarbanes-Oxley Act of
2002
|
SIGNATURES
The
registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and that it has duly caused and authorized the undersigned to sign
this Annual Report on its behalf.
CREDICORP
LTD.
|
|
|
|
|
By:
|
/s/ ALVARO CORREA
|
|
Name:
|
Alvaro
Correa
|
|
Title:
|
Chief
Financial Officer
|
|
Dated: June
17, 2010
EXHIBIT
INDEX
|
1.1
|
Bye-laws
of Credicorp Ltd., incorporated herein by reference to Exhibit 1.1 to
Credicorp’s Annual Report on Form 20-F dated June 30,
2005
|
|
|
|
|
1.2
|
Memorandum
of Association of Credicorp Ltd., incorporated herein by reference to
Exhibit 1.2 to Credicorp’s Annual Report on Form 20-F dated June 27,
2003
|
|
|
|
|
8
|
List
of Subsidiaries, incorporated herein by reference to Exhibit 8 to
Credicorp’s Annual Report on Form 20-F dated June 27,
2003
|
|
|
|
|
12.1
|
Certification
by the Chief Executive Officer Pursuant to Section 302 of the U.S.
Sarbanes-Oxley Act of 2002
|
|
|
|
|
12.2
|
Certification
by the Chief Financial and Accounting Officer Pursuant to Section 302 of
the U.S. Sarbanes-Oxley Act of 2002
|
|
|
|
|
13.1
|
Certification
by the Chief Executive Officer Pursuant to Section 906 of the U.S.
Sarbanes-Oxley Act of 2002
|
|
|
|
|
13.2
|
Certification
by the Chief Financial and Accounting Officer Pursuant to Section 906 of
the U.S. Sarbanes-Oxley Act of
2002
|