Financial illiteracy | Credicorp, resilience and adaptability

Credicorp is one of the 4 Peruvian companies listed in the United States under the AD’s format, for its acronym in English (American Depository Receipts). They are financial instruments that allow US investors to directly access foreign stocks. They function as certificates issued by US banks, backed by shares of foreign companies.

ADRs are stock deposit certificates of shares that can be traded directly on the New York Stock Exchange (NYSE). They are very attractive because they allow you to diversify investments in more exotic markets from the US.

Credicorp LTD. is a financial services holding company in Peru, founded in 1995, and covers four operating segments based on its products and services, which are pension funds, banking, insurance and investment banking.

This Peruvian holding company has a presence in the region in countries such as Colombia, Chile, Bolivia, Panama and the United States. It has maintained its position in 2023 and as the current year progresses, its ADR performance has come into focus. Credicorp has demonstrated resilience and adaptability in a constantly changing economic environment. Its ADR reflects a thermometer to evaluate the confidence of international investors in the Peruvian market.

Its main operating subsidiaries are Banco de Crédito del Perú (BCP), Mibanco, BCP Bolivia, Atlantic Security Bank, Grupo Pacífico Seguros, Prima AFP, and Credicorp Capital.

As of today, more than 70% of Credicorp Ltd. shares correspond to holdings traded on the New York Stock Exchange. 13% of the shares correspond to the family of Dionisio Romero Seminario and 15% to the Atlantic Security Corporation.

Credicorp Ltd. was incorporated in August 1995, in the city of Hamilton in Bermuda, after acquiring through an exchange offer the common shares corresponding to BCP, the Atlantic Security Holding Corporation and Pacífico Seguros y Reaseguros, with 90.1%, 98.2 % and 75.8%, respectively. BCP was created in 1891, while Pacífico Compañía de Seguros is the result of the merger of two Peruvian insurance companies and Atlantic Security Bank, a Cayman Islands bank created in 1981.

In the results conference for the last quarter of 2023, the CEO of Credicorp Limited (NYSE: BAP), Gianfranco Ferrari, stated that, despite the difficult conditions in which Peru lives, including social protests, political instability and natural disasters, the company has managed to maintain a solid position.

Full-year return on equity (ROE) stood at 15.8%, focusing on risk management and digital growth, especially in the retail segment. Looking to the future, Credicorp expects an improvement in macroeconomic conditions and projects GDP growth of 2.5% for Peru in 2024.

The company also plans higher dividend payouts and anticipates positive dynamics in emerging markets, including lower policy rates and high commodity prices.
The advantages of an ADR like Credicorp can be differentiated between the point of view of the company and the investor.

In the first case, the company finds new potential investors, which could mean financing and improving the brand image by becoming known in the US market.
From the investor’s point of view, some of the advantages may mean savings in commissions. For the American investor, it may be more convenient not to have to analyze the language of the source and taxation market, as well as to benefit from the trading volume of a US stock exchange.