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Operator
Good day, everyone, and welcome to the Credicorp Ltd Fourth Quarter 2007 Earnings Release Conference Call. As a reminder, today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Walter Bayly, Chief Financial Officer. Please go ahead.
Walter Bayly - CFO
Good morning, everybody. First of all, I would like to apologize for the delay. We had some problems in setting up the lines. Welcome to Credicorp's conference call for the fourth quarter and year-end 2007.
2007 has, no doubt, been a remarkable year. The vigorous economic and business growth with good fundamentals was the main driver of the excellent performance of the whole financial system of our country and the outstanding high growth rates achieved in the banking business. The excellent business environment, coupled with the appropriate strategies to take advantage of such growth, led to the results we are pleased to present today. Next page, please.
Credicorp reported today a further 4.1% increase in fourth quarter earnings, reaching $94 million, continuing this way its improving trend throughout the year. BCP, however, shows slightly weaker quarterly bottom-line results, with earnings 5% down from the third quarter '07. We will see that this drop is not worrisome, nor a change in growth trend. It is not related to income generation, which continues as strong as ever, but rather an expected and announced pick-up in expenditures related to seasonality and to the aggressive expansion plans of our business.
On the other hand, all other subsidiaries reported positive results. BCP Bolivia reached a record $10 million contribution for the quarter. Atlantic Security has leveled out income after the turmoil in the markets, but remains consistent with its $5 million contribution for the quarter. Prima, within Grupo Credito, is now definitely over its break-even and starts generating increasingly positive numbers.
In Credicorp Ltd, which provisions the withholding taxes that correspond to the dividends received by Credicorp from its Peruvian subsidiaries, reported a positive contribution, given an adjustment and partial reversal of such provisions following the decision to retain earnings at BCP to support growth and thus reduce the amount of dividends received by Credicorp.
These improvements could more than offset the reduced contribution reported by the insurance company for the quarter despite the strong business growth experience. Pacifico had a hard third quarter due to the strong earthquake from August 2007 and was additionally hit by two severe claims in the fire insurance segment this fourth quarter. This led to the low $0.6 million contribution. Nevertheless, it has recovered from the loss level of the previous quarter. Next page, please.
Following such improved quarterly results, Credicorp closed the year 2007 with $350.7 million total net income after minority deductions, a truly outstanding result which reflects a 52.3% annual growth in earnings generation. The significant improvement in earnings is evident when comparing Credicorp's 2007 net earnings with results of the previous two years, observing the increased growth rate and the improved return on average equity of 22.9% for the year 2007 versus 16% two years ago.
Being BCP the dominant subsidiary, it is only logical that its growth and financial contribution are determinant for Credicorp's results. In fact, BCP has shown consistent annual growth of 35% of its bottom line contribution to Credicorp as a result of its strategy and timely anticipation of the business opportunity. However, the important impact of the other subsidiaries in Credicorp's final reported results is noteworthy. Thus, while growth of Credicorp's net earnings in 2006 was 27%, that is lower than BCP's growth of 35% in the same period.
In 2007, Credicorp's earnings grew 52%, surpassing BCP's growth of 35% for that year. Therefore, growth contribution of subsidiaries -- such as BCP Bolivia, which reached an impressive 95% annual growth of earnings contribution, and Atlantic, which again grew 31% its total contribution to Credicorp -- has certainly contributed to the results we are reporting and help compensate the lower contribution from the earthquake-hit insurance business of Pacifico, which dropped 35%.
Nevertheless, the strong impact on results comes from the turnaround in Prima's net earnings, which went from a loss of almost $21 million in 2006 to a positive contribution of $3 million for 2007, and from the normalization of withholding tax charges on dividends received by Credicorp, which were doubled in to 2006 due to an accounting change and now reflect a normal level in 2007. Furthermore, given that BCP will retain a portion of earnings, provisions for such withholding tax were reduced.
To reach such a record earnings level is even more remarkable when considering the devastating impact for the country, its businesses and the population of the August 15th earthquake. This meant a hard test on Credicorp, on its ability to restore its operational capabilities in the devastated region, mainly for BCP, and absorb the financial impact, especially in the insurance business.
All in all, last year we said we were taking corrective measures aimed at improving the problem sectors of Credicorp, clearing the path for further growth. Today, we are seeing that growth. In this contributions breakdown, we would like to give you some details on the main earning contributors.
Page five, please. Looking at BCP, net earnings reached a total of $86.2 million for the fourth quarter, revealing a 5% drop from the previous quarter. BCP's loan growth and income generation was, however, as strong as ever. In fact, total loans reached a record 11% growth rate for the quarter, and interest income increased an even higher 13%. Even after assimilating the slight increase in funding costs, we have experienced as a consequence of this fast loan growth, net interest income is still up by 9% for the quarter. Furthermore, non-interest income is also growing at a strong rate of 12% for the quarter. Thus, the drop in net earnings responds rather to an important increase in expenses, which were up 27% for the quarter.
This jump was a result of increased personnel expenditures related to the increased provisions for performance-related compensation, increased hiring for our expansion plans, plus increased administrative expenses, which were strongly related to the business expansion and included more marketing support, system growth and maintenance. There was also an element of year-end run-up of budgeted costs.
Despite this fourth quarter growth in earnings, year-end results are as robust as expected. BCP closed the year with total $331.7 million net earnings, 34% above 2006 results. Loan growth exceeded all expectations, with total loans up 40.1% in the year. Interest income was 34% higher in 2007, while increased funding costs resulting from such aggressive loan growth led to a net interest income growing by a more moderate 27%. Nevertheless, this income growth led to an improved net interest margin of 5.24% for 2007 versus 5.17% for 2006.
Loan portfolio quality deserves again a special mention as, despite this strong growth, it kept improving as BCP's partial loan to total loan ratio dropped further to 0.7%. Nevertheless, provisions grew in line with our loan book and portfolio quality and reached over 33 million in provisions versus an almost negligible 1.9 million for 2006.
Non-interest income also grew at an impressive 25% rate for the year, which includes a fee income growth of 21% for the year and also an important boost from the excellent performance of the Peruvian Stock Exchange, which resulted in gains from the sale of securities of about $21 million for the year versus only $8.7 million in 2006.
Despite the run-up in costs in the fourth quarter, total operating costs for the year were up by only 17.4%, given the reduced non-operating expenses, which included in 2006 the cost of the senior management compensation program, which is today covered by a financial hedge. A better reflection of cost evolution is the efficiency ratio, which did deteriorate from 50.5% in 2006 to 51.3% for 2007.
The final year-end bottom-line results of BCP are certainly a reflection of this excellent business evolution, but also benefited strongly this year of a translation gain resulting from the strong valuation of our local currency against the weak U.S. dollar, which accumulated throughout the year to reach $29 million addition to our bottom line. The following charts will help us explain this development a bit further. Next page, please.
Loan growth measured by average monthly balances of 10.2% for the quarter reflects the still very high growth of 15% plus of the corporate and 3.4% growth of the middle market sectors during the quarter. This responds to a continuing investment activity in expanding production capacity mainly of the corporate industries, which involved not only the capital investments, but also expanded [needs] of work capital.
Annual growth numbers for these sectors are, however, outstanding, with the corporate sector reaching an unprecedented 33% annual growth and the middle market sector 34.2% annual growth. The growth rates reached by these business sectors is truly atypical and reflect the unique booming economic environment Peru is going through. Thus, we cannot view these growth rates as sustainable.
On the other hand, the retail business was expected to perform strongly and, in fact, continuing growing also at an accelerated pace, reaching 12.9% for the quarter and revealing an impressive 38.6% annual growth of average monthly balances for the year. Furthermore, growth of the individual retail products reflect as well such retail activity, being the best performance by consumer loans with 96.6% year-over-year growth followed by SME loans with 54.5% year-over-year.
Page seven, please. The continuing economic expansion and increased consumer confidence is behind the continuing improvement in portfolio quality and further recoveries of charged-off loans. Thus, we are experiencing unprecedented low level of delinquencies, which has further dropped to 0.7% of past due loans of our total loan portfolio. The obvious affect of such high portfolio quality is the low level of provisions they require, which, despite the strong loan growth, amounted to 0.79% of our loan portfolio. Coverage ratio increased to a very high 351%, surpassing by far the system's average.
Page eight. Following such robust loan growth, interest income also grows 13.3% quarter-over-quarter. For the year, interest income growth reached 34.3%. Interest expense, however, was affected by a change in our funding structure, which led to external financing and is explained in the next slide. Thus, interest expense was up 19.7% for the quarter and a total 47.7% for the year. This change in our funding structure resulted ultimately in a drop of our net interest margin from 5.2% for the third quarter to 5.17% this quarter. For the year, however, net interest margin shows an improvement from 5.17% in 2006 to 5.24% for 2007.
All together, core earnings reveal a solid 9.7% growth for the fourth quarter. For the year 2007, core earnings grew at a strong 25.9%, with fee income showing an excellent performance with a strong 21% annual growth. Transaction volumes increased significantly during the year. Foreign exchange gains reported an even stronger expansion of 42% due to the increased transactional foreign exchange activity in the second half following the volatility in the U.S. dollar solid exchange rate.
Page nine, please. Looking at our funding structure, deposits have always been our core source of funding. Nevertheless, the extraordinary 40% growth rate of our loan book made it necessary to complement an also strong organic funding growth to deposits of 30% for the year with external financing. In fact, after an adjustment made to our total deposits in order to reclassify as bonds certain deposits that were originated by an external financing structure through an SPV, our loan-to-deposit ratio reaches today a still-healthy 77% versus 71% in 2006 and represents 74% of our liabilities versus 81% a year ago. The trend is clear.
To support the growth of our business and the strong growth of the volume of transactions processed and as already announced, BCP continues expanding significantly its distribution network, opening new branches, installing new ATMs and introducing in a massive way its cost-efficient distribution channel, Agentes BCP. The charts above show the advances up to now and reflect clearly the dominant position of our network, which has surpassed 2,200 network points throughout the country by year end and keeps growing. Noteworthy is also the percentage of transactions done through electronic channels, which reached already 71% of total transaction volume. Next page, please.
Looking at the cost side and as explained before, fourth quarter reveals a significant increase in operating cost, mainly personnel and administrative costs. Thus, personnel costs were up 26% for the quarter and were related, to a great extent, to year-end provisions for performance-related compensation bonuses, provisions for the retirement of senior officials of the bank and also increased hiring for the network expansion announced in the second half of 2007.
Administrative expenses increased 39% and were strongly related to the aggressive business expansion expected, including increased marketing support, systems growth and maintenance, but also an important element of our year-end run-up of budgeted costs.
On an annual basis, costs were up only 17.4%, since the drop in other expenses compensated partially the strong increase in personnel and administrative expense. Such drop in the other expenses responded to the reduction in 2007 of the cost impact of the senior management compensation scheme, which is tied to the performance of our stock. These costs, which were significant in 2006, were eliminated, to a great extent, through a financial hedge. Thus, real operating costs were up by 32% personnel costs and 26% administrative costs, which resulted in a deterioration of BCP's efficiency ratio from 50.5% in 2006 to 51.3% for 2007.
We have been cautioning the market about an expected deterioration of our efficiency ratio because of the expected investments in our aggressive expansion plan, and this has only materialized now. Furthermore, the costs related to this network expansion will be significant during 2008, and we maintain our advice to expect a further cost increase in the near future.
Page 12, please. The performance of BCP in the fourth quarter resulted in the drop of performance ratios, as return on average equity dropped from 36% to 31.7% in the fourth quarter and the efficiency ratio increased. For the year, however, the profitability improvements continue being impressive, with return on average equity increasing from 27.7% for 2006 to 31.7% for 2007.
Next page, 13, please. Banco de Credito de Bolivia. We would like to briefly point out the excellent performance Bolivia is having, despite the political environment in which it operates. As shown in the above charts, BCP Bolivia's net results had an impressive growth in the last years. This way, Bolivia has become a significant contributor to BCP's results, adding a total net earnings for the year of almost $27 million and which, in turn, reflects a return on equity of over 35%.
Portfolio quality has, at the same time, improved significantly and is with 1.7% pass-through loans at a perfectly normal and acceptable level, which is, in addition, significantly better than the average of the Bolivian banks. Finally, BCP Bolivia's market share puts it as the third-largest bank. Furthermore, it enjoys today an excellent standing in the Bolivian market.
Next page, please. Looking at Atlantic Security, Credicorp's offshore private banking business had a slightly lower contribution for the fourth quarter of $5 million, down from $6.2 million in the third quarter. This result responds to a reduced commission income, given some increased subcontracting of funds management, lower foreign exchange gains and increased provision following the turmoil in the market. Nevertheless, its business is sound and reveals a very positive 31% growth in annual contribution to the bottom-line results of Credicorp, with a total of USD$20 million contribution in 2007 versus $15.7 million in the prior year.
Atlantic's asset management business, which includes customer deposits, mutual funds and securities, continues being a strong fee generator. Assets under management grew 11% quarter-over-quarter, and on a yearly basis, its growth rate of 42.7% is a reflection of the increasing wealth in our market. Assets under management now reach $3.6 billion. Next page, please.
Pacifico Peruano Suiza. Even though in the fourth quarter Pacifico continued reporting strong business growth and recovered from the effects of the strong earthquake in the third quarter results, this fourth quarter some additional severe claims in the fire insurance segment hit the company and generated again losses in the property casualty business. These losses were offset by the positive results of the life and health business, leaving only a very small contribution to Credicorp of $0.6 million for the quarter.
After this difficult second half of the year, the accumulated underwriting results of the consolidated company at the year end 2007 reached $15.5 million and led to total net income of $22 million, which translates into a contribution to Credicorp of $9.4 million for the year. That is 35% lower than the prior year. The property casualty business total premiums grew 15% quarter-over-quarter and for the year reached an extraordinary growth rate of 35%, leading to a market share recovery of 4%, reaching 34% market share at the year end.
2007 experienced, however, a significant increase in casualties with NEL ratio up 18.2%, for [64.1%] in 2006. The strong earthquake in the third quarter and additional fire claims in the fourth quarter resulted in a net loss for the year of $5.7 million. The life insurance segment showed total premiums growth of 6.8% quarter-over-quarter and an annual growth rate of 17%. However, also in this segment, claims increased by 22% for the year.
Nevertheless, in 2007, the life business benefited from the annuity business related to the expansion of pension fund business of Prima. Thus, bottom-line results improved for the fourth quarter and led to $15.5 million contribution for the year, reflecting a 66% annual growth. In the health segment, production increased 10% quarter-over-quarter. However, claims increased as we [billed by] an NEL ratio of 80% versus 77% in the prior year.
Competition was strong with new players entering the market. Net income for the year was $2.7 million, which is 25% lower than the $3.6 million in the prior year. In brief, 2007 was a year of growth for Pacifico, as revealed by the strong premiums growth and recovery of its market share, but it was also characterized by an important increase in casualties for the whole industry throughout the different insurance segments, which led to deteriorated results. [This reports] Pacifico's strategy to work towards a recomposition of its risk portfolio, favoring the retail segments of property casualty, which offer more retention, diversification and predictability of risk. Next page, please.
Prima. Reaching a profitable operating performance proved to need more time than expected at Prima, but it has finally been achieved. Prima's fourth quarter results reached again a positive number with $2.3 million net income after the efforts made in the year to reduce operating costs by cutting the sales of the salesforce, but was finally reflected in the results. Plus, results for the year were finally in the blue with $3 million total net income in contribution to Credicorp. Prima has certainly reduced its operating costs. Nevertheless, Prima will continue to carry some merger-related costs, such as goodwill amortization and acquisition financing costs, that extend into the next years.
Commercial results, however, continue their excellent path. Prima has positioned itself with the best offer in the market. Its funds have all reached either number one or second place in profitability, and it offers the lowest commission to customers. This positioning resulted in the increase of attractiveness of Prima's offer, as reflected by the high 33.7% market share of collections, which are new contributions into the system. Though the better results are tangible, consolidating and maintaining its leadership and improvement of its fee structure continue being the main objective. Next page, please.
We are particularly pleased with the performance of Credicorp, as reflected by the improvement reported in all of these ratios. More so, given that we certainly had an important hurdle to overcome with the August 15 earthquake. And most importantly, as a result of our described achievements, we continue to generating shareholder value, as can be seen in the following page. On page 18, we have the charts that reflect the improved performance of Credicorp.
With this, we are through with my presentation, and we are ready for the question-and-answer period. Thank you very much.
Operator
Thank you. (OPERATOR INSTRUCTIONS)
And we will take our first question from Daniel Abut from Citi.
Daniel Abut - Analyst
Good morning, Walter. A couple of questions. One on the expectation for volume growth this year after the spectacular '07. You ended with 40% loan growth, and the economy seems to be off to a good start. So what's your outlook for volume growth this year? And second, on expenses, you've been warning, as you said in your remarks, for a while that expenses eventually were going to catch up, given your expansion plans. We saw that in the fourth quarter. How should we think about expense growth into 2008? What type of guidance can you share with us?
Walter Bayly - CFO
Okay, thank you, Daniel, for your questions. Regarding volume growth, clearly last year was extremely high volume growth. We do not expect those numbers to repeat themselves, though we expect to continue having aggressive growth rates at the retail sector. Undoubtedly, the turbulence in the world economies is eventually going to have some impact in the growth in the country. The initial estimates for growth of GDP were 7.5%. More recent estimates, which reflect uncertainties in the U.S. economy particularly, lower that to close to 6%, which is still very, very good numbers.
But again, it is early in the game to be fully -- to take in the total impact of what can happen in the future. Volume growth, we would estimate to be about 20%, maybe closer to the 30% for the year. But again, there is a certain level of uncertainty as to what is going to happen in Peru as a result of the world economy.
As to expenses, undoubtedly the last quarter has certain elements of seasonality. We do not expect costs for this year to keep that pace of growth. We will, nevertheless, as we have mentioned continuously, be experiencing growth rate. Our challenge, and we hope we can achieve, is that the growth rate in expenses will be similar to the growth rate in our net interest margin. And that is our objective. I'm reluctant to throw out more specific numbers. We do not give a lot of guidance, as you are very well aware of, Daniel.
Daniel Abut - Analyst
Thank you, Walter.
Walter Bayly - CFO
You're welcome.
Operator
(OPERATOR INSTRUCTIONS)
And next we will take a question from Juan Partida from JPMorgan.
Juan Partida - Analyst
Hi, good morning. I have two questions. The first one is related to the increasing cost of funding that we've seen at the bank and basically to understand better what are the options -- the funding options that you have open for 2008, and more or less if you can give us some indication as to what to expect in terms of net interest margins for next year?
The second question is regarding your market share in the voluntary contributions segment of the pension fund at Prima. Thank you.
Walter Bayly - CFO
Sure. Cost of funding. Thank you for your questions. Yes, undoubtedly, if we continue growing our loan portfolio at a faster pace than our deposits grow, furthermore considering the fact that we have very high legal reserves, we will have to access other source of funding other than deposits. Undoubtedly, the securitization transactions, which we were very successful in placing in the market last year, appears not to be an option at this stage of the game.
Nevertheless, we do have other options. We have syndicated loans, and actually, we are right now in the process of syndicating a transaction, which is being very successfully received by the market. And we have the domestic capital market. So, yes, funds are available, obviously at a different cost than what they were a year ago. Nevertheless, for everything that happens, for our loan book in the top corporates, we will have to pass along those costs and in the middle market.
So net-net, we do not expect any important deterioration in our net interest margin. Furthermore, this is further aided by the fact that we continue having this rebalancing of our total loan portfolio as the retail, which has a higher margin, grows at a faster pace than that of the wholesale. So net-net, these two affects, we think, will allow us to maintain roughly our net interest margin.
Regarding market share of voluntary contributions, because we have such a very good performance in our funds, we were able to capture a very important market share, above 47% of the voluntary contributions in the market. We have now priced in a fee for this contribution. So this will give us additional earnings next year, which did not exist in the year 2006. We understand, we realize that a 47% market share is a very, very high number that is not necessarily sustainable in the long run. Nevertheless, we have set ourselves a target of having a market share of over 40% in voluntary contributions, and the challenge is to achieve that.
Juan Partida - Analyst
Thank you very much.
Walter Bayly - CFO
You're welcome.
Operator
(OPERATOR INSTRUCTIONS)
And next we'll take a question from Alonso Aramburu from Santander.
Alonso Aramburu - Analyst
Yes, hi. Good morning, Walter. I was wondering if you can give us or if you have measured at the bank the effect of the higher reserve requirement? How will this affect profitability this year, number one? And number two, regarding Prima, are you at the level of salesforce that you now think is sustainable for this year, or do you think you need to reduce this number even further?
Walter Bayly - CFO
Sure. In Prima -- to take the easy one first. In Prima, we expect to continue reducing our salesforce and obtain further cost reductions there. Regarding the impact of the reserve requirements, it has two sides of it. One is that, clearly, it reduces the amount of funds available to be lent, and that is obviously the intention of the Central Bank. And on the other hand, it increases the cost of the funds.
Probably this means an increase in costs, particularly in the local currency, between 60 to 80 basis points, and we are obviously trying to pass those costs along to the borrowers. They are increased costs. It is very early yet to determine that. Nevertheless, we do have competition in the local currency from the domestic capital market. And on the U.S. dollar portion of the increased costs, we've had competition from banks abroad that do not have this cost. So, yes, probably a 60 to 80 basis points in the margin would be the overall effect if we are unable to pass this along.
Alonso Aramburu - Analyst
Thank you.
Operator
And next we'll take a follow-up question from Juan Partida from JPMorgan.
Juan Partida - Analyst
Yes, thank you very much. Just to follow up on Alonso's question a little bit, what is the -- are you seeing any -- or what's your expectation for deposit growth in 2008?
Walter Bayly - CFO
Okay, just to clarify Alonso's previous question, the increased cost is on the marginal -- obviously, on the marginal funds, no? The 60 to 80 basis points is on the marginal. Your question related to deposit growth, we are expecting probably a deposit growth between 20% and 25% for the year. That would be our objective.
Juan Partida - Analyst
Okay, perfect. 20% to 25%. And then are you -- just on these reserve requirements, are you expecting any additional pressure from regulators in this regard, either through additional reserve requirements or higher interest rate? Like what is the outlook for the currency? Do you expect a little less pressure that could perhaps result in lower incentives for the government to restrain liquidity?
Walter Bayly - CFO
Well, clearly, the Central Bank's incentive with the recent measures was to prevent a very strong run-up in the sol. It has been stated by them that their intention is not to maintain the value of the sol or any specific exchange rate, but rather to avoid very sudden movements in the currency.
We think that these measures that they have recently enacted will achieve that, and thus, no further movements are expected. Furthermore, if inflation in Peru starts to come down, we will assume that the Central Bank will lower its reference rate to align itself more with what is happening abroad and, thus, further eliminate the arbitrage opportunity.
Juan Partida - Analyst
Thank you very much.
Walter Bayly - CFO
You're welcome.
Operator
(OPERATOR INSTRUCTIONS)
And we'll next hear from Jorge Chang from Larrain Vial.
Jorge Chang - Analyst
Hello, Walter. My question is regarding your increasing provisions. I understand this increase is somehow reflecting the strong growth in loans, but on the other hand, I would like to know to what extent this increase in provisions reflects your expectations of an eventual portfolio deterioration during 2008? My other question is regarding the options you mentioned for funding. I think you mentioned syndicated loans, the access to domestic capital markets. Are you weighting an option, are you preferring one of those options above the others? Thank you.
Walter Bayly - CFO
Sure. To take the second one first, regarding the funding, we are constantly testing several funding alternatives. We are looking at probably five or seven funding alternatives, and we are constantly pricing and comparing one against the other. We have a very strong preference to take the cheapest money where we can find it, and we have no particular preference as to any structure. So we are very open to whatever the market is able to give us in whatever currency or structure that suits the market in that particular time. So, in reality, no preference.
And regarding the portfolio, we are clearly very mindful to the fact that a very strong expansion in the loan portfolio has some risks. And to that extent, we are watching this portfolio very closely, and we see at this stage no indication of any deterioration whatsoever. Nevertheless, we are making provisions to the extent feasible, according to the accounting regulations, which we are subject to, and be as conservative as we can.
At this stage, with these growth rates, we do not need to take any additional risk. If we are growing at this stage, it doesn't make any sense to lower our credit standards, and we will provision as aggressively as our accountants will allow us. Yes, we -- one would assume that the economies in the world are going to slow down, and undoubtedly, slowdown brings the potential for the deterioration of the credit quality. We are very vigilant as to the possibility of this happening. Again, it has not happened so far, and we make as much provisions as we can.
I don't know if that answers, Jorge, your question.
Jorge Chang - Analyst
Yes, thank you.
Operator
And it does appear we have no further questions, Mr. Bayly.
Walter Bayly - CFO
Okay, thank you very much. And for the closing remarks, I would like to invite Mr. Raimundo Morales, our CEO, to make the closing remarks. Thank you very much.
Raimundo Morales - CEO
Our CEO that is leaving. Hello, everybody. I just wanted to make these closing remarks because it's my last call -- my last participation in a call as CEO of Credicorp. And basically, what I wanted to transmit to you is that we are very optimistic about the future, both of Credicorp and of Peru. The Peruvian economy has been growing at a very healthy pace. And even though we see some type of slowdown in growth as a result of the international economy, we do think that Peru is going to be very resilient and going to be able to continue having rates of growth over and above 5.5%, 6% for several years.
And along that, we also see a fairly aggressively growth in the banking system. The level of financial intermediation in the country today is fairly low, and we think that we're going to be able to incorporate a larger portion of the population into operating the banking system. As a result of that, we're making really some important investments that will have varied results. Not necessarily in this year, but I'm sure there will be results in the future years to come, as the economy continues growing and the banking system continues to grow.
I also wanted to tell you that I'm convinced that we have an excellent management team, that the new management that stays in charge will be more than able to continue benefiting -- having Credicorp benefiting from the Peruvian economy, the growth in the banking system, and will be able to assume, I think with success, all the challenges this growth is going to provide. So I just wanted to reassure you that Credicorp is very, very well positioned for the future. I am optimistic about Credicorp's performance in the years ahead. And I just wanted to close this, thanking you for your support and for your interest in our Company.
Thank you. And from now on, I think Walter will be the one in charge of keeping this organization moving ahead. Thank you. Walter?
Walter Bayly - CFO
Thank you all for joining us on this conference call, and we conclude the presentation this morning. Thank you.
Operator
And that does conclude today's conference. We want to thank you for your participation and ask that you enjoy the remainder of your day.