使用警語:中文譯文來源為 Google 翻譯,僅供參考,實際內容請以英文原文為主
Operator
Good day, ladies and gentlemen and welcome to the Credicorp Ltd.
fourth quarter and year-end conference call.
My name is Veronica and I will be your coordinator for today.
At this time, all participants are in listen-only mode.
Following the prepared remarks, there will be a question-and-answer session.
(Operator Instructions).
I would now like to turn the presentation over to Mr.
Alvaro Correa, Chief Financial Officer of Credicorp.
Please proceed, sir.
Alvaro Correa - CFO
Thank you, Veronica.
Good morning and welcome to Credicorp's fourth quarter and year-end conference call for 2010.
The results of the fourth quarter confirms the growth expectations for the year both in the retail sector with its recovered dynamism and in the wholesale sector as the investment mood in our market remains high and the expansion continues.
Consequently, core income generation was strong though this quarter captured the volatility generated by non-recurring items and year-end seasonality that depressed quarter results, as we will see further on.
The year -- today's numbers, however, do reflect the strong expansion and income generation growth and therefore captured the upside potential we see in this business.
As we will see later and despite the lower fourth quarter earnings, the accumulated results for the year did reach the high end of expectations.
Next page, please.
The highlights of the fourth quarter of 2010 show a very solid business expansion though accompanied by the volatility in income referred to before and generated by non-recurring items and some seasonality.
As we will see in more detail, strong loan growth of 7.3% for the quarter and 24% for the year in line with economic recovery led to higher net interest income which was, however, weaker than loan expansion reflecting a change in asset mix that did not favor NIM.
Core non-financial income, that is fee income and income from foreign exchange transactions, stayed firm for the quarter and show stronger expansion for the year, revealing as well the vigorous economic activity we referred to before.
Such strong loan growth was accompanied by lower past due loan ratios and an improvement in the quality of the portfolio.
However, the extraordinary income from the sale of securities which boosted the second and the third quarter were not present this quarter.
Furthermore, our conservative position regarding loan-loss provisions in coverage as well as countercyclical provision in regulation led to a sustained high level of provisions despite the improvement in portfolio quality resulting in depressed core earnings.
This was further exacerbated by seasonality, or seasonally higher operating expenses and a translation loss due to the international strengthening of the US dollar in the last month.
All this led to a lower net interest income for the quarter versus the previous two quarters, which benefited from high extraordinary income.
Credicorp's subsidiaries, on the other hand, show excellent business expansion and bottom-line contributions for the quarter.
Having said this, net earnings of Credicorp are still healthy at $129 million for the quarter and contributes to accumulated earnings for the year, which in fact reveal the real performance of Credicorp and all of its subsidiaries and shows very strong business and income generation for the year reaching $571 million as total income attributable to Credicorp for 2010.
This, in fact, is a very good performance that reveals net income growth of 21.6% this year as we will see in the next slide.
Next page, please.
When looking at the financial indicators and ratios, growth indicators showed the strong expansion of our loan book, up 7.3% for the quarter, insurance premiums up 5.2% and total assets up also 7%.
However, and as expected, it also shows a quarter-over-quarter contraction of all income indicators.
Year-end numbers, however, do show very clearly the excellent performance of Credicorp for the year with operating income and net income both show growth beyond 21% for the year and core operating income, that is excluding extraordinary gains on securities, a vigorous 32%, a good indicator of real business expansion.
Loan growth is beyond 24% for the year with the stable portfolio quality indicators and in addition improved efficiency and a flat NIM.
That also reveals the excellent business evolution.
All this led to the reported net income attributable to Credicorp for the year 2010 of $571 million certainly confirming our best expectations.
Next page, please.
Let us talk about BCP.
BCP reported numbers, which are explained in a similar way as those of Credicorp.
Again strong 7.6% loan growth spurred by the expansion of business activity and which led to a 5.1% growth or -- in net interest income for the quarter.
However, provisions stayed at a high level despite improvements in portfolio quality and fee income remained flat.
This and the absence of extraordinary gains from securities together with typically higher year-end operating expenses finally put pressure on this quarter's results with BCP's core operating income dropping 7.1% to $151 million.
However, for the full year the evolution of those same lines is quite positive.
Increased net loan-loss provisions is only 6.5%, much lower than loan growth of 24%, reflecting the improvement of the portfolio compared to the previous year.
Fee income growth is strong at 25.5% compensating for lower extraordinary gains on securities resulting in non-interest income still increasing 9.8%.
Despite the fourth quarter spike in operating expenses, fees expanded at a much lower pace throughout the year than earnings generation showing only a 10.9% increase, while net interest income expanded 18.3% for the year.
Consequently, operating income was up 22.5% and net income up 20% for the year.
No doubt a very good performance.
Next page, please.
Looking at the evolution of our loan portfolio and as pointed out in the past, the reactivation of economic growth in the country started already at the end of 2009, as is obvious from these charts, and continues undisturbed so far.
Furthermore, the evolution shown in the last quarters remain the same.
Our foreign currency portfolio continues being concentrated in wholesale loans.
This foreign currency portfolio has remained flat for the retail sector while its growth was triggered by the reactivation of investment activity within the wholesale sector which typically demands dollar loans as such activities are still very much dollar.
The domestic currency portfolio, on the other hand, remains mainly concentrated in the retail business.
The real domestic currency loan book has continuously grown showing a good performance driven by all products.
Overall, loan growth is strong and reveals a year-over-year growth of 24% above our expectations at the start of the year.
Next page, please.
Looking at the income generation, this chart's main revelations on interest income are the following.
First, interest income does increase by 10.5% for the year.
However, this growth is lower than average asset growth rate due to first, faster growth on lower yield corporate loans versus retail loans; second, higher requirements of low or no yield cash in reserves; and finally, a reduction of other interest income due mainly to valuation of derivatives.
Interest expense shows a hike of 9.9% for the quarter, but a drop of 4.8% for the year as our funding structure changes towards more solid denominated deposits and borrowed funds.
In fact, interest rates on deposits dropped towards the end of 2009 and stayed low reducing the funding costs throughout the year until the fourth quarter when interest on time deposits were raised impacting margins.
The significantly lower funding costs for core deposits partially compensated the additional costs on external financing and time deposits resulting in lower funding costs for the year.
This lower interest expense led to an 18.3% stronger net interest income for the year.
The impact of this evolution, especially of interest expense on NIMs, is negative for the quarter but shows an increase in NIMs for loans for the year which goes up from 7.4% to 7.6% despite a predominance of the corporate book and allows overall NIM to stay fairly stable at 4.8%.
Next page, please.
Despite the improvements in delinquencies and stable performance in general of our past due loan portfolio, which improved the past due loan ratio that peaked at 1.71% in the second quarter to 1.46% in the fourth quarter, provisions for loan losses stayed at the high level though lower than in the third quarter following a conservative decision to increase the coverage ratio which went up to 198% and also given the regulatory changes introduced recently that required higher countercyclical provisions.
In fact, though net provisions dropped to $48.5 million from $52.6 million, this is still a high level and contributed to a tighter operating income as explained before.
It is important, however, to keep in mind that the high levels of provisions are only a function of more conservative and surely sound decisions of our management and regulators since the portfolio quality represents no concern at all at these levels.
Next page, please.
Non-financial income dropped 4.4% quarter-over-quarter mainly due to the absence of non-recurring income generated by the sales of securities.
It is, therefore, noteworthy that the core fee income related to banking service commissions at BCP did maintain the high level of the third quarter and income from foreign exchange transactions was up 9.7% for the quarter, given the year-end activity.
On a year-to-date basis, however, the good evolution of core non-interest income, which includes fee and FX income, is evident since despite a substantial drop in income from gains on sales of securities total non-financial income goes up by 9.8%.
Next page, please.
A year-end seasonality drove operating expenses up 16% for the quarter.
Most of this increase is related to administrative expenses due to seasonal pressures and accumulation of payables towards the end of the year.
Some additional costs stems from the increased levels of variable remuneration of employees and provisions for our incentive compensation programs.
The higher expenses impacted the efficiency ratio, which pulled back to 50.9% in the quarter after significant improvements in the first three quarters.
Overall, and when looking at year-to-date numbers, expenses are growing at a lower pace than income showing an increase of only 10.9%, which was precisely the objective of all our efficiency-geared efforts.
Consequently, the efficiency ratio reported by BCP continued showing important improvements moving from 51.9% in 2009 to 49.1% in 2010, which again is better than our original expectations for the year.
Next page, please.
BCP Bolivia reported this quarter a stable earnings contribution of $3.4 million which seems to set a new level of income for our Bolivian bank.
Loan growth, however, was strong reaching 6% quarter over quarter though this did not translate into higher net interest income revealing further compressions of margins which is, to a large extent, the result of prevailing regulation that forces the bank to hold high cash positions.
Portfolio quality show a slight increase for the quarter, but an improvement for the year at 1.47% past due loan ratio.
Overall, profitability continues dropping as also reflected by a further drop in return on average equity for the quarter to 14.7%.
For the year to date, return on equity reached 17.4%, a substantial drop from the 31.6% in 2009.
And Edyficar, BCP's micro-lending vehicle, has in turn reported a very good business evolution with lending activity growing at a robust pace of 11.8% this quarter and a very strong 42.6% for the year, no doubt, the fastest growing business segment of Credicorp.
Furthermore, despite a drop in fourth quarter contribution related to higher income tax provisions, total contribution to BCP for the year reached $22 million and represented a strong performance with a return on equity of 22.7%.
Next page, please.
Turning now to Atlantic, Atlantic reported an increase in contribution of 10% reaching $11.7 million for the quarter.
The quarter-over-quarter increase is primarily attributable to higher margins in the fourth quarter which were associated with a strategy to seek higher returns by reshuffling the investment portfolio.
Aligned with this move, $1.8 million in provisions were set aside this quarter in keeping with the bank's conservative policy.
This result brought Atlantic's contribution to Credicorp for the full year to a record sum of $48.8 million, an unprecedented figure for our private banking and asset management business.
Next page, please.
Pacifico Insurance Group reported net income of $16.5 million in the quarter similar to the figure of $16.4 million recorded in the third quarter.
However, accumulated results in 2010 reported record net income of $68.3 million which tops the 2009's results of $61.7 million by 10.8%.
This increase is due primarily to an improvement in the underwriting result.
The underwriting result obtained in 2010 totaled $93.4 million, which exceeds last year's results by 16.9%.
This significant growth is due to a lower loss ratio of 63.6% versus 65.2% in 2009, which is in turn attributable to a disciplined approach to underwriting and portfolio diversification.
The expense side, however, increased enough to eliminate improvement in the loss ratio, though leaving enough room for the 10.8% net earnings expansion referred to above.
What stands out this quarter, however, is the improvement in Pacifico's contribution to Credicorp after the acquisition of ALICO shares of the Pacifico Group, especially since the profitable life insurance business contributes now almost 100% to its income versus about 50% before the acquisition.
Such contributions reached this quarter $60 million which exceeded in almost 53% Pacifico's third quarter contribution and topped the earnings of $12.4 million reported in fourth quarter '09.
For the year, Pacifico contributed $47.4 million to Credicorp's bottom-line becoming this way a significant player that offers also a large growth potential.
Next page, please.
Finally, Prima AFP outperformed its previous results and reported $8 million contribution for the quarter, up 41%.
This is the result of the reversal of some provisions for taxes and profit sharing and a slight increase in fee income.
On a yearly basis, Prima also reported collections expanding 8%.
Operating expense is under control with 7% growth for the year and operating income up 9% all of which led to an extraordinary 23% increase in net income contribution reaching a total of $25.5 million, an outstanding result for a business that is still constrained by the temporary regulatory measures.
Furthermore, during 2010 Prima has managed to consolidate its clear leadership in the pension -- in the private pension fund industry.
Next page, please.
The contributions chart reflects this [plain] evolution and makes evident the significant improvement achieved year-to-date, that is a 22% increase in net income attributable to Credicorp, which as mentioned before puts Credicorp in line with expectations.
Next page, please.
The market data on this slide reflects the recent volatility in our stock's valuation related more to market moods and investment preferences rather than Credicorp's results and despite the impeccable growth track demonstrated by our results with earnings per share showing strong and steady growth for the last [five] years.
We are certainly pleased with the evolution of our business and the future growth prospects which we believe are still unshaken.
Thank you for listening.
And I'd like to proceed now to our Q-and-A session.
Operator
Ladies and gentlemen, we are ready to open the lines up for your question.
(Operator Instructions).
Tito Labarta, Deutsche Bank.
Tito Labarta - Analyst
Just have a couple of questions, just first in terms of net interest margin, you saw some pressure there and you mentioned partially given the shift in loan mix to more corporate.
Just want to get a little more color on that given -- you've mentioned in the past the focus on the retail segment.
So how should we think about net interest margin going forward and also the shift in loan mix?
Is this just a one time, like, just for this year?
Do you think you'll grow faster in the retail segment going forward?
And so how do you see your net interest margin should evolve over the next year?
And then a second question in terms of expenses, we did see a sharp increase there.
I know you mentioned partially due to some seasonality.
So just want to get a sense also in terms of expenses going forward.
Can we see this decline in the first quarter or just overall growth for 2011 in expenses?
Thanks.
Alvaro Correa - CFO
On the first question, yes, you said it correctly.
It is -- we think it is, well, a short-term effect of the wholesale sector reactivating faster than the retail.
We were surprised really by the activity in that sector and the investment mood in the country.
We don't think that that will be the case for the next following years.
We still think that the retail business will be growing faster than the wholesale.
And we will probably see that.
We have started to see that this first quarter and that will be the case in the future.
As for the second question on expenses, this is something typical that in -- especially in December we concentrate a lot of payments because many contracts renew at that point.
And it's a typical -- maybe a couple of lines were out of expectations, but nothing that won't be the case for the next quarters.
Basically expenses will continue to grow for sure, but at a lower pace than income.
Therefore, our efficiency ratio will continue to improve.
That's for sure.
Tito Labarta - Analyst
Okay, and maybe if you could just give me just a little more color in terms of loan growth for next year.
Just what kind of loan growth do you expect in the different segments?
And then also should we expect the margin to remain stable?
Do you think there could be some upside as you shift to more retail?
If you could maybe give some more color there.
And then also on the expense side, just what growth do you think you'll see in expenses for 2011?
Alvaro Correa - CFO
We continue to think that the rate -- the pace of growth for the loan book should be what we have been saying of around three times GDP growth.
If we consider that for this year GDP will grow between 6% and 6.5%, that will make up to something between 18% and 20% or maybe a little more and probably growing now faster as I said before on the retail business than the wholesale business, above 20% on retail, below 20% on wholesale.
That should be the case this year again.
Expenses will grow together with the expansion of the network.
This year we have a plan to open around 30 -- more than 30 branches.
We will install more than probably 500 ATMs and 1,000 agents.
So expenses will continue to grow alongside the expansion of the network.
That's for sure.
But the base would be probably in the mid-10s numbered like around 12% to 50%, that's what we expect.
Tito Labarta - Analyst
All right, thanks.
Sorry to harp on this, but just in terms of the net interest margin do you think there could be some upside?
How should we think of that going forward?
Alvaro Correa - CFO
As the mix changes, we should be able to maintain the NIM.
We don't know really what will happen with the reserve requirements because the central bank is very active thinking about the -- increasing reserve requirements, which have definitely an impact on NIM.
And -- but assuming that that won't be a major change in the asset mix from now on, we should expect NIMs to be maintained precisely because of the factor growth in the retail sector.
Tito Labarta - Analyst
All right, thank you very much.
Operator
Saul Martinez, JP Morgan.
Saul Martinez - Analyst
A couple of questions.
First, just going back to slide 9, where you give the color at Banco de Credito on non-core income and non-financial income and you show that non-core income was $35 million this year.
It was $72.7 million the previous year.
And I acknowledged that if you normalize both years for that, you had very strong growth here in non-financial income and in earnings.
But looking forward, how should we think about that number?
Should we think -- I mean, is the right way to think about that going forward that number should be zero, that that's a non-recurring impact that you've had the benefit of over the last couple of years that's kind of supplemented your bottom-line in going forward, a normal run rate is closer to zero or is that something that we should think about as sort of something that's going to be consistently in the numbers that help you?
And then secondly, just -- I mean, obviously your ROE was low this quarter relative to what you've thought as a normal run rate of above 20%.
To what extent do you think that is this -- looking out ahead, is this -- to what extent should we think of this as an anomaly and how quickly do you think that the earnings can ramp up in the coming quarters?
Or is this a more normalized level of earnings with respect to what you've been generating in the previous quarters?
Alvaro Correa - CFO
As of non-recurring income, it would probably not be zero because there is always some room for some trading gains.
However, remember that we were quite well positioned for the reductions on interest rates since we had in the past a big portfolio of government securities.
Those are gone and reductions on interest rates are gone.
Therefore, we don't really expect a big number there.
Zero, what -- will probably not be the number, but $30 million, I don't think so, maybe something closer to the bottom part of that range.
As of return on equity, we do think that the fourth quarter figure was quite low because of the increase in reserve requirements, because of the translation losses in that quarter that also affected that.
But from now on, we should see that figure improving definitely this year and in the future.
Saul Martinez - Analyst
How worried are you about additional -- I mean, you -- in response to Tito's question, you mentioned the central bank's been very reactive there.
I know it's difficult to tell, and I think the central bank in Peru has historically used reserve requirements as an additional monetary policy tool.
Do you have any thoughts in terms of how active they can continue to be on reserve requirements going forward?
Alvaro Correa - CFO
I think they will be active.
They are very concerned about the risk of inflation.
The overheating of the economy is a risk that they perceive now.
And they will definitely use this tool.
It's probably the only tool they have to try to control a little the activity of the economy.
So they will definitely be active on that.
They are not at all thinking of reducing reserve requirements.
If something, they would probably think about increasing a little what we have now.
Saul Martinez - Analyst
If they increase it, do you think it makes it much more difficult for you to maintain your NIM?
Alvaro Correa - CFO
In the short run, probably -- that's what happened in the fourth quarter, since it is not immediate how we transfer that into pricing in the loan book.
But we will eventually transfer that into our rates, our interest rates, and we will cover that.
But in the short run, that always have an impact.
Saul Martinez - Analyst
Okay, great.
Thanks a lot, Alvaro.
Operator
Fabio Zagatti, Barclays Capital.
Fabio Zagatti - Analyst
First of all, I just wanted to recap on the ROE guidance.
Do you stick with the 20%, 25% level for the year?
And then I have a second question.
Alvaro Correa - CFO
Okay.
Yes, we think it should be around 25% or even higher for the year.
The figure for the last quarter was atypical in our view.
Fabio Zagatti - Analyst
Okay, and my second question is, I just wanted to hear from you an update on the plans to deploy excess capital generated in coming years, as it has been unveiled back then at the ninth investors meeting in late October.
I remember management saying there were several opportunities being analyzed.
Just curious where you stand in this process.
Thanks.
Alvaro Correa - CFO
Yes, we have a team of people looking at potential alliances and investments in things that are somehow related to Credicorp's core businesses.
We will continue in that line.
We have already in place about four or five potential investments.
Some of them are -- the allocation of money is not that high and a couple of them could be significant, not major but we -- definitely we will continue in that line.
Fabio Zagatti - Analyst
Okay, and can you provide us some sort of timeframe for the announcement of a potential deal or do you think that this is more medium term, long term, definitely 2011?
Thanks.
Alvaro Correa - CFO
I'm sure that a couple of those, probably three of those, will be announced in the next 30 to 60 days.
So you will start seeing some of these in that sense shortly.
Fabio Zagatti - Analyst
Thank you, Alvaro.
Operator
Daniel Abut, Citi.
Daniel Abut - Analyst
On this whole issue of deploying the excess capital and a link to the ROE question that was evaded before, are you thinking -- how are you thinking about your dividends?
And you are about to decide, once you decide how to allocate the dividends for this year that just closed, how are you thinking about your dividend payout ratio because another possibility to use that excess capital would be to increase the payout ratio and that will certainly help to make your ROE rebound.
It seems that your capital position is very comfortable and for the level of growth that you are seeing, 18% to 20% loan growth, you may not need to retain that much capital.
So how are you thinking about your dividends?
That will be my question number one.
Alvaro Correa - CFO
We should -- I mean the payout has been for the last few years around 30%.
We should expect something along those lines, not a major change in that policy.
But remember that the policy had been always also to maintain at the bank level and at the insurance company and all subsidiaries level whatever we need to grow and in this time around requirements are high.
So we will have to keep part -- a big part of the earnings as part of the capital of the subsidiaries.
The amount of money or the capital we will invest in those other ventures will not be that significant so that we have to change the policy on dividend payments.
Daniel Abut - Analyst
Okay.
Thank you, Alvaro.
My second question is somewhat related.
I wanted to challenge a bit that guidance of 18% to 20% loan growth you gave for this year.
It sounds too much on the conservative side to me.
I mean, you grew 24% in your loans last year.
Things are picking up.
You even say that you expect now retail to become more dynamic.
Normally in an election year, things cool off in Peru but it seems that everybody has taken the election will largely be a non-event from the point of view of affecting the main grasp of economic policy and that's why investment has been so strong already in anticipation of that.
If retail picks up the pace, why shouldn't you be able to grow more than just 18% to 20% and probably something closer to what you grew last year?
Again, capital is not the issue and the penetration of loans in Peru is still so low.
Alvaro Correa - CFO
Well, you might be right.
Maybe the 18% to 20% could be in the lower end of that forecast.
We think, though, that the central bank will be active trying to prevent us to grow that fast.
They -- whatever happens above the 20% line, they are concerned.
So we expect some controls there in terms of as of reserves and other measures.
So that makes us a little bit more conservative this year.
We also have to see what will happen in the world.
If nothing major happens in the world, we don't really think that the risks are internal now.
As you said, elections are coming.
We don't expect a major change in -- whoever wins will be a pro-system candidate.
We don't expect a major change there.
If everything goes well, probably an 18% loan growth is conservative.
You are right.
Daniel Abut - Analyst
Thank you.
Operator
Victor Galliano, HSBC.
Victor Galliano - Analyst
Just on the provisioning, if you can just take us through a little bit of what happened again there, what happened in Q4 and what you think will happen going forward.
I mean in terms of -- are there any new rules and regulations here in terms of countercyclical provisioning that will impact that going forward or was this a kind of one-time effect in Q4?
Alvaro Correa - CFO
It was a one-time effect.
Part of it happened in the third quarter, but mostly in the last quarter.
Since we wanted to catch up with regulation that was in place, it's a one-time thing.
Having said that though, going forward the new loans, the growth in loans will have to incorporate that additional provisioning level.
So it's not an adjustment, but is an additional requirement on provisions on new loans.
Victor Galliano - Analyst
Okay, so it's a kind of like generic provision?
Alvaro Correa - CFO
Yes.
Victor Galliano - Analyst
All right, how much is that -- is that a sort of flat rate for the loan or does it depend on the type of the loan?
Alvaro Correa - CFO
It is for -- it depends on the type of loans.
Victor Galliano - Analyst
Right.
Alvaro Correa - CFO
For instance, for the wholesale loans they used to be 0.7%.
Now it's 1.3%.
That goes up to 2.5% for micro lending for instance and a range of loans.
Victor Galliano - Analyst
What -- sorry, was that 22.5% for micro did you say?
Alvaro Correa - CFO
It is 2.5%.
Victor Galliano - Analyst
2.5%, right.
Sorry.
Okay.
Alvaro Correa - CFO
That's more or less the range.
Victor Galliano - Analyst
Okay.
Alvaro Correa - CFO
Between 130 and 250.
Victor Galliano - Analyst
So, I mean, in terms of the impact for you if you managed to maintain your NPL ratio at 1.5% going forward, I mean your coverage is going to go up to -- I don't know, 220 plus?
Alvaro Correa - CFO
Probably, yes.
But remember that we used to have something closer to 300 a few years ago.
Victor Galliano - Analyst
Right.
Alvaro Correa - CFO
So anything between 200 and 300 is acceptable.
Victor Galliano - Analyst
It's kind of you, okay.
Great, thanks, Alvaro.
Operator
Luis Guzman, Santander.
Luis, your line is open.
Please check your mute function.
Sir, at this time there are no further questions in the queue.
(Operator Instructions) Alonso Aramburu, BTG Pactual.
Alonso Aramburu - Analyst
I just want to get a sense of what kind of year -- what kind of growth do you expect in the other subsidiaries, in Pacifico, Prima and Atlantic?
Specifically in Prima, I believe this year you go back to the 14 contributions per year and I assume that should improve your bottom-line.
And also how should we think about the profitability of Pacifico, if you can improve on that based on the last results?
Alvaro Correa - CFO
We have the people from Pacifico.
In Prima, I just mentioned that there's a big question mark there on whether the extension on the law that was passed a couple of years ago where contributions on July and December were cut is going to be there.
So far, we should get that contribution back but there's always the risk that somebody in the Congress says that that law should continue.
Therefore, that will make -- that single factor could make that we get either 12 contributions per year or something more like 14 contributions per year.
That's a big question mark on Prima.
Besides that growth should be alongside growth in salaries and the formalization of the economy which is something that happens slowly.
As for Pacifico, [Carlos].
Unidentified Company Representative
We're expecting an increase in production in terms of the Pacific Insurance Group of around 20%, 25% next year.
And in terms of net income, we're expecting around 12%.
So we're forecasting from going from [$59] million to almost $80 million from the total Pacific Insurance Group.
Alonso Aramburu - Analyst
Okay, thank you.
And if I could ask also about Atlantic, what are your expectations for Atlantic this year?
Alvaro Correa - CFO
I think that the $48 million, almost $49 million was exceptional because we got some gains on sales of securities that won't be necessarily there this quarter.
But still contribution should be substantial not far from what we got the previous year.
Assets under management passed the $4 billion, assets and deposits together as of the third quarter, and that should continue to grow as well as commissions on that management.
So that should continue to be a very strong contributor for this year.
Alonso Aramburu - Analyst
Okay, so when you look at the four (inaudible), the Bank and the three -- and Atlantic, Prima and Pacifico, so you think this year given the numbers you're giving us the Bank should be the one that grows the most and drives the growth in 2011.
It seems that from the numbers you're giving us.
Alvaro Correa - CFO
The Bank and together with Pacifico not only because of its own growth -- business growth but also because it will contribute more this year since we have 98% of the stock.
Alonso Aramburu - Analyst
All right.
Okay, thank you.
Operator
Federico Rey, Raymond James.
Federico Rey - Analyst
I have a question on the balance sheet.
During the quarter, we saw a meaningful shift between investment securities available for sale and cash and you from banks.
I would like to understand that and I would like to understand if this will have an impact on the margins going forward?
Thank you.
Alvaro Correa - CFO
That's a good question.
There's a major shift from investments to deposits.
The reason is that the central bank changed its strategy, instead of issuing certificates of deposits, tradable paper, they started auctioning deposits, non-tradable time deposits.
Federico Rey - Analyst
Okay.
Alvaro Correa - CFO
But the effect on --
Federico Rey - Analyst
And do you think this will have an impact on net interest margin or not?
Alvaro Correa - CFO
Well, not because of that change because it's basically the same for us.
We don't trade them, we just invest them -- invest on those deposits or series.
And that happens regardless of the type of paper that the central bank issues.
What will happen there though is that the rates on those securities or those deposits should continue to grow together with a reference rate.
On the reference rate which is 3.25% in (inaudible) now we expect that to be closer to 4%, even 4.25% by the end of this year.
So the rate will get there, will continue to grow.
Federico Rey - Analyst
Okay.
Thank you very much.
Operator
Luis Guzman, Santander.
Boris Molina - Analyst
This is Boris from Santander.
I have a question regarding capital ratios.
Recently the local regulator has begun to look at consolidated group capital ratios.
So I don't know, I wanted to know if you plan to start publishing consolidated group capital ratios and whether this regulation with potential changes in Basel III could lead to some divergences between what the capital ratio on a consolidated basis looks like and the one you publish which I think is right now tied to the Banco de Credito one?
On a related matter, whether you foresee that you would need to increase capital in the short term where you foresee that any transaction with regarding to issuing the shares?
Alvaro Correa - CFO
We don't -- we still don't have any consolidated capital ratio.
We don't have a regulator that requires that.
What the regulator requires now is that Credicorp has capital that is stable and we will -- if we want to reduce capital for instance, we will have to ask for permission to the consolidated regulator which is the superintendents in Peru.
So they have started looking at the consolidated capital of Credicorp which wasn't the case in the past, but no capital ratio so far.
As of what the second question was related to -- sorry.
Boris Molina - Analyst
Whether you have any plans to issue those new shares related to potential actions or support growth, et cetera.
Alvaro Correa - CFO
No, we don't expect -- we don't expect to issue capital.
We think we have the earnings -- the earning capability to continue growing with our own capital.
Boris Molina - Analyst
Okay.
Thank you.
Operator
At this time, there are no questions in the queue.
Sir, please proceed to closing remarks.
Alvaro Correa - CFO
Okay, thank you very much everyone.
We're looking forward to a very good year since we are very optimistic about the evolution of the Peruvian economy.
And we will -- we're quite certain that we will continue showing very good numbers for -- in 2011.
Thank you very much again.
Till next time.
Operator
Thank you for your participation in today's conference.
This concludes the presentation.
You may now disconnect.
Good day.