CREDICORPLTDUPGRADETONBETTERMACROANDMICROFACTORSDRIVEESTIMATESSHIFT1115

1、bloombergbap uscompany reportfigcommercial banksequity perucredicorp ltdabcglobal researchneutraltarget price (usd)share price (usd)potential return (%)147.00137.936.6upgrade to n: better macro and micro factors driveestimates shift we revise the key drivers, due to better peru prospectsnote: potent

2、ial return equals the percentagedifference between the current share price andthe target pricedec 2011 a 2012 e 2013 e we raise our net earnings estimates by 17% in 2012, 13% in2013 and 2014hsbc epshsbc peperformanceabsolute (%)relative (%)8.8915.51m10.313.010.1913.53m21.813.911.4412.112m27.813.6 up

3、grade rating to n from uw; raise tp to usd147 (usd110)in the wake of strong 3q12 results, and more solid peru prospects, we revise our key driversnote: (v) = volatile (please see disclosure appendix)13 november 2012victor gallianoanalysthsbc securities (usa) inc1 212 525 mariel santiagoanalysthsbc s

4、ecurities (usa) inc+1 212 525 view hsbc global research at:http:/issuer of report: hsbc securities(usa) incdisclaimer &disclosuresthis report must be readwith the disclosures andthe analyst certifications inthe disclosure appendix,and with the disclaimer,which forms part of itfor credicorp. 3q12

5、 results for credicorp were well ahead of our and market expectations (seecredicorp ltd first cut: 3q12 a well performed quarter, 8 november 2012) largely due to bcp,the peruvian banking operation that accounts for 81% of group earnings so far in 2012, and lead tous revise our forecasts for 4q 2012,

6、 2013 and 2014. we outline our key driver changes in the tableon page 5; healthy loan growth forecasts are supported by gdp growth forecasts of 6.1% for 2012and 6.2% for 2013, according to hsbc economists. this high rate of growth also supports creditquality, and we expect that loan margins should e

7、xpand further as the credit mix grows fastest inconsumer segments.we raise our credicorp earnings estimates by 17% in 2012, 13% in 2013 in 2014, as aresult of these better drivers. for 2012, the big revisions to the full year estimates are drivenby the stronger-than-expected 3q12 and our higher esti

8、mates for 4q12. for 2013 and 2014, ourestimates reflect the more constructive outlook driving revenue, which, under our newassumptions, is better able to absorb the growth in opex as well as the higher structural level ofprovisioning which faster loan growth in the consumer segment warrants. we fore

9、cast roe of21.6% for 2012, 20.3% for 2013 and 18.2% for 2014.credicorp has “scarcity value” as a liquid country and sector play. credicorp is the mostliquid country and sector stock listed on the nyse for peru, which gives it scarcity value andpotentially could result in greater share volatility; th

10、is is well chronicled in the report by ourlatam equity strategist ben laidler, peru handbook; frustrating but worth it, november 2012.credicorps re-rating has been driven by increased investor appetite for it (post 3q12) and forperuvian equity exposure in general. on our new estimates, we arrive at

11、a target price ofusd147 based on our implied pe valuation metric which in turn is due to the new 2013 targetpe of 12.9x; this warrants an upgrade to a neutral rating. we estimate credicorp trades on pemultiples of 13.5x for 2012, 12.1x for 2013 and 11.8x for 2014 and on a 2012 pbv ratio of2.6x. risk

12、s to the upside include better-than-expected credit quality, margins and fee growth;risks to the downside include higher-than-expected npl ratio and provisions and higher opex.index lima general index free float (%) 58index level 21,060 market cap (usdm) 11,007ric bap.nsource: hsbcsource: hsbccredic

13、orp ltdcommercial banks13 november 2012financials & valuationfinancial statementsabccredicorp, tp usd147, ncore profitability (% rwas) and leverageyear to12/2011a12/2012e12/2013e12/2014eyear to12/2011a12/2012e12/2013e12/2014ep&l summary (usdm)net interest income7.5net interest incom

14、enet fees/commissionstrading profitsother incometotal incomeoperating expensebad debt chargeotherhsbc pbtpbttaxationminorities + preferencesattributable profithsbc attributable profit1,306608553752,344-1,233-21538934934-211-157097091,6207391123772,848-1,448-372631,0901,090-262-168138131,915821864033

15、,225-1,609-439591,2361,236-306-179129122,100919954413,555-1,690-527-751,2631,263-316-18929929net fees/commissionstrading profitstotal incomeother incomeoperating expensepre-provision profitbad debt chargehsbc attributable profitleverage (x)return on average equityvaluation datayear tope*3.50.312.12.

16、2-7.16.4-22.812/2011a12.31.7-6.76.5-21.612/2012e11.91.6-6.46.4-20.312/2013e11.81.6-6.06.6-18.212/2014e11.8balance sheet summary (usdm)pre-provision multiplep/nav5.92.0ordinary equity3,3764,1654,8035,407dividend yield

17、 (%)3.0hsbc ordinary equity3,3764,1654,8035,407customer loansdebt securities holdingscustomer depositsinterest earning assetstotal assets16,9236,05818,98827,54230,91620,6837,40823,10631,97939,36125,1407,55826,00637,28743,37929,6937,71027,87440,66046,364price relative139129119139129119capita

18、l (%)1099910999rwa (usdm)total tier 1total capital19,4458.010.123,6878.011.326,8958.512.229,2099.212.789796989796959495949ratio, growth & per share analysis2010201120122013year toyear-on-year % changetotal incomeoperating expensepre-provision profitepshsbc epsdpsnav (including goodwill)12/2011a1

19、8.822.814.718.912/2012e21.517.526.014.614.614.623.412/2013e15.312/2014e10.25.018.812.6credicorp ltdsource: hsbcnotes:price at close 12 nov 2012of* = based on hsbc eps (fully diluted)rel to lima general indexratios (%)cost/income ratiobad debt chargecusto

20、mer loans/depositsnpl/loannpl/rwaprovision to risk assets/rwanet write-off/rwacoverageroe (including goodwill)52.61.42.8-0.7213.122.850.82.03.1-1.0198.021.649.91.93.4-1.1191.620.347.51.93.9-1.3188.618.2per share data (usd)eps reported (fully diluted)hsbc eps

21、(fully diluted)dpsnavnav (including goodwill)8.898.892.6742.3242.3210.1910.193.0652.2152.2111.4411.443.4360.2260.2211.6511.654.0867.7967.7923latam valuation tablepricetarget_ p/e _ _ pbv_11/12/12mkt captickerratingpricepr (%)2012e2013e2014e2012e2013ebrazilian banksbrlmbrlbradescobanco ita unibancoba

22、nco do brasilsantander brasilbanrisul32.029.820.814.114.2122,118134,64459,51553,3965,787bbdc4itub4bbas3sanb11brsr6nowownn(v)36.037.529.515.519.012.5%25.8%42.0%10.3%34.3%5.01.2mexican banksmxnmmxngrupo financiero banortesantander mexico71.136.616

23、5,451248,586gfnortesanmexbnn78.041.09.7%11.9%14.914.511.412.010.311.02.12.6andean banksusdmusdbancolombia (colombia)credicorp (peru)63.4137.913,50411,007cibbapuwn62.5147.0-1.4%6.6%16.213.511.612.110.3source: hsbc, factsetroe %credicorp ltdcommercial banks13 november 2012credicorp peruvian

24、premium gdp growth supports our higher loan growthprospects, along with better margin outlook from credit mix credit quality outlook, especially in consumer, is improving anddriving lower provision charges we are upgrading credicorp shares to neutral from underweightand raising our target price to u

25、sd147 from usd110abcinvestment thesiswe are raising our target price for credicorp tousd147 from usd110 and upgrading the stockto neutral from underweight rating. our newtarget price is driven by an increase in net profitestimates of 17.1% in 2012, 12.6% in 2013 and13.1% in 2014. we now expect a med

26、ium-term(2011-2014) eps growth of 9.4% versus 6.9%previously. we believe credicorp will likelybenefit from the strong economic growthexpectations in peru (6%+ gdp for 2013) and thelow level of banking credit penetration in thewe rate the stock a neutral as we believe most ofcredicorps strong prospec

27、ts are already reflectedin valuations. we believe credicorp trades on pemultiples of 13.5x for 2012, 12.1x for 2013 and11.8x for 2014 and on ptbv multiples of 2.6x for2013 and 2.3x for 2013. we estimate roes of21.6% for 2012, 20.3% for 2013 and 18.2% for2014.forecasts and coreassumptionscredicorp: k

28、ey assumptionscountry (26.4% in peru compared to 49% in2012e2013e2014ebrazil and 77% in chile).our estimates revisions are based on stronger loanloan growth, y/y % changeinterest margin, %npl ratio, %provision to average loans %22.2 (18.9) 21.6 (17.0) 18.1 (16.4)5.07 (5.04) 5.1 (4.99) 5.2 (5.0)1.75

29、(1.85) 1.85 (1.95) 1.95 (2.0)2.0 (unch) 1.9 (1.8) 1.9 (1.8)growth assumptions that should be supported by apremium gdp growth in peru, with a loan-to-gdp growth multiple of c3.5x. we also believethat our previously more bearish than market nplratio estimates have been avoided; especially incredit ca

30、rds (credit card registered a 60bpsimprovement q-on-q in 3q12). additionally thechange in credit mix with the strong growth inconsumer credit and sme loans should besupportive for margins.421.6 (19.1) 20.3 (19.3) 18.2 (17.3)source: hsbc estimates. old estimates are in parenthesisstrong loan growth e

31、xpectations: we believe thebanking sector in peru will be the fastest growingfinancial system in latam as banks should benefitfrom the strong consumer trends. we are raisingour loan growth expectations to 22.2% from18.9% in 2012, to 21.6% from 17% in 2013 and to18.1% from 16.4% in 2014. although, cu

32、rrenttrends are slowing from the high 20%+ levels,2014e11.6510.30credicorp ltdcommercial banks13 november 2012growth rates should be sustainable in the mid-teensfor the next two years.nii and margins to expand: credicorp isshifting its credit mix away from large corporateloans to higher margin and f

33、ast growing consumerlending and we believe this should drive nimexpansion next year. we believe credit nii shouldgrow in line with the loan portfolio and offsetpartly the higher risk of tapping consumers andlow income segments. we are increasing our nimhistorical average for credicorp. given the bet

34、tertrends in credit card asset quality in 3q12, we arelowering our npl ratio estimate by 10bps to1.75% in 2012; in 2013, we estimate it increasesto 1.85% and to 1.95% in 2014.estimate revisionscredicorp: hsbc estimates versus consensus(usdm except eps) 2012e 2013eeps hsbc old 8.70 10.16eps hsbc new

35、10.19 11.44abcexpectations by 3bps in 2012, 11bps in 2013 andnet profit hsbc oldnet profit hsbc new694813810912822929by 20bps in 2014.strong fee & commission growth: we believeenhanced cross-selling of insurance and growth inchange in net profitnet profit consensushsbc estimates versus consensus

36、no. of estimatessource: hsbc estimates, bloomberg17.1% 12.6%759 8947.1% 2.1%8.70 10.1613.1%1,001-7.2%10.30credit cards should drive fee growth over themedium term. we expect this line should expandby 21.6% in 2012, then new regulations impactingfees should take effect in 2013 and we expectgrowth of1

37、1% in 2013 and 12% in 2014.efficiency ratio to remain high: operatingexpense continued to grow at a higher than usualpace (9%+ q/q in 3q12), and this we believeshould continue as credicorps expansioncontinues and new business such as retail bankingand investment banking increase in transactionalacti

38、vity. in addition, we believe higher opexour new net income estimates factor in strongerloan growth assumptions for 2012-214, better thanpreviously expected asset quality ratios andimproved financial margins. we have increasedour estimates by 17.1% in 2012, 12.6% in 2013and 13.1% in 2014. these esti

39、mates imply epsgrowth of 12% y/y in 2013 and 2% in 2014. asshown in the table above our estimates are morebullish than consensus for 2012-2013 and belowconsensus by 7.2% in 2014.valuationgrowth resulting from the acquisition andincorporation of correval in colombia and imtrust in chile should contin

40、ue to add pressures toreturns. however, higher expenses should becredicorp: implied pegrowth rate (g) roe roe-g4.25% 20.35% 16.10%4.50% 20.35% 15.85%(k-g) pe 2013 target price6.77% 11.7 133.606.52% 11.9 136.56offset by higher revenues, and help efficiencystabilize through next year in peru. we estim

41、ateefficiency ratios of 50.8% for 2012, 49.9% for2013 and 47.6% for 2014.4.75%5.00%5.25%5.50%5.75%6.00%6.25%20.35%20.35%20.35%20.35%20.35%20.35%20.35%15.60%15.35%15.10%14.85%14.60%14.35%14.10%6.27%6.02%5.77%5.52%5.27%5.02%4.77%12.212.512.913.213.614.014.5139.76143.23147.00151.11155.60160.55166.01ass

42、et quality and provisions: as credicorpcontinues with its efforts to expand into the retailand lower income segments, we believeprovisions should remain in the 1.8-1.9% as apercentage of average loans. this is lower thanthe 2% level in 2012 but still higher than the 1.4%source: hsbcwe use implied pe

43、 as our core valuationmethodology, as we believe this best captures bothgrowth potential and return on capital (roe). theimplied or target pe multiple is defined as roe52%1%credicorp ltdcommercial banks13 november 2012credicorp: rolling 1-yr forward pesource: datastreamless long-term growth (roe-g)

44、divided by roetimes cost of capital less long-term growth (k-g). inessence, implied pe is implied pbv (gordonsgrowth model) divided by roe. we assume roeof 20.3% for 2013e and cost of capital of 11%, withan assumed stock beta of 1x, medium-term (2011-2014e) eps growth of 9.4% pa (6.3% previously),an

45、d long-term (2015e-2017e) eps growth of 5.3%pa (4% previously). based on an implied pe of12.9x for 2013, we arrive at a target price ofusd147 for credicorp shares.credicorp: rolling 1-yr forward pbsource: datastreamrisksupside risks, we believe, are faster-than-expectedloan growth, higher-than-expec

46、ted interestmargins, and lower-than-expected asset qualitydeterioration in the retail segment, thus resultingin lower provision expenses.downside risks include greater than expectedgrowth in operating expenses, lower-thanexpected loan growth and higher-than expecteddeterioration of asset quality in

47、consumer thatcould result in higher provision charges.abccredicorp: valuation ratios and roemultiples at current price2011a 2012e 2013e 2014eperu: the fastest growingeconomy in latampe (x)ptbv (x)roe (%)multiples at target pricepe (x)ptbv (x)roe (%)15.53.322.816.53.522.813.52.621.614.42.821.612.12.3

48、20.312.92.420.311.82.018.2average gdp growth (2001-2011)7%6%5%4%source: hsbc estimatesunder our research model, for stocks without avolatility indicator, the neutral band is 5ppts3%above and below the hurdle rate for peruvian0%perucolombiachilebrazilmexicostocks of 11%. our target price i

49、mplies a potentialreturn of 6.6%, which is within the neutral band;therefore, we upgrade the stock to neutral fromunderweight. potential return equals thepercentage difference between the current shareprice and the target price, including the forecastdividend yield, when indicated.6source: imfperu h

50、as been the fastest growing latameconomy over the past ten years. hsbcseconomic team expects this to continue, withpotential gdp slightly above 6% in 2013, driven70.0%60.0%50.0%40.0%30.0%0.0%credicorp ltdcommercial banks13 november 2012mainly by a fast growing consumer market. thelatest activity tre

51、nds from september showed thatthe economy is still portraying strong growthrates, hovering around potential. in september,monthly gdp went up 6.3% y-o-y while recentactivity indicators point to growth maintainingthis pace or even accelerating slightly in october.moreover, we believe political concer

52、ns are likelyoverdone and president humala has so far takensensible policy stances since his election.our economic team also sees with limitedinflationary pressures for the coming year. ourinflation forecast is 3.2% for 2012 and 2.5% for2013, which supports our loan growth forecasts of22.2% for 2012

53、 and 21.6% for 2013. this implies,according to hsbc economics, low benchmarkinterest rates of 4.3% for 2012 and 2013. in thefollowing table, we outline the hsbc economicsteams key peruvian macroeconomic forecasts,which form the backdrop for operations for theperuvian banking sector.peru banking tren

54、dsperus total loans have increased more than three-times from usd19bn in 2000 to usd61bn in1h12. this has doubled loans/gdp from 15% tonear 30% over the same period, but still remainslow compared to other countries in latam likebrazil at 49% and chile at 66%, while mexicosis low at 25%. peru has usd

55、47bn in reserves(more than four times countrys term debt), a 2013projected annual inflation of 2.5% and gdpgrowth of 6.2%. credit demand is at its highestand deposits are at record levels. in addition,banks capitalization is well above the required10% level at 13.4% average.latam credit penetration9

56、0.0%80.0%20.0%abc10.0%peru: hsbcs main economic forecasts20112012e2013echilebrazilcolombiaperumexicogdp (y/y%)private consumption (y/y%)unemployment rate (avge %)inflation rate (year-end %)monetary policy rate (year-end %)usd/pen (year-end)source: hsbc economics6.96.08.06.

57、4.32.5source: imfpenetration of banking services is still very low inperu, so there is still big room to grow. peru has apopulation of more than 30m people, but only25% of the annual gdp is financed through banksand there are less than 150,000 home mortgages.savings have grown at a fast pa

58、ce since the early90s when a private pension fund system wascreated, thereby creating opportunities to financeperu financial system key ratios200020012002200320042005200620072008200920102011 1h 2011 1h 2012capital rationplcoverageroeloans (us $bn)loan y-o-y%11.9%9.4%91.3%3.2%19.41.3%12.5%10.5%100.1%

59、3.1%17.6-9.3%13.0%9.4%112.8%5.0%17.1-2.6%13.0%8.0%130.1%8.0%16.8-1.7%13.4%6.0%140.3%11.1%17.01.4%13.9%3.8%171.4%11.3%17.21.0%12.3%2.3%226.0%22.3%19.412.6%12.3%1.7%245.3%25.3%22.114.1%11.7%1.4%254.0%27.7%28.830.3%11.9%1.3%249.3%31.5%38.734.5%13.5%1.7%232.1%23.9%40.33.9%13.5%1.5%238.9%24.3%47.417.8%13

60、.3%1.5%244.4%24.5%57.621.5%14.7%1.7%225.6%23.8%61.315.5%source: hsbc, brcp7sep-11dec-10dec-11sep-12mar-11mar-12jun-11jun-12nov-08apr-09jul-10dec-10aug-07sep-09feb-10may-11aug-12jan-08mar-07jun-08mar-12oct-06oct-116.0%5.0%4.0%3.0%2.0%1.0%0.0%21.91credicorp ltdcommercial banks13 november 2012domestic industrial product