Welcome to the second quarter 2013 Credicorp Earnings Conference Call. My name is Lorena and I will be your operator for today’s call. At this time all participants are in a listen only mode. Later we will conduct a question-and-answer session. I will now turn the call over to Mr. Alvaro Correa, Chief Financial Operator from Credicorp. Mr. Correa you may begin.

Thank you, Lorena. Good morning and welcome to Credicorp’s second quarter earnings results conference for 2013. As you will see along this presentation the main message that we want to convey today is that even though our results for the quarter have been severely affected by the devaluation of Nuevo Sol, the core business activities of Credicorp have performed well and the company is well positioned to continue capturing the growth opportunities that lay ahead. A stronger devaluation of the local currency was recorded this second quarter which reached 7.5% and added to the 1.5% devaluation of the first quarter resulted in a total of 9% devaluation for the first half of the year. This volatility of the local currency in our market surpassed all precedents in the last 20 years. These variations were initially attributable to changes in Central Bank’s policy and then to the fact that the U.S. dollar has strengthened worldwide. In the past and as long as U.S. dollar remained dominant currency in the different businesses of Credicorp this exposure was small and easily managed. However as the local currency gained importance and began dominate in Credicorp’s core businesses, our corporation became more exposed to currency fluctuations when reported in U.S. dollars. Even more so, given that we maintain the policy of keeping our equity in both currencies as a way of protecting capital. Therefore, the result of this second quarter incorporates the full impact of such devaluation. This has generated a significant distortion in the reported volumes for growth and income generation at most of Credicorp’s Nuevos Soles denominated businesses which currently contribute over 87% of the corporation’s income and has also generated translation losses as well as a valuation loss on structural forward contracts both of which arise from efforts to protect the capitalization…

Okay, thank you Alvaro. Good morning to all of you. Before we go in to the Q&A we thought it was worthwhile that I take a couple of minutes and try to give you a better sense on how we see the future long term. Clearly this first six months have been highly impacted by evolutions in the world economy. The world that we saw at the end of last year clearly is not the same one that we see today. Our base case scenario going forward continues to be that Peru will probably grow at a 5% give plus or minus 5% around in GDP growth. But how does this translate into growth in the financial sector. Traditionally this meant that the financial sector would grow between 2.5 and three times GDP growth. We think that is no longer the case. Not only has Peru reached a higher level of penetration of the banking industry but furthermore regulators are very much concerned to continue to see very important growth rates in the loan portfolio of the banks. Even with this 5% Peruvian GDP growth our base case is that the financial system as a whole will probably grow between 10, 12 maximum 15% growth. Both numbers continue to be very good, particularly when compared with the rest of the world. But that is basically the scenario that we see. Now having said that our base case scenario – now having said that there is another scenario which is that China does not do what everybody expects and that a slowdown in the Chinese economy is a lot stronger than what is in our base case and China grows at a 4% rate give or take. Those numbers would have severe impact in the growth of the Peruvian economy because…

Thank you. We will now begin the question-and-answer session. (Operator Instructions). And our first question comes from Thiago Batista from Itaú. Please go ahead. Thiago Batista – Itaú BBA: Hi guys. Thiago Batista from Itaú BBA. I have two questions. The first one regarding the asset quality in the SME segment. After all the adjustments you did in the credit policy of the segment in September last year have you already starting to see some improvement in asset quality in the new vintages and do you believe the peak of the loan of this portfolio will be achieved? And my second question is regarding to the impact of the Soles depreciation. Are you taking any measure to reduce the exposure of the bank to the currency at least in short-term?

Sure. Thank you very much for the questions. I will take one the first one and I will leave the second one for Alvaro. On the SME portfolio we have seen continued deterioration. Clearly we have made I think it was 60 days ago our first set said of initial changes in our underwriting policies and adjustments in our credit standards. I would expect results to start showing in the last quarter of this year. We have within our portfolio certain loans that will continue to deteriorate so provisions and passive loans will probably even slightly increase the next three months. And we could expect first stabilization or even improvement in the last quarter of this year. With regards to the exposure and when we have now we are not far away from the neutral; let’s say neutral position in the mix of dollars and Soles coverage of equity. What we have done in the last quarter is probably we are a little bit into the Soles larger Soles position because we are preparing the equity for factor growth in Soles. So we are taking a step forward but basically what we have done in the last two months is putting ourselves in a more neutral position in terms of protecting equity. This does not mean this is a neutral position in terms of P&L, that is we will continue to bring volatility if there are major changes in the FX. Thiago Batista – Itaú BBA: Okay.

Thank you. And our next question comes from Carlos Macedo from Goldman Sachs. Please go ahead. Carlos Macedo – Goldman Sachs: Good morning gentlemen. I have actually couple of questions. The first one is more related to what Walter just announced in terms of the growth in loans and also the growth or the efficiency program. If I remember maybe not last year but the previous quarter you were talking about doubling the size of the bank and how that would have a negative impact and would allow the efficiency ratio to improve for two or three years. What does this – given the new outlook for loan growth and given the new outlook for this efficiency program what does that mean with respect to your efficiency ratio and to your branch network? Do you still look towards an aggressive expansion of branches or is that going to be on the backburner for now while you carry out this efficiency program? And the second question is a little bit more related to FX exposures. While they are not specifically the exposure, with the current keeping I think you mentioned in the last conference call that you expect the government to allow the currency to fluctuate with the little bit more volatility going forward. And with over 87% of your net income coming in Soles I understand that your functional currency is the dollar but is there any way that you can start reporting in Soles in order to basically offset part of the translation confusion. Thank you.

Okay, thank you Carlos for two questions. I will start with the first one and Alvaro will take the second one. In terms of branches inefficiency what we are seeing is that yes, we will continue to grow our transaction and assets anywhere between 10% and 15% let’s stay 12%. That will require growth in our branch network absolutely yes. The number that is floating around and we are still in the process of making detailed projections. So this is still preliminary. But the number that we seem to fluctuate around is about 50-60 branches per year going forward. So yes it is a lot less than we had originally mentioned. We are always talking about a number 80 to 100 and we are not talking 50-60. But again preliminary numbers but just to give you a sense of what we are seeing going forward. In terms of the efficiency I will probably need a little bit more time to give you more detailed numbers. We are in the middle of process of working, we are having a series workshops working internally. We have visited banks that have been very successful doing this and I think it will be a bit preliminarily on my side to give you targets. And we will give you, those obviously to the market as soon as we have them, which will probably be for the next quarter. But clearly we are going to be very ambitious. We have been fluctuating, again big numbers. We have been fluctuating around the 50%-52% and clearly we would love to reach closer to the 42%. But again these are preliminary numbers was just to give you a sense of our ambitions and the overall sense of where we are going.

With regards to reporting to change the functional currency that’s definitely a very reasonable question. We are in the process of doing that assessment. It makes sense to start thinking about that once we have reached this turning point of 50% Soles dollar mix in the asset side and even more so when we talk about income and expenses so it’s in progress but no decision so far. Carlos Macedo – Goldman Sachs: Okay, thank you for the answers both of you, very interesting and we hope to hear from you in both developments. Thanks.

All right, thank you Carlos.

Thank you. And our next question comes from Tito Labarta from Deutsche Bank. Please go ahead. Tito Labarta – Deutsche Bank: Hi, Alvaro and Walter good morning. Thanks for the call. Couple of questions also. Just given also the outlook you just presented with a – in a slower growth environment, how do you think that we could end up in terms of profitability? In the past you have mentioned you target ROE 20% plus, I mean do you think that’s still the case or does this kind of slower growth environment means that you think profitability will also come down from the guidance you have given in the past? And then a follow-up question in terms of your asset quality and provisions. You mentioned you may have some additional provisions in the third quarter related to SMEs. Now is that on top of like the $20 million that we saw this quarter or should we think more the additional provisions would be above like 1.8% excluding that? So just if you could give some more color on the provisioning levels for the rest of the year. Thank you.

Sure, Tito. Thank you. In terms of our profitability I want to be very clear. I have absolutely no doubt that the 20 plus return equity is achievable, sustainable over time. We have been affected. This is the first quarter I can think of or the first half of the year that I can think of since I have been in this bank where we have not achieved a 20 plus return equity. It is exclusively or attributable to the fluctuations in the currency, even leaving all the other things on the side. So the 20 plus return equity is very much our target and I have very little doubt that, that is an achievable number. In terms of provisioning, just a few comments and maybe Alvaro you want to add something afterwards. I was referring that the SME portfolio we continue to see – we have not fully digested the loans that we have in our book and as they continue to deteriorate we will have to increase our provisions, that’s exclusively on the SME. Clearly all the other pieces of our portfolio continue to be very stable. You have seen them in the chart. We have seen a spike in provisions but related to growth which is fine. So asset quality is really not a concern. Our consumer portfolio continues to boom. The new vintage that we sell are very good. So increase in provisions will only be on the SME and hopefully offset by improvements in the other pieces of the portfolio. Alvaro you want to add something?

No, just to stress on the point that you made before that we started with the adjustments in the SME policies just two-three months ago and we are yet to see the results of that in the second quarter. So – sorry in the fourth quarter of the year. So I would say that we might expect additional provisions in that business alone going forward for a short period of time. Tito Labarta – Deutsche Bank: Thank you. It was very helpful. Just a follow-up on the provisioning then. So the way we saw about $20 million in addition provision this quarter it could be some additional provisions like that just related to SME but do you think the level will come down from this $20 million or is that kind of a level to expect do you think that it should trend down a bit?

Just to be conservative I will keep it stable marginal increase but nothing, I think that the level that we have right now is what I could say is relatively high. We don’t expect dramatic improvements nor dramatic deteriorations from this level. Tito Labarta – Deutsche Bank: All right, thank you very much.

You are welcome.

Thank you. And our next question comes from Jose Barria from Bank of America. Please go ahead. Jose Barria – Bank of America Merrill Lynch: Hi, good morning, Walter and Alvaro. Thank you for taking my question. Just on loan growth, we did see some pretty different trends on local denominated portfolio and the U.S. denominated portfolio. Looking specifically at the U.S. denominated portfolio most of that concentration is obviously in commercial loans. What exactly is happening, we understand that the economic environment is decelerating but looking at the quarterly evolution it was a decline in portfolio. Is this related to specific clients that maybe did not renew in the [inaudible] capital markets or is this more of a trend in the system that you are expecting much less demand in commercial loans going forward.

Okay, it’s both. Actually there were a very few number of specific customers that did bonds issues in international capital market, dollar bond issues and obviously with those bonds they repaid the loan facility that had a lot of them which were with BCP. So yes that was that particular specific effect. Second, we expect less dollar demand clearly corporate have been also very affected by the valuation coming from a very stable currency exchange rate it had become quite common to see large corporate borrowing dollars because of the lower coupon. They have been affected, the result have been affected by translation losses this quarter. Clearly they have been a lot more conservative in matching their flows. So that we do not expect growth in our dollar portfolio. We expect on the other hand more, and we are seeing more local currency demand. So overall commercial loans will continue to grow but of course tied to a lower growth rate of the economy. If you see the addition of both currencies. In dollars we expect a lot less demand. I don’t know if I explain myself. Jose Barria – Bank of America Merrill Lynch: Yeah, no that was very clear, thank you. And then when we think about margins going forward, Central Bank is easing maybe on reserve requirements, you have got higher growth in retail, lower in commercial. How should we think about margins going forward? I mean it seems to me like those movements should imply that we should see some stability already increasing, barring any future impacts on the currency which could add some distortion to the evolution?

I think the trend that we expect to see going forward has not changed. What we have been thinking in the past which is there are two process that playing against each other. One is the fact that this is a very competitive market and competition is clearly driving margins downwards. But on the other hand we do have a portfolio mix which is growing more on the retail side which has higher margins. So I think it would be conservative to expect overall margins to stay flat even marginally increase but I think it’s a fair assumption that they would stay flat going forward. Jose Barria – Bank of America Merrill Lynch: Perfect, thank you very much.

Thank you. And our next question comes from Philip Finch from UBS. Please go ahead. Philip Finch – UBS: Good morning everyone, thank you for the presentation and taking our questions. I just have one question. In the second quarter you introduced a new scoring model for SMEs which lead to the additional $20 million of provisions that is non-recurring. Can you tell us what other possible loan book have yet to come under this new scoring system and whether this means we could see additional provisioning adjustments in future quarters? Thank you.

Okay, we are continuously upgrading risk management tools of the SMEs. We have introduced a new scoring model but the scoring model what it does, it allows the entry or non-entry of new loans. The provisions that we have done are related to the portfolio that is already on our books which will continue to deteriorate. So the fact that we continue to change the model and we have done that in the past and changing even the parameters the approval rate and that is a continuous effort. So the fact that we have made additional provisions is not directly related to the fact that we introduced a new model but again what the new model does it allows us to have better predictability on the loans that we accept. The provisions are for the loans that we have already in our books. Philip Finch – UBS: Great, thank you very much.

Welcome.

Thank you. And our next question comes from Mariel Santiago from HSBC. Please go ahead. Mariel Santiago – HSBC: Hi, thank you for taking my question. My questions have been answered but if I can just do a follow-up on your – you mentioned that you are very, you show that you can achieve the 20% ROE for this year. If you can just explain a little bit more, what are going to be the main drivers to achieve these ROE levels this year?

Okay Mariel, no I did not imply that for this year we will have a 20% return on equity. Clearly that would be a complicated mathematical exercise given return on equity in the first half. What I implied is our long term return on equity objective continues to be 20% and that clearly, hopefully even it’s only exclude only having the second half of this year we might get closer to the 20% depends on how the currency fluctuate. So no let me make it very clear, for the year 2013 we will not have 20% return on equity but that is our target achievable on the long term basis. Mariel Santiago – HSBC: What do you think then could be your ROE range for the year?

Anywhere between 20 and what we have in the first half. I’m sorry I would try not to give very detail projection going forward as you can imagine. Mariel Santiago – HSBC: Great, thank you for the answers.

Thank you. And our next question comes from Saúl Martinez from JPMorgan. Please go ahead. Saúl Martinez – JPMorgan: Hi, good morning everybody. I’m going to play devil’s advocate a little bit and I apologize if the line of questioning comes across a little bit aggressive but I want to ask, it seems like the message that Alvaro gave was really that this is a very good quarter operationally in terms of operation in profitability trend if you look at the currency depreciation. And when I look at the numbers my conclusion is that, it was a good quarter from a top line perspective and a growth perspective looking past the currency depreciation but not necessarily from a profitability standpoint. And when I look at for example the BCP numbers in local currency and adjusting for currency gains this quarter obviously in local currency and maybe someone-offs and I know it’s tricky. It seems like the earnings there were not very good in local currency, you had pretty elevated cost growth obviously. You had as you mentioned very high increases in provisioning and it seems like at least the growth you had is in the short term negatively impacting your core profitability. So I’m wondering how you respond to that and especially in light of the later comment made you really that you are fine tuning the risk management practices, you didn’t have best practices. How do you think about that and is that assessment that, that growth has led to lower profitability more recently this quarter and the first quarter, is that a fair assessment in your view?

Sure. You are not absolutely wrong I think you have a good point. It was a good quarter again excluding all the effects, noise it looks a good quarter from a top line and yet can be better on the bottom line. Two things to consider when you are looking exclusively at the BCP local currency numbers. One is that we continue to have BCP Correval until the end of the second half, which was not there the first quarter last year. So comparing you are not comparing apples-to-apples, there are couple of oranges there. And the other thing again exclude from that a loss which is already reflected in BCP’s books of the sale of Correval to Credicorp Capital which is on the consolidated it’s not a loss obviously. So even if you think those two out which are clearly make it for more comparable numbers trying to look different your conclusion would be not exactly, what you are saying though at a different level. We have to work better on our bottom line and our bottom line I think where we can extract a lot of value is again on the risk management and on the efficiencies. Even excluding Correval I think we have work to do and again we talk about the negative effect of translation. But they have had positive effects on the cost of [inaudible]. So yes we do have to work a lot on efficiencies and we can fine tune our risk management. So you are right. Even if you exclude the foreign exchange and the extraordinary items that you have mentioned we do have work to do and that’s what we are very much focused on and your conclusion would not be absolutely wrong but at a different level. Saúl Martinez – JPMorgan: Okay.

We will see good result, good bottom line results but not extraordinary. Saúl Martinez – JPMorgan: Can you remind me what the loss on Correval was at BCP, do you disclose that or no?

Seven? 10, 10 million. Saúl Martinez – JPMorgan: 10 million okay. 10 million Soles?

Dollars. Saúl Martinez – JPMorgan: Dollars, okay. Got it. And then just secondly related, how do you I mean the three levers risk management and efficiency in SMEs but typically when I look at SME, when I look at a segment where a company is tightening risk selection and tightening risk standards they typically don’t grow as quickly as you’re still growing in SME even as you are tightening risk standards. How do you respond to the notion that you shouldn’t be growing 30% in your local currency SME book 6% sequentially, if you really are indeed tightening risk standard and trying to tighten up risk selection there?

Okay, let me go deeper into SMEs. Even within the SMEs you do have different types of SMEs. Obviously you’ve got the large SMEs and the very small, if you will, entry level SMEs. The entry level SMEs will be an extremely healthy portfolio, mostly done with through [inaudible] report separate numbers and you can truly evaluate what I’m seeing, you’ll see extremely healthy growth and very consistent delinquencies. Where we have had a problem is with the high end SMEs, which are mostly done at BCP, in BCP’s books. So at the low end SMEs we have absolutely no concerns. They’re growing quite healthily. What I referred to in terms of focusing on SMEs going forward is what we see a longer trend, which is that the entry level SME are Edyficar type of model. We don’t see that market segment gaining market share, if you will, of our total portfolio. Where we see the growth coming in the next, five to seven years is at the high end, precisely where we are not very good at. We’re not very good at risk management and we’re not very good, even in our commercial processes. So that is what we are focusing on. The lower SME is a very healthy business model, which is operating quite perfectly with low delinquencies. On the high end is where we have to focus which is at the bank level. Saúl Martinez – JPMorgan: Okay, thank you very much. That’s very helpful Walter.

You’re welcome.

Thank you. (Operator Instructions). And our next question comes from Boris Molina from Santander. Please go ahead. Boris Molina – Santander: Yes, I had a question regarding capital [issues[, I hear that you begin to publish the consolidated group capital ratio requirement for the bank and insurance up gradations, and we really appreciate this it’s a nice big improvement in disclosure. Nonetheless when you look at the Tier 1 ratio that would be derived from this, this would be around 7.8 for the second quarter. But then it’s improved on a year-to-year basis. We would like to see if you can help us understand how does the local regulator look at this capital ratios? And what are limits they are in and how do you feel about this number, because it’s the discrepancies between what the bank and the group are, could be misleading.

Thank you, Boris. The local regulator does not have a minimum of tier 1 capital. What they do have is the total capital and a minimum mix of tier 1 to tier 2, which is 50%. Obviously we don’t want to be at that level. We have our target of tier 1 to tier 2 or tier 2 to total of around 30% roughly, but no specific target for a tier 1 or tier 1 common capital ratio. We do have an internal minimum set by the board, which is going to go up overtime from 8% to 9%. I think we’re about 8.5% today, for BCP. I am talking about BCP. With regards to your question on Credicorp consolidated capital ratio, the local regulator was defined as the consolidated regulator for Credicorp. And they do have the implemented consolidated capital requirements about three years ago, and we do comply with that, I want to report that as well and that includes all businesses, financial and non-financial businesses that we may have. Boris Molina – Santander: So they think that it’s the same minimum and limit requirements for the [consolidators] or the bank or is there a different, because there seems to be some too big to fail and market share and all this stuff the additional capital requirements that they put. So we don’t understand if this is same as the bank or the group level and how does that regulator feel about the minimal? Is the minimal for the group is the same as the minimal for the bank?

They are the different metrics. For the bank you have capital requirements for different purposes, as you mentioned for big-too-sale and for concentration and other types of capital requirements and they received a schedule to adopt to that to adjust to that. We have decided internally to adjust it fully by July of last year. So we’re very compliant with that. And we do not have the same type of metrics for the consolidated Credicorp capital. There, what we have it’s an amount that has to be defined depending on the different, under the different business we are in. So it’s basically first one amount, not a ratio.

Boris, this Walter. This is extremely complicated calculation. Boris Molina – Santander: Yeah, I can see.

For the bank it’s relatively simple, standard, worldwide capital ratios and very comparable to what you would see in other places. For the Group through they are very complicated, because they include insurance. We even have non-financial businesses, capital requirements, how do you consolidate them separately. It’s very complex and what I would do is I would ask our Investor Relations team to give you a call and going to all the detail you want. It will be very difficult… Boris Molina – Santander: I appreciate that.

Try to explain that here. Boris Molina – Santander: Yeah, one question is, the local regulator has introduced some accounting changes for local listed banks in terms of something IFRS updations. Do you foresee that they would actually to comply to the local regulatory accountings standards as part of this process or review of your portion of currency change? And do you foresee that you might be willing or require to publish audited statements with notes on a quarterly basis?

We, as of this year, we had already have to comply with the new IFRS aligned reporting for local purposes; a very, very similar to international standards. So you won’t see, besides if we ever change the currency, the functional currency with beside the translation or, sorry the conversion you should not see major differences in reporting. We are not required to have quarterly audited financial statement. Boris Molina – Santander: Okay, I guess I was making this question just because I was wondering where are the local accounting treatment of the four-walls that you’re putting your margin would be IFRS compliant on the Peruvian version.

Yeah, they’re same accounting books.

The only major difference you see between local accounting IFRS rule and international is probably the provision itself, provisions for portfolio in which provisions under the local books are more in-line with the super-in tendencies, methodologies then with international financial reporting standards. Boris Molina – Santander: Okay, wonderful. Thank you.

Thank you. And at this time I’m showing no further questions. This concludes the question-and-answer session of today’s call. I would now turn the call back over to Alvaro Correa, Chief Financial Officer for closing remarks.

Okay, thank you very much everyone. Good questions. I think we have been a resource of the quarter and then we definitely hope to have a net volatile quarter and hope to hear from you soon about our company. Thank you very much.

Thank you ladies and gentlemen. This concludes today’s teleconference. Thank you for participating. You may now disconnect.