Credicorp Remains A Well-Run House In A Tricky Neighborhood

I’ve long been a fan of Credicorp (NYSE:BAP), a well-run leading Peruvian bank, and I’ve been impressed with the company’s ability to navigate challenges in the political and macroeconomic environment of Peru, while continuing to maintain good lending share and investing in growth drivers like digital banking. I haven’t been as big of a fan of operating conditions in Peru, though, and I’m not altogether surprised that Credicorp’s shares are about 20% lower than at my last write-up, as the macroeconomic situation in Peru has gotten more challenging.

It’s easier to be bullish on Credicorp at this lower valuation, though I still see economic and political risk as major factors in the investment analysis. Weak business confidence and low real wage growth aren’t great underlying trends for the near term, nor is a 20% approval rating for the president or a significant increase in the price of credit default swaps for Peru since the start of the year. All in all, I like the double-digit prospective returns here, but investors need to go in with their eyes open with respect to the above-average risks and volatility here.

 

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Credicorp Remains A Well-Run House In A Tricky Neighborhood