Tito Labarta, an analyst from Goldman Sachs, maintained the Sell rating on Credicorp (BAP – Research Report). The associated price target was raised to $150.00.
Tito Labarta has given his Sell rating due to a combination of factors that include a tempered outlook on loan growth and concerns about achieving the projected return on equity (ROE). Credicorp’s management anticipates a more conservative growth in loans, especially given diminished demand in wholesale banking and ongoing cautiousness in retail banking and Mibanco. Despite these concerns, the company has maintained its guidance for loan growth and expects to hit near the lower end of the 3-5% target. Credicorp also aims to sustain an ROE around 17%, bolstered by positive trends in insurance and fee income. Yape, the company’s digital platform, is expected to become profitable soon due to growing income across its business lines. However, Labarta remains skeptical that Credicorp can achieve the 17% ROE target in 2024.
Labarta’s evaluation also takes into account the stock’s current valuation, which he considers premium compared to its Latin American banking peers. Despite an increase in estimates following recent favorable financial results, mainly from higher expected fee income and lowered costs, Labarta projects provisions to rise through 2026. The first quarter’s lower provisions were primarily due to the reversal of provisions related to the El Niño phenomenon. Even with adjustments, Labarta forecasts a ROE for Credicorp that falls short of the company’s guidance, estimating it at 16.2% for 2024. Additionally, Credicorp’s stock is trading at a higher price-to-earnings (P/E) and price-to-book (P/B) ratios than the median of its peers, which does not align with its lower expected ROE, prompting Labarta to suggest that there is greater upside in other stocks within his coverage.
TipRanks tracks over 100,000 company insiders, identifying the select few who excel in timing their transactions. By upgrading to TipRanks Premium, you will gain access to this exclusive data and discover crucial insights to guide your investment decisions. Begin your TipRanks Premium journey today.
Credicorp (BAP) Company Description:
Credicorp Ltd. is a holding company, which engages in the provision of financial services. It operates through the following segments: Universal Banking; Insurance & Pensions; Microfinance; and Investment Banking & Wealth Management. The Universal Banking segment includes the operations related to the granting of various credits and financial instruments to individuals and legal entities. The Insurance and Pensions segment includes the issue of insurance policies to cover losses in commercial property, transport, marine vessels, automobiles, life, health and pensions and also provides management service of private pension funds to the affiliates. The microfinance segment includes the management of loans, credits, deposits and current accounts of the small and microenterprises. The Investment Banking & Wealth Management segment includes the brokerage service and investment management services offered to clientele, which includes corporations, institutional investors, governments and foundations; also, the structuring and placement of issues in the primary market, as well as the execution and negotiation of transactions in the secondary market. The company was founded on October 20, 1995 and is headquartered in Lima, Peru.
