Lima — En sus casi 30 años como parte del grupo Credicorp, el banquero Walter Bayly reconoce haber tenido momentos buenos, no tan buenos y también malos.It was for many years General Manager of the Bank of Credit of Peru (BCP), the largest financial institution in the country, and as CEO of Credicorp Ltd.He has led the company's expansion to other regions such as Bolivia, Colombia and Chile.

“What always gave me a lot of strength to follow is the tremendous commitment that I have seen in all Credicorp collaborators, it is an organization with spectacular people, very identified with the organization and proud to work in a company with a very high professional level.That gave me a lot of strength in the most difficult moments, ”Bayly told Bloomberg Line, before saying goodbye to the position of general manager of the company this last month of 2021 to deliver the post to Gianfranco Ferrari. En esta entrevista, Bayly revela cómo deja a una de las compañías más grandes del país y lo que se vendría este 2022.

More than three years have passed since he assumed Ceo de Credicorp, but you withdraw from the corporation after almost three decades.If we talk about these last years, what achievements would you say you have achieved in this position and how does this stage close?

One of the things that I feel most proud of, without a doubt, is to have involved and involved Credicorp in the world of microfinance.There are not only business reasons, but also the tremendous number of people participating in the world of informality;This presents an important challenge about how to include them financially.Credicorp's presence in the Peruvian economy would be incomplete if we are not in this segment.Even in the first years that I was general manager of the BCP several times we tried to get involved in microfinance through the bank, and every time we arrived at those clients or uploaded our costs or delinquency flew.We were lucky that the sale of a company called was built, we bought it and learned a lot;Then Mibanco appeared, we bought it and merged both companies.Now we are also in Colombia.Therefore, leaving Credicorp with a relevant presence in microfinance in Peru is something that makes me proud.(Microfinance) has become one of the most internationalization potential businesses.

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Are there potential markets that have studied to arrive with Credicorp in terms of microfinance?

Mexico, no doubt.In Mexico there is only a microfinance, which is smaller than Mibanco in a country six times larger than Peru.There is no national champion.There is space and there are a lot of small players.In Colombia Credicorp it is already 9% of the microfinance market and aspires to reach 20% -25% of the market.

If we talk about the microfinance ecosystem of Peru, considering that the Government has expressed its intention to intervene in the financial market with the Bank of the Nation in areas where there is currently no formal financial offer, why do you think it has not been able to penetrate that offer that offerTo these areas where are there financial needs?Could alliances between the private and public sector be formed to achieve this purpose?

Those alliances have been for years.Even before buying, I already had and continues to have an alliance with the Bank of the Nation.But if Credicorp has not reached places it is because profitability does not give us.It is very important to understand that for microfinance to work they have to be sustainable, they cannot live as a subsidy.There are places where the distribution cost becomes so high that it does not allow the business to be viable.

Last year the standard that stops the interest rates of the financial system entered into force.How much has this measure impact negatively and how does it affect the possibilities of expansion of the system at the national level?

The last time I reviewed the information, there are 780 thousand people who left the financial system product of the top of interest rates.The case where the company lived it with more time is Colombia, which also has a rave stop scheme.The company's competition in Colombia is not the other banks but informal lenders.The challenge is how to lower costs in such a way that you can compete with informal lenders who are huge in Colombia.

Is this financial financial market bigger there than in Peru?

Yes, because the top of the interest rate in Colombia is lower.

How much in Peru the competition has been given by the informal side?

Here is competition from both sides.There is a very good competence of the boxes that have a relevant presence, of some financial ones, but there is also a very large growth potential if it is possible to capture that large number of people in the informal economy.There is a very interesting market there.

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How much the pandemic changed or accelerated the expectations that you had about the company and the management of it, as well as Credicorp plans in the medium and long term?

When Pandemia came our first concern was our people.We gave information about how they and their family take care of them, as the first focus.The second focus was how to maintain operational continuity with our collaborators working at the branches: the BCP, Mibanco, and Pacific Seguros, as systemic organizations, could not stop operating.Retting all the engineering to function remotely took us a short time but a few days, and there were cybernetic risks to take into account.Then we focus on seeing that our customers had access to bank services and loans or renovations;And finally, we analyze how to help society.

Then came the concern about what could happen to credit portfolios.We look for a historical data set of situations in which a very abrupt fall was made in GDP, such as when the crisis was given by Lehman Brothers and Peru went from growing 9% to 0%.That was a reference point: what happened then with credit cards, loans, and different segments or products given that fall.We also find other experiences such as when the El Niño phenomenon occurred in the North, when the fall of the regional GDP was immense.Based on that we developed data thinking about what could happen in the credit portfolios of Credicorp's financial institutions.We were very aggressive in generating provisions to be solid and face the deterioration that could come in the portfolios.What we could not incorporate into the model was the tremendous positive impact that had reactive Peru (credits guaranteed by the Government during the pandemic) in the companies and the withdrawals of the AFPs in the people.The amount of provisions we made was very conservative and the exit of the crisis for us has been very fast because we were tremendously provisioned.We see the economy bouncing well, so Credicorp remains quite calm.

How much has the use of cash in Peru decreased following the pandemic and the increase in the use of digital channels to make transfers or payments?

Cash management has fallen into the formal economy, but it is still extremely high -almost 90% of the informal economy -.In the formal, it is almost nothing.The means of payment have become very accessible to small amounts with all the different digital wallets.In the formal world the cash has a much lower role;Although there is still a pending task in the informal world.

How did Yape 2021 closed and what perspectives do they have at 2022?

Yape was 8 million customers at the end of 2021 and the goal of 2022 I left is 10 million customers.I will not be in the company, but I can say that the way in which these disruptive business models grow is, first, to find a client pain point.The point of pain through which Yape grew are person -to -person payments.If you wanted to spend 15 suns to a person, it was a relaxation.It is based on what climbed, but then functionalities were added.Yape already has its electronic wallet;He is making loans;It is adding functionalities little by little and that is the route that is going.

Considering the impact of pandemic outside of Peru, how much changed the Credicorp expansion plans and investments?What is coming?

Before answering that question, I must say that the tremendous positive impact that life insurance companies during the pandemic has not been commented enough.The amount of payments they made was tremendous.We paid 500 million soles to families who unfortunately had a deceased.In the Life Insurance Portfolio that within Pacific is the most important, we are very good in what is known as a disassembly: when you take a loan of some kind, if for some reason you die the debt, no one inherits it but anywhere but pays automatically.That very big impact that caused immense losses has not been commented enough, but it is the business and has contributed.

Answering the question now, Credicorp did strategic reviews in all businesses and countries in which it is.There is no strategic change but it has happened that investments will be compressed over a much smaller period of time to accelerate the reality of the greater use of digital media by customers.Everything accelerates.

What investment opportunities still identify in countries where they have investments and in general in Latin America?How much political contexts have affected the region?

In the more than 130 years that the BCP has life, the company has gone through all political situations, wars, natural and unnatural disasters, etc.., and it is an institution committed to the countries in which it is.Will continue to invest and there is absolutely no change.There will be tactical movement but does not change the strategy, or anything.I recently visited Chile and Colombia, I admire a lot, and since Peru they are happening a time when the pendulum moves from one place to another, but life is so.That is why we will stop doing the things we want to do.Customers and the presence of the company gives it a purpose.

One of the criticisms that are made of the financial system in Peru is to "concentrate" the competition in four great competitors in the banking sector.How do you take these comments?What differentiates the Peruvian financial system from that of its regional peers?

There is no difference.If you see the concentration in Colombia there are four banks, and in Chile there are four banks the largest.The size of our countries is relatively smaller and does not give rise to 25 banks because they would all be small, and that is not good at all.Now, in spite of this there is a tremendous bank competition.Many times there is talk that there is a concentration and it is true that there are few players, but that does not mean that there is no competition.The mortgage market in which Credicorp is is tremendously competitive and there are 45 players.All boxes place mortgages.There is little knowledge of the detail about real competitive dynamics when talking about concentration.He has never taken my dream.This concentration occurs in Turkey, Peru, Brazil and everywhere.There are competitors who are even larger than the credit bank.None of those who participate in the financial market feel that there is a lack of competition.

Fintech entry was also quite disruptive.How much Credicorp has seen potential in continuing to invest in these technologies or even to ally or acquire different operations?

I think it is tremendously relevant towards the future of Credicorp the success in developing and climbing these disruptive business models.We are permanently seeing worldwide what models appear and which could be relevant to be applied in our markets.One of the advantages of Peru is that it is not the most interesting market: by scale in Latin America if someone develops a disruptive or super creative business EM some market, usually looks first to Brazil, Argentina, Mexico or Colombia.We always have a little time to see what works and what do we develop.These digital business models are developed, some, within Credicorp, but also has Krealo that as a unit seeks to bring these disruptive models if they are not being developed by the mother institution in that segment to complement it and be prepared.What we do not want to happen is that they come from a third party.The company is investing a lot in that.Anyway the future goes around.

Political context

There was a lot of fear in the private sector with the arrival of Pedro Castillo to the Presidency.Do you perceive that moderation has effectively occurred to what was previously thought to represent your management?

Little by little the initiatives of this government will continue to transparent.But my concern is not whether the government is left or right, but how we improve the quality of public administration in general.This is a legacy that comes from years ago, it is not from this government.There is no relevant project or initiative that can transform this country that does not go through any state entity.To the extent that we do not have personnel and executives who feel that working for the State is a valid career and option, or there is no ability to attract talent, we will always have a limited execution.Many times resources are assigned to various units and are not finished using because there is no necessary equipment behind.The main concern for me is if we will be able to someday have an administrative apparatus of the State that is efficient.We have not lacked resources, but we have a health system with tremendous deficiencies that were evidenced in this crisis, an education system that could greatly improve...That for me is more relevant than the political movement in the short term.

What is the balance that would make the first months of Pedro Castillo's government?

Obviously it is a complex situation.Our countries require important structural reforms.To the extent that we are not able to face and execute those necessary and obvious reforms -the judicial system, health, education, capacity for execution of the State -we will continue to have these volatilities.Instead of focusing if this or that political problem happened this month, I focus on how we build the capacities so that our country can make the next jump, regardless of whether the government has a trend or another.I am peaceful to see that it seems that a prudent and consistent monetary management will be maintained over time and from the Ministry of Economy and Finance (MEF) there were commitments for Peru to maintain its investment grade.I see a good degree of orthodox management of the macroeconomic variables that have given us peace of mind in the medium term.

At any time from Credicorp analyzed any scenario in which nationalizations or statizations could be given, as the private sector feared?Did you see this as a possibility?

Obviously we analyze it but it does not seem very realistic that some of that can happen, for the simple sense that nationalization costs.Peru is a country that is involved in the world through international bilateral and multilateral treaties, as well as subject to under -intentions under international forums and cuts.If one wants to expropriate the mining industry, Peru does not have enough money.If you would like to expropriate the gas industry, half of the reserves go.It does not seem very viable or realistic to think of nationalization scenarios.

It would not be so realistic then that in the private sector it was afraid for this.

Well, for every time everyone is mentioned..But if you double click, you feel calmer.

Recently his successor Gianfranco Ferrari has been incorporated into the Lava Jato case by the Prosecutor's Office.How are these cases that have involved BCP in fiscal investigations here in Peru?

We are collaborating with justice.I know Gianfranco and I know the case, I have worked with him 25 years ago and I have no concern or doubt about his behavior.He is a tremendously ethical person and will have to undergo everything he has to do.I have supreme confidence in him.

Were there changes in the institution to prevent situations from occurring in the present or future?

One of the most relevant initiatives that we have started in recent years is from the ESG criteria (Environmental, Social and Corporate Government).What has to do with governance was a very interesting project that we took a year and a half ago.Although Credicorp's government systems remained the same since the holding company was created, over time the company's business structure multiplied by 15.But government schemes had not evolved.An external consultancy of an English company was brought and a total review of the firm's government model was made.Thus, we adapt everything to the new standards and also to the new reality of Credicorp.I think that with that the foundations for a very solid growth of the company have been created.

In line with the ESG, something that is becoming a lot of importance at the international level, there is an obvious tendency to make companies more sustainable in all areas.How much Credicorp also bets on this long term?

If we focus on the social criteria (s), which is how Credicorp and its subsidiaries interact and how they relate to society, this has a lot of relevance in our countries and in the world where a very large polarization is being seen.All Credicorp units always had a lot of participation with a set of programs -ABC of banking, training programs, etc..-, and what we did was put a very big umbrella to all these projects;make sure that each of the subsidiary projects gender to this great umbrella.We put very struts on a set of topics.

In the third that is the environment (e) we are still a little more backward.We have a relevance to the extent that through our loans and our credit portfolio can indirectly impact the environment.We are learning and looking for good experiences in the world because it is also how we finance the transition;How to help others become.

What filters can be placed there to adequately filter customers with whom you work?

Good practices are being developed internationally, although there is no specific set of measures in the world.Creicorp is participating in several spaces where nomenclatures and homogeneous practices are being developed to be able to measure, compare and establish benchmarks among companies among companies.The holding company has also promised to be neutral carbon from 2032 and already has some that are without compensation as a cousin and peaceful.

There are many threats globally in the field of financial cybersecurity.How much have invested in this part to avoid these problems, and how much more can be done to protect users?

It is an never ending initiative.Hackers develop new methods and should be answered.Credicorp tremendously reinforced the capacity and cybersecurity system, which did well.But thousands of daily attacks are given.You can never lower your guard.Luckily there has been nothing very serious so far.We are bringing outside talent that helps us prepare better, because this is probably the greatest risk we have financial institutions.In the BCP they must be more than 100 people dedicated to this.

What would you say to entrepreneurs who still see a situation of tension or see the Executive with doubts, considering how agitated the first months of Pedro Castillo's government and the polarization that is maintained?

I think that companies together with Credicorp are evolving in our ability to connect with society in general and every day, given the polarization that occurs in societies worldwide, we are internalizing more the need to live our purpose.That the purpose is not simply a warning on the walls, but is lived at all levels.That the person who manages mortgage loans, credits, among others, have our purpose and the client very internalized.That is a very necessary world trend for society to perceive the value that companies bring and require.

Peruvian banking system

In your last Conference Call you mentioned that towards next year you were going to see much more dynamic in the retail segment than in the wholesaler, following a slowdown or even setback in private investment.Do you still keep this look for 2022, or perceive that there may be more private economic movement in the current circumstances?

On the retail side, dynamism was seen in certain segments and products and very little in others.For example, there is very low dynamism on credit cards and very little growth in this segment.Product of the withdrawals of the AFP people have used part of that money to lower debts and are being more cautious regarding personal indebtedness in the world of consumption.It is not so in the world of the mortgage where a larger dynamism is seen, especially in the lowest segment.What I see is an unequal growth through all retail segments and products, but if we see it on average yes I think consumption will grow more than wholesale banking.

Do you still think that the deterioration in the exchange rate of the dollar in Peru will not have long -term effects for dynamics in the banking and financial sector?

The exchange rate has not had a very large impact on the financial system.I would say it is marginal.It is not good (that rises) in the sense that brings inflation in the country, but it seems that there was a movement and we see a degree of stability relatively within a fairly reasonable range.We did not see any scenario in which this effect happens, because what was given of movement occurred and we will be around that.The exchange rate has marginally modified customer behavior, especially in the corporate part that are canceling their dollars and passing to soles, and marginally in the part of the deposits have grown in something those that are in dollars versus versusthose of Soles, but it is not so relevant.

Do you still have the expectation that the total assets of Credicorp return to its pre-covid-19 level towards the last quarter of 2022?Or could this happen before?

Assets are inflated by reactive loans.It was tremendously successful and we grew a lot in placements, but they are non -profitable placements.We have grown a lot in non-profitable assets, and profitable assets that are the ones that concern Credicorp do not yet reach pre-covid-19 levels.I think that at the latest 2022 those levels will be reached.