Fixed Income Presentation Fourth Quarter 2017 Disclaimer The - PowerPoint PPT Presentation

Fixed Income Presentation Fourth Quarter 2017

Disclaimer The information contained herein has been prepared by Banco de Crédito del Perú (“BCP”) solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities and should not be treated as giving investment or other advice. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein. Any opinions expressed in this presentation are subject to change without notice and BCP is under no obligation to update or keep current the information contained herein. The information contained herein does not purport to be complete and is qualified in its entirety by reference to more detailed information appearing elsewhere, if any. BCP and its respective affiliates, agents, directors, partners and employees accept no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this material. This presentation may contain statements that are forward-looking subject to risks and uncertainties and factors, which are based on current expectations and projections about future events and trends that may affect BCP’s business. You are cautioned that any such forward-looking statements are not guarantees of future performance. Several factors may adversely affect the estimates and assumptions on which these forward-looking statements are based, many of which are beyond our control. 2

Investment Highlights 1 Peru: Strong Macroeconomic Fundamentals and Underpenetrated Financial System 2 Leading Financial Institution in Latin America and Peru 3 Solid Growth and Profitability with Strong Efficiency Levels 4 Solid Asset Quality and Stable Funding Base 5 Disciplined and Conservative Capital Management 6 Comprehensive Business Strategy with Strong Governance Focus 3

Macroeconomic Outlook Latam & Peru

1 Peru: a brief introduction Peru at a glance LatAm: CDS to 5 years (As of Feb 14th) 180 164 Economic Indicators (2016) 160 140 GDP (Billions) USD 195.7 120 108 107 Exports (Billions) USD 37.0 100 81 Copper USD 10.2 80 Gold USD 7.4 54 60 Agriculture USD 5.6 40 Imports (Billions) USD 35.1 20 Gas and Fuels USD 3.8 0 Brazil Mexico Colombia Peru Chile Credit / GDP (%) 40.9% Socio-Demographic Indicators (2016) Sovereign Ratings Rating Scale Peru Brazil Chile Colombia México Population 31.5 million Moody's AA- / Aa3 *+7 (negative) Urban Population (%, 2015) 76.7% A+ / A1 *+6 S&P (stable) A / A2 *+5 Fitch (stable) Rural Population (%, 2015) 23.3% Moody's Moody's A- / A3 *+4 (stable) (negative) Economically Active Population (EAP) 16.5 million S&P (stable) S&P (stable) BBB+ / Baa1 *+3 Fitch (stable) Fitch (stable) Urban EAP 12.6 million Moody's GDP per Capita USD 6,205 BBB / Baa2 *+2 (stable) Fitch (stable) GDP per Capita (ppp) USD 12,913 BBB- / Baa3 *+1 S&P (stable) BB+ / Ba1 *-1 Poverty Rate (%) 20.7% Moody's (stable) BB / Ba2 *-2 Fitch (negative) BB- / Ba3 *-3 S&P (stable) Sources: Bloomberg, BCRP, INEI, BCP Economic Research 5

Peru’s economic performance and outlook remain above LatAm peers’ 1 GDP Growth (real, %) Inflation (%) 15 10 3.5 5 3.2 1.4 2.5 0 -5 2004 2006 2008 2010 2012 2014 2016 2018e 2004 2006 2008 2010 2012 2014 2016 2018e Peru Chile Colombia Mexico Brazil Peru Chile Colombia Mexico Brazil Fiscal Balance (% GDP) Current Account Balance (% of GDP) 10.0 Peru Chile Colombia Mexico Brazil 5.0 1.4 0.5 0.0 -0.9 -0.5 -1.5 -1.7 -1.9 -2.1 -5.0 -2.6 -2.7 -2.9 -3.0 -3.4 -3.5 -6.4 -10.0 2004 2006 2008 2010 2012 2014 2016 2018e -8.3 2010 - 2012 2013 - 2015 2016 - 2018e Peru Chile Colombia Public Debt (% GDP) International Reserves (% GDP) Peru Chile Colombia Mexico Brazil Peru Chile Colombia Mexico Brazil 32 31 30 83 65 62 19 55 52 50 16 15 15 15 15 15 46 14 15 43 13 43 12 10 26 23 23 21 15 11 2010 - 2012 2013 - 2015 2016 - 2018e 2010 - 2012 2013 - 2015 2016 - 2018e *Forecasts by BCP Economic Research as of February, 2018. 6 Sources: BCP, IMF, BCRP, LatinFocus (Jan-18) and Bloomberg. e: estimates

1 Solid macroeconomic fundamentals persist Peru will still out-perform the main economies of the region (Brazil, Mexico, Argentina, Colombia and Chile) We lowered our GDP growth forecast from 4.2% to 3.5% due to political uncertainty and risks in the construction sector. Local headwinds will stop Peru from growing close to 5% (in line with the average growth of the past 25 years). Some tailwinds:  Favorable international environment.  Counter-cyclical monetary and fiscal policies. Some headwinds:  Further deter of business and consumer expectations due to political tensions and the outcome of the “Construction Club” scan dal GDP and Domestic Demand Growth (% change) GDP Growth forecast for 2018 (% change) Average 1993-2018: 4.0 20.0 GDP 3.5 GDP 4.9% Domestic Demand 3.5 3.2 DD: 5.0% 15.0 3.0 2.5 2.3 2.3 2.5 10.0 1.9 2.0 5.0 1.5 1.0 0.0 0.5 -5.0 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 0.0 Peru Chile Argentina Colombia Mexico Brazil Source: BCP Economic Research, IMF (Jan-18), Credicorp Capital, BCRP 7

1 Favorable international environment 2018 will be a better year for GDP and Domestic Demand… Changes in Sovereign yields and UST (% change y/y in Commodity price change (% change Jan-18 vs Jan-16) basic points, as of 14-Feb-18) 140 150 93 121 100 120 43 50 100 0 80 -50 -100 55 60 -100 -150 -138 -148 40 -166 -200 -177 -189 20 -212 20 -250 Sov 2020 Sov 2023 Sov 2024 Sov 2026 Sov 2028 Sov 2031 Sov 2032 UST2Y UST10Y 0 Zinc Copper Gold  The IMF recently made upwards revision to the world GDP growth forecast for 2018 from 3.7% to 3.9% (third consecutive upward revision and highest expansion in 7 years).  Price of copper stands around USD/lb. 3.20%, almost 60% above the observed two year ago. Moreover, the price of zinc stands close to a 10-year high.  Despite political turmoil, demand for Peru from foreign investors remains robust due to the strong macroeconomic fundamentals (Sovereign yields have fallen, on average, 165bps in the past year). Source: Bloomberg 8

1 Fiscal Policy The Ministry of Finance faces important short and medium- term challenges… Fiscal Revenues in emerging markets with investment grade in Public Investment of the General Government in real terms (% change y/y) 2017 (% of GDP) 25.0 45.0 40.0 20.0 35.0 15.0 30.0 10.0 25.0 5.0 20.0 0.0 15.0 -5.0 10.0 5.0 -10.0 0.0 -15.0 Poland Russia South Africa China Colombia Chile Thailand Mexico Panama India Malaysia Peru Indonesia -20.0 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 Jan-18  The fiscal deficit closed 2017 at 3.2% of GDP, the highest print in 17 years. Fiscal Revenues represented 18.0% of GDP, the lowest print in 14 years.  The main challenges for the Ministry of Finance in the short and medium term are:  Ensuring Public Investment grows at two-digit rates (1H17: -10% y/y).  Substantially increasing fiscal revenues (VAT Peru: 18%, VAT Chile & Colombia: 18-19%).  Complying with the commitment from the Government to narrow the fiscal deficit from 3.5% in 2018 to 1.0% by 2021.  Notable improving the quality of public spending, as well as prioritizing public investment projects and Public-Private Partnerships (PPP’s) .  Several years of subdued growth and persistent inability to comply with fiscal targets could trigger a change in the sovereign credit rating to negative in 2018-2019. Source: BCRP, IMF 9

1 Monetary Policy The Central Bank has lowered its policy rate 125bps since Apr-17 Inflation forecast (%) BCRP vs FED key rate spread (basic points) 5.00 700 4.50 600 4.00 500 3.50 400 3.00 300 2.50 200 2.00 Headline Inflation 100 1.50 Core Inflation 0 1.00 0.50 -100 0.00 -200 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18 Dec-18 Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 Oct-13 Jul-14 Apr-15 Jan-16 Oct-16 Jul-17 Apr-18  In Jan-18 headline inflation stood at 1.3% y/y, below the mid-point of the target range (1-3%), and the lowest print in 8 years. Core inflation stood at 2.0% y/y (Dec-17: 2.2%), the lowest print in 5 years.  We expect annual inflation to stand below 1.0% y/y in temporarily during March. Thereafter it will gradually accelerate and close the year close to 2.5%  We expect a new 25bps rate cut from the BCRP (current: 3.00% and -125bps since Apr-17) due to the decrease of annual inflation and a negative output gap which narrows at a slower pace. We see this rate cut occurring in March. However, currently we can not discard further rate cuts.  As the Central Bank lowers the policy rate and the FED hikes its policy rate, the key rate spread will narrow Source: INEI, BCRP, Fed, BCP Economic Research 10