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Credicorp Ltd 6-K, filed Jun 8, 2020

Credicorp Ltd (BAP)

6-K 2020-06-08 For: 2020-06-08
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Added on April 07, 2026

About this 6-K

Credicorp Ltd filed this 6-K on June 8, 2020.

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 under the

Securities Exchange Act of 1934

For the month of June 2020

Commission File Number: 001-14014

CREDICORP LTD.

(Translation of registrant’s name into English))

Of our subsidiary

Banco de Credito del Peru:

Calle Centenario 156

La Molina

Lima 12, Peru

(Address of principal executive office)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F x Form 40-F ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨

The registrant is furnishing this report on Form 6-K to present its interim condensed consolidated financial statements as of March 31, 2020 and December 31, 2019 and for the three-month periods ended March 31, 2020 and 2019, attached hereto as Exhibit 99.1, and to present a discussion of the registrant’s business and operations as of and for the three months ended March 31, 2020, and other recent developments, attached hereto as Exhibit 99.2.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: June 8, 2020

CREDICORP LTD.<br><br> <br>(Registrant)
By: /s/ Miriam Böttger
Miriam Böttger
Authorized Representative

Exhibit99.1

CREDICORPLTD. AND SUBSIDIARIES

Interim condensed consolidated financial statements

As of March 31, 2020 and December 31, 2019 and for the three-month

periods ended March 31, 2020 and 2019

CREDICORPLTD. AND SUBSIDIARIES

Interim condensed consolidated financial statements as of March 31, 2020 and December 31, 2019 and for the three-month periods ended March 31, 2020 and 2019

Content Pages
Interim condensed<br> consolidated statement of financial position 1
Interim condensed consolidated<br> statement of income 2 - 3
Interim condensed consolidated<br> statement of comprehensive income 4
Interim condensed consolidated<br> statement of changes in net equity 5
Interim condensed consolidated<br> statement of cash flows 6 - 8
Notes to the interim<br> condensed consolidated financial statements 9 - 104
US$ = United States dollar
--- --- ---
S/ = Sol

CREDICORPLTD. AND SUBSIDIARIES

Interim condensed consolidated statement of financial position

As of March 31, 2020 (unaudited) and December 31, 2019 (audited)

As of March 31, As of December
Note 2020 31, 2019
S/(000) S/(000)
Assets
Cash and due from banks:
Non-interest-bearing 6,787,357 6,177,356
Interest-bearing 19,538,429 19,809,406
4 26,325,786 25,986,762
Cash collateral, reverse repurchase agreements and securities borrowing 5(a) 4,424,345 4,288,524
Investments:
At fair value through profit or loss 6(a) 4,185,638 3,850,762
At fair value through other comprehensive income 25,836,140 24,614,050
At fair value through other comprehensive income pledged as<br> collateral 2,552,232 1,588,673
6(b) 28,388,372 26,202,723
Amortized cost 2,706,190 1,907,738
Amortized cost pledged as collateral 1,536,453 1,569,308
6(c) 4,242,643 3,477,046
Loans, net: 7
Loans, net of unearned income 120,708,515 115,609,679
Allowance for loan losses (5,931,772 ) (5,123,962 )
114,776,743 110,485,717
Financial assets designated at fair value through profit or loss 8 559,321 620,544
Premiums and other policies receivable 9(a) 822,669 838,731
Accounts receivable from reinsurers and coinsurers 9(b) 787,672 791,704
Property, furniture and equipment, net 10 1,397,089 1,428,173
Due from customers on acceptances 555,598 535,222
Intangible assets and goodwill, net 11 2,424,404 2,552,274
Right-of-use assets, net 12(a) 805,997 839,086
Deferred tax assets, net 805,589 520,953
Other assets 13 7,320,023 5,458,470
Total assets 197,821,889 187,876,691
Liabilities
Deposits and obligations: 14
Non-interest-bearing 38,482,377 33,830,166
Interest-bearing 81,081,168 78,175,219
119,563,545 112,005,385
Payables from repurchase agreements and securities lending 5(b) 8,254,726 7,678,016
Due to banks and correspondents 15 9,854,630 8,841,732
Banker’s acceptances outstanding 555,598 535,222
Accounts payable to reinsurers 9(b) 198,473 216,734
Lease liabilities 12(b) 838,248 847,504
Financial liabilities at fair value through profit or loss 533,146 493,700
Technical reserves for insurance claims and premiums 16 9,975,945 9,950,233
Bonds and notes issued 17 15,178,148 14,946,363
Deferred tax liabilities, net 94,744 134,204
Other liabilities 13 9,051,875 5,481,288
Total liabilities 174,099,078 161,130,381
Equity, net 18
Equity attributable to Credicorp´s equity holders:
Capital stock 1,318,993 1,318,993
Treasury stock (209,309 ) (207,839 )
Capital surplus 165,188 226,037
Reserves 21,360,272 19,437,645
Other reserves 359,565 1,088,189
Retained earnings 210,930 4,374,935
23,205,639 26,237,960
Non-controlling interest 517,172 508,350
Total equity, net 23,722,811 26,746,310
Total liabilities and net equity 197,821,889 187,876,691

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

- 1 -

CREDICORPLTD. AND SUBSIDIARIES

Interim condensed consolidated statement of income

For the three-month periods ended March 31, 2020 and 2019 (unaudited)

Forthe three-month periodsended March 31,
2020 2019
S/(000) S/(000)
Interest and similar income 22 3,163,609 3,001,674
Interest and similar expenses 22 (784,309 ) (804,506 )
Net interest, similar income and expenses 2,379,300 2,197,168
Provision for credit losses on loan portfolio 7(c) (1,388,711 ) (453,285 )
Recoveries of written-off loans 47,230 70,074
Provision for credit losses on loan portfolio, net of recoveries (1,341,481 ) (383,211 )
Net interest, similar income and expenses, after provision for credit losses on loan portfolio 1,037,819 1,813,957
Other income
Commissions and fees 23 760,329 782,922
Net gain on foreign exchange transactions 166,983 178,423
Net (loss) gain on securities 24 (101,408 ) 128,331
Net gain (loss) on derivatives held for trading 35,430 (2,434 )
Net (loss) gain from exchange differences (21,240 ) 13,490
Others 29 117,770 75,605
Total other income 957,864 1,176,337
Insurance underwriting result
Net premiums earned 25 627,935 584,209
Net claims incurred for life, general and health <br>insurance contracts 26 (373,502 ) (383,817 )
Acquisition cost (112,507 ) (91,281 )
Total insurance underwriting result 141,926 109,111
Other expenses
Salaries and employee benefits 27 (891,183 ) (834,317 )
Administrative expenses 28 (539,644 ) (538,157 )
Depreciation and amortization (125,150 ) (105,643 )
Depreciation for right-of-use assets (46,598 ) (25,682 )
Others 29 (176,060 ) (50,177 )
Total other expenses (1,778,635 ) (1,553,976 ) 
- 2 -

Interim condensed consolidated statement of income (continued)

Forthe three-month periodsended March 31,
2020 2019
S/(000) S/(000)
Profit before income tax 358,974 1,545,429
Income tax (145,799 ) (422,165 )
Net profit 213,175 1,123,264
Attributable to:
Credicorp’s equity holders 209,274 1,100,867
Non-controlling interest 3,901 22,397
213,175 1,123,264
Net basic and dilutive earnings per share attributable to Credicorp's equity holders (in Soles):
Basic 30 2.64 13.86
Diluted 30 2.63 13.84

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

- 3 -

CREDICORP LTD. AND SUBSIDIARIES

Interim condensed consolidated statement of comprehensive income

For the three-month periods ended March 31, 2020 and 2019 (unaudited)

For the three-month periods<br><br> ended March 31,
2020 2019
S/(000) S/(000)
Net profit for the period 213,175 1,123,264
Other comprehensive income:
To be reclassified to profit or loss in subsequent periods:
Net (loss) gain on investments at fair value through other comprehensive income (990,349 ) 308,328
Income tax 56,367 (11,008 )
(933,982 ) 297,320
Net movement on cash flow hedges (18,718 ) (11,077 )
Income tax 5,229 3,066
(13,489 ) (8,011 )
Other reserves 168,315 -
168,315 -
Exchange differences on translation of foreign operations (60,068 ) (30,614 )
(60,068 ) (30,614 )
Total (839,224 ) 258,695
Not to be reclassified to profit or loss in subsequent periods:
Net gain in equity instruments designated at fair value through other comprehensive income 96,090 167,607
Income tax 4,402 (570 )
100,492 167,037
Total 100,492 167,037
Total other comprehensive income (738,732 ) 425,732
Total comprehensive income for the period, net of income tax (525,557 ) 1,548,996
Attributable to:
Credicorp's equity holders (519,350 ) 1,521,298
Non-controlling interest (6,207 ) 27,698
(525,557 ) 1,548,996

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

- 4 -

CREDICORP LTD. AND SUBSIDIARIES

Interim condensed consolidated statement of changes in net equity

For the three-month periods ended March 31, 2020 and 2019 (unaudited)

Attributable<br> to Credicorp's equity holders
Other<br> reserves
Treasury<br> stock Instruments<br><br> that will <br><br> not be <br><br> reclassified<br><br> to income Instruments<br> that will be <br><br> reclassified to the interim <br><br> condensed consolidated <br><br> statement of income
Capital<br><br> stock Shares<br> <br><br> of the<br><br> Group Share-<br><br> based<br><br> payment Capital<br><br> surplus Reserves Investments<br> <br>in equity instruments Investments<br> <br>in debt instruments Cash<br><br> flow<br><br> hedge<br><br> reserve Insurance<br><br> reserves Foreign<br><br> currency<br><br> translation<br><br> reserve Retained<br><br> earnings Total Non-<br><br> controlling<br><br> interest Total net<br> <br>equity
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Balances<br> as of January 1, 2019 1,318,993 (204,353 ) (3,641 ) 246,194 17,598,556 452,551 229,470 (3,161 ) - 29,593 4,175,041 23,839,243 426,833 24,266,076
Changes in equity in 2019 -
Net profit for the period - - - - - - - - - - 1,100,867 1,100,867 22,397 1,123,264
Other comprehensive income - - - - - 167,034 291,839 (7,831 ) - (30,611 ) - 420,431 5,301 425,732
Total comprehensive income - - - - - 167,034 291,839 (7,831 ) - (30,611 ) 1,100,867 1,521,298 27,698 1,548,996
Transfer<br> of retained earnings to reserves, Note 18(c) - - - - 1,858,811 - - - - - (1,858,811 ) - - -
Dividend distribution, Note 18(d) - - - - - - - - - - (1,595,229 ) (1,595,229 ) - (1,595,229 )
Dividends<br> paid to interest non-controlling of subsidiaries - - - - - - - - - - - - (40,519 ) (40,519 )
Purchase<br> of treasury stock, Note 18(b) - - (1,814 ) (101,411 ) - - - - - - - (103,225 ) - (103,225 )
Share-based<br> payment transactions - - 2,055 77,566 (48,491 ) - - - - - - 31,130 - 31,130
Others - (144 ) - - - - - - - - (982 ) (1,126 ) 1,884 758
Balances as of March 31, 2019 1,318,993 (204,497 ) (3,400 ) 222,349 19,408,876 619,585 521,309 (10,992 ) - (1,018 ) 1,820,886 23,692,091 415,896 24,107,987
Balances as of January 1, 2020 1,318,993 (204,388 ) (3,451 ) 226,037 19,437,645 550,065 1,255,988 (30,104 ) (658,491 ) (29,269 ) 4,374,935 26,237,960 508,350 26,746,310
Changes in equity in 2020 -
Net profit for the period - - - - - - - - - - 209,274 209,274 3,901 213,175
Other comprehensive income - - - - - 100,674 (922,718 ) (13,187 ) 166,206 (59,599 ) - (728,624 ) (10,108 ) (738,732 )
Total comprehensive income - - - - - 100,674 (922,718 ) (13,187 ) 166,206 (59,599 ) 209,274 (519,350 ) (6,207 ) (525,557 )
Transfer of retained earnings<br> to reserves, Note 18(c) - - - - 1,977,091 - - - - - (1,977,091 ) - - -
Dividend<br> distribution, Note 18(d) - - - - - - - - - - (2,392,844 ) (2,392,844 ) - (2,392,844 )
Dividends<br> paid to interest non-controlling of subsidiaries - - - - - - - - - - - - (799 ) (799 )
Purchase<br> of treasury stock, Note 18(b) - - (3,356 ) (148,543 ) - - - - - - - (151,899 ) - (151,899 )
Share-based<br> payment transactions - - 2,709 87,694 (54,464 ) - - - - - - 35,939 - 35,939
Others - (823 ) - - - - - - - - (3,344 ) (4,167 ) 15,828 11,661
Balances<br> as of March 31, 2020 1,318,993 (205,211 ) (4,098 ) 165,188 21,360,272 650,739 333,270 (43,291 ) (492,285 ) (88,868 ) 210,930 23,205,639 517,172 23,722,811

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

- 5 -

CREDICORP LTD. AND SUBSIDIARIES

Interim condensed consolidated statement of cash flows

For the three-month periods ended March 31, 2020 and 2019 (unaudited)

For the three-month periods<br> <br>ended March 31,
Note 2020 2019
S/000 S/000
CASH AND CASH EQUIVALENTS FROM OPERATING ACTIVITIES
Net profit for the period 213,175 1,123,264
Adjustment to reconcile net profit to net cash arising from operating activities:
Provision for credit losses on loan portfolio 7(c) 1,388,711 453,285
Depreciation and amortization 125,150 105,643
Depreciation of right-of-use assets 46,598 25,682
Depreciation of investment properties 13(e) 1,682 6,727
Deferred (income) expense tax 19(b) (212,846 ) 42,449
Adjustment of technical reserves 25(a) 57,539 246,699
Net loss (gain) on securities 24 101,408 (128,331 )
Provision for sundry risks 29 5,772 6,195
Loss (gain) on financial assets designated at fair value through profit and loss 25(a) 98,243 (47,242 )
Net (gain) loss of trading derivatives (35,430 ) 2,434
Net income from sale of property, furniture and equipment 29 (10,319 ) -
Net (gain) loss from sale of seized and recovered assets 29 (1,312 ) 5,533
Expense for share-based payment transactions 27 20,120 26,390
Others 21,240 (13,490 )
Net changes in assets and liabilities
Net (increase) decrease in assets:
Loans (4,319,772 ) 1,269,838
Investments at fair value through profit or loss (374,935 ) (574,837 )
Investments at fair value through other comprehensive income (2,882,465 ) (1,499,324 )
Cash collateral, reverse repurchase agreements and securities borrowings (10,460 ) 3,363
Other assets (696,212 ) (546,345 )
Net increase (decrease) in liabilities
Deposits and obligations 5,812,631 (114,193 )
Due to Banks and correspondents 824,889 (1,159,531 )
Payables from repurchase agreements and securities lending 549,499 (581,787 )
Bonds and notes issued (108,479 ) 202,622
Short-term and low-value lease payments (22,418 ) (18,843 )
Other liabilities 3,051,336 2,600,039
Income tax paid (392,399 ) (393,582 )
Net cash flow from operating activities 3,250,946 1,042,658 
- 6 -

Interim condensed consolidated statement of cash flows (continued)

For the three-month periods<br> <br>ended March 31,
Note 2020 2019
S/000 S/000
NET CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, furniture and equipment 22,453 2,197
Purchase of property, furniture and equipment (15,348 ) (32,084 )
Purchase of investment property 13(e) (6,595 ) 23
Purchase of intangible assets (79,958 ) (54,298 )
Purchase of investment at amortized cost (1,273,186 ) (403,523 )
Proceeds from sale and reimbursement of investment to amortized cost 338,099 1,439,604
Net cash flows from investing activities (1,014,535 ) 951,919
NET CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid 18(d) (2,392,844 ) (1,595,229 )
Dividends paid to non-controlling interest of subsidiaries (799 ) (40,519 )
Principal payments of leasing contracts (42,282 ) (40,335 )
Interest payments of leasing contracts (7,803 ) (5,985 )
Purchase of treasury stock 18(b) (151,899 ) (103,225 )
Net cash flows from financing activities (2,595,627 ) (1,785,293 )
Net (decrease) increase of cash and cash equivalents before effect of changes in exchange rate (359,216 ) 209,284
Effect of changes in exchange rate of cash and cash equivalents 697,368 (257,967 )
Cash and cash equivalents at the beginning of the period 25,974,042 22,160,803
Cash and cash equivalents at the end of the period 26,312,194 22,112,120
Additional information from cash flows
Interest received 3,196,720 3,022,022
Interest paid (817,727 ) (790,420 ) 
- 7 -

Interim condensed consolidated statement of cash flows (continued)

Reconciliation of liabilities arising from financing activities:

Changes<br> that generate<br><br> cash flows Changes<br> that do not generate<br><br> cash flows
For<br> the three-month period<br><br> ended March 31, 2020 As<br> of January<br><br> 1, 2020 New<br><br> issues Amortization<br><br> of principal Exchange<br><br> difference Others As<br> of March<br><br> 31, 2020
Subordinated bonds:
Amortized cost 4,387,743 – – 149,395 1,583 4,538,721
4,387,743 – – 149,395 1,583 4,538,721
Changes that generate<br><br> cash flows Changes that do not generate<br><br> cash flows
--- --- --- --- --- --- --- --- --- --- --- --- --- ---
For the three-month period<br><br> ended March 31, 2019 As of January<br><br> 1, 2019 New<br><br> issues Amortization<br><br> of principal Exchange<br><br> difference Others As of March<br><br> 31, 2019
Subordinated bonds:
Amortized cost 5,424,401 – – (92,949 ) 3,649 5,335,101
5,424,401 – – (92,949 ) 3,649 5,335,101

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

- 8 -

CREDICORP LTD. AND SUBSIDIARIES

Notes to the interim condensed consolidated financial statements

as of March 31, 2020 and December 31, 2019 and for the three-month

periods ended March 31, 2020 and 2019

1 OPERATIONS

Credicorp Ltd. (hereinafter “Credicorp” or “the Group”) is a limited liability company incorporated in Bermuda in 1995 to act as a holding company and to coordinate the policies and administration of its subsidiaries. It is also engaged in investing activities.

Credicorp Ltd., through its banking and non-banking subsidiaries and its associate Entidad Prestadora de Salud, provides a wide range of financial, insurance and health services and products mainly throughout Peru and in certain other countries (See Note 3(b)). Its major subsidiary is Banco de Crédito del Perú (hereinafter “BCP” or the “Bank”), a Peruvian universal bank. Credicorp’s address is Clarendon House 2 Church Street Hamilton, Bermuda; likewise, administration offices of its representative in Peru are located in Calle Centenario Nº156, La Molina, Lima, Peru.

Credicorp is listed on the Lima and New York stock exchanges.

The consolidated financial statements as of December 31, 2019 and for the year then ended were approved by the Board of Directors on February 27, 2020. The interim condensed consolidated financial statements as of March 31, 2020 and for the three-month periods ended March 31, 2020 were approved by the Management on June 4, 2020 and will be submitted for their final approval by the Board of Directors; in Management’s opinion, these will be approved without modifications.

- 9 -
2 SIGNIFICANT TRANSACTIONS
a) Main acquisitions, incorporations and mergers
--- ---

During the first quarter of 2020, the Group have not performed any significant transaction of acquisitions, incorporations and mergers.

b) The outbreak of the new coronavirus (hereinafter<br> “COVID-19”)

A more recent event that implies risks for the Peruvian economy and our result of operations is the ongoing outbreak of COVID-19, which was first reported in Wuhan, China, on December 31, 2019. Due to the nature of the outbreak, strong measures to mitigate COVID-19 contagion have been taken by governments all around the world, which include closed international borders and severe mobility restrictions (quarantines). As a result, global gross domestic product (GDP) is estimated to contract severely in 2020 (lowest since the Great Depression of 1929), which affects Peru’s main trade partners, including China and the U.S. Moreover, Peru’s exports prices will also be affected due to lower global demand.

As a result of COVID-19, the economies in which Credicorp operates (mainly Peru, Colombia and Bolivia) will be severely disrupted by two factors: (i) the effect on the global economy (economic growth of our main trade partners like China and the U.S., as well as lower commodity prices), and (ii) the local effect of government measures to stop the COVID-19 outbreak. Estimates suggest that around 60% of GDP growth volatility in Peru is explained by external factors.

In Bolivia, acting president established a state of emergency on March 21, 2020 ordering a nation-wide quarantine, in which the public and private activities were suspended until May 10, 2020. Later, the government resolved have a conditional and a dynamic regional quarantine based on the three risks levels (high, medium and low) until June 30, 2020. The low reproduction rate of COVID-19 in high altitude areas could be a positive factor helping Bolivia to maintain the cases at a low level.

To cope with the economic shock due to COVID-19, Bolivia’s government announced fiscal and monetary measures, including monetary transfers for the unemployed and for families with children, coverage of basic services, credits to companies to cover the payment of wages, and a Microcredit Support Program. In addition, the Central Bank injected liquidity into the local market.

In Colombia, the president established the state of emergency on March 23, 2020. The lockdown has been extended until July 1, 2020. However, sectors such as manufacturing and construction (which account for 10% of GDP) were recently reactivated to minimize the economic shock. The COVID-19 pandemic occurred while the economy was in a process of gradual recovery due to the drop in the price of oil. Further, Colombia has the highest level of current account deficit in the region (4.3% of GDP in 2019) while public debt has been expanding over the last years (50% of GDP in 2019). In addition, the government faces the potential loss of their investment grade rating after S&P and Fitch gave the country a BBB- rating with a negative outlook. Finally, a decrease in exports due to the COVID-19 will be a significant challenge for Colombia to overcome this year.

To cope with the economic shock due to COVID-19, Colombia’s government gradually implemented fiscal measures such as wage subsidies, deferment of payment of corporate income taxes and social transfers. On the monetary side, the Central Bank has injected close to 1.4% of GDP in liquidity into the local market, and the Central Bank cut the reference rate by 100 basis points to 3.25%, the lowest rate since 2013 and the first cut in almost two years.

In Peru, the president established a state of emergency on March 16, 2020, and ordered a general lockdown on the country. Minor exceptions were made for key sectors (food supply, health, and banking). The lockdown was initially established for 15 calendar days, but was extended on several occasions, to last until June 30, 2020, for a total of 107 calendar days. Even though the Peruvian economy has one of the strongest macroeconomic fundamentals among emerging markets, the quality of the health system in Peru stands below the region’s average.

- 10 -

In response to the major sanitary and economic shock from COVID-19, the Ministry of Finance, the Central Bank and the Congress have announced and are implementing ample package of measures to mitigate and stimulate the economy for the equivalent of approximately 20% of GDP. The ability to implement measures of this magnitude stems from prudent macroeconomic policies that have been implemented for decades. The measures enacted include tax relief, public spending, access to private savings (pension fund accounts and severance indemnity deposits), and government-backed liquidity programs.

In particular, the government is supporting the business sector through two government-backed programs:

- “Reactiva Peru”<br>is a liquidity program, implemented through BCRP, that has resources of PEN 60 billion (8% of GDP) and will help mainly small and<br>medium-size companies obtain new working capital and continue operating. The government guarantee coverage level for these loans<br>varies between 80% and 98% for loans between PEN 30 thousand and PEN 10 million. The criteria to establish coverage limits the<br>maximum between three times the contribution to social security during 2019 or one month of average sales in 2019, according to<br>SUNAT. These new loans will have terms of up to 36 months, with up to a 12 month grace period. The interest rates for these loans<br>will be capped according to the auction results published by the Central Bank, which charges a flat 0.5% to participating institutions<br>for the transaction.
- The Enterprise Support<br>Fund (FAE, by its Spanish initials) program enables banks and microfinance entities to provide Small and Micro businesses loans<br>for up to S/4 billion with government guarantee coverage levels between 90%-98%. This amount represents about 9% of the loan portfolio<br>for SMEs systemwide.
--- ---

Finally, the Central Bank has lowered its reference rate 200 basis points to 0.25%, a historic minimum, and has provided liquidity for 6 and 12 months through Repo operations since the beginning of March. BCRP has also implemented measures to mitigate exchange rate volatility. Additionally, the SBS has authorized credit extensions for up to 6 months with no effect on client credit ratings.

The COVID-19 pandemic has caused disruptions in the world economy, which, in turn, could disrupt the business of both Credicorp and its customers. Due to the travel restrictions, closed international borders and prolonged lockdown periods decreed by governments around the world to manage the COVID-19 outbreak, Credicorp’s business may be affected.

As of the first quarter of 2020 some of the impacts already generated by COVID-19 at Credicorp are: (i) about 70% of BCP Stand-alone and Mibanco branches are serving nationwide and work at 50% of their capacity; (ii) financial relief measures have been offered to clients, including debt and insurance premium reprograming, cost-free cash management services, COVID-19 health and life insurance coverage and partial reimbursements of premiums on car insurance; (iii) there has been lower business activity as a result of lockdown, (iv) lower reference rates (-200 bps) which impact NIMs; (v) higher market volatility that impact investment portfolios; (vi) lower GDP growth expectations which negatively impact forward looking provisions; and (vii) new expenses including both one-off donations and operating expenses related to crisis management measures.

The impact of the COVID-19 pandemic may adversely affect the credit risk of Credicorp’s investment portfolio and wholesale loan portfolio. In particular, the challenges posed by COVID-19, including reduced business volumes, temporary closures and insufficient liquidity may have a higher impact on clients engaging in certain economic activities such as retail, automobile sales, residential real estate, poultry farming, air travel, tourism, microfinance, transportation and restaurants. As a result, the company expects a downgrade in the financial condition of some of our borrowers, which, in turn, could materially affect Credicorp’s business and result of operations.

- 11 -

The impact of the COVID-19 pandemic may adversely affect the credit risk of Credicorp’s retail and microfinance loan portfolio, due to its effect in SME and individual clients. SME clients may be adversely impacted by the lockdown period and the resulting inability to perform operations and generate cash flows. After the lockdown period, SMEs may also face a period of reduced level of operations because of the restrictions that may be imposed on the reopening of different economic sectors. Individuals may be adversely impacted by an increase of the unemployment rate and the reduction of business operations. As a result, the company expects an adverse effect on the credit quality of its loan portfolio and an increase of the cost of risk.

The unprecedented shocks to the economy and the high level of uncertainty regarding its recovery, as a result of COVID-19 may increase market risk by causing fluctuations in market prices and loss of liquidity of financial instruments, which may have an adverse impact on our investment portfolio.

Prolonged economic stress and market disruptions as a result of COVID-19 may generate pressure on our liquidity management. This increase in liquidity risk may result in limited and/or costly access to financing sources, inability to access capital markets, an increase in draws of outstanding credit lines and a change in the expected level of cash inflow as consequence of large-scale loan reprogramming.

In terms of non-financial risks, given the high rate of contagion of the disease, a significant number of our employees may acquire the virus, which may affect our ability to continue operating. Additionally, due to prolonged lockdowns, some of our critical suppliers may stop providing us with certain key services for business continuity. Finally, since we have adopted a remote work approach, we may be exposed to a greater risk of cybersecurity threats because many of our employees now connect to Credicorp’s systems from outside our controlled technological environments.

The full extent of the effect on Credicorp’s operating and financial results is still difficult to predict due to the uncertainty about the duration and concentration of the outbreak, but the COVID-19 pandemic, or any other health crisis beyond our control, could have a material adverse effect on our business, financial condition and results of operations.

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3 SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies applied in the preparation of Credicorp’s interim condensed consolidated financial statements are set out below:

a) Basis of presentation, use of estimates and changes in accounting policies -

The accompanying interim condensed consolidated financial statements as of March 31, 2020, and for the three-month period ended March 31, 2020, have been prepared in accordance with IAS 34 “Interim Financial Reporting”.

The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the annual consolidated audited financial statements for the year ended December 31, 2019 (henceforth “2019 Annual consolidated financial statements”), date February 27, 2020.

The interim condensed consolidated financial statements have been prepared following the historical cost criteria, except for investments at fair value through profit or loss, investments at fair value through other comprehensive income, financial assets designated at fair value through profit or loss, derivative financial instruments, and financial liabilities at fair value through profit or loss; which have been measured at fair value.

The interim condensed consolidated financial statements are presented in Soles (S/), which is the functional currency of the Group, and all values are rounded to thousands of soles, except when otherwise indicated.

The preparation of the interim condensed consolidated financial statements in accordance with International Financial Reporting Standards (henceforth “IFRS”) as issued by the International Accounting Standards Board (IASB), requires Management to make estimations and assumptions that affect the reported amounts of assets, liabilities, income and expenses and the disclosure of significant events in notes to the interim condensed consolidated financial statements.

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. The final results could differ from said estimates; however, the Management expects that the variations, if any, will not have a material impact on the interim condensed consolidated financial statements.

The most significant estimates included in the accompanying interim condensed consolidated financial statements are related to the calculation of the allowance of the expected credit loss on loan portfolio, the valuation of investments, the technical reserves for insurance claims and premiums, the impairment of goodwill , the expected credit loss for investments at fair value through other comprehensive income and investments at amortized cost, the valuation of share-based payment plans and the valuation of derivative financial instruments. Furthermore, other estimates exist, such as the estimated useful life of intangible assets, property, furniture and equipment and the deferred income tax assets and liabilities.

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The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended December 31, 2019, except for the adoption of new standards effective as of January 1, 2020, as described below:

(i) Definition of Material – Amendments to IAS 1 and IAS 8 -

The IASB has made amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors which use a consistent definition of materiality throughout International Financial Reporting Standards and the Conceptual Framework for Financial Reporting, clarify when information is material and incorporate some of the guidance in IAS 1 about immaterial information.

In particular, the amendments clarify:

- That the reference to obscuring information addresses situations in which the effect is similar to omitting or misstating that<br>information, and that an entity assesses materiality in the context of the financial statements as a whole, and
- The meaning of ‘primary users of general-purpose financial statements’ to whom those financial statements are directed,<br>by defining them as ‘existing and potential investors, lenders and other creditors’ that must rely on general purpose<br>financial statements for much of the financial information they need.
--- ---
(ii) Definition of a Business – Amendments to IFRS 3 –
--- ---

The amended definition of a business requires an acquisition to include an input and a substantive process that together significantly contribute to the ability to create outputs. The definition of the term ‘outputs’ is amended to focus on goods and services provided to customers, generating investment income and other income, and it excludes returns in the form of lower costs and other economic benefits.

The amendments will likely result in more acquisitions being accounted as asset acquisitions.

(iii) Revised Conceptual Framework for Financial Reporting –

The IASB has issued a revised Conceptual Framework which will be used in standard-setting decisions with immediate effect. Key changes include:

- Increasing the prominence of stewardship in the objective of financial reporting.
- Reinstating prudence as a component of neutrality.
--- ---
- Refining a reporting entity, which may be a legal entity, or a portion of an entity.
--- ---
- Revising the definitions of an asset and a liability.
--- ---
- Removing the probability threshold for recognition and adding guidance on derecognition.
--- ---
- Adding guidance on different measurement basis, and
--- ---
- Stating that profit or loss is the primary performance indicator and that, in principle, income and expenses in other comprehensive<br>income should be recycled where this enhances the relevance or faithful representation of the financial statements.
--- --- 
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No changes will be made to any of the current accounting standards. However, entities that rely on the Framework in determining their accounting policies for transactions, events or conditions that are not otherwise dealt with under the accounting standards will need to apply the revised Framework from January 1, 2020. These entities will need to consider whether their accounting policies are still appropriate under the revised Framework.

The modifications indicated above had no impact on the amounts recognized in previous or current periods and are not expected to significantly affect future periods.

b) Basis of consolidation –

The interim condensed consolidated financial statements of the Group comprise the condensed financial statements of Credicorp and Subsidiaries for all the years presented. The method adopted by the Group to consolidate its Subsidiaries is described in Note 3(b) of the 2019 Annual Consolidated Financial Statements.

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As of March 31, 2020 and December 31, 2019, the following entities comprise the Group (the individual or consolidated figures of their financial statements are presented in accordance with IFRS and before eliminations for consolidation purposes, except for the elimination of Credicorp’s treasury shares and its related dividends):

Entity Activity and<br><br> country of<br><br> incorporation Percentage of<br><br> interest (direct <br><br>and indirect) Assets Liabilities Equity Net income (loss) <br><br>for the three-month<br><br> periods ended <br><br>March 31,
As of<br><br> March 31,<br><br> 2020 As of<br><br> December 31,<br><br> 2019 As of <br><br>March 31,<br><br> 2020 As of<br><br> December 31,<br><br> 2019 As of <br><br>March 31,<br><br> 2020 As of<br><br> December 31,<br><br> 2019 As of<br><br> March 31,<br><br> 2020 As of<br><br> December 31, <br><br>2019 2020 2019
% % S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Grupo Crédito S.A. and Subsidiaries (i) Holding, Peru 100.00 100.00 157,270,681 165,072,249 136,994,794 142,514,228 20,275,887 22,558,021 162,642 1,033,387
Pacífico Compañía de Seguros y Reaseguros S.A and Subsidiaries (ii) Insurance, Peru 98.79 98.79 13,728,994 13,783,515 10,994,137 10,963,533 2,734,857 2,819,982 99,838 78,070
Atlantic Security Holding Corporation and Subsidiaries (iii) Capital Markets, Cayman Islands 100.00 100.00 8,483,365 6,076,928 7,075,645 4,986,657 1,407,720 1,090,271 436,345 348,530
Credicorp Capital Ltd. and Subsidiaries (iv) Capital Markets and asset management, Bermuda 100.00 100.00 4,115,320 4,807,905 3,255,430 3,832,287 859,890 975,618 (7,447 ) 15,571
CCR Inc.(v) Special purpose Entity, Bahamas 100.00 100.00 362,088 386,146 360,885 385,253 1,203 893 310 672
(i) The main activity of Grupo Crédito is to invest in shares listed in the Peruvian-Stock Exchange and in unlisted shares<br>of Peruvian companies. Below, we present the individual or consolidated figures of their financial statements are presented in<br>accordance with IFRS and before eliminations for consolidation purposes:
--- ---
Entity Activity and<br><br> country of<br><br> incorporation Percentage of<br><br> interest (direct <br><br>and indirect) Assets Liabilities Equity Net income<br> (loss) <br><br>for the three-month<br><br> periods ended <br><br>March 31,
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
As of<br><br> March 31,<br><br> 2020 As of<br><br> December 31,<br><br> 2019 As of<br><br> March 31,<br><br> 2020 As of<br><br> December 31,<br><br> 2019 As of <br><br>March 31,<br><br> 2020 As of<br><br> December 31,<br><br> 2019 As of<br><br> March 31,<br><br> 2020 As of<br><br> December 31, <br><br>2019 2020 2019
% % S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Banco de Crédito del Perú and Subsidiaries (a) Banking, Peru 97.71 97.71 160,824,748 152,426,848 141,992,056 133,456,760 18,832,692 18,970,088 181,257 937,556
Inversiones Credicorp Bolivia S.A. and Subsidiaries (b) Banking, Bolivia 99.96 99.96 11,405,835 10,552,154 10,663,937 9,773,372 741,898 778,782 9,893 16,674
Prima AFP (c) Private pension fund administrator, Peru 100.00 100.00 982,264 982,591 402,446 284,643 579,818 697,948 (4,079 ) 57,000
Krealo SpA and Subsidiaries (d) Holding, Chile 100.00 100.00 76,637 72,847 40,639 41,765 35,998 31,082 (2,396 ) -
a) BCP was established in 1889 and its activities are regulated by the Superintendency of Banks, Insurance and Pension Funds -Perú<br>(the authority that regulates banking, insurance and pension funds activities in Perú, hereinafter “the SBS").
--- ---

Its main Subsidiary is Mibanco, Banco de la Microempresa S.A. (hereinafter “MiBanco”), a banking entity in Peru oriented towards the micro and small business sector. As of March 31, 2020, the assets, liabilities, equity and net income of Mibanco amount to approximately S/13,529.0 million, S/11,408.0 million, S/2,121.0 million and S/34.0 million, respectively (S/13,741.7 million, S/11,655.7 million, S/2,086.0 million, and S/401.0 million, respectively as of December 31, 2019).

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b) Inversiones Credicorp Bolivia S.A. (hereinafter “ICBSA”) was established in February 2013 and its objective is<br>to make capital investments for its own account or for the account of third parties in companies and other entities providing financial<br>services, exercising or determining the management, administration, control and representation thereof, both nationally and abroad,<br>for which it can invest in capital markets, insurance, asset management, pension funds and other related financial and/or stock<br>exchange products.

Its principal Subsidiary is Banco de Crédito de Bolivia (hereinafter “BCB”), a commercial bank which operates in Bolivia. As of March 31, 2020, the assets, liabilities, equity and net profit of BCB were approximately S/11,358.7 million, S/10,648.7 million, S/710.0 million and S/7.0 million, respectively (S/10,480.9 million, S/ 9,743.9 million, S/737.0 million and S/79.0 million, respectively as of December 31, 2019).

c) Prima AFP is a private pension fund and its activities are regulated by the SBS.
d) Krealo SpA (hereinafter “Krealo") was established in January 2019; and is oriented to make capital investments outside<br>the country. On July 1, 2019, Krealo acquired Tenpo SpA and Multicaja Prepago S.A.
--- ---
(ii) Pacífico Seguros is an entity regulated by the SBS and its activities comprise the contracting and management of all<br>types of general risk and life insurance, reinsurance and property investment and financial operations. Its Subsidiaries are Crediseguro<br>Seguros Personales and Crediseguro Seguros Generales, and it has Pacífico EPS as an associate, which are dynamic participants<br>in the business of multiple and health insurance, respectively.
--- ---
(iii) Its most important Subsidiary is Atlantic Security Bank (ASB), which is incorporated in the Cayman Islands and operates through<br>branches and offices in Grand Cayman and the Republic of Panama; its main activities are private and institutional banking services<br>and trustee administration, mainly for BCP’s Peruvian customers.
--- ---
(iv) Credicorp Capital Ltd. was formed in 2012, and its main subsidiaries are Credicorp Capital Holding Peru (owner of Credicorp<br>Capital Perú S.A.A.), Credicorp Holding Colombia (owner of Credicorp Capital Colombia, Ultraserfinco S.A. and Banco Compartir<br>S.A.), and Credicorp Capital Holding Chile (owner of Credicorp Capital Chile), which carry out their activities in Peru, Colombia<br>and Chile, respectively. We present below the consolidated financial statements in accordance with IFRS and before eliminations<br>for consolidation purposes:
--- ---
Entity Percentage of <br><br>interest (direct <br><br>and indirect) Assets Liabilities Equity Net income (loss) <br><br>for the three-month<br><br> periods ended <br><br>March 31,
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
As of<br><br> March 31,<br><br> 2020 As of<br><br> December 31,<br><br> 2019 As of<br><br> March 31,<br><br> 2020 As of<br><br> December 31,<br><br> 2019 As of<br><br> March 31,<br><br> 2020 As of<br><br> December 31,<br><br> 2019 As of<br><br> March 31,<br><br> 2020 As of<br><br> December 31, <br><br>2019 2020 2019
% % S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Credicorp Holding  Colombia S.A.S. and Subsidiaries (a) 100.00 100.00 2,771,905 3,400,683 2,159,820 2,692,520 612,085 708,163 (2,444 ) 5,224
Credicorp Capital Holding  Chile and Subsidiaries (b) 100.00 100.00 1,094,288 1,161,991 950,257 1,017,072 144,031 144,919 (5,436 ) 2,628
Credicorp Capital Holding Perú S.A. and Subsidiaries (c) 100.00 100.00 241,950 228,421 125,208 114,913 116,742 113,508 2,038 2,871
a) Credicorp Holding Colombia was incorporated in Colombia on March 5, 2012, and its main purpose is the administration, management<br>and increase of its equity through the promotion of industrial and commercial activity, through investment in other companies or<br>legal persons. Its main subsidiary is Credicorp Capital Colombia S.A.
--- ---
b) Credicorp Holding Chile was incorporated in Chile on July 18, 2012, and aims to invest for long-term profitable purposes, in<br>corporeal goods (movable and immovable property) and incorporeal, located in Chile or abroad. Its main subsidiary is Credicorp<br>Capital Chile S.A.
--- ---
c) Credicorp Capital Holding Perú S.A. was incorporated in Peru on October 30, 2014, and aims to be the Peruvian holding<br>of investment banking. Its main subsidiary Credicorp Capital Perú S.A.A.; which has as its main activity the function of<br>holding shares, participations and transferable securities in general, providing advisory services in corporate and financial matters,<br>and investment in real estate.
--- ---
(v) CCR Inc. was incorporated in 2000, its main activity is to manage loans granted to BCP by foreign financial entities, See Note<br>17(a)(vi). These loans are collateralized by transactions performed by BCP.
--- --- 
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c) International Financial Reporting Standards issued but not yet effective -

The Group decided not to early adopt the following standards and interpretations that were issued but are not effective as of March 31, 2020:

(i) IFRS 17 “Insurance Contracts” -

IFRS 17 was issued in May 2017 in replacement of IFRS 4 “Insurance Contracts”. This standard requires a current measurement model, where estimate are remeasured in each reporting period. The contracts are measured using the building blocks of:

- Discounted- weighted of probability cash flows
- An explicit risk adjustment, and
--- ---
- A contractual service margin which represents the unearned profit of the contract recognized as income over the coverage.
--- ---

IFRS 17 applies to all types of insurance contracts (life, non-life and reinsurance insurance), regardless of the type of entities that issue them, as well as certain guarantees and financial instruments with certain discretionary participation characteristics. The general objective of IFRS 17 is to provide an accounting model that is more useful and uniform for insurance entities. Unlike IFRS 4, which relies heavily on the application of existing / local accounting policies, IFRS 17 provides a comprehensive model for insurance contracts, which covers all relevant accounting aspects.

The standard permits a choice between recognizing the changes in discount rates, either in the statement of income or directly in other comprehensive income. The choice probably reflects how insurers record their financial assets according to IFRS 9.

An optional, simplified premium allocation approach is permitted for the liability for the remaining coverage for short duration contracts, which are often written by non-life insurers.

There is a modification of the general measurement model denominated “Variable commissions method” for certain contracts of insurers with life insurance in which the insured share the yields from the underlying elements. Upon applying the variable commissions’ method, the entity’s participation in changes in fair value of the underlying elements is included in the contractual service margin. Therefore, it is probable that the results of the insurers that use this model will be less volatile than under the general model.

The new rules will affect the financial statements and key performance indicators of all entities that issue insurance contracts or investment contracts with discretionary participation features.

Also, its implementation will modify the recognition, measurement, presentation and disclosure of insurance contracts having a significant impact on the underlying valuation models, systems, processes, internal controls and other fundamental aspects of the insurance business.

The Group has established governance structures related to the IFRS 17 project with the Audit Committee as the highest instance. As required by the standard, currently, the entities that make up the Group are in the process of determining the impact of their application.

Initially, IFRS 17 would apply to annual periods beginning on or after January 1, 2021; however, on November 14, 2018, the IASB agreed to defer the effective date of application to annual periods beginning on or after January 1, 2022.

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(ii) Amendments to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in associates and joint<br>ventures”: Sale or contribution of assets between an investor and its associate or joint venture –

The IASB made limited scope amendments to IFRS 10 and IAS 28.

The amendments clarify the accounting treatment of the sales or contribution of assets between an investor and his associates or joint venture. These amendments confirm that the accounting treatment depends on whether the non-monetary assets sold or contributed to an associate or joint venture constitutes “a business” (as defined in IFRS 3 “Business combinations”).

If the non-monetary assets constitute a business, the investor will recognize the total gain or loss on the sale or contribution of assets. If the assets do not comply with the definition of “business”, the investor will recognize the gain or loss only in proportion to the investor’s investment in the associate or joint venture. The amendments will apply prospectively.

The IASB decided to defer the application date of this amendment until it has completed its research project on the equity method.

The Group is in the process of evaluating the impact of the application of these standards, and to date, it considers that there will be no significant impact on the consolidated financial statements, except for IFRS 17.

Likewise, there are no other standards or amendments to standards which have not yet become effective and are expected to have a significant impact on the Group, either in the current or future periods, as well as on expected future transactions.

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4 CASH AND DUE FROM BANKS
a) The composition of the item is presented below:
--- ---
As of March 31,<br><br> 2020 As of December 31, <br><br>2019
--- --- --- --- ---
S/(000) S/(000)
Cash and clearing (b) 5,249,377 4,917,674
Deposits with Central Reserve Bank of Peru (BCRP) (b) 16,626,007 18,367,651
Deposits with Central Bank of Bolivia 927,759 646,865
Deposits with foreign banks (c) 2,598,983 1,408,117
Deposits with local banks (c) 526,810 481,412
Interbank funds 376,289 137,722
Accrued interest 6,969 14,601
Total cash and cash equivalents 26,312,194 25,974,042
Restricted funds 13,592 12,720
Total cash 26,325,786 25,986,762

Cash and cash equivalents presented in the interim condensed consolidated statement of cash flows exclude restricted funds.

b) Cash and clearing and deposits with Central Reserve Bank of Peru -

These accounts mainly include the legal cash requirements that Subsidiaries of Credicorp, incorporated in Peru, must keep to be able to honor their obligations with the public. The composition of these funds is as follows:

As of March 31,<br><br> 2020 As of December 31, <br><br>2019
S/(000) S/(000)
Legal cash requirements (i)
Deposits with Central Reserve Bank of Peru 9,989,397 13,727,222
Cash in vaults of Bank 4,462,793 4,132,347
Total legal cash requirements 14,452,190 17,859,569
Additional funds
Overnight deposits with Central Reserve Bank of Peru (ii) 6,636,610 4,640,429
Cash in vaults of Bank and others 786,584 785,327
Total additional funds 7,423,194 5,425,756
Total 21,875,384 23,285,325 
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(i) As of March 31, 2020, cash and deposits subject to legal cash requirements in local and foreign currency<br>are subject to an implicit rate of 5.01 percent and 35.42 percent, respectively, on the total balance of obligations subject to<br>legal cash requirements, as required by the BCRP (5.01 percent and 35.06 percent, respectively, as of December 31, 2019).

In Management's opinion, the Group has complied with the calculation legal cash requirements established by current regulations.

(ii) As of March 31, 2020, the Group maintains three "overnight" deposits with the BCRP, of which<br>are two denominated in soles for S/690.6 million and one in U.S Dollars for US$1,730.0 million, equivalent to S/5,946.0 million.<br>At said date, the deposit in soles and deposits in U.S Dollars accrue interest at annual rates of 0.25 percent and 0.17 percent,<br>respectively, and have maturities at 1 day.

As of December 31, 2019, the Group maintains three “overnight” deposits with the BCRP, which are one denominated in soles for S/360.0 million and two in U.S Dollars for US$1,291.6 million, equivalent to S/4,280.4 million. At said date, deposit in soles and deposits in U.S Dollars accrue interest at annual rates of 1.00 percent and 1.57 percent, respectively, and have maturities at 2 days.

c) Deposits with local and foreign banks -

Deposits with local and foreign banks mainly consist of balances in soles and U.S. dollars; these are cash in hand and earn interest at market rates. As of March 31, 2020 and December 31, 2019 Credicorp and its Subsidiaries do not maintain significant deposits with any bank in particular.

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5 CASH COLLATERAL, REVERSE REPURCHASE AGREEMENTS AND SECURITIES BORROWING AND PAYABLES FROM REPURCHASE<br>AGREEMENTS AND SECURITIES LENDING
a) We present below the composition of cash collateral, reverse<br>repurchase agreements and securities borrowing:
--- ---
As of March 31,<br><br> 2020 As of December 31, <br><br>2019
--- --- --- --- ---
S/(000) S/(000)
Cash collateral on repurchase agreements and security lendings (i) 3,455,245 3,293,837
Reverse repurchase agreement and security borrowings 969,100 899,435
Receivables for short sales - 95,252
Total 4,424,345 4,288,524
(i) As of March 31, 2020, the balance mainly comprises cash collateral for approximately US$835.5 million,<br>equivalent to S/2,871.6 million, delivered to BCRP to secure a borrowing in soles of approximately S/2,822.6 million from the same<br>entity (cash collateral for approximately US$844.5 million, equivalent to S/2,798.7 million, and borrowing of approximately S/2,800.4<br>million, as of December 31, 2019).
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Cash collateral granted bears interest at an average annual effective interest rate according to market rates. The related liability is presented in “Payables from repurchase agreements and securities lending” of the interim condensed consolidated statement of financial position, see paragraph (c) below.

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b) Credicorp, through its subsidiaries, obtains financing through “Payables<br>from repurchase agreements and securities lending” by selling financial instruments and committing to repurchase them at<br>future dates, including interest at a fixed rate. The details of said transactions are as follows:
As of March 31, 2020 As of December 31, 2019
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Currency Average interest<br> <br>rate Up to 3<br> <br>days From <br><br>3 to<br><br> 30<br> days More<br><br> than <br><br>30 days Carrying<br><br> amount Fair <br><br>value of<br><br> underlying<br><br> assets Average interest<br> <br>rate Up to 3<br> <br>days From<br><br> 3 to <br><br>30 days More<br><br> than <br><br>30 days Carrying<br><br> amount Fair<br><br> value of<br><br> underlying<br><br> assets
% S/(000) S/(000) S/(000) S/(000) S/(000) % S/(000) S/(000) S/(000) S/(000) S/(000)
Debt instruments (c) 71,284 - 7,282,252 7,353,536 7,736,198 64,900 25,699 6,240,866 6,331,465 6,709,182
Instruments issued by the Colombian Government Colombian pesos 5.79 462,739 346,918 1,692 811,349 814,101 5.49 135,997 941,431 - 1,077,428 1,077,917
Instruments issued by the Chilean Government Chilean pesos 0.13 37,544 - - 37,544 37,675 0.20 130,551 44,411 - 174,962 175,054
Other instruments 0.50 51,961 336 - 52,297 52,524 2.07 70,997 16,809 6,355 94,161 105,086
623,528 347,254 7,283,944 8,254,726 8,640,498 402,445 1,028,350 6,247,221 7,678,016 8,067,239 
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c) As of March 31, 2020 and December 31, 2019, the Group has repurchase<br>agreements secured with: (i) cash, see Note 5(a), and (ii) investments, see Note 6(b). This item consists of the following:
As of March 31, 2020 As of December 31, 2019
--- --- --- --- --- --- --- --- --- --- --- ---
Carrying Carrying
Counterparties Currency Maturity amount Collateral Maturity amount Collateral
S/(000) S/(000)
BCRP, Note 5(a)(i) Soles April<br> 2020 / March 2023 2,822,600 Cash with BCRP February<br> 2020 / October 2020 2,800,400 Cash with BCRP
BCRP Soles June<br> 2020 / March 2021 2,439,675 Investments June<br> 2020 / November 2020 1,504,088 Investments
Natixis S.A. Soles August<br> 2020 / August 2028 570,000 Investments August<br> 2020 / August 2028 570,000 Investments
Banco Central de Bolivia Bolivianos May<br> 2020 / February 2021 466,354 Cash May<br> 2020 / February 2021 398,586 Cash
Nomura International PLC U.S. Dollar August<br> 2020 274,960 Investments and cash August<br> 2020 265,120 Investments and cash
Nomura International PLC U.S. Dollar August<br> 2020 240,590 Investments and cash August<br> 2020 231,980 Investments and cash
Citigroup Global Market<br>Limited U.S. Dollar August<br> 2026 154,665 Investments August<br> 2026 149,130 Investments
Citigroup Global Markets<br>Limited Soles August<br> 2020 100,000 Investments August<br> 2020 100,000 Investments
Natixis S.A U.S. Dollar August<br> 2026 85,925 Investments August<br> 2026 82,850 Investments
Banco de la República Colombian pesos April<br> 2020 63,265 Investments January<br> 2020 64,540 Investments
Naitixis Colombian pesos October<br> 2020 34,068 - - - -
Other below S/8.0 million - April<br> 2020 / April 2033 8,010 Investments January<br> 2020 / April 2033 64,970 Investments
Accrued interest 93,424 99,801
7,353,536 6,331,465

As of March 31, 2020, said operations accrue interest at fixed and variable rates between 0.72 percent and 7.20 percent and between Libor 3M + 0.80 percent and Libor 6M + 1.90 percent, respectively, (between 2.6 percent and 7.20 percent and between Libor 3M + 0.80 percent and Libor 6M + 1.90 percent, respectively, as of December 31, 2019). Also, certain repurchase agreements were hedged using interest rate swaps (IRS) and cross-currency swaps (CCS), see Note 13(b).

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6 INVESTMENTS
a) Investment at fair value through profit or loss consist of the following:
--- ---
As of March<br> <br>31, 2020 As of December<br> <br>31, 2019
--- --- --- --- ---
S/(000) S/(000)
Government treasury bonds (i) 1,971,197 1,276,573
Mutual funds 831,775 593,552
Restricted mutual funds (ii) 398,111 460,086
Participation in RAL Funds (iii) 328,697 300,398
Corporate bonds 199,285 326,673
Investment funds 89,295 327,659
Royalty Pharma (iv) 79,084 68,584
Central Bank of Chile bonds 64,822 182,540
Shares 41,326 83,085
Subordinated bonds 24,810 80,084
Multilateral organization bonds 17,793 53,353
Others 129,243 93,204
Balance before accrued interest 4,175,438 3,845,791
Accrued interest 10,200 4,971
Total 4,185,638 3,850,762
(i) As of March 31, 2020 and December 31, 2019, the balance of these instruments includes the following<br>government treasury bonds:
--- ---
As of March<br> <br>31, 2020 As of December<br> <br>31, 2019
--- --- --- --- ---
S/(000) S/(000)
Colombian Treasury bonds 972,857 1,102,865
Peruvian Treasury bonds 768,254 95,308
U.S. treasury and federal agency bonds 128,542 78,400
Panama Treasury bonds 67,173 -
Brasil Treasury bonds 25,652 -
Chile Treasury bonds 6,979 -
Mexico Treasury bonds 1,740 -
Total 1,971,197 1,276,573
(ii) The restricted mutual funds comprise the participation quotas in the private pension funds managed<br>by the Group, and are maintained in compliance with the legal regulations in Peru. Their availability is restricted and the yield<br>received is the same as that received by the private pension funds managed.
--- ---
(iii) As of March 31, 2020, these funds are approximately S/146.5 million in bolivianos and S/182.2 million<br>in U.S. Dollars (S/166.9 million in bolivianos and S/133.5 million in U.S. Dollars as of December 31, 2019) and comprise the investments<br>made by the Group in the Central Bank of Bolivia as collateral for deposits<br>received from the public. These funds have restrictions for their use and are required from all banks in Bolivia.
--- ---
(iv) It corresponds to participations in RPI International Holding, LP, who invests in a series of subordinate<br>funds whose objective is to invest in Royalty Pharma Investments, an investment fund established under the laws of Ireland. This<br>investment fund is dedicated to buying medical and biotechnology patents. Participations in RPI International Holdings, LP, are<br>not liquid and require authorization for negotiation.
--- ---

During the period ended March 31, 2020 and March 31, 2019, the Group has received dividends from these participations for S/1,012,164 and S/930,591, respectively; which are presented in the item of “Interest and similar income” of the interim condensed consolidated statement of income.

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b) Investments at fair value through other comprehensive income consist<br>of the following:
As<br> of March 31, 2020 As<br> of December 31, 2019
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Unrealized<br> gross amount Unrealized<br> gross amount
Amortized<br> cost Profits Losses Estimated<br><br><br> fair value Amortized<br><br><br> cost Profits Losses Estimated<br><br><br> fair value
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Debts instruments:
Corporate bonds (i) 9,380,090 495,928 (366,679 ) 9,509,339 7,974,080 706,394 (8,322 ) 8,672,152
Certificates of deposit BCRP (ii) 9,644,503 40,800 (37 ) 9,685,266 8,649,885 15,388 (1 ) 8,665,272
Government treasury bonds (iii) 6,526,977 519,946 (92,463 ) 6,954,460 6,009,137 690,048 (1,109 ) 6,698,076
Securitization instruments (iv) 662,395 43,886 (11,891 ) 694,390 580,778 53,328 (8,344 ) 625,762
Negotiable certificates of deposit 466,101 1,492 (671 ) 466,922 369,016 856 (303 ) 369,569
Subordinated bonds 155,746 10,042 (5,352 ) 160,436 150,172 14,085 (100 ) 164,157
Others 169,816 7,398 (1,687 ) 175,527 167,529 7,896 - 175,425
27,005,628 1,119,492 (478,780 ) 27,646,340 23,900,597 1,487,995 (18,179 ) 25,370,413
Equityinstruments designated at the initial recognition
Shares issued by:
Alicorp S.A.A. 12,198 158,582 - 170,780 12,198 201,567 - 213,765
Inversiones Centenario 112,647 190,776 - 303,423 112,647 195,305 - 307,952
Bolsa de Valores de Lima 19,423 1,153 - 20,576 19,423 2,115 - 21,538
Bolsa de Comercio de Santiago 4,964 4,365 - 9,329 4,964 5,688 - 10,652
Compañía Universal Textil S.A. 9,597 248 (3,432 ) 6,413 9,597 248 (3,432 ) 6,413
Pagos Digitales Peruanos S.A. - - - - 5,197 - - 5,197
Corporación Andina de Fomento - - - - 4,441 181 - 4,622
Bolsa de Valores de Colombia 819 1,286 (210 ) 1,895 872 4,070 (53 ) 4,889
Others 6,962 2,988 - 9,950 2,638 1,533 - 4,171
166,610 359,398 (3,642 ) 522,366 171,977 410,707 (3,485 ) 579,199
Balance before accrued interest 27,172,238 1,478,890 (482,422 ) 28,168,706 24,072,574 1,898,702 (21,664 ) 25,949,612
Accrued interest 219,666 253,111
Total 28,388,372 26,202,723

The Management of Credicorp has determined that the unrealized losses on investment at fair value through other comprehensive income as of March 31, 2020 and December 31, 2019 are of a temporary nature, considering factors such as intended strategy in relation with the identified security or portfolio, its underlying collateral and credit rating of the issuers. As of March 31, 2020, as a result of assessment of the impairment of its investments at fair value through other comprehensive income, the Group recorded a provision of credit loss of S/11.8 million (recovery of credit loss of S/0.7 million during the three-month period ended March 31, 2019), which is shown in “Net gain on securities” in the interim condensed consolidated statement of income. Also, Management has decided and has the ability to hold each investment for a period of time sufficient to allow for an anticipated recovery in fair value, until the earlier of its anticipated recovery or maturity.

As of March 31, 2020 and December 31, 2019, the Group has not reclassified instruments from the portfolio of investments at fair value through other comprehensive income to investments at amortized cost.

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The maturities and annual market rates of investments at fair value through other comprehensive income as of March 31, 2020 and December 31, 2019, are as follows:

Maturities Annual<br> effective interest rate
As of March 31,<br> <br>2020 As of December<br> 31, 2019 As<br> of March 31, 2020 As<br> of December 31, 2019
S/ US Other S/ US Other
Min Max Min Max Min Max Min Max Min Max Min Max
% % % % % % % % % % % %
Corporate bonds (*) Apr-2020 / Feb-2065 Jan-2020 / Feb-2065 (0.57 ) 33.99 19.43 0.49 9.92 1.09 8.16 8.25 0.62 6.55
Certificates of deposit BCRP Apr-2020 / Mar-2023 Jan-2020 / Jul-2021 1.25 2.41 - - - 2.02 2.35 - - -
Government treasury bonds Apr-2020 / Feb-2055 Jan-2020 / Feb-2055 0.78 5.88 6.31 2.59 2.89 0.55 5.31 4.61 0.43 0.82
Securitization instruments May-2020 / Sep-2045 May-2020 / Sep-2045 2.89 13.32 9.11 1.68 6.00 2.46 13.26 9.14 1.68 6.00
Negotiable certificates of deposits Apr-2020 / Dec 2026 Jan-2020 / Dec-2026 2.47 3.75 4.00 0.80 4.98 3.27 4.01 2.68 1.00 4.98
Subordinated bonds Apr-2022 / Aug-2045 Apr-2022 / Aug-2045 1.28 7.28 6.78 - - 1.21 5.52 5.23 1.53 1.53
Others Apr-2020 / Feb-2035 Jan-2020 / Jan-2028 1.61 7.05 6.92 - - 1.95 3.73 6.92 - -

All values are in US Dollars.

(*) As of March 31, 2020, the annual effective interest rates of (0.57) percent and 33.99 percent correspond to bonds issued by JP Morgan Chase & Co. and ICCGSA Inversiones S.A., respectively; excluding such interest rates, the ranges are from 1.34 percent to 11.90 percent.

Likewise, as of March 31, 2020, the Group entered into repurchase agreement transactions for corporate bonds, multilateral organization bonds and foreign government bonds classified as investments at fair value through other comprehensive income, for an estimated fair value of S/2,552.2 million (S/1,588.7 million as of December 31, 2019), of which the related liability is presented in “Payables from repurchase agreements and securities lending” of the interim condensed consolidated statement of financial position, see note 5(c).

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(i)    As of March 31, 2020, the largest unrealized loss respect to the balance as of December 31, 2019 is due to the COVID-19 crisis, which had a greater impact in the electricity, gas and water sector and in the financial services sector amounting to S/145.2 million and S/75.2 million, respectively; generated mainly by Peruvian, Colombian and United States issuers for S/113.2 million, S/38.8 million and S/23.0 million, respectively.

(ii) As of March 31, 2020, the Group maintains 97,647 certificates of deposits BCRP (87,530 as of December<br>31, 2019); which are instruments issued at discount through public auction, traded on the Peruvian secondary market and payable<br>in soles.
(iii) As of March 31, 2020 and December 31, 2019, the balance includes the following Government Treasury<br>Bonds:
--- ---
Asof March31, 2020 Asof December31, 2019
--- --- --- --- ---
S/(000) S/(000)
Peruvian treasury bonds 6,126,787 5,959,066
U.S. treasury and federal agency bonds 485,215 391,475
Chilean treasury bonds 179,061 173,364
Bolivian treasury bonds 60,803 72,516
Colombian treasury bonds 61,157 61,009
Others 41,437 40,646
Total 6,954,460 6,698,076
(iv) As of March 31, 2020 and December 31, 2019, the balance of securitization instruments includes the<br>following:
--- ---
Asof March31, 2020 Asof December31, 2019
--- --- --- --- ---
S/(000) S/(000)
Inmuebles Panamericana 163,705 169,959
Abengoa Transmisión del Norte 89,961 87,377
Industrias de Aceite S.A. 50,808 32,050
Costa de Sol S.A. 49,807 –
Homecenters Peruanos S.A. 34,537 35,269
Others 305,572 301,107
Total 694,390 625,762

The instruments have semiannual payments until 2045.The pool of underlying assets consists mainly of accounts receivable from income, revenues for services and from maintenance and marketing contributions (Inmuebles Panamericana), accounts receivable for electrical transmission services from the Carhuamayo - Cajamarca line (Abengoa Transmisión Norte) and accounts receivable for the transformation and commercialization of agribusiness products (Industrias de Aceite S.A.).

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c) Amortized cost investments consist of the following:
As of March 31, 2020
--- --- --- --- --- --- ---
Carrying Fair
amount value
S/(000) S/(000)
Peruvian sovereign bonds (i) 4,086,569 4,332,415
Foreign government bonds (i) 18,360 18,363
Certificates of payment on work progress (CRPAO) (ii) 99,226 103,432
Sub total 4,204,155 4,454,210
Accrued interest 39,080 39,080
Total investments at amortized cost 4,243,235 4,493,290
Provision for credit losses (592 ) (592 )
Total investments at amortized cost, net 4,242,643 4,492,698
As of December 31, 2019
--- --- --- --- --- --- ---
Carrying Fair
amount value
S/(000) S/(000)
Peruvian sovereign bonds (i) 3,277,667 3,694,631
Foreign government bonds (i) 21,168 21,168
Certificates of payment on work progress (CRPAO) (ii) 100,298 103,015
Sub total 3,399,133 3,818,814
Accrued interest 78,180 78,180
Total investments at amortized cost 3,477,313 3,896,994
Provision for credit losses (267 ) (267 )
Total investments at amortized cost, net 3,477,046 3,896,727
(i) As of March 31, 2020, said bonds have maturities between April 2020 and February 2042, accruing interest at an annual effective<br>interest rate between 1.27 percent and 5.88 percent on bonds denominated in soles and between 0.47 percent and 2.62 percent annual<br>on bonds issued in other currencies (as of December 31, 2019, have maturities between January 2020 and February 2042, accruing<br>interest at an annual effective interest rate between 2.14 percent and 5.28 percent on bonds denominated in soles and between 0.45<br>percent and 2.53 percent on bonds issued in other currencies).
--- ---

Likewise, Credicorp Management has determined that as of March 31, 2020, the difference between amortized cost and the fair value of these investments is temporary in nature and Credicorp has the intention and ability to hold each of these investments until its maturity.

As of March 31, 2020, the Group has repurchase agreement transactions for investments at amortized cost for an estimated fair value of S/1,536.5 million (S/1,569.3 million as of December 31, 2019), the related liability for which is presented in the caption “Payables from repurchase agreements and securities lending” of the interim condensed consolidated statement of financial position, see note 5(c).

- 29 -
(ii) As of March 31, 2020, there are 145 certificates of Annual Recognition of Payment on Work Progress - CRPAO from Spanish acronym<br>(153 CRPAOs as of December 31, 2019), issued by the Peruvian Government to finance projects and concessions. Said issuance is a<br>mechanism established in the concession agreement signed between the State and the concessionaire, which allows the latter to obtain<br>financing to continue with the work undertaken. Said investment matures between April 2020 and April 2026, accruing interest at<br>an annual effective rate between 2.48 percent and 4.52 percent as of March 31, 2020 (between January 2020 and April 2026, accruing<br>interest at an annual effective rate between 3.74 percent and 4.67 percent as of December 31, 2019).

On July 30, 2019, the Assets and Liabilities Committee (ALCO) approved the request to change the Atlantic Security Bank (ASB) business model to manage its investments according to its new balance sheet structure, which generated a reclassification of the entire investment portfolio classified as amortized cost to the investment portfolio at fair value with changes in other comprehensive income and then sell them and acquire new investments that adapt to the new investment portfolio strategy.

The value of the investments at amortized cost as of July 30, 2019 amounted to US$73,030.4 (in thousands) with a fluctuation amounting to US$2,117.5 (in thousands), with a market value of US$ 75,147.9 (in thousands) and finally an expected credit loss of US$82.4 (in thousands). The fluctuation and expected credit loss were recorded in other comprehensive income.

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c) The table below shows the balance of investments classified by maturity, without consider accrued<br>interest or provision for credit loss:
As of March 31, 2020
--- --- --- --- --- --- ---
At fair value<br><br> through profit<br><br> or loss At fair value<br><br> through other<br><br> comprehensive<br><br> income Amortized<br><br> cost
S/(000) S/(000) S/(000)
Up to 3 months 80,620 3,096,776 9,930
From 3 months to 1 year 227,761 7,395,276 900,711
From 1 to 3 years 301,369 2,992,056 43,921
From 3 to 5 years 406,610 2,724,779 687,704
More than 5 years 1,488,621 11,437,457 2,561,889
Without maturity 1,670,457 522,362 -
Total 4,175,438 28,168,706 4,204,155
As of December 31, 2019
--- --- --- --- --- --- ---
At fair value<br><br> through profit<br><br> or loss At fair value<br><br> through other<br><br> comprehensive<br><br> income Amortized<br><br> cost
S/(000) S/(000) S/(000)
Up to 3 months 237,624 2,420,464 9,969
From 3 months to 1 year 269,199 6,694,486 908,271
From 1 to 3 years 472,215 2,155,053 42,440
From 3 to 5 years 289,393 2,961,767 690,289
More than 5 years 1,029,883 11,138,643 1,748,164
Without maturity 1,547,477 579,199 -
Total 3,845,791 25,949,612 3,399,133 
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7              LOANS, NET

a) This item consists of the following:
As of March<br><br> 31, 2020 As of<br><br> December 31,<br><br> 2019
--- --- --- --- --- --- ---
S/(000) S/(000)
Direct loans -
Loans 96,511,233 91,481,200
Leasing receivables 6,082,888 5,978,421
Credit cards 8,317,732 8,479,355
Discounted notes 1,985,466 2,200,142
Factoring receivables 1,870,705 2,015,513
Advances and overdrafts in current account 388,912 162,149
Refinanced loans 1,128,730 1,186,167
Restructured loans 129 125
Total direct loans 116,285,795 111,503,072
Internal overdue loans and under legal collection loans 3,586,794 3,304,886
119,872,589 114,807,958
Add (less) -
Accrued interest 964,985 870,410
Unearned interest (129,059 ) (68,689 )
Total direct loans 120,708,515 115,609,679
Allowance for loan losses (c) (5,931,772 ) (5,123,962 )
Total direct loans, net 114,776,743 110,485,717
b) As of March 31, 2020 and December 31, 2019, the composition of the gross credit balance is as follows:
--- ---
As of March<br><br> 31, 2020 As of<br><br> December 31,<br><br> 2019
--- --- --- --- ---
S/(000) S/(000)
Direct loans 119,872,589 114,807,958
Indirect loans, Note 21(a) 20,426,402 21,081,035
Banker’s acceptances outstanding 555,598 535,222
Total 140,854,589 136,424,215 
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The composition of gross balance of direct and indirect loans and the allowance of loan losses by stages is as follows:

Direct and indirect loans Allowancefor loan losses ofdirect and indirect loans
Loans by class As of March<br><br> 31, 2020 As of<br><br> December<br><br> 31, 2019 As of March<br><br> 31, 2020 As of<br><br> December<br><br> 31, 2019
S/000 S/000 S/000 S/000
Stage 1
Commercial loans 80,554,815 75,838,248 481,034 388,685
Residential mortgage loans 18,198,762 17,903,028 53,844 38,085
Micro-business loans 13,636,094 13,782,323 572,593 425,642
Consumer loans 12,120,435 12,222,858 548,288 248,355
Total 124,510,106 119,746,457 1,655,759 1,100,767
Stage 2
Commercial loans 4,662,246 4,883,039 215,280 166,135
Residential mortgage loans 847,285 778,702 33,381 25,684
Micro-business loans 1,644,333 1,839,597 305,838 249,960
Consumer loans 2,366,810 2,210,504 625,724 513,431
Total 9,520,674 9,711,842 1,180,223 955,210
Stage 3
Commercial loans 3,800,246 3,771,417 1,396,146 1,315,227
Residential mortgage loans 1,032,404 994,991 500,544 472,711
Micro-business loans 1,221,634 1,350,858 924,955 960,885
Consumer loans 769,525 848,650 674,194 702,959
Total 6,823,809 6,965,916 3,495,839 3,451,782
Consolidated 3 Stages
Commercial loans 89,017,307 84,492,704 2,092,460 1,870,047
Residential mortgage loans 20,078,451 19,676,721 587,769 536,480
Micro-business loans 16,502,061 16,972,778 1,803,386 1,636,487
Consumer loans 15,256,770 15,282,012 1,848,206 1,464,745
Total 140,854,589 136,424,215 6,331,821 5,507,759

The growth in the stock of the allowance for loan losses of Credicorp is mainly due to the impact of COVID-19, which explains the variation of 83% in stock of the allowance for loan losses compared to the period 2019.

The impact of COVID-19 mainly due to the updates of the projections of the macroeconomic scenarios to more severe conditions, which has had a different impact on each loan portfolio, mainly affecting the credits of the Stage 1 and Stage 2.

Additionally, considering the extent of the quarantine and its impact on the country's economic activity, we expect that the recovery level of our loan portfolio will be affected, especially in the retail portfolio of consumer and Small and medium businesses (PYME, from Spanish acronym) and, in a minor degree, in the wholesale portfolio.

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c) The allowance for loan loss for direct and indirect loans was determined under the expected credit<br>loss model as established in IFRS 9. The movement of the allowance for loan loss for direct and indirect loans is shown below:
Forthe three-month periodsended March 31,
--- --- --- --- --- --- ---
2020 2019
S/(000) S/(000)
Balance at beginning of period 5,507,759 5,314,531
Provision for credit losses on loan 1,388,711 453,285
Written-offs loans (519,532 ) (434,759 )
Exchange differences and others (45,117 ) (120,772 )
Balance ended of period (*) 6,331,821 5,212,285
(*) The movement in the allowance for loan losses for the three-month period ended March 31, 2020 includes<br>the allowance for direct and indirect loans for approximately S/5,931.8 million and S/400.0 million, respectively (approximately<br>S/5,124.0 million and S/383.8 million, respectively, as of December 31, 2019). The expected loan loss for indirect loan is included<br>in “Other liabilities” of the interim condensed consolidated statement of financial position, Note 13(a). In Management’s<br>opinion, the allowance for loan losses recorded as of March 31,2020 and December 31, 2019 has been established in accordance with<br>IFRS 9 and is sufficient to cover incurred losses on the loan portfolio.
--- ---
d) Interest rates on loans are set considering the rates prevailing in the markets where the Group’s<br>subsidiaries operate.
--- ---

e)     A portion of the loan portfolio is collateralized with guarantees received from customers, which mainly consist of mortgages, trust assignments, securities and industrial and mercantile pledges.

f) The following table presents the gross direct loan portfolio as of March 31, 2020 and December 31,<br>2019 by maturity based on the remaining period to the payment due date:
As of March<br><br> 31, 2020 As of<br><br> December 31,<br><br> 2019
--- --- --- --- ---
S/(000) S/(000)
Outstanding loans -
Up to 1 year 55,562,538 53,306,936
From 1 to 3 years 25,639,567 24,586,441
From 3 to 5 years 10,194,090 9,615,514
More than 5 years 24,889,600 23,994,181
116,285,795 111,503,072
Internal overdue loans -
Overdue 90 days 861,596 692,161
Over 90 days 2,725,198 2,612,725
3,586,794 3,304,886
Total 119,872,589 114,807,958

See credit risk analysis in Note 34.1.

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8 FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

The Group issues Investment Link life insurance contracts whereby the policyholder takes the investment risk on the assets held in the Investment Link funds as the policy benefits are directly linked to the value of the assets in the fund. The Group’s exposure to market risk is limited to the extent that income arising from asset management charges is based on the value of assets in the fund.

The profit resulting from these assets is shown in “Net premiums earned” in the interim condensed consolidated statement of income. The composition of the generated returns is presented below:

As of March 31,<br><br> 2020 As of December 31, <br><br>2019
S/(000) S/(000)
Net profit on sale of financial investments 10,560 21,879
Changes in the fair value of financial assets (110,691 ) 58,351
Dividends, interests and others 1,888 13,434
Total (98,243 ) 93,664

The variation in the result of these assets is a consequence of COVID-19, which generated that the financial markets as of March 31, 2020 experienced a drop of close to 20 percent compared to the period 2019.

At the date of this report, there has been a recovery of the global indices, and what Credicorp seeks is to control the volatility of the portfolio in order to minimize the losses of our clients in these difficult times.

The offsetting of this effect is included in the technical reserve adjustment, which is part of the item “Net premiums earned” of the interim condensed consolidated statement of income, see Note 25.

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9 ACCOUNTS RECEIVABLE AND PAYABLE FROM INSURANCE CONTRACTS
a) As of March 31, 2020 and December 31, 2019, “Premiums and other policies receivable” in<br>the interim condensed consolidated statement of financial position includes balances for approximately S/822.7 million and S/838.7<br>million, respectively, which are primarily of current maturity, have no specific collateral and present no material past due balances.
--- ---
b) The movements of the captions “Accounts receivable and payable to reinsurers and coinsurers”<br>are as follows:
--- ---

Accounts receivable:

As<br> of March 31,<br><br> 2020 As of December 31,<br><br> 2019
S/(000) S/(000)
Balances as of January 1 791,704 842,043
Reported claims of premiums ceded, Note 26 42,407 321,375
Reserve risk in progress of premiums ceded, Note 25(a)(**) (35,618 ) (14,935 )
Premiums assumed - 668
Settled claims of premiums ceded by reinsurance contracts (18,918 ) (226,769 )
Collections and others, net 8,097 (130,678 )
Balances at the end of the period 787,672 791,704

Accounts receivable as of March 31, 2020 and December 31, 2019, include S/162.0 million and S/201.0 million, respectively, which correspond to the assigned portion of technical reserves for premiums ceded to the reinsurers.

Accounts Payable:

Asof March 31, 2020 Asof December 31, 2019
S/(000) S/(000)
Balances as of January 1 216,734 291,693
Premiums ceded for automatic contracts (mainly excess of loss), Note 25(a)(**) 78,084 254,839
Premiums ceded to reinsurers in facultative contracts, Note 25(a)(**) 39,752 289,386
Coinsurance granted 2,745 4,332
Payments and other, net (138,842 ) (623,516 )
Balances at the end of the period 198,473 216,734

Accounts payable to reinsurers are primarily related to proportional facultative contracts (on an individual basis) for ceded premiums, automatic non-proportional contracts (excess loss) and reinstallation premiums. For facultative contracts the Group transfers to the reinsurers a percentage or an amount of an insurance contract or individual risk, based on the premium and the coverage period.

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10 PROPERTY, FURNITURE AND EQUIPMENT, NET
a) The composition of property, furniture and equipment and accumulated depreciation as of March 31, 2020 and December 31, 2019<br>was as follows:
--- ---
As<br> of March 31, 2020 As<br> of December 31, 2019
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Cost Accumulated<br><br> depreciation Net<br> carrying<br><br> amount Cost Accumulated<br><br> depreciation Net<br> carrying<br><br> amount
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Land 402,089 - 402,089 401,553 - 401,553
Buildings<br> and other constructions 1,157,318 (665,274 ) 492,044 1,156,252 (657,690 ) 498,562
Installations 660,978 (486,658 ) 174,320 653,728 (478,294 ) 175,434
Furniture<br> and fixtures 475,819 (312,539 ) 163,280 479,748 (308,020 ) 171,728
Computer<br> hardware 640,145 (559,112 ) 81,033 635,203 (552,023 ) 83,180
Vehicles<br> and equipment 115,708 (89,476 ) 26,232 116,625 (88,277 ) 28,348
Work<br> in progress 58,091 - 58,091 69,368 - 69,368
Total 3,510,148 (2,113,059 ) 1,397,089 3,512,477 (2,084,304 ) 1,428,173

Banks, financial institutions and insurance entities operating in Peru are not allowed to pledge their fixed assets.

In the three-month period ended March 31, 2020, the Group did not have any significant commitments to purchase property, furniture and equipment. During the year 2019, the Bank has made disbursements mainly related to the remodeling of its headquarters in La Molina and integral remodeling to the Sucursal Cusco.

Credicorp’s subsidiaries hold insurance contracts over its main assets in accordance with the policies established by Management.

Management periodically reviews the residual value, useful life and method of depreciation of the Group’s property, furniture and equipment to ensure that they are consistent with their actual economic benefits and life expectations. In Management’s opinion, as of March 31, 2020 and December 31, 2019, there is no evidence of impairment of the Group’s property, furniture and equipment.

- 37 -
11 INTANGIBLE ASSETS AND GOODWILL, NET
a) Intangible assets -
--- ---

The composition of intangible assets with limited useful life and accumulated amortization as of March 31, 2020 and December 31, 2019 was as follows:

As<br> of March 31, 2020 As<br> of December 31, 2019
Cost Accumulated<br><br> amortization Net<br> carrying<br><br> amount Cost Accumulated<br><br> amortization Net<br> carrying<br><br> amount
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Client<br> relationships 362,450 (238,649 ) 123,801 378,896 (243,951 ) 134,945
Brand<br> name 191,346 (60,745 ) 130,601 193,247 (60,643 ) 132,604
Fund<br> manager contract 82,139 (12,141 ) 69,998 94,143 (12,441 ) 81,702
Relationships<br> with holders 21,100 (21,100 ) - 21,100 (20,219 ) 881
Software<br> and developments 2,725,960 (1,848,784 ) 877,176 2,704,561 (1,774,183 ) 930,378
Intangible<br> in progress 376,112 - 376,112 363,347 - 363,347
Other 68,592 (41,214 ) 27,378 49,695 (27,287 ) 22,408
3,827,699 (2,222,633 ) 1,605,066 3,804,989 (2,138,724 ) 1,666,265

In the three-month period ended March 31, 2020, the Group did not have any significant commitments to purchase or make intangibles. During the year 2019, the Group has made disbursements mainly related with the implementation and development of various IT projects such as DataLake, Holístico, SpotLigth, DWH, Operating Model, Client 360, Connex, Mainframe, Kalignite NDC, Small and medium businesses.

Also, during the year 2019, the activation of various intangibles in progress was carried out, mainly the DataLake system for a total cost of US$19.7 million, equivalent to S/64.9 million. This system manages the Bank's customer database and provides various financial reports.

- 38 -
b) Goodwill -

Goodwill acquired through business combinations has been allocated to each subsidiary or groups of them, which are also identified as a CGU for the purposes of impairment testing.

The recoverable amount of all of the CGUs has been determined based on the calculations of the fair value less selling costs, which is the present value of the discounted cash flows determined principally with assumptions of revenue and expenses projection (based on efficiency ratios).

As of March 31, 2020 and December 31, 2019, the net book balance amounted to S/819.3 million and S/886.0 million, respectively.

As of March 31, 2020, the Group has evaluated the impairment of goodwill by making an interim estimate based on the information available to date about the unusual and uncertain situation generated by COVID-19, concluding that there is no evidence of impairment at said date; therefore, during the three-month period ended March 31, 2020 and during the year 2019, the Group did not recorded any impairment loss.

- 39 -
12 RIGHT-OF-USE ASSETS AND<br>LEASE LIABILITIES
a) Right-of-use
--- ---

The Group has leased agreements according to the following composition:

As<br> of March 31, 2020 As<br> of December 31, 2019
Cost Accumulated<br><br> depreciation Net<br> carrying<br><br> amount Cost Accumulated<br><br> depreciation Net<br> carrying<br><br> amount
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Property: Agencies and offices 821,503 (162,460 ) 659,043 819,046 (130,761 ) 688,285
Servers and technology platforms 171,374 (50,488 ) 120,886 168,371 (40,591 ) 127,780
Spaces for ATM 29,150 (9,689 ) 19,461 25,146 (7,900 ) 17,246
Transport units 3,300 (1,107 ) 2,193 3,006 (971 ) 2,035
Other leases 8,724 (4,310 ) 4,414 7,394 (3,654 ) 3,740
1,034,051 (228,054 ) 805,997 1,022,963 (183,877 ) 839,086
b) Lease Liabilities
--- ---

The Group maintains contracts, with certain renewal options and for which the Group has reasonable certainty that this option will be exercised. In those cases, the period of lease used to measure the liability and assets corresponds to an estimation of future renovations.

- 40 -
13 OTHER ASSETS AND OTHER LIABILITIES
a) This item consists of the following:
Asof March 31,2020 Asof December 31, 2019
--- --- --- --- ---
S/(000) S/(000)
Other assets -
Financial instruments:
Receivables 1,718,496 1,311,892
Derivatives receivable (b) 1,790,770 1,092,107
Receivables from sale of investments (g) 998,947 278,580
Operations in process (c) 55,648 110,389
4,563,861 2,792,968
Non-financial instruments:
Deferred fees (f) 1,119,810 1,056,656
Investment in associates (d) 618,310 628,822
Investment properties, net (e) 456,009 450,929
Income tax prepayments, net 278,628 191,502
Adjudicated assets, net 142,072 143,349
Improvements in leased premises 105,719 112,385
VAT (IGV) tax credit 26,424 75,605
Others 9,190 6,254
2,756,162 2,665,502
Total 7,320,023 5,458,470
Asof March 31,2020 Asof December 31, 2019
--- --- --- --- ---
S/(000) S/(000)
Other liabilities -
Financial instruments:
Dividends payable by Credicorp Ltd. (h) 2,392,844 -
Accounts payable 1,589,995 1,670,525
Derivatives payable (b) 1,751,719 1,040,282
Accounts payable for acquisitions of investments (g) 1,029,208 311,348
Salaries and other personnel expenses 486,924 760,140
Allowance for indirect loan losses, Note 7(c) 400,049 383,797
Operations in process (c) 95,643 80,734
7,746,382 4,246,826
Non-financial instruments:
Taxes 753,447 644,802
Provision for sundry risks 361,280 359,853
Others 190,766 229,807
1,305,493 1,234,462
Total 9,051,875 5,481,288 
- 41 -
b) The risk in derivative contracts arises from the possibility<br>of the counterparty failing to comply with the terms and conditions agreed and that the reference rates at which the transactions<br>took place change.

The table below shows as of March 31, 2020 and December 31, 2019 the fair value of derivative financial instruments, recorded as an asset or a liability, together with their notional amounts and maturities. The nominal amount, recorded gross, is the amount of a derivative’s underlying asset and is the basis upon which fair value of derivatives is measured.

As<br> of March 31, 2020 As<br> of December 31, 2019 2020 and 2019
Assets Liabilities Notional<br><br><br> amount Maturity Assets Liabilities Notional<br><br><br> amount Maturity Related<br><br> instruments
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Derivatives held for trading<br> (i) -
Foreign currency forwards 472,830 427,076 27,928,979 April<br> 2020 / October 2022 306,148 246,960 27,422,634 January<br> 2020 / October 2020 -
Interest rate swaps 689,397 869,448 23,693,862 April<br> 2020 / December 2031 268,633 350,938 26,268,071 January<br> 2020 / December 2031 -
Currency swaps 477,578 337,654 9,219,526 April<br> 2020 / January 2033 411,656 366,545 8,177,179 January<br> 2020 / January 2033 -
Foreign exchange options 25,976 22,149 1,564,752 April<br> 2020 / March 2021 6,489 6,089 1,565,083 January<br> 2020 / December 2020 -
Futures - 56 17,185 June<br> 2020 10 139 16,901 March<br> 2020 -
1,665,781 1,656,383 62,424,304 992,936 970,671 63,449,868
Derivatives held as hedges
Cash flow hedges -
Interest rate swaps (IRS) - 1,758 687,400 May<br> 2020 / November 2020 102 1,111 662,800 May<br> 2020 / November 2020 Debt to banks
Interest rate swaps (IRS) - 1,460 653,030 May<br> 2020 / June 2020 - 1,046 629,660 May<br> 2020 / June 2020 Debt to banks
Interest rate swaps (IRS) - 1,281 168,413 November<br> 2020 55 714 984,258 February<br> 2020 / November 2020 Debt to banks
Interest rate swaps (IRS) - 3,093 1,031,100 May<br> 2020 / August 2020 315 839 994,200 May<br> 2020 / August 2020 Debt to banks
Interest rate swaps (IRS) - 1,380 343,700 August<br> 2020 114 - 331,400 August<br> 2020 Debt to banks
Interest rate swaps (IRS) - 1,087 343,700 June<br> 2020 - 447 331,400 June<br> 2020 Debt to banks
Interest rate swaps (IRS) - 4,686 240,590 March<br> 2021 - 2,555 231,980 March<br> 2021 Bonds issued
Interest rate swaps (IRS) - 2,216 103,110 March<br> 2022 - - - - Bonds issued
Cross currency swaps (CCS) 33,453 9,748 467,467 October<br> 2020 / September 2024 20,803 1,167 107,425 May<br> 2021 / September 2024 Investments (*)
Cross currency swaps (CCS) 40,274 - 240,590 August<br> 2020 30,741 - 231,980 August<br> 2020 Repurchase agreements
Cross currency swaps (CCS) - 28,599 154,665 August<br> 2026 - 30,352 149,130 August<br> 2026 Repurchase agreements
Cross currency swaps (CCS) - 11,449 85,925 August<br> 2026 - 12,236 82,850 August<br> 2026 Repurchase agreements
Cross currency swaps (CCS) - - - - 7,624 - 331,400 January<br> 2020 Debt to banks
Cross currency swaps (CCS) 1,749 - 171,850 January<br> 2025 - 8,197 165,700 January<br> 2025 Bonds issued
Cross currency swaps (CCS) - 2,152 159,630 August<br> 2021 - 2,823 152,545 August<br> 2021 Bonds issued
Cross currency swaps (CCS)<br> and <br>Interest rate swaps (IRS) 49,513 101 274,960 August<br> 2020 39,417 - 265,120 August<br> 2020 Repurchase agreements
Fair value hedges -
Interest rate swaps (IRS) - 26,326 596,732 March<br> 2022 / May 2023 - 8,124 618,790 June<br> 2021 / May 2023 Investments (*)
124,989 95,336 5,722,862 99,171 69,611 6,270,638
1,790,770 1,751,719 68,147,166 1,092,107 1,040,282 69,720,506

(*) Corresponds to investments classified at the fair value through other comprehensive income under IFRS 9 as of March 31, 2020 and December 31, 2019.

- 42 -
(i) Held-for-trading derivatives are principally negotiated to satisfy customers’ needs. On the other hand, the Group may<br>also take positions with the expectation of profiting from favorable movements in prices or rates. Also, this caption includes<br>any derivatives which do not comply with IFRS 9 hedge accounting requirements. Fair value of derivatives held for trading classified<br>by contractual maturity is as follows:
As<br> of March 31, 2020 As<br> of December 31, 2019
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Up to 3 From 3 months From 1 to 3 From 3 to 5 Over 5 Up to 3 From 3 months From 1 to 3 From 3 to 5 Over 5
months to<br> 1 year years years years Total months to<br> 1 year years years years Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Foreign currency forwards 339,049 128,097 5,684 - - 472,830 199,070 104,265 2,813 - - 306,148
Interest rate swaps 15,350 13,731 84,869 26,728 548,719 689,397 3,716 8,409 38,569 8,067 209,872 268,633
Currency swaps 2,100 133,620 130,438 64,976 146,444 477,578 7,124 101,368 102,703 67,826 132,635 411,656
Foreign exchange options 14,846 11,130 - - - 25,976 1,844 4,645 - - - 6,489
Futures - - - - - - 10 - - - - 10
Total assets 371,345 286,578 220,991 91,704 695,163 1,665,781 211,764 218,687 144,085 75,893 342,507 992,936
As<br> of March 31, 2020 As<br> of December 31, 2019
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Up to 3 From 3 months From 1 to 3 From 3 to 5 Over 5 Up to 3 From 3 months From 1 to 3 From 3 to 5 Over 5
months to<br> 1 year years years years Total months to<br> 1 year years years years Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Foreign currency forwards 310,699 111,613 4,764 - - 427,076 154,424 89,739 2,797 - - 246,960
Interest rate swaps 16,745 20,908 99,918 59,901 671,976 869,448 7,705 13,837 46,840 18,477 264,079 350,938
Currency swaps 34,887 124,121 97,233 42,093 39,320 337,654 41,729 92,917 79,844 50,663 101,392 366,545
Foreign exchange options 11,509 10,640 - - - 22,149 836 5,253 - - - 6,089
Futures - 56 - - - 56 139 - - - - 139
Total liabilities 373,840 267,338 201,915 101,994 711,296 1,656,383 204,833 201,746 129,481 69,140 365,471 970,671 
- 43 -
c) Transactions in process<br>include deposits received, granted and collected loans, funds transferred and other similar types of transactions, which are made<br>in the final days of the month and not reclassified to their final accounts in the interim condensed consolidated statement of<br>financial position until the first days of the following month. The regularization of these transactions does not affect the Group’s<br>net income.
d) Credicorp’s principal associate is Entidad Prestadora de Salud (EPS), whose balance amounts<br>to S/560.5 million and S/571.9 million as of March 31, 2020 and December 31, 2019, respectively.
--- ---
e) Investment properties -
--- ---

The movement of investment properties is as follows:

As of March 31, 2020 As of December<br> <br>31, 2019
Own assets
Land Buildings Total Total
S/(000) S/(000) S/(000) S/(000)
Cost
Balance at January 1 253,041 238,325 491,366 484,782
Additions (i) - 6,595 6,595 33,321
Sales (ii) - - - (26,775 )
Disposals and others 147 23 170 38
Ending Period 253,188 244,943 498,131 491,366
Accumulated depreciation
Balance at January 1 - 39,027 39,027 43,488
Depreciation for the year - 1,682 1,682 6,727
Sales (ii) - - - (11,435 )
Disposals and others - 3 3 247
Ending Period - 40,712 40,712 39,027
Impairment losses (iii) 689 721 1,410 1,410
Net carrying amount 252,499 203,510 456,009 450,929

Land and buildings are mainly used for office rental, which are free of all encumbrances.

(i) As of March 31, 2020, in order to consolidate the real<br>estate projects, the Group has made disbursements mainly for the improvements of the following buildings: one of them located<br>in Trujillo for approximately S/3.8 million and the other one located in Arequipa for approximately S/1.5 million.

As of December 31, 2019, the most important additions corresponded to the acquisition of 13th floor of Panorama Building located in the district of Santiago de Surco for approximately S/10.1 million (S/1.3 million for land and S/8.8 million for building) and land located in the district of San Martín de Porres for approximately S/8.7 million.

(ii) The amount for the sales in the year 2019, is mainly<br>made up of the sale of a property located in Camino Real 348, San Isidro, whose sale value was S/27.5 million (cost of disposal<br>of the property amounted to S/6.3 million); and a property located in Manuel Maria Izaga Street, located in the province of Chiclayo,<br>whose value was S/3.4 million (cost of disposal of the property amounted to S/4.2 million).
(iii) The Group’s Management has determined that the<br>recoverable value of its investment properties is greater than their net carrying amount, with the exception of a property located<br>in the city of Ica, for which an impairment of S/0.3 million was recorded during 2019.
--- ---

As of March 31, 2020 and December 31, 2019, the market value of the property amounts to approximately S/978.3 million and S/937.8 million, respectively; which was determined through a valuation made by an independent appraiser.

f) As of March 31, 2020 the balances corresponds mainly to the payment in favor of Latam Airlines Group<br>S.A. Sucursal Perú for US$188.9 million, equivalent in soles to S/649.2 million (US$202.0 million, equivalent in soles to<br>S/669.4 million, as of December 31, 2019) on account of Latam Pass Miles that the Bank must acquire from January 2020.
g) As of March 31, 2020 and December 31, 2019, corresponds to accounts receivable and payable for the<br>sale and purchase of financial investments negotiated during the last days of the month, which were settled during the first days<br>of the following month.
--- ---
h) The Board of Directors held in February 27, 2020, agreed to distribute dividends, net of the effect<br>of treasury stock, for approximately S/2,392.8 million from the retain earnings. Said dividends were declared in soles and paid<br>in U.S. Dollars May 8, 2020 using the weighted exchange rate of the professional market registered by the SBS at the close of business<br>on May 6, 2020. See Note 18(e).
--- --- 
- 44 -
14 DEPOSITS AND OBLIGATIONS

a)  This item consists of the following:

As of March 31, 2020 As of December 31, 2019
S/(000) S/(000)
Demand deposits 38,746,240 34,213,188
Time deposits (c) 33,954,557 32,853,576
Saving deposits 37,872,955 35,179,770
Severance indemnity deposits 7,204,922 7,897,199
Bank’s negotiable certificates 1,090,657 1,180,461
Total 118,869,331 111,324,194
Interest payable 694,214 681,191
Total 119,563,545 112,005,385

The Group has established a policy to remunerate demand deposits and savings accounts according to a growing interest rate scale, based on the average balance maintained in those accounts; on the other hand, according to its policy, balances that are lower than a specified amount for each type of account do not bear interest. Also, time deposits earn interest at market rates.

Interest rates are determined by the Group considering the interest rates prevailing in the market in which each of the Group’s subsidiaries operates.

b)   The amounts of non-interest-bearing and interest-bearing deposits and obligations are presented below:

As of March 31, 2020 As of December 31, 2019
S/(000) S/(000)
Non-interest-bearing -
In Peru 35,407,187 31,155,442
In other countries 3,075,190 2,674,724
38,482,377 33,830,166
Interest-bearing -
In Peru 71,224,757 68,899,966
In other countries 9,162,197 8,594,062
80,386,954 77,494,028
Total 118,869,331 111,324,194 
- 45 -

c)  The balance of time deposits classified by maturity is as follows:

As of March 31, 2020 As of December 31, 2019
S/(000) S/(000)
Up to 3 months 14,909,932 14,674,773
From 3 months to 1 year 9,526,978 8,975,269
From 1 to 3 years 6,004,161 6,096,891
From 3 to 5 years 795,182 819,446
More than 5 years 2,718,304 2,287,197
Total 33,954,557 32,853,576

In Management’s opinion the Group’s deposits and obligations are diversified with no significant concentrations as of March 31, 2020 and December 31, 2019.

As of March 31, 2020 and December 31, 2019, of the total balance of deposits and obligations, approximately S/35,356.0 million and S/35,511.9 million, respectively, are secured by the Peruvian “Fondo de Seguro de Depósitos” (Deposit Insurance Fund). At said dates, maximum amount of coverage per depositor recognized by “Fondo de Seguro de Depósitos” totaled S/100,123 and S/100,661, respectively.

- 46 -
15 DUE TO BANKS AND CORRESPONDENTS

a) This item consists of the following:

As of March 31, 2020 As of December 31,2019
S/(000) S/(000)
International funds and others (b) 6,738,811 5,654,014
Promotional credit lines (c) 3,056,167 2,938,981
Inter-bank funds - 205,000
9,794,978 8,797,995
Interest payable 59,652 43,737
Total 9,854,630 8,841,732

b) This item consists of the following:

As of March 31, 2020 As of December 31, 2019
S/(000) S/(000)
Bank of America, N.A. 1,044,825 994,200
Citibank N.A. 1,031,100 662,800
Sumitomo Mitsui Banking Corporation 683,963 984,258
Wells Fargo Bank, N.A. 653,030 730,074
Bank of New York Mellon 515,551 331,400
Corporación Andina de Fomento - CAF 343,700 662,800
Corporación Financiera de Desarrollo (COFIDE) 298,331 406,710
Banco de la Nación 260,000 -
Brown Brothers Harriman 210,010 -
Pershing Usd - Rfi 183,860 -
Standard Chartered Bank 183,104 86,827
JP Morgan Chase Bank, National Association 171,850 -
Wachovia Bank N.A. 103,110 -
Caja Municipal de Ahorro y Crédito de Arequipa S.A. 100,000 140,000
Scotiabank Perú S.A.A. 100,000 100,000
Banco Internacional del Perú S.A.A. (Interbank) 110,000 50,000
Banco BBVA Perú 100,500 85,000
Bofa - Casa De Valores C1 69,133 -
Banco de Occidente 68,553 -
Bancoldex 58,430 -
Banco ICBC 55,000 -
International Finance Corporation (IFC) 4,022 91,558
Others less than S/52.5 million 390,739 328,387
Total 6,738,811 5,654,014 
- 47 -

As of March 31, 2020, the loans have maturities between April 2020 and March 2032 (between January 2020 and March 2032, as of December 31, 2019) and accrue interest in foreign currency at rates that fluctuate between 0.50 percent and 9.63 percent and accrue interest in soles at rates that fluctuate between 3.10 percent and 3.90 percent (between 0.50 percent and 9.65 percent and between 3.17 percent and 8.67 percent, respectively as of December 31, 2019).

c)    Promotional credit lines represent loans granted by Corporación Financiera de Desarrollo and Fondo de Cooperación para el Desarrollo Social (COFIDE and FONCODES for their Spanish acronyms, respectively) to promote the development of Peru, they mature between April 2020 and July 2029 and bear annual interest in soles at rates that fluctuate between 4.20 percent and 7.60 percent and interest in foreign currency at 7.75 percent as of March 31, 2020 (between January 2020 and July 2029 and with annual interest in soles at rates that fluctuate between 4.20 percent and 7.60 percent and interest in foreign currency at 7.75 percent as of December 31, 2019). These credit lines are secured by a loan portfolio totaling S/3,056.2 million and S/2,939.0 million, as of March 31, 2020 and December 31, 2019, respectively.

d)    The following table presents the maturities of due to banks and correspondents as of March 31, 2020 and December 31, 2019 based on the period remaining to maturity:

As of March 31, 2020 As of December 31, 2019
S/(000) S/(000)
Up to 3 months 3,416,750 2,062,121
From 3 months to 1 year 3,035,700 3,693,328
From 1 to 3 years 796,272 559,511
From 3 to 5 years 604,233 614,265
More than 5 years 1,942,023 1,868,770
Total 9,794,978 8,797,995

e)   As of March 31, 2020 and December 31, 2019, lines of credit granted by various local and foreign financial institutions, to be used for future operating activities total S/9,795.0 million and S/8,593.0 million, respectively.

f)   Certain debts to banks and correspondents include standard covenants addressing observance of financial ratios, the use of the funds and other administrative matters; which, in Management’s opinion, do not limit the Group’s operations and have been complied with at the date of the consolidated financial statements.

- 48 -
16 TECHNICAL RESERVES FOR INSURANCE CLAIMS AND PREMIUMS

a) This item consists of the following:

As of March 31, 2020
Technical<br> <br>reserves for claims Technical<br> <br>reserves for premiums (*) Total
S/(000) S/(000) S/(000)
Life insurance 956,564 7,524,137 8,480,701
General insurance 599,840 633,859 1,233,699
Health insurance 81,387 180,158 261,545
Total 1,637,791 8,338,154 9,975,945
As of December 31, 2019
--- --- --- --- --- --- ---
Technical<br> <br>reserves for claims Technical<br> <br>reserves for premiums (*) Total
S/(000) S/(000) S/(000)
Life insurance 908,362 7,548,684 8,457,046
General insurance 590,588 651,129 1,241,717
Health insurance 77,278 174,192 251,470
Total 1,576,228 8,374,005 9,950,233

(*) As of March 31, 2020, the life insurance technical reserves include the mathematical reserves of income amounting to S/5,939.0 million (S/5,961.0 million as of December 31, 2019).

Insurance claims reserves represent reported claims and an estimate for incurred but non reported claims (IBNR). Reported claims are adjusted on the basis of technical reports received from independent adjusters.

Insurance claims to be paid by reinsurers and co-insurers represents ceded claims, which are presented in “Accounts receivable from reinsurers and coinsurers” of the interim condensed consolidated statement of financial position, See note 9(b).

As of March 31, 2020, the reserves for direct claims include reserves for IBNR for life, general and health insurance for an amount of S/414.8 million, S/26.8 million and S/69.5 million, respectively (S/393.4 million, S/24.3 million and S/63.5 million, respectively, as of December 31, 2019).

As of March 31, 2020, and in previous years, the differences between the estimates for the incurred and non-reported claims and the settled and pending liquidation claims have not been significant. In the case of general risks and health, retrospective analysis indicates that the amounts accrued are adequate and Management believes that the estimated IBNR reserve is sufficient to cover any liability as of March 31, 2020 and December 31, 2019.

Technical reserves include reserves for obligations for future benefits under insurance of life and personal accidents in force; and the unearned premium reserves in respect of the portion of premiums written that is allocable to the unexpired portion of the related policy periods of related coverage.

- 49 -
17 BONDS AND NOTES ISSUED

a) This item consists of the following:

As of March 31, 2020 As of December 31, 2019
Annual interest Interest Issued Issued
rate payment Maturity amount Maturity amount
% (000) S/(000) (000) S/(000)
Senior notes - BCP (i) From 2.70 to 5.38 Semi-annual September 2020 / January 2025 US1,074,628 3,599,045 September 2020 / <br>January 2025 US1,074,628 3,464,199
Senior notes - BCP (ii) 4.25 Semi-annual April 2023 US716,301 2,410,715 April 2023 US716,301 2,318,975
Senior notes - BCP (iii) From 4.65 to 4.85 Semi-annual October 2020 / September 2024 S/2,900,000 2,869,747 October 2020 / <br>September 2024 S/2,900,000 2,872,355
Senior notes - BCP (iv) Libor 3M + 100 pb Quarterly March 2021 US70,000 240,376 March 2021 US70,000 231,738
Senior notes - BCP (v) 0.42 Semi-annual August 2021 ¥ 5,000,000 159,082 August 2021 5,000,000 151,888
Senior notes - BCP Libor 3M + 0.55 Quarterly March 2022 US30,000 102,883 - - -
MMT 100 - Secured notes- CCR Inc. (vi)
2012 Series C Floating rate certificates 4.75 Monthly July 2022 US315,000 360,886 July 2022 US315,000 385,253
Corporate bonds -
Fourth program
Tenth issuance (Series A, B and C) - BCP From 5.31 to 7.25 Semi-annual December 2021 / November 2022 S/550,000 528,087 December 2021/ <br>November 2022 S/550,000 527,868
Fifth program
First issuance (Series D) - BCP 5.91 Semi-annual - - - January 2020 S/182,410 182,061
Third issuance (Series A) - BCP 4.59 Semi-annual July 2021 S/70,770 63,496 July 2021 S/70,770 63,430
Third issuance (Series B) - BCP 4.88 Semi-annual October 2021 S/42,200 29,056 October 2021 S/42,200 29,183
Third issuance (Series C) - BCP 4.25 Semi-annual July 2022 S/109,310 108,851 July 2022 S/109,310 108,821
Third issuance (Series D) - BCP 3.88 Semi-annual August 2022 S/42,660 42,366 August 2022 S/42,660 42,337
771,856 953,700

All values are in US Dollars.

- 50 -
As of March 31, 2020 As of December 31, 2019
Annual interest Interest Issued Issued
rate payment Maturity amount Maturity amount
% (000) S/(000)
Subordinated bonds - BCP (vii) 6.13 Semi-annual April 2027 US720,000 2,472,234 April 2027 US720,000 2,383,860
Subordinated bonds - BCP (viii) 6.88 Semi-annual September 2026 US476,120 1,600,491 September 2026 US476,120 1,549,702
Subordinated bonds -
First program
First issuance (Series A) - BCP 6.22 Semi-annual May 2027 S/15,000 15,000 May 2027 S/15,000 15,000
First issuance (Series A) - Pacífico Seguros 6.97 Quarterly November 2026 US60,000 206,220 November 2026 US60,000 198,840
Second program
First issuance (Series A) - Mibanco 8.50 Semi-annual May 2026 S/100,000 100,000 May 2026 S/100,000 99,934
First issuance (Series B) - Mibanco 7.22 Semi-annual June 2027 S/30,000 30,000 June 2027 S/30,000 30,000
Third program
Issuance I - Banco de Crédito de Bolivia 6.25 Semi-annual August 2028 Bs70,000 35,179 August 2028 Bs70,000 33,816
Issuance II - Banco de Crédito de Bolivia 5.25 Semi-annual August 2022 Bs137,200 69,422 August 2022 Bs137,200 66,782
455,821 444,372
Negotiable certificate of deposit - Mibanco From 3.01 to 5.80 Annual April 2020 / March 2025 S/1,301 1,301 January 2020 / <br>January 2024 S/997 997
Subordinated negotiable certificates - BCP Libor 3M + 279 bp Semi-annual November 2021 US2,960 10,175 November 2021 US2,960 9,809
15,054,612 14,766,848
Interest payable 123,536 179,515
Total 15,178,148 14,946,363

All values are in US Dollars.

- 51 -

During the three-month period ended March 31, 2018, in accordance with the risk exposure strategy of the interest rate, the Group discontinued the fair value hedge of certain bonds, issued in U.S. Dollars at a fixed rate, through the liquidation of the IRS. The accumulated profit of the fair value of these bonds at the time of the liquidation of the derivatives amounted to US$22.0 million (equivalent to S/71.7 million), recorded in the liability, which has been transferred to the consolidated statement of income up to the date of maturity of said bonds. As of March 31, 2020, the liability amounts to US$7.5 million, equivalent to S/25.7 million, (US$8.7 million, equivalent to S/28.8 million, as of December 31, 2019). The amount recorded in the interim condensed consolidated statement of income ended March 31, 2020 amounts to US$1.2 million, equivalent to S/4.2 million (US$1.6 million, equivalent to S/5.4 million, during the period ended as of March 31, 2019).

(i) In September 2019, the Bank announced a repurchase offer and propose an exchange to the holders of<br>senior notes of the US$800.0 million issued in September of 2010, managing to repurchase US$220.3 million and exchanging US$ 205.0<br>million with new senior notes, at market rates , whose terms and conditions were very similar to the previous issue. At the end<br>of said offer, the Bank keeps a notional value payable amounting to US$374.6 million, which can be redeemed by the Bank in whole<br>or in part, in any date, having as a penalty an interest rate equal to the Treasury of the United States of America’s rate<br>plus 40 basis points.

In the same way, in September 2019, the Bank issued senior notes of approximately US$700 million (that amount includes the US$205.0 million of the exchange mentioned in the paragraph before). The Bank can redeem all or part of the notes at any date, between October 11, 2021 and December 10, 2024, at a redemption price equal to or greater than: (i) 100 percent of the aggregate principal amount of the notes to be redeemed; and (ii) the sum of the present value of each remaining scheduled payment discounted at interest rate equal to the Treasury of the United States of America’s rate plus 20 basis points. From December 11, 2024 onwards, the Bank can redeem the total or part of the notes to a redemption price equal to 100 percent of the aggregate principal amount of the notes to be redeemed.

The payment of principal will take place on the due date or when the Bank redeems the notes.

(ii) The Bank can redeem the total or part of the notes in any time, having as a penalty an interest rate<br>equal to the Treasury of the United States of America’s rate plus 50 basis point. The payment of principal will take place<br>on the due date of the notes or when the Bank redeems these notes.
(iii) In September 2019, the Bank announced a repurchase offer and propose an exchange to the holders of<br>senior notes of the S/2,000 million issued in October of 2017, managing to repurchase S/291.2 million and exchanging S/1,308.8<br>million with new senior notes, at market rates, whose terms and conditions are very similar to the previous issue. At the end of<br>said offer, the Bank keeps a notional value payable amounting to S/400.0 million, which can be redeemed by the Bank in whole or<br>in part, as of October 15, 2020 without penalties.
--- ---

At the same date, the Bank issued senior notes for approximately S/2,500.0 million (this amount includes the S/1,308.8 million of the exchange mentioned in the paragraph before). The Bank can redeem the whole or part of the senior notes between October 17, 2021 and August 16, 2024, at a redemption price equal to or greater than: (i) 100 percent of the aggregate principal amount of the notes, and (ii) the sum of the present value of cash flows discounted at interest rate equivalent to sovereign bonds issued by the government of Perú or other comparable titles plus 25 basis points. As of August 17, 2024, the Bank may redeem all or part of the senior notes at a redemption price equal to 100 percent of the aggregate amount of the principal to be redeemed.

The payment of principal will take place on the due date or when the Bank redeems the notes.

(iv) In February of 2019, the Bank issued Senior Notes for approximately US$70.0 million at variable rate. 
- 52 -
(v) In July of 2019, the Bank issued Senior Notes for approximately JPY5,000.0 million at fixed interest<br>rate.
(vi) This issue is guaranteed by the future collection of electronic payment orders sent to BCP (including<br>foreign branches) through the Society Worldwide Interbank Financial Telecommunications, through which the correspondent bank uses<br>the network to places orders of payment to beneficiary that is not a financial institution.
--- ---
(vii) The Bank as of the year of 2022 will pay a three-month Libor plus 70.3 basis points. Between April<br>24, 2017 and April 24, 2022, the Bank can redeem the whole or part of the bonds having a penalty of an interest rate equal to the<br>Treasury of United States of América’s rate plus 50 basis points. Also, as of April 25, 2022 or at any date after<br>interest payment, the Bank can redeem all or part of the bonds without penalty. Payment of the principal will take place on the<br>due date of the bonds or when the Bank redeems them.
--- ---
(viii) The Bank as of September 16, 2021, will pay a three-month Libor plus 770.8 basis points. Between the<br>dates of September 16, 2016 and September 15, 2021, the Bank can redeem the whole or part of the bonds, having a penalty of an<br>interest rate equal to the Treasury of United States of America´s rate plus 50 basis point. Also, as of September 16, 2021<br>or at any time after at the payment of interests, the Bank can redeem the whole or part of the bonds without penalties. The payment<br>of the principal amount will take place on due date or in the redemptions of them.
--- ---
b) The table below shows the bonds and notes issued, classified by maturity, without accrued interests:
--- ---
As of March 31,<br><br> 2020 As of December 31, <br><br>2019
--- --- --- --- ---
S/(000) S/(000)
Up to 3 months 39,080 182,365
From 3 months to 1 year 2,026,599 1,739,358
From 1 to 3 years 1,250,592 1,438,732
From 3 to 5 years 4,959,838 4,863,708
More than 5 years 6,778,503 6,542,685
Total 15,054,612 14,766,848 
- 53 -
18 EQUITY
a) Capital stock -
--- ---

As of March 31, 2020 and December 31, 2019, a total of 94,382,317 shares have been issued at US$5 per share.

b) Treasury stock -

We present below the stocks of Credicorp Ltd., that the entities of the Group maintain as of March 31, 2020 and 2019:

Number of shares
As of March 31, 2020 Shares of <br><br>the Group Shared-based<br><br> payment (*) Total
Atlantic Security Holding Corporation 14,620,846 - 14,620,846
BCP - 159,339 159,339
Pacífico Seguros - 29,845 29,845
Credicorp Perú - 32,512 32,512
Credicorp Capital Servicios Financieros - 17,598 17,598
Other minors 63,307 53,946 117,253
14,684,153 293,240 14,977,393
Number of shares
--- --- --- --- --- --- ---
As of March 31, 2019 Shares of <br><br>the Group Shared-based<br><br> payment (*) Total
Atlantic Security Holding Corporation 14,620,846 - 14,620,846
BCP - 134,041 134,041
Pacífico Seguros - 29,539 29,539
Credicorp Perú - 21,695 21,695
Credicorp Capital Servicios Financieros - 12,667 12,667
Other minors 12,202 45,354 57,556
14,633,048 243,296 14,876,344
(*) Corresponds to treasury stock that were granted to employees<br>and senior management, for which they have the right to vote; also, these stocks are not vested at said dates. See more detail<br>in Note 20.
--- ---

During the three-month period ended March 31, 2020 and 2019, the Group purchased 240,151 and 129,807 shares of Credicorp Ltd., respectively, for a total of US$44.4 million (equivalent to S/151.9 million) and US$31.0 million (equivalent to S/103.2 million), respectively.

- 54 -
c) Reserves -

Certain Group’s subsidiaries are required to keep a reserve that equals a percentage of paid-in capital (20, 30 or 50 percent, depending on its activities and the country in which production takes place); this reserve must be constituted with annual transfers of not less than 10 percent of net profits. As of March 31, 2020 and December 31, 2019, the balance of this reserves amounts approximately to S/6,248.0 million, S/6,236.5 million, respectively.

At the Board meetings held on February 27, 2020 and February 27, 2019, the decision was made to transfer from “Retained earnings” to “Reserves” S/1,977.1 million and S/1,858.8 million, respectively.

d) Dividend distribution –

The chart below shows the distribution of dividends agreed by the Board of Directors:

Asof December 31, 2019
Date of Meeting - Board of Directors 27.02.2020 27.02.2019
Dividends distribution, net of treasury shares effect (in thousands of soles) 2,392,844 1,595,229
Payment of dividends per share (in soles) 30.0000 20.0000
Date of dividends payout 08.05.2020 10.05.2019
Exchange rate published by the SBS 3.4081 3.3150
Dividends payout (equivalent in thousands of US) 702,105 481,215

All values are in US Dollars.

In the Board of Directors held in September 25, 2019, they agreed an additional dividend payment, net of the effect of treasury stock, for approximately S/638.4 million from the retain earnings and reserves. Said dividends have been paid in November 22, 2019.

In accordance with current Peruvian legislation, there is no restriction for overseas remittance of dividends or the repatriation of foreign investment. As of March 31, 2020 and December 31, 2019, dividends paid by the Peruvian subsidiaries to Credicorp are subject to a 5.0 percent withholding tax.

e) Regulatory capital -

As of March 31, 2020 and December 31, 2019, the regulatory capital requirement (“patrimonio efectivo” in Peru) applicable to Credicorp subsidiaries engaged in financial services and insurance activities in Peru, determined under the provisions of the Peruvian banking and insurance regulator, SBS, totals approximately S/27,868.3 million and S/25,732 million, respectively. At those dates, the Group’s regulatory requirement exceeds by approximately S/7,202.4 million and S/4,151.6 million, respectively, the minimum regulatory capital required by the SBS

- 55 -
19 TAX SITUATION
a) Credicorp is not subject to income tax or any taxes on capital gains, equity or property in Bermuda.<br>Credicorp’s Peruvian Subsidiaries are subject to the Peruvian tax regime.
--- ---

The income tax rate in Peru as of March 31, 2020 and December 31, 2019 was 29.5 percent of the taxable income after calculating the worker's participation, which is determined using a rate of 5.0 percent.

The income tax rate in Bolivia is 25.0 percent as of March 31, 2020 and December 31, 2019. Financial entities have an additional rate if the ROE exceeds 6.0 percent; in that case, they must consider an additional 25.0 percent, with which the rate would be 50.0 percent.

In the case of Chile, there are two tax regimes: partially integrated regime and attributed regime. Credicorp Capital Holding Chile and all their Subsidiaries are under partially integrated regime, whose tax rate for domiciled legal entities under this regime is 27.0 percent as of March 31, 2020 and December 31, 2019.

On the other hand, individuals or legal entities not domiciled in Chile will be subject to a tax called "Additional income tax" whose rates are between 4.0 percent and 35.0 percent, depending on the nature of the income. Additionally, Chile has signed treaties to avoid double taxation with different countries so certain income could be released from withholding tax or for the use of reduced rates.

In the case of Colombia, the income tax rate as of December 31, 2019, under the law called “Financing Law” N° 1943 dated December 28, 2018, the income tax rate of 33.0 percent was established for all entities without surcharge. As of March 31, 2020, under the law N° 2010 issued in December 27, 2019, the tax rates are as follows:

Taxable year Rate Additional rate<br><br> (surcharge) (*)
2020 32 4
2021 31 3
2022 30 3
As of 2023 30 -
(*) The additional rate (surcharge) will be applicable only<br>to financial entities, that in the corresponding year, with a taxable rate equal or greater than 120,000 Unit of tax value (“UVT”<br>from its Spanish acronym) which as of March 31, 2020 amounts to a total of S/3.9 million; in that sense, Credicorp Capital Colombia,<br>Credicorp Capital Fiduciaria and Banco Compartir must pay the income tax taking into account the aforementioned.
--- ---

Atlantic Security Holding Corporation and its Subsidiaries are not subject to taxes in the Cayman Islands or Panama. As of March 31, 2020 and December 31, 2019, no taxable income was generated from the operations in the United States of America.

- 56 -
b) Income tax expense for the three-month periods ended March 31, 2020 and 2019<br>comprises:
For the three-month<br><br> periods ended March 31,
--- --- --- --- --- --- ---
2020 2019
S/(000) S/(000)
Current -
In Peru 312,877 329,339
In other countries 45,768 50,377
358,645 379,716
Deferred -
In Peru (208,779 ) 51,522
In other countries (4,067 ) (9,073 )
(212,846 ) 42,449
Total 145,799 422,165

The deferred income tax has been calculated on all temporary differences, considering the income tax rates effective where Credicorp’s Subsidiaries are located.

c) The Peruvian Tax Authority has the right to review and, if necessary, amend<br>the annual income tax returns filed by Peruvian subsidiaries up to four years after their filing date. Income tax returns of the<br>major Subsidiaries open for examination by the tax authorities are as follows:
Banco de Crédito del Perú S.A. 2016 to 2019
--- ---
Mibanco, Banco de la Microempresa S.A. 2015 to 2019
Prima AFP S.A 2016 to 2019
Pacífico Compañía de Seguros y Reaseguros 2015, 2017 to 2019
Pacífico Peruano Suiza 2015 to 2017

On September 10, 2019 and December 20, 2019, the Peruvian Tax Authority started the examination of income tax returns of Banco de Crédito del Perú for the year 2014 and 2015, respectively, of Banco de Crédito del Perú, a tax control process that is still in process. Likewise, on December 10, 2019 the Tax Administration notified a Resolution finalizing the process of inspection of the Income Tax declaration of 2013 fiscal year in which a lower tax payment was determined.

It is important to mentioned that the Peruvian Tax Authority is auditing the Income Tax declaration of 2014 of Mibanco and the Income Tax declaration of 2016 of Pacífico Compañía de Seguros y Reaseguros.

- 57 -

The Bolivian, Chilean and Colombian Tax Authorities have the power to review and, if applicable, make a new determination for the income tax calculated by the Subsidiaries located in said countries in the previous 8 years, 3 years and 3 years, respectively, upon presentation of their Income Tax declarations. Additionally, in the case of Colombia, a period of 6 years was established for the taxpayers obliged to apply Transfer Prices or taxpayers who report tax losses. The annual income tax declarations pending examination by the overseas tax authorities are the following:

Banco de Crédito de Bolivia 2011, 2012, 2014 to 2019
Credicorp Capital Colombia 2016 to 2019
Credicorp Capital Holding Chile 2018 to 2019

Since tax regulations are subject to interpretation by the different Tax Authorities where Credicorp’s Subsidiaries are located, it is not possible to determine at the present date whether any significant additional liabilities may arise from any eventual tax examinations of the Credicorp’s Subsidiaries. Any resulting unpaid taxes, tax penalties or interest that may arise will be recognized as expenses in the year in which they are determined. However, Management of Credicorp and its Subsidiaries and their legal counsel consider that any additional tax assessments would not have a significant impact on the interim condensed consolidated financial statements as of March 31, 2020 and December 31, 2019.

20 SHARE-BASED COMPENSATION PLANS

On March of each year, the Group grants its own shares to certain key employees. The awarded shares are liberated in the three following years for up to 33.3 percent of the shares granted in each of the three previous years. The Group assumes the payment of the related income tax on behalf of its employees, which depend on the country of residence and the annual compensation of the employee.

As of March 31, 2020 and December 31, 2019, the Group has granted 175,564 and 116,594 Credicorp shares, of which 293,240 and 246,931 shares not vested as of March 31, 2020 and December 31, 2019, respectively. During the three-month periods ended March 31, 2020 and 2019, the recorded expense amounted to approximately S/20.1 million and S/26.4 million, respectively, see Note 27.

- 58 -
21 OFF-BALANCE SHEET ACCOUNTS
a) This item consists of the following:
--- ---
Asof March 31, 2020 As of December 31, 2019
--- --- --- --- ---
S/(000) S/(000)
Contingent credits – indirect loans (b)
Guarantees and standby letters 18,138,220 18,894,456
Import and export letters of credit 2,288,182 2,186,579
Sub-total, Note 7(b) 20,426,402 21,081,035
Responsibilities under credit line agreements (c) 79,706,040 75,615,563
Total 100,132,442 96,696,598

Reference values of operations with derivatives are recorded in off-balance sheet accounts in the committed currency, as shown in Note 13(b).

b) In the normal course of their business, the Group’s banking Subsidiaries are party to transactions<br>with off-balance sheet risk. These transactions expose them to credit risk in addition to the amounts recognized in the interim<br>condensed consolidated statement of financial position.

Credit risk for contingent credits is defined as the possibility of sustaining a loss because one of the parties to a financial instrument fails to comply with the terms of the contract. The risk of credit losses is represented by the contractual amounts specified in the related contracts. The Group applies the same credit policies in making contingent commitments and other obligations as it does for on-balance sheet instruments (Note 7(a)), including the requirement to obtain collateral when it is deemed necessary.

Collateral held varies, but may include deposits in financial institutions, securities or other assets. Many of the contingent transactions reach maturity without any performance being required; therefore, the total committed amounts do not necessarily represent future cash requirements.

c) Lines of credit include consumer loans and other consumer loan facilities (credit card receivables)<br>granted to customers and are cancelable upon related notice to the customer. 
- 59 -
22 INTEREST, SIMILAR INCOME AND SIMILAR EXPENSES

This item consists of the following:

For the three-month <br><br>periods ended March 31,
2020 2019
S/(000) S/(000)
Interest and similar income
Interest on loans 2,770,351 2,562,286
Interest on investments at fair value through other comprehensive income 261,189 269,603
Interest on investments at amortized cost 50,848 51,531
Interest on due from banks 49,113 86,699
Interest on investments at fair value through profit or loss 10,697 11,654
Dividends received 7,879 9,667
Other interest and similar income 13,532 10,234
Total 3,163,609 3,001,674
Interest and similar expense
Interest on deposits and obligations (364,107 ) (353,834 )
Interest on bonds and notes issued (198,114 ) (226,498 )
Interest on due to banks and correspondents (137,126 ) (145,303 )
Deposit Insurance Fund (40,030 ) (36,857 )
Interest on lease liabilities (7,803 ) (5,985 )
Other interest and similar expense (37,129 ) (36,029 )
Total (784,309 ) (804,506 ) 
- 60 -
23 COMMISSIONS AND FEES
For the three-month periods <br><br>ended March 31,
--- --- --- --- ---
2020 2019
S/(000) S/(000)
Maintenance of accounts, transfers and credit and debit card services 306,906 319,612
Funds and equity management 180,307 169,738
Contingent loans and foreign trade fees 90,596 87,439
Commissions for banking services 57,878 69,095
Brokerage, securities and custody services 22,122 13,091
Penalty commissions 19,809 20,304
Collection services 28,984 32,866
Others 53,727 70,777
Total 760,329 782,922 
- 61 -
24 NET GAIN ON SECURITIES

This item consists of the following:

Forthe three-month periodsended March 31,
2020 2019
S/(000) S/(000)
Net gain on investments at fair value through other comprehensive income 37,531 50,588
Net gain in associates (*) 19,225 14,786
Net (loss) gain on financial assets at fair value through profit or loss (**) (146,020 ) 62,235
(Provision) recovery of credit loss for investments at fair value through other comprehensive income, Note 6(b) (11,752 ) 72
Others (392 ) 650
Total (101,408 ) 128,331
(*) It mainly includes the gain of its associated “Entidad Prestadora de Salud” for approximately S/17.2 million during<br>the three-month period ended March, 31 2020 (S/8.9 million during the three-month period ended March 31, 2019).
--- ---
(**) The variation is due to the realized losses mainly from the following Subsidiaries occurred during the three-month period ended<br>March 31, 2020:
--- ---
- Banco de Crédito del Perú for approximately S/64.9 million, of which: (i) S/63.0 million correspond to realized<br>losses on the sale of financial investments mainly from the Peruvian Treasury bonds (S/37.1 million), Colombian Treasury bonds<br>(S/19.8 million), Colombian Treasury bonds (S/3.3 million) and Mexico Treasury bonds (S/2.5 million), y (ii) S/1.9 million correspond<br>to unrealized losses.
--- ---
- Prima AFP for approximately S/62.1 million. It corresponds to the drop of the restricted mutual funds, which was due to the<br>reduction in the profitability of Fund 1 in 10.93 percent, Fund 2 in 13.22 percent and Fund 3 in 18.90 percent, all of this caused<br>by the global crisis of COVID-19. These losses are mainly concentrated in fixed income government securities from emerging countries<br>(Fund 1), and in emerging variable income and local variable income assets (Fund 2 and Fund 3).
--- --- 
- 62 -
25 NET PREMIUMS EARNED
a) This item consists of the following:
--- ---
For<br> the three-month<br> periods ended March 31, Gross<br> written<br><br> premiums Technical reserve<br><br> adjustment(*) Total<br> gross<br><br> written premiums<br><br> (**) Premiums ceded to reinsurers and co-insurers, net (***) Results<br> of<br><br> financial assets<br><br> designated at fair <br><br> value through<br><br> profit and loss,<br><br> Note 8 Total Net premiums earned
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
2020
Life insurance 512,946 (48,867 ) 464,079 (30,130 ) (98,243 ) 335,706
Health insurance 147,757 (8,427 ) 139,330 (3,281 ) – 136,049
General insurance 240,850 35,373 276,223 (120,043 ) – 156,180
Total 901,553 (21,921 ) 879,632 (153,454 ) (98,243 ) 627,935
2019
Life insurance 513,409 (221,772 ) 291,637 (32,402 ) 47,242 306,477
Health insurance 141,596 (9,974 ) 131,622 (2,995 ) – 128,627
General insurance 237,533 13,294 250,827 (101,722 ) – 149,105
Total 892,538 (218,452 ) 674,086 (137,119 ) 47,242 584,209
(*) The variation during the three-month period ended March 31, 2020 respect to the previous period is mainly due to the following:<br>(i) lower sales in annuities, generating a lower constitution of reserves, and (ii) increase<br>in the market participation of pension insurance and increase in the withholding percentage.
--- ---
(**) This item includes earned premiums, reinsurance premiums accepted, and coinsurance premiums accepted and received.
--- ---
(***) “Premiums ceded to reinsurers and coinsurers, net” include:
--- ---
Forthe three-month periodsended March 31,
--- --- --- --- --- --- ---
2020 2019
S/(000) S/(000)
Premiums ceded for automatic contracts <br>(mainly excess of loss), Note 9(b) (78,084 ) (75,656 )
Premiums ceded for facultative contracts, <br>Note 9(b) (39,752 ) (33,216 )
Annual variation of reserve risk in <br>progress of premiums ceded, Note 9(b) (35,618 ) (28,247 )
(153,454 ) (137,119 ) 
- 63 -

b)      Gross written premiums by insurance type are described below:

For the three-month periods ended March 31,
2020 2019
S/(000) % S/(000) %
Life insurance (i) 464,079 52.76 291,637 43.26
Health insurance (ii) 139,330 15.84 131,622 19.53
General insurance (iii) 276,223 31.40 250,827 37.21
Total 879,632 100.00 674,086 100.00
(i) The breakdown of life insurance gross written premiums is as follows:
--- ---
For the three-month periods ended March 31,
--- --- --- --- --- --- --- --- --- --- ---
2020 2019
S/(000) % S/(000) %
Credit life 154,895 33.38 130,892 44.88
Disability and survival (*) 123,524 26.62 101,571 34.83
Individual life (**) 135,916 29.29 (8,834 ) (3.03 )
Group life 31,705 6.83 52,471 17.99
Annuities 18,039 3.88 15,537 5.33
Total 464,079 100.00 291,637 100.00
(*) This item includes Complementary Work Risk Insurance (“SCTR” from its Spanish acronym).
--- ---
(**) Individual life insurance premiums include Investment Link insurance contracts.
--- ---
(ii) Health insurance gross written premiums after adjustments include medical assistance which amounts<br>to S/119.5 million and S/110.7 million during the three-month periods ended March 31, 2020 and 2019, respectively; and represents<br>85.72 percent and 84.05 percent of this line of business at said periods, respectively.
--- ---
(iii) General insurance gross written premiums consist of the following:
--- ---
For the three-month periods ended March 31,
--- --- --- --- --- --- --- --- ---
2020 2019
S/(000) % S/(000) %
Automobile 90,957 32.93 86,702 34.57
Fire and allied lines 67,668 24.50 67,746 27.01
Theft and robbery 33,240 12.03 22,615 9.02
Technical lines (*) 17,433 6.31 16,779 6.69
Third party liability 14,444 5.23 13,810 5.51
Transport 11,334 4.10 10,233 4.08
SOAT (Mandatory automobile line) 9,548 3.46 9,971 3.97
Marine Hull 6,180 2.24 6,822 2.72
Aviation 15,310 5.54 3,048 1.21
Others 10,109 3.66 13,101 5.22
Total 276,223 100.00 250,827 100.00
(*) Technical lines include Contractor’s All Risk (CAR), Machinery breakdown, All Risk (EAR), Electronic<br>equipment (EE), All Risk Contractor’s Equipment (ARCE).
--- --- 
- 64 -
26 NET CLAIMS INCURRED FOR LIFE, GENERAL AND HEALTH INSURANCE CONTRACTS

This item consists of the following:

For the three-month periods ended March 31, 2020
Lifeinsurance Generalinsurance Healthinsurance Total
S/(000) S/(000) S/(000) S/(000)
Gross claims 260,122 80,319 75,468 415,909
Ceded claims, Note 9(b) (23,606 ) (19,428 ) 627 (42,407 )
Net insurance claims 236,516 60,891 76,095 373,502
For the three-month periods ended March 31, 2019
--- --- --- --- --- --- --- --- --- --- --- --- ---
Lifeinsurance Generalinsurance Healthinsurance Total
S/(000) S/(000) S/(000) S/(000)
Gross claims 246,516 163,865 82,202 492,583
Ceded claims (27,126 ) (80,602 ) (1,038 ) (108,766 )
Net insurance claims 219,390 83,263 81,164 383,817 
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27 SALARIES AND EMPLOYEES BENEFITS

This item consists of the following:

For the three-month periods ended March 31,
2020 2019
S/(000) S/(000)
Salaries 493,689 445,750
Vacations, medical assistance and others 86,734 78,562
Bonuses 69,505 67,410
Workers’ profit sharing 57,102 58,293
Social security 60,286 56,699
Additional participation 63,247 62,095
Severance indemnities 40,500 39,118
Share-based payment plans 20,120 26,390
Total 891,183 834,317 
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28 ADMINISTRATIVE EXPENSES

This item consists of the following:

For the three-month periods<br> <br>ended March 31,
2020 2019
S/(000) S/(000)
Repair and maintenance 106,360 102,916
Publicity 75,256 76,175
Taxes and contributions 68,017 66,709
Leases of low value and short-term 18,843 22,418
Consulting and professional fees 39,485 41,360
Transport and communications 35,466 41,636
Sundry supplies 23,424 17,564
Security and protection 15,286 17,002
Electricity and water 11,175 12,027
Subscriptions and quotes 10,752 9,570
Services by third-party and others (*) 135,580 130,780
Total 539,644 538,157
(*) The balances consists mainly of cleaning service, representation<br>expenses, insurance policy expenses and commission expenses.
--- --- 
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29 OTHER INCOME AND EXPENSES

This item consists of the following:

For the three-month periods<br> <br>ended March 31,
2020 2019
S/(000) S/(000)
Other income
Revenue from sale of loan portfolio 26,078 14,166
Rental income 9,962 13,879
Net income from the sale of property, furniture and equipment 10,319 -
Recoveries of other accounts receivable and other assets 219 128
Net gain from sale of adjudicated assets 1,312 -
Others (*) 69,880 47,432
Total other income 117,770 75,605
For the three-month periods<br> <br>ended March 31,
--- --- --- --- ---
2020 2019
S/(000) S/(000)
Other expenses
Donations (**) 114,454 4,419
Losses due to operational risk 8,330 6,869
Expenses on improvements in building for rent 6,738 7,144
Provision for sundry risks 5,772 6,195
Association in participation 6,430 2,736
Provision for other accounts receivable 3,367 2,228
Net loss from sale adjudicated assets - 5,533
Administrative and tax penalties 262 52
Others 30,707 15,001
Total other expenses 176,060 50,177
(*) During the three-month periods ended March 31, 2020 and 2019, the balance mainly comprises liquidation<br>for sale of Credicorp shares, penalty for breach of contract, commissions for recovery in civil and judicial lawsuits of Personal<br>Credits and Credit Card products; also, collection of commission for relocation, vehicle taxes, municipal property taxes, fines<br>and penalties to clients related to the Leasing product.
--- ---
(**) During the three-month period ended March 31, 2020, the<br>Group has made donations mainly through their subsidiaries BCP and MiBanco, a donation amounted of S/100.0 million was the fundraising<br>campaign named “#YoMeSumo” of BCP and S/10.0 million a donation of MiBanco, in both cases, in order to raise funds<br>for the poorest families affected by COVID19.
--- --- 
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30 EARNING PER SHARE

The net earnings per ordinary share were determined based on the net income attributable to equity holders of the Group as follows:

For the three-month periods<br><br> <br>ended March 31,
2020 2019
Net income attributable to equity holders of Credicorp (in thousands of Soles) 209,274 1,100,867
Number of stock
Ordinary stock, Note 18(a) 94,382,317 94,382,317
Less – opening balance of treasury stock (14,872,164 ) (14,883,274 )
(Acquisition) sale of treasury stock, net (92,761 ) (65,095 )
Weighted average number of ordinary shares for basic earnings 79,417,392 79,433,948
Plus - dilution effect - stock awards 134,201 113,814
Weighted average number of ordinary shares adjusted for the effect of dilution 79,551,593 79,547,762
Basic earnings per share (in Soles) 2.64 13.86
Diluted earnings per share (in Soles) 2.63 13.84 
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31 OPERATING SEGMENTS

In the Credicorp Board of Directors organized the Group’s subsidiaries according to the types of financial services provided and the sectors on which they are focused; with the objective of optimizing the management thereof. Next, we present the Group´s business lines:

a) Universal Banking –

Includes the operations related to the granting of various credits and financial instruments to individuals and legal entities, from the segments of wholesale and retail banking, such as the obtaining of funds from the public through deposits and current accounts, obtaining of funding by means of initial public offerings and direct indebtedness with other financial institutions. This business line incorporates the results and balances of the Banco de Crédito del Perú (BCP) and Banco de Crédito de Bolivia (BCB).

b) Insurance and Pensions<br> –
- Insurance: includes, mainly, the issue of insurance policies to cover losses in commercial property,<br>transport, marine vessels, automobiles, life, health and pensions, operations carried out through Pacífico Compañía<br>de Seguros y Reaseguros.
--- ---
- Pensions: provides Management Service of private pension funds to the affiliates, operation carried<br>out from Prima AFP.
--- ---
c) Microfinance –
--- ---

Includes the management of loans, credits, deposits and current accounts of the small and microenterprises: carried out through Mibanco, Banco de la Microempresa S.A., Banco Compartir S.A. and Edyficar S.A.S. (Encumbra).

d) Investment Banking and Wealth Management –

Brokerage service and investment management services offered to a broad and diverse 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. Additionally, it structures securitization processes for corporate customers and manages mutual funds.

All of these services are provided through Credicorp Capital Ltd. and subsidiaries; Atlantic Security Bank (ASB) and the Wealth Management team of BCP.

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Management of these business lines is designed to:

- Promote the joint action of our businesses in order to take advantage of the synergies which resulting<br>from the diversification of our portfolio.
- Strengthening our leadership in the financial sector through our growth in new businesses, and<br>the establishment of an investment banking platform available not only to the corporate world, but also to the retail segment,<br>especially to the Small and Medium Enterprise (SME) and Consumer sectors.
--- ---
- Improve the ongoing search to bring to adapt our business models, processes and procedures into line<br>with best practices worldwide.
--- ---

The operating results of the Group’s new business lines are monitored separately by the Board of Directors and Senior Management on a monthly basis, in order to make decisions regarding the allocation of resources and the evaluation of the performance of each one of the segments. The Chief Operating Decision Maker (CODM) of Credicorp is the Chief Executive Officer (CEO). The performance of the segments is evaluated based on the operating profits or losses and is measured consistently with the operating profits and losses presented in the interim condensed consolidated statement of income.

Financial information by segment is prepared subject to the minimum controls necessary and on a uniform basis, with coherent grouping according to the type of activity and customer. The transfer prices used for determining income and expenses generated among the operating segments are similar to the prices that would be applicable to transactions carried out at arm’s length.

None of the income derives from transactions carried out with a single customer or counterparty which is equal to or greater than 10 percent or more of the total income of the Group for the first three-month period ended March 31, 2020 and the first three-month period ended March 31, 2019.

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(i) The following table presents information recorded in the results and for certain items of the assets<br>corresponding to the Group’s reportable segments (in millions of soles):
For<br> the three-month period ended March 31, 2020 As<br> of March 31, 2020
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Income<br> (*)
Operating segments External From<br> other<br><br> segments (**) Net<br> interest,<br><br> similar<br><br> income and<br><br> expenses Other<br><br><br> income,<br><br> net (***) Provisionforcredit losses on loan portfolio Depreciationand amortization Income<br><br><br> tax Net<br> profit Total<br> assets Total<br><br><br> liabilities
Universal Banking
Banco<br> de Crédito del Perú 2,820 121 1,616 762 (1,152 ) (110 ) (81 ) 146 148,697 132,075
Banco de<br> Crédito de Bolivia 190 1 87 25 (38 ) (5 ) (6 ) 7 11,359 10,649
Insurance and Pension funds
Pacífico<br> Seguros and Subsidiaries 807 19 128 683 - (15 ) (2 ) 100 13,740 11,005
Prima AFP 41 1 - 41 - (5 ) (3 ) (4 ) 974 427
Microfinance
Mibanco 628 12 485 41 (189 ) (23 ) (17 ) 34 13,529 11,408
Banco Compartir<br> S.A. 51 12 35 6 (8 ) (3 ) - (4 ) 836 708
Edyficar<br> S.A.S. 12 - 11 (104 ) (1 ) - (1 ) 1 116 64
Investment Banking and Wealth<br> Management 197 (2 ) 14 146 – (5 ) (3 ) (4 ) 10,715 9,423
Other segments 3 (2 ) 443 (8 ) – (6 ) (33 ) (63 ) 3,878 4,223
Eliminations – – (440 ) (492 ) (1 ) – – – (6,022 ) (5,883 )
Total consolidated 4,749 162 2,379 1,100 (1,389 ) (172 ) (146 ) 213 197,822 174,099
For<br> the three-month period ended March 31, 2019 As<br> of December 31, 2019
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Income<br> (*)
Operating segments External From<br> other<br><br> segments (**) Net<br> interest,<br><br> similar<br><br> income and<br><br> expenses Other<br><br> income,<br><br> net (***) Provision for credit losses on loan portfolio Depreciation and amortization Income<br><br> tax Net<br> profit Total<br> assets Total<br><br> liabilities
Universal Banking
Banco de Crédito<br> del Perú 2,821 95 1,489 831 (331 ) (86 ) (314 ) 835 139,832 123,057
Banco de Crédito de<br> Bolivia 175 1 78 29 (15 ) (3 ) (7 ) 13 10,481 9,744
Insurance and Pension funds
Pacífico Seguros and<br> Subsidiaries 766 (4 ) 121 808 – (14 ) (2 ) 78 13,785 10,964
Prima AFP 123 1 1 123 – (4 ) (24 ) 57 909 211
Microfinance
Mibanco 600 29 468 45 (106 ) (12 ) (40 ) 102 13,576 11,489
Banco Compartir S.A. – – – – – – – – 1,046 888
Edyficar S.A.S. 12 – 11 (80 ) (1 ) – (1 ) 2 141 80
Investment Banking and Wealth<br> Management 238 3 24 175 – (5 ) (5 ) 65 9,423 7,950
Other segments 27 38 305 43 – (7 ) (29 ) (29 ) 2,998 992
Eliminations – – (300 ) (689 ) – – – – (4,314 ) (4,245 )
Total consolidated 4,762 163 2,197 1,285 (453 ) (131 ) (422 ) 1,123 187,877 161,130
(*) Corresponds to total interest and similar income, other<br>income (includes income and expenses on commissions) and net earned premiums from insurance activities.
--- ---
(**) Corresponds to income derived from transactions with<br>other segments, which were eliminated in the interim condensed consolidated statement of income.
--- ---
(***) Corresponds to other income (include income and expenses<br>for commissions) and insurance underwriting result.
--- --- 
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(ii) The following table presents (in millions<br>of soles) the distribution of the total revenue, operating revenue and non-current assets of the Group; all assigned based on the<br>location of the clients and assets, respectively:
For<br> the three-month period ended<br><br> March 31, 2020 As<br> of March 31, 2020 For<br> the three-month period ended<br><br> March 31, 2019 As<br> of December 31, 2019
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Totalincome(*) Operatingincome(**) Totalnoncurrentassets (***) Totalliabilities Totalincome(*) Operatingincome(**) Totalnoncurrentassets (***) Totalliabilities
Peru 4,322 2,360 3,835 149,850 4,337 2,177 3,943 142,178
Bermuda 11 - 115 3,098 14 6 117 266
Panama - - - - - - - -
Cayman Islands 38 27 20 7,122 94 35 20 5,008
Bolivia 209 97 99 10,769 193 87 93 9,815
Colombia 138 38 427 2,195 81 3 435 2,769
United States of America 10 - 3 7 2 - 3 6
Chile 21 (1 ) 128 1,058 41 (2 ) 209 1,088
Total consolidated 4,749 2,521 4,627 174,099 4,762 2,306 4,820 161,130
(*) Including total interest and similar income, other income and net premiums earned from insurance activities.
--- ---
(**) Operating income includes the income from interest and similar expenses from banking activities and insurance underwriting<br>result.
--- ---
(***) Non-current assets consist of property, furniture and equipment (fixed assets), intangible assets and goodwill and right-for-use<br>assets, net.
--- --- 
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32 TRANSACTIONS WITH RELATED PARTIES
a) The Group’s interim condensed consolidated financial statements as of March 31, 2020 and December<br>31, 2019 include transactions with related companies, the Board of Directors, the Group’s key executives (defined as the<br>Management of Credicorp) and the companies which are controlled by these individuals through their majority shareholding or their<br>role as Chairman or CEO.
--- ---
b) The following table presents the main transactions with related parties:
--- ---
As of March<br> 31, 2020 As of<br> December 31,<br> 2019
--- --- --- --- --- --- ---
S/(000) S/(000)
Statement of financial position -
Direct loans 2,269,648 1,657,206
Investments 876,807 935,286
Deposits (1,846,410 ) (751,990 )
Derivatives at fair value 3,390 4,984
Off-balance sheet
Indirect loans 421,168 373,865
Forthe three-month periodsended March 31,
--- --- --- --- --- --- ---
2020 2019
S/(000) S/(000)
Statement of income
Interest income related to loans 8,012 7,225
Interest expenses related to deposits (2,794 ) (3,431 )
Other income 1,520 2,595
c) All transactions with related parties are made in accordance with normal market conditions available<br>to other customers. As of March 31, 2020, direct loans to related companies are secured by collateral, had maturities between Abril<br>2020 and January 2030, at an annual soles average interest rate of 6.21 percent and at an annual foreign currency average interest<br>rate of 4.79 percent (as of December 31, 2019, maturities where between January 2020 and December 2028, and the annual soles average<br>interest rate was 6.21 percent and the annual foreign currency average interest rate was 5.70 ). Also, as of March 31, 2020 and<br>December 2019, the Group maintains an allowance for loan losses for related parties amounting to S/30.1 million and S/12.6 million,<br>respectively.
--- ---
d) As of March 31, 2020 and December 31, 2019, directors, officers and employees of the Group have been<br>involved, directly and indirectly, in credit transactions with certain subsidiaries of the Group, as permitted by Peruvian Banking<br>and Insurance Law Nº26702, which regulates and limits certain transactions with employees, directors and officers of a bank<br>or an insurance company. As of March 31, 2020 and December 31, 2019, direct loans to employees, directors, key management and family<br>members amounted to S/993.4 million and S/1,003.2 million, respectively; they are repaid monthly and earn interest at market rates.
--- --- 
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33 FINANCIAL INSTRUMENTS CLASSIFICATION

The table below shows the carrying amounts of the financial assets and liabilities captions in the interim condensed consolidated statement of financial position, by categories as defined under IFRS 9 as of March 31,2020 and IAS 39 as of December 31, 2019:

As<br> of March 31, 2020 As<br> of December 31, 2019
Financial assets and liabilities at fair value through profit or loss Financial<br> assets at fair value<br><br> through other comprehensive<br><br> income Financial assets and liabilities at fair value through profit or loss Financial<br> assets at fair value<br><br> through other comprehensive<br><br> income
Investments<br><br> and hedges Investments<br><br> designated at<br><br> inception Investments Investments<br><br> designated at<br><br> inception Financial<br><br> assets and<br><br> liabilities<br><br> measured at<br><br> amortized cost Total Investments<br><br> and hedges Investments<br><br> designated at<br><br> inception Investments Investments<br><br> designated at<br><br> inception Financial<br><br> assets and<br><br> liabilities<br><br> measured at<br><br> amortized cost Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Assets
Cash and due<br> from banks - - - - 26,325,786 26,325,786 - - - - 25,986,762 25,986,762
Guarantee funds, reverse<br> repurchase <br>agreements and securities borrowings - - - - 4,424,345 4,424,345 - - - - 4,288,524 4,288,524
At fair value through<br> profit or loss 4,185,638 - - - - 4,185,638 3,850,762 - - - - 3,850,762
Investments at fair value<br> through other <br>comprehensive income, note 6(b) - - 27,865,207 523,165 - 28,388,372 - - 25,623,934 578,789 - 26,202,723
Amortized cost investments - - - - 4,242,643 4,242,643 - - - - 3,477,046 3,477,046
Loans, net - - - - 114,776,743 114,776,743 - - - - 110,485,717 110,485,717
Financial assets designated<br> at fair value <br>through profit or loss - 559,321 - - - 559,321 - 620,544 - - - 620,544
Premiums and other policies<br> receivable - - - - 822,669 822,669 - - - - 838,731 838,731
Accounts receivable from<br> reinsurers and <br>coinsurers - - - - 787,672 787,672 - - - - 791,704 791,704
Due from customers on<br> acceptances - - - - 555,598 555,598 - - - - 535,222 535,222
Other<br> assets, note 13(a) 1,790,770 - - - 2,773,091 4,563,861 1,092,107 - - - 1,700,861 2,792,968
5,976,408 559,321 27,865,207 523,165 154,708,547 189,632,648 4,942,869 620,544 25,623,934 578,789 148,104,567 179,870,703
Liabilities
Deposits and obligations - - - - 119,563,545 119,563,545 - - - - 112,005,385 112,005,385
Payables from repurchase<br> agreements <br>and securities lending - - - - 8,254,726 8,254,726 - - - - 7,678,016 7,678,016
Due to banks and correspondents - - - - 9,854,630 9,854,630 - - - - 8,841,732 8,841,732
Bankers’ acceptances<br> outstanding - - - - 555,598 555,598 - - - - 535,222 535,222
Accounts payable to reinsurers<br> and <br>coinsurers - - - - 198,473 198,473 - - - - 216,734 216,734
Lease liabilities - - - - 838,248 838,248 - - - - 847,504 847,504
Financial liabilities<br> at fair value through <br>profit or loss 533,146 - - - - 533,146 493,700 - - - - 493,700
Bonds and notes issued - - - - 15,178,148 15,178,148 - - - - 14,946,363 14,946,363
Other<br> liabilities, note 13(a) 1,751,719 - - - 5,994,663 7,746,382 1,040,282 - - - 3,206,544 4,246,826
2,284,865 - - - 160,438,031 162,722,896 1,533,982 - - - 148,277,500 149,811,482 
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34 FINANCIAL RISK MANAGEMENT

The Group’s activities involve principally the use of financial instruments, including derivatives. It also accepts deposits from customers at both fixed and floating rates, for various periods, and invests these funds in high-quality assets. Additionally, it places these deposits at fixed and variable rates with legal entities and individuals, considering the finance costs and expected profitability.

The Group also trades in financial instruments where it takes positions in traded and over-the-counter instruments, derivatives included, to take advantage of short-term market movements on securities, bonds, currencies and interest rates.

Given the Group’s activities, it has a framework for risk appetite, a corner stone of the management. The risk management processes involve continuous identification, measurement, treatment and monitoring. The Group is exposed, principally, to operating risk, credit risk, liquidity risk, market risk, strategic risk and insurance technical risk. Finally, it reports on a consolidated basis the risks to which the Group is exposed.

a) Risk management structure -

The Board of Directors of the Group and of each subsidiary are ultimately responsible for identifying and controlling risks; however, there are separate independent instances in the major subsidiaries responsible for managing and monitoring risks, as further explained below:

(i) Group’s Board of Directors -

Credicorp Board of Directors -

This Board of Directors is responsible for the overall risk management approach and for the approval of the levels of risk appetite that the Group is prepared to assume. Furthermore, it approves the guidelines and policies for Integral Risk Management. On the other hand, the Board establishes an organizational culture which emphasizes the importance of risk management, oversees the internal control system and ensures the adequate performance of the compliance function.

Group Company Boards -

The Board of each of the Group companies is responsible for aligning the risk management established by the Board of Credicorp with the context of each one of them. For that, it establishes a framework for risk appetite, policies and guidelines.

(ii) Credicorp Risk Committee -

Represents the Board of Credicorp in risk management decision-making. This Committee defines the strategies used for the adequate management of the different types of risks and the supervision of risk appetite. In addition to it, they establish principles, policies and general limits.

The Risk Committee is presided by a Board member of Credicorp, it also consists of a second member of the Board of Credicorp, a Board member of BCP, the General Manager of BCP, the Central Manager of Planning and Finance of BCP, the Central Risk Manager of BCP and the Manager of the Risk Management Division of BCP.

In addition to effectively managing all the risks, the Credicorp Risk Committee is supported by the following committees which report periodically on all relevant changes or issues relating to the risks being managed:

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Credit Risk Committees (retail and non-retail) -

The Credit Risk Committees are responsible for reviewing the tolerance level of the credit risk appetite, the limits of exposure and the actions for the implementation of corrective measures, in case there are deviations. In addition, they propose credit risk management norms and policies within the framework of governance and the organization for the integral management of credit risk. Furthermore, they propose the approval of any changes to the functions described above and important findings to the Risk Committee.

Treasury and ALM (Asset Liability Management) Risk Committee -

The Treasury Risk Committee and ALM Credicorp are responsible for analyzing and proposing the corporate objectives, guidelines and policies for Treasury Risk Management and ALM of all the companies of the Group. As well as, monitoring the indicators and limits of Credicorp market risk appetite and each of the companies of the Group. Further, they are responsible of be aware of the actions for the implementation of the corrective measures if there are deviations from appetite levels and risk tolerance assumed by the companies of Group. Furthermore, they are responsible for proposing the approval of any changes in the functions described above and for reporting any finding to the Risk Committee.

Credicorp Model Risk Committee -

The Credicorp Model Risk Committee is responsible for analyzing and proposing the actions corrections in case there are deviations with respect to the degrees of exposure assumed in the Appetite for Model Risk. Likewise, it proposes the creation and/or modification of the government for model risk management, monitoring compliance with the same. The Model Risk Committee monitors the Group's data and analytical strategy and the health status of the model portfolio. They are also responsible to inform the Committee of Credicorp Risks on exposures, related to model risk, which involve variations in the risk profile.

Operational Risk Methodology Committee

The Credicorp Methodological Committee of Operational Risk has as main responsibilities to review the main indicators of Operational Risk of the companies of the Credicorp Group, as well as the progress of the methodologies deployed for Operational Risk and Business Continuity. Likewise, share best practices regarding the main challenges faced by Credicorp Group companies.

(iii) Central Risk Management -

The Central Risk Management is responsible for implementing policies, procedures, methodologies and actions to identify, measure, monitor, mitigate, report and control the different types of risks to which the Group is exposed. Also, it participates in the design and definition of the strategic plans of the business units to ensure that they are framed within the risk appetite metrics approved by Credicorp Board of Directors. Likewise, it also broadcasts the importance of adequate risk management, specifying in each of the units, their role in the timely identification and definition of actions corresponding.

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The Central Risk Management is divided into the following units:

Credit Division -

The Credit Division proposes credit policies and evaluation criteria and credit risk management that the Group assumes with segment customers wholesaler. Evaluate and authorize loan proposals until their autonomy and propose their approval to the higher instances for those that exceed it. These guidelines are established on the basis of the policies set by the Credicorp Board, respecting the laws and regulations in force.

Risk Management Division -

The Risk Management Division is responsible for ensuring that risk management directives and policies comply with the established by the Board of Directors. In addition, it is responsible for supervising the process of risk management and for coordinating with the companies of Credicorp involved in the whole process, promoting homogeneous risk management and aligned with the best practices. It also has the task of informing Board of Directors about: global exposure and by type of risk, as well as the specific exposure of each Group company.

Retail Banking Risk Division -

This division is responsible for ensuring the quality of retail portfolio and the development of credit policies that are consistent with the overall guidelines and risk policies set by the Board of Credicorp.

Cybersecurity Management -

The Cybersecurity Management area establishes polices and regulatory framework for information security and cybersecurity risk management. It is also responsible for designing and implementing the strategies used to create and monitor controls that enable the permanent evaluation of regulatory framework effectiveness. In addition, the area supervises the performance of the functions of the responsible units, monitoring the processes used for the identification, assessment, recording and treatment of information security and cybersecurity risks.

Corporate Security and Cybernetic Crime Management -

The Corporate Security and Cybernetic Crime Management is responsible for implementing policies, procedures and actions that safeguard the security of employees, customers and assets of the organization, and protect the Group against incidents of fraud, security and reputational risk. In addition, it fosters a culture of prevention, which minimizes risks in fraud and security.

Non-financial Risks Division -

The Non-financial Risks Division is responsible for defining a non-financial risk strategy aligned with the objectives and risk appetite set by the Board of Credicorp. This strategy seeks to strengthen the management process, generate synergies, optimize resources and achieve better results among the units responsible for managing non-financial risks in the Group. Additionally, in order to achieve the objectives defined in the non-financial risk strategy, the Division is responsible for promoting risk culture, developing talent, defining indicators and generating and following-up strategic projects and initiatives.

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(iv) Internal Audit Division and Compliance Division -

The Audit Division is in charge of monitoring on an ongoing basis the effectiveness and efficiency of the risk management function in the Group, verifying compliance with regulations, policies, objectives and guidelines set by the Board of Directors. On the other hand, it evaluates sufficiency and integration level of Group’s information and database systems. Finally, it ensures that independence is maintained between the functions of the risk management and business units, for each of the Group’s companies.

The Corporate Compliance and Ethics Division reports to the Board of Directors and is responsible for ensure that Credicorp Group companies specifically comply with regulations that apply to them and the guidelines established in the Code of Ethics.

b) Risk measurement and reporting systems -

The risk is measured according to models and methodologies developed for the management of each type of risk. Credicorp has risk reports that allow to monitor at the level added and detailed the different types of risks of each company which is exposed. The system provides the facility to meet the appetite review needs by risk requested by the committees and areas described above; as well as comply with regulatory requirements.

c) Risk mitigation -

Depending on the type of risk, the Group uses mitigating instruments to reduce its exposure, such as guarantees, derivatives, controls and insurance, among others. Furthermore, it has policies linked to risk appetite and established procedures for each type of risk.

The Group actively uses guarantees to reduce its credit risks.

d) Risk appetite -

Based on corporate risk management, Group's Board of Directors approves the risk appetite framework to define the maximum level of risk that the organization is willing to take as seeks its strategic and financial objectives, maintaining a corporate vision in individual decisions of each entity. This Risk Appetite framework is based on "core" and specific metrics:

Core metrics are intended to preserve the organization’s strategic pillars, defined as solvency, liquidity, profit and growth, income stability and balance sheet structure.

Specific metrics objectives are intended to monitor on a qualitative and quantitative basis the various risks, to which the Group is exposed, as well as defining a tolerance threshold of each of those risks, so the risk profile set by the Board is preserved and any risk focus is anticipated on a more granular basis.

Risk appetite is instrumented through the following elements:

- Risk appetite statement: Establishes explicit general principles and the qualitative declarations which complement the risk<br>strategy.
- Metrics scorecards: These are used to define the levels of risk exposure in the different strategic pillars.
--- ---
- Limits: Allows control over the risk-taking process within the tolerance threshold established by the Board. They also provide<br>accountability for the risk-taking process and define guidelines regarding the target risk profile.
--- --- 
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- Government scheme: Seeks to guarantee compliance of the framework through different roles and responsibilities assigned to<br>the units involved.

The appetite is integrated into the processes of strategic and capital guidelines, as well as in the definition of the annual budget, facilitating the strategic decision making of the organization.

e) Risk concentration -

Concentrations arise when a reduced and representative number of all counterparties of the Group are engaged in similar business activities, or activities in the same geographic region, or have similar economic and political conditions among others.

In order to avoid excessive concentrations of risk, the policies and procedures include specific guidelines to guarantee a diversified portfolio.

34.1 Credit risk -
a) The Group takes on exposure to credit risk, which is the probability of suffering losses caused by<br>debtors or counterparties failing to comply with payment obligations in on or off the balance sheet exposures.

Credit risk is the most important risk for the Group’s business; therefore, Management carefully manages its exposure to credit risk. Credit exposures arise principally from lending activities that lead to direct loans; they also result from investment activities. There is also credit risk in off-balance sheet financial instruments, such as contingent credits (indirect loans), which expose Credicorp to risks similar to direct loans. Likewise, credit risk arises from derivative financial instruments that present showing positive fair values. Finally, all exposure to credit risk (direct or indirect) is mitigated by the control processes and policies.

As part of the management of this type of risk, Credicorp assigns impairment provisions for its loan portfolio at the date of the interim condensed consolidated statement of financial position.

The Group defines the levels of credit risk assumed based on risk exposure limits, which are frequently monitored. Said limits are established in relation to one borrower or group of borrowers, geographical and industry segments. Furthermore, the risk limits by product, industry sector and by geographical segment are approved by the Risk Committee of Credicorp.

Exposure to credit risk is managed through regular analysis of the ability of debtors and potential debtors to meet interest and principal repayment obligations and by changing the credit limits when it is appropriate. Other specific control measures are outlined below:

(i) Collateral -
- The Group employs a range of policies and practices to mitigate credit risk. The most traditional of these is collateralization<br>which is common practice. The Group implements guidelines on the acceptability of specific classes of collateral or credit risk<br>mitigation. The main types of collateral obtained are as follows:
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For loans and advances, collateral includes, among others, mortgages on residential properties; liens on business assets such as plants, inventory and accounts receivable; and liens on financial instruments such as debt securities and equity securities.

- Long-term loans and financing to corporate entities are generally guaranteed. Loans to micro business generally have no collateral.<br>In order to minimize credit loss, the Group will seek additional collateral from the counterparty as soon as impairment indicators<br>arise.
- For repurchase agreements and securities lending, collateral consists of fixed income instruments and cash.
--- ---

Collateral held as security for financial assets other than loans is determined by the nature of the instrument. Debt securities, treasury and other eligible bills are generally unsecured, with the exception of assets backed securities and similar instruments, which are secured by portfolios of financial instruments.

Management monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its review of the adequacy of the allowance for impairment losses. As part of the Group’s policies, the recovered goods are sold in seniority order. The proceeds of the sale are used to reduce or amortize the outstanding credit. In general, the Group does not use recovered assets for its operational purposes.

(ii) Derivatives -

The amount subject to credit risk is limited to the current and potential fair value of instruments that are favorable to the Group (fair value is positive). In the case of derivatives this is only a small fraction of the contract, or notional values used to express the volume of instruments outstanding. This credit risk exposure is managed as a portion of the total credit limits with customers, together with potential exposures from market movements. Collateral or other security is not usually obtained for this type of risk exposure.

(iii) Credit-related commitments -

The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and letters of credit have the same credit risk as direct loans. Documentary and commercial letters of credit - which are written undertakings by the Group on behalf of a customer authorizing a third party to draw drafts on the Group up to a stipulated amount under specific terms and conditions - are collateralized by the underlying shipments of goods to which they relate and therefore have less risk than a direct loan. The Group has no mandatory commitments to extend credit.

b) The maximum exposure to credit risk as of March 31, 2020 and December 31, 2019, before the effect<br>of mitigation through any collateral, is the carrying amount of each class of financial assets described in Notes 34.7(a), 34.7(b)<br>and the contingent credits detailed in Note 21(a).

Management is confident of its ability to continue controlling and maintaining minimal credit risk exposure within the Group, considering both its loan and securities portfolio.

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c) Credit risk management for loans -

The management of credit risk is mainly based on rating and scoring of the internal models of each company of the Group. In Credicorp, a quantitative and qualitative analysis is made of each client, with regard to his financial position, his credit behavior in the System and the market in which it operates; which is carried out continuously, so as to assemble the risk profile of each operation and client with a credit position in the Group.

In the Group, a loan is internally classified as past due, depending on three aspects: the number of days in arrears based on the contractually agreed due date, the subsidiary and the type of credit. In that sense:

-         Banco de Crédito del Perú, Mibanco and Solución Empresa Administradora Hipotecaria S.A. consider a past due loan:

- For corporate enterprises, large and medium companies after 15 days past due.
- For small and micro-business after 30 days past due.
--- ---
- For overdrafts, after 30 days past due.
--- ---
- For consumer, mortgage and lease operation products, quotas are considered past due internally when they are between 30 and<br>90 days past due; after 90 days, the pending loan balance is considered past due.
--- ---

-         Atlantic Security Bank considers a credit past due when its payment schedule of capital and/or interest exceed 30 days in arrears.

-         Banco de Crédito de Bolivia, Edyficar S.A.S. and Bancompartir consider a credit as an internal past due with effect from day 30 in arrears.

Estimate of the expected loss -

The measurement of the credit loss is based on the product of the following parameters: (i) probability of default (PD) (ii) loss given default (LGD), and (iii) Exposure at default (EAD); discounted at the reporting period, using the effective interest rate. The definition of the parameters is presented below:

-           Probability of Default (PD): this is a measurement of credit rating given internally to a customer, designed to estimate their probability of default within a specific horizon. The process of obtaining the PD is carried out through scoring and rating tools.

The Group considers that a financial instrument is in default if it meets the following conditions depending on the type of asset:

- Consumer Products, Credit Card and SME: If the costumer, at some point, presents arrears equal to or greater than 60 days and/or<br>has operations that are refinanced, restructured, in pre-judicial, judicial proceedings or written off.
- Mortgage Product: If the customer, at some point, presents arrears equal to or greater 120 days and/or has operations that<br>are refinanced, restructured, in pre-judicial, judicial proceedings or written off.
--- ---
- Commercial Banking: Those customers that are in the Special Accounts portfolio or have risk classification as deficient, doubtful<br>or lost, or have refinanced, judicial or written off operations. Also, a customer can be considered as Default in case there are<br>signs of significant qualitative impairment to consider it in said stage.
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- Investments: If the instrument has a Default rating according to external rating agencies such as Fitch, Standard & Poor’s<br>or Moody's or with an indicator of arrears equal to or greater than 90 days. Also, a customer can be considered as Default in case<br>of signs of significant qualitative impairment.

-         Loss Given Default (LGD): Is a measurement which estimates the severity of the loss which would be incurred at the time of the default. It has two approaches in the estimate of the severity of the loss, depending on the stage of the customer:

- LGD Workout: The LGD workout is the real loss of the customers who have arrived at the stage of default. The recoveries and<br>costs of each one of the operations are used in order to calculate it (Includes open and closed recovery processes).
- LGD ELBE (Expected Loss Best Estimate): The LGD ELBE is the loss of the contracts in a default situation, based on the time<br>in arrears of the operation (The longer the operation is in default, the greater will be the loss level).
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-         Exposure at Default (EAD): Is a measurement which estimates the exposure at the time of the customer goes into default, taking into account changes in future exposure, for example, in the case of prepayments and/or greater utilization of unused lines.

Accordingly, the estimated of the parameters take into consideration information regarding the actual conditions, as well as the projections of future macroeconomic events and conditions in three scenarios (base, optimistic and pessimistic) which are analyzed in order to obtain the expected loss.

The fundamental difference between the credit loss of an account considered as Stage 1 and Stage 2 is the PD horizon. Specifically, the estimates of Stage 1 use a maximum PD of 12 months, while those in Stage 2 will use a PD measured for the entire life of the instrument. The estimates of Stage 3 will be carried out on the basis of a best estimate LGD.

In those cases, in which the portfolio is immaterial and does not have credit score models, the option was to extrapolate the loss ratio of portfolios with comparable characteristics.

Prospective information:

The measurement of expected credit losses for each stage and the evaluation of significant increases in credit risk consider information on previous events and current conditions, as well as reasonable projections based on future events and economic conditions.

For the estimation of the risk parameters (PD, LGD, EAD), used in the calculation of the provision in stages 1 and 2, the significance of the macroeconomic variables (or their variations) that have the greatest influence on each portfolio was tested. Each macroeconomic scenario used in calculating the expected loss considers projections of relevant macroeconomic variables, such as the gross domestic product (GDP), employment, terms of trade, inflation, among others, for a period of 3 years and a long-term projection.

The estimate of the expected loss for stages 1, 2 and 3 is a weighted estimate that considers three future macroeconomic scenarios. The base, optimistic and pessimistic scenarios, as well as the probability of occurrence of each scenario, are macroeconomic projections provided by the Economic Studies Management. It should be noted that the scenario design is adjusted quarterly. All the scenarios considered apply to portfolios subject to expected credit losses with the same probabilities.

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Changes from one stage to another

The classification of an instrument as stage 1 or stage 2 depends on the concept of "significant increase in credit risk" at the reporting date compared to the origin. This classification is updated monthly. As the IFRS 9 states, this classification depends on the following criteria:

- An account is classified in stage 2 if it has more than 30 days of<br>delay.
- Additionally, significant risk thresholds were established based on<br>absolute and relative thresholds that depend on the level of risk in which the instrument originated. The thresholds differ for<br>each of the portfolios considered.
--- ---
- Additional qualitative reviews are carried out based on the segmentation<br>of risks used in the management of Retail Banking and an individual review in Wholesale Banking.
--- ---

Additionally, all those accounts classified as default at the reporting date according to the management definition used by the Group are considered as stage 3.

Evaluations of a significant increase in risk from initial recognition and credit deterioration are carried out independently on each reporting date. Assets can be moved in both directions from one phase to another; in this sense, a financial asset that migrated to stage 2 will return to stage 1, if its credit risk did not increase significantly from its initial recognition until a subsequent reporting period. Likewise, an asset that is in stage 3 will return to stage 2 if the credit is no longer considered to be impaired.

Expected life

For the instruments in stage 2 or 3, the reserves for losses will cover the expected credit losses during the expected time of the remaining useful life of the instrument. For most instruments, the expected life is limited to the remaining contractual life, adjusted by expected anticipated payments. In the case of revolving products, a statistical analysis was carried out in order to determine what would be the expected life period.

d) Credit risk management on reverse repurchase agreements and securities borrowing -

Most of these operations are performed by Credicorp Capital. The Group has implemented credit limits for each counterparty and most of transactions are collateralized with investment grade financial instruments and financial instruments issued by Governments.

e) Credit risk management on investments -

The Group evaluates the credit risk identified of each of the investments, disclosing the risk rating granted to them by a risk rating agency. For investments traded in Peru, risk ratings used are those provided by the three most prestigious Peruvian rating agencies (authorized by Peruvian regulator) and for investments traded abroad, the risk-ratings used are those provided by the three most prestigious international rating agencies.

In the event that any subsidiary uses a risk-rating prepared by any other risk rating agency, said risk-ratings are standardized with those provided by the above-mentioned institutions.

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The following table shows the analysis of the risk-rating of the investments, provided by the institutions referred to above:

As of March 31, 2020 As of December 31, 2019
S/(000) % S/(000) %
Instruments rated in Peru:
AAA - - 1,621,270 4.8
AA- a AA+ 3,846,829 10.4 1,853,042 5.5
A- to A+ 6,680,686 18.1 8,970,590 26.8
BBB- to BBB+ 5,491,524 14.9 1,874,556 5.6
BB- to BB+ 496,934 1.3 517,146 1.5
Lower and equal to +B - - - -
Unrated: - - - -
BCRP certificates of deposit 9,685,268 26.3 8,665,272 25.8
Listed and unlisted securities 518,883 1.4 573,485 1.7
Restricted mutual funds 398,111 1.1 460,086 1.4
Investment funds 123,521 0.3 102,085 0.3
Mutual funds 324,989 0.9 291,024 0.9
Other instruments 129,502 0.4 264,497 0.8
Subtotal 27,696,247 75.1 25,193,053 75.1 
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As of March 31, 2020 As of December 31, 2019
S/(000) % S/(000) %
Instruments rated abroad:
AAA 779,762 2.2 657,787 2.0
AA- a AA+ 829,310 2.3 854,501 2.5
A- to A+ 1,481,441 4.1 1,581,995 4.7
BBB- to BBB+ 2,925,325 7.9 2,974,639 8.9
BB- to BB+ 1,379,199 3.7 996,917 3.0
Lower and equal to +B 146,408 0.4 54,316 0.2
Unrated: - - - -
Listed and unlisted securities 44,824 0.1 88,799 0.3
Participations of RAL funds 328,697 0.9 300,398 0.9
Mutual funds 301,075 0.8 302,528 0.9
Investment funds 250,573 0.7 294,158 0.9
Hedge funds 32,830 0.1 33,223 0.1
Other instruments 620,962 1.7 198,217 0.5
Subtotal 9,120,406 24.9 8,337,478 24.9
Total 36,816,653 100.0 33,530,531 100.0 
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f) Concentration of financial instruments exposed to credit risk -

As of March 31, 2020 and December 31, 2019, financial instruments with exposure to credit risk were distributed considering the following economic sectors:

As<br> of March 31, 2020 As<br> of December 31, 2019
At fair value<br><br><br><br>through profit for loss At fair value<br><br><br><br>through profit for loss
Held for<br> <br>trading, hedging and others (*) Designated<br> <br>at inception Financial assets at amortized cost At fair value through other comprehensive income investments Total Held for<br> <br>trading, hedging and others (*) Designated<br> <br>at inception Financial assets at amortized cost At fair value through other comprehensive income investments Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Central Reserve Bank of Peru 352 - 10,680,069 9,685,268 20,365,689 - - 21,166,346 8,665,272 29,831,618
Financial services 3,071,100 179,082 24,898,280 4,123,657 32,272,119 2,856,512 237,240 13,281,408 2,883,301 19,258,461
Manufacturing 35,138 28,972 17,223,380 1,177,084 18,464,574 202,554 36,686 15,608,834 1,225,118 17,073,192
Mortgage loans - - 19,399,960 - 19,399,960 - - 18,985,407 - 18,985,407
Consumer loans - - 14,783,831 - 14,783,831 - - 14,809,503 - 14,809,503
Micro-business loans - - 5,072,017 - 5,072,017 - - 13,902,760 - 13,902,760
Commerce 35,752 2,673 18,198,251 508,875 18,745,551 21,228 12,468 12,636,843 452,214 13,122,753
Government and public administration 2,307,534 14,290 4,779,421 7,420,833 14,522,078 1,581,527 12,994 3,985,158 7,170,624 12,750,303
Electricity, gas and water 86,950 47,173 3,736,550 1,990,593 5,861,266 91,055 50,929 3,014,319 2,286,932 5,443,235
Community services 1,773 - 5,362,445 - 5,364,218 - - 4,858,427 5,798 4,864,225
Communications, storage and transportation 41,437 260,127 6,117,569 1,242,577 7,661,710 17,306 59,392 4,421,095 1,071,335 5,569,128
Mining 91,577 - 3,219,283 163,673 3,474,533 41,687 27,875 3,195,049 146,362 3,410,973
Construction 31,464 979 2,525,297 354,674 2,912,414 20,847 3,967 2,089,164 322,864 2,436,842
Agriculture 19,112 - 3,511,248 19,667 3,550,027 1,963 - 3,050,141 17,887 3,069,991
Insurance 19,713 - 8,483 858 29,054 5,100 - 123,771 986 129,857
Education, health and others 95,426 15,650 1,583,002 747,672 2,441,750 4,543 53,792 1,364,542 644,143 2,067,020
Real estate and leasing 53,950 3,769 7,586,771 437,970 8,082,460 43,203 125,201 7,158,667 1,276,941 8,604,012
Fishing 720 - 455,967 7,955 464,642 321 - 417,067 - 417,388
Others 84,410 6,606 5,566,723 507,016 6,164,755 55,023 - 4,036,066 32,946 4,124,035
Total 5,976,408 559,321 154,708,547 28,388,372 189,632,648 4,942,869 620,544 148,104,567 26,202,723 179,870,703

(*) It includes non-trading investments that did not pass SPPI test.

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As of March 31, 2020 and December 31,2019 financial instruments with exposure to credit risk were distributed by the following geographical areas:

As<br> of March 31, 2020 As<br> of December 31, 2019
At fair value<br><br><br><br>through profit for loss At fair value<br><br><br><br>through profit for loss
Held for<br> <br>trading, hedging and others (*) Designated<br> <br>at inception Financial assets at amortized cost At fair value through other comprehensive income investments Total Held for<br> <br>trading, hedging and others (*) Designated<br> <br>at inception Financial assets at amortized cost At fair value through other comprehensive income investments Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Peru 1,894,058 41,164 132,810,079 21,787,681 156,532,982 688,099 138,293 130,436,702 20,674,142 151,937,236
United States of America 692,809 320,851 1,969,194 2,825,298 5,808,152 568,588 275,991 982,944 2,770,903 4,598,426
Bolivia 535,454 - 9,869,666 674,603 11,079,723 494,547 - 9,218,219 555,028 10,267,794
Colombia 1,135,593 8,138 2,970,059 1,289,064 5,402,854 1,346,042 21,289 2,627,353 385,794 4,380,478
Panama 71,906 - 687,553 96,235 855,694 - - 905,675 91,571 997,246
Chile 576,763 9,039 2,251,710 471,382 3,308,894 683,822 34,606 2,047,951 450,382 3,216,761
Brazil 25,899 5,057 512,815 43,690 587,461 6,023 5,867 485,594 40,472 537,956
Mexico 27,137 9,818 7,264 231,683 275,902 28,846 18,093 5,962 247,713 300,614
Canada 19,200 210 66,206 99,182 184,798 29,976 - 109,233 108,494 247,703
Europe:
United Kingdom 189,749 18,905 899,530 75,852 1,184,036 189,658 14,950 273,477 80,965 559,050
Others in Europe 129,072 15,893 129,250 45,071 319,286 127,915 17,184 83,979 46,331 275,409
France 572,122 2,083 17,808 171,725 763,738 227,823 8,850 27,244 169,632 433,549
Spain 11,971 - 36,476 34,278 82,725 11,105 - 32,836 32,366 76,307
Switzerland 704 1,138 36,879 39,141 77,862 514 - 980 26,136 27,630
Netherlands 1,072 1,716 17,147 66,214 86,149 - - 26,024 108,343 134,367
Others 92,899 125,309 2,426,911 437,273 3,082,392 539,911 85,421 840,394 414,451 1,880,177
Total 5,976,408 559,321 154,708,547 28,388,372 189,632,648 4,942,869 620,544 148,104,567 26,202,723 179,870,703

(*) It includes non-trading investments that did not pass SPPI test.

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g) Offsetting financial assets and liabilities<br> -

The disclosures set out in the tables below include financial assets and liabilities that:

- Are<br> offset in the Group’s interim condensed consolidated statement of financial position;<br> or
- Are<br> subject to an enforceable master netting arrangement or similar agreement that covers<br> similar financial instruments, irrespective of whether they are offset in the interim<br> condensed consolidated statement of financial position.
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Similar agreements include derivative clearing agreements, master repurchase agreements, and master securities lending agreements. Similar financial instruments include derivatives, accounts receivable from reverse repurchase agreements and securities borrowing, payables from repurchase agreements and securities lending and other financial assets and liabilities. Financial instruments such as loans and deposits are not disclosed in the tables below because they are not offset in the interim condensed consolidated statement of financial position.

The offsetting framework contract issued by the International Swaps and Derivatives Association Inc. (“ISDA”) and similar master offsetting arrangements do not meet the criteria for offsetting in the interim condensed consolidated statement of financial position, because said agreements were created in order for both parties to have an enforceable offsetting right in cases of default, insolvency or bankruptcy of the Group or the counterparties or following other predetermined events. In addition, the Group and its counterparties do not intend to settle said instruments on a net basis or to realize the assets and settle the liabilities simultaneously.

The Group receives and gives collateral in the form of cash and trading securities in respect of the following transactions:

- Derivatives;
- Accounts<br> receivable from reverse repurchase agreements and securities borrowing;
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- Payables<br> from repurchase agreements and securities lending; and
--- ---
- Other<br> financial assets and liabilities
--- ---

Such collateral adheres to standard industry terms including, when appropriate, an ISDA Credit Support Annex. This means that securities received/given as collateral can be pledged or sold during the term of the transaction but have to be returned on maturity of the transaction. The terms also give each party the right to terminate the related transactions upon the counterparty’s failure to return the respective collateral.

34.2 Market risk -

The Group has exposure to market risk, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risks arise from open positions in interest rates, currency, commodities and equity products; all of which are exposed to general and specific market movements and changes in the level of volatility of prices such as interest rates, credit spreads, foreign exchange rates and equity prices. Due to the nature of the Group’s current activities, commodity price risk is not applicable.

The Group separates exposures to market risk in two groups: (i) those that arise from value fluctuation of trading portfolios recognized at fair value through profit or loss due to movements of market rates or prices (Trading Book) and (ii) those that arise from changes in the structural positions of non-trading portfolios due to movements of the interest rates, prices and foreign exchange ratios (Banking Book) and that are recorded at amortized cost and at fair value with changes in other comprehensive income, this is due to movements in interest rates, prices and currency exchange rates.

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The risks that trading portfolios face are managed through Value at Risk (VaR) historical simulation techniques; while non-trading portfolios (Banking Book) are monitored using rate sensitivity metrics, which are a part of Asset and Liability Management (ALM).

a) Trading<br> Book -

The trading book is characterized for having liquid positions in stocks, bonds, foreign currencies and derivatives, arising from market-making transactions where the Group acts as principal with the customers or with the market. This portfolio includes investments and derivatives classified by Management as held for trading.

(i) Value<br> at Risk (VaR) -

The Group applies the VaR approach to its trading portfolio to estimate the market risk of the main positions held and the maximum losses that are expected, based upon a number of assumptions for various changes in market conditions and considering the risk appetite of the subsidiary.

Daily calculation of VaR is a statistically-based estimate of the maximum potential loss on the current portfolio from adverse market movements.

VaR expresses the “maximum” amount the Group might lose, but only to a certain level of confidence (99 percent). There is therefore a specified statistical probability (1 percent) that actual loss could be greater than the VaR estimate. The VaR model assumes a certain “holding period” until positions can be closed (1 - 10 days).

The time horizon used to calculate VaR is one day; however, the one-day VAR is amplified to a 10-day time frame and calculated multiplying the one-day VaR by the square root of 10. This adjustment will be accurate only if the changes in the portfolio in the following days have a normal distribution independent and identically distributed; because of that, the result is multiplied by a non-normality adjustment factor. The limits and consumptions of the VaR are established on the basis of the risk appetite and the trading strategies of each subsidiary.

The assessment of portfolio movements has been based on annual historical information and 110 market risk factors, which are detailed below; 18 market curves, 70 stock prices, 18 mutual fund values, 3 series of volatility and 1 survival probability curves. The Group directly applies these historical changes in rates to each position in its current portfolio (method known as historical simulation).

The Group Management considers that the market risk factors, incorporated in their VaR model, are adequate to measure the market risk to which its trading portfolio is exposed.

The use of this approach does not prevent losses outside of these limits in the event of more significant market movements. Losses exceeding the VaR figure may occur, on average under normal market conditions, not more than once every hundred days.

VaR limits have been established to control and keep track of all the risks taken. These risks arise from the size of the positions and/or the volatility of the risk factors embedded in each financial instrument. Regular reports are prepared for the Treasury Risk Committee and ALM, the Risk Management Committee and Senior Management.

VaR results are used to generate economic capital estimates by market risk, which are periodically monitored and are part of the overall risk appetite of each subsidiary. Furthermore, at Group level, there is also a limit to the risk appetite of the trading portfolio, which is monitored and informed to the Treasury Risks and ALM Credicorp Committee.

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In VaR calculation, the effects of the exchange rate are not included because said effects are measured in the net monetary position, see note 34.2 (b)(ii).

The Group's VaR showed an increase at March 31, 2020, by Interest Rate and Price effect due to the increase in the Fixed Income position, as well as an increase in the volatility of interest rates and equities prices caused by the COVID-19 pandemic. The VaR remains contained within the limits of the risk appetite established by the Bank's Risk Management of each subsidiary.

As of March 31, 2020 and December 2019, the Group’s VaR by risk type is as follows:

As of<br><br> March 31,<br><br> 2020 As of<br><br> December 31, <br><br> 2019
S/(000) S/(000)
Interest rate risk 94,647 9,274
Price risk 14,711 7,809
Volatility risk 2,052 463
Diversification effect (26,094 ) (6,245 )
Consolidated VaR by type of risk 85,316 11,301

In VaR calculation, financial instruments from the trading book were taken.

On the other hand, the instruments recorded as fair values through profit or loss are not part of the selling business model and are considered as part of the sensitivity analysis of rates in the next section. See the chart of sensitivity of earnings at risk, net economic value and price sensitivity.

b) Banking<br> Book -

Non-trading portfolios which comprise the Banking Book are exposed to different risks, given that they are sensitive to market rate movements, which could bring about a deterioration in the value of assets compared to liabilities and hence to a reduction of their net worth.

(i) Interest<br> rate risk -

The Banking Book-related interest rate risk arises from eventual changes in interest rates that may adversely affect the expected gains (risk gains) or market value of financial assets and liabilities reported on the balance sheet (net economic value). The Group assumes the exposure to the interest rate risk that may affect their fair value as well as the cash flow risk of future assets and liabilities.

The Risk Committee sets the guidelines regarding the level of unmatched repricing of interest rates that can be tolerated, which is periodically monitored through ALCO.

Corporate policies include guidelines for the management of the Group’s exposure to the interest rate risk. These guidelines are implemented considering the features of each segment of business in which the Group entities operate.

In this regard, Group companies that are exposed to the interest rate risk are those that have yields based on interest, such as credits, investments and technical reserves. Interest rate risk management in BCP Peru, BCP Bolivia, MiBanco, Atlantic Security Bank and Pacífico Grupo Asegurador is carried out by performing a repricing gap analysis, sensitivity analysis of the financial margin (GER) and sensitivity analysis of the net economic value (VEN). These calculations consider different rate shocks in stress scenarios.

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The Group measures potential changes in market prices for investments in equity securities and funds that are non-trading, recorded at fair value through other comprehensive income and at fair value through profit or loss, respectively. A 10, 25 and 30 percent of changes in market prices is conducted to these price-sensitivity securities.

The market price sensitivity tests as of March 31, 2020 and December 31, 2019 are presented below:

Equity securities
Measured at fair value through other comprehensive<br> income Change in<br><br> market prices As of <br><br> March 31, <br><br> 2020 As of<br><br> December 31,<br><br> 2019
% S/(000) S/(000)
Equity securities +/-10 52,237 57,920
Equity securities +/-25 130,592 144,800
Equity securities +/-30 156,710 173,760
Funds
--- --- --- --- --- ---
Measured at fair value through<br> profit or loss Change in<br><br> market prices As of March 31, 2020 As of December 31, 2019
% S/(000) S/(000)
Participation in mutual funds +/-10 61,408 59,127
Participation in mutual funds +/-25 153,519 147,818
Participation in mutual funds +/-30 184,223 177,381
Restricted mutual funds +/-10 39,811 46,009
Restricted mutual funds +/-25 99,528 115,022
Restricted mutual funds +/-30 119,433 138,026
Participation in RAL funds +/-10 32,870 30,040
Participation in RAL funds +/-25 82,174 75,100
Participation in RAL funds +/-30 98,609 90,119
Investment funds +/-10 37,409 30,576
Investment funds +/-25 93,523 76,440
Investment funds +/-30 112,227 91,728
Hedge funds +/-10 3,369 3,364
Hedge funds +/-25 8,423 8,410
Hedge funds +/-30 10,108 10,092
Exchange Trade Funds +/-10 2,115 1,360
Exchange Trade Funds +/-25 5,287 3,399
Exchange Trade Funds +/-30 6,344 4,079

(ii) Foreign currency exchange risk -

The Group is exposed to fluctuations in foreign currency exchange rates on its financial position and cash flows. Management sets limits on the level of exposure by currency and overnight and intra-day total positions, which are monitored daily.

As of March 31, 2020, the free market exchange rate for buying and selling transactions for each United States of Dollars, the main foreign currency held by the Group, was S**/**3.437 (S/3.314 as of December 31, 2019).

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Foreign currency transactions are made at the free market exchange rates of the countries where Credicorp’s Subsidiaries are established. As of March 31, 2020 and December 31, 2019, the Group’s assets and liabilities by currencies were as follows:

As of March 31, 2020 As of December 31, 2019
Soles U.S. Dollars Other currencies Total Soles U.S. Dollars Other currencies Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Monetary assets
Cash and due from banks 4,268,564 20,135,678 1,921,544 26,325,786 3,960,190 20,762,648 1,263,924 25,986,762
Cash collateral, reverse repurchase agreements<br> and securities borrowing 300,011 3,491,080 633,254 4,424,345 150,009 3,389,090 749,425 4,288,524
Investments:
At fair value through<br> profit or loss 1,353,563 1,364,827 1,467,248 4,185,638 800,370 1,053,925 1,996,467 3,850,762
At fair value through<br> other comprehensive income 19,247,296 7,644,031 974,809 27,866,136 18,221,102 6,869,840 532,582 25,623,524
At amortized cost 4,125,015 99,227 18,401 4,242,643 3,355,579 100,299 21,168 3,477,046
Loans, net 67,391,910 39,083,898 8,300,935 114,776,743 66,737,870 35,598,141 8,149,706 110,485,717
Financial assets designated at fair value through<br> profit or loss 13,399 545,922 - 559,321 44,223 576,321 - 620,544
Other assets 2,246,770 3,618,423 842,207 6,707,400 2,072,867 2,142,237 678,111 4,893,215
Total monetary assets 98,946,528 75,983,086 14,158,398 189,088,012 95,342,210 70,492,501 13,391,383 179,226,094
Monetary liabilities
Deposits and obligations (60,565,799 ) (49,512,600 ) (9,485,146 ) (119,563,545 ) (56,769,748 ) (46,319,179 ) (8,916,458 ) (112,005,385 )
Payables<br> from repurchase agreements and securities lending (6,022,646 ) (759,021 ) (1,473,059 ) (8,254,726 ) (5,068,896 ) (734,441 ) (1,874,679 ) (7,678,016 )
Due to bank and correspondents (3,839,029 ) (5,622,718 ) (392,883 ) (9,854,630 ) (3,798,717 ) (4,709,610 ) (333,405 ) (8,841,732 )
Lease liabilities (153,145 ) (634,193 ) (50,910 ) (838,248 ) (162,103 ) (605,036 ) (80,365 ) (847,504 )
Financial<br> liabilities at fair value through profit or loss - (210,530 ) (322,616 ) (533,146 ) - (94,475 ) (399,225 ) (493,700 )
Technical reserves for claims and insurance (5,378,623 ) (4,590,650 ) (6,672 ) (9,975,945 ) (5,642,772 ) (4,301,468 ) (5,993 ) (9,950,233 )
Bonds and notes issued (3,824,085 ) (11,087,837 ) (266,226 ) (15,178,148 ) (4,028,893 ) (10,660,989 ) (256,481 ) (14,946,363 )
Other liabilities (5,630,568 ) (3,213,874 ) (1,056,248 ) (9,900,690 ) (3,541,350 ) (1,951,682 ) (874,416 ) (6,367,448 )
Total monetary liabilities (85,413,895 ) (75,631,423 ) (13,053,760 ) (174,099,078 ) (79,012,479 ) (69,376,880 ) (12,741,022 ) (161,130,381 )
13,532,633 351,663 1,104,638 14,988,934 16,329,731 1,115,621 650,361 18,095,713
Forwards position, net 1,368,178 (823,070 ) (469,265 ) 75,843 1,534,948 (1,351,414 ) (116,899 ) 66,635
Currency swaps position, net (311,660 ) 311,660 - - 281,672 (281,672 ) - -
Cross currency swaps position, net (808,229 ) 1,044,793 (396,194 ) (159,630 ) (787,355 ) 692,525 (57,715 ) (152,545 )
Options, net 282,420 (282,420 ) - - 25,071 (25,071 ) - -
Net monetary position 14,063,342 602,626 239,179 14,905,147 17,384,067 149,989 475,747 18,009,803 
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The Group manages foreign exchange risk by monitoring and controlling the currency position values exposed to changes in exchange rates. The Group measures its performance in soles. (since 2014 considering its change in functional currency, it was measured in U.S. Dollars before), so if the net foreign currency exchange position (U.S. Dollar) is positive, any depreciation of soles would positively affect the Group’s interim condensed consolidated statement of financial position. The current position in a foreign currency comprises exchange rate-linked assets and liabilities in that currency. An institution’s open position in individual currencies comprises assets, liabilities and off-balance sheet items denominated in the respective foreign currency for which the institution itself bears the risk; any appreciation/depreciation of the foreign exchange would affect the interim condensed consolidated statement of income.

The Group’s net foreign exchange position is the sum of its positive open non-soles positions (net long position) less the sum of its negative open non-soles positions (net short position). Any depreciation/appreciation of the foreign exchange position would affect the interim condensed consolidated statement of income. A currency mismatch would leave the Group’s interim condensed consolidated statement of financial position vulnerable to a fluctuation of foreign currency (exchange rate shock).

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The table below shows the sensitivity analysis of the U.S. Dollar, the currency to which the Group had significant exposure as of March 31, 2020 and December 31, 2019 in its monetary assets and liabilities and its forecast cash flows. The analysis determines the effect of a reasonably possible variation of the exchange rate against Soles with all other variables held constant on the interim condensed consolidated statement of income, before income tax. A negative amount in the table reflects a potential net reduction in the interim condensed consolidated statement of income, while a positive amount reflects a net potential increase:

Currency rate sensitivity Change in<br> <br>currency rates As of March<br><br> <br>31, 2020 As of December<br><br> <br>31, 2019
% S/000 S/000
Depreciation -
Soles in relation to U.S. Dollar 5 28,696 7,142
Soles in relation to U.S. Dollar 10 54,784 13,635
Appreciation -
Soles in relation to U.S. Dollar 5 (31,717 ) (7,894 )
Soles in relation to U.S. Dollar 10 (66,958 ) (16,665 )
34.3 Liquidity risk
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Liquidity risk is the risk that the Group is unable to meet its short-term payment obligations associated with its financial liabilities when they fall due and to replace funds when they are withdrawn. In this sense, the company that is facing a liquidity crisis would be failing to comply with the obligations to pay depositors and with commitments to lend or satisfy other operational cash needs.

The Group is exposed to daily cash requirements, interbank deposits, current accounts, time deposits, use of loans, guarantees and other requirements. The Management of the Group's subsidiaries establishes limits for the minimum funds amount available to cover such cash withdrawals and on the minimum level of inter-bank and other borrowing facilities that should be in place to cover withdrawals at unexpected levels of demand. Sources of liquidity are regularly reviewed by the corresponding risk teams to maintain a wide diversification by currency, geography, type of funding, provider, producer and term.

The procedure to control the mismatching of the maturities and interest rates of assets and liabilities is fundamental to the management of the Group. It is unusual for banks to be completely matched, as transacted business is often based on uncertain terms and of different types. An unmatched position potentially enhances profitability, but also increases liquidity risk, which generates exposure to potential losses.

Maturities of assets and liabilities and the ability to replace them, at an acceptable cost are important factors in assessing the liquidity of the Group.

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A mismatch, in maturity of long-term illiquid assets against short-term liabilities, exposes the interim condensed consolidated statement of financial position to risks related both to rollover and to interest rates. If liquid assets do not cover maturing debts, an interim condensed consolidated statement of financial position is vulnerable to a rollover risk. Furthermore, a sharp increase in interest rates can dramatically increase the cost of rolling over short-term liabilities, leading to a rapid increase in debt cost. The contractual-maturity gap report is useful in showing liquidity characteristics.

Corporate policies have been implemented for liquidity risk management by the Group. These policies are consistent with the particular characteristics of each operating segment in which each of the Group companies operate. Risk Management heads set up limits and autonomy models to determine the adequate liquidity indicators to be managed.

Commercial banking and Microfinance:

Liquidity risk exposure in BCP Peru, BCP Bolivia, Mibanco and Atlantic Security Bank is based on indicators such as the Internal Liquidity Coverage Ratio (RCLI, the Spanish acronym) which measures the amount of liquid assets available to meet cash outflows needs within a given stress scenario for a period of 30 days and the Internal Ratio of Stable Net Funding (RFNEI, the Spanish acronym), which is intended to guarantee that long-term assets are financed at least with a minimum number of stable liabilities within a prolonged liquidity crisis scenario and works as a minimum compliance mechanism that supplements the RCLI. The core limits of these indicators are 100% and any excess is presented in the Credicorp Treasury Risk Committee, Credicorp Risk Committee and the Assets Liabilities Committee (ALCO) of the respective subsidiary.

Insurances and Pensions:

Insurances**:** Liquidity risk management in Pacífico Grupo Asegurador follows a particular approach given the nature of the business. For annually renewable businesses, mainly general insurance, the emphasis of liquidity is focused on the quick availability of resources in the event of a systemic event (e.g. earthquake); for this purpose, there are minimum investment indicators in place relating to local cash/time deposits and foreign fixed-income instruments of high quality and liquidity.

For long-term businesses such as Pacífico Seguros, given the nature of the products offered and the contractual relationship with customers (the liquidity risk is not material); the emphasis is on maintaining sufficient flow of assets and matching their maturities with maturities of obligations (mathematical technical reserves); for this purpose there are indicators that measure the asset/liability sufficiency and adequacy as well as calculations or economic capital subject to interest rate risk, this last under the methodology of Credicorp.

Pensions**:** Liquidity risk management in AFP Prima is carried out in a differentiated manner between the fund administrator and the funds being managed. Liquidity management regarding the fund administrator is focused on hedge meeting periodic operating expense needs, which are supported with the collection of commissions. The fund administering entity does not record unexpected outflows of liquidity.

Investment banking:

Liquidity risk in the Grupo Credicorp Capital principally affects the security brokerage. In managing this risk, limits of use of liquidity have been established as well as mismatching by dealing desk; follow-up on liquidity is performed on a daily basis for a short-term horizon covering the coming settlements. If short-term unmatched maturities are identified, repos are used. On the other hand, structural liquidity risk of Credicorp Capital is not significant given the low levels of debt, which is monitored regularly using financial planning tools.

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In the case of Atlantic Security Bank, the risk liquidity management performs through indicators such as Internal Liquidity Coverage Ratio (RCLI, the Spanish acronym) and the Internal Ratio of Stable Net Funding (RFNEI, the Spanish acronym) with the core limits of 100% and any excess is presented in the Credicorp Treasury Risk Committee, Credicorp Risk Committee and the Assets Liabilities Committee (ALCO) of the respective subsidiary.

During the first quarter of 2020, the Group maintained a comfortable position, supported by a robust high-quality liquid assets buffer, with ratios well above limits.

34.4 Operational risk -

Operational risk is the possibility of the occurrence of losses arising from inadequate processes, human error, failure of information technology, relations with third parties or external events. Operational risks can, lead to financial losses and have legal or regulatory compliance consequences, but exclude strategic or reputational risk (with the exception of companies under Colombian regulations, where reputational risk is included in operational risk).

Operational risks are grouped into internal fraud, external fraud, labor relations and job security, relations with customers, business products and practices, damages to material assets, business and systems interruption, and failures in process execution, delivery and management of processes.

One of the Group’s pillars is to develop an efficient risk culture, and to achieve this, it records operational risks and their respective process controls. The risk map permits their monitoring, prioritization and proposed treatment according to established governance. Likewise carries out an active cybersecurity and fraud prevention management, aligned with the best international practices.

The business continuity management system enables the establishing, implementing, operating, monitoring, reviewing, maintaining and improving of business continuity based on best practices and regulatory requirements. The Group implements recovery strategies for the resources that support important products and services of the organization, which will be periodically tested to measure the effectiveness of the strategy.

In the management of operational risk, cybersecurity, fraud prevention and business continuity, corporate guidelines are used, and methodologies and best practices are shared among the Group's companies.

The management of information security is carried out through a systemic process, documented and known by the entire organization under the best practices and regulatory requirements. The Group designs and develops the guidelines described in the policy and procedures to have strategies for availability, privacy and integrity of the information assets of the organization.

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34.5 Risk of the insurance activity -

The principal risk the Group faces under insurance contracts is that the actual claims and benefit payments or the timing thereof, differ from expectations. This is influenced by the frequency of claims, severity of claims, actual benefits paid and subsequent development of long-term claims. Therefore, the objective of the Group is to ensure that sufficient reserves are available to cover these liabilities.

The above risk exposure is mitigated by diversification across a large portfolio of insurance contracts. The variability of risks is also improved by careful selection and implementation of underwriting strategy guidelines, as well as the use of reinsurance arrangements. The Group’s placement of reinsurance is diversified so that it is neither dependent on a single reinsurer nor are the operations of the Group substantially dependent upon any single reinsurance contract.

Life insurance contracts -

The main risks that the Group is exposed to are mortality, morbidity, longevity, investment yield and flow, losses arising from policies due to the expense incurred being different than expected, and the policyholder decision; all of which, do not vary significantly in relation to the location of the risk insured by the Group, type of risk insured or industry.

The Group’s underwriting strategy is designed to ensure that risks are well diversified in terms of type of risk and level of insured benefits. This is achieved through diversification across insurable risks, the use of medical screening in order to ensure that pricing takes account of current health conditions and family medical history, regular review of actual claims experience and product pricing, as well as detailed claims handling procedures. Underwriting limits are in place to enforce appropriate risk selection criteria. For example, the Group has the right not to renew individual policies, it can impose deductibles and it has the right to reject the payment of fraudulent claims.

For contracts when death or disability is the insured risk, the significant factors that could increase the overall frequency of claims are epidemics, widespread changes in lifestyle and natural disasters, resulting in more claims than expected.

For retirement, survival and disability annuities contracts, the most significant factor is continuing improvement in medical science and social conditions that increase longevity.

Management has performed a sensitivity analysis of the technical reserve estimates, Note 16(c).

Non-life insurance contracts (general insurance and healthcare) -

The Group mainly issues the following types of non-life general insurance contracts: automobile, technical branches, business and healthcare insurances. Healthcare contracts provide medical expense cover to policyholders. Risks under non-life insurance policies usually cover 12 months.

For general insurance contracts the most significant risks arise from climate changes, natural disasters and other type of damages. For healthcare contracts the most significant risks arise from lifestyle changes, epidemics and medical science and technology improvements.

Most of these risks do not vary significantly in relation to the location of the risk insured by the Group, type of risk insured or industry.

The above risk exposures are mitigated by diversification across a large portfolio of insurance contracts. The variability of risk is improved by careful selection and implementation of underwriting strategies, which are designed to ensure that risks are diversified in terms of type of risks and level of insured benefits. This is achieved, in various cases, through diversification across industry sectors and geography. Furthermore, strict claim review policies to assess all new and ongoing claims and in process of settlement, regular detailed review of claims handling procedures and frequent investigation of possible fraudulent claims are all policies and procedures put in place to reduce the Group’s risk exposure. Insurance contracts also entitle the Group to pursue third parties for payment of some or all costs. Also, the Group actively manages and promptly pursues claims, in order to reduce its exposure to unpredictable future developments that can negatively impact the Group.

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The Group has also limited its exposure by imposing maximum claim amounts on certain contracts as well as the use of reinsurance arrangements in order to limit its exposure to catastrophic events.

Credit risk of the insurance activity –

Credit risk is the risk that one party to a financial instrument will cause a financial loss to the other party by failing to discharge the total obligation at maturity.

The following policies and procedures are in place to mitigate the Group’s exposure to credit risk:

- The Group sets the maximum amounts and limits that may be granted to corporate counterparties according to their long- term<br>credit ratings.
- Credit risk from customer balances related to non-payment of premiums or contributions, will only persist during the grace<br>period specified in the policy document or trust deed until the policy is paid up or terminated. Commissions paid to intermediaries<br>are netted off against amounts receivable from them in order to reduce the risk of doubtful accounts.
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- Reinsurance is placed with counterparties that have a good credit rating and concentration of risk is avoided by following<br>guidelines in respect of counterparties’ limits which are set each year by the Board of Directors and are subject to regular<br>reviews. At each reporting date, Management performs an assessment of creditworthiness of reinsurers and updates the reinsurance<br>contracts strategy, determining whether the need exists to establish an allowance for impairment.
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- A Group policy setting out the assessment and determination of what constitutes credit risk for the Group is in place, its<br>compliance is monitored, and exposures and breaches are reported to the Group risk committee. The policy is regularly reviewed<br>for pertinence and for changes in the risk environment.
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- The Group issues Investment Link life insurance contracts whereby the policyholder bears the<br>investment risk on the financial assets held in the Company’s investment portfolio as the policy benefits are directly linked<br>to the value of the assets in the portfolio. Therefore, the Group has no material credit risk on Investment Link financial assets.
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34.6 Capital management -

The Group maintains an actively managed capital base to cover risks inherent in its business. The adequacy of the Group’s capital is monitored using, among other measures, the rules and ratios established by the SBS, the supervising authority of its major subsidiaries and for consolidation purposes. Furthermore, capital management responds to market expectations in relation to the solvency of the Group and to support the growth of the businesses considered in the strategic planning. In this way, the capital maintained by the Group enables it to assume unexpected losses in normal conditions and conditions of severe stress.

The Group’s objectives when managing capital are: (i) to comply with the capital requirements set by the regulators of the markets where the entities within the Group operate; (ii) to safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders; and (iii) to maintain a strong capital base to support the development of its business, in line with the limits and tolerances established in the declaration of Risk Appetite.

As of March 31, 2020 and December 31, 2019, the regulatory capital for the Subsidiaries engaged in financial and insurance activities amounted to approximately S/27,868.3 million and S/25,732 million, respectively. The regulatory capital has been determined in accordance with SBS regulations in force as of said dates. Under the SBS regulations, the Group’s regulatory capital exceeds by approximately S/7,202.4 million the minimum regulatory capital required as of March 31, 2020 (approximately S/4,151.6 million as of December 31, 2019).

34.7 Fair values –
a) Financial instruments recorded at fair value and fair value hierarchy –
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Financial instruments included in the Level 1 category are those that are measured on the basis of quotations obtained in an active market. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

Financial instruments included in the Level 2 category are those that are measured on the basis of observable market factors. This category includes instruments valued using: quoted prices for similar instruments, either in active or less active markets and other valuation techniques (models) where all significant inputs are directly or indirectly observable based on market data.

Following is a description of how fair value is determined for the main Group’s financial instruments where valuation techniques were used with inputs based on market data which incorporate Credicorp’s estimates on the assumptions that market participants would use for measuring these financial instruments:

- Valuation<br>of derivative financial instruments -

Interest rate swaps, currency swaps and forward exchange contracts are measured by using valuation techniques where inputs are based on market data. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs, including the credit quality of counterparties, spot exchange rates, forward rates and interest rate curves. Options are valued using well-known, widely accepted valuation models.

A credit valuation adjustment (CVA) is applied to the “Over-The-Counter” derivative exposures to take into account the counterparty’s risk of default when measuring the fair value of the derivative. CVA is the mark-to market cost of protection required to hedge credit risk from counterparties in this type of derivatives portfolio. CVA is calculated by multiplying the probability of default (PD), the loss given default (LGD) and the expected exposure (EE) at the time of default.

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A debit valuation adjustment (DVA) is applied to include the Group’s own credit risk in the fair value of derivatives (that is the risk that the Group might default on its contractual obligations), using the same methodology as for CVA.

As of March 31, 2020, the balance of receivables and payables corresponding to derivatives amounted to S/1,790.8 million and S/1,751.7 million respectively, See Note 13(b), generating DVA and CVA immaterial adjustments that have not changed significantly compared to the period 2019. As of December 31, 2019, the balance of receivables and payables corresponding to derivatives amounted to S/1,092.1 million and S/1,040.3 million, respectively, See Note 13(b), generating DVA and CVA adjustments for approximately S/12.6 million and S/14.0 million, respectively. Also, the net impact of both items in the interim condensed consolidated statement of income amounted to S/3.2 million.

- Valuation of debt securities classified in the category “at<br>fair value through other comprehensive income” and included in level 2 -

Valuation of certificates of deposit BCRP, corporate, leasing, subordinated bonds and Government treasury bonds are measured calculating their Net Present Values (NPV) through discounted cash flows, using appropriate and relevant zero coupon rate curves to discount cash flows in the respective currency and considering observable current market transactions.

Certificates of deposit BCRP (CD BCRP) are securities issued at a discount in order to regulate the liquidity of the financial system. They are placed mainly through public auction or direct placement, are freely negotiable by their holders in the Peruvian secondary market and may be used as collateral in Repurchase Agreement Transactions of Securities with the BCRP.

Other debt instruments are measured using valuation techniques based on assumptions supported by prices from observable current market transactions, obtained via pricing services. Nevertheless, when prices have not been determined in an active market, fair values are based on broker quotes and assets that are valued using models whereby the majority of assumptions are market observable.

- Valuation of financial instruments included in level 3 -

These are measured using valuation techniques (internal models), based on assumptions that are not supported by transaction prices observable in the market for the same instrument, nor based on available market data.

In this regard, no significant differences were noted between the estimated fair values and the respective carrying amounts.

As of March 31, 2020 and December 31, 2019, the net unrealized loss of Level 3 financial instruments amounted to S/1.6 million and S/1.9 million, respectively. At said dates, changes in the carrying amount of Level 3 financial instruments have not been significant since there were no purchases, issuances, settlements or any other significant movements or transfers from level 3 to Level 1 or Level 2 or vice versa.

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b) Financial instruments not measured at fair value -

The methodologies and assumptions used by the Group to determine fair values depend on the terms and risk characteristics of the various financial instruments and include the following:

(i) Long-term fixed-rate and variable-rate loans are evaluated by the Group based on parameters such as interest rates, specific<br>country risk factors, and individual creditworthiness of the customer and the risk characteristics of the financed project. Based<br>on this evaluation, allowances are taken into account for the incurred losses of these loans. As of March 31, 2020 and December<br>31, 2019, the carrying amounts of loans, net of allowances, were not materially different from their calculated fair values.
(ii) Assets for which fair values approximate their carrying value - For financial assets and financial liabilities that are liquid<br>or have a short-term maturity (less than three months) it is assumed that the carrying amounts approximate to their fair values.<br>This assumption is also applied to demand deposits, savings accounts without a specific maturity and variable rate financial instruments.
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(iii) Fixed rate financial instruments - The fair value of fixed rate financial assets and liabilities carried at amortized cost<br>are estimated by comparing market interest rates when they were first recognized with current market rates offered for similar<br>financial instruments. The estimated fair value of fixed interest-bearing deposits is based on discounted cash flows using prevailing<br>market interest rates for financial instruments with similar credit risk and maturity. For quoted debt issued the fair values are<br>calculated based on quoted market prices. When quoted market prices are not available, a discounted cash flow model is used based<br>on a current interest rate yield curve appropriate for the remaining term to maturity.
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34.8 Fiduciary activities, management of funds and pension funds -
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The Group provides custody, trustee, investment management and advisory services to third parties; therefore, the Group makes allocations and purchase and sale decisions in relation to a wide range of financial instruments. Assets that are held in a fiduciary capacity are not included in these consolidated financial statements. These services give rise to the risk that the Group will be accused of mismanagement or under-performance.

As of March 31, 2020 and December 31, 2019, the value of the net assets under administration off the balance sheet (in millions of soles) is as follows:

Asof March<br><br> <br>31, 2020 As of December<br> <br>31, 2019
S/(000) S/(000)
Pension funds 46,607 53,912
Investment funds and mutual funds 39,469 43,635
Equity managed 17,792 18,387
Bank trusts 4,753 4,834
Total 108,621 120,768 
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35 COMMITMENTS AND CONTINGENCIES

Legal claim contingencies –

i) Madoff Trustee Litigation -

In September 2011, the Trustee for the liquidation of Bernard L. Madoff Investment Securities LLC (BLMIS) and the substantively consolidated estate of Bernard L. Madoff (the Madoff Trustee) filed a complaint (the Madoff Complaint) against Credicorp’s subsidiary ASB in the U.S. Bankruptcy Court for the Southern District of New York (the Bankruptcy Court). The Madoff Complaint seeks recovery of approximately US$120 million, which is alleged to be equal to the amount of redemptions between the end of 2004 and the beginning of 2005 of ASB-managed Atlantic U.S. Blue Chip Fund assets invested in Fairfield Sentry Limited (Fairfield Sentry). The Madoff Complaint seeks the recovery of these redemptions from ASB as “subsequent transfers” or “avoided transfers” from BLMIS to Fairfield Sentry that Fairfield Sentry in turn subsequently transferred to ASB. The Madoff Trustee has filed similar “clawback” actions against numerous other alleged “subsequent transferees” that invested in Fairfield Sentry and its sister entities, which, in turn, invested in and redeemed funds from BLMIS.

There has been significant briefing on issues related to these Madoff Trustee actions, and these cases have been pending for many years. In November 2016, the Bankruptcy Court issued a Memorandum Decision Regarding Claims to Recover Foreign Subsequent Transfers (the Memorandum Decision) holding that the recovery of certain subsequent foreign transfers is barred under the doctrine of comity and/or extraterritoriality, and it dismissed the claims brought by the Madoff Trustee against a number of parties, including ASB. In March 2017, the Madoff Trustee filed an appeal (the Appeal) of the Memorandum Decision to the United States Court of Appeals for the Second Circuit, which reversed the Dismissal Order and remanded the matter to the Bankruptcy Court (the Second Circuit Opinion). In April 2019, the defendant-appellees, including ASB, filed, and the Second Circuit granted, a motion to stay the issuance of the mandate pending the filing of a petition for a writ of certiorari in the United States Supreme Court. The petition for a writ of certiorari was filed in the United States Supreme Court in August 2019. The mentioned petition was denied by the Supreme Court in June 2020. Therefore, the defense counsel will need to coordinate with Madoff Trustee´s counsel on a briefing schedule related to their pending motion to replead and request for limited discovery if that is still the desire of the Trustee. The Group believes that ASB has other defenses against the Madoff Trustee’s claims alleged in the Madoff Complaint.

ii) Fairfield Liquidator Litigation -

In April 2012, Fairfield Sentry (In Liquidation) and its representative, Kenneth Krys (the Fairfield Liquidator), filed a complaint against ASB (the Fairfield Complaint) in the Bankruptcy Court (the Fairfield v. ASB Adversary Proceeding). The Fairfield Complaint seeks to recover US$115.2 million from ASB, representing the amount of ASB’s redemptions of certain investments in Fairfield Sentry. These are essentially the same funds that the Madoff Trustee seeks to recover in the Madoff Trustee litigation described above. After the Fairfield Complaint was filed, the Bankruptcy Court procedurally consolidated the Fairfield v. ASB Adversary Proceeding with other adversary actions brought by the Fairfield Liquidator against former investors in Fairfield Sentry.

Similar to the Madoff Trustee litigation described above, the Fairfield v. ASB Adversary Proceeding and related adversary actions have been pending for many years. In October 2016, the Fairfield Liquidator filed a Motion for Leave to Amend (the Motion for Leave) various complaints, including the Fairfield Complaint. Certain defendants, including ASB, filed a motion to dismiss (the Motion to Dismiss) and a consolidated memorandum of law (i) in opposition to the Motion for Leave and (ii) in support of the Motion to Dismiss. In December 2018, the Bankruptcy Court entered a memorandum decision granting in part and denying in part the Motion to Dismiss and the Motion for Leave (the Memorandum Decision). In March 2019, the Fairfield Liquidator submitted a form of a stipulated order dismissing the adversary proceeding against ASB (the Dismissal Order), as directed by the Bankruptcy Court, but filed notices of appeal, including of the dismissal of the claims asserted against ASB and other defendants, in May 2019. The appeal remains pending.

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The Group believes that ASB has substantial defenses against the Fairfield Liquidator’s claims alleged in the Amended Complaint and the Fairfield Liquidator’s appeal.

36 EVENTS OCCURRED AFTER THE REPORT PERIOD

From April 1, 2020 until the date of this report, no significant event of a financial-accounting nature has occurred which affects the interpretation of the consolidated financial statements, except for the following paragraphs.

Due COVID-19 Pandemic effects (see Note 2(b)), since April, 2020 Credicorp and subsidiaries have offered its clients in Retail Banking the opportunity to reschedule their loans for 30 or 90 days without incurring in overdue fees and interest on capital during this period, which could generate impairment charges in the short term, according to IFRS9. For this type of loans, IFRS9 require to recalculate the gross carrying amount, and the company shall recognize a modification loss. The gross carrying amount of the loan shall be recalculated as the present value of the new contractual cash flows that are discounted at market effective interest rate. This charge represents a temporal difference which will be amortized over the remaining term of the zero-interest-rate loan. At this time, Management is determining the impacts that could be generated in relation to these rescheduled loans.

Finally, on May 26, 2020 the Peruvian Government was enacted the Supreme Decree 094-2020-PCM to extend the National Emergency period from May 25, 2020 to June 30, 2020.

- 104 -

Exhibit 99.2

tableof contents

Page
Summary 1
Selected Financial Information 8
Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
Selected Statistical and Other Information 46
Business and Other Updates 84
Forward-Looking Statements 91

Summary

The discussion that follows highlightsselected information about Credicorp Ltd. (“Credicorp,” “we,” “us” and “our”) andour business as of and for the three months ended March 31, 2020, together with certain information regarding recent developmentssince such date, and should be read together with our unaudited condensed consolidated interim financial information as of andfor the three months ended March 31, 2020, presented above and our consolidated financial statements included in our 2019 Form20-F filed on May 29, 2020.

Overview

We are the largest financial services holding company in Peru. We conduct our financial services business through our lines of business as follows: (1) universal banking, (2) microfinance, (3) insurance and pensions and (4) investment banking and wealth management. Each line of business is further broken down into segments. According to IFRS, an operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the entity’s chief operating decision maker, who makes decisions about resources allocated for the segment and assesses its performance, and for which discrete financial information is available.

The financial information as of and for each of the three months ended March 31, 2019 and 2020 and each of the three years ended December 31, 2017, 2018 and 2019 has been derived from our consolidated financial statements included in our Form 20-F filed on May 29, 2020. The financial statements have been prepared in accordance with IFRS as issued by the IASB.

The following tables provide certain financial information about our lines of business as of and for the three months ended March 31, 2020, as derived from Note 31 to our interim unaudited financial statements:

As of and for the Three Months Ended March 31, 2020
External Income^(1)^ Net Interest, Similar Income and Expenses Other Income, Net^(2)^ Total Assets
Amount % Total Amount % Total Amount % Total Amount % Total
(Soles in millions, except percentages)
Universal Banking
BCP Stand-alone 2,820 59.4 1,616 67.9 762 69.3 148,697 75.2
BCP Bolivia 190 4.0 87 3.7 25 2.3 11,359 5.7
Insurance and Pension funds
Grupo Pacifico 807 17.0 128 5.4 683 62.1 13,740 6.9
Prima AFP 41 0.9 — 0.0 41 3.7 974 0.5
Microfinance
Mibanco 628 13.2 485 20.4 41 3.7 13,529 6.8
Banco Compartir S.A. 51 1.0 35 1.4 6 0.5 836 0.4
Edyficar S.A.S. 12 0.3 11 0.5 (104 ) (9.5 ) 116 0.1
Investment Banking and Wealth Management 197 4.1 14 0.6 146 13.3 10,715 5.4
Other segments 3 0.1 443 18.6 (8 ) (0.7 ) 3,878 2.0
Eliminations - 0.0 (440 ) (18.5 ) (492 ) (44.7 ) (6,022 ) (3.0 )
Total consolidated 4,749 100.0 2,379 100.0 1,100 100.0 197,822 100.0
(1) Corresponds to total interest and similar income, other income (includes income and expenses on commissions) and net earned<br>premiums from insurance activities.
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(2) Corresponds to total other income (includes income and expenses for commissions) and insurance underwriting result.
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The following tables provide certain financial information about our lines of business as of December 31, 2019 and for the three months ended March 31, 2019, as derived from Note 31 to our interim unaudited financial statements:

As of December 31, 2019 and for the Three Months Ended March 31 , 2019
External Income(1) Net Interest, Similar Income and Expenses Other Income, Net(2) Total Assets
Amount % Total Amount % Total Amount % Total Amount % Total
(Soles in millions, except percentages)
Universal Banking
BCP<br> Stand-alone 2,821 59.2 1,489 67.8 831 64.7 139,832 74.4
BCP<br> Bolivia 175 3.7 78 3.6 29 2.3 10,481 5.6
Insurance and Pension<br> funds
Grupo<br> Pacifico 766 16.1 121 5.5 808 62.9 13,785 7.3
Prima<br> AFP 123 2.6 1 0.0 123 9.6 909 0.5
Microfinance
Mibanco 600 12.6 468 21.3 45 3.5 13,576 7.2
Banco<br> Compartir S.A. — — — — — — 1,046 0.6
Edyficar<br> S.A.S. 12 0.2 11 0.5 (80 ) (6.2 ) 141 0.1
Investment<br> Banking and Wealth Management 238 5.0 24 1.1 175 13.6 9,423 5.0
Other segments 27 0.6 305 13.9 43 3.2 2,998 1.6
Eliminations — — (300 ) (13.7) (689 ) (53.6 ) (4,314 ) (2.3 )
Total<br> consolidated 4,762 100.0 2,197 100 (1,285 ) 100.0 187,877 100.0
(1) Corresponds to total interest and similar income, other income (includes income and expenses on commissions) and net earned<br>premiums from insurance activities.
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(2) Corresponds to total other income (includes income and expenses for commissions) and insurance underwriting result.
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The following table sets forth the net cash dividends available to Credicorp Ltd, as principal shareholder, from other group companies in 2015, 2016, 2017, 2018 and 2019, as derived from Credicorp’s standalone financial statements as of and for the years ended December 31, 2019 and 2018:

**** As of and for the years ended December 31,
**** 2015 2016 2017 2018 2019
**** (Soles in millions) (U.S. dollars in millions)(1) (Soles in millions) (U.S. dollars in millions)(1) (Soles in millions) (U.S. dollars in millions)(1) (Soles in millions) (U.S. dollars in millions)(1) (Soles in millions) (U.S. dollars in millions)(1)
BCP(2) 376 114 1,134 342 1,425 430 1,457 440 1,989 600
Pacifico 27 8 102 31 243 73 247 75 249 75
Prima<br> AFP 135 41 164 49 169 51 131 39 131 40
ICBSA — — — — 47 14 46 14 79 24
Credicorp<br> Capital — — — — 82 25 98 30 141 42
ASHC(3) 115 35 18 6 148 45 129 39 407 123
Others(4) 40 12 37 11 31 9 23 7 24 7
Total 694 209 1,455 439 2,146 648 2,132 643 3,020 911

Source: Credicorp and Grupo Credito Separate Financial Statements as of Years ended December 31, 2019 and 2018.

(1) For the convenience of the reader,<br> data as of and for the period ended December 31, 2015, 2016, 2017, 2018 and 2019 have<br> been translated from Soles into U.S. dollars at a rate of S/3.314 to U.S.$1.00 (the exchange<br> rate as of December 31, 2019 as published by the SBS).
(2) Includes dividends received from<br> BCP’s majority participation in Mibanco.
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(3) Dividends received from Treasury<br> Shares held by ASHC are not included.
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(4) Includes direct dividends from Mibanco.
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Our Operations

Universal Banking

Our universal banking business, which focuses on lending and investment, is organized into (i) wholesale banking activities, including our corporate and middle-market banking business segments, which are carried out by BCP Stand-alone’s Wholesale Banking Group (“WBG”); (ii) retail banking activities, including our SME-Business, SME-Pyme, mortgage, consumer financing, credit card segments, which are carried out by BCP Stand-alone’s Retail Banking Group (“RBG”); (iii) treasury activities, including money market trades, foreign exchange trading, derivatives and proprietary trading which are carried out by BCP Stand-alone’s Treasury; and (v) wholesale and retail banking activities in Bolivia.

The majority of our banking business is carried out through BCP Stand-alone. We conduct banking activities in Bolivia through BCP Bolivia, a full-service commercial bank. As of March 31, 2020, BCP Stand-alone and BCP Bolivia together represented approximately 80.9% of Credicorp’s total assets, 71.8% of Credicorp’s net profit, and 73.1% of equity attributable to Credicorp’s shareholders.

We apply uniform credit policies and approval and review procedures, which are based on conservative criteria adopted by BCP Stand-alone and BCP Bolivia. Our Chief Executive Officer is in charge of setting the general credit policies for each business areas. These policies are set within the guidelines established by the laws and regulations of the markets in which we operate, and the guidelines set forth by our Board of Directors.

Microfinance

The microfinance line of business consists of a group of subsidiaries offering commercial banking activities and specialized financial services to support small and micro business clients in Peru through Mibanco and in Colombia through Edyficar S.A.S. (whose commercial name is Encumbra), incorporated in 2013 and Bancompartir incorporated in December 2019. As of March 31, 2020, Mibanco represented approximately 93.4% of the total loans of the microfinance line of business, 6.7% of Credicorp’s total assets, 15.9% of Credicorp’s net profit, and 8.9% of equity attributable to Credicorp’s shareholders.

Mibanco’s credit policies are set within the guidelines established by the laws and regulations of the markets in which we operate and by the guidelines set forth by the Board of Directors.

Insurance and Pensions

We conduct our insurance business exclusively through Grupo Pacifico, which operates in Peru and Bolivia and is the largest Peruvian insurance company by collections and contributions in 2019, according to the SBS and the Peruvian Superintendency of Health (Superintendencia Nacional de Salud) (“Susalud”). Grupo Pacifico provides a broad range of insurance products focusing on three business areas: property and casualty (“P&C)”, life insurance business, and corporate health insurance and medical services. Grupo Pacifico, like other major Peruvian insurance companies, sells its products both directly (through its own sales force) and through independent brokers, bancassurance, and sponsors.

Credicorp conducts its pension fund business through Prima AFP, which operates through individual capitalization accounts and provides its affiliates with retirement, disability, survival, and burial benefits. For this purpose, Prima AFP collects affiliates’ mandatory and voluntary contributions, and invests the funds in local and foreign financial markets. The funds that Prima AFP holds in custody for its affiliates are non-attachable by it and autonomous assets and are not affected by Prima AFP’s financial results. Prima AFP offers four types of funds, which differ by risk profile and the asset classes in which they invest. The investment and risk management policies are defined by internal committees and supervised by the SBS and the SMV.

As of March 31, 2020, Grupo Pacifico represented approximately 6.9% of Credicorp’s total assets, 46.9% of Credicorp’s net profit, and 11.5% of equity attributable to Credicorp’s shareholders.

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Investment Banking and Wealth Management

Credicorp Capital carries out its investment banking and wealth management operations in the Latin America region through Credicorp Capital Peru, Credicorp Capital Colombia, and Credicorp Capital Chile which hold a considerable market share in the Peruvian, Colombian and Chilean markets, respectively. In 2018, the creation of the Investment banking and wealth management Line of business included the addition of BCP Stand-alone’s Wealth Management Division and Atlantic Security Bank to Credicorp Capital. The main objective of this new Line of business is to operate as a single regional wealth management model within one business unit, instead of three different models under different business units. This new structure facilitates sharing of best practices and delivery of a regional value proposition, with Atlantic Security Bank supporting all wealth management business units and clients (instead of focusing on Peru-based wealth management customers). With the same objective, in 2019, Credicorp Capital completed the acquisition of Ultraserfinco and its subsidiaries expanding our wealth management business in Colombia and also strengthening our geographical presence in Medellin.

Our investment banking and wealth management line of business’s four main business units are asset management, capital markets, corporate finance and wealth management.

As of March 31, 2020, our investment banking and wealth management business represented approximately 5.4% of Credicorp’s total assets, 1.9% of Credicorp’s net profit, and 5.4% of equity attributable to Credicorp’s shareholders.

Our Strategies

Credicorp operates mainly in Peru, an important emerging market economy that has been growing at a solid pace for the past few decades, with a gross domestic product (“GDP”) of U.S.$230 billion in 2019, according to the figures of BCRP, that has grown at a compound annual growth rate (“CAGR”) of 8.3% from 2001 to 2019, and which still has an under-penetrated banking system. These two characteristics represent an important opportunity for long-term growth in Peru. Credicorp has consistently diversified and solidified its presence in the region through its operations in Peru, Bolivia, Colombia and Chile, contributing to its financial development and accompanying its clients in their growth.

Since Credicorp was created nearly 25 years ago, it has evolved into a much larger and complex company. In 2018, the management of the several businesses was organized into the four lines of business: universal banking, microfinance, insurance and pensions, and investment banking and wealth management. Our strategies include:

· Universal Banking. The universal banking line of business continues with its strategy to improve its clients’<br>experiences in all segments by upgrading and innovating digital banking, which implies, in many cases, educating and accompanying<br>clients in the use of digital channels. In 2019, we continued to advance in our transformation strategy by improving our digital<br>sales and customer satisfaction. This line of business aims to maintain an adequate balance between risk, growth, profitability<br>and operating efficiency.
· Microfinance. The microfinance line of business continues to invest in building capacities to fuel local and<br>regional growth based on its current business model. This will be accomplished by focusing on consolidating the new hybrid model<br>and in creating new business alliances to scale the business. It will continue to drive efforts to capture deposits, which in addition<br>to benefitting the funding structure, allows the organization to analyze and take advantage of information to continuously improve<br>its business model and value proposition for its clients. In 2019, we acquired Bancompartir, a subsidiary that will allow us to<br>consolidate our business in the microfinance market in Colombia with Encumbra.
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· Insurance and Pensions. The insurance and pensions line of business continues to focus on capturing growth in<br>the Peruvian market, which has one of the lowest penetration levels in the region. As such, this Line of business will continue<br>to focus on growing in different channels and in bancassurance to take advantage of the group’s synergies. Furthermore, Grupo<br>Pacifico and Prima AFP will leverage the experience in the Centro de InnovaCXion at Banco de Credito del Peru to innovate different<br>channels and products. Furthermore, Grupo Pacifico will focus on improving the profitability of the health insurance business,<br>which is managed alongside the strategic partner, United Health/Banmedica. In 2019, we continued to improve the synergies between<br>various teams from Prima AFP and Pacifico, which will help us reduce our operating expenses and improve our efficiency.
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4
· Investment Banking and Wealth Management. The investment banking and wealth management line of business continues<br>to consolidate its position as the best financial advisory service in Peru, Chile and Colombia by strengthening the regional offering<br>of asset management and wealth management services to provide clients with a complete vision of all of their assets while increasing<br>the market share in Colombia and Chile. In 2019 we acquired Ultraserfinco, which will increase our presence in Colombia.

Recent Developments

Declaration of dividends

At a meeting held on February 27, 2020, our Board of Directors approved the distribution of a cash dividend of S/2,831,469,510.00, for a total of 94,382,317 outstanding shares, which is equivalent to S/30.00 per share. The cash dividend was paid on May 8, 2020, without withholding tax at source, to shareholders of record on April 13, 2020.

The dividend was paid in U.S. dollars using the weighted exchange rate reported by the SBS for transactions at the close of business on May 6, 2020 (S/3.4081 per U.S. dollar). As a result, the dividend paid per share was U.S.$8.8026, equivalent to the declared dividend of S/30.00 per share.

Board of Directors

On April 24, 2020, we announced that Dionisio Romero Paoletti, Chairman of the Board of Directors, would not stand for reelection to our Board of Directors. At our Annual General Meeting of Shareholders held on June 5, 2020, the following individuals were re-elected as members of our Board of Directors: Fernando Fort Marie, Patricia Lizarraga Guthertz, Raimundo Morales Dasso and Luis Enrique Romero Belismelis. The following individuals were newly-elected as independent members of our Board of Directors: Mr. Alexandre Gouvea, Ms. Maite Aranzabal Harreguy, Mr. Antonio Abruña Puyol and Mr. Irzio Pinasco Menchelli. The shareholders also decided to increase the number of directors from eight to nine. As per our Bye-laws, after the Annual General Meeting of Shareholders, the new Board of Directors in its first session shall designate the new Chairman and the new composition of committees of the Board of Directors.

Response to COVID-19

We expect Peru’s GDP to experience a contraction due to the current global spread of COVID-19. The measures implemented to contain the COVID-19 contagion, both locally and abroad, have had disruptive effects on economic activity. Since March 15, 2020, President Vizcarra has taken swift and stringent action to control the COVID-19 pandemic through a countrywide lockdown, initially set for 15 days, which has been extended various times, and is currently in place until June 30, 2020. This has impacted several indicators, such as electricity demand and public investment. Our estimates suggest that the economy is operating at 40%-45% of its capacity during the lockdown. A package of measures to mitigate and stimulate the economy have been implemented for an equivalent of approximately 20% of GDP. These measures are designed to provide economic support for households and companies, access to private savings (pension funds, CTS, etc.) for individuals, injections of liquidity into the economy through Government-backed guarantees via the Reactiva Peru program and FAE program, tax alleviation and public spending measures, as well as other economic stimulus measures yet to be announced. For further detail about the COVID-19 risk related to the economy, please refer to “Item 3.D. Risk Factors—(12) Our business and results of operations could continue to be negatively impacted by the COVID-19 outbreak or other public health crises beyond our control” in our 2019 Form 20-F.

At Credicorp, we are managing the impact of COVID-19 by tailoring responses by asset type and client segments. In terms of our investment portfolio, around 90% is comprised of fixed income investments (U.S. Treasuries, global and sovereign bonds, and Peruvian Certificated Deposits), as such, most value changes do not materially impact our results (as such fixed-income investments continue to provide the same level of payments regardless of market value), but do directly affect our equity because of changes in the value of the portfolio. In terms of our loan portfolio, the most highly exposed economic sectors include retail, vehicle, real estate (residential), poultry, airlines, tourism, microfinance, transportation and restaurants. From a client segmentation perspective, we consider Microfinance clients, SME Retail clients and part of our Wholesale clients to be the most exposed.

5

In order to help our clients through these difficult times, Credicorp has offered debt extensions, installment-freezing solutions and cost-free services, as well as zero-interest-rate financings, which, according to IFRS 9, may generate impairments in the short term. As a complementary measure for business clients, we are participating in the “Reactiva Peru” program, where BCP has been awarded a significant share of the amount auctioned.

The drivers that will impact Credicorp’s results throughout 2020 will be the macroeconomic environment, the special interest-free and cost-free solutions offered to clients and a marked decline in business activity during the lockdown, all of which will impact our sources of income. Additionally, the use of IFRS 9 will result in a significantly higher amount of provisions, since we are using judgement and adjusting our approach to determining expected losses in different circumstances, based on reasonable and supportable information. In line with the IFRS 9 methodology, forward looking COVID-19 provisions are estimated based on a macroeconomic perspective. Given that macroeconomic projections continue to worsen significantly, materially higher provisions than those already accounted for could be recorded in the future. Finally, in order to manage expenses, we are taking measures to optimize operating costs and to re-prioritize strategic projects.

In terms of our liquidity and capital management, Credicorp operates through strict risk management standards. For management decisions, Credicorp relies on liquidity coverage ratios of 15, 30 and 60 days, in line with Basel III. In the context of the COVID-19 pandemic, as measured through the first quarter of 2020, Credicorp has maintained its high quality liquid assets. As of the first quarter of 2020, each subsidiary maintains capital levels well above statutory requirements. In addition, Credicorp reduced dividends from all subsidiaries to strengthen the capital base of its operating units. For more detail about liquidity and regulatory capital, please see “Item 5. Operating and Financial Review and Prospects—5.B. Liquidity and Capital Resources” in our 2019 Form 20-F and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

In terms of relationships with clients, Credicorp clients have been able to rely on the strong relationships we have built over several years and have benefited from our digital network. During the lockdown period, in the three months ended March 31, 2020, loans and deposits have increased materially. Wholesale clients increased their short-term funding needs and part of the fresh liquidity obtained by the aforementioned segment has been maintained at the bank as demand deposits.

With respect to retail banking, the first quarter of 2020 has also been an opportunity for our clients to benefit from our digital channels. Yape welcomed more than 500,000 new users from January to April this year. As of April 2020, the monthly amount transacted through this app had grown almost four-fold compared to April 2019. Moreover, our BCP Stand-alone digital channels have registered a material gain in their share of our distribution network due to an uptick in use during lockdown.

As a result of the above and due to the adoption of certain measures listed below, since the adoption of governmental measures to control the COVID-19 pandemic, there has been an increase in our provisions, and as a result our net income for the current period may be adversely impacted.

Some of the measures that Credicorp adopted in order to provide relief and assistance to its customers and the general population, include:

· the donation of S/100 million through BCP Stand-alone and S/10 million through Mibanco to help families in need, with the “Yo<br>me sumo” program;
· the reimbursement by Pacifico of 50% of car premiums in April and May to Individual clients which where up to date in their<br>payments;
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· the donation by Pacifico of S/5 million through life insurance to health services professionals, police and the Peruvian army;
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· the negative effect of Prima AFP’s fee income by the exemption of contributions to the pension fund system in April,<br>and the measures decreed by the government and congress that allow affiliates to withdraw a portion of the pension funds; and
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· an increase in the operating expenses of our lines of business as a result of measures taken to protect the health of employees<br>and clients, and to ensure business continuity.

We are aware of the level of uncertainty we are facing, and as such, the need to adapt our businesses and organization in a changing environment. In this context, we are reviewing our strategic initiatives on a constant basis and adjusting them to each line of business:

Universal banking will focus on:

· engaging with customers to understand their financial needs post COVID-19;
· implementing the “Reactiva Peru” program;
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· adjusting risk management measures and designing medium-term restructuring initiatives;
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· re-starting sales capabilities coupled with dynamic pricing, and accelerating customer digital adoption; and
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· rethinking and implementing the new operating model.
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Microfinance will focus on:

· engaging with customers, assessing new needs and risks and executing refinancing initiatives;
· implementing the FAE program;
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· accelerating the path to the hybrid decision making model, leveraging the use of data and analytics;
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· redefining the new remote operating model; and
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· finalizing the Bancompartir merger by the third quarter of 2020.
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Insurance and pensions will focus on:

· re-starting the Insurance sales force, coupled with digital capabilities;
· adjusting Pacifico’s new operating model;
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· managing the liquidity and profitability of the Pension investment portfolio in the context of expected withdrawals; and
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· actively participating in pension system reform.
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Investment banking and wealth management will focus on:

· developing business opportunities in Wealth Management and Asset Management by offering a diversified portfolio;
· developing the Corporate Finance pipeline;
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· improving efficiency by re-prioritizing operating expenses and investments;
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· defining support functions and technological platforms to improve the customer experience and enable future growth; and
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· finalizing the integration of Ultraserfinco in the first half of 2020.
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Finally, on a consolidated level, Credicorp has launched a project to develop a strategy aimed at integrating ESG more deeply and consistently into business planning and activities. Additionally, to take advantage of the new opportunities, we will accelerate select specific initiatives at Krealo.

Selected Financial Information

The following tables present certain of our consolidated financial and other information derived from (1) our unaudited condensed consolidated interim financial information as of and for the three months ended March 31, 2019 and 2020 presented above, and (2) our audited consolidated financial statements as of and for the years ended December 31, 2017, 2018 and 2019 included in our 2019 Form 20-F filed on May 29, 2020.

Consolidated Income Statement Data

The following table sets forth certain of our statement of our income statement data for each of the periods presented:

For the Years Ended December 31, For the Three Months Ended March 31,
2017 2018 2019 2019 2019 2020 2020
(Soles in thousands) (U.S. dollars in thousands)(1) (Soles in thousands) (U.S. dollars in thousands) (1)
(audited) (audited) (unaudited) (unaudited)
Interest income and expense
Interest<br> and dividend income 11,030,683 11,522,634 12,381,664 3,602,463 3,001,674 3,163,609 920,457
Interest<br> expense (2) (2,959,196 ) (3,033,529 ) (3,290,867 ) (957,482 ) (804,506 ) (784,309 ) (228,196 )
Net interest income 8,071,487 8,489,105 9,090,797 2,644,981 2,197,168 2,379,300 692,261
Gross<br> provision for credit losses on loan portfolio (2,057,478 ) (1,814,898 ) (2,100,091 ) (611,024 ) (453,285 ) (1,388,711 ) (404,047 )
Recoveries<br> of written-off loans 268,313 283,190 254,155 73,947 70,074 47,230 13,742
Provision for credit losses on loan portfolio, net of recoveries (1,789,165 ) (1,531,708 ) (1,845,936 ) (537,077 ) (383,211 ) (1,341,481 ) (390,305 )
Risk-adjusted net interest income 6,282,322 6,957,397 7,244,861 2,107,904 1,813,957 1,037,819 301,956
Non-financial income
Fee<br> income 2,911,408 3,126,857 3,232,781 940,582 782,922 760,329 221,219
Net<br> gain on foreign exchange transactions 650,228 737,954 748,382 217,743 178,423 166,983 48,584
Net<br> gain on sales of securities (3) 731,261 170,575 466,970 135,866 113,545 (120,633 ) (35,098 )
Net<br> gain from associates (3)(4) 29,511 72,254 79,844 23,231 14,786 19,225 5,594
Net<br> gain on derivatives held for trading 103,580 13,262 6,043 1,758 (2,434 ) 35,430 10,308
Net<br> gain from exchange differences 17,394 16,022 19,735 5,742 13,490 (21,240 ) (6,180 )
Other<br> non-financial income 249,197 273,882 344,229 100,154 75,605 117,770 34,265
Total non-financial income 4,692,579 4,410,806 4,897,984 1,425,076 1,176,337 957,864 278,692
Insurance underwriting result
Net<br> earned premiums 1,875,973 2,091,366 2,419,349 703,913 584,209 627,935 182,699
Net<br> claims (1,118,304 ) (1,239,635 ) (1,554,477 ) (452,277 ) (383,817 ) (373,502 ) (108,671 )
Acquisition<br> costs (5) (269,504 ) (380,310 ) (365,848 ) (106,444 ) (91,281 ) (112,507 ) (32,734 )
Total insurance underwriting result 488,165 471,421 499,024 145,192 109,111 141,926 41,294
Total expenses
Salaries<br> and employee benefits (3,071,020 ) (3,219,875 ) (3,411,023 ) (992,442 ) (834,317 ) (891,183 ) (259,291 )
Administrative,<br> general and tax expenses (2,158,823 ) (2,330,044 ) (2,354,630 ) (685,083 ) (538,157 ) (539,644 ) (157,010 )
Depreciation<br> and amortization (6) (419,975 ) (429,122 ) (455,032 ) (132,392 ) (131,325 ) (125,150 ) (36,413 )
Depreciation<br> for right-of-use assets — — (177,307 ) (51,588 ) — (46,598 ) (13,558 ) 
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For the Years Ended December 31, For the Three Months Ended March 31,
2017 2018 2019 2019 2019 2020 2020
(Soles in thousands) (U.S. dollars in thousands)(1) (Soles in thousands) (U.S. dollars in thousands) (1)
(audited) (audited) (unaudited) (unaudited)
assets
Impairment<br> loss on goodwill — (38,189 ) — — — — —
Association<br> in participation (7) (19,757 ) (14,526 ) (22,636 ) 6,586 (2,736 ) (6,430 ) (1,871 )
Other<br> expenses (218,557 ) (215,654 ) (245,833 ) (71,525 ) (47,441 ) (169,630 ) (49,354 )
Total expenses (5,888,132 ) (6,247,410 ) (6,666,461 ) (1,939,616 ) (1,553,976 ) (1,778,635 ) (517,496 )
Profit before income tax 5,574,934 5,592,214 5,975,408 1,738,556 1,545,429 358,974 104,446
Income<br> tax (1,393,286 ) (1,520,909 ) (1,623,077 ) (472,237 ) (422,165 ) (145,799 ) (42,420 )
Net profit 4,181,648 4,071,305 4,352,331 1,266,319 1,123,264 213,175 62,025
Non-controlling<br> interest 89,895 87,440 87,027 25,321 22,397 3,901 1,135
Net profit attributable to Credicorp 4,091,753 3,983,865 4,265,304 1,240,998 1,100,867 209,274 60,890
(1) For<br> the convenience of the reader data as of and for the three months ended March 31, 2020<br> and the year ended December 31, 2019 have been translated from Soles into U.S. dollars<br> at a rate of S/3.437 for U.S.$1.00 (the March 31, 2020 exchange rate as published by<br> the SBS).
--- ---
(2) As<br> of 2019, financing expenses related to lease agreements is included according to the<br> application of IFRS 16.
--- ---
(3) Starting<br> in 2019 the gain from other investments in related companies has been included in the<br> item “Net gain in associates”; which previously was presented in the item<br> “Net gain on securities.”
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(4) Includes<br> gains on other investments, mainly made up of the profit of Banmedica.
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(5) The<br> acquisition costs of Pacifico include net fees and underwriting expenses.
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(6) From<br> the first quarter of 2019, the effect is being incorporated by the application of IFRS<br> 16, which corresponds to a greater depreciation for the asset for right-of-use.”<br> Likewise, the expenses related to the depreciation of improvements in building for rent<br> is being reclassified to the item “Other expenses.”
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(7) From<br> this quarter, the item “Association in participation” was incorporated, which<br> previously was presented in the item “Net gain on securities.”
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9

Consolidated Statement of Financial Position Data

The following table sets forth certain of our consolidated statement of financial position data as of the periods indicated:

As of December 31, As of March 31,
2017 2018 2019 2019 2020 2020
(Soles in thousands) (U.S. dollars in thousands)(1) (Soles in thousands) (U.S. dollars in thousands)(1)
(audited) (audited) (unaudited) (unaudited)
ASSETS
Cash and due from banks(1)
Non-interest<br> bearing 6,019,776 7,435,807 6,177,356 1,797,310 6,787,357 1,974,791
Interest<br> bearing 17,202,211 14,732,709 19,809,406 5,763,575 19,538,429 5,684,733
Total<br> cash and due from banks 23,221,987 22,168,516 25,986,762 7,560,885 26,325,786 7,659,525
Cash<br> collateral, reverse repurchase agreements and securities borrowing(1) 7,480,420 4,082,942 4,288,524 1,247,752 4,424,345 1,287,269
Fair<br> value through profit or loss investments 4,024,737 3,512,445 3,850,762 1,120,385 4,185,638 1,217,817
Fair<br> value through other comprehensive income investments — 25,195,835 26,202,723 7,623,719 28,388,371 8,259,637
Available<br> for sale 24,423,891 — — — — —
Amortized<br> cost investments — 4,154,838 3,477,046 1,011,651 4,242,643 1,234,403
Held-to-maturity 4,413,373 — — — — —
Loans 100,477,775 110,759,390 115,609,679 33,636,799 120,708,515 35,120,313
Current 97,458,552 107,642,312 112,311,888 32,677,302 117,129,011 34,078,851
Internal<br> overdue loans 3,019,223 3,117,078 3,297,791 959,497 3,579,504 1,041,462
Less<br> - allowance for loan losses (4,500,498 ) (4,952,392 ) (5,123,962 ) (1,490,824 ) (5,931,772 ) (1,725,857 )
Loans,<br> net 95,977,277 105,806,998 110,485,717 32,145,975 114,776,743 33,394,455
Financial<br> assets designated at fair value through profit or loss(2) 537,685 521,186 620,544 180,548 559,321 162,735
Accounts<br> receivable from reinsurers and coinsurers 715,695 842,043 791,704 230,347 787,672 229,174
Premiums<br> and other policyholder receivables 656,829 887,273 838,731 244,030 822,669 239,357
Property,<br> plant and equipment, net(3) 1,509,492 1,480,702 1,428,173 415,529 1,397,089 406,485
Right-of-use<br> assets, net — — 839,086 244,133 805,997 234,506
Due<br> from customers on acceptances 532,034 967,968 535,222 155,724 555,598 161,652
Investments<br> in associates(4) 708,873 582,132 628,822 182,957 618,310 179,898
Intangible<br> assets and goodwill, net 1,978,865 2,055,702 2,552,274 742,588 2,424,404 705,384
Other<br> assets(5) 4,291,125 5,004,621 5,350,601 1,556,765 7,507,302 2,184,260
Total<br> Assets 170,472,283 177,263,201 187,876,691 54,662,988 197,821,889 57,556,558
LIABILITIES AND EQUITY
Deposits and obligations
Non-interest<br> bearing 29,382,909 32,249,606 33,830,166 9,842,935 38,482,377 11,196,502
Interest<br> bearing 67,787,502 72,301,704 78,175,219 22,745,190 81,081,168 23,590,680
Total<br> deposits and obligations 97,170,411 104,551,310 112,005,385 32,588,125 119,563,545 34,787,182
Payables<br> from repurchase agreements and securities lending 13,415,843 9,415,357 7,678,016 2,233,930 8,254,726 2,401,724
BCRP<br> instruments 9,467,943 5,226,870 4,381,011 1,274,661 5,346,373 1,555,535
Repurchase<br> agreements with third parties 2,360,763 2,638,231 1,820,911 529,797 1,935,879 563,247
Repurchase<br> agreements with customers 1,587,137 1,550,256 1,476,094 429,472 972,474 282,943
Due<br> to banks and correspondents 7,996,889 8,448,140 8,841,732 2,572,514 9,854,630 2,867,219 
10
As of December 31, As of March 31,
2017 2018 2019 2019 2020 2020
(Soles in thousands) (U.S. dollars in thousands)(1) (Soles in thousands) (U.S. dollars in thousands)(1)
(audited) (audited) (unaudited) (unaudited)
Bonds<br> and notes issued 16,242,257 15,457,540 14,946,363 4,348,665 15,178,148 4,416,104
Banker’s<br> acceptances outstanding 532,034 967,968 535,222 155,724 555,598 161,652
Lease<br> Liabilities — — 847,504 246,582 838,248 243,889
Reserves<br> for property and casualty claims 1,180,852 1,366,669 1,576,228 458,606 1,637,791 476,518
Reserve<br> for unearned premiums 6,262,908 7,086,002 8,374,005 2,436,429 8,338,154 2,425,998
Accounts<br> payable to reinsurers 235,185 291,693 216,734 63,059 198,473 57,746
Financial<br> liabilities at fair value through profit or loss(6) 168,089 362,310 493,700 143,643 533,146 155,120
Other<br> liabilities 5,014,112 5,050,136 5,615,492 1,633,835 9,146,619 2,661,222
Total<br> Liabilities 148,218,580 152,997,125 161,130,381 46,881,112 174,099,078 50,654,372
Net<br> equity 21,756,567 23,839,243 26,237,960 7,633,971 23,205,639 6,751,713
Capital<br> stock 1,318,993 1,318,993 1,318,993 383,763 1,318,993 383,763
Treasury<br> stock (208,937 ) (207,994 ) (207,839 ) (60,471 ) (209,309 ) (60,899 )
Capital<br> surplus 271,948 246,194 226,037 65,766 165,188 48,062
Reserves 14,647,709 17,598,556 19,437,645 5,655,410 21,360,272 6,214,801
Unrealized<br> gains and losses 1,455,594 708,453 1,088,189 316,610 359,565 104,616
Retained<br> earnings 4,271,260 4,175,041 4,374,935 1,272,894 210,930 61,370
Non-controlling<br> interest 497,136 426,833 508,350 147,905 517,172 150,472
Total<br> Net Equity 22,253,703 24,266,076 26,746,310 7,781,877 23,722,811 6,902,185
Total<br> liabilities and equity 170,472,283 177,263,201 187,876,691 54,662,988 197,821,889 57,556,558
Off-balance<br> sheet 65,840,952 121,222,849 125,344,301 36,469,101 131,725,399 38,325,691
Total<br> performance bonds, stand-by and L/Cs. 19,369,559 20,774,271 21,081,035 6,133,557 20,426,402 5,943,090
Undrawn<br> credit lines, advised but not committed 23,553,406 74,234,033 75,613,805 21,999,943 79,703,253 23,189,774
Total<br> derivatives (notional) and others 22,917,987 26,214,545 28,649,461 8,335,601 31,595,744 9,192,826
(1) For the convenience of the reader<br> data as of and for the three months ended March 31, 2020 and the year ended December<br> 31, 2019 have been translated from Soles into U.S. dollars at a rate of S/3.437 for U.S.$1.00<br> (the March 31, 2020 exchange rate as published by the SBS).
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(2) The amounts differ from those previously<br> reported in 2018 period, due to the reclassification to the item “Cash collateral,<br> reverse repurchase agreements and securities borrowing” mainly for the cash collateral<br> in dollars delivered to the BCRP, previously presented in the item “Cash and due<br> from banks.”
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(3) In the 2019 period, this item was<br> opened in the statement of financial position; previously presented under the item “Investments<br> at fair value through profit or loss.”
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(4) The amounts differ from those previously<br> reported in 2018 period, due to the reclassification of the expenses on improvements<br> in building for rent, previously presented in the item “Other assets.” Likewise,<br> in 2019, the asset for the right to use the lease contracts was incorporated, in application<br> of IFRS 16.
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(5) Includes investments in associates,<br> mainly Banmedica and Visanet, among others.
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(6) Includes mainly accounts receivables<br> from brokerage and others.
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(7) In the 2019 period, this item was<br> opened in the statement of financial position; previously presented in the item “Other<br> liabilities.”
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11

Other Financial Data

The following selected financial and operating data as of and for each of the three months ended March 31, 2020 and 2019 and as of and for the years ended December 31, 2019, 2018 and 2017 have been derived from the financial statements. This information should be read in conjunction with the financial statements and the notes thereto.

As<br> of and for the Years Ended <br><br>December 31, As<br> of and for the Three Months Ended<br> March 31,
2017 2018 2019 2019 2020 2020<br> (U.S.<br><br> dollars in<br><br> thousands, where<br><br> applicable)
(Soles in thousands,<br> except as otherwise indicated)
Net interest income 8,071,487 8,489,105 9,090,797 2,197,168 2,379,300 692,261
Provision for credit losses on<br><br> <br>loan portfolio, net of<br><br> <br>recoveries (1,789,165 ) (1,531,708 ) (1,845,936 ) (383,211 ) (1,341,481 ) (390,306 )
Risk-adjusted<br>net interest<br><br> <br>income 6,282,322 6,957,397 7,244,861 1,813,957 1,037,819 301,955
Non-financial income 4,692,579 4,410,806 4,897,984 1,176,337 957,864 278,692
Insurance underwriting result 488,165 471,421 499,024 109,111 141,926 41,294
Total expenses (5,888,132 ) (6,247,410 ) (6,666,461 ) (1,553,976 ) (1,778,635 ) (517,496 )
Profit before income tax 5,574,934 5,592,214 5,975,408 1,545,429 358,974 104,444
Income taxes (1,393,286 ) (1,520,909 ) (1,623,077 ) (422,165 ) (145,799 ) (42,420 )
Net profit 4,181,648 4,071,305 4,352,331 1,123,264 213,175 62,024
Non-controlling interest 89,895 87,440 87,027 22,397 3,901 1,135
Net profit attributable to<br><br> <br>Credicorp 4,091,753 3,983,865 4,265,304 1,100,867 209,274 60,889
Net income / share (S/) 51 50 54 14 3 1
Loans 100,477,775 110,759,390 115,609,679 108,350,384 120,708,515 35,120,313
Deposits and obligations 97,170,411 104,551,310 112,005,385 103,727,257 119,563,545 34,787,182
Net equity 21,756,567 23,839,243 26,237,960 23,692,091 23,205,639 6,751,713
Profitability
Net interest margin(1) 5.32 % 5.28 % 5.40 % 5.39 % 5.35 %
Risk-adjusted Net interest<br><br> <br>margin(1) 4.14 % 4.33 % 4.30 % 4.45 % 2.33 %
Funding cost(1) 2.31 % 2.25 % 2.36 % 2.38 % 2.13 %
Return on average equity -<br><br> <br>ROAE(1) 19.8 % 17.5 % 17.0 % 18.5 % 3.4 %
Return on average total assets –<br><br> <br>ROAA(1) 2.50 % 2.29 % 2.34 % 2.50 % 0.40 %
Loan portfolio quality
IOL ratio(2) 3.00 % 2.81 % 2.85 % 2.91 % 2.97 %
IOL over 90 days ratio 2.26 % 2.13 % 2.15 % 2.09 % 1.86 %
NPL ratio(3) 3.92 % 3.97 % 3.88 % 4.09 % 3.90 %
Cost of risk(1)(4) 1.78 % 1.38 % 1.60 % 1.41 % 4.45 %
Coverage ratio of IOLs 149.1 % 158.9 % 155.4 % 154.2 % 165.7 %
Coverage ratio of IOL 90-days 197.9 % 210.4 % 204.5 % 214.8 % 264.8 %
Coverage ratio of NPLs(5) 114.4 % 112.7 % 114.4 % 109.7 % 126.1 %
Operating efficiency
Efficiency ratio(6) 43.5 % 43.8 % 43.5 % 42.4 % 43.4 %
Operating expenses / Total<br><br> <br>average assets(7) 3.63 % 3.67 % 3.72 % 3.60 % 3.57 %
Insurance ratios
Combined ratio of P&C(8)(9) 97.1 % 100.3 % 98.4 % 104.4 % 94.4 %
Loss ratio(9)(10) 58.8 % 59.0 % 64.0 % 65.6 % 59.9 %
Capital adequacy(11)
BIS ratio(12) 15.05 % 14.17 % 14.47 % 15.49 % 13.52 %
Tier I ratio(13) 10.84 % 10.28 % 11.07 % 11.73 % 10.33 %
Common equity tier I ratio(14) 11.83 % 11.55 % 12.35 % 11.39 % 11.89 %
Share Information
Outstanding Shares 94,382 94,382 94,382 94,382 94,382
Treasury Shares(15) 14,902 14,883 14,872 14,876 14,977
Floating Shares 79,480 79,499 79,510 79,506 79,405
(1) Annualized.
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(2) Internal overdue loans: includes overdue loans and loans under legal collection, according to our internal policy for overdue<br>loans. Internal Overdue ratio: Internal overdue loans / Total loans.
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(3) Non-performing loans (NPL): Internal overdue loans plus Refinanced loans. NPL ratio: NPL / Total loans.
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(4) Cost of risk: Annualized Provision for credit losses on loan portfolio, net of recoveries / Total loans.
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(5) Coverage ratio of Non-performing loans: Allowance for loans losses divided by Overdue loans and loans under legal collection,<br>according to our internal policy for overdue loans plus refinanced loans.
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(6) Efficiency ratio is equal to (Salaries and employee benefits plus Administrative expenses plus Depreciation and amortization<br>plus Association in participation plus Acquisition costs) / (Net interest income plus Fee Income plus Net gain on foreign exchange<br>transactions plus Net Gain From associates plus Net gain on derivatives held for trading plus Result on exchange differences plus<br>Net Premiums Earned).
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(7) Operating expenses / Average of Total Assets. Average is calculated with period-beginning and period-ending balances. “
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(8) Combined ratio is equal to (Net claims / Net earned premiums) plus (Acquisition costs plus Operating expenses) / Net earned<br>premiums. Does not include the life insurance business.
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(9) Considers amounts for Grupo Pacifico before eliminations for consolidation with Credicorp.
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(10) Net claims / Net earned premiums.
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(11) All Capital ratios are for BCP Stand-alone and based on generally accepted accounting principles in Peru (“Peruvian GAAP”).
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(12) Regulatory Capital / Risk-Weighted Assets (the legal minimum has been 10% since July 2011).
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(13) Tier I is equal to Capital plus Legal and other capital reserves plus Accumulated earnings with capitalization agreement plus<br>(0.5 x Unrealized profit and net income in subsidiaries) less Goodwill less (0.5 x Investment in subsidiaries) plus Perpetual subordinated<br>debt (maximum amount that can be included is 17.65% of Capital plus Reserves plus Accumulated earnings with capitalization agreement<br>plus Unrealized profit and net income in subsidiaries less Goodwill).
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(14) Common Equity Tier I is equal to Capital plus Reserves less 100% of applicable deductions (investment in subsidiaries, goodwill,<br>intangibles and net deferred taxes that rely on future profitability) plus retained earnings plus unrealized gains.<br><br>Adjusted Risk-Weighted Assets is equal to Risk-Weighted Assets less (RWA Intangible assets, excluding goodwill, plus RWA Deferred<br>tax assets generated as a result of temporary differences in income tax, in excess of 10% of CET1, plus RWA Deferred tax assets<br>generated as a result of past losses).”
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(15) Shares held by ASHC.
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12

Data Based on Credicorp Stand-Alone FinancialStatements

The following table sets forth certain statement of financial position data on a stand-alone basis for Credicorp as of the dates indicated:

As<br> of December 31, As<br> of March 31,
2017 2018 2019 2019 2020 2020
(Soles<br> in thousands) (U.S.<br> dollars in<br><br> thousands)(1) (Soles<br> in thousands) (U.S.<br><br> dollars in<br><br> thousands)(1)
(audited) (audited) (unaudited) (unaudited)
ASSETS
Current Assets
Cash and cash<br> equivalent 48,205 818,986 139,900 40,704 117,596 51,672
Fair<br> value through profit or loss<br><br> <br>investments 2,051 1,943 — — — —
Fair<br> value through other<br><br> <br>comprehensive<br> income<br><br> <br>investments 586,308 580,158 521,939 151,859 474,425 138,035
Investments<br> in subsidiaries and<br><br> <br>associates 23,525,406 26,279,817 29,806,937 8,672,370 29,733,748 8,651,076
Other<br> assets 9,899 1,665 970 282 2,044 595
Total<br> Assets 24,171,869 27,682,569 30,469,746 8,865,215 30,387,813 8,841,377
LIABILITIES AND EQUITY
Deposits and obligations
Other<br> liabilities (2) 76,544 137,290 207,597 60,401 3,073,999 894,384
Total Liabilities 76,544 137,290 207,597 60,401 3,073,999 894,384
Capital stock 1,318,993 1,318,993 1,318,993 383,763 1,318,993 383,763
Treasury stock (138 ) (26 ) (62 ) (18 ) — —
Capital surplus 389,977 390,581 387,429 112,723 384,542 111,883
Reserves 14,337,890 17,271,506 19,093,038 5,555,228 21,070,409 6,130,465
Unrealized gains and losses 1,246,921 496,339 866,271 252,043 138,564 40,315
Retained earnings 6,801,682 8,067,866 8,596,199 2,501,076 4,401,306 1,280,566
Total<br> Equity 24,095,325 27,545,279 30,262,149 8,804,815 27,313,814 7,946,993
Total<br> liabilities and equity 24,171,869 27,682,569 30,469,746 8,865,215 30,387,813 8,841,377
(1) For the convenience of the reader data as of and for the three months ended March 31, 2020 and the year ended December 31,<br>2019 have been translated from Soles into U.S. dollars at a rate of S/3.437 for U.S.$1.00 (the March 31, 2020 exchange rate as<br>published by the SBS).
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(2) Includes provision for income tax on dividends, dividends pending, deferred income tax, among others.
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13

Management’s Discussion and Analysis of Financial Condition

and Results of Operations

The following discussion and analysisof our financial condition and results of operations should be read in conjunction with our audited consolidated financial statementsand our unaudited condensed consolidated interim financial information and other information presented herein. This discussionand analysis should also be read in conjunction with “Item 5. Operating and Financial Review and Prospects” in our2019 Form 20-F filed on May 29, 2020.

The following discussion and analysiscontains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those discussedin the forward-looking statements as a result of various factors, including those set forth below under “Forward-LookingStatements.”

Introduction

The following discussion should be read in conjunction with the interim consolidated financial statements as of March 31, 2020 and for the three months ended March 31, 2019 and 2020 which were prepared in accordance with IFRS, in each case including the notes thereto.

Our financial statements are consolidated with the financial statements of our subsidiaries, which are companies controlled by us. Control is achieved when Credicorp is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. See note 3(b) to the annual consolidated financial statements included in our 2019 Form 20-F filed on May 29, 2020.

Critical Accounting Policies

The preparation of our consolidated financial statements requires our management to use judgments, estimates and assumptions that affect the actual presented amounts. Accordingly, we use the best and more updated information available in the market for the preparation of our financial statements. However, due to the uncertainties involved in this type of assessment, materialized assumptions and estimates may differ from expected assumptions and estimates, generating results that require substantial adjustments in the book value of assets and liabilities in future years. See “Item 5. Operating and Financial Review and Prospects—5.A Operating Results—(1) Critical Accounting Policies” of our 2019 Form 20-F and our unaudited condensed consolidated interim financial information as of and for the three months ended March 31, 2020 for a description of the main accounting judgments, estimates and assumptions used in the preparations of our financial statements, which, if changed, may significantly change our disclosed results of operations and shareholders’ equity.

Subsequent Events

Declaration of dividends

At a meeting held on February 27, 2020, our Board of Directors approved the distribution of a cash dividend of S/2,831,469,510.00, for a total of 94,382,317 outstanding shares, which is equivalent to S/30.00 per share. The cash dividend was paid on May 8, 2020, without withholding tax at source, to shareholders of record on April 13, 2020.

The dividend was paid in U.S. dollars using the weighted exchange rate reported by the SBS for transactions at the close of business on May 6, 2020 (S/3.4081 per U.S. dollar). As a result, the dividend paid per share was U.S$8.8026, equivalent to the declared dividend of S/30.00 per share.

Consolidated Results of Operations for the Three Months Ended March 31, 2019 Compared to the Three Months Ended March 31, 2020

The following discussion of our results of operations is based on the interim financial information derived from our unaudited condensed consolidated interim financial information. In the following discussion, references to increases or decreases in any three months ended are made by comparison with the corresponding prior three months ended, as applicable, except as the context otherwise indicates. The discussion in this section is based on a comparison of the three months ended March 31, 2019 with the three months ended March 31, 2020.

14

The following table sets forth, for the three months ended March 31, 2019 and the three months ended March 31, 2020, the principal components of our net profit:

Three Months Ended <br><br>March 31,
2019 2020
(in thousands of Soles)
Interest and similar income 3,001,674 3,163,609
Interest and similar expenses (804,506 ) (784,309 )
Net interest, similar income and expenses 2,197,168 2,379,300
Provision for credit losses on loan portfolio (453,285 ) (1,388,711 )
Recoveries of written-off loans 70,074 47,230
Provision for credit losses on loan portfolio, net of recoveries (383,211 ) (1,341,481 )
Net interest, similar income and expenses, after provision for credit losses on<br><br> <br>loan portfolio 1,813,957 1,037,819
Total other income 1,176,337 957,864
Total insurance underwriting results 109,111 141,926
Total other expenses (1,553,976 ) (1,778,635 )
Profit before income tax 1,545,429 358,974
Income tax (422,165 ) (145,799 )
Net profit 1,123,264 213,175
Net profit attributable to:
Credicorp’s equity holders 1,100,867 209,274
Non-controlling interest 22,397 3,901

In the three months ended March 31, 2020, the net profit attributable to our equity holders decreased 80.99% compared to the three months ended March 31, 2019. This result was primarily due to (i) higher provision for credit losses on our loan portfolio, given that we expect there will be an economic recession resulting in an increase in the probability of default in certain sectors of clients, in line with IFRS 9; (ii) lower total other income, as a result of a decrease in net gain on securities (attributable to bond issuances at Atlantic Security Bank and BCP Stand-alone in the first half of the three months ended March 31, 2020); and (iii) lower commission and fees. This was partially offset by higher net interest income (an increase of 8.3% compared to the three months ended March 31, 2019) in line with growth in total loans led by retail banking, and by the mortgage and consumer segments in particular.

15

Net interest, Similar Income and Expenses

The following table sets forth the components of net interest, similar income and expenses:

Three Months Ended<br><br> March 31,
2019 2020(1)
(in thousands of Soles )
Interest and similar income:
Interest on loans 2,562,286 2,770,351
Interest on investments at fair value through other comprehensive income 269,603 261,189
Interest on available-for-sale investments — —
Interest on investments at amortized cost 51,531 50,848
Interest on held-to-maturity investments — —
Interest on due from banks 86,699 49,113
Interest on investments at fair value through profit or loss 11,654 10,697
Dividends received 9,667 7,879
Other interest and similar income 10,234 13,532
Total interest income 3,001,674 3,163,609
Interest and similar expenses:
Interest on deposits and obligations (353,834 ) (364,107 )
Interest on bonds and notes issued (226,498 ) (198,114 )
Interest on due to banks and correspondents (145,303 ) (137,126 )
Deposit Insurance Fund (36,857 ) (40,030 )
Interest on lease liabilities (5,985 ) (7,803 )
Other interest expenses and similar expense (36,029 ) (37,129 )
Total interest expense (804,506 ) (784,309 )
Net interest income 2,197,168 2,379,300
(1) Bancompartir is consolidated within the Microfinance line of business as of the three months ended March 31, 2020.
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Net interest income increased 8.29% in the three months ended March 31, 2020 compared to the three months ended March 31, 2019.

Interest and similar income increased 5.39% in the three months ended March 31, 2020 compared to the three months ended March 31, 2019. The increase in the three months ended March 31, 2020 was mainly due to an increase of 8.1% in income for interest on loans. This expansion was attributable to (i) volume, due to an acceleration in the growth of average daily balances in all segments with the exception of Atlantic Security Bank, (ii) the mix by segment, given that retail banking represented 40.8% of total loans compared to 39.8% in the three months ended March 31, 2019, and (iii) the currency mix, given that growth in average daily balances was primarily attributable to loan expansion of +10.7% in the LC portfolio.

Interest and similar expense decreased in the three months ended March 31, 2020 by 2.5% to S/784 million compared to an interest expense in the three months ended March 31, 2019 of S/804 million. This was driven by (i) a decrease of 12.5% in interest on bonds and notes issued, as a result of the debt restructuring strategy at BCP Stand-alone, which included liability management transactions in relation to two corporate bonds and the redemption of perpetual subordinated debt; and (ii) a decrease of 5.6% on due to banks and correspondents after rates fell in the international market. This was partially offset by an increase in interest on deposits and obligations, in line with the growth in total deposits mainly driven by an increase in the volume of time deposits.

Provision for Loan Losses

The following tables set forth the changes in our allowance for loan losses:

Three Months Ended <br><br>March 31,
2019 2020(1)
(in thousands of Soles)
Provision for credit losses on loan portfolio (453,285 ) (1,388,711 )
Recoveries of written-off loans 70,074 47,230
Provision for credit losses on loan portfolio, net of recoveries (383,211 ) (1,341,481 )
(1) Bancompartir is consolidated within the Microfinance line of business as of the three months ended March 31, 2020.
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Provision for credit losses on our loan portfolio, net of recoveries increased by 250.06% in the three months ended March 31, 2020 to S/1,341 million, compared to S/383 million in the three months ended March 31, 2019. The increase reflects the higher provisions in line with expectations of a recession in Peru and the region, and with the reduction in the debt service capacity of some clients due to COVID-19. This was mainly due to the increase of provisions at BCP Stand-alone, primarily attributable to deterioration in the SME-Pyme segment, and in non-revolving loans in particular, and to a lesser extent, to the deterioration of the credit card segment, which reflected excess indebtedness in the financial system.

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Total recoveries of written-off loans reached S/70 million in the three months ended March 31, 2020 and S/47 million in the three months ended March 31, 2019, constituting a 32.6% decrease in the three months ended March 31, 2020.

Non-Interest Income

The following table reflects the components of our non-interest income:

Three Months Ended March 31,
2019 2020(1)
(in thousands of Soles)
Commissions and fees 782,922 760,329
Net gain on foreign exchange transactions 178,423 166,983
Net gains on securities 128,331 (101,408 )
Net gains on derivatives held for trading (2,434 ) 35,430
Net gain from exchange difference 13,490 (21,240 )
Other 75,605 117,770
Total non-interest income 1,176,337 957,864
(1) Bancompartir is consolidated within the Microfinance line of business as of the three months ended March 31, 2020.
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The non-interest income, without including net premiums earned, decreased by 18.6% to S/958 million in the three months ended March 31, 2020 compared to S/1,176 million in the three months ended March 31, 2019. The decrease in 2020 was primarily due to the decrease of net gains on securities and net gain from exchange difference.

Net gains on securities decreased 179.0% to a loss of S/101 million in the three months ended March 31, 2020 compared to the gain of S/128 million in the three months ended March 31, 2019. The decrease was primarily attributable to (i) a reduction in the profitability of the legal reserves at Prima AFP, and (ii) losses on proprietary investment portfolios at Credicorp Capital, which registered negative results for mark-to-market adjustments in the trading portfolio. Losses were also attributable to an extraordinary result in the three months ended March 31, 2019, which was generated by the favorable evolution of the financial markets in 2019 experienced through Credicorp Capital, Prima AFP and Atlantic Security Bank, which was in contrast to the market volatility and a decrease in the value of assets in the three months ended March 31, 2020 due to the impact of the COVID-19 pandemic.

Net gain from exchange difference decreased by 257.4% due to the loss reported for the exchange differences relative to IFRS 16, mainly in the month of January at BCP Stand-alone, and to a lesser extent, at Mibanco.

Commissions and fees decreased by 2.9% to S/760 million in the three months ended March 31, 2020 compared to S/783 million in the three months ended March 31, 2019. The decrease in commissions and fees from the three months ended March 31, 2019 to the three months ended March 31, 2020 was primarily due to (i) the facilities and fees exemptions extended to our clients in connection with the COVID-19 pandemic, (ii) the decrease in consumption and service volumes due to the compulsory quarantine imposed by the Peruvian government in mid-March, and (iii) the decrease in transactional activity at BCP Stand-alone and Mibanco.

Insurance Premiums and Claims on Insurance Activities

The following table reflects the earned premiums and claims incurred in connection with our insurance activities:

Three Months Ended March 31,
2019 2020
(in thousands of Soles)
Gross written premiums 892,538 901,553
Technical reserve adjustment (218,452 ) (21,921 )
Gross written premiums after adjustments 674,086 879,632
Premiums ceded to reinsurers, net (137,119 ) (153,454 ) 
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Three Months Ended March 31,
2019 2020
(in thousands of Soles)
Results of assets designated at fair value through profit or loss 47,242 (98,243 )
Net premiums earned 584,209 627,935
Net claims incurred for life insurance (219,390 ) (236,516 )
Net claims incurred for general insurance (83,263 ) (60,891 )
Net claims incurred for health insurance (81,164 ) (76,095 )
Acquisition costs (91,281 ) (112,507 )
Total net premiums and claims 109,111 141,926

Operating Expenses

The following table reflects the components of our operating expenses:

Three Months Ended March 31,
2019 2020(1)
(in thousands of Soles)
Salaries and employee benefits (834,317 ) (891,183 )
Administrative expenses (538,157 ) (539,644 )
Depreciation and amortization (105,643 ) (125,150 )
Depreciation for right-of-use assets (25,682 ) (46,598 )
Impairment loss on goodwill — —
Other (50,177 ) (176,060 )
Total operating expenses (1,553,976 ) (1,778,635 )
(1) Bancompartir is consolidated within the Microfinance line of business as of December 2019.
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Salaries and employee benefits increased by 6.8%, mainly due to the Microfinance business and, to a lesser extent, at BCP Stand-alone. In the case of Microfinance, the increase was attributable to (i) Mibanco, due to an increase in headcount in 2019, which was primarily to bolster commercial teams to build the capacities needed to ensure growth down the line at Mibanco, and (ii) Bancompartir, which is included in Credicorp’s balance sheet since December 2019. At BCP Stand-alone, growth was attributable to hiring of individuals with specialized profiles in 2019.

Depreciation and amortization increased by 18.5%, due to the higher amortization expenses for software, in line with the investment in new software to support our Yape and credit card business.

Exchange Difference

The exchange difference reflects exposure to appreciation of net monetary positions in foreign currencies, principally U.S. dollars in the first three months ended March 31, 2020 and 2019, and Soles in previous years. We recorded a loss exchange difference of S/21.2 million as of March 31, 2020. This loss was due to the implementation of IFRS 16, mainly in the month of January at BCP Stand-alone, and to a lesser extent, at Mibanco. We recorded a gain exchange difference of S/13.5 million as of March 31, 2019.

We manage foreign exchange risk by monitoring and controlling the position values due to changes in exchange rates. We measure our performance in Soles (since 2014, when we changed our functional currency from U.S. dollars), so if the net foreign exchange position (e.g. U.S. dollar) is an asset, any depreciation of Soles with respect to the relevant foreign currency would positively affect our consolidated statements of financial position. The current position in a foreign currency comprises exchange rate-linked assets and liabilities in that currency. An institution’s open position in individual currencies comprises assets, liabilities and off-balance sheet items denominated in the respective foreign currency for which the institution itself bears the risk; any appreciation/depreciation of the foreign exchange would affect the consolidated statements of income.

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As of March 31, 2020 and December 31, 2019, Credicorp’s net foreign exchange balance is the sum of its positive open non-Soles positions (net long position) less the sum of its negative open non-Soles positions (net short position). As of December 31, 2013, Credicorp’s net foreign exchange balance was the sum of its positive open non-U.S. dollar positions (net long position) less the sum of its negative open non-U.S. dollar positions (net short position). Any depreciation/appreciation of the foreign exchange position would affect the consolidated statements of income. A currency mismatch would leave Credicorp’s consolidated statements of financial position vulnerable to a fluctuation of the foreign currency (exchange rate shock).

Income Taxes

We are not subject to income taxes, taxes on capital gains, capital transfers or equity or estate duty under Bermuda law. However, some of our subsidiaries are subject to income tax and taxes on dividends paid to us, depending on the legislation of the jurisdictions in which they generate income.

Our Peruvian subsidiaries, including BCP Stand-alone, are subject to corporate taxation on income under Peruvian tax law. For 2019 and in 2020 to the date hereof, the Peruvian statutory income tax rate was 29.5 % on taxable profit after calculating the workers’ profit sharing, which is determined using a 5.0% rate.

An additional 5.0% withholding tax is applied on to dividends, which we register as income tax based on the liquid amount received from BCP Stand-alone, Grupo Credito and Grupo Pacifico. Through Legislative Decree No. 1261, published on December 11, 2016, the withholding tax on dividends for the profits generated was increased according to the following terms:

Rate for the Profits Generated in the Years Percentage(%)
Until 2014 4.1
2015 and 2016 6.8
From 2017 onward 5.0

Peruvian tax legislation is applicable to legal entities established in Peru, and on an individual (not consolidated) basis. Our non-Peruvian subsidiaries are not subject to taxation in Peru and their assets are not included in the calculation of the Peruvian extraordinary tax on net assets.

The Bolivian statutory income tax rate is 25%. Financial entities have an additional rate if the ROE exceeds 6%. In that case, an additional 25% must be considered, with which the rate becomes 50%.

In the case of Chile, there are two tax regimes: the partially integrated regime and the attributed regime. Credicorp Capital Holding Chile S.A. and all its subsidiaries are under partially integrated regime, under which the tax rate for domiciled legal entities was 27% for 2019 and for 2020 to the date hereof. On the other hand, individuals or legal entities not domiciled in Chile are subject to a tax called “additional income tax” whose rates are between 4% and 35%, depending on the nature of the income. Additionally, Chile has signed treaties to avoid double taxation with different countries so certain income could be released from withholding tax or for the use of reduced rates.

In the case of Colombia, pursuant to Financing Law No. 1943, dated December 28, 2018, the income tax rate for 2019 was 33% (without a surcharge) for all entities in the country whose taxable income was less than U.S.$800.0 million of Colombian pesos. From 2020, pursuant to Law No. 2010 dated December 27, 2019 the tax rates are as follows:

Taxable Year Rate (%) Additional Rate (Surcharge) (%) (1)
2020 32 4
2021 31 3
2022 30 3
As of 2023 30 —
(1) The additional rate (surcharge) will be applicable only to financial entities that, in the corresponding year, have a taxable<br>rate equal to or greater than 120,000 units of tax value (Unidad de Valor Tributario) which for the year of 2020 amounts<br>to a total of S/3.9 million. Accordingly, Credicorp Capital Colombia, Credicorp Capital Fiduciaria and Banco Compartir must pay<br>income tax taking into account based on the aforementioned.
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ASHC and its subsidiaries are not subject to taxes in the Cayman Islands or Panama. For 2019 and 2020 to the date hereof, no taxable income was generated from their operations in the United States of America.

Tax expenses paid by the subsidiaries decreased to S/145.8 million in the three months ended March 31, 2020 from S/422.2 million in the three months ended March 31, 2019. Income tax decrease in these periods reflects decreases in our taxable income. Since 1994, we have paid the Peruvian income tax at the statutory rate.

Results of Operations by Line of Business for the Three Months Ended March 31, 2019 Compared to the Three Months Ended March 31, 2020

The following discussion of our results of operations is based on the interim financial information derived from our unaudited condensed consolidated interim financial information. In the following discussion, references to increases or decreases in any three months ended are made by comparison with the corresponding prior three months ended, as applicable, except as the context otherwise indicates. The discussion in this section is based on a comparison of the three months ended March 31, 2019 with the three months ended March 31, 2020 for each of our lines of business.

Universal Banking

Assets Structure

BCP Stand-alone

At the end of the three months ended March 31, 2020, BCP Stand-alone’s total assets amounted to S/148.7 billion, which represents a 11.7% increase compared to the three months ended March 31, 2019 (S/133.2 billion in the three months ended March 31, 2019). The increase in total assets in the three months ended March 31, 2020 was mainly due to the increase of our loan portfolio, which grew by 12% in the three months ended March 31, 2020 (7.8% in the three months ended March 31, 2019).

As of March 31, 2020, BCP Stand-alone’s total loans, measured in average daily balances, expanded 8.0% year-over-year. This increase was primarily due to:

· The increase in retail banking loans, led by mortgages, which increased by 12.0% in average daily balances (due to market dynamism<br>and Mivivienda loans, as well as to the consumer, SME-Pyme and credit cards segments, which increased by 17.5%, 9.7% and 8.4%,<br>respectively) as compared to the three months ended March 31, 2019.
· The increase of 5.3% and 5.0% in average daily balances in Corporate Banking and middle-market loans, respectively, mainly<br>in short-term financing, during the lockdown period in the second half of March.
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BCP Bolivia

At the end of the three months ended March 31, 2020, BCP Bolivia’s total assets amounted to S/11.4 billion, which represents a 14.9% increase compared to the three months ended March 31, 2019 of S/9.9 billion. The increase in total assets in the three months ended March 31, 2020 was mainly explained by the increase in cash due from banks and by a 77.7% and 9.2% increase, respectively, in our loan portfolio in the three months ended March 31, 2020 (as compared to a decrease of 4.7% and an increase of 13.5%, respectively, in the three months ended March 31, 2019).

Portfolio Quality

BCP Stand-alone

The IOL ratio at BCP Stand-alone increased from 2.72% at the end of the three months ended March 31, 2019 to 2.79% at the end of the three months ended March 31, 2020. The ratio in the three months ended March 31, 2020 was higher than the three months ended March 31, 2019 following the deterioration in debt service capacity of a small number of clients in the SME-business segment. The IOL ratio at March 31, 2020 was also higher than the IOL ratio as of the end of the last three fiscal years (2.65% in 2017 and 2018; and 2.69% in 2019). The NPL ratio decreased from 3.98% in the three months ended March 31, 2019 to 3.79% at the end of the three months ended March 31, 2020. The ratio in the three months ended March 31, 2020 was lower than at the end of the three months ended March 31, 2019, as a result of loan growth in all segments, which offset the increase in non-performing loans. This ratio has remained relatively stable during the last three years (3.87% in 2017 and 2018; and 3.80% in 2019).

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BCP Stand-alone’s net provisions for loan losses (expense of the P&L) increased by 303.8%, primarily due to a deterioration in the SME-Pyme segment, and in non-revolving loans in particular, and to a lesser extent, the deterioration of the credit card segment, which reflected over indebtedness in the financial system. This is in line with expectations of a recession in Peru and the region and with the reduction in the debt servicing capacity of some clients due to the COVID-19 pandemic and the associated economic slowdown. BCP and the Peruvian government have taken several measures to offset the deterioration in the situation of clients and the economy respectively. As a result, cost of risk increased significantly from 1.23% in the three months ended March 31, 2019 to 4.44% in the three months ended March 31, 2020, a level which is higher than in the last three years (1.58% for 2017, 1.05% for 2018 and 1.43% for 2019). The increase in net provisions for loan losses resulted in an increase of the NPL coverage ratio from 103.3% in the three months ended March 31, 2019 to 118.1% at the end of the three months ended March 31, 2020, as a result of the higher growth in allowance for loan losses compared to the increase in non-performing loans.

BCP Bolivia

BCP Bolivia’s net provisions for loan losses increased by 147.3% during the three months ended March 31, 2020 due to a change in macroeconomic expectations for Bolivia and in the debt servicing capacity of BCP Bolivia’s clients as a result of the COVID-19 pandemic. Nevertheless, the internal overdue ratio has improved by 27 basis points, from 2.13% in the three months ended March 31, 2019 to 1.86% in the three months ended March 31, 2020, after overdue loans were written off in the same period in 2019.

Funding Structure

BCP Stand-alone

At the end of the three months ended March 31, 2020, BCP Stand-alone’s total funding increased by 13.5% (in comparison to 3.1% in the three months ended March 31, 2019), mainly due to total deposits, which increased by 16.0% during fiscal year the three months ended March 31, 2020.

Due to ongoing growth, total deposits reflected an increase in the share of total funding, which represented 76.9% for the three months ended March 31, 2020 (in comparison to 75.3% for the three months ended March 31, 2019). The increase was mainly due to (i) an increase in demand deposits (an increase of 25.7% year-on-year, due to an increase in the volume of non-interest bearing demand deposits attributable to current accounts held by corporate banking clients), (ii) an increase of 15.7% year-on-year in saving deposits, due to a decrease in consumers’ debit and credit card spending as a result of social isolation measures put in place in response to the COVID-19 pandemic and the results of the campaigns to capture savings accounts, mainly through digital channels, and (iii) a 7.1% increase in time deposits, mainly driven by deposits in foreign currency.

BCP Bolivia

At the end of the three months ended March 31, 2020, BCP Bolivia increased its total funding by 16.2%, in comparison to 9.2% in the three months ended March 31, 2019. This was due to (i) an 11.9% increase in total deposits, and (ii) a 427.1% increase in repurchase agreements.

Financial ratios

BCP Stand-alone’s net earnings contribution to Credicorp totaled S/142,2 million in the three months ended March 31, 2020, which represented a 82.6% decrease with regard to the S/816.0 million reported in the three months ended March 31, 2019. This was mainly driven by a significant increase in provisions for loan losses, which have been set aside in advance, given that we foresee a severe economic downturn and a subsequent material increase in the probability of default in certain sectors of clients, in line with IFRS 9.

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BCP Stand-alone’s ROAE contribution to Credicorp was 3.5% in the three months ended March 31, 2020 (versus 22.5% in the three months ended March 31, 2019). The evolution in the three months ended March 31, 2020 reflects (i) an increase in provisions for loan losses, (ii) a S/100 million non-deductible charge for COVID-19 donations in other expenses, (iii) a decrease in non-financial income, due to realized losses in net gain on securities, and (iv) a decrease in both fee income and net gains on foreign exchange differences and transactions.

Net interest margin (“NIM”) was situated at 4.70% in the three months ended March 31, 2020. This represented a decrease of four basis points from 4.74% for the three months ended March 31, 2019. This decrease was in line with the lower market rates, that mainly affected the wholesale banking segments, which are more sensitive to interest rate movements.

In the three months ended March 31, 2020, the efficiency ratio at BCP Stand-alone increased by 70 basis points, from 38.1% in the three months ended March 31, 2019 to 38.8% for the three months ended March 31, 2020. This increase was due to the lower growth of operating income compared to the increase of operating expenses. The increase in operating expenses was due primarily to an increase in administrative and general expenses, mainly attributable to payments for software programs and marketing expenses, and an increase in expense for salaries and employee benefits, due to an increase in headcount in 2019. The abovementioned was offset by an increase in net interest income, in line with growth in average daily balances.

Microfinance

Assets Structure

The total asset level at Mibanco was situated at S/13.5 billion as of March 31, 2020 (compared to S/13.4 billion as of March 31, 2019). The 1.2% increase in total assets in the three months ended March 31, 2020 reflects the increase in our loan portfolio, which was driven by business expansion. This was offset by a decrease in short-term investments after a strategy was implemented to optimize the structure of the composition of the portfolio.

On March 31, 2020, Mibanco’s loans posted an increase of 5.3% year-over-year (compared to 5.6% in the three months ended March 31, 2019). This increase was primarily attributable to an increase in loans in the small business segment, which increased 9.2% in the three months ended March 31, 2020 (compared to an increase of 8.9% in the three months ended March 31, 2019). The increase offset the decrease in loans in the microbusiness segment, which registered a decrease of 3.4% in the three months ended March 31, 2020 (compared to an increase of 0.7% in the three months ended March 31, 2019). The small business and microbusiness segments represented a lower share of total loans in the three months ended March 31, 2020 with shares of 60.4% and 25.5% respectively. Additionally, Mibanco’s loan portfolio was highly concentrated in Soles as LC loans represented 99.5% of total loans as of March 31, 2020 (compared to 99.3% as of March 31, 2019).

Short-term investments fell 8.9% in the three months ended March 31, 2020 (compared to a decrease of 2.1% in the three months ended March 31, 2019). The decline was associated with the sale of BCRP Certificates of Deposits and in line with the strategy to optimize the composition of the portfolio. The loan portfolio represented 97.6% of total interest-earning assets in the three months ended March 31, 2020 (compared to 96.5% in the three months ended March 31, 2019).

Portfolio Quality

Mibanco’s cost of risk ratio, which is defined as net provisions for loan losses over total loans, was situated at 6.7% on March 31, 2020. This reflected a variation of 315 basis points, over the 3.6% reported on the three months ended March 31, 2019. This was the result of provisions made in connection with the COVID-19 pandemic and operating improvements in the origination and collections processes, in each case as follows: (i) the recording of additional provisions, in line with expectations of a recession in Peru and with the reduction in the debt service capacity of some clients due to the economic consequences of the COVID-19 pandemic; (ii) adjustments in credit policies and models; (iii) focus on early collections and improving the scheme of incentives for the sales force; and (iv) development of new channels and collections strategies. The increase in net provisions for loan losses resulted in an increase of the NPL coverage ratio, from 138.2% in the three months ended March 31, 2019 to 156.7% at the end of the three months ended March 31, 2020, as a result of the higher growth in allowance for loan losses compared to the increase in non-performing loans. The coverage ratio was higher than in the last three years (148.9% for 2017, 142.2% for 2018 and 139.2% for 2019).

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Funding Structure

On March 31, 2020, total liabilities at Mibanco amounted to S/11.4 billion, which represented a decrease of 0.3% with regard to the total liabilities reported at the end of the three months ended March 31, 2019 (S/11.4 billion at the end of the three months ended March 31, 2019). In the three months ended March 31, 2020, Mibanco’s funding strategy reflected an increase in retail deposits and amounts due to other banks and a decrease in institutional deposits and bond debt.

In the three months ended March 31, 2020 total deposits continued to represent the largest source of funding, accounting for 73.3% of total liabilities (compared to 73.7% in the three months ended March 31, 2019). In the three months ended March 31, 2020, the increase in deposits was led by retail channels, while institutional deposits decreased considerably. In this context, retail time and retail savings deposits increased 19.8% and 11.4%, respectively. Consequently, retail deposits posted an increase in their share of total funding, going from 38.8% in the three months ended March 31, 2019 to 44.2% in the three months ended March 31, 2020.

In the three months ended March 31, 2020, Mibanco increased its loans with other banks to take advantage of lower interest rates. Financing through bonds and subordinated debt fell due to the expiration of issuances.

Financial ratios

Net earnings at Mibanco totaled S/34.1 million in the three months ended March 31, 2020, which represented a 66.5% decrease with regard to the S/101.9 million reported in the three months ended March 31, 2019. Net earnings attributable to Credicorp totaled S/33.3 million in the three months ended March 31, 2020, which was 66.5% lower than in the three months ended March 31, 2019 of S/99.6 million.

Mibanco’s ROAE contribution to Credicorp was 6.5% (compared to 21.3% in the three months ended March 31, 2019). The evolution in the three months ended March 31, 2020 reflects (i) an increase in net interest income; (ii) an increase in net provisions for loans losses, which was attributable to provisions made in connection with the COVID-19 pandemic that offset improvements in loan acceptance practices and portfolio quality; (iii) a decrease in non-financial income, driven by fees from bancassurance; and (iv) an increase in operating expenses due to an increase in the headcount of the sales force and donations to alleviate the distress of the most vulnerable segments of the population during the COVID-19 pandemic.

NIM was situated at 15.16% in the three months ended March 31, 2020. This represented an increase of 46 basis points compared to the three months ended March 31, 2019 of 14.70%. This increase was attributable to an increase in the interest rates offered in the microfinance market in the context of a new pricing strategy. Interest rate cuts were partially offset by an increase in the small business portfolio.

In the three months ended March 31, 2020, the efficiency ratio at Mibanco was 55.6%, higher than the 54.7% registered for the three months ended March 31, 2019. This result was attributable to an increase in operating expenses, which was directly associated with higher expenses related to an increase of the headcount of the sales force.

Insurance and Pensions

Grupo Pacifico

Grupo Pacifico’s net profit before non-controlling interest was S/99.8 million in the three months ended March 31, 2020, 27.9% higher than the amount of S/78.1 million reported in the three months ended March 31, 2019. Higher net profit was mainly associated with an increase in (i) the P&C insurance business, which represented S/26.6 million in the three months ended March 31, 2020, 1,343% higher than the S/1.8 million reported in the three months ended March 31, 2019; and (ii) corporate health insurance and medical services (which includes only 50% of this business due to its association with Banmedica), which represented S/17.1 million in the three months ended March 31, 2020, 93.1% higher than the S/8.9 million reported in the three months ended March 31, 2019. The increase was offset in part by (i) the life insurance business, which represented S/51.2 million in the three months ended March 31, 2020, 17.8% lower than the S/62.3 million reported in the three months ended March 31, 2019 and (ii) Crediseguros, which represented S/4.9 million in the three months ended March 31, 2020, 2.7% lower than the S/5.0 million reported in the three months ended March 31, 2019.

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Grupo Pacifico’s net profit contribution to Credicorp was S/98.7 million in the three months ended March 31, 2020, 27.9% higher than the S/77.2 million reported in the three months ended March 31, 2019.

Grupo Pacifico’s 27.9% increase in net profit before non-controlling interest from the three months ended March 31, 2019 was due to an increase in net premiums in both businesses, a decrease in net claims in the P&C business and higher net profit in Corporate Health insurance. The above mentioned was offset by the increase in acquisition costs in both businesses and a lower net financial income in the P&C insurance business and lower net profit income in medical services.

Grupo Pacifico reported written premiums of S/917.9 million in the three months ended March 31, 2020, which represented an increase of 2.4% compared to the three months ended March 31, 2019. This was mainly attributable to the credit life, commercial lines and personal lines businesses. These increases were offset in part by decreases in the annuities line and automobile line.

Written Premiums(1)(2)

Three Months Ended March 31,
2019 2020
(in thousands of Soles)
Total Written Premiums(2) 896,518 917,964
Property and Casualty Business 384,104 401,636
Commercial Lines 65,493 80,382
Personal Lines 95,484 105,841
Automobile 102,482 88,372
Medical Assistance 120,644 127,041
Life Business 499,671 502,265
Annuities Line 133,612 99,018
Credit Life 115,784 141,422
Individual Life 93,450 96,714
Group Life 55,098 60,194
Disability and Survival 101,727 104,916
Crediseguros 12,743 14,063
(1) The association with Banmedica stipulates that the corporate health insurance business and medical services (network of clinics,<br>medical centers and laboratories) must be reported as an investment in subsidiaries and consequently are not fully consolidated<br>in the Grupo Pacifico financial statements. Both businesses are managed by Banmedica, and Grupo Pacifico receives 50% of net earnings.
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(2) Without eliminations.
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Financial Ratios

Grupo Pacifico’s ROAE was 14.5% in the three months ended March 31, 2020, higher than its return of 11.8% in the three months ended March 31, 2019. This was explained by (i) an increase in net premiums in both businesses, (ii) lower net claims in the P&C business, (iii) a continuous increase in health insurance and medical services, and (iv) lower operating expenses. These effects were offset by higher acquisition costs in both businesses and lower net financial income in the P&C business.

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Three Months Ended March 31,
ROAE (1) 2019 2020
Grupo Pacifico 11.8 % 14.5 %
Grupo Pacifico (2) 14.4 % 16.5 %
(1) Annualized and average are determined as the average of the period beginning and period ending. This includes 50% of the corporate<br>health insurance and medical services business results due to the agreement with Banmedica. These figures do not include eliminations<br>for Credicorp’s consolidation purposes.
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(2) Excludes unrealized gains or losses.
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Property and Casualty Business

Grupo Pacifico’s P&C insurance business achieved net profit of S/26.6 million in the three months ended March 31, 2020, 1,342% higher than the S/1.8 million reported in the three months ended March 31, 2019. This increase is attributable to (i) an increase in underwriting results, (ii) a lower operating expenses ratio, and (iii) an increase in translations results and other income. This was offset in part by lower financial income.

Underwriting increased 59% from the three months ended March 31, 2019, which was mainly attributable to an increase in written premiums and lower net claims. This was offset by an increase in acquisition costs.

Written premiums totaled S/401.6 million in the three months ended March 31, 2020, which represented an increase of 4.6% compared to the three months ended March 31, 2019. This increase was mainly attributable to (i) commercial lines, which registered higher sales in the agriculture and aviation lines; (ii) Medical Assistance, due to an increase in sales of oncological and comprehensive health products; and (iii) Personal Lines, due to an increase in the price of the card protection product and to an increase in sales of personal accident products. Pacifico maintained second place in the P&C business, with 22% of market share as of March 31, 2020, (compared to 22.3% at the end of the three months ended March 31, 2019), according to the SBS.

Net claims decreased 12.7% over the previous year, mainly in the Automobile line, due to a decrease in claims notifications after the quarantine was imposed mid-March, and also attributable to an improvement in claims management in Cars. The decrease in claims was also seen in the Commercial and Medical Assistance lines after fewer notifications for claims were received due to the quarantine. These effects were offset by an increase in the Personal Lines, which registered an increase in case frequency due to its self-insurance product. As a result, the loss ratio in the three months ended March 31, 2020 was 48.2% lower than 58.8% in the three months ended March 31, 2019.

Acquisition costs increased 14.8% over the same period in the previous year, mainly in the underwriting expenses for cars after approximately S/8.0 million in premiums were returned to clients who were unable to use their cars during the quarantine. In addition, higher reserves were registered for uncollectible premiums, mainly in the commercial, cars and Medical Assistance lines.

Net financial income decreased 37.9% in the three months ended March 31, 2020 compared to the three months ended March 31, 2019, primarily due to adverse fluctuations in the financial markets in connection with the COVID-19 pandemic.

Net Profit and Selected Ratios for Grupo Pacifico’s - P&C business (1)

Three Months Ended March 31,
2019 2020
(in thousands of Soles)
Written premiums 384,104 401,636
Ceded premiums 76,115 88,742
Reserves 23,757 10,243
Net earned premiums 284,232 302,651
Net claims 167,083 145,940
Acquisition costs(2) 66,834 76,721 
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Three Months Ended March 31,
2019 2020
(in thousands of Soles)
Underwriting result 50,316 79,990
Net financial income 20,167 12,519
Total expenses 65,569 66,776
Other income/loss 157 4,295
Translation result (492 ) 2,994
Gain (loss) from Grupo Pacifico and Banmedica agreement (2,736 ) (6,430 )
Income tax — —
Income before minority interest 1,843 26,592
Non-controlling interest — —
Net profit 1,843 26,592
Loss ratio(3) 58.8 % 48.2 %
Acquisition costs ratio(4) 23.5 % 25.3 %
Operating expenses / net earned premiums 23.1 % 22.1 %
Combined ratio of P&C(5) 105.4 % 95.6 %
(1) Financial statements without consolidation adjustments.
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(2) Fees plus Underwriting expenses, net.
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(3) Net claims / Net earned premiums.
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(4) Acquisition costs / Net earned premiums.
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(5) (Net claims / Net earned premiums) plus (Acquisition costs plus Total expenses) / Net earned premiums.
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Life Business

Grupo Pacifico’s life insurance business net profit was S/52.6 million in the three months ended March 31, 2020, 15.7% less than the S/62.4 million reported in the three months ended March 31, 2019. This decrease was mainly attributable to (i) an increase in acquisition costs, (ii) higher net claims, (iii) higher total expenses, and (iv) a decrease in translations results. These effects were offset in part by an increase in net earned premiums and higher financial income.

The life insurance business acquisition costs increased in the three months ended March 31, 2020 compared to the three months ended March 31, 2019 mainly due to the increase in fees for credit life after premiums rose through the alliance channel.

In the three months ended March 31, 2020, net claims increased by 7.9% compared to the three months ended March 31, 2019, which was primarily driven by D&S through SISCO II and SISCO III due to a decrease in interest rates and in annuities as a result of the growth in pension payments through individual annuities.

Grupo Pacifico’s life insurance business reported written premiums of S/502.3 million in the three months ended March 31, 2020, which represented an increase of 0.5% compared to the three months ended March 31, 2019. This result was mainly driven by (i) credit life, where growth was attributable to an increase in premiums in the alliance and bancassurance channel and to solidarity payments (debts assumed by the entity); (ii) group life, due to an increase in statutory life products after a new regulation went into effect in January 2020 which required companies to insure their employees from the first day of work (rather than after four years) and to growth in collective life, which was reflected in an increase in premium turnover in the bancassurance channel; (iii) individual life, due to an increase in premium turnover for renewals; and (iv) D&S, due to an increase in premiums through SISCO IV. These increases were offset in part by a decrease in premiums in annuities due to individual annuities and to a decrease in selling days due to the quarantine ordered by the Peruvian government in connection with the COVID-19 pandemic.

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Financial income showed a slight growth of 0.6% in the three months ended March 31, 2020 compared to the three months ended March 31, 2019 as a result of higher interest and income on investments.

Net Profit and Selected Ratios for Grupo Pacifico’s- Life business(1)

Three Months Ended March 31,
2019(2) 2020
(in thousands of Soles)
Written premiums 499,671 502,265
Ceded premiums 31,190 29,096
Reserves 177,449 150,364
Net earned premiums 291,033 322,805
Net claims 215,143 232,243
Acquisition costs(3) 102,577 126,744
Underwriting result (26,687 ) (36,182 )
Net financial income 118,982 119,637
Total expenses 30,832 31,894
Other income/loss 912 1,044
Translations results (51 ) (1,397 )
Income before minority interest 62,324 51,208
Non-controlling interest 0 0
Net profit 62,324 51,208
Loss ratio(4) 33.2 % 30.4 %
Acquisition costs ratio(5) 35.2 % 39.3 %
Operating expenses / net earned premiums 10.6 % 9.9 %
Combined ratio of Life(6) 79.0 % 79.5 %
(1) Financial statements without consolidation adjustments.
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(2) The concept of policy fee was not reclassified as written premium in 2017.
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(3) Fees and underwriting expenses, net.
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(4) Net claims / Net earned premiums.
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(5) Acquisition costs / Net earned premiums.
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(6) (Net claims / Net earned premiums) plus (Acquisition costs plus Total expenses) / Net earned premiums.
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Corporate Health Insurance and Medical Services

Corporate health insurance and medical services recorded net profit of S/34.3 million in the three months ended March 31, 2020, an increase of 93.1% compared to the S/17.8 million reported in the three months ended March 31, 2019. This increase is primarily the result of corporate health insurance, mainly due to higher net earned premiums and lower claims as a result of a decrease in frequency of medical care due to quarantine during the COVID-19 pandemic, and was offset by the decrease in medical services income (S/12.8 million in the three months ended March 31, 2020 compared to S/21.1 million in the three months ended March 31, 2019).

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Net Profit and Selected Ratios for Grupo Pacifico’s - Corporate Health Insurance and Medical Services(1)

Three Months Ended March 31,
2019(2) 2020
(in thousands of Soles)
Written premiums 262,085 282,092
Ceded premiums 2,727 3,004
Reserves 99 (519 )
Net earned premiums 259,258 279,606
Net claims 233,597 213,978
Acquisition costs(3) 15,594 16,313
Underwriting result 10,068 49,315
Net financial income 1,505 532
Total expenses 17,535 19,659
Other income/loss 1,012 244
Translations results (17 ) 919
Income tax (1,615 ) 9,825
Net profit Corporate health insurance (3,353 ) 21,526
Medical Services 21,108 12,765
Net profit 17,756 34,290
Loss ratio(3) 90.1 % 76.5 %
Acquisition costs ratio(4) 6.0 % 5.8 %
Operating expenses / net earned premiums 6.8 % 7.0 %
Combined ratio(5) 102.9 % 89.4 %
(1) Financial statements without consolidation adjustments.
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(2) Fees plus underwriting expenses, net
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(3) (Net claims)/ Net earned premiums.
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(4) Acquisition costs / Net earned premiums
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(5) (Net claims / Net earned premiums) plus (Acquisition costs plus Total expenses) / Net earned premiums.
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Underwriting, Actuarial and Reinsurance

Underwriting guidelines for substantially all P&C and corporate health insurance risks are developed by profit centers in collaboration with the actuarial staff. Grupo Pacifico’s P&C unit has an engineering staff which inspects most medium and medium-to-large commercial property insured for risks prior to underwriting and third party surveyors are employed to inspect smaller and/or lower risk property. Pricing and underwriting guidelines, rates and approval thresholds for these risks are periodically reviewed by the profit centers with actuarial staff and reported to the risk committee. Conditions are monitored continuously to ensure they are within competitive market conditions and profitability targets.

Grupo Pacifico’s P&C insurance business transfers risks to reinsurers in order to limit its maximum aggregate potential losses and minimize exposures on large individual risks. Reinsurance is placed with reinsurance companies based on the evaluation of the credit quality of the reinsurer, terms of coverage and price. The P&C insurance business acts as a reinsurer on a very limited basis, providing excess facultative reinsurance capacity to other Peruvian insurers that are unable to satisfy their reinsurance requirements and/or the interests of Peruvian clients in Latin America.

Historically, Grupo Pacifico’s P&C insurance business has obtained reinsurance for a substantial portion of its earthquake-related insurance portfolio through excess loss reinsurance treaties. In 2012, Grupo Pacifico’s P&C insurance business negotiated proportional reinsurance support for this portfolio, which it maintains as of March 31, 2020. Grupo Pacifico’s P&C insurance business has property catastrophe reinsurance coverage in place that covers its probable maximum loss under local regulatory requirements. However, there can be no assurance that a major catastrophe would not have a material adverse impact on Grupo Pacifico’s financial condition and/or its operations.

Heavy rains caused by the El Nino Phenomenon in early 2017 generated losses in Grupo Pacifico’s P&C insurance business of approximately U.S.$131.1 million (through March 31,2020), of which approximately 95% was ceded to reinsurers and coinsurers. Approximately 5% constituted net retained losses, which was within the risk appetite and risk tolerance parameters set by Grupo Pacifico’s risk management unit and approved by our risk committee.

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In the three months ended March 31, 2020, Grupo Pacifico’s total ceded reinsurance premiums totaled approximately U.S.$ 34.7 million (approximately 12.8% of total group written premiums), of which approximately 90.4% were ceded to carriers with A- and above ratings.

Grupo Pacifico’s life insurance business holds excess of loss reinsurance contracts for its individual life, personal accident, group life and credit life products; and in the case of work compensation risk insurance and D&S products, a quota share contract is held. Catastrophic reinsurance contracts cover all of Grupo Pacifico’s life lines (Individual Life, Personal Accident, Group Life, Credit Life, SCTR and D&S), except for the annuity line. Life premiums ceded to reinsurers represented less than 6% of the life business written premiums in the three months ended March 31, 2020.

Investment portfolio

Grupo Pacifico’s investments are made primarily to meet its solvency equity ratio and to provide reserves for its claims. Investments are managed by product within (i) the property and casualty lines, and (ii) the life and annuities lines, and are designed to contain sufficient assets to match the company’s liabilities and to comply with the specific technical requirements of each business line. Grupo Pacifico has adopted strict policies related to investment decisions that are reviewed and approved by Grupo Pacifico’s Board of Directors. Its investment strategy is reviewed by the Investment Committee and the Board of Directors on a monthly basis. Grupo Pacifico invests in local and international markets, emphasizing investments in Peru, the U.S. and Latin America.

As of March 31, 2020, the market value of Grupo Pacifico’s investment portfolio was S/11,439 million, which included mainly S/441 million in equity securities, S/1,197 million in investment properties, and S/9,801 million in fixed income instruments. The portfolio is diversified and follows an asset-liability management strategy focused on cash flow, duration and currency matching of assets (portfolio) and liabilities (reserves), and on supporting Grupo Pacifico’s capital structure. Grupo Pacifico’s financial income decreased 5.0% in the three months ended March 31, 2020 (to S/132.2 million, from S/139.1 million in the three months ended March 31, 2019).

Prima AFP

As of March 31, 2020, the number of affiliates in Prima AFP was 2.37 million, an increase from 2.26 million as of March 31, 2019. This increase was primarily driven by Prima AFP’s winning the Third Pension Tender (May 2017-June 2019), as a result of which new members of the SPP joined Prima AFP by default.

Prima AFP’s funds under management (“FuMs”) totaled S/46.86 billion in the three months ended March 31, 2020, a decrease of 7.6% compared to the prior year (S/50.74 billion). The decrease was mainly driven by the below average return of the FuMs. In the three months ended March 31, 2020, nominal annual yields were 4.31%, 3.32%, negative 1.77%, and negative 11.81% for Funds 0, 1, 2, and 3, respectively.

Prima AFP’s revenues were S/103.23 million in the three months ended March 31, 2020, an increase over S/99.76 million in revenues for the three months ended March 31, 2019. The increase in the three months ended March 31, 2020 was primarily the result of winning the Third Pension Tender. Additionally, operating expenses were S/41.93 million in the three months ended March 31, 2020, and relatively stable as compared to S/41.82 million in the three months ended March 31, 2019.

Prima AFP’s net profit was S/-4.08 million in the three months ended March 31, 2020, down from S/57.0 million in the three months ended March 31, 2019 due to the negative returns in the reserve fund given the COVID-19 crisis. In the three months ended March 31, 2020, Prima AFP’s ROAE decreased to negative 2.6%, compared to 37.6% in the three months ended March 31, 2019.

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The following table summarizes the administration fees charged by the SPP’s AFPs in the three months ended March 31, 2020:

Remuneration <br> Scheme Mixed-<br> Commission Scheme
Monthly Fee<br> on Salary Monthly Fee<br> on Salary Annual Fee<br> on Funds
AFP
Prima AFP 1.60 % 0.18 % 1.25 %
AFP Integra 1.55 % 0.00 % 0.82 %
Profuturo AFP 1.69 % 0.67 % 1.20 %
AFP Habitat 1.47 % 0.38 % 1.25 %

As of March 31, 2020, Prima AFP had S/973.86 million in assets (compared to S/982.26 million as of March 31, 2019), S/426.51 million in liabilities (compared to S/402.45 million as of March 31, 2019), and shareholders’ equity of S/547.35 million (S/579.82 million as of March 31, 2019).

Investment Banking and Wealth Management

Our investment banking and wealth management line of business registered a net loss of S/4 million in the three months ended March 31, 2020, mainly due to a 28% decrease in revenues due to the market impact of the COVID-19 pandemic. Throughout this period, we were adversely affected by the economic and market conditions arising from the pandemic. Projects and deals were postponed, the market downturn had a significant impact in our proprietary portfolios and early fund withdrawals were made by our institutional clients. However, our wealth management teams in Peru, Colombia and Chile carried out a focused client outreach effort that allowed us to mitigate asset outflows and offset the negative impact of the pandemic on our revenues.

Corporate Finance

Our corporate finance business was affected by decreased corporate activity, resulting in a reduced number of executed transactions compared to the three months ended March 31, 2019. However, there were a series of important operations that were executed throughout the first quarter of the year: Loans to Buenaventura, Skanon Investments and Austral Group in Perú; M&A advisory work for Nexus for the sale of Banco Santander Chile’s participation in Nexus (Chile); and advisory work for CAP S.A. in Chile for the modification of its corporate bond issuance contracts.

Asset Management

Market conditions led to withdrawals from traditional funds in the second half of March, mainly from institutional clients and mainly in Colombia (where AUM for Fonval decreased by almost 50%). However, despite a decrease in fund management income during March 2020, overall revenues increased in the three months ended March 31, 2020 compared to the same period in 2019, boosted by an increase in AUMs from retail and institutional clients, due to an attractive range of products that maintain international standards, competitive returns, and a knowledgeable investment team with a high degree of specialization in the Latin American market.

Revenues were also boosted by the increase in the sale of structured products and third-party funds to private banking clients, the continued development of a regional platform of alternative funds (especially the real estate fund Inmoval in Colombia), and higher revenues as distributors of third-party products to institutional investors.

In total, assets under management, aggregating institutional and retail clients, exceeded S/60 billion in the three months ended March 31, 2020, an increase of 12% compared to the end of the three months ended March 31, 2019.

Three Months Ended March 31,
2019 2020
(in millions of Soles)
Assets under management (“AuM”) – Peru(1) 22,073 24,477
AuM – Colombia 10,686 10,800
AuM – Chile 20,935 25,065
Total AuM 53,694 60,342
(1) Includes AuMs in Atlantic Security Bank. Includes AuM for which there is a service agreement between Atlantic Security Bank<br>and Credicorp Capital for the latter to perform functions as portfolio manager (Atlantic Security Bank funds in millions of Soles<br>are: S/5,020 and S/5,001 in the three months ended March 31, 2019 and the three months ended March 31, 2020, respectively).
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Capital Markets

In the three months ended March 31, 2020, our capital markets business was significantly affected by the global crisis related to the COVID-19 pandemic. As market downturn scaled up, specifically during March, the impact in our proprietary portfolios resulted in a decrease of approximately S/27 million that offset favorable returns achieved in the first half of the quarter, which led to our implementation of a stop-loss strategy during the crisis. These results are in contrast to those obtained during the three months ended March 31, 2019, which were above expectations and characterized by stable and favorable market conditions..

Notwithstanding, even in the context of the COVID-19 pandemic, our sales business generated an increase in revenues compared to the three months ended March 31, 2019, even while traded volumes in Colombia appear to be lower than those from a year ago due to a currency conversion effect. A portion of the increase came during March 2020, when trading volumes were unusually higher due to sales of securities and bargain purchases.

Capital Markets Securities Portfolio

**** Three Months Ended March 31,
**** 2019 2020
(in millions of Soles)
Traded Volume
Equity Securities – Peru(1) 1,605 3,674
Fixed Income – Peru(1) 8,282 16,052
Equity Securities – Colombia(2) 4,042 3,813
Fixed Income – Colombia(2) 53,683 50,463
Equity Securities – Chile(3) 7,237 3,127
Fixed Income – Chile(3) 28,478 14,549
(1) Peru: BVL information. Fixed income data also includes<br>information from Datatec platform. Does not include repo operations.
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(2) Colombia: Colombia Stock Exchange information. Fixed<br>income data also includes Banco de la Republica’s information. Does not include repo operations.
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(3) Chile: Santiago Stock Exchange information. Fixed income<br>data includes financial intermediation operations. Equity securities include operations with investment fund shares and foreign<br>stock. Does not include repo operations
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Wealth Management

Our wealth management business experienced a first quarter with different results across countries. Compared to the three months ended March 31, 2019, revenues in the three months ended March 31, 2020 increased in both Colombia and Chile, where we are carrying out an initiative to standardize and expand an integral private banking advisory model and deploy the full value of our wealth management model (including lending, wealth and financial planning and family office). The result in Colombia was also impacted positively following the acquisition of Ultraserfinco and Ultralat at the end of 2019. However, increased revenues in Colombia and Chile were offset by a slight decrease in revenue in Peru, mainly due to lower deposit balances and lower income from the family office services.

Assets under management for private banking clients reached a total of S/48.7 billion as of March 31, 2020, a decrease of 12% compared to March 31, 2019. Most of the decrease is due to a mark-to-market effect (including currency conversion) on AUMs during the last two weeks of the first quarter of 2020, as we were able to avoid withdrawals in the context of the COVID-19 pandemic due to an important client outreach effort.

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Wealth Management Assets under Management

Three Months Ended March 31,
2019 2020
(in millions of Soles)
WM AuMs Peru(1) 42,837 37,146
WM AuMs Colombia(2)(3) 3,979 3,401
WM AuMs Chile(2) 8,290 8,142
Total WM AuMs 55,106 48,689
Total WM Clients(2)(3) 4,117 4,118
(1) Includes AuMs booked in Atlantic Security Bank.
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(2) Estimated. Includes clients with net worth over U.S.$1 million.
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(3) Does not include Ultraserfinco and subsidiaries.
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Other Relevant Businesses

Our trust services business, which mainly includes income from custody of securities in Peru and administration of trusts in Peru and Colombia, demonstrated positive results in the three months ended March 31, 2020 with an increase of 15% compared to the three months ended March 31, 2019.

Finally, treasury income decreased in the three months ended March 31, 2020 compared to the three months ended March 31, 2020, mainly because we realized gains from selling securities within our ALM portfolio in Atlantic Security Bank in the three months ended March 31, 2019, which gains were not repeated in 2020. In addition, revenues were also affected by the financial crisis in connection with the COVID-19 pandemic. We recorded negative foreign exchange rate results from positions in foreign currency, and the ALM portfolio in Atlantic Security Bank was negatively impacted by sovereign and corporate spreads on interest rates, leading to a deterioration in Atlantic Security Bank’s net equity

Dividend Policy and History

It is our policy to pay cash dividends each year in an amount not less than 25% of our consolidated net profits based on the last audited financial accounts. The Board of Directors takes into consideration the following when deciding to distribute dividends:

· the availability of dividends from the Company’s subsidiaries;
· whether the declaration and payment of dividends would cause the Company to breach any applicable laws or adversely impact<br>the equity growth requirements of the Company or its subsidiaries;
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· financial performance of the Company;
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· general business and economic-financial conditions affecting the Company; and
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· any other factors which the Board may deem relevant.
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Under Bermuda Law, any dividend may only be declared and paid if (i) the Company is able to pay its liabilities as they become due, and (ii) the realizable value of the Company’s assets would not thereby be less than its liabilities.

The Board of Directors may in its sole discretion declare and pay a dividend below 25% if any of the above mentioned conditions are not met. Subject to the foregoing, it is expected that regular dividend payments are to be made once a year within 90 calendar days of the meeting held by the Board to approve the dividend declaration. No interim dividends are to be paid. In certain years the payment of extraordinary dividends could be done if previously approved by the board of directors. This policy has been in force since fiscal year 2016, and will continue to be applicable until amended or rescinded by the Board of Directors.

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The following table sets forth the net cash dividends available to Credicorp Ltd, as principal shareholder, from other group companies in 2015, 2016, 2017, 2018 and 2019, as derived from Credicorp's standalone financial statements as of and for the years ended December 31, 2019 and 2018:

As<br> of and for the years ended<br> December 31,
2015 2016 2017 2018 2019
(Soles<br> in<br><br> millions) (U.S.<br><br> dollars in<br><br> millions)(1) (Soles<br> in<br><br> millions) (U.S.<br><br> dollars in<br><br> millions)(1) (Soles<br> in<br><br> millions) (U.S.<br><br> dollars in<br><br> millions)(1) (Soles<br> in<br><br> millions) (U.S.<br><br> dollars in<br><br> millions)(1) (Soles<br> in<br><br> millions) (U.S.<br><br> dollars in<br><br> millions)(1)
BCP(2) 376 114 1,134 342 1,425 430 1,457 440 1,989 600
Pacifico 27 8 102 31 243 73 247 75 249 75
Prima<br> AFP 135 41 164 49 169 51 131 39 131 40
ICBSA — — — — 47 14 46 14 79 24
Credicorp<br> Capital — — — — 82 25 98 30 141 42
ASHC(3) 115 35 18 6 148 45 129 39 407 123
Others(4) 40 12 37 11 31 9 23 7 24 7
Total 694 209 1,455 439 2,146 648 2,132 643 3,020 911

Source: Credicorp and Grupo Credito Separate Financial Statements as of Years ended December 31, 2019 and 2018.

(1) For<br> the convenience of the reader, data as of and for the period ended December 31, 2015,<br> 2016, 2017, 2018 and 2019 have been translated from Soles into U.S. dollars at a rate<br> of S/3.314 to U.S.$1.00 (the exchange rate as of December 31, 2019 as published by the<br> SBS).
(2) Includes<br> dividends received from BCP’s majority participation in Mibanco.
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(3) Dividends<br> received from Treasury Shares held by ASHC are not included.
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(4) Includes<br> direct dividends from Mibanco.
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We have declared dividends in a total amount of S/2,831 million (U.S.$831 million) in the three months ended March 31, 2020. See “Item 8. Financial Information—8.A Consolidated Statements and Other Financial Information—(3) Dividend Policy” in our 2019 Form 20-F for additional information on our dividend policy and past payments of dividends.

Liquidity and Capital Resources

Regulatory Capital – BAP

As of % Change
March<br> 31, 2019 December<br> 31, 2019 March<br> 31, 2020 March<br> 31, 2020 /<br> December<br> 31, 2019 March<br> 31, 2020 /<br> 2019
(Soles in thousands, except percentages)
Regulatory Capital and Capital Adequacy Ratios
Capital Stock 1,318,993 1,318,993 1,318,993 0.0 % 0.0 %
Treasury Stocks (207,897 ) (207,839 ) (209,309 ) 0.7 % 0.7 %
Capital Surplus 222,349 226,037 165,188 (26.9 )% (25.7 )%
Legal and Other capital reserves(1) 19,408,876 19,437,645 21,360,272 9.9 % 10.1 %
Minority interest(2) 357,833 393,019 386,326 (1.7 )% 8.0 %
Loan loss reserves(3) 1,575,966 1,690,510 1,728,836 2.3 % 9.7 %
Perpetual subordinated debt 580,650 — — — (100.0 )%
Subordinated Debt 4,777,811 4,409,840 4,568,131 3.6 % (4.4 )%
Investments in equity and subordinated debt of financial and insurance companies (615,275 ) (700,859 ) (630,805 ) (10.0 )% 25 %
Goodwill (602,485 ) (834,881 ) (819,338 ) (1.9 )% 36.0 %
Deduction for subordinated debt limit (50% of Tier I excluding deductions)(4) — — — — —
Deduction for Tier I Limit 50% of Regulatory capital(4) — — — — —
Total Regulatory Capital (A) 28,816,810 25,732,465 27,868,293 8.3 % 3.9 %
Tier I(5) 14,827,121 14,010,215 15,271,385 9.08 % 3.0 %
Tier II(6) plus Tier III(7) 11,989,689 11,722,249 12,596,929 7.5 % 5.1 %
Financial Consolidated Group (FCG) Regulatory Capital Requirement(8) 19,595,889 20,750,935 19,925,877 (4.0 )% 1.7 %
Insurance Consolidated Group (CG) Capital Requirements(9) 1,019,984 1,199,850 1243,035 3.6 % 21.9 %
FCG Capital Requirements related to operations with ICG (216,360 ) (329,262 ) (503,013 ) 52.8 % 132.5 %
CG Capital Requirements related to operations with FCG — — — — —
Total Regulatory Capital Requirements (B) 20,399,513 21,621,522 20,665,899 (4.4 )% 1.3 %
Regulatory Capital Ratio (A) / (B) 1.31 1.19 1.35
Required Regulatory Capital Ratio(10) 1.00 1.00 1.00 
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(1) Legal and other capital reserves include restricted capital reserves (S/14,745 million) and optional capital reserves (S/6,615<br>million).
(2) Minority interest includes Tier I (S/386 million).
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(3) Up to 1.25% of total Risk-Weighted Assets of Banco de Credito del Perú, Solucion Empresa Administradora Hipotecaria,<br>Mibanco and Atlantic Security Bank.
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(4) Tier II plus Tier III cannot be more than 50% of total regulatory capital.
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(5) Tier I is equal to capital plus restricted capital reserves plus Tier I minority interest less goodwill less (0.5 x investment<br>in equity and subordinated debt of financial and insurance companies) plus perpetual subordinated debt.
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(6) Tier II is equal to subordinated debt plus Tier II minority interest plus loan loss reserves less (0.5 x investment in equity<br>and subordinated debt of financial and insurance companies).
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(7) Tier III is equal to Subordinated debt covering market risk only.
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(8) Includes regulatory capital requirements of the financial consolidated group.
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(9) Includes regulatory capital requirements of the insurance consolidated group.
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(10) Regulatory Capital / Total Regulatory Capital Requirements (the legal minimum is 1.00).
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Total regulatory capital at Credicorp as of March 31, 2020 increased 8.3% compared to December 31, 2019 and 3.9% compared to March 31, 2020. This was driven by an increase in legal and other capital reserves and loan loss reserves, reflecting preventive measures to absorb the potential effects of variations in expectations for economic growth in Peru due to the COVID-19 pandemic. Credicorp’s regulatory capital requirement as of March 31, 2020 fell 4.4% compared to December 31, 2019 but increased 1.3% compared to March 31, 2020. SBS relaxed countercyclical capital requirements for Peruvian banks in March 2020, as a precautionary step to help banks cope with the fallout from the COVID-19 pandemic and the related economic crisis.

Credicorp’s regulatory capital ratio remained at a comfortable level as of December 31, 2019 and represented 1.35 times the capital required by the regulator in Peru as of the same date.

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Regulatory Capital – BCP Stand-alone based on Peruvian GAAP

As of % Change
March<br> 31, 2019 December<br> 31, 2019 March<br> 31, 2020 March<br> 31, 2020 /<br> December<br> 31, 2019 March<br> 31, 2020 /<br> 2019
(Soles in thousands, except percentages)
Regulatory Capital and Capital Adequacy Ratios
Capital Stock 10,217,387 10,217,387 10,217,387 0.0 % 0.0 %
Legal and Other capital reserves 4,695,118 4,695,118 4,695,118 0.0 % 0.0 %
Accumulated earnings with capitalization agreement - 850,000 850,000 0.0 % NA
Loan loss reserves(1) 1,284,021 1,367,259 1,383,834 1.2 % 7.8 %
Perpetual subordinated debt 580,650 — — NA NA
Subordinated Debt 4,236,505 3,980,904 4,128,099 3.7 % (2.6 )%
Investment in subsidiaries and others, net of unrealized profit and net income (1,722,979 ) (1,580,583 ) (1,937,102 ) 22.6 % 12.4 %
Investment in subsidiaries and others (1,812,955 ) (1,965,037 ) (2,008,802 ) 2.2 % 10.8 %
Unrealized profit and net income in subsidiaries 89,976 384,454 71,700 (81.4 )% (20.3 )%
Goodwill (122,083 ) (122,083 ) (122,083 ) 0.0 % 0.0 %
Total Regulatory Capital 19,168,618 19,408,002 19,215,253 (1.0 )% 0.2 %
Off-balance sheet 84,074,345 86,273,789 88,755,362 2.9 % 5.6 %
Tier I(2) 14,509,582 14,850,131 14,671,871 (1.2 )% 1.1 %
Tier II(3) + Tier III(4) 4,659,036 4,557,871 4,543,382 (0.3 )% (2.5 )%
Common Equity Tier I 13,742,713 15,842,022 16,146,020 1.9 % 17.5 %
Total Risk-Weighted Assets – SBS 123,718,427 134,128,850 142,084,684 5.9 % 14.8 %
Credit Risk-Weighted Assets 112,023,537 122,233,929 129,331,389 5.8 % 15.5 %
Market Risk-Weighted Assets(5) 2,528,029 2,263,835 3,074,766 35.8 % 21.6 %
Operational Risk-Weighted Assets 9,166,861 9,631,086 9,678,529 0.5 % 5.6 %
Adjusted Risk-Weighted Assets – Basel 120,622,867 128,238,694 135,790,140 5.9 % 12.6 %
Total Risk-Weighted Assets 123,718,427 134,128,850 142,084,684 5.9 % 14.8 %
(-) RWA Intangible assets, excluding goodwill 3,491,859 6,330,168 6,802,121 7.5 % 94.8 %
(+) RWA Deferred tax assets generated as a result of temporary differences in income tax, in excess of 10% of CET1 396,299 440,012 507,578 15.4 % —
(+) RWA Deferred tax assets generated as a <br> result of past losses — — — — —
Total capital requirement 15,765,636 16,982,136 16,346,724 (3.7 )% 3.7 %
Credit risk capital requirement 11,202,354 12,223,393 12,933,139 5.8 % 15.5 %
Market Risk-Weighted Assets(5) 252,803 226,384 307,477 35.8 % 21.6 %
Operational risk capital requirement 916,686 963,109 967,853 0.5 % 5.6 %
Additional capital requirements 3,393,794 3,569,251 2,138,255 (40.1 )% (37.0 )%
Capital ratios
Tier I ratio(6) 11.73 % 11.07 % 10.33 %
Common Equity Tier I ratio(7) 11.39 % 12.35 % 11.89 %
BIS ratio (8) 15.49 % 14.47 % 13.52 %
Risk-Weighted Assets / Regulatory capital(9) 6.45 6.91 7.39
(1) Up to 1.25% of total Risk-Weighted Assets .
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(2) Tier I is equal to Capital plus Legal and other capital reserves plus Accumulated earnings with capitalization agreement plus<br>(0.5 x Unrealized profit and net income in subsidiaries) less Goodwill less (0.5 x Investment in subsidiaries) plus Perpetual subordinated<br>debt (maximum amount that can be included is 17.65% of Capital plus Reserves plus Accumulated earnings with capitalization agreement<br>plus Unrealized profit and net income in subsidiaries less Goodwill).
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(3) Tier II is equal to Subordinated debt plus Loan loss reserves plus (0.5 x Unrealized profit and net income in subsidiaries)<br>less (0.5 x Investment in subsidiaries).
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(4) Tier III is equal to Subordinated debt covering market risk only. Tier III exists since the first quarter of 2010.
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(5) It includes capital requirement to cover price and rate risk.
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(6) Tier I / Total Risk-Weighted Assets.
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(7) Common Equity Tier I is equal to Capital plus Reserves less 100% of applicable deductions (investment in subsidiaries, goodwill,<br>intangibles and net deferred taxes that rely on future profitability) plus retained earnings plus unrealized gains.
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Adjusted Risk-Weighted Assets is equal to Risk-Weighted Assets less (RWA Intangible assets, excluding goodwill, plus RWA Deferred tax assets generated as a result of temporary differences in income tax, in excess of 10% of CET1, plus RWA Deferred tax assets generated as a result of past losses).”

(8) Regulatory Capital / Risk-Weighted Assets (the legal minimum has been 10% since July 2011)
(9) Since July 2012, Risk-Weighted Assets is equal to Credit Risk-Weighted Assets multiplied by 1.00 plus Capital requirement to<br>cover market risk multiplied by 10 plus Capital requirement to cover operational risk multiplied by 10 multiplied by 1.00 (since<br>July 2014).
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As of March 31, 2020, the BIS and Tier I ratios at BCP were 13.52% and 10.33% respectively. This was attributable to an increase in RWAs as of March 31, 2020 of 5.9% compared to December 31, 2019. Furthermore, no capitalization on retained earnings was done in March at BCP, since the board of directors’ annual meeting took place in April 2020 due to government lockdown restrictions.

Total regulatory capital as of March 31, 2020 fell 1% compared to December 31, 2019, which was attributable to a full capitalization of 2019 retained earnings at the subsidiary level. Total RWAs increased due to growth in Credit RWAs (an increase of 5.8% as of March 31, 2020 compared to December 31, 2019) in line with the 5.4% growth loan balances as of March 31, 2020 compared to December 31, 2019.

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Comparing March 31, 2020 to March 31, 2019 shows a decrease in the BIS Ratio and in the Tier I ratio. This was attributable to the fact that the growth posted for RWAs outpaced the expansion registered for regulatory and Tier I capital, and the capitalization decision was made in April, instead of March, in 2020.

The evolution of total RWAs when comparing March 31, 2020 to March 31, 2019 mainly reflects an increase of 15.5% in Credit RWAS and to a lesser extent, an expansion in market risk and operational RWAs. This growth primarily reflects the effect of 12.0% growth in loan balances when comparing March 31, 2020 to March 31, 2019.

Common Equity Tier I Ratio – BCP Stand-alone

(1) Includes investments in BCP Bolivia and other subsidiaries.

Finally, the Tier I Common Equity (“CET1”) ratio, which is considered the most rigorous indicator with which to measure capitalization levels, reported a decrease of 46 basis points in the three months ended March 31, 2020 as compared to the three months ended March 31, 2019, and amounted to 11.89% at the end of the three months ended March 31, 2020. This was mainly attributable to an increase of 5.9% in adjusted RWAs in the three months ended March 31, 2020 as compared to the three months ended March 31, 2019. In a year-on-year analysis, the CET1 ratio increased 50 basis points in a context in which the Tier I Common Equity rose 17.5%, while adjusted RWAs increased 12.6%.

Deposits

As of % Change
March<br> 31, 2019 December<br> 31, 2019 March<br> 31, 2020 March<br> 31, 2020 / December<br> 31, 2019 March<br> 31, 2020 / 2019
(Soles in thousands, except percentages)
Deposits and Obligations
Demand deposits 31,695,558 34,213,188 38,746,240 13.2 % 22.2 %
Saving deposits 32,968,147 35,179,770 37,872,955 7.7 % 14.9 %
Time deposits 31,399,811 34,034,037 35,045,214 3.0 % 11.6 %
Severance indemnity deposits 7,074,344 7,897,199 7,204,922 (8.8 )% 1.8 %
Interests payable 589,397 681,191 694,214 1.9 % 17.8 %
Deposits and obligations 103,727,257 112,005,385 119,563,545 6.7 % 15.3 %

As of March 31, 2020, deposits and obligations expanded 6.7% compared to December 31, 2019. This growth over the three months ended March 31, 20120 is due to the following:

(i) The increase in demand deposits, which represents 60% of the growth in total deposits, was primarily due to (i) an increase<br>in volume from Wholesale Banking clients at BCP Stand-alone, who increased their demand for liquidity, and (ii) to a lesser extent,<br>the evolution at Atlantic Security Bank as a result of the transfer of client balances to its accounts to reduce the exposure of<br>their investment portfolios as a result of market volatility. This evolution reflects the impact of COVID-19 and a variation in<br>the exchange rate exercising a preponderant effect on FC deposits, given that volumes in FC represent 57% of the total volume and<br>65% of the increase in demand deposits. 
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(ii) The growth in savings deposits, which increased 7.7% compared to December 31, 2019, due to higher volumes in LC (which accounted<br>for 67% of the increase). This expansion was due to (i) profit sharing and/or bonuses for individual persons with savings accounts<br>at BCP Stand-alone or Mibanco in the month of March, (ii) the compulsory lockdown established by the Peruvian government since<br>March 15, 2020 and (iii) an increase in the number of savings accounts opened through cost-efficient channels (Kiosko and Vía<br>BCP). These channels represent 41% of total account openings (compared to 34% as of December 31, 2019).
(iii) The increase in the volume of time deposits at (i) BCP Stand-alone after more time deposits were opened in February through<br>Wholesale Banking (especially at Corporate Banking), after competitive rates were offered for professional funding, and (ii) BCP<br>Bolivia, due to a strategy to capture more stable deposits in the medium term.
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(iv) The contraction in severance indemnity deposits due to (i) the measure implemented by the Ministry of Economy and Finance in<br>March, which allowed independent workers to withdraw up to S/2,400 from their accounts to cover liquidity needs due to the impact<br>of COVID-19, and (ii) seasonality every first quarter, where employees tend to withdraw funds after the second yearly severance<br>payment is made in the month of November.
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In the four quarters ended March 31, 2019, total deposits and obligations registered growth in all types of deposits, translating into an increase of 15.3% in the main source of funding, which was primarily due to:

(i) A 20.0% increase in demand deposits due to growth in the volume of non-interest bearing demand deposits, which was primarily<br>attributable to current accounts held by Corporate Banking clients at BCP Stand-alone and mainly driven by FC (representing 60%<br>of the total increase in demand deposits).
(ii) The growth in savings deposits due to (i) a decrease in the consumption level of individual persons through credit and debit<br>cards due to the quarantine imposed to control the COVID-19 contagion, and (ii) the results of the campaigns to capture savings<br>accounts, mainly through digital channels, which have registered high levels of acceptance of and use by BCP’s clients.
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(iii) An 11.6% increase in time deposits, in line with the analysis for the three months ended March 31, 2020, mainly driven by volumes<br>in FC (representing 70% of the increase in time deposits).
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Deposits: dollarization level

Dollarization Level of Deposits^(1)^– BAP

(1) Quarter-end balances. 
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Credicorp – Deposit Dollarization measured in quarter-end balances

The dollarization level of Credicorp’s deposits remained stable in the three months ended March 31, 2020 after volumes in LC and FC increased at proportional levels, posting increases of 6.7% and 6.8%, respectively.

Growth in LC volumes was due primarily to savings deposits, demand deposits (particularly non-interest bearing deposits), and to a lesser extent, to time deposits. The expansion in FC volumes was attributable primarily to demand deposits via non-interest bearing demand deposits and to a lesser extent, to savings deposits. The increase in savings deposits was mainly attributable to accounts opened by individual persons while growth in demand deposits was associated with institutional clients in Wholesale Banking at BCP Stand-alone in both LC and FC.

The four quarters ended March 31, 2020 revealed slight growth in the dollarization level (20 basis points), which was attributable to a 15.8% growth in FC, which outpaced the increase of 14.8% growth registered in LC. The abovementioned was driven by an increase in all types of FC deposits, with the exception of severance indemnity deposits. The largest contributor to growth in FC were demand deposits (23.6%), led by non-interest bearing deposits (which represent 40% of the total increase in FC deposits) and time deposits (17.0%). In the case of LC deposits, all deposits types increased, mainly driven by savings deposits (accounting for 47% of total increase in LC deposits).

All of the abovementioned is aligned with the objective to maintain an adequate balance between assets and liabilities by currency in accordance with Credicorp’s appetite for risk.

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Market share in Deposits

Market share in Peru

Source: SBS

(1) Figures may not add due to rounding.

Peruvian Financial System: As of February 28, 2020, the subsidiaries of Credicorp in Peru, BCP and Mibanco, reported market shares of 29.9% and 2.8% respectively. Consequently, Credicorp continued to rank first in the financial system for total deposits, with a market share that was significantly higher than its closest competitor (which was a market share of 19.0%).

Comparing March 31, 2020 to March 31, 2019, BCP’s market share increased by 150 basis points. This was primarily attributable to an increase in the share of demand deposits (330 basis points). Mibanco’s market share, however, fell during the same period (to 2.7% as of March 31, 2020 compared to 2.9% as of March 31, 2019) due to a slight contraction in the market share of time deposits, which decreased by 40 basis points.

Bolivian Financial System: BCP Bolivia continued to rank fifth in the Bolivian financial system with a market share of 9.7% at the end of March 31, 2020 compared to 9.8% at the end of December 31, 2019. The market share fell by 9.9% as of March 31, 2020 compared to March 31, 2019.

Other Funding Sources

As of % Change
March<br> 31, 2019 December<br> 31, 2019 March<br> 31, 2020 March<br> 31, 2020 /<br> December<br> 31, 2019 March<br> 31, 2020 /<br> 2019
(Soles in thousands, except percentages)
Other funding sources
Due to banks and correspondents 7,219,120 8,841,732 9,854,630 11.5 % 36.5 %
BCRP instruments 4,984,192 4,381,011 5,346,373 22.0 % 7.3 %
Repurchase agreements 2,324,385 1,820,911 1,935,879 6.3 % (16.7 )%
Bonds and notes issued 15,472,882 14,946,363 15,178,148 1.7 % (1.9 )%
Total other funding sources 30,000,579 29,990,017 32,315,030 7.8 % 7.7 %

Other funding sources increased 7.8% compared to December 31, 2019 due to an increase in the volume of all other sources of funding. This expansion was primarily attributable to an increase in the amounts due to banks and correspondents and BCRP Instruments, which combined represented 84% of the increase of these sources of funding.

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Amounts due to banks and correspondents registered an increase in the level of obligations (i) at Atlantic Security Bank, due to a single short term operation to cover liquidity measures, (ii) at BCP Stand-alone, due to new operations with foreign financial institutions, in FC, and (iii) to a lesser extent, at Mibanco, due to new debts with companies in the national financial system and with COFIDE, in LC. It is important to note that 61% of this line is denominated in FC and as such, was impacted by the upward trend in the valuation of the U.S. dollar.

Growth in BCRP Instruments was attributable to new certificates of deposits (“CDs”) agreements and an increase in regular repos at BCP Stand-alone in March, after the bank took advantage of the attractive rates offered through BCRP lending operations. BCRP’s objective was to provide short-term liquidity to companies impacted by COVID-19.

The increase in repurchase agreements was primarily attributable to new interbank repurchase agreements at BCP Bolivia and to a lesser extent, at Atlantic Security Bank, both in FC.

Bonds and issued notes registered growth after a corporate bond was issued at BCP Stand-alone in February. Growth in this line was also attributable to a variation in the exchange rate given that 75% of the total volume of this line is in FC and 100% of the increase was in FC.

Comparing March 31, 2020 to March 31, 2019, other sources of funding rose 7.8%, which was primarily attributable to an increase in amounts due to banks and correspondents, which accounted for 88% of total growth in this line.

Liquidity Risk

We manage our assets and liabilities to ensure that we have sufficient liquidity to meet our present and future financial obligations and to be able to take advantage of appropriate business opportunities as they arise. Liquidity risk represents the potential for loss as a result of limitations on our ability to adjust future cash flows to meet the needs of depositors and borrowers and to fund operations on a timely and cost-effective basis. Financial obligations arise from withdrawals of deposits, repayment on maturity of purchased funds, extensions of loans or other forms of credit, and working capital needs.

The increase in our deposit base over the years has enabled us to significantly increase our lending activity. BCP and Mibanco are subject to SBS Resolution No. 9075-2012, enacted in December 2012, which set responsibilities for liquidity management within the different committees and risk units, and by which minimum liquidity ratios were established. The ratio of liquid assets as a percentage of short-term liabilities, as strictly defined by the SBS, must exceed 8% for Soles-based transactions, and 20% for foreign exchange-based transactions. We have never defaulted on any of our debt or been forced to reschedule any of our obligations. Even during the early 1980s, when the government of Peru and many Peruvian companies and banks were forced to restructure their debt as a result of the Latin American debt crisis and government restrictions, BCP and Grupo Pacifico complied with all of their payment obligations.

See also “Item 5. Operating and Financial Review and Prospects—5.B. Liquidity and Capital Resources—(2) Liquidity Risk” of our 2019 Form 20-F and our unaudited condensed consolidated interim financial information as of and for the three months ended March 31, 2020 for more information.

Additional Information

See also “Item 5. Operating and Financial Review and Prospects—5.B. Liquidity and Capital Resources” of our 2019 Form 20-F and our unaudited condensed consolidated interim financial information as of and for the three months ended March 31, 2020 for more information.

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Off-Balance Sheet Arrangements

We record various contractual obligations as liabilities in our financial statements. We do not recognize other contractual arrangements, such as off-balance-sheet exposures, as liabilities in our financial statements. These other contractual arrangements are required to be registered in off-balance-sheet accounts. We enter into these off-balance-sheet arrangements in the ordinary course of business to provide support to our clients and to hedge risks in our statement of financial position, including through use of guarantees, letters of credit, derivatives and swaps.

The following table reflects our off-balance sheet arrangements as of December 31, 2019 and March 31, 2020:

As of December 31,<br><br> 2019 As of March 31,<br><br> 2020
(in thousands of Soles)
Off-balance-sheet exposure
Guarantees and stand-by letters 18,894,456 18,138,220
Import and export letters of credit 2,186,579 2,288,182
Sub Total 21,081,035 20,426,402
Responsibilities under credit line agreements(1) 75,615,563 79,706,040
Derivatives (notional amount)
Forwards 27,422,634 27,928,979
Currency swaps 8,177,179 9,219,526
Options 1,565,083 1,564,752
Interest rate swaps 31,052,559 27,861,637
Cross currency swaps 1,221,030 1,280,127
Cross currency swaps and interest rate swaps 265,120 274,960
Futures 16,901 17,185
Sub Total 69,720,506 68,147,166
Total 166,417,104 168,279,608
(1) Lines of credit include consumer loans and other consumer loan facilities (credit card receivables) granted to customers and<br>are cancelable upon related notice to the customer.
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In the normal course of their business, our banking subsidiaries are parties to transactions with off-balance-sheet risk. These transactions expose them to additional credit risks relative to amounts recognized in the consolidated statements of financial position.

Credit risk for off-balance sheet financial instruments is defined as the possibility of sustaining a loss because any other party to a financial instrument fails to perform in accordance with the terms of the contract. The exposures to losses are represented by the contractual amount specified in the related contracts. We apply the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments (see Note 21(a) to our interim unaudited financial statements), including the requirement to obtain collateral when necessary. The collateral held varies, but may include deposits in financial institutions, securities or other assets. Many of the contingent transactions are expected to expire without any performance being required. Therefore, the total committed amounts do not necessarily represent future cash requirements.

Credicorp has currency-forwards derivatives. Currency-forwards are commitments to buy or sell currency at a future date at a contracted price. Risk arises from the possibility that the counterparty to the transaction will not perform as agreed and from the changes in the prices of the underlying currencies. As of March 31, 2020 and December 31, 2019, the nominal amounts for forward currency purchase and sale agreements, which in general have maturities of less than one year, were approximately S/27,929.0 million and S/27,422.6 million, respectively.

These agreements are entered into to satisfy client requirements and are recognized in the Consolidated Financial Statements at their fair value. As of March 31, 2020 and December 31, 2019, the forward contracts net position was an over-bought of U.S. dollars of approximately S/7,334.1 million and S/8,327.3 million, respectively.

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Credicorp’s swap contracts include interest rate and currency swap contracts, as well as cross-currency swap contracts. Interest rate and currency swap contracts are derivatives contracts, where counterparties exchange variable interest rates for fixed interest rates or different currencies, respectively, in the terms and conditions established at the contract inception. The risk arises each time the projected level of the variable rate during the term of the contract is higher than the swap rate, as well as from non-compliance with contractual terms by one of the parties. As of March 31, 2020, the notional amount of open interest rate and currency swap contracts was approximately S/37,081.2 million, compared to approximately S/39,229.7 million as of December 31, 2019, see note 13(b) to our interim unaudited financial statements.

Cross-currency swap contracts involve the exchange of interest payments based on two different currency principal balances and referenced interest rates. They generally also include the exchange of principal amounts at the start and end of the contract. As of March 31, 2020, the notional amount of cross-currency swap contracts was approximately S/1,555.1 million compared to approximately S/1,486.2 million as of December 31, 2019. See note 13(b) to our interim unaudited financial statements.

As of March 31, 2020, the fair values of the asset and liability forward-exchange contracts, options, futures and interest rate and cross-currency swaps amounted to approximately S/1,790.8 million and S/1,751.7 million, respectively (compared to approximately S/1,092.1 million and S/1,040.3 million as of December 31, 2019) and are included under the caption “Other assets and other liabilities” of the consolidated statements of financial position, respectively, see note 13(b) to our interim unaudited financial statements.

Commitments and Contractual Obligations

We enter into various commitments and contractual obligations which we recognize on our statement of financial position that may require future cash payments. The following table summarizes our commitments and contractual obligations by remaining maturity as of March 31, 2020.

Payments Due by Period
Total as of<br><br> March 31, 2020 Less than<br><br> 1 year 1–3 years 3–5 years More than<br> 5 years
(in thousands of Soles)
Borrowed funds 6,704,514 6,135,154 260,886 89,986 218,488
Promotional credit lines 3,056,167 282,999 535,386 514,247 1,723,535
Interbank funds — — — — —
Time deposits 33,954,557 24,436,910 6,004,161 795,182 2,718,304
Bonds and notes issued 15,054,611 2,065,679 1,250,591 4,959,838 6,778,503
Operating lease obligations(1) 1,031,631 128,621 228,269 206,528 468,213
Total(2) **** 59,801,480 **** 33,049,363 **** 8,279,293 **** 6,565,781 **** 11,907,043
(1) Demand deposits, saving deposits and severance indemnity deposits do not have a specific maturity date because they are required<br>on demand and therefore are excluded from this table.
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(2) The balance does not include accrued interest as of March 31, 2020 (which is not significant with respect to the item “Interest<br>and similar expense”); except for lease liabilities that includes future interest payments.
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Borrowed funds obtained include the obligation to comply with certain covenants which, in our management’s opinion, are being complied with as of the consolidated statement of financial position dates. Some international funds and promotional credit lines include standard covenants related to compliance with financial ratios, use of funds and other administrative matters. In our management’s opinion, these covenants do not limit our operations and we have fully complied with them as of the consolidated statement of financial position dates. Our deposits and obligations are widely diversified and have no significant concentrations.

Trend Information

We expect Peru’s GDP to experience a contraction due to the current global spread of COVID-19. The measures implemented to contain the COVID-19 contagion, both locally and abroad, have had disruptive effects on economic activity. Since March 15, 2020, President Vizcarra has taken swift and stringent action to control the COVID-19 pandemic through a countrywide lockdown, initially set for 15 days, which has been extended various times, and is currently in place until June 30, 2020. This has impacted several indicators, such as electricity demand and public investment. Our estimates suggest that the economy is operating at 40%-45% of its capacity during the lockdown. A package of measures to mitigate and stimulate the economy have been implemented for an equivalent of approximately 20% of GDP. These measures are designed to provide economic support for households and companies, access to private savings (pension funds, CTS, etc.) for individuals, injections of liquidity into the economy through Government-backed guarantees via the Reactiva Peru program and FAE program, tax alleviation and public spending measures, as well as other economic stimulus measures yet to be announced. For further detail about the COVID-19 risk related to the economy, please refer to “Item 3.D. Risk Factors—(12) Our business and results of operations could continue to be negatively impacted by the COVID-19 outbreak or other public health crises beyond our control” in our 2019 Form 20-F.

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At Credicorp, we are managing the impact of COVID-19 by tailoring responses by asset type and client segments. In terms of our investment portfolio, around 90% is comprised of fixed income investments (U.S. Treasuries, global and sovereign bonds, and Peruvian Certificated Deposits), as such, most value changes do not materially impact our results (as such fixed-income investments continue to provide the same level of payments regardless of market value), but do directly affect our equity because of changes in the value of the portfolio. In terms of our loan portfolio, the most highly exposed economic sectors include retail, vehicle, real estate (residential), poultry, airlines, tourism, microfinance, transportation and restaurants. From a client segmentation perspective, we consider Microfinance clients, SME Retail clients and part of our Wholesale clients to be the most exposed.

In order to help our clients through these difficult times, Credicorp has offered debt extensions, installment-freezing solutions and cost-free services, as well as zero-interest-rate financings, which, according to IFRS 9, may generate impairments in the short term. As a complementary measure for business clients, we are participating in the “Reactiva Peru” program, where BCP has been awarded a significant share of the amount auctioned.

The drivers that will impact Credicorp’s results throughout 2020 will be the macroeconomic environment, the special interest-free and cost-free solutions offered to clients and a marked decline in business activity during the lockdown, all of which will impact our sources of income. Additionally, the use of IFRS 9 will result in a significantly higher amount of provisions, since we are using judgement and adjusting our approach to determining expected losses in different circumstances, based on reasonable and supportable information. In line with the IFRS 9 methodology, forward looking COVID-19 provisions are estimated based on a macroeconomic perspective. Given that macroeconomic projections continue to worsen significantly, materially higher provisions than those already accounted for could be recorded in the future. Finally, in order to manage expenses, we are taking measures to optimize operating costs and to re-prioritize strategic projects.

In terms of our liquidity and capital management, Credicorp operates through strict risk management standards. For management decisions, Credicorp relies on liquidity coverage ratios of 15, 30 and 60 days, in line with Basel III. In the context of the COVID-19 pandemic, as measured through the first quarter of 2020, Credicorp has maintained its high quality liquid assets. As of the first quarter of 2020, each subsidiary maintains capital levels well above statutory requirements. In addition, Credicorp reduced dividends from all subsidiaries to strengthen the capital base of its operating units. For more detail about liquidity and regulatory capital, please see “Item 5. Operating and Financial Review and Prospects—5.B. Liquidity and Capital Resources” in our 2019 Form 20-F and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

In terms of relationships with clients, Credicorp clients have been able to rely on the strong relationships we have built over several years and have benefited from our digital network. During the lockdown period, in the three months ended March 31, 2020, loans and deposits have increased materially. Wholesale clients increased their short-term funding needs and part of the fresh liquidity obtained by the aforementioned segment has been maintained at the bank as demand deposits.

With respect to retail banking, the first quarter of 2020 has also been an opportunity for our clients to benefit from our digital channels. Yape welcomed more than 500,000 new users from January to April this year. As of April 2020, the monthly amount transacted through this app had grown almost four-fold compared to April 2019. Moreover, our BCP Stand-alone digital channels have registered a material gain in their share of our distribution network due to an uptick in use during lockdown.

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As a result of the above and due to the adoption of certain measures listed below, since the adoption of governmental measures to control the COVID-19 pandemic, there has been an increase in our provisions, and as a result our net income for the current period may be adversely impacted.

Some of the measures that Credicorp adopted in order to provide relief and assistance to its customers and the general population, include:

· the donation of S/100 million through BCP Stand-alone and S/10 million through Mibanco to help families in need, with the “Yo<br>me sumo” program;
· the reimbursement by Pacifico of 50% of car premiums in April and May to Individual clients which where up to date in their<br>payments;
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· the donation by Pacifico of S/5 million through life insurance to health services professionals, police and the Peruvian army;
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· the negative effect of Prima AFP’s fee income by the exemption of contributions to the pension fund system in April,<br>and the measures decreed by the government and congress that allow affiliates to withdraw a portion of the pension funds; and
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· an increase in the operating expenses of our lines of business as a result of measures taken to protect the health of employees<br>and clients, and to ensure business continuity.
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We are aware of the level of uncertainty we are facing, and as such, the need to adapt our businesses and organization in a changing environment. In this context, we are reviewing our strategic initiatives on a constant basis and adjusting them to each line of business:

Universal banking will focus on:

· engaging with customers to understand their financial needs post COVID-19;
· implementing the “Reactiva Peru” program;
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· adjusting risk management measures and designing medium-term restructuring initiatives;
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· re-starting sales capabilities coupled with dynamic pricing, and accelerating customer digital adoption; and
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· rethinking and implementing the new operating model.
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Microfinance will focus on:

· engaging with customers, assessing new needs and risks and executing refinancing initiatives;
· implementing the FAE program;
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· accelerating the path to the hybrid decision making model, leveraging the use of data and analytics;
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· redefining the new remote operating model; and
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· finalizing the Bancompartir merger by the third quarter of 2020.
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Insurance and pensions will focus on:

· re-starting the Insurance sales force, coupled with digital capabilities;
· adjusting Pacifico’s new operating model;
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· managing the liquidity and profitability of the Pension investment portfolio in the context of expected withdrawals; and
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· actively participating in pension system reform.
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Investment banking and wealth management will focus on:

· developing business opportunities in Wealth Management and Asset Management by offering a diversified portfolio;
· developing the Corporate Finance pipeline;
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· improving efficiency by re-prioritizing operating expenses and investments;
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· defining support functions and technological platforms to improve the customer experience and enable future growth; and
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· finalizing the integration of Ultraserfinco in the first half of 2020.
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Finally, on a consolidated level, Credicorp has launched a project to develop a strategy aimed at integrating ESG more deeply and consistently into business planning and activities. Additionally, to take advantage of the new opportunities, we will accelerate select specific initiatives at Krealo.

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Selected Statistical and Other Information

Interest-Earning Assets

As of March 31 2020, our interest earning assets had grown 4.7% compared to December 31, 2019. Growth in interest earning assets was mainly attributable to an increase in loan and investment balances. The comparison to March 31, 2019, which eliminates the effects of seasonality on loans, reflects an increase of 11.7% in interest earning assets, which was primarily driven by growth in loans, and to a lesser extent, by an increase in available funds and investments. As of March 31 2020, loans, our most profitable asset, registered growth in average daily balances of 1.0% compared to December 31, 2019 and 7.8% compared to March 31, 2019. This growth was mainly attributable to the increase in loans at BCP, primarily in the retail banking portfolio.

As of % Change
March<br> 31, 2019 December<br> 31, 2019 March<br> 31, 2020 March<br> 31, 2020 /<br><br> December<br> 31, 2019 March<br> 31, 2020 / 2019
Interest earning assets (Soles in thousands)
Cash and due from banks 14,816,077 19,671,684 19,162,140 (2.6 )% 29.3 %
Interbank funds 288,093 137,722 376,289 173.2 % 30.6 %
Total investments 34,960,529 33,530,531 36,816,653 9.8 % 5.3 %
Cash collateral, reverse repurchase agreements and securities borrowing 4,026,447 4,288,524 4,424,345 3.2 % 9.9 %
Financial assets designated at fair value through profit or loss 576,618 620,544 559,321 (9.9 )% (3.0 )%
Total loans(1) 108,350,384 115,609,679 120,708,515 4.4 % 11.4 %
Total interest earning assets 163,018,148 173,858,684 182,047,263 4.7 % 11.7 %
(1) Balances as of period end.
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As of % Change
--- --- --- --- --- --- --- --- --- --- --- --- ---
March<br> 31, 2019 December<br> 31, 2019 March<br> 31, 2020 March<br> 31, 2020 /<br><br> December<br> 31, 2019 March<br> 31, 2020 / 2019
(Soles in thousands)
Fair value through profit or loss investments 4,136,148 3,850,762 4,185,638 8.7 % 1.2 %
Fair value through other comprehensive income investments 27,184,560 26,202,723 28,374,836 8.3 % 4.4 %
Amortized cost investments 3,639,821 3,477,046 4,241,713 22.0 % 16.6 %
Total investments 34,960,529 33,530,531 36,816,563 9.8 % 5.3 %

Evolution of Interest Earning Assets

Total loans

Total loans as of March 31, 2020 increased 4.4% compared to December 31, 2019. Growth in total loans is mainly attributable to the translation effect on the FC portfolio, which was driven by a 3.7% appreciation of the U.S. Dollar. Excluding the FC translation effect, total loans increased 2.9% in real terms. As of March 31, 2020, FC loans represented 40.1% of total loans. Quarterly growth in the total loan portfolio was mainly attributable to shifts in loan balances at BCP Stand-alone, which posted mixed results:

(i) The largest increase in the portfolio was driven by wholesale banking, which registered double-digit growth (a 10.5% increase<br>in growth as of March 31, 2020 compared to December 31, 2019). This was primarily attributable to the translation effect caused<br>by the appreciation of the U.S. dollar. 
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(ii) The retail banking portfolio remained stable, with growth in loans in the mortgage, consumer and business segments, which was<br>offset by decreases in loan balances in the credit card and SME-Pyme segments. The decreases in credit card and SME-Pyme balances<br>are subject to a degree of seasonality in the first quarter of every year, when loan balances decrease in comparison to balances<br>in the final few months of the preceding year, which generally increase due to retail spend and SME-Pyme spending (and consequently<br>higher lending balances) driven by the Christmas holiday and year-end sales campaigns.

Comparing March 31, 2020 to March 31, 2019, loans increased 11.4% (9.9% excluding the translation effect for exchange rate variation). This growth was attributable to expansion across all segments in 2020, which was attributable, in order of magnitude, to the following:

(i) growth in the wholesale banking portfolio, led by corporate banking, which was primarily attributable to an increase in loan<br>disbursements for medium and long-term loans in LC and to financing for working capital in both LC and FC;
(ii) growth in retail banking loans, led by the mortgage segment and followed by the consumer, SME Business, SME-Pyme and credit<br>card segments;
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(iii) expansion in Mibanco’s portfolio (a 5.3% increase as of March 31, 2020 compared to March 31, 2019) and BCP Bolivia (a<br>4.3% increase as of March 31, 2020 compared to March 31, 2019).
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Investments

Total investments increased 5.3% and 9.8% as of March 31, 2020 compared to March 31, 2019 and December 31, 2019, respectively. Expansion was driven by growth in the fair value through other comprehensive income portfolio (formerly characterized as investments available for sale) at BCP Stand-alone, which was driven by purchases of low risk assets in the context of attractive prices due to the adverse market conditions arising in connection with the COVID-19 pandemic, which caused a significant decline in prices of financial assets across the globe that generated investment opportunities.

Other IEA

As of March 31, 2020, available funds decreased 2.6% compared to December 31, 2019, after a reduction was registered in FC funds, which were transferred to other profitable assets when the BCRP freed up reserves to inject liquidity into the financial system in an effort to mitigate the economic impact arising from government measures taken to stem the spread of disease in connection with the COVID-19 pandemic. Comparing March 31, 2020 to 2019, available funds increased 29.3%, driven by an increase in FC funds held in BCRP and, to a lesser extent, by an increase in FC balances held in foreign banks.

Credicorp Loans

Loan evolution by business segment

The table below shows the breakdown of loans by subsidiary and business segment measured in average daily balances. These balances provide the most complete picture of how interest on loans, which constitutes Credicorp’s primary source of income, has evolved. Additionally, average daily balances reflect trends or variations to a different degree than quarter-end balances which may include pre-payments or loans made at the end of the quarter. In comparative terms, these payments, affect average daily balances less than quarter-end balances and as such, the former provide a more balanced picture of the growth of our loan portfolio.

As of March 31, 2020, average daily balances increased 1.0% compared to December 31, 2019 due to an increase in the balances of consumer, mortgage and corporate banking loans within BCP, and growth in Mibanco. This growth was partially offset by a decrease in SME-Business and middle market banking loans within BCP. Comparing March 31, 2020 to 2019, growth in average daily loan balances was 7.8%, driven by growth in the mortgage, consumer and SME-Pyme segments in retail banking and the corporate banking segment in wholesale banking. The growth in loan balances was concentrated mainly in local currency.

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Loan Evolution Measured in Average Daily Balances by Segment(1)

Total<br> Loans %<br> Change %<br> of Total Loans
As<br> of March<br> 31, 2019 As<br> of December<br> 31, 2019 As<br> of March<br> 31, 2020 March<br><br> 31, 2020 / December<br> 31, 2019 March<br><br> 31, 2020 / 2019 As<br> of March<br> 31, 2019 As<br> of December<br> 31, 2019 As<br> of March<br> 31, 2020
(Soles in millions,<br> except percentages)
BCP 88,020 94,390 95,083 0.7 % 8.0 % 81.9 % 82.3 % 82.1 %
Wholesale Banking 45,299 47,446 47,658 0.4 % 5.2 % 42.2 % 41.4 % 41.2 %
Corporate 27,670 28,860 29,146 1.0 % 5.3 % 25.7 % 25.2 % 25.2 %
Middle – Market 17,629 18,586 18,511 (0.4 )% 5.0 % 16.4 % 16.2 % 16.0 %
Retail Banking 42,720 46,944 47,425 1.0 % 11.0 % 39.8 % 41.0 % 40.9 %
SME – Business 5,258 5,806 5,456 (6.0 )% 3.8 % 4.9 % 5.1 % 4.7 %
SME – Pyme 9,413 10,194 10,330 1.3 % 9.7 % 8.8 % 8.9 % 8.9 %
Mortgage 15,100 16,590 16,905 1.9 % 12.0 % 14.1 % 14.5 % 14.6 %
Consumer 7,645 8,659 8,984 3.8 % 17.5 % 7.1 % 7.6 % 7.8 %
Credit card 5,305 5,695 5,750 1.0 % 8.4 % 4.9 % 5.0 % 5.0 %
Mibanco 9,910 10,310 10,629 3.1 % 7.3 % 9.2 % 9.0 % 9.2 %
Bolivia 7,096 7,563 7,686 1.6 % 8.3 % 6.6 % 6.6 % 6.6 %
Atlantic Security Bank 2,442 2,368 2,415 2.0 % (1.1 )% 2.3 % 2.1 % 2.1 %
BAP’s total loans 107,468 114,631 115,813 1.0 % 7.8 % 100.0 % 100.0 % 100.0 %

For consolidation purposes, loans generated in FC are converted to LC.

(1) Includes work out unit, and other banking.

Loan Growth in Average Daily Balances

Expressed in millions of S/

Increase of 1.0% in the Three Months Ended March 31, 2020

During the three months ended March 31, 2020, growth in average daily balances by business segment reflected mixed results due to economic conditions arising as a result of the COVID-19 pandemic and by a seasonal effect that caused downward pressure on loan growth:

(i) In the retail banking portfolio, the consumer and mortgage segments recorded strong growth, followed by SME-Pyme and credit<br>cards. This growth was offset by a decrease in average daily balances in the SME-Business due to the seasonal effect<br>experienced in this part of the year due to less active lending to small and medium-sized businesses in the beginning of the year<br>in comparison to the final months of each year in connection with increased business spending during the Christmas holiday seasons<br>and year-end sales campaigns. 
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(ii) Growth in the microfinance portfolio, and, to a lesser extent, expansion in loans at BCP Bolivia.
(iii) Within the wholesale banking portfolio, growth in corporate banking was attributable to an appreciation in the U.S. dollar<br>given that FC loans account for 58% of total wholesale banking loans. The contraction in the middle market loan portfolio was even<br>greater in real terms due to the translation effect given that 54% of all middle market loans are in FC.
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Loan Growth in Average Daily Balances

Expressed in millions of S/

Increase of 7.8% in the four quarters ended March 31, 2020

The analysis of our growth by segment in the four quarters ended March 31, 2020, measured in average daily balances, reveals:

(i) Growth in retail banking, led by expansion in the mortgage segment (an increase of S/1,806 million, or 12.0%), which continued<br>the upward trend in line with recent quarters. Record growth for this segment was registered throughout 2019, fueled by favorable<br>economic conditions and Mivivienda loans.
(ii) Other significant variations, which were registered in the consumer segment (an increase of S/1,339 million, or 17.5%), SME-Pyme (an<br>increase of S/917 million, or 9.7%) and credit cards (an increase of S/444 million, or 8.4%) within retail banking and in corporate<br>banking (an increase of S/1,476 million, or 5.3%) and middle market banking (an increase of S/883 million, or 5.0%) within<br>wholesale banking. Excluding the translation effect for foreign currency loans, Corporate Banking and Middle Market Banking would have<br>grown 3.5% (S/971 million) and 3.3% (S/585 million), respectively, if we exclude the effect of year-over-year U.S. dollar<br>appreciation of 3.6% in the four quarters ended March 31, 2020.
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(iii) Growth in Mibanco loans of 7.3%, which reflects the bank’s strategy to grow its portfolio and remain focused on financial<br>inclusion (that is, attracting new clients to the financial system) while meeting the needs of existing clients, many of whom face<br>adversity due to the global spread of COVID-19. The economic impact of the COVID-19 pandemic has been particularly acute for microbusinesses.
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(iv) Growth of 8.3% in loans at BCP Bolivia. This growth was primarily attributable to expansion in the retail portfolio, which<br>was led by the mortgage segment followed by the consumer segment. Wholesale banking also contributed to growth to a lesser extent.<br>Expansion in the wholesale banking portfolio was led by middle market banking, followed by corporate banking.
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Growth in the Level of Dollarization by Segment

Loan Growth by Currency - Average Daily Balances(1)

Domestic<br> Currency Loans Foreign<br> Currency Loans %<br> Part. by Currency
Soles<br> in millions U.S.<br> in millions Three<br> Months Ended March 31, 2020
As<br> of March<br> 31, 2019 As<br> of December<br> 31, 2019 As<br> of March<br> 31, 2020 March<br><br> 31, 2020 / December<br> 31, 2019 March<br> 31, 2020 / 2019 As<br> of March<br> 31, 2019 As<br> of December<br> 31, 2019 As<br> of March<br> 31, 2020 March<br><br> 31, 2020 / December<br> 31, 2019 March<br><br> 31, 2020 / 2019 LC FC
(Soles in millions,<br> except percentages) (U.S. Dollars<br> in millions, except percentages)
BCP<br> Stand-alone 54,956 60,870 60,854 0.0 % % 9,963 10,000 10,009 0.1 % 0.5 % 64.0 % 36.0 %
Wholesale<br> Banking 19,753 21,614 20,733 (4.1 )% % 7,698 7,707 7,873 2.2 % 2.3 % 43.5 % 56.5 %
Corporate 11,551 12,854 12,186 (5.2 )% % 4,857 4,775 4,959 3.9 % 2.1 % 41.8 % 58.2 %
Middle-Market 8,202 8,760 8,546 (2.4 )% % 2,841 2,931 2,914 (0.6 )% 2.6 % 46.2 % 53.8 %
Retail<br> Banking 35,203 39,257 40,122 2.2 % % 2,265 2,293 2,136 (6.9 )% (5.7 )% 84.6 % 15.4 %
SME –<br> Business 2,490 2,695 2,624 (2.6 )% % 834 928 828 (10.8 )% (0.7 )% 48.1 % 51.9 %
SME –<br> Pyme 9,161 9,982 10,104 1.2 % % 76 63 66 4.2 % (13.3 )% 97.8 % 2.2 %
Mortgage 12,477 14,249 14,698 3.1 % % 790 698 646 (7.5 )% (18.3 )% 86.9 % 13.1 %
Consumer 6,478 7,465 7,763 4.0 % % 352 356 357 0.2 % 1.5 % 86.4 % 13.6 %
Credit<br> Card 4,598 4,865 4,932 1.4 % % 213 248 239 (3.4 )% 12.3 % 85.8 % 14.2 %
Mibanco 9,364 9,785 10,064 2.9 % % 164 157 165 5.4 % 0.4 % 94.7 % 5.3 %
Bolivia ¾ ¾ ¾ ¾ 2,139 2,256 2,247 (0.4 )% 5.1 % ¾ 100.0 %
Atlantic<br> Security Bank ¾ ¾ ¾ ¾ 736 706 706 0.0 % (4.0 )% ¾ 100.0 %
Total<br> loans 64,320 70,655 70,919 0.4 % % 13,002 13,119 13,127 0.1 % 1.0 % 61.2 % 38.8 %

All values are in US Dollars.

(1) Includes Work out unit, and other banking.

For the three months ended March 31, 2020, LC loan growth was led by the retail banking segment and Mibanco, offset in part by decreases in the wholesale banking portfolio. The corporate banking segment contributed to growth in the FC loan portfolio, offset in part by decreases in the SME-Business and mortgage segments within retail banking.

For the four quarters ended March 31, 2020, the wholesale banking and retail banking segments and Mibanco contributed to growth in the LC portfolio. Within the FC portfolio, wholesale banking and BCP Bolivia were the primary contributors to growth, offset in part by a decrease in balances in FC loans in the mortgage segment.

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Twelve Months Ended March 31, 2020 Growth of the Level of Dollarization by Segment(1)(2)(3)

(1) Average daily balances.
(2) The FC share of Credicorp’s loan portfolio is calculated including BCP Bolivia<br>and Atlantic Security Bank, however the chart shows only the loan books of BCP Stand-alone and Mibanco.
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(3) The year with the historic maximum level of dollarization for Wholesale Banking was 2012,<br>for Mibanco was 2016 and for the rest of segments was 2009.
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At BCP, the level of loans denominated in U.S. dollars fell to 36% as of March 31, 2020. Dollarization continued a downward trend across segments, led by the mortgage segment, which decreased from 17% as of March 31, 2019 to 13% as of March 31, 2020. This decrease was due to a high percentage of mortgage loans that were disbursed in FC and also reflects compliance with the dollarization targets set by the BCRP.

As shown by the chart below, the share of the loan portfolio that is highly exposed to foreign currency exchange risk on credit risk remains relatively low.

BCRP De-Dollarization plan at BCP Stand-alone

At the end of 2014, the BCRP established a program to reduce the dollarization level of the total loan portfolio throughout the Peruvian banking system. As part of this program, the BCRP set certain targets to reduce loan balances denominated in U.S. dollars progressively by the end of each of June 2015, December 2015, December 2016, December 2017, December 2018 and December 2019. However, for the remainder of 2020, the BCRP has suspended the requirement for additional reserves for FC loans and consequently suspended the reduction targets for loan balances in FC. This change in position by the BCRP was driven by the need to bolster liquidity in the financial system to mitigate the economic impact of the COVID-19 pandemic.

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Market Share in Loans

Market Share in Peru(1)

(1) Market shares are different than previously reported because they now include non-performing loans in the sample.

Peruvian Financial System

At the end of February 2020, BCP continued to lead the Peruvian financial market with a market share of 28.8%, with the next closest competitor registering a market share of 17.7%. Mibanco’s market share of the total financial system was 3.2%, which was similar to its market share positions as of December 31, 2019 and March 31, 2019.

Within wholesale banking, the corporate banking segment registered an advance of 40 basis points in its market share compared to its market share as of December 31, 2019. The middle market banking segment’s market share held steady at 35.9%. In the four quarters ended March 31, 2020, the corporate banking segment registered a 40 basis point decline in its market share while the middle market banking segment reported a 50 basis point increase in its market share. These BCP segments continue to lead their respective markets.

As of March 31, 2020, in retail banking, BCP continued to lead the market in the mortgage segment (a zero basis point increase compared to December 31, 2019 and a 60 basis point increase compared to March 31, 2019) and in the SME-Business segment (a 120 basis points decrease compared to December 31, 2019 and 310 basis points increase compared to March 31, 2019). In the consumer and credit card segments, BCP ranked second in both markets.

In the SME-Pyme segment, Mibanco continued to lead with a market share of 21.9%, which was greater than the market share of 21.7% registered as of December 31, 2019, but lower than the 22.4% market share reported as of March 31, 2019 due to a highly competitive market for microlending in 2019. BCP continued to rank second in the microlending segment with a market share of 11.6%.

Bolivian Financial System

Finally, BCP Bolivia’s market share remained at the levels recorded in the last quarter of 2019 and for the previous year. BCP Bolivia continues to rank fifth in the Bolivian financial system with a market share of 9.4%.

Funding Sources

As of March 31, 2020, total funding increased 7.0% in comparison to December 31, 2019 and 13.6% in comparison to March 31, 2019. Growth was primarily attributable to an increase in deposits and obligations, which each recorded increases in their share of total funding. These increases were driven mainly by growth in the volume of demand deposits, primarily non-interest bearing, and savings deposits, which constitute lowest-cost sources of funding. Within other sources of funding, the highest growth was seen in due to banks and correspondents. As of March 31, 2020, the funding mix and the rate effect contributed to a contraction in Credicorp’s funding cost of 17 basis points compared to December 31, 2019 and a 25 basis points decrease compared to March 31, 2019.

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As<br> of %<br> Change
March<br><br> 31, 2019 December<br><br> 31, 2019 March<br><br> 31, 2020 March<br><br> 31, 2020 / December<br> 31, 2019 March<br><br> 31, 2020 / 2019
(Soles in thousands,<br> except percentages)
Demand deposits 31,695,558 34,213,188 38,746,240 13.2 % 22.2 %
Saving deposits 32,968,147 35,179,770 37,872,955 7.7 % 14.9 %
Time deposits 31,399,811 34,034,037 35,045,214 3.0 % 11.6 %
Severance indemnity deposits 7,074,344 7,897,199 7,204,922 (8.8 )% 1.8 %
Interest payable 589,397 681,191 694,214 1.9 % 17.8 %
Deposits and obligations 103,727,257 112,005,385 119,563,545 6.7 % 15.3 %
Due to banks and correspondents 7,219,120 8,841,732 9,854,630 11.5 % 36.5 %
BCRP instruments 4,984,192 4,381,011 5,346,373 22.0 % 7.3 %
Repurchase agreements 2,324,385 1,820,911 1,935,879 6.3 % (16.7 )%
Bonds and notes issued 15,472,882 14,946,363 15,178,148 1.7 % (1.9 )%
Total funding 133,727,836 141,995,402 151,878,575 7.0 % 13.6 %

Funding Structure

Evolution of Funding Structure and Cost – BAP

(S/ billions)

The chart showing the evolution of our funding structure and cost is calculated using period-end balances. In general, the funding structure reflects:

(i) The on-going growth in deposits, our main source of funding, which implies lower costs compared to other funding sources. Deposits<br>as a share of total funding increased to 78.7% as of March 31, 2020 compared to 77.6% as of March 31, 2019. This growth was due<br>to an increase in the volume of all types of deposits, which reflects expansion of 15.3% in the four quarters ended March 31, 2020.
(ii) Within the deposit mix, demand deposits and savings deposits showed significant growth as of March 31, 2020, increasing their<br>share of total deposits to 64.1% as compared to 62.0% as of December 31, 2019 and 62.3% as of March 31, 2019. Both deposit types<br>offer the lowest costs within the mix of deposits.
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(iii) Expansion of 7.8% compared to each of December 31, 2019 and March 31, 2019 in other funding sources, which was mainly attributable<br>to an increase in the volume of due to banks and correspondents (an 11.5% increase compared to December 31, 2019 and a 36.5% increase<br>compared to March 31, 2019) and BCRP instruments (a 22.0% increase compared to December 31, 2019 and a 7.3% increase compared to<br>March 31, 2019), as explained in more detail under “Management’s Discussion and Analysis of Financial Condition and<br>Results of Operations—Liquidity and Capital Resources—Other Sources of Funding.”
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Deposits and Other Funding Sources

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Deposits” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Other Sources of Funding.”

Loan / Deposit (L/D)

Loan / Deposit Ratio by Subsidiary

Comparing March 31, 2020 to March 31, 2019, the L/D ratio at Credicorp fell 101.0%. This was due to the fact that growth in deposits (6.7%) outpaced the growth in loans (4.4%).

At the subsidiary level for BCP, the L/D ratio followed a similar trend, with a decrease in BCP’s L/D ratio to 102.8% as of March 31, 2020 compared to 105.1% as of December 31, 2019 due to the growth in deposit volume (7.8%) outpacing the growth in loans (5.4%). This was driven by an increase in the level of demand deposits and savings deposits. Mibanco’s L/D ratio increased during the three months ended March 31, 2020 primarily due to a 2.2% decrease in deposits.

Comparing March 31, 2020 to March 31, 2019, the L/D ratio at Credicorp and its subsidiaries reflects the same dynamics as the periods ending March 31, 2020 and December 31, 2019. At the Credicorp level, on-going growth in deposits exceeded growth in loans (15.3% and 11.4%, respectively).

Loan / Deposit Ratio by Currency

Local Currency

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Foreign Currency

Comparing March 31, 2020 to December 31, 2019 by currency, the L/D ratio in LC at Credicorp decreased in line with higher growth in LC deposits, mainly driven by demand deposits and savings deposits through BCP. The L/D ratio in FC at Credicorp increased 100 basis points comparing March 31, 2020 to December 31, 2019 after the increase in loans (8.2%) outpaced the growth in deposits (6.8%). This change was driven primarily by loan growth in FC (9.9%) at BCP that exceeded the growth in FC deposits (8.2%) at BCP.

Comparing March 31, 2020 to December 31, 2019, the L/D ratio in LC and FC fell after the increase in deposits in both currencies outpaced the growth in loans in both currencies.

Funding Cost

Funding Cost – Credicorp(1)

(1) The funding cost by currency is calculated with the average of period-beginning and period-ending balances.

Funding cost at Credicorp decreased as of March 31, 2020 compared to December 31, 2019 and March 31, 2019. The decrease in funding costs as of March 31, 2020 compared to December 31, 2019 was attributable to:

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(i) A decrease in the funding cost in FC of 18 basis points, which was due primarily to a decrease in interest expenses on bonds<br>and issued notes, which accounted for 80% of the total decrease in FC expenses, due primarily to BCP’s liability management<br>at lower rates at the end of 2019.
(ii) A decrease in the total funding cost of 17 basis points, which was primarily attributable to a decrease in expenses for all<br>sources of funding as international rates continued to follow a downward trend. In addition, the total funding mix has improved<br>due to an increase in the volume of low-cost sources of funding, such as deposits.
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(iii) A decrease in the funding cost in LC of 14 basis points, which was due primarily to an increase in the total volume of funding<br>in LC, which increased 6.6%, while interest expenses decreased by 0.1% due to lower expenses from due to banks and correspondents.
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There was a 25 basis point decrease in the total funding cost as of March 31, 2020 compared to March 31, 2019, primarily attributable to:

(i) A more favorable deposit mix given that lower-cost deposits, such as demand deposits and savings deposits, posted the highest<br>growth (22.2% and 14.9%, respectively), as well as a favorable currency mix, where growth in FC deposits outpaced growth in LC<br>deposits.
(ii) The recomposition of the funding structure, where deposits gained an increase in their share of total funding (going from 77.6%<br>as of March 31, 2019 to 78.7% as of March 31, 2020), representing 87% of the total increase in funding.
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(iii) A decrease in interest rates nationally and internationally, which led to a decrease in the funding cost of all funding sources.
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The funding cost by subsidiary is depicted in the chart below:

Funding Cost by Subsidiary – Credicorp

(i) The funding cost at BCP followed the same trend as the funding cost at Credicorp, which reflected a decrease when comparing<br>March 31, 2020 to March 31, 2019 that was primarily attributable to (i) the funding mix, which was composed of a higher volume<br>of deposits (which represent 85% of the increase in funding), (ii) an improvement in the deposit mix where demand deposits and<br>savings deposits registered the most significant increases (which represent 92% of the increase in total deposits), and (iii) the<br>effect of lower interest rates, due to high exposure to lower international interest rates, considering that 50% of funding is<br>in FC. The funding cost has remained relatively stable year-to-year, at 2.09% in 2017, 1.99% in 2018 and 2.10% in 2019. 
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(ii) The funding cost at Mibanco decreased considerably when comparing March 31, 2020 to March 31, 2019. When comparing March 31,<br>2020 to December 31, 2019, interest expenses decreased due to a decrease in leasing expenses. When comparing March 31, 2020 to<br>March 31, 2019, the decrease was attributable to a decrease in financial expenses for (i) bonds and issued notes, which reported<br>a decrease in volume (63%), and (ii) deposits (to a lesser extent), due to a decrease in the level of the most expensive deposits,<br>such as time deposits (3%), which were replaced by retail savings deposits. Between 2017 and 2018, the cost of funding decreased<br>by 75 basis points due to an improved funding structure, with an increase in deposits. Between 2018 and 2019, the cost of funding<br>remained relatively stable, reaching 4.26% in 2019.
(iii) When comparing March 31, 2020 to March 31, 2019, the funding cost increased due to the effect of both the volume and mix, where<br>time deposits had the greatest increase. BCP Bolivia’s funding cost has increased each year in the past three years, from<br>2.40% in 2017, to 2.96% in 2018 and 3.10% in 2019.
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Portfolio Quality and Provisions for Loan Losses

The cost of risk at Credicorp increased significantly when comparing March 31, 2020 to December 31, 2019 and when comparing March 31, 2020 to March 31, 2019, primarily in connection with expectations that Peru and the region will enter a recession and a decrease in the debt service capacity of certain clients due to the economic impact of the COVID-19 pandemic. Consequently, we have made significant increases in provisions for loan losses for all segments at each subsidiary. We expect that the total impact will be felt throughout the year. In terms of portfolio quality ratios, the non-performing loan (“NPL”) ratio deteriorated due to a degree of deterioration in the SME-Pyme and credit card segments. The impact on the NPL ratio has been addressed to a certain extent by certain measures taken by the Peruvian government, and Credicorp, to mitigate the negative effects of the COVID-19 pandemic on the economy, and Credicorp’s clients, respectively. In this context, the coverage ratio for NPL loans rose from 109.7% as of March 31, 2019 to 126.1% in as of March 31, 2020.

Quarterly Evolution of the Cost of Risk (Basis Points)

(1) Includes BCP Bolivia, Encumbra, Bancompartir, Atlantic Security Bank and eliminations for consolidation purposes. 
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Provisions for loan losses

For<br> the Three Months Ended %<br> Change
March<br><br> 31, 2019 December<br><br> 31, 2019 March<br><br> 31, 2020 March<br><br> 31, 2020 /<br><br> December<br> 31, 2019 March<br><br> 31, 2020 / 2019
(Soles<br> in thousands, except percentages)
Gross<br> provision for credit losses on loan portfolio (453,285 ) (568,727 ) (1,388,711 ) 144.2 % 206.4 %
Recoveries<br> of written-off loans 70,074 57,067 47,230 (17.2 )% (32.6 )%
Provision<br> for credit losses on loan portfolio,net of recoveries (383,211 ) (511,660 ) (1,341,481 ) 162.2 % 250.1 %

Net provisions for loan losses after recoveries increased significantly when comparing March 31, 2020 to March 31, 2019 and when comparing March 31, 2020 to December 31, 2019, in line with expectations of a recession in Peru and the region and with the reduction in the debt service capacity of certain clients due to the economic effects of the COVID-19 pandemic. Credicorp and the government have taken different measures in an effort to mitigate the deterioration in clients’ capacity to pay, and the economy, respectively. Credicorp has offered its clients the following measures:

(i) BCP has offered its retail banking clients the opportunity to reschedule repayments on their loans for 30 or 90 days without<br>incurring fees for overdue amounts and interest on principal.
(ii) Mibanco has also offered loan extensions to certain clients with a grace period of up to 6 months, which includes a waiver<br>of interest on principal.
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(iii) In April, both BCP and Mibanco have granted clients the option to postpone payments in April and May without incurring additional<br>interest.
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These benefits have been granted without affecting our clients’ risk ratings.

These actions served to ameliorate, to a certain extent, the provisions we made for credit losses on our loan portfolio, net of recoveries. However, a number of factors could not be offset and will continue to affect the lending portfolio throughout the year, including:

(i) Changes in macroeconomic expectations due to the COVID-19 pandemic, with expectations for a recession in the Peruvian economy<br>causing a negative impact in the framework of expected losses. Moreover, loan loss provisions may increase if economic expectations<br>continue to deteriorate.
(ii) Portfolio deterioration, where a number of clients have been affected by a stoppage in their operations or sales due to lockdowns<br>ordered by the government in connection with the COVID-19 pandemic. This has been reflected primarily in the retail segment at<br>BCP Stand-alone, and was particularly marked in the SME-Pyme, credit card, consumer and mortgage segments.
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We believe the impact of COVID-19 on the middle-market and SME-Business portfolios will be mitigated in part by the Reactiva Peru loan program offered by the Peruvian government. Through this program, eligible companies will receive loans backed by government guarantees with coverage rates between 80%-98%. Additionally, through the Enterprise Support Fund (“FAE”) we will be able to provide loans to the SME-Pyme segment and Mibanco, where loans will be backed by government guarantees for 90%-98% of the total amount.

Finally, provisions at BCP Stand-alone increased on top of provisions related to COVID-19, mainly attributable to the deterioration in the SME-Pyme segment, in revolving loans in particular, and to a lesser extent, attributable to deterioration in the credit card segment, which reflected excess lending in the financial system.

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Cost of risk

For<br> the Three Months Ended %<br> Change
March<br><br> 31, 2019 December<br><br> 31, 2019 March<br><br> 31, 2020 March<br><br> 31, 2020 /<br><br> December<br> 31, 2019 March<br><br> 31, 2020 / 2019
Cost of risk and Provisions (Soles<br> in thousands, except percentages)
Cost of risk(1) 1.41 % 1.77 % 4.45 % 268<br> bps 304<br> bps
Provision<br> for credit losses on loan portfolio,<br> net of recoveries/Net interest income 17.4 % 21.6 % 56.4 % 3,480<br> bps 3,890<br> bps
(1) Annualized Provision for credit losses on loan portfolio, net of recoveries / Total loans.
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Due to the factors described above, Credicorp’s cost of risk increased 268 basis points when comparing the three months ended March 31, 2020 to three months ended December 31, 2019 and 304 basis points when comparing the three months ended March 31, 2020 to three months ended March 31, 2019.

Portfolio Quality: Delinquency Ratios

As of % Change
March<br> 31, 2019 December<br> 31, 2019 March<br> 31, 2020 March<br> 31, 2020 /<br><br> December<br> 31, 2019 March<br> 31, 2020 / 2019
Portfolio quality and Delinquency ratios (Soles in thousands, except percentages)
Total loans (Quarter(end balance) 108,350,384 115,609,679 120,708,515 4.4 % 11.4 %
Allowance for loan losses 4,862,801 5,123,962 5,931,772 17.0 % 22.0 %
Write-offs 433,231 509,571 519,866 2.0 % 20.0 %
Internal overdue loans (IOLs)(1) 3,153,187 3,297,791 3,579,504 8.5 % 13.5 %
Internal overdue loans over 90-days(1) 2,263,777 2,479,940 2,239,789 (9.7 )% (1.1 )%
Refinanced loans 1,278,459 1,182,798 1,125,394 (4.9 )% (12.0 )%
Non(performing loans (NPLs)(2) 4,431,646 4,480,589 4,704,898 5.0 % 6.2 %
IOL ratio 2.91 % 2.85 % 2.97 % 12 bps 6 bps
IOL over 90(days ratio(3) 2.09 % 2.15 % 1.86 % (29) bps (23) bps
NPL ratio 4.09 % 3.88 % 3.90 % 2 bps (19) bps
Coverage ratio of IOLs 154.2 % 155.4 % 165.7 % 1,034 bps 1,150 bps
Coverage ratio of IOL 90-days 214.8 % 204.5 % 264.8 % 6,030 bps 5,000 bps
Coverage ratio of NPLs 109.7 % 114.4 % 126.1 % 1,170 bps 1,640 bps
(1) Includes overdue loans and loans under legal collection (quarter-end balances).
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(2) Non-performing loans include internal overdue loans and refinanced loans (quarter-end balances).
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In terms of portfolio delinquency, it is important to note:

(i) The delinquency level of our loan portfolio was not impacted by the economic consequences of the COVID-19 pandemic as<br>of March 31, 2019, primarily due to Credicorp’s quick action to offer clients debt repayment plans or a<br>freeze on debt payments.
(ii) The total internal overdue loans (“IOL”) portfolio increased 8.5% when comparing March 31, 2020 to December 31,<br>2019 and 13.5% when comparing March 31, 2020 to March 31, 2019, mainly in the retail banking business, in particular in the SME-business<br>segment after a small number of clients experienced a deterioration in their debt service capacity. These loans have been correctly<br>provisioned but cannot be written off given that they have guarantees. Additionally, the SME-PYME segment registered an increase<br>in IOLs, which was primarily attributable to a deterioration in revolving loans during the quarter.
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(iii) The NPL portfolio increased 5.0%  when comparing March 31, 2020 to December 31, 2019 and 6.2%  when comparing<br>March 31, 2020 to March 31, 2019. This increase was lower than the increase recorded in the IOL portfolio due to a 4.9% decrease <br>when comparing March 31, 2020 to December 31, 2019 and 12.0%  when comparing March 31, 2020 to March 31, 2019, in<br>the refinanced portfolio. When comparing March 31, 2020 to December 31, 2019, the reduction was mainly attributable to the retail<br>banking segment. When comparing March 31, 2020 to March 31, 2019, the result was driven by amortizations of refinanced<br>loans for the construction sector in wholesale banking during the last quarter, which offset the increase in NPL loans in the SME-Pyme<br>and credit card segments.
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Due to the factors described above, our delinquency ratios deteriorated when comparing March 31, 2020 to December 31, 2019. When comparing March 31, 2020 to March 31, 2019, however, the NPL ratio improved by 19 basis points after loans increased 11.4%, offsetting the increase registered in the IOL portfolio.

Our coverage ratios improved when comparing March 31, 2020 to December 31, 2019 and when comparing March 31, 2020 to March 31, 2019, in line with an increase in provisions due to the economic consequences of the COVID-19 pandemic, which offset growth in the IOL and NPL portfolios.

Other factors that impact an analysis of our delinquency indicators include that:

(i) Traditional delinquency ratios (IOL and NPL ratios) continue to be distorted by the presence of loans with real<br>estate collateral (commercial and residential properties). This means that a significant portion of loans that are more than 150<br>days past due cannot be written-off (despite the fact that provisions have been made) given that a judicial process must be initiated<br>to liquidate the collateral, which takes five years on average.
(ii) In the second half of every year, loans are more dynamic, particularly in the SME-Pyme and Mibanco segments<br>given that the main sales campaigns (Christmas and year-end campaigns) for clients in these segments are held in the second half<br>of the year and these short-term loans are paid off in the first half of the following year.
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Delinquency Ratios

(1) Adjusted NPL ratio is equal to (Non-performing loans plus Write-offs) / (Total loans plus Write-offs).
(2) Cost of risk is equal to Annualized provisions for loan losses net of recoveries / Total loans.
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Delinquency Indicators by Business Line

Wholesale Banking – Delinquency Ratios

(i) The IOL ratio increased slightly when comparing March 31, 2020 to December 31, 2019 and when comparing March 31, 2020 to March<br>31, 2019 after certain clients in the middle-market segment experienced a deterioration in their debt service capacity, which was<br>offset in part by loan growth. The NPL ratio registered an improvement when comparing March 31, 2020 to March 31, 2019, in line<br>with the amortization of refinanced loans, primarily in the construction sector, over the three months ended March 31, 2020.

SME-Business – Delinquency Ratios

(ii) The IOL and NPL ratios increased when comparing March 31, 2020 to December 31, 2019 and when comparing March 31, 2020 to March<br>31, 2019, which was primarily due to the deterioration in the debt service capacity of certain clients. All of these loans are<br>fully provisioned but are nonetheless covered by guarantees, which means they cannot be written off and subsequently removed from<br>the IOL portfolio. Notwithstanding increases in the IOL and NPL ratios, this business segment maintains credit quality indicators<br>that are within the risk appetite established by Credicorp. Our objective is to maximize the portfolio’s profitability by<br>striking an adequate balance between risk and growth. 
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SME - Pyme – Delinquency Ratios

(iii) In the SME-Pyme loan portfolio, the early delinquency ratio is an important metric, as it excludes loans that are overdue less<br>than 60 days (volatile loans whose percentage of recovery is very high) and those overdue more than 150 days (loans that have been<br>provisioned but which cannot be written off due to the existence of real estate collateral, such as commercial properties, that<br>take five years on average to liquidate).

Traditional delinquency ratios increased when comparing March 31, 2020 to December 31, 2019 and March 31, 2020 to March 31, 2019, which was mainly attributable to a decrease in loan balances and, to a lesser extent, to the deterioration seen since 2019 in revolving and long-term loans. Early delinquency also increased, which was primarily due to a deterioration in revolving loans.

Mortgage – Delinquency Ratios

(iv) Delinquency ratios in the mortgage segment are affected by the existence of real estate collateral, which results in a protracted<br>recovery process (around 5 years) and as such, impedes the bank’s capacity to write off loans even if wholly provisioned.

Traditional delinquency ratios increased when comparing March 31, 2020 to December 31, 2019, which was mainly driven by an increase in Mivivienda loans in 2019 and in the three months ended March 31, 2019, which constitute riskier loans than the traditional mortgage portfolio. Comparing March 31, 2020 to March 31, 2019, the delinquency ratio improved, primarily due to loan growth.

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The early delinquency ratio, which excludes the effect of loans that are more than 150 days past due, also increased when comparing March 31, 2020 to December 31, 2019 and March 31, 2020 to March 31, 2019, which was due primarily to an increase in loans through Mivivienda.

Consumer – Delinquency Ratios

(v) The IOL ratio increased when comparing March 31, 2020 to December 31, 2019 and March 31, 2020 to March 31, 2019, primarily<br>due to deterioration in the debt service capacity of over-indebted clients in the financial system, which affected clients who<br>are current and those with refinanced loans. The NPL ratio decreased when comparing March 31, 2020 to December 31, 2019 and March<br>31, 2020 to March 31, 2019, as loan growth offset growth in the NPL portfolio.

The early delinquency ratio increased when comparing March 31, 2020 to December 31, 2019 and March 31, 2020 to March 31, 2019, in line with the deterioration in the debt service capacity of over-indebted clients in the financial system.

Credit Card – Delinquency Ratios

(vi) The credit card segment registered an increase in its delinquency ratios when comparing March 31, 2020 to December 31, 2019<br>and March 31, 2020 to March 31, 2019. This increase began in 2019 and coincides with an increase in per capita indebtedness in<br>the Peruvian financial system. 
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Mibanco – Delinquency Ratios

(vii) The IOL and NPL ratios remained stable when comparing March 31, 2020 to December 31, 2019, given that loan growth offset growth<br>in the IOL portfolio. When comparing March 31, 2020 to March 31, 2019, the IOL portfolio increased, in line with a decrease in<br>loans written off in 2019. The NPL ratio, on the other hand, fell due to improved measures for new loan acceptances since the beginning<br>of 2019, which has led to a decrease in refinanced loans.

The cost of risk increased significantly when comparing March 31, 2020 to December 31, 2019 and March 31, 2020 to March 31, 2019, which reflects the impact of the economic effects of the COVID-19 pandemic on the loan portfolios as described under “—Net provisions for loan losses.”

BCP Bolivia – Delinquency Ratios

(viii) Delinquency ratios for BCP Bolivia deteriorated when comparing March 31, 2020 to December 31, 2019, which was driven by deterioration<br>in the SME-Pyme segment due to political unrest in the country since the third quarter of 2019. The IOL and NPL portfolios improved<br>when comparing March 31, 2020 to March 31, 2019 after certain overdue loans were written off in 2019.

The cost of risk deteriorated when comparing March 31, 2020 to December 31, 2019 and March 31, 2020 to March 31, 2019, which was mainly attributable to provisions that were set aside in the context of the COVID-19 pandemic, which has generated a change in macroeconomic expectations for Bolivia and in the debt service capacity of BCP Bolivia’s clients.

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Net Interest Income (“NII”)

In the three months ended March 31, 2020, NII, the main component of income, increased 0.6% and 8.3% compared to the three months ended December 31, 2019 and the three months ended March 31, 2019, respectively, while average interest-earning assets increased 3.2% and 9.1% compared to the three months ended December 31, 2019 and the three months ended March 31, 2019, respectively. This led to a decrease of 14 basis points when comparing the three months ended March 31, 2020 and December 31, 2019, and a decrease of four basis points when comparing the three months ended March 31, 2020 and 2019. The increase in NII was primarily attributable to a more favorable funding structure, which led to a decrease in interest expenses as of March 31, 2020 of 2.9% and 2.5% compared to the three months ended December 31, 2019 and the three months ended March 31, 2019, respectively, and offset the contraction in interest income comparing the same periods. The decrease in interest income was insufficient to offset growth in average interest-earning assets. Risk-adjusted net interest margin (“NIM”) as of March 31, 2010 contracted 197 basis points and 212 basis points compared to the three months ended December 31, 2019 and the three months ended March 31, 2019, respectively, due primarily to an increase in the cost of risk due to a change in expectations for economic growth in Peru in the framework of the COVID-19 pandemic and the measures enacted by the Peruvian government to slow the advance of the novel coronavirus.

For the Three Months Ended % Change
March<br> 31, 2019 December<br> 31, 2019 March<br> 31, 2020 March<br> 31, 2020 / December<br> 31, 2019 March<br> 31, 2020 / 2019
Net interest income (Soles in thousands, except percentages)
Interest income 3,001,674 3,172,695 3,163,609 (0.3 )% 5.4 %
Interest on loans 2,562,286 2,768,468 2,770,351 0.1 % 8.1 %
Dividends on investments 9,667 3,764 7,879 109.3 % (18.5 )%
Interest on deposits with banks 86,699 68,813 49,113 (28.6 )% (43.4 )%
Interest on securities 332,788 311,414 322,734 3.6 % (3.0 )%
Other interest income 10,234 20,236 13,532 (33.1 )% 32.2 %
Interest expense 804,506 807,869 784,309 (2.9 )% (2.5 )%
Interest on deposits 353,834 367,257 364,107 (0.9 % 2.9 %
Interest on borrowed funds 145,303 141,552 137,126 (3.1 )% (5.6 )%
Interest on bonds and subordinated notes 226,498 209,238 198,114 (5.3 )% (12.5 )%
Other interest expense 78,871 89,822 84,962 (5.4 )% 7.7 %
Net interest income 2,197,168 2,364,826 2,379,300 0.6 % 8.3 %
Risk-adjusted Net interest income 1,813,957 1,853,166 1,037,819 (44.0 )% (42.8 )%
Average interest earning assets 168,438,416 172,401,758 177,952,973 3.2 % 9.1 %
Net interest margin(1) 5.22 % 5.49 % 5.35 % (14) bps (4) bps
NIM on loans(1) 7.38 % 7.85 % 7.61 % (24) bps 23 bps
Risk-adjusted Net interest margin(1) 4.31 % 4.30 % 2.33 % (197) bps (212) bps
Net provisions for loan losses / Net interest income(1) 17.44 % 21.64 % 56.38 % 3,474 bps 3,894 bps
(1) Annualized.
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Interest Income

Interest Income - LC Interest Income – FC
(S/ millions) (S/ millions) 

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Comparing the three months ended March 31, 2020 and December 31, 2019, the 0.3% decrease in interest income was primarily attributable to a decrease of 28.6% in interest on deposits in other banks in connection with a decrease in international interest. This decrease was also associated, to a lesser extent, with the release of FC reserves, which led to a decrease in the balance of available funds in FC of 3.5% and to a decrease in the rate of return on legal reserves in FC. As a result, interest income on deposits in other banks in FC decreased 31.1%.

Comparing the three months ended March 31, 2020 and 2019, interest income on loans remained mostly stable (increasing 0.1%). This result was attributable to a 0.9% decrease in interest income on LC loans, which was offset by a 3.4% increase in interest income on FC loans.

Comparing the three months ended March 31, 2020 and 2019, interest income increased 5.4%, which outpaced the increase shown in the three months ended December 31, 2019. Growth in interest income was mainly attributable to an increase in interest on loans (8.1%). This expansion was attributable to:

(i) The volume effect, due to an acceleration in the growth of average daily balances in all segments with the exception of Atlantic<br>Security Bank, which translated into growth of 8.0% in total loans. This increase was mainly driven by retail banking, with an<br>increase of 11.0% in average daily loan balances comparing the three months ended March 31, 2020 and 2019.
(ii) The mix by segment given that retail banking represented 40.8% of total loans in three months ended March 31, 2020 compared<br>to 39.8% in three months ended March 31, 2019.
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(iii) A favorable currency mix, given that growth in average daily balances was primarily attributable to loan expansion of 10.7%<br>in LC loans when comparing the three months ended March 31, 2020 and 2019.
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The increases described above were partially offset by a decrease in income from deposits in other banks due to a decrease in local and international interest. In addition, the BCRP’s release of legal reserves in LC and FC to inject liquidity to combat the economic consequences of COVID-19 reduced the balances of deposits in others banks.

Interest Expenses

Interest Expenses – LC Interest Expenses – FC
(S/ millions) (S/ millions)

Comparing the three months ended March 31, 2020 and December 31, 2019, interest expenses decreased 2.9%, due primarily to a decrease in interest on bonds and subordinated notes and, to a lesser extent, to the decrease in interest on loans.

The 5.3% reduction in expenses for bonds and subordinated notes was the result of BCP’s liability management in the third and fourth quarters of 2019. In 2019, BCP issued bonds in LC and FC at very favorable rates which, coupled with expirations and calls for bonds, extended the tenure of BCP’s debt and reduced funding rates.

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The decrease of 3.1% in interest expense on loans was attributable to a decrease in interest rates nationally and internationally. Interest payments in LC decreased 3.8%, and payments in FC decreased 1.8%.

Comparing the three months ended March 31, 2020 and 2019, interest expense decreased 2.5%. This was primarily attributable to a decrease in interest expenses on bonds and subordinated notes and also attributable to a decrease in interest expense on loans, which offset an increase in expenses on deposits.

Interest expense on bonds and subordinated notes fell 12.5%, after BCP implemented a debt restructuring strategy in the last two quarters of 2019. This strategy was divided into two phases. During the first phase, BCP carried out a liability management transaction for corporate bonds issued by BCP, in both LC and FC. In the second phase, BCP redeemed a perpetual subordinated debt. As a consequence of these actions, BCP increased the tenor of its debt and reduced interest rates.

Interest expenses on borrowed funds decreased 5.6% in connection with the decrease in interest rates in the international market, which primarily impacted interest on borrowed funds in FC, which fell 22.5% compared to March 31, 2019.

The decrease in interest expense was offset in part by a 2.9% increase in interest on deposits. This increase was mainly driven by an 11.6% increase in the volume of the most expensive deposits, time deposits.

Net Interest Margin (NIM) and Risk-Adjusted NIM

Credicorp’s NIM and Risk-Adjusted NIM(1)

(1) Starting in the first quarter of 2017, we exclude derivatives from the NII result. For comparative purposes, figures starting<br>from the first quarter of 2016 have been recalculated with the new methodology

NIM decreased when comparing the three months ended March 31, 2020 and December 31, 2019 and when comparing the three months ended March 31, 2020 and 2019. This decrease was attributable to:

(i) The increase in average interest-earning assets of 3.2% and 9.1% with regard to the three months ended<br>March 31, 2020 and December 31, 2019, respectively.
(ii) Slower growth in net interest income, despite lower interest expenses, which was primarily attributable to an improvement<br>in the funding structure, where deposits now account for a larger share of the funding structure.
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Risk-adjusted NIM as of March 31, 2020 fell 197 basis points compared to the three months ended December 31, 2019 and fell 212 basis points compared to the three months ended March 31, 2019, which was attributable to an increase in provisions after expectations for economic growth in Peru decreased due to the COVID-19 pandemic and the government’s decision to restrict movement in the country to slow the virus’s spread.

NIM on loans as of March 31, 2020 decreased 24 basis points compared to the three months ended December 31, 2019. This decrease was attributable to a decrease in market interest rates in three months ended March 31, 2020 in both LC and FC. This decrease was attributable to government initiatives taken in an effort to stimulate economic activity in the context of the COVID-19 pandemic. When comparing the three months ended March 31, 2020 to the corresponding period of 2019, the NIM on loans increased after new pricing strategies were implemented in retail banking and at Mibanco to cover higher risks assumed in 2019.

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NIM on loans(1)<br><br> <br>
(1) NIM on loans is calculated as follows:
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The table below contains the interest margins at each of Credicorp’s subsidiaries.

NIM Breakdown BCP<br> Stand-alone Mibanco BCP<br> Bolivia Credicorp(1)
Year ended December 31, 2017 4.50 % 15.71 % 4.31 % 5.29 %
Year ended December 31, 2018 4.53 % 15.64 % 3.69 % 5.28 %
Year ended December 31, 2019 4.81 % 14.89 % 3.61 % 5.40 %
Three Months ended March 31, 2019 4.74 % 14.70 % 3.52 % 5.39 %
Three Months ended March 31, 2020 4.70 % 15.16 % 3.60 % 5.35 %

NIM: Annualized Net interest income / Average period end and period beginning interest earning assets.

(1) Credicorp also includes Credicorp Capital, Prima, Grupo Credito and Eliminations for consolidation purposes.

When comparing the three months ended March 31, 2020 to the corresponding period of 2019 at the Credicorp level, NIM decreased in line with a decrease in BCP’s NIM, which represents 68% of Credicorp’s consolidated net interest income. This decrease was weighted heavily on Credicorp’s consolidated results and was not offset by the improvement in Mibanco’s NIM.

BCP Stand-alone’s NIM deteriorated four basis points when comparing the three months ended March 31, 2020 to the corresponding period of 2019. The reduction in the margin was driven by lower market rates. This mainly affected the wholesale banking business, which is more sensitive to interest rate movements. BCP Stand-alone’s NIM increased 28 basis points from 4.53% to 4.81% between 2018 and 2019, while between 2017 and 2018 NIM increased by three basis points from 4.50% in 2017. The greater growth from 2018 to 2019 is explained by the increase in retail banking loans, which have higher margins.

Mibanco’s NIM, which represents 20% of our net interest income, increased 46 basis points when comparing the three months ended March 31, 2020 to the corresponding period of 2019 after a new pricing strategy was implemented. The new pricing strategy and other measures allowed for an improvement in disbursement rates during the quarter. In contrast, annual growth has been affected by increased competition in the microfinance market. This caused Mibanco’s NIM to decrease from 15.71% in 2017 to 15.64% in 2018 and to decrease further to 14.89% in 2019.

The following table shows the net risk-adjusted margins for each of Credicorp’s main subsidiaries.

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Risk Adjusted NIM Breakdown BCP<br> Stand-alone Mibanco BCP<br> Bolivia Credicorp(1)
Year ended December 31, 2017 3.38 % 12.29 % 3.33 % 4.12 %
Year ended December 31, 2018 3.69 % 12.20 % 3.07 % 4.33 %
Year ended December 31, 2019 3.75 % 11.59 % 2.96 % 4.30 %
Three Months ended March 31, 2019 3.86 % 11.86 % 2.86 % 4.45 %
Three Months ended March 31, 2020 1.45 % 9.54 % 2.11 % 2.33 %

Risk-Adjusted NIM: (Annualized Net interest income less annualized provisions) / Average period end and period beginning interest earning assets.

(1) Credicorp also includes Credicorp Capital, Prima, Grupo Credito and Eliminations for consolidation purposes.

Credicorp reported a significant deterioration in the risk-adjusted NIM of 212 basis points when comparing the three months ended March 31, 2020 to the corresponding period of 2019, which reflects deterioration at the main subsidiaries after the cost of risk rose following the change in expectations for economic growth as a consequence of the effects of the COVID-19 pandemic. This caused BCP’s risk-adjusted NIM to decrease 241 basis points when comparing the three months ended March 31, 2020 to the corresponding period of 2019. Mibanco’s risk-adjusted NIM decreased 254 basis points when comparing the three months ended March 31, 2020 to the corresponding period of 2019. BCP Stand-alone’s risk adjusted NIM has increased every year since 2017, going from 3.38% to 3.69% in 2018 and 3.75% in 2019. The lower rate of increase between 2018 and 2019 is due to the strategy to enter into segments that bring higher margins, but have higher associated risks. In contrast, Mibanco’s risk adjusted NIM has deteriorated year-over-year as a consequence of increased market competition, which has led to a decrease of 9 bps between 2017 and 2018 and a decrease of 61 bps between 2018 and 2019.

The share of loans within total earning assets is calculated by dividing the average of the beginning and closing balances of total loans for the reporting period, by the average of the beginning and closing balances of the interest earning assets for the reporting period.

Non-Financial Income

In the three months ended March 31, 2020, non-financial income decreased compared to the three months ended December 31, 2019 and the three months ended March 31, 2019. This was primarily attributable to losses on net gain on securities, which stemmed from recent volatility in global financial markets due to the economic crisis related to the COVID-19 pandemic. Impacts were seen in proprietary investment portfolios, mainly at Prima AFP, Credicorp and BCP Stand-alone. The main components of non-financial income, fee income and net gain on foreign exchange transactions registered a decrease in income after transactional activity decreased due to the quarantine imposed by the Peruvian government in mid-March.

For the Three Months Ended % Change
March<br> 31, 2019 December<br> 31, 2019 March<br> 31, 2020 March<br> 31, 2020 / December<br> 31, 2019 March<br> 31, 2020 / 2019
(Soles in thousands, except percentages)
Non-Financial Income
Fee income 782,922 847,206 760,329 (10.3 )% (2.9 )%
Net gain on foreign exchange transactions 178,423 193,528 166,983 (13.7 )% (6.4 )%
Net gain on securities 113,545 102,011 (120,633 ) (218.3 )% (206.2 )%
Net gain from associates(1) 14,786 22,738 19,225 (15.4 )% 30.0 %
Net gain on derivatives held for trading (2,434 ) 7,043 35,430 403.1 % (1,555.6 )%
Net gain from exchange differences 13,490 17,957 (21,240 ) (218.3 )% (257.4 )%
Other non-financial income 75,605 74,713 117,770 57.6 % 55.8 %
Total non-financial income, net 1,176,337 1,265,196 957,864 (24.3 )% (18.6 )%
(1) Includes gains on other investments, mainly made up of the profit of Banmedica.
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For the Three Months Ended % Change
March<br> 31, 2019 December<br> 31, 2019 March<br> 31, 2020 March<br> 31, 2020 / December<br> 31, 2019 March<br> 31, 2020 / 2019
(Soles in thousands, except percentages)
(+) EPS contribution (50%) 8,918 17,262 17,186 (0.4 )% 92.7 %
(-) Private health insurance deduction (50%) (2,736 ) (9,806 ) (6,430 ) (34.4 )% 135.0 %
(=) Net gain from association with Banmedica 6,182 7,456 10,756 44.3 % 74.0 %

Comparing the three months ended March 31, 2020 to the three months ended December 31, 2019, non-financial income decreased 24.3% due to:

(i) A decrease in the net gain on securities, due to (i) Prima AFP, which posted a decrease in the profitability of its legal reserves<br>after withdrawals from its funds amid increased market volatility, (ii) losses on proprietary investment portfolios at Credicorp<br>Capital, which registered negative results in its trading portfolio related to mark-to-market funds, and (iii) BCP, due to realized<br>losses after the sale of sovereign bonds. These decreases were driven by market volatility and a decline in asset values due to<br>the impact of the COVID-19 pandemic. Finally, the decrease when comparing the three months ended March 31, 2020 to the three months<br>ended December 31, 2019 was attributable to non-recurring positive results in the three months ended December 31, 2019 after positions<br>were sold in the fair value through other comprehensive investments, recorded in the results of Credicorp Capital and Atlantic<br>Security Bank.
(ii) A decrease in fee income, (i) in line with seasonality in the first quarter of every year, in connection with the usual decrease<br>in operations for banking services in comparison to those at the end of the year, mainly at BCP Stand-alone, and to a lesser extent,<br>at Mibanco, and (ii) due to a decrease in the income reported by Credicorp Capital for the corporate finance business due to an<br>unfavorable environment for executing transactions. For more information, see “—Fee income.”
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(iii) A decrease in net gain from exchange differences, due to the loss reported for the exchange differences relative to IFRS 16,<br>mainly in the month of January at BCP, and to a lesser extent, at Mibanco.
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(iv) A decrease in net gain on foreign exchange transactions, due to lower volumes generated through wholesale banking and retail<br>banking clients at BCP, mainly in March.
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The abovementioned was offset in part by:

(i) An increase in other non-financial income due to (i) BCP, for the sale of a portfolio of loans under legal collection proceedings<br>in February 2020, and (ii) Mibanco, due to the sale of a property (building on Aramburu) in March 2020.
(ii) An increase in net gain on speculative derivatives after advance executions of derivatives associated with structured products<br>in the asset management business line at Credicorp Capital.
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Comparing the three months ended March 31, 2020 to the corresponding period of 2019, non-financial income decreased 18.6% due to:

(i) Losses on the net gain on securities mainly at Prima AFP and Credicorp Capital, due to the market effects of the COVID-19 pandemic<br>as described above. Losses were also attributable to an extraordinary result in the three months ended March 31, 2019, which was<br>generated by favorable financial market conditions in 2019 manifested through Credicorp Capital, Prima AFP and Atlantic Security<br>Bank.
(ii) The negative result for the net gain from exchange differences, which was attributable to the market effects of the COVID-19<br>pandemic as described above.
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(iii) A decrease in fee income, which was attributable to (i) the facilities and fees exemptions extended to our clients in the framework<br>of the economic crisis resulting from the COVID-19 pandemic, (ii) the decrease in consumption and service volumes due to the obligatory<br>quarantine imposed by the Peruvian government in mid-March, and (iii) the decrease in transactional activity in the banking businesses<br>at BCP Stand-alone and Mibanco, as described below under “—Fee Income”.
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These decreases were partially offset by increases in other non-financial income and the net gain on speculative derivatives for the reasons described above.

Fee Income

By Subsidiary

The chart below shows the contribution of each of Credicorp’s subsidiaries to growth in Credicorp’s fee income in the three months ended March 31, 2020.

Evolution of Fee Income by Subsidiary, Three Months Ended March 31, 2020

Compared to the Three Months Ended December 31, 2019 (S/ Million)

* Others include Encumbra, Bancompartir, Grupo Pacifico and eliminations for consolidation purposes.

The chart below shows the annual evolution of fee income by subsidiary:

Evolution of Fee Income by Subsidiary, Three Months Ended March 31, 2020

Compared to the Corresponding Period of 2019 (S/ Million)

* Others include Encumbra, Bancompartir, Grupo Pacifico and eliminations for consolidation purposes. 
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Fee Income in the Banking Business

The following table shows a breakdown of the main components of fee income in the banking business for each of the periods presented:

Composition of Fee Income in the Banking Business

For the Three Months Ended % Change
**** **** March 31, 2019 December 31, 2019 March 31, 2020 **** March 31, 2020 / December 31, 2019 **** March 31, 2020 / 2019 ****
(Soles in thousands, except percentages)
Fee Income
Miscellaneous accounts(1) 177,517 186,506 164,963 (11.6 )% (7.1 )%
Credit cards(2) 69,499 72,051 60,435 (16.1 )% (13.0 )%
Drafts and transfers 60,232 71,547 61,846 (13.6 )% 2.7 %
Personal loans(2) 23,590 28,125 28,352 0.8 % 20.2 %
SME loans(2) 18,565 18,452 18,808 1.9 % 1.3 %
Insurance(2) 22,210 25,776 25,179 (2.3 )% 13.4 %
Mortgage loans(2) 9,428 10,678 9,402 (12.0 )% (0.3 )%
Off-balance sheet(3) 47,302 48,215 50,093 3.9 % 5.9 %
Payments and collections(3) 103,763 109,311 101,283 (7.3 )% (2.4 )%
Commercial loans(3) 22,423 24,391 17,978 (26.3 )% (19.8 )%
Foreign trade(3) 14,948 13,516 11,576 (14.4 )% (22.6 )%
Corporate finance and mutual funds 15,028 18,690 16,673 (10.8 )% 10.9 %
Atlantic Security Bank 10,271 11,550 8,412 (27.2 )% (18.1 )%
Others(4) 69,836 79,916 62,067 (22.3 )% (11.1 )%
Total fee income 664,612 718,725 637,067 (11.4 )% (4.1 )%

Source: BCP

(1) Saving accounts, current accounts, debit card and master account.
(2) Mainly Retail fees.
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(3) Mainly Wholesale fees.
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(4) Includes fees from BCP Bolivia, Mibanco, network usage and other services to third parties, among others.
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Total fee income increased by 5.64% between 2019 and 2018, from S/2,615,461 to S/2,763,232. This is less than the growth of 6.55% reached between 2017 and 2018 (total fee income was S/2,454,573 in 2017). Comparing the three months ended March 31, 2020 to the three months ended December 31, 2019, fee income in the banking business decreased 11.4%. The line items that registered the most significant decreases included:

(i) Miscellaneous accounts, mainly for (a) debit cards, due to the reduction in fees for card replacement and a decrease<br>in cash withdrawals, and to a lesser extent, due to (b) savings accounts and (c) current accounts, for which fees generated for<br>account maintenance decreased;
(ii) Others, mainly at Mibanco, which represents 90% of the decrease due to a decrease in income from obligatory insurance<br>and a decrease in fees assessed on overdue loans. This last decrease was generated after the bank waived certain fees and offered<br>to freeze installment payments for up to two pay cycles without penalties, in each case in connection with the economic crisis<br>related to the COVID-19 pandemic.
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(iii) Credit cards, due to (a) seasonality evident in the first quarter of every year due to an increase in transactional<br>activity for year-end transactions and the ordinary-course decrease in activity in the first quarter of every year, (b) a decrease<br>in fees from establishments due to a decrease in consumption, (c) a decrease in fees for overdue loans due to our initiatives not<br>to collect from clients who have availed themselves of our loan freeze programs, and (d) a decrease in card membership fees (which<br>have been suspended until July 2020), in each case in connection with the economic crisis related to the COVID-19 pandemic.
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(iv) Drafts and transfers, due to (a) a decrease in transactions of approximately 50% in the month of March (as compared<br>to February), which affected the volume of local and foreign transfers, (b) facilities offered for free local transfers for 30<br>days, which led fee income for this component to fall 50% in comparison to the level recorded in February, and (c) ordinary-course<br>seasonality when comparing the fourth quarter to the first quarter of every year, whereby a higher number of transactions are carried<br>out in the fourth quarter.

Comparing the three months ended March 31, 2020 to the corresponding period of 2019, the 4.1% decrease was attributable to (i) miscellaneous accounts, (ii) credit cards and (iii) others, which was attributable to the same factors discussed in the comparison between the three months ended March 31, 2020 and three months ended December 31, 2019 and to a decrease in transactional activity during the COVID-19 pandemic. Additionally, the decrease in income is in line with our transactional strategy to encourage clients to migrate to digital channels.

Insurance Underwriting Result

The insurance underwriting result fell 1.8% comparing the three months ended March 31, 2020 to the three months ended December 31, 2019, which was primarily attributable to an increase in the acquisition costs in both P&C and Life insurance. This was mitigated by a decrease in claims in P&C and an increase in net premiums in Life insurance. Comparing the three months ended March 31, 2020 to the corresponding period of 2019, the underwriting result rose 30.1%, which was driven primarily by an increase in net earned premiums in both the life insurance and the P&C businesses; and by a decrease in claims in the P&C business, which was mitigated by an increase in customer acquisition costs in both businesses.

For the Three Months Ended % Change
March<br> 31, 2019 December<br> 31, 2019 March<br> 31, 2020 March<br> 31, 2020 /<br><br> December<br> 31, 2019 March<br> 31, 2020 / 2019
(Soles in thousands, except percentages)
Insurance underwriting result(1)
Net earned premiums 584,209 620,578 627,935 1.2 % 7.5 %
Net claims (383,817 ) (387,426 ) (373,502 ) (3.6 )% (2.7 )%
Acquisition costs(2) (91,281 ) (88,662 ) (112,507 ) 26.9 % 23.3 %
Total insurance underwriting result 109,111 144,490 141,926 (1.8 )% 30.1 %
(1) Includes the results of the Life, Property and Casualty and Crediseguros business
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(2) Includes net fees and underwriting expenses.
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Life Insurance

Life Insurance Total Premiums

(S/ millions)

Total premiums increased 0.4% when comparing the three months ended March 31, 2020 to the three months ended December 31, 2019, which was attributable to (i) an increase in group life policies, mainly through statutory life due to new regulations that went into effect in January 2020 in which companies must insure their employees upon the first day of employment; (ii) credit life policies, through the alliance channel after solidarity payments (late payments assumed by the entity) were made; and (iii)  D&S, after an increase in premiums was registered through SISCO IV. These increases were offset in part by annuities and driven primarily by a decrease in sales of individual annuities and individual life policies after issuances of individual policies decreased in the direct channel; both annuities and individual life policies were affected by a decrease in the number of selling days due to the quarantine measures instituted by the government in connection with the COVID-19 pandemic.

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Comparing the three months ended March 31, 2020 to the corresponding period of 2019, total premiums increased 0.5%, which was mainly driven by (i) credit life policies, where growth was attributable to an increase in premiums in the alliance and bancassurance channels and to solidarity payments (debts assumed by the entity); (ii) group life, due to an increase in statutory life insurance products after a new regulation went into effect in January 2020 in which companies must insure their employees upon the first day of employment, and to growth in collective life policies, which was reflected in an increase in premium turnover in the bancassurance line; (iii) individual life policies, due to an increase in premium turnover for renewals; and (iv) D&S, due to an increase in premiums through SISCO IV. These increases were offset in part by a decrease in premiums in annuities due to individual annuities and to a decrease in selling days due to the quarantine measures instituted by the government in connection with the COVID-19 pandemic.

Life Insurance Net Earned Premiums(1)

(S/ millions)

(1) Total premiums without considering reinsurance nor reserve premiums.

Net earned premiums increased 5.5% comparing the three months ended March 31, 2020 to the three months ended December 31, 2019. This was primarily attributable to growth in credit life policies and statutory life policies, which mirrored growth observed in total premiums, and was also due to the performance of annuities, which was driven by a decrease in reserves due to adjustments in the parameters for investment rates.

Comparing the three months ended March 31, 2020 to the corresponding period of 2019, net earned premiums increased 11.1%. This was primarily driven by: (i) credit life policies, which reported an increase in sales through the alliance and bancassurance channels and to the increase registered for solidarity payment; (ii) group life policies, which was mainly attributable to an increase in sales of the collective life product through the bancassurance channel; (iii) annuities, due to a decrease in reserves after adjustments were made to the parameters for investment rates; and (iv) D&S, due to an increase in the premiums reported in SISCO IV. These increases were offset in part by a decrease in individual life policies after a higher adjustment was made to reserves.

Life Insurance Net Claims

(S/ millions)

Net claims increased 1.2% comparing the three months ended March 31, 2020 to the three months ended December 31, 2019. This was attributable to: (i) credit life, which reported higher claims in the bancassurance channel; (ii) group life, after more IBNR reserves were set aside for statutory life and collective life products; and, (iii) annuities due to an increase in pension payments for individual annuities. These increases were offset in part by D&S after provisions for claims through SISCO IV were released.

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Comparing the three months ended March 31, 2020 to the corresponding period of 2019, net claims increased 7.9%, which was primarily driven by D&S through SISCO II and SISCO III due to a decrease in interest rates and in annuities due to an increase in pension payments through individual annuities.

Property and Casualty Insurance

Property and Casualty Total Premiums

(S/ millions)

Total premiums in property and casualty insurance decreased 10.8% comparing the three months ended March 31, 2020 to the three months ended December 31, 2019, which was attributable to (i) commercial lines, due to a decrease in renewals in the fire and third-party liability lines, which was mitigated by an increase in sales in the agriculture and aviation lines; (ii) cars, due to a decrease in sales of new policies through the brokers channel and to a decrease in production due to the quarantine imposed by the Peruvian government in mid-March in connection with the COVID-19 pandemic; and (iii) SOAT, due a decrease in sales through brokers. These decreases were offset in part by increases in (i) personal lines, due to renewed premiums for mortgage products; and (ii) medical assistance, due to an increase in sales of comprehensive health products through brokers.

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Comparing the three months ended March 31, 2020 to the corresponding period of 2019, total premiums in property and casualty insurance increased 2.0% due to (i) commercial lines, which experienced growth in the agriculture and aviation lines; (ii) medical assistance, due to an increase in sales of oncological and comprehensive health products; and (iii) personal lines, due to an increase in the price of the credit card protection product and to an increase in sales of personal accident products. These increases were offset in part by a decrease in sales of new policies for cars and SOAT through brokers and to the decrease in the number of selling days after the quarantine was imposed by the Peruvian government in mid-March in connection with the COVID-19 pandemic.

Property and Casualty Net Earned Premiums(1)

(S/ millions)

(1) Total premiums without considering reinsurance nor reserve premiums.

Net earned premiums in property and casualty insurance decreased 3.3% comparing the three months ended March 31, 2020 to the three months ended December 31, 2019, which was primarily attributable to the factors described above in relation to total premiums, as well as to an increase in unexpired risk reserves (URR) for products in the personal lines and medical assistance.

Comparing the three months ended March 31, 2020 to the corresponding period of 2019, net premiums in property and casualty insurance increased 3.5%. This was primarily attributable to increases in medical assistance premiums and personal lines premiums, for the same reasons as those attributable to the evolution of total premiums described above, and to the performance of cars, which was marked by a decrease in the reserves set aside for unexpired risk after direct premiums decreased.

Property and Casualty Net Claims

(S/ millions)

Net claims in property and casualty insurance decreased 11.3% comparing the three months ended March 31, 2020 to the three months ended December 31, 2019, which was attributable to a decrease in claims notifications after the quarantine was imposed by the Peruvian government in mid-March in connection with the COVID-19 pandemic. This decrease was mainly registered in cars, SOAT and personal lines. The decrease in claims was also attributable to an improvement in claims management in cars. The factors described above were offset in part by increases in claims for medical assistance, which registered an increase in IBNR reserves.

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Comparing the three months ended March 31, 2020 to the corresponding period of 2019, net claims fell 17.3%. The decrease in claims was seen across business lines after fewer notifications for claims were received due to the quarantine that was instituted by the Peruvian government in mid-March in connection with the COVID-19 pandemic and to an improvement in claims management in cars.

Acquisition Costs

Acquisition Costs per Business

(S/ millions)

For<br> the Three Months Ended %<br> Change
March<br><br> 31, 2019 December<br><br> 31, 2019 March<br><br> 31, 2020 March<br><br> 31, 2020 / December<br> 31, 2019 March<br><br> 31, 2020 / 2019
(Soles in thousands, except percentages)
Acquisition Costs
Net Fees (60,013 ) (65,316 ) (65,825 ) 0.8 % 9.7 %
Underwriting Expenses (34,576 ) (35,206 ) (47,286 ) 34.3 % 36.8 %
Underwriting Income 3,308 11,860 604 (94.9 )% (81.7 )%
Acquisition<br> Costs (91,281 ) (88,662 ) (112,507 ) 26.9 % 23.3 %

Acquisition costs increased 26.9% comparing the three months ended March 31, 2020 to the three months ended December 31, 2019. This was attributable to an increase in the net underwriting expense in P&C and to an increase in fees associated with life insurance. In P&C, growth was driven mainly by an increase in the underwriting expenses for cars after S/8 million in premiums were returned to clients who were unable to use their cars during the quarantine; higher reserves for uncollectible premiums, mainly in the commercial, cars and medical assistance lines; and a decrease in underwriting income for commercial lines. In the life insurance business, the increase was due to growth in fees through the alliances channel for credit life products, after premiums rose, and to a decrease in underwriting income after profit sharing with reinsurers in the three months ended December 31, 2019.

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Comparing the three months ended March 31, 2020 to the corresponding period of 2019, the acquisition costs increased 23.3% in both the life and P&C businesses. In Life insurance, growth was attributable to an increase in fees for credit life after premium rose through the alliance channel. In P&C, growth was attributable to the increase discussed in the previous paragraph and to a move to set aside more reserves for uncollectible premiums in cars, commercial lines and medical assistance.

Underwriting Result by Business

Underwriting Result by Business

(S/ millions)

Comparing the three months ended March 31, 2020 to the three months ended December 31, 2019, the decrease in the underwriting result was attributable to P&C and mitigated by life insurance. In P&C, the reduction was attributable to: (i) an increase in underwriting expenses after premiums were reimbursed in cars and to a move to set aside more reserves for uncollectible premiums; and (ii) a decrease in net premiums across business lines, which was mitigated by a decrease in claims given that fewer claims notifications were received during the quarantine imposed by the Peruvian government in mid-March in connection with the COVID-19 pandemic. In the life insurance business, growth was attributable to an increase in net earned premiums in credit life, annuities and group life, which was offset in part by an increase in the acquisition costs due to growth in fees after an increase in premiums, and to a decrease in underwriting income after profit sharing in the three months ended December 31, 2019.

Comparing the three months ended March 31, 2020 to the corresponding period of 2019, the increase in the underwriting results were primarily attributable to P&C and to a lesser extent to life insurance products. In P&C, the increase was associated with a decrease in claims after fewer claims notifications were received during the quarantine period imposed by the Peruvian government in Mid-March in connection with the COVID-19 pandemic and to an increase in net premiums in the medical assistance and personal lines, which was offset in part by an increase in the acquisition costs after premiums were reimbursed in cars. In the life insurance business, the variation was attributable to an increase in premiums in credit life, group life and annuities, which was offset in part by growth in claims in D&S and annuities and by an increase in fees in credit life after an increase in premiums.

Operating Expenses and Efficiency

The improvement in the operating efficiency ratio when comparing the three months ended March 31, 2020 to the three months ended December 31, 2019 was attributable to a seasonal effect on expenses, which reach their highest level in the last quarter of the year. Comparing the three months ended March 31, 2020 to the corresponding period of 2019, which excludes the seasonal effect, the operating efficiency ratio deteriorated 100 basis points, which was primarily due to an increase in salaries and employee benefits in the microfinance line, which offset the increase in net interest income.

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For<br> the Three Months Ended %<br> Change
March<br><br> 31, 2019 December<br><br> 31, 2019 March<br><br> 31, 2020 March<br><br> 31, 2020 / December<br> 31, 2019 March<br><br> 31, 2020 / 2019
(Soles in thousands, except percentages)
Operating Expenses
Salaries and employees benefits 834,317 885,526 891,183 0.6 % 6.8 %
Administrative, general and tax expenses 538,157 701,225 539,644 (23.0 )% 0.3 %
Depreciation and amortization 131,325 176,593 171,748 (2.7 )% 30.8 %
Association in participation 2,736 9,806 6,430 (34.4 )% 135.0 %
Acquisition costs(1) 91,281 88,662 112,507 26.9 % 23.3 %
Operating expenses(2) 1,597,816 1,861,812 1,721,512 (7.5 )% 7.7 %
Operating income(3) 3,768,564 4,073,876 3,967,962 (2.6 )% 5.3 %
Efficiency ratio 42.4 % 45.7 % 43.4 % (230) bps 100 bps
Operating expenses / Total average assets(4) 3.60 % 3.99 % 3.57 % (42) bps (3) bps
(1) The acquisition costs of Pacifico include net fees and underwriting expenses.
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(2) Operating expenses are equal to Salaries and employees benefits plus Administrative, general and tax expenses plus Depreciation<br>and amortization plus Acquisition costs plus Association in participation.
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(3) Operating income is equal to Net interest income plus Fee income plus Net gain on foreign exchange transactions plus Net gain<br>from associates plus Net gain on derivatives held for trading plus Result on exchange differences plus Net premiums earned.
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(4) Average is calculated with period-beginning and period-ending balances.
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Comparing the three months ended March 31, 2020 to the three months ended December 31, 2019, the improvement in the efficiency ratio was attributable to a seasonal effect on operating expenses; as such, the comparison of the three months ended March 31, 2020 to the corresponding period of 2019 provides a clearer picture of the evolution of efficiency.

In the three months ended March 31, 2020 compared to the corresponding period of 2019, the efficiency ratio deteriorated 100 basis points. This was primarily attributable to the fact that operating expenses posted a higher increase than growth in operating income.

The figure below depicts the impact of the variation of each component of operating income and operating expenses in the efficiency ratio for the three months ended March 31, 2020 in comparison to the corresponding period in 2019:

Year on Year Evolution of the EfficiencyRatio by Account

(1) Other operating income includes: Net gain on foreign exchange transactions, Net gain from associates, Net gain on derivatives<br>held for trading and Net gain from exchange difference.
(2) Other operating expenses includes: Acquisition costs and Association in participation
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An analysis of the impact of operating expenses shows that the negative effect on the operating efficiency ratio was due to:

(i) An increase in salaries and employee benefits, mainly in the microfinance business and, to a lesser extent, at BCP Stand-alone.<br>In the case of microfinance, the increase was attributable to (i) Mibanco, due to an increase in headcount in 2019, which was primarily<br>to encourage commercial teams to build the capacities needed to ensure growth down the line at Mibanco; and (ii) Bancompartir,<br>which has been consolidated in Credicorp’s balance sheet since December 2019. At BCP Stand-alone, growth was attributable<br>to hiring of individuals with specialist skills in 2019.
(ii) The increase in depreciation and amortization due to the higher amortization expenses for software, in line with the investment<br>in new software to support our credit card business.
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(iii) An increase in the acquisition costs, which was attributable to growth in net earned premiums and the reimbursement of 50%<br>of the premiums paid by clients for cars for personal use in March.
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In terms of operating income, the effects that positively impacted the operating efficiency ratio were:

(i) Growth in net interest income, in line with the expansion in average daily loan balances in all segments, as indicated in “—Interest<br>Income.”
(ii) The increase in net earned premiums at Grupo Pacifico, which was seen in both the life and P&C lines, as explained in further<br>detail in “—Net Earned Premiums.”
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In the context of the COVID-19 pandemic, Credicorp is looking to reduce growth in operating expenses given that it expects operating income for the year to decrease.

Credicorp’s Administrative, General and Tax Expenses

Credicorp’s Administrative, General and Tax Expenses

For the Three Months Ended % Change
March<br> <br><br> 31, 2019 % December<br><br> 31, 2019 % March<br><br> 31, 2020 % March<br> <br><br> 31, 2020 /<br><br> December<br><br> 31, 2019 March<br> <br><br> 31, 2020 /<br><br> 2019
(Soles in thousands, except percentages)
Administrative, general and tax expenses
Repair and<br> maintenance 102,916 19 % 167,771 24 % 106,360 14 % (36.60 )% 3.30 %
Publicity 76,175 14 % 129,938 19 % 75,256 13 % (42.10 )% (1.20 )%
Taxes and contributions 66,709 12 % 93,004 14 % 68,017 14 % (26.90 )% 2.00 %
Leases of low value and<br> short-term 22,418 4 % 15,953 2 % 18,843 3 % 18.10 % (15.90 )%
Consulting and professional<br> fees 41,360 8 % 106,193 15 % 39,485 5 % (62.80 )% (4.50 )%
Transport and communications 41,636 8 % 40,632 7 % 35,466 5 % (12.70 )% (14.80 )%
Sundry supplies 17,564 3 % 18,551 3 % 23,424 9 % 26.30 % 33.40 %
Security and protection 17,002 3 % 15,996 2 % 15,286 1 % (4.40 )% (10.10 )%
Electricity and water 12,027 2 % 14,644 2 % 11,175 1 % (23.70 )% (7.10 )%
Subscriptions and quotes 9,570 2 % 13,252 2 % 10,752 4 % (18.90 )% 12.40 %
Services by third-party<br> and others (1) 130,780 25 % 77,597 11 % 135,580 9 % 74.70 % 3.70 %
Total administrative<br> and general expenses 538,157 100 % 693,530 101 % 539,644 100 % (23.0 )% 0.3 %
(1) Others include Atlantic Security Bank, BCP Bolivia, Grupo Credito and eliminations for consolidation.
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The decrease in administrative and general expenses and taxes when comparing the three months ended March 31, 2020 to the three months ended December 31, 2019 was due primarily to a seasonal effect given that these expenses reach their highest point in the last quarter of every year.

Comparing the three months ended March 31, 2020 to the corresponding period of 2019, which excludes the seasonal effect on operating expenses, administrative and general expenses and taxes remained stable, though with some notable increases.

(i) Total expenses for programs, systems and systems outsourcing increased, mainly in BCP Stand-alone, due to the higher expenses<br>for the management of our IT infrastructure and the spending on new programs for projects related to our transformation strategy. 
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(ii) Infrastructure expense increased, primarily due to the purchase and distribution of medical supplies and to an increase in<br>expenses for the cleaning of different branches at BCP.

These increases were offset in part by a decrease in expenses for consultants, primarily at BCP, given that in the three months ended March 31, 2019, more consultants were needed to implement a variety of projects related to the transformation strategy.

Efficiency Ratio

Efficiency Ratio by Subsidiary(1)

BCP<br><br> Stand-alone BCP<br><br> Bolivia Microfinance Pacifico Prima<br> AFP Credicorp
Three Months Ended March 31, 2019 38.1 % 61.8 % 55.0 % 39.0 % 41.6 % 42.4 %
Three Months Ended December 31, 2019 43.8 % 60.1 % 56.4 % 44.7 % 45.1 % 45.7 %
Three Months Ended March 31, 2020 38.8 % 57.0 % 58.4 % 41.5 % 40.6 % 43.4 %
Variation (Quarter on Quarter) (500 )bps (310 )bps 200 bps (320 )bps (450 )bps (230 )bps
Variation (Year on Year) 70 bps (480 )bps 340 bps 250 bps (100 )bps 100 bps
(1) (Salaries and employee’s benefits plus Administrative, general and tax expenses plus Depreciation and amortization plus<br>Acquisition costs plus Association in participation) / (Net interest income plus Fee income plus Net gain on foreign exchange transactions<br>plus Net gain from associates plus Net gain on derivatives held for trading plus Result on exchange differences plus Net premiums<br>earned).
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Comparing the three months ended March 31, 2020 to the three months ended December 31, 2019, the improvement in the efficiency ratio was attributable to a seasonal effect on operating expenses. As such, comparing the three months ended March 31, 2020 to the corresponding period of 2019 analysis provides a clearer picture of the change in the efficiency ratio.

The figure below shows the contribution of each subsidiary to the evolution of the efficiency ratio for the three months ended March 31, 2020 compared to the corresponding period of 2019.

Year on Year Evolution of the Efficiency Ratio by Subsidiary

(1) Others includes: Credicorp Capital, Prima AFP, BCP Bolivia, Atlantic Security Bank, Grupo Credito, among other subsidiaries<br>and the eliminations for consolidation purposes.

Comparing the three months ended March 31, 2020 to the corresponding period of 2019, efficiency deteriorated 100 basis points, which was attributable to:

(i) The incorporation of Bancompartir, which was included in the balance sheet since December 2019 within the Microfinance business<br>line. This subsidiary contributed 50 basis points to total deterioration given that more than 2,000 employees were added to Credicorp’s<br>payroll after the acquisition. Increased expenses related to Bancompartir were not offset by the net interest income at Bancompartir.<br>Mibanco also registered slight deterioration, which was mainly attributable to on-going increases in headcount in 2019; 
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(ii) BCP Stand-alone registered an increase in administrative and general expenses, which was mainly attributable to payments to<br>renew licenses for software programs and to higher marketing expenses for advertising campaigns through digital channels. Additionally,<br>the expense for salaries and employee benefits increased due to growth in the headcount in 2019 and to a transportation bonus to<br>help personnel reach branches during the quarantine. These expense increases and their effect on the efficiency ratio were offset<br>in part by an increase in net interest income, in line with growth in average daily balances; and
(iii) Grupo Pacifico, which registered an increase in the acquisition costs in the life business due to growth in sales of D&S<br>policies through the alliance channel and in the P&C business due to the reimbursement of 50% of the premiums for car insurance<br>for certain clients for the months of March and April in connection with the quarantine ordered by the Peruvian government in relation<br>to the COVID-19 pandemic.
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Business and Other Updates

Recent Developments

Declaration of dividends

At a meeting held on February 27, 2020, our Board of Directors approved the distribution of a cash dividend of S/2,831,469,510.00, for a total of 94,382,317 outstanding shares, which is equivalent to S/30.00 per share. The cash dividend was paid on May 8, 2020, without withholding tax at source, to shareholders of record on April 13, 2020.

The dividend was paid in U.S. dollars using the weighted exchange rate reported by the SBS for transactions at the close of business on May 6, 2020 (S/3.4081 per U.S. dollar). As a result, the dividend paid per share was U.S.$8.8026, equivalent to the declared dividend of S/30.00 per share.

Board of Directors

On April 24, 2020, we announced that Dionisio Romero Paoletti, Chairman of the Board of Directors, would not stand for reelection to our Board of Directors. At our Annual General Meeting of Shareholders held on June 5, 2020, the following individuals were re-elected as members of our Board of Directors: Fernando Fort Marie, Patricia Lizarraga Guthertz, Raimundo Morales Dasso and Luis Enrique Romero Belismelis. The following individuals were newly-elected as independent members of our Board of Directors: Mr. Alexandre Gouvea, Ms. Maite Aranzabal Harreguy, Mr. Antonio Abruña Puyol and Mr. Irzio Pinasco Menchelli. The shareholders also decided to increase the number of directors from eight to nine. As per our Bye-laws, after the Annual General Meeting of Shareholders, the new Board of Directors in its first session shall designate the new Chairman and the new composition of committees of the Board of Directors.

Distribution Channels

Distribution channels at BCP, Mibanco and BCP Bolivia totaled 10,806 points of contact at the end of March 2020, which represented a decrease of 194 points when comparing March 31, 2020 to December 31, 2019 due to a decrease in the number of Agentes BCP (BCP Agents). Comparing March 31, 2020 to March 31, 2019, however, the total expanded 356 points, which was mainly driven by growth in cost-efficient channels at BCP Bolivia, bolstered by more BCP Agentes, and, to a lesser extent, by expansion of these channels at BCP Stand-alone.

Consolidated Points of Contact

As<br> of #<br> Change
March<br><br> 31, 2019 December<br><br> 31, 2019 March<br><br> 31, 2020 March<br><br> 31, 2020 / December<br> 31, 2019 March<br><br> 31, 2020 / 2019
BCP Stand-alone
Branches 405 404 404 — (1 )
ATMs 2,244 2,285 2,291 6 47
Agentes BCP 6,759 7,187 6,869 (318 ) 110
Total BCP<br> Stand-alone 9,408 9,876 9,564 (312 ) 156
Total Mibanco’s<br> Network (1) 324 323 325 2 1
BCP Bolivia
Branches 56 54 55 1 (1 )
ATMs 299 301 307 6 8
Agentes BCP Bolivia 363 446 555 109 192
Total Bolivia’s<br> Network 718 801 917 116 199
Total Points<br> of Contact 10,450 11,000 10,806 (194 ) 356
(1) Mibanco does not have Agents or ATMs because it uses the BCP network. Mibanco branches include Banco de la Nacion branches,<br>which in March 31, 2019, December 31, 2019 and March 31, 2020 were 35.
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Universal Banking

Points of Contact by Geographic Area – BCP

As<br> of #<br> Change
March<br><br> 31, 2019 December<br><br> 31, 2019 March<br><br> 31, 2020 March<br><br> 31, 2020 / December<br> 31, 2019 March<br><br> 31, 2020 / 2019
Lima 256 255 255 0 (1 )
Provinces 149 149 149 0 0
Total Branches 405 404 404 0 (1 )
Lima 1,490 1,533 1,536 3 46
Provinces 754 752 755 3 1
Total ATM’s 2,244 2,285 2,291 6 47
Lima 3,460 3,581 3,418 (163 ) (42 )
Provinces 3,299 3,606 3,451 (155 ) 152
Total Agentes<br> BCP 6,759 7,187 6,869 (318 ) 110
Total Points<br> of Contact 9,408 9,876 9,564 (312 ) 156

BCP recorded a decrease of 312 points of contact comparing March 31, 2020 to December 31, 2019, to a total of 9,564 points as of March 31, 2020. The decline was due primarily to a decrease in the number of Agentes BCP, which fell 318 points (163 points in Lima and 155 in the provinces). Our service channels are evaluated on a regular basis to determine if they should remain open or be relocated. Decisions on these matters are executed in the first quarter of the year. In 2020, the plan was to relocate a large number of agents. As such, non-performing channels were closed at the beginning of the first quarter of 2020. In addition, the outbreak of COVID-19 and the government measures ordering the population to shelter in place adversely affected BCP’s plans to relocate certain Agentes, which is expected to commence when the state of emergency is lifted.

The number of branches between December 31, 2019 and March 31, 2020 remained stable and ATMs increased by six. Growth at the branch level was seen in areas that required more coverage to meet the needs of BCP’s clients. Expansion in ATMs was due to openings of neutral points in Lima and in certain provinces.

Comparing March 31, 2020 to March 31, 2019, BCP’s total points of contact increased by 156 points. This was driven primarily by growth in Agentes BCP in the provinces (152) and by an increase in ATMs (47) after neutral points were installed in Lima and new modules were set up at our branches in Lima and Callao in 2019. The abovementioned reflects the bank’s strategy to be closer to our clients and to the population that has yet to access the financial system by providing cost-efficient channels and ensuring better coverage in locations where we already have a presence.

Transactions per Channel – BCP Stand-alone

Transactions per Channel – BCP Stand-alone

Monthly<br> Average in Each Quarter %<br> Change
No.<br> of Transactions per <br><br>channel(1) Three<br> Months<br><br> Ended March<br><br> 31, 2019 % Three<br> Months<br><br> Ended December<br><br> 31, 2019 % Three<br> Months<br><br> Ended March<br><br> 31, 2020 % Quarter<br> on<br><br> Quarter Year<br> on<br><br> Year
Traditional Teller 7,836,871 4.4 % 7,715,870 3.1 % 6,699,584 2.9 % (13.2 )% (14.5 )%
channels Telephone banking 4,947,564 2.8 % 5,056,869 2.0 % 4,354,138 1.9 % (13.9 )% (12.0 )%
Cost-efficient Agentes BCP 24,802,140 14.0 % 32,534,245 13.0 % 28,285,371 12.2 % (13.1 )% 14.0 %
channels ATMs 24,405,732 13.8 % 25,678,078 10.3 % 21,110,659 9.1 % (17.8 )% (13.5 )
Digital Mobile banking 68,528,959 38.6 % 120,275,484 48.1 % 114,479,895 49.4 % (4.8 )% 67.1 %
channels Internet banking Via BCP 16,185,835 9.1 % 23,757,780 9.5 % 22,449,556 9.7 % (5.5 )% 38.7 % 
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**** **** Monthly Average in Each Quarter **** % Change ****
**** No. of Transactions per channel(1) Three Months Ended March 31, 2019 % **** Three Months Ended December 31, 2019 % **** Three Months Ended March 31, 2020 % **** Quarter on Quarter **** Year on Year ****
Balance inquiries 1,295,030 0.7 % 1,238,521 0.5 % 991,474 0.4 % (19.9 )% (23.4 )%
Telecrédito 11,318,983 6.4 % 13,208,492 5.3 % 13,571,633 5.9 % 2.7 % 19.9 %
Others Direct debit 717,284 0.4 % 920,143 0.4 % 1,028,329 0.4 % 11.8 % 43.4 %
Points of sale P.O.S. 17,205,460 9.7 % 19,251,035 7.7 % 18,389,832 7.9 % (4.5 )% 6.9 %
Other ATMs network 212,155 0.1 % 290,695 0.1 % 256,084 0.1 % (11.9 )% 20.7 %
Total<br> transactions 177,456,012 100.0 % 249,927,212 100.0 % 231,616,556 100.0 % (7.3 )% 30.5 %
(1) Figures include monetary and non-monetary transactions.
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In the current economic and social environment, which has been marked by stringent restrictions on movements and economic activities since mid-March to stem contagion from the COVID-19 pandemic, the average number of transactions fell 7.3% comparing the three months ended March 31, 2020 to the three months ended December 31, 2019. The majority of this decline was concentrated in March, when the Peruvian government instituted a state of emergency and mandated obligatory social distancing measures. In contrast, the level of transactions increased 30.5% comparing the three months ended March 31, 2020 to the three months ended March 31, 2019.

Comparing the three months ended March 31, 2020 to the three months ended December 31, 2019, transactions decreased across all channels with the exception of telecredito (2.7%) and direct debit (11.8%). In the three months ended March 31, 2020, the largest decrease in volume was recorded in mobile banking (4.8%) and ATMs (17.8%) due to the COVID-19 crisis.

Comparing the three months ended March 31, 2020 to the corresponding period of 2019, the monthly average of transactions increased. This was mainly driven by an increase in volume through the following channels:

(i) Mobile banking (67.1% comparing the three months ended March 31, 2020 to the corresponding period of 2019), which continued<br>to post an increase in its share of total transactions due to operating improvements that were rolled out for the “Mobile<br>Banking BCP” application and also related to our clients’ on-going shift to digital channels.
(ii) Internet Banking Vía BCP (38.7% comparing the three months ended March 31, 2020 to the corresponding period of 2019),<br>driven by the effort to redesign our web page to allow our clients to conduct transactions and find information with greater ease<br>and speed.
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(iii) Agentes BCP (14.0% comparing the three months ended March 31, 2020 to the corresponding period of 2019), which registered in<br>increase in locations.
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Transactions through traditional channels continued to fall comparing the three months ended March 31, 2020 to the corresponding period of 2019: (i) ATMs (13.5%), (ii) Tellers 14.5%), (iii) Telephone Banking (12.0%) and (iv) Balance Inquiry Modules (23.4%). These decreases were due to (i) an increased shift toward digital channels such as mobile and internet banking offer similar functions and (ii) on-going efforts to implement other digital platforms in branches, which allow clients to consult information, open savings accounts and pick up debit cards.

We expect that growth in banking transactions in the region will continue to be directed mainly through digital channels. The current scenario of social distancing and public health measures will drive even more demand for these services. Growth in the volume of transactions will be carried out primarily through mobile banking and internet banking, which will blend well with our objective to possess an efficient and profitable network of customer service channels. Our interbank payment application, Yape, hit the 2.5 million user mark in the first quarter of 2020 and has become a useful instrument for both individuals and businesses to conduct efficient, zero-cost transactions.

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Points of Contact – BCP Bolivia

As<br> of #<br> Change
March<br><br> 31, 2019 December<br><br> 31, 2019 March<br><br> 31, 2020 March<br><br> 31, 2020 / December<br> 31, 2019 March<br><br> 31, 2020 / 2019
Branches 56 54 55 1 (1 )
ATMs 299 301 307 6 8
Agentes BCP Bolivia 363 446 555 109 192
Total<br> Bolivia’s Network 718 801 917 116 199

At BCP Bolivia, points of contact increased by 116 comparing March 31, 2020 to December 31, 2019 after an increase in Agentes BCP Bolivia (109) were deployed in line with our strategy to growth points of contacts through cost-efficient channels.

The comparison between March 31, 2020 and March 31, 2019 experienced a similar trend, where the total number of points of contact in BCP Bolivia increased 199. This was primarily attributable to growth in the number of Agentes BCP Bolivia (192) and, to a lesser extent, to expansion in the number of ATMs (8). The number of branches, nonetheless, fell by one when comparing these periods. The increases in the number of Agentes and ATMs was attributable to the bank’s strategy to establish cost-efficient channels to reach more clients and also reflects a move to offset the effect of branch closings.

Microfinance

Points of Contact – Mibanco

As of #Change
March 31, 2019 December 31, 2019 March 31, 2020 March 31, 2020 / December 31, 2019 March 31, 2020 / 2019
Total Mibanco’s Network(1) 324 323 325 2 1
(1) Mibanco does not have Agents or ATMs because it uses the BCP network. Mibanco branches include Banco de la Nacion branches,<br>which in Mar 19, Dec 19 and Mar 20 were 35.
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At Mibanco, points of contact increased by two comparing March 31, 2020 to December 31, 2019. When comparing March 31, 2020 and March 31, 2019, there was one additional branch. Mibanco has an agreement with the Banco de la Nacion to use the latter’s branches at the national level to reduce operating costs. At the end of March 31, 2020, these branches represented 11% (35 branches) of the 325 operated by Mibanco.

Economic Perspectives

Peru Economic Data and Forecasts
Peru 2017 2018 2019(3) 2020(3)
GDP (U.S. Millions) 194,653 214,397 225,364 230,413 200,000
Real GDP (% change) 4.0 2.5 4.0 2.2 (7)–(13)
GDP per capita (U.S.) 6,179 6,742 6,999 7,090 6,098
Domestic demand (% change) 1.1 1.4 4.3 2.3 (8)–(13)
Gross fixed investment (as % GDP) 21.9 20.5 21.4 21.2 (19)–(20)
Public Debt (as % GDP) 23.9 24.9 25.7 26.8 34.3–38.5
System loan growth (% change)(1) 4.9 5.6 10.1 6.2 —
Inflation(2) 3.2 1.4 2.2 1.9 0.0 – 0.5

All values are in US Dollars.

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****
Peru 2017 2018 2019(3) 2020(3)
Reference Rate 4.25 3.25 2.75 2.25 0.25
Exchange rate, end of period 3.36 3.24 3.37 3.31 3.40–3.45
Exchange rate, (% change) (1.7 )% (3.5 )% 4.1 % (1.7 )% 4.1 %
Fiscal balance (% GDP) (2.6 ) (3.1 ) (2.5 ) (1.6 ) (9.4 )
Trade balance (U.S. Millions) 1,953 6,700 7,197 6,614 3,000
(As % GDP) 1.0 % 3.1 % 3.2 % 2.9 % 1.5 %
Exports 37,082 45,422 49,066 47,688 37,000
Imports 35,128 38,722 41,870 41,074 34,000
Current account balance (U.S. Millions) (5,064 ) (2,779 ) (3,821 ) (3,530 ) (5,000
(As % GDP) (2.6 )% (1.3 )% (1.7 )% (1.5 )% (2.5 )%
Net international reserves (U.S. Millions) 61,686 63,621 60,121 68,316 68,000
(As % GDP) 31.7 % 29.7 % 26.7 % 29.6 % 34.0 %
(As months of imports) 21 20 17 20 24

All values are in US Dollars.

Source: INEI, BCRP,and SBS.

(1) Financial System, Current Exchange Rate.
(2) Inflation target: 1% to 3%.
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(3) Estimates by BCP Economic Research as of April 2020.
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Main Economic Variables

Economic Activity – GDP

(% Change Year-on-Year)

Source: INEI

After expanding 3.0% comparing January 2020 to January 2019 and 3.8% comparing February 2020 to February 2019, economic activity was severely affected by government measures to halt the COVID-19 pandemic, which measures included instituting mandatory social distancing beginning on March 16, 2020. Some indicators that show the impact on economic activity in March include: electricity production (declined 27% comparing the second half of the month with the corresponding period of the previous year), public investment by the general government (decreased 25% in March in comparison to the corresponding period of the previous year), and wholesale poultry sales (decreased 10% in March in comparison to the corresponding period of the previous year and 25% in the last week of March in comparison to the corresponding period of the previous year).

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Inflation and Monetary Policy Rate (%)

Source: INEI, BCRP

The inflation rate was 1.8% as of March 31, 2020 on a year-on-year basis, compared to 1.9% as of December 31, 2019. Furthermore, core inflation (excluding food and energy) decreased to 1.7% as of March 31, 2020 on a year-on-year basis compared to 2.3% as of December 31 2019, the lowest level in nine years.

In March 2020, the BCRP held an extraordinary (and unprecedented) monetary policy meeting, where it lowered its monetary policy rate by 100 basis points to 1.25%, a level not seen since the global financial crisis of 2009. The institution took into account the deterioration of the international environment due to the COVID-19 pandemic, as well as local economic conditions. In April 2020, the BCRP held another extraordinary meeting and agreed to cut an additional 100 basis points to set the rate at 0.25%, a new historic low. In addition, the BCRP took different measures to inject liquidity into the economy, such as extending its operating terms; exercising flexibility with regard to reserve requirements for institutions in the financial system; and providing liquidity through specific operations (such as asset repurchases and foreign exchange repurchases).

Fiscal Result and Current Account Balance (% of GDP, Quarter)

Source: BCRP

* BCP estimates 
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In March 2020, fiscal revenues at the national government level declined 19% year-on-year in real terms, the worst level recorded since July 2009. The strong contraction was attributable to an 11% decline in VAT revenues and a 24% decline in income tax revenues. The decline in fiscal revenues is primarily attributable to the measures adopted by the government during the national state of emergency in response to the COVID-19 pandemic. Certain notable measures include: (i) deferral of yearly income tax filings, (ii) deferral of internal tax payments and declarations, and (iii) flexibility regarding terms for installment payments, extensions and tax-debt refinancing. During the same period, national government non-financial spending increased 12% year-on-year in real terms. Current expenditures in particular increased 15% year-on-year, a 26-month peak, due to an increase in national government transfers (an increase of 94%). In contrast, public investment from the national government declined 25% year-on-year in real terms.

Exchange Rate (S/ per U.S.$)

Source: SBS

The exchange rate as of March 31, 2020 was S/3.437 for U.S.$1.00, representing depreciation of the Peruvian Sol of 3.7% in three month period ended March 31, 2020, primarily due to foreign currency effects of the international economic environment in the context of the COVID-19 pandemic.

The BCRP mitigated the depreciation of the Peruvian Sol though foreign exchange swaps for S/7,296 million in the three months ended March 31, 2020 (S/6,170 million were placed in March alone).

International net reserves stood at U.S.$68,022 million as of March 31, 2020, which represents a decrease of U.S.$294 million compared to March 31, 2019.

Finally, as of March 31, 2020, all currencies in the region depreciated compared to the end of 2019, with depreciation of the Brazilian Real of 29%, the Mexican Peso of 25%, the Colombian Peso of 24%, and the Chilean Peso of 13%). The Peruvian Sol was the only currency in the region which did not exceed its historical peak during this period.

Other

From time to time, we are and may become involved in litigation, investigations and other legal or administrative proceedings relating to claims arising from our operations, either in the normal course of business or otherwise, or arising from violations or alleged violations of laws, regulations or acts. As described in, but not limited to, “Item 8. Financial Information—8.A. Consolidated Statements and Other Financial Information—(1) Legal Proceedings” in our 2019 Form 20-F, as of December 31, 2019, we were subject to a number of significant legal proceedings. In addition, an investigation was carried out regarding certain donations in an amount of U.S.$3.65 million, which were made by Credicorp to the Fujimori 2011 presidential election campaign. The SMV has initiated a sanctioning process against Credicorp for not having disclosed to the market, in due course, the contributions made to political campaigns in the years 2011 and 2016. The SMV has also initiated a sanctioning process against three subsidiaries of Credicorp (BCP Stand-alone, Mibanco and Grupo Pacifico), for not having disclosed to the market, in due course, the contributions made to political campaigns in connection with the 2016 presidential elections. We do not believe the results of these sanctioning processes will have a material adverse effect on our business, financial condition or results of operations, but cannot assure you that these or any of our other regulatory matters and legal proceedings, including any that may arise in the future, will not harm our reputation, adversely affect our ability to conduct our business in the manner that we expect, or require us to pay fines, which could adversely affect our results of operation in case of an unfavorable ruling. In addition, Dionisio Romero Paoletti, the former Chairman of our Board of Directors, is currently part of a preliminary investigation by a district attorney in relation to allegations made by a private citizen with respect to campaign contributions made in the 2011 and 2016 elections. Such allegations are not directed against Credicorp and we believe they would not have any material impact on the Company.

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Forward-Looking Statements

The preceding presentation contains estimates and forward-looking statements. Some of the matters discussed concerning our business and financial performance include estimates and forward-looking statements.

Our estimates and forward-looking statements are mainly based on our current expectations and estimates on projections of future events and trends, which affect or may affect our businesses and results of operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of information currently available to us. Our estimates and forward-looking statements may be influenced by the following factors, among others:

· general economic conditions, including, in particular, economic conditions in Peru;
· the occurrence of disasters or political or social instability in the countries where we operate, including, in particular,<br>the economic conditions in Peru;
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· the adequacy of the dividends that our subsidiaries are able to pay to us, which may affect our ability to pay dividends to<br>shareholders;
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· performance of, and volatility in, financial markets, including Latin American and other emerging markets;
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· the frequency and severity of insured loss events;
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· fluctuations in interest rate levels;
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· currency exchange rates, including the Sol/U.S. dollar exchange rate;
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· deterioration in the quality of our loan portfolio;
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· increasing levels of competition in Peru and other emerging markets;
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· developments and changes in laws and regulations and adoption of new international guidelines;
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· changes in the policies of central banks and/or foreign governments;
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· general competitive factors, in each case on a global, regional and/or national basis, including in the Peruvian banking industry;
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· effectiveness of our risk management policies and of our operational and security systems;
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· losses associated with counterparty exposures;
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· the duration and severity of the novel coronavirus 2019 (“COVID-19”) outbreak and its impacts on our business and<br>economic conditions generally; and
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· other risk factors discussed in our 2019 Form 20-F filed on May 29, 2020.
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The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify estimates and forward-looking statements. Estimates and forward-looking statements speak only as of the date they were made, and we undertake no obligation to update or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Our future results may differ materially from those expressed in these estimates and forward-looking statements. In light of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this Form 6-K might not occur and our future results and our performance may differ materially from those expressed in these forward-looking statements due to but not limited to, the factors mentioned above. Because of these uncertainties, you should not make any investment decision based on these estimates and forward-looking statements.

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