Welcome to the Fourth Quarter 2013 Credicorp Earnings Conference Call. My name is Richard, and I will be your operator for today's call. At this time, all participants are in a listen only mode. Later we will conduct a question-and-answer session. I will now turn the call over to Mr. Fernando Dasso, Chief Financial Officer of Credicorp. Mr. Dasso, you may begin. Mr. Dasso, if your line is on mute, please unmute it. If you are on a speaker phone, please pick up your handset. Participants please standby while we reconnect the host. Ladies and gentlemen, please continue to standby, as we reconnect your host. Thank you for your patience. Ladies and gentlemen, please continue to standby, while we reconnect Mr. Dasso to the call.

Please standby, as we try to reconnect your speaker. Thank you for your patience.

Hello. Good morning. Hello. Is everybody in? Okay. I am sorry for the technical difficulty. Good morning. And welcome to Credicorp's fourth quarter and year end earnings results conference for 2013. Operational trend and income generation for the fourth quarter, as well as for the year, the quarter was significantly better than reported number suggests. Income generation was strong for the year as a result of good portfolio growth and improved pricing to compensate for higher cost of risk combined with lower funding costs. However, the year 2013 presented a series of events which driven our reporting on constant currency U.S. dollar and the financial environment generated substantial accounting and extraordinary losses related to, first, the nature of the dual currency financial system under transitional period in which we find ourselves combined with the unexpected currency volatility experienced in the first half of the year, second, the general market volatility, and third, some regulatory changes that affected some business sectors and resulted in extraordinary accounting adjustments, most of them in the fourth quarter. Isolating only the most easily quantifiable losses were expenses generated by the loss event, we can identify a total of US$194.4 million that was deducted from the income generated in the year of which US$34.2 million affected this fourth quarter. Furthermore, this reported income was already diminish by the conversions of around 80% of the income generation which is in U.S. dollar or 9.6% were expense of U.S. dollar, resulting in lower U.S. dollar denominated reported income amount, which is distorted the real growth and income generation perception. If we were to report the same year in more constant currencies and focus on recurrent income generation excluding all accounting and extraordinary costs that affected this year. Net interest income growth for the year would reach an approximate…

Thank you. (Operator Instructions) Our first question on line comes from Thiago Batista from Itau. Please go ahead.

Yeah. Hi, guys. Good morning and thanks for opportunity. I have basically two questions. The first one regarding your non-recurring items during the 4Q, could you give us a little more color about why you did the impairment in IM Trust this quarter, what was the main trigger for this -- for this impairment is the first question? And my second question is about asset quality. I know that we are at comments and that you are very comfortable, we saw the adjustments you did in the past. So it’s possible to expect that the PDL ratio of Credicorp will contract during this year. And specifically about the SME segment we saw in the chart you posted in release that the PDL ratio of SME put some small downtick in December against November figures. So my question is, it’s assumed to say that the peak in the PDL ratio of the SME segment is occurred in November or maybe we could see some additional deterioration going forward?

Sure, Thiago, hi. This is Walter. Maybe I will tackle the first part regarding the non-recurring items and leave to Fernando the second part of your question. The non-recurring items for this quarter indeed have been quite high. The most important one is the one you mentioned which is the impairment charge for IM Trust and there the reality is that we paid a price which was related to the margin and we have learned that the margin for mistakes. It was a difficult market situation. There are a lot of different alternative investments we could have done. With that being mentioned what happened were two things. One is that the markets moved against us. IM Trust gained market share in all its domestic businesses, but the overall size of the market was relatively smaller. There was less business activity in the domestic capital markets in Chile. And while this was happening, of course there was also a devaluation of the Chilean peso so that in dollar terms which is what was recorded, the price which was recorded, is recorded at Credicorp the overall market became smaller. So if one looks forward the exercise which we have to do to value on a yearly basis the impairment involves projecting forward the expected results of IM Trust and we see that those projections, originally projections will converge with the numbers that we project this year, I think three or four years down the road but there is a gap which will not be recovered and that fair share value of that is the impairment. So yes, we pay to the margin, we have very little room for error and error did occur, but markets played against this. The volumes were smaller than anticipated and of course the currency did not help. There were a couple of other extraordinary items in the quarter, one related to is the Loot which is the local social security. There was a new interpretation by the regulatory authorities on how that charges should or should not be applicable to extraordinary bonus payments etcetera, etcetera. And yes, this affected several of our companies and we had to do a one-off adjustment which if I recall correctly throughout record amounts about $10 million. And then last but not least, there were several accounting items related to our slowly incorporating all IFRS principles to some of our accounting. And those included items of about $10 million. Now in the past we have always had extraordinary items that affect our P&L, not in this magnitude but they will always counter by extraordinary items on the positive side, none of which we have had this year. So it is unfortunate I think, but it is not being bet that keeps us awake at night. The IM Trust is unfortunate one, but reality is what it is. And I would now pass on to Fernando to tackle the second portion of your questions.

Hello, Thiago. As you can see the chart and the chart there 6, 9 for each different segment, we are very comfortable with the no work for lines as you can imagine and actually very positively impressed with what is happening in the consumer segment, although we have to admit that December is a very good month in terms of payments because people that earn wages, former workers and a double wage. So that helps not only in the consumer and the other segments but also in the SME segment because I mean these people have some times two different jobs, one is an independent and one is a dependent job, so that happens. And that’s probably what happened in the SME segment. There is actually as we say here more money in the street, so our customers are able to pay more. So what I would say is that number in the SME is a good number, the line is getting down, but it is still very early to make conclusions. During the whole year 2013 we have engaged in picking a lot of measures in terms of applications scores, in terms of collections, in terms of policy for grade in the SME segment and we feel that they are beginning to realize good results, but this is still an early stage to tell you that we will go down in the near future. We will probably have to talk again in May and we hope to have better results. There is another point important to talk about in the credit card portfolio. The thing is that like two months ago regulation made all the banks and institutions improve to shorten the period of payment for credit cards. We had large periods of payment and now with most -- depending on the cards that we shortened them by half. So actual installments for our clients have increased somehow and they are adjusting to that. And we will see what happens. We feel that this period line for credit cards could go up a little further and then it will come down when our clients adjust to the new rules. In reality, this measure taken by the SBS, our regulator is a very healthy measure in terms of the future of the market. We are actually -- I mean we’ve taken it and we are actually looking for great results in the long run.

Fair enough. Thanks for that.

Thank you. Our next question online comes from Mr. Carlos Macedo at Goldman Sachs. Please go ahead.

Hi, good morning, gentlemen. Thanks for the opportunity to ask questions. I have a couple of questions. One, Fernando, if you could give us some more color on your efficiency program and how that’s progressing, what’s staggering, we did see some benefit from it this quarter. What kind of impact you expect that to generate in the coming years and just some more color on that? And the second you just mentioned regulation that’s changing credit cards, is there anything else in the pipeline that we should be thinking about looking forward to the next 12 months that you can see that’s in the process of approval that may affect your results? Thanks.

Carlos, this is Walter Bayly. I will tackle the first question regarding the efficiency, and thank you for your question because it gives me the opportunity to clarify this because I know there has been a lot of questions I and her team about it. Yes, we have embarked on a very thorough profound initiative to take our efficiency levels dramatically down. This is something we initiated in around September, probably October. Where we are now is that we have developed the methodology, we have about a complete front related to long-term changes, we have nine different fronts and a whole area of work related to short-term controls or tools to help management spend more intelligently. We are in the process of looking at this very closely, each of the different teams is working and we expect everybody to come back to the table around May, June and only then we’ll have a very clear number as to what level of efficiency do we want to reach and when. Already in May, June when each of the different teams tackling the different initiatives, you will come back and again we will be able to consolidate all the information and give you guidelines as to how we will be able to do this and what timeframe and what levels of efficiency. So right now, it is still premature for us to give you a number or a timetable and we expect that to be able to give you that in May, June. So yes, we are working on it, it’s one of our key initiatives, but I don’t want to mention numbers before we are really prepared to do so.

Carlos, I think in terms of the second question, as you know during the last three, four months the regulators have been very active in terms of new regulation in the pension funds system, in insurance, in banking, especially in terms of fees, regulating fees, number of fees and what you can charge or not, whatever. We don’t feel that they will be at this in the near future. As you know well this year still a normal year, next year is a pre-electoral year so we feel that they will be into the very less active in these terms.

Okay. Thank you, Fernando. Thank you, Walter.

Thank you. Our next question online comes from Mr. Tito Labarta from Deutsche Bank. Please go ahead.

Hi, good morning, Fernando and Walter. Thanks for the call. My question in terms of your margin, I just want to get kind of how you expect to see that going forward. We saw very strong loan growth on a local currency side which we think helped the margin, but the growth was also driven more by the corporate side as opposed to SME. So, can you give a little bit of color and how these moving elements should impact the margins going forward with the strong loan growth in the local currency but driven more by the corporate as opposed to consumer and how do you see the loan growth evolving in these segments and how that’s going to impact your margins? Thanks.

Thank you for questions. First of all, the country is planning to grow by say 5.5% next year. Things were a little rough in terms of expectations at the beginning of the last year. This year the environment looks better and we feel that the country is to continue growing better than last year. And the first thing you is the corporate and those companies beginning to be more active, that’s what we have seen in the last quarter and we are continuing to see this quarter. So we feel that this could be a good year and what is happening really is that, our lending business is turning more toward solid and we are receiving more deposits in dollars. It is a very sharp trend but it is a trend and that, I mean, that will help if rates begin to go up and that’s really the case we are looking at. Margins will properly come up as well and that will be helpful for our institutions.

Thanks. Maybe just give a little bit more color on that, as well as you are getting growing loan portfolio more in Soles but then deposits growing more in dollars which you would be worried about some mismatch from that prospective as well?

As you probably know, our -- because of what happened during the last three, four years, we had a portfolio in which our loans in dollars represented like 56%, 58%, so that number is coming down and in Soles it was the opposite. Deposits in Soles were on 54%, 55%, so the trends are the other way around now because of what’s going on with the currencies of other countries are also improved. So what we see is the balance will be more -- we actually need balanced with our assets and liabilities in the same currency. We were less balanced in the past.

I see. Thanks. So just to be clear in terms of margin expectations and so even though you probably grow more on the corporate side given that it is more from the local currency than the U.S. dollars, overall you think that should lead the higher margins for this year?

What we see is that if the corporates begin to grow, companies will begin to grow and then their employees will also begin to grow and earn more money, and that will also help the retail, but that will come further along the way.

So would you expect the corporate to go faster than consumer this year or kind of you know maybe corporate go faster in the first half and then second half of the year you grow faster on the consumer side? I just want to get a sense of the loan growth in corporate versus retail as well.

I feel that we have already -- the corporates are growing faster now and the retail customers will probably catch-up during the second semester of the year.

All right. Thank you very much.

Thank you. Our next question on line comes from the Mr. Saúl Martinez from JPMorgan. Please go ahead. Saúl Martinez - JPMorgan: Hi, guys. Good morning. Two questions, I am going to be blind with my first question and should you be in the insurance business, is this a good business, for as long as I’ve covered you guys, it’s been a turnaround, sorry, its been sort of a drag in on profitability and you guys, you brought in David Saettone a few years ago, he didn’t worked out in terms of turning around, now Alvaro is trying to turn it around? Does he seem to be getting better even notwithstanding the one-off issues, the results have been pretty poor, you are not, your ROEs at or below your cost-to-capital for a long time? Is this just a bad business? Is this a business that maybe you don’t do as well as the banking business? Should you be allocating capital to other businesses? So I kind of want to get a sense of what your strategic vision is here and whether this is a flexible business, because it has been awhile, it feels like that it really hasn’t delivered in terms of result? Secondly on your credit card, credit card asset quality, I get the change in regulation to make sense that MPLs would go up? Having said that, if I look at the industry numbers, MPLs went up, I think, 30 basis points and if I probably if you exclude your numbers from that, it went up less, Intercorp had no deterioration in the fourth quarter? Why is your MPL evolution in cards so much worse than your peers, especially considering that it has been awhile, well over year since you introduced your pricing adjustment to that business?

Sure. Thank you Saúl. This is Walter. Let me tackle the second question first, make a brief comment about the insurance. Unfortunately we have Alvaro Correa who will be able to give us a little bit more color regarding insurance. As to the credit cards, the adjustments for the new regulation was passed at the beginning of the year and each bank and the latest you could it was by December. And most of the other financial institutions did it earlier in the year thus we were the latest and so we are the only one that did the adjustment this last quarter, most of our competitors did it in earlier quarters, we have until year end. Intercorp which is the one that you mentioned did not have to do the adjustment because they -- my understanding is that they have been operating under the new guidelines for quite awhile. Saúl Martinez - JPMorgan: Okay.

So I hope that answers the question. Saúl Martinez - JPMorgan: Yeah.

Regarding the insurance, yes, regarding the insurance, yes, those are all fair questions, questions that we have debated amongst ourselves. But, again, as I mentioned, I will leave, Alvaro, to give you a little bit more color on where we are and we are intend to go forward. Alvaro?

Hi, Saúl. Thank you for the question. Actually that was my first question before accepting the position. And I would say that after four months in that role, I still have a few answers waiting there. But basically what you see in this company and this business is that you have very different realities with (inaudible). First of all, you have the property and casualty business, which is the poorest one where we have more complexities and difficulties to make it profitable. Then you have the health, P&C insurance business, which is getting better and better with all the adjustments and improvements of last year. And then -- and the investment that’s within the business we are making into the medical services, which are made to be profitable, but we have already made all the improvements and adjustments. And this is the year to make it, put it on the positive side and start getting a better return equity base. And finally, the life insurance business which is a very profitable one, we do it well. We have it very well linked to bank insurance to bank generated insurance, linked to loan side. And in addition to that, we have the annuities and all the other businesses that are performing quite well. Going back to the property and casualty, which is where we have the challenges. We’ve seen it. Again, we have different businesses. So, the large companies or customers that have been a challenge for a while and now we have a different type of reinsurance there. We have this quota share contract that is basically transferring the risks to reinsurance or a big part of the risk, 55% today. And that has brought much more stability or less volatility to the P&L this last year. However, businesses are…

It is about -- well this year -- this last year, the first nine months of the year where we had the business because we lost it starting October the 1st, was a very profitable one which doesn’t mean that, it has been that profitable in the past and won’t be that profitable in the future. Basically, the contribution has been around $5 million in the past, this last year was $12 billion and that would be what you see as we have lost there. However, the rules of the game have changed. Now you have much lower premiums there and the companies that have won that business seems to be losing earnings basically. So we were not that wrong by losing that business as it works designed. We are really hoping that since the company started losing money in this business, in the new auction the rules would change a little and could be an opportunity for us to get back in. Saúl Martinez - JPMorgan: Okay, that’s helpful. Thank you very much for your answers.

Thank you. Our next question online comes from Philip Finch from UBS. Please go ahead.

Good morning, everyone. Thank you for taking my questions. I have got two please. First of all, in the past few quarters you’ve been slowing down your branch expansion program. So, can you give us an update on why we found in, in terms of how many branches we should expect you to open this year and each year going forward? And secondly, what is your ROE expectation, again in the past you’ve talked about achieving close to 20% ROEs. Is that something you think you can achieve this year? Thank you.

Sure, Philip, this is Walter. Regarding our branch expansions, we said in a couple of days I was reviewing with Gianfranco who runs our retail operation his mid-term expansion program. And yes, we will continue to expand probably a number which will be around 40 to 50 branches per year, probably closer to 40. Those numbers can change, not in the next year because there is a lag of about 18 months between decide and decided to open the branch than you actually do it. So probably the next 12 months are already played out. And more on a longer-term basis, that is one of the issues that is going to be tackled through the efficiency whether the model of our branch, the footprints that we want to have is the right one to move on to change it or not. But to give you a simple answer probably our number are out 40 is one that you can feel comfortable around. The second question was regarding return on equity, yes, 20 plus return on equity is a doable and achievable target for Credicorp and we are very, very focused on reaching those return on equities on this first quarter.

So, I mean, you achieve that mid first quarter?

Yes, sir.

Okay, thank you.

Just to add a little bit on the branch question. What we’re looking at is that actually transactions in our branches are diminishing month by month. So our branches will be much more devoted to sales and service and less devoted to cash transactions and that’s already a case for -- it's been a case for the last 15 months and we probably continue to resolve. So it’s not only a matter of putting more branches but of really signing the branches because we are needing them more for sales and service rather than transactions.

I got indeed. Thank you very much.

Okay. Our next question on line comes to [Mr. Fred Emery] from UBS. Please go ahead.

Good morning, everyone. Thank you for the call. A couple of questions on my side. The first one is a follow-up on, Tito, question on the margins. So I understand that corporate is going to grow a bit more in the first half of the year then maybe consumable catch-up, but we also have the impact on the currency. I wanted to hear from you net-net if the impact on the margin would be positive for this year. In other words, do we expect margin expansion for 2014, so that would be the first one? And the second one is on one of the subsidiaries, Edyficar, which you mentioned was a great assets. We’ve seen an increase in MPLs at one of your main competitors in microfinance. And I wanted to hear from you your thoughts in terms of asset quality, whether we should be concerned about contingent and whether you expect these trends to continue to be very strong at Edyficar? Thank you.

In terms of margins, there are really two businesses as you said. One is a wholesale business and we believe that margins will -- could improve a bit especially because rate, especially long-term rates will begin rollout. We don’t know what’s going to happen in this market because it’s really volatile but the trends are carrying assets they will go up. So margins will expand a bit. But that’s a very competitive business. Our margins are very small compare to retail. In the retail segment, there is ample room for improvement. And last year we’ve been very much engaged in developing new tools to make our numbers and our pricing more transparent to ourselves and to our customers. So we have these new pricing tools now in place in most of our businesses. We will really increase some of our prices, some of our rates in the SME segment and we plan to be much more intelligent in pulling our rates and also our fees in place next year and that will probably have a very good impact in terms of margins.

Regarding your questions on the credit quality of Edyficar vis-à-vis it’s competitors. The Edyficar and the micro segment business, which is still -- the bulk or not the bulk, but the largest share of its portfolio. They have a very successful model in which I would say 70% of Edyficar customers are not shared customers. Their customers are exclusively work with Edyficar on the lending side. So that’s gives them a very special position in the market which -- the market which has been contaminated because of over lending. Most of the financial institutions have been very aggressive. The whole bunch of (inaudible), et cetera that has been very aggressive including Banco which is the name I understand you are alluding too.

Yeah.

So, yes, there was a bigger over lending fortunately it has not hit Edyficar because of the fact that I mentioned that the bulk of the customers are not shared customers. On the other side on the portfolio which is the larger, the company slightly above the microfinance which is the [FEMA]. It is not an important portion of Edyficar’s portfolio but it is growing but with the different business model and we think that it will not be effective.

That’s right. Very clear. If I may just ask you for a follow up on the 20% ROE that you just referred to, you were saying that you could reach this by the third quarter of this year. And maybe just summarize what would be main driver. Are you thinking that maybe the performance in ROE will be because of margins, because of lower provisions? What do you think is the biggest driver for this return?

Sure. They only caveat I would say to my comment about the 20 % this quarter is that there are any currency disruptions.

Okay.

But you may decide assuming that there will be no major currency disruptions. What will allow us to reach at 20 plus return on equity, just a fact that we will not have the all those unusual circumstances that have overshadowed our performance. We got again the devaluation, the impact of the fixed income, the accounting changes, et cetera, et cetera. If you take all those from the performance of Credicorp the last year then even assuming the underperformance of Pacifico and we will have been under 20%. So what do we need to happen for that 20% return on equity to be obtain in the first quarter, one no major currency disruption and second elimination of non-recurring items, just the business itself will do it.

That’s great. Very clear. Thank you.

Welcome.

Thank you. Our next question comes from Mr. Jose Barria from Bank of America. Please go ahead.

Thank you, gentlemen. Most of my questions have been answered. So I’ll just ask some very quick ones, mostly on follow-ups to previous questions. The first one is on loan growth, understanding that you’re seeing maybe a better economic growth this year but given that you had some problems in certain portfolio that you kind of rectify. What kind of loan growth can we expect in 2014, assuming no currency impacts? The second question is with regards to your decision to change the reporting currency, obviously, it, given that there is a high degree of deodorization in the economy, it makes sense. But I wanted to understand what your thoughts are on changing the composition of your equity because you still have a large portion in dollars and there could be some translation, that’s still happening in the other direction, those will be it? Thank you.

Okay. First one, in terms of loans, we actually, we -- what we’ve had in the past is the growth of loans which is approximately double the growth of inflation of the country or the GDP plus inflation. So if the GDP grows by say 5.5% on inflation, is plan to be plan to be around 2.5%, it will be 8%. So we are planning to grow twice that, so it will be around 16%. That’s broadly what we are planning for the next year. And it will depend on the segment, some of them will grow faster and others, they are still measures to take to let them go faster in terms of risks. And your second question was about…

Currency?

Currency, okay, we’ve change our currency because now like 70% of our income and costs are in Soles. So that’s really our functional currency. And now the dollars will give us volatility, the dollars in our balance sheet. And we are planning to live with that, actually we are still trying to cover a little bit the net -- that were, I think, when you, never, but in the future we’ll have to learn to live with that because the economy will continue to grow into Soles and therefore our business will be in Soles on and on.

Let me expand on that a bit. Even today, we have always switch on functional currency but the bank has not changed. We still have a dollar portion of our portfolio and the local currency of the portfolio. Clearly, the trends are that the local currency will grow at a faster pace and thus this de-dollarization overall in our P&L and balance sheet will continue to happen but we will this year and the next couple of years continue to have a portion of our assets in denominated dollars. The question is should we or should we not have a long dollar position and that there are two debates to counter arguments. One is do we have want to volatility on our P&L. If the answer is no, then the dollar position should be zero. But the counterargument to that is should there be a more drastic movement in the currency as you have a portion of your asset denominated in dollars and your capital is all in Soles then there is a potential for us to be undercapitalized because as expressed in local currency, you dollar portfolio will have more Soles. So the counterargument if you are worried about your equity is that you should have your dollar position -- a composition of the equity which mirrors the dollar sold, the mix of your portfolio so there is no simple answer. So what we have done is probably a combination of both that we do want to have a portion of our equity invested in dollars because we do not want to be totally unprotected should there be some movements in the exchanges -- the exchange rate but on the other hand we want to minimize the volatility on our P&L. So somewhere in the middle as where we would be navigating.

I see.

Did I explain myself?

No. Yes absolutely. Just in terms of, for our purposes, so that we could try to quantify what the impact could be, what do you think is a sweet spot in terms of mix of soles versus dollar on your book value?

The number I have in mind is probably around having a long dollar position of about $400 million. What percentage would that be on the capital. Fernando, do you have a number in mind?

The capital of Credicorp is for…

A billion, yes.

Yes, probably 30% or something.

So I’m looking at 4 billion or 400, we are talking about 10%?

10% yes.

Probably, call it, 3 like that because…

10% to 15% probably the number.

Got it. Okay and lastly Alvaro if you could -- just because I didn’t understand clearly your answer to Soles question on the impact of the loss of the Prima business on the insurance side. What did that represent in terms of net income for the Pacifico Group in the first nine months of 2013?

It was around $12 million.

$12 million.

Yes, it was a very good year, lower cash and good income which will not be repeated primarily.

So roughly around 4 million a quarter and in 2012, it was around the same level?

Low.

It was low okay.

It was about $1 million and $1.5 million per quarter.

Got it.

Like this.

Okay. Thank you very much.

You are welcome.

Our next question on line comes from Boris Molina from Santander. Please go ahead.

Yes. I was trying to piece together a little bit from your comments of what is going to affect your guidance for the year. So basically we are talking about the 16% loan growth but you gave some more details about the cost and provision expenses for the year. Do you see that in terms of other operating lines and how do we arrive to that 20%+ ROAE for the year if you can give more clarity, that would be great? Thank you.

Okay good question. We talked already about loans and you ask about operating cost and provisions. What we feel is that given all the measures as we have taken already, those numbers will grow by about the same, I mean, in terms of costs, we are planning about maybe 14% to 15% and in terms of provisions, it will probably be the same growth of our loan portfolios.

Okay. Thank you so much.

Our next question comes from Amit Mehta from PIMCO. Please go ahead.

Hi, some of my questions have been answered. But I guess I’ll just quickly wanted to focus on your MPA level and also kind of may be elaborate on the components of the cost of risk charge that you see going forward given the mix shift that you are seeing. And then also on the cost growth, I just won’t understand how much of your cost growth is flexible going forward. I appreciate you are in the process of doing your review at present but I just wanted to understand if we have a deceleration or reacceleration, how manageable is it for you to control your cost going forward because it does seem quite sticky historically.

We are right now in the process of finalizing all our OpEx and all our personnel costs. As you have said, part of it is fixed but the first findings of our analysis is that there is ample room for improvement. Some of that improvement will be faster to make and the other part will need some automation. As Walter said these efficiency program because this is really a program, will not take six months. It will probably take some years and we are pulling together the pillars to make that strong and healthy program. There is some flexibility in our cost structure that if there is a downturn in the economy, we will probably need to bring to a table in terms of our results.

Is there going to be any additional one-off costs to implement this cost saving program ultimately?

Nothing major. At least that we have foreseen right now. We will be able to give a little bit more detail as I mentioned later on but -- later in the year but at this stage, nothing that should stand out.

Okay. And then on the MPA and credit costs?

What? The NPLs are the PLs.

Yes, non-performing -- I mean as you highlight in our summary slide, your cost of credit is 2.2 but you are saying that will grow I mean can you just give some color on where do you think that level will get to?

We feel that, as I said in the hotel arena we are almost there. We have a very low risk portfolio and we plan to continue in that low-risk space. In the retail segment, as you probably already know we have been penetrating different less penetrated segments and there is less knowledge of how to deal with those people that was risky, that was a learning process and the product of that learning process was all the measures that we have taken last year. We have learned a lot in terms of how these people behave, how these people pay. We’ve included those learning in our models. And we feel that we have much more robust models in terms of applications scores, behavior scores, ways of calculating the income of these people. So we feel much better. We have not won 100% of this battle but we feel much better than we were -- than we felt last year. So that’s really our plan to continue growing fast as you have seen the numbers and hopefully with less delinquencies.

And would you be going back into segments where you have been before and had a bad experience because now you are better prepared in terms of how to analyze the situation. So how should be we think about the low segment of SMEs that you have doubling in and kind of retreated from?

Its very, very strange because for example in the lowest segment of SMEs, it is a difficult place and we have great portfolios, very healthy, still delinquencies, stable PDLs and they know their business then if you go a little further that’s where our opportunity and all sort of challenges and this is in terms both of Edyficar and BCP because that’s the arena where we are still learning how to deal with. Then if you go further up, we’ve taken many measures in different segment and we feel that we can grow on a very healthy fashion in those segments both in terms of SMEs and in terms of consumer lending.

Okay. Thank you.

Our next question online comes from Mr. Carlos Lopez from HSBC. Please go ahead.

Hello, good morning. Two questions. If you go to page 27 offshore report on the capital section, you have a common equity Tier 1 now of 7.52%. I would like to know where you would like to take it and where you would have a Basel III figure that you would have today and where you want to be? And my second question refers to goodwill, could you update us where your goodwill now stands both for IM Trust and for Corredores and when will it be tested again, whether it’d be next year? Thank you.

In terms of the first question, we plan to bring our BIS ratio to higher 14. We are right now somehow over there. We have an internal limit which is around 13.5; we plan to have it around the 14. We also have this other ratio which we called common equity Tier 1, which is also Basel compliant. And that I don't remember exactly, but Basel states that you have to have it around 7, 7.5, we plan to reach around 10% at the end of the year '16.

10% by the end of the year '16.

Yes.

Okay. And would that -- that would be current Basel, I guess Basel II presumably.

That’s Basel compliant. That’s what we called the common equity Tier 1, the most straight of those ratios.

So that would incorporate all the new limitations of release of Basel III, should I understand that?

Correct, yes. We feel that our own rate later will be integrated, more compliant with Basel, that's why they are being in Peru. So we plan that our relation will be really Basel based in the next two, three years in terms of capital.

Okay. And again, I mean, if you want to do that, do that have any consequence in terms of dividends, we obviously have to retain more to get to 10%?

Yes, it is unlikely that we will grow our dividends. It depends on growth of our portfolio, but that's the case.

Okay. Thank you. And on the goodwill, sir?

Could you repeat your second question please?

Yes, what is the current level of goodwill especially for Corredores and for IM Trust and when will it be tested again?

Yeah, every piece of goodwill that we have in our books has to be tested on a yearly basis according to the International Financial Reporting Standards. So we will do so again by the end of this year.

And the current balance.

Good question. I don’t have it.

We'll get back to you.

Yeah, I don't have it in my mind frankly.

Okay. Thank you. Have a good day.

Our last question online comes from Mr. Jose Barria from Bank of America. Please go ahead.

Hi. Just a follow-up on the question of guidance on expenses, you said 14% to 15%. Should that be off of the reported operating expenses or the adjusted after you take out the non-recurring charges?

Without our recurring charges.

I see, okay. That's it. Thank you.

This concludes the question-and-answer session of today's call. I will now turn the call back over to our COO, Walter Bayly for closing remarks.

Thank you all for joining us this call and for some very, very good questions. Last year was clearly disappointing year for Credicorp. Our performance was overshadowed by a series of one-off events. Clearly the movement in the exchange rate was by far the largest, will get us in several parts of our portfolio, just a simple line translation losses have been reduced about a $105 million. The margins were hit by about a $140 million, of which 45 were just the open position of foreign exchange, which is recorded in the margin, but the fact that our local currency portfolio are smaller in dollars, in dollar terms means that we had less margin than we have last year. So overall, the impact of the valuation is closer to $250 million. If you recall in the first quarter we had when interest rate moved up, we had our fixed income portfolio which mark-to-market gave us $44 million in losses. Fortunately those ended up in $12 million because we were able to have some gains throughout the year, but that was a large one-off event that unfortunately we did not properly anticipate. And then we were hit by various extraordinary which have been already talked about, IM Trust, the account, the interpretations in the rulings with social security accounting etcetera, which come to about $35 million. All-in-all, if you take income taxes into consideration, this was probably about $230 million in after-tax impact, which would have taken Credicorp’s earnings closer to the $800 million, which is a 19% return on equity. That is why I am so confident that we don't have to do anything extraordinary just having a stable foreign exchange environment and trying not to have those one-off events. Our wholesale bank exceeded its budget last year. Our retail…

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.