BAP 20-F Report ended Dec. 31, 2017

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE

SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 31 ^st , 2017

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES

EXCHANGE ACT OF 1934

Date of event requiring this shell company report ______________

For the transition period from to

Commission file number 1-14014

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Securities registered or to be registered pursuant to Section 12(g) of the Act. None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. Common Shares, par value $5.00 per share 94,382,317

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act ¨

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

CONTENT

ABBREVIATIONS

PRESENTATION OF FINANCIAL INFORMATION

Credicorp Ltd. is a Bermuda limited liability company (and is referred to in this Annual Report as Credicorp, the Company, the Group, we, or us, and means either Credicorp as a separate entity or as an entity together with our consolidated subsidiaries, as the context may require). We maintain our financial books and records in Peruvian Soles and present our financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). IFRS differ in certain respects from Accounting Principles Generally Accepted in the United States (U.S. GAAP).

We operate primarily through our four operating segments: banking, investment banking, insurance, and pension funds. See information about operating segments in “Item 4.-Information on the Company: (A) History and Development of the Company, and (B) Business Overview”.

Our six principal operating subsidiaries are: (i) Banco de Credito del Peru (which, together with its consolidated subsidiaries, is referred to as BCP Consolidated or just BCP); (ii) Atlantic Security Bank, which we hold through Atlantic Security Holding Corporation (which are referred to as ASB and ASHC, respectively); (iii) Pacífico Compañía de Seguros y Reaseguros (“PPS”, which together with its consolidated subsidiaries, is referred to as Grupo Pacifico); (iv) Prima AFP; (v) Credicorp Capital Ltd. (“Credicorp Capital”, which consolidates the companies of our investment banking platform); and (vi) Banco de Credito de Bolivia, which we hold through Inversiones Credicorp Bolivia S.A. (“ICBSA”). As of and for the year ended December 31, 2017, BCP contributed with 81.9% of our total assets, 71.8% of our net income and 70.8% of our net equity attributable to Credicorp’s equity holders ¹ . Unless otherwise specified, the individual financial information for BCP Stand-alone, ASB, Grupo Pacifico, Prima AFP and Credicorp Capital included in this Annual Report is presented in accordance with IFRS and before eliminations for consolidation purposes. See “Item 3. Key Information – 3.A Selected Financial Data” and “Item 4. Information on the Company - 4.A History and Development of the Company.” We refer to BCP Stand-alone, ASB, Grupo Pacifico, Banco de Credito de Bolivia, Prima AFP and Credicorp Capital as our main operating subsidiaries, and we refer to Grupo Credito S.A. (“Grupo Credito”) and ASHC as our two main holding subsidiaries.

“Item 3. Key Information - 3.A Selected Financial Data” contains key information related to our performance. This information was obtained mainly from our Consolidated Financial Statements as of December 31, 2013, 2014, 2015, 2016 and 2017.

¹ For the purposes of this document, equity holder refers to a shareholder

Unless otherwise specified or the context otherwise requires, references in this Annual Report to “S/”, “Sol”, “local currency” or “Soles” are to Peruvian Soles (each Sol is divided into 100 centimos (cents)), and references to “$”, “US$,” “Dollars,” “foreign currency” or “U.S. Dollars” are to United States Dollars.

In light of changes in the Peruvian economy and Credicorp’s operations in Peru, the Board of Directors of Credicorp determined, in its session held on January 22, 2014, that from and after January 1, 2014 the Peruvian Sol would be the functional currency and the currency in which Credicorp’s financial statements would be presented. This decision was made in accordance with the International Financial Reporting Standards (“IFRS”), and specifically IAS 21, based on an analysis performed by Credicorp’s management, which revealed that the Sol has become since 2014 the most relevant currency for Credicorp’s subsidiaries in Peru, and specifically for Credicorp’s main subsidiary, Banco de Credito del Peru. This decision does not change the currency (U.S. Dollar) in which the nominal value of Credicorp’s shares is denominated. In accordance with Credicorp’s Bye-laws, these values remain in U.S. Dollars, the currency in which Credicorp’s stock is listed on the New York Stock Exchange (the “NYSE”) and on the Lima Stock Exchange (BVL by its Spanish initials). For this Annual Report, we have restated in Soles the financial information presented for years prior to 2014. The methodology used for the restatement is in accordance with the IFRS and specifically IAS 21 "The Effects of Changes in Foreign Exchange Rates". The methodology applied is explained in “Item 4. Information on the Company - 4.B Business overview - (10) Selected Statistical Information”.

Some of our subsidiaries, namely ASB; Credicorp Capital Securities Inc. (“CSI”); and Credicorp Capital Asset Management (subsidiaries of Credicorp Capital), maintain their operations and balances in U.S. Dollars and other currencies. As a result, in certain instances throughout this Annual Report, we have translated U.S. Dollars and other currencies to Soles. You should not construe any of these translations as representations that the U.S. Dollar amounts actually represent such equivalent Sol amounts or that such U.S. Dollar amounts could be converted into Soles at the rate indicated, as of the dates mentioned herein, or at all. Unless otherwise indicated, these Sol amounts have been translated from U.S. Dollar amounts at an exchange rate of S/3.241 = US$1.00, which is the December 31, 2017 exchange rate set by the Peruvian Superintendent of Banks, Insurance and Pension Funds (SBS by its Spanish initials). Converting U.S. Dollars to Soles on a specified date (at the prevailing exchange rate on that date) may result in the presentation of Sol amounts that are different from the Sol amounts that would result by converting the same amount of U.S. Dollars on a different specified date (at the prevailing exchange rate on such date). Our Bolivian subsidiary operates in Bolivianos. For consolidation purposes, our Bolivian subsidiary’s financial statements are also presented in Soles. Our Colombian and Chilean subsidiaries, Credicorp Capital Holding Colombia S.A.S. (“Credicorp Capital Holding Colombia”) and Credicorp Capital Holding Chile S.A. (“Credicorp Capital Holding Chile”) operate in Colombian Pesos and Chilean Pesos, respectively, and their financial statements are also converted into Soles for consolidation purposes.

Our management’s criteria for translating foreign currency, for the purpose of preparing the Credicorp Consolidated Financial Statements, are described in “Item 5. Operating and Financial Review and Prospects- 5.A Operating Results—(1) Critical Accounting Policies – 1.3 Foreign Exchange”

CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS

Certain statements contained in this Annual Report are not historical facts, including, without limitation, certain statements made in the sections entitled “Item 3. Key Information”, “Item 4. Information on the Company”, “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures about Market Risk”, which are forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934 (or the Exchange Act). You can find many of these statements by looking for words such as “approximates”, “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans”, “would”, “may”, or other similar expressions. These forward-looking statements are based on our management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in the forward-looking statements. Therefore, actual results, performance or events may be materially different from those in the forward-looking statements due to, without limitation:

See “Item 3. Key Information - 3.D Risk Factors” and “Item 5. Operating and Financial Review and Prospects”.

We are not under any obligation to, and we expressly disclaim any obligation to, update or alter any forward-looking statements contained in this Annual Report whether as a result of new information, future events or otherwise.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

The following table presents a summary of our consolidated financial information at the dates and for the periods indicated. This selected financial data is presented in Soles. You should read this information in conjunction with, and qualify this information in its entirety by reference to, the Consolidated Financial Statements, which are also presented in Soles.

The summary of our consolidated financial data as of, and for the years ended, December 31, 2013, and 2014 was derived from the Consolidated Financial Statements audited by Paredes, Zaldivar, Burga & Asociados S.C.R.L, member firm of Ernst & Young Global (“EY Global”), independent registered public accountants. The consolidated financial data as of, and for the years ended, December 31, 2015, 2016, 2017 was derived from the Consolidated Financial Statements audited by Gaveglio, Aparicio y Asociados S.C.R.L, member firm of PricewaterhouseCoopers International Limited, independent registered public accountants.

The report of Gaveglio, Aparicio y Asociados S.C.R.L on the Consolidated Financial Statements as of December 31, 2016 and 2017 and for the years ended December 31, 2015, 2016 and 2017 appears elsewhere in this Annual Report.

SELECTED FINANCIAL DATA

In this document the total internal overdue includes internal overdue loans and under legal collection loans.

Not applicable.

Not applicable.

Our businesses are affected by many external and other factors in the markets in which we operate. Different risk factors can impact our businesses, our ability to operate effectively and our business strategies. You should consider the risk factors carefully and read them in conjunction with all the information in this document. You should note that the risk factors described below are not the only risks to consider. Rather, these are the risks that we currently consider material. There may be additional risks that we consider immaterial or of which we are unaware, and any of these risks could have similar effects to those set forth below.

(1)   Our geographic location exposes us to risk related to Peruvian political, social and economic conditions

Most operations of BCP, Grupo Pacifico, Prima AFP, and a significant part of Credicorp Capital’s operations are located in Peru. In addition, while ASB is based outside of Peru, most of its customers are located in Peru. Therefore, our results are affected by economic activity in Peru. Changes in economic conditions, both international and domestic, or government policies can alter the financial health and normal development of our business. The changes may include, but are not limited to, high inflation, currency depreciation, confiscation of private property and financial regulation. Similarly, terrorist activity, political and social unrest, and possible natural disasters (i.e. earthquakes, flooding, etc.) can adversely impact our operations.

Peru has a long history of political instability that includes military coups and a succession of regimes that featured heavy government intervention in the economy. In 1990, Alberto Fujimori took office as president in the middle of hyperinflation (7,649.7% in 1990) and insecurity due to terrorist activities. Market-based reforms and the gradual success of the authorities in capturing terrorist leaders allowed the country to stabilize, and by 1995 Fujimori was re-elected. The administration was accused of authoritarian behavior, especially after closing Peru’s Congress in 1992 and crafting a new constitution. The Fujimori administration also faced several corruption charges. Shortly after starting a controversial third term, Fujimori resigned the presidency and a transitional government led by Valentin Paniagua called for elections to be held in April 2001. After spending several years in Japan, Fujimori was brought back to Peru and was sentenced in 2009 to 25 years in prison for human rights violations. The governments that have been elected since 2001 are those of Alejandro Toledo, from 2001 to 2006; Alan Garcia, from 2006 to 2011; Ollanta Humala from 2011 to 2016; and Pedro Pablo Kuczynski, whose term began in 2016 (as described below) and was to end in 2021. These administrations, despite their different policy priorities, have each been characterized by political fragmentation (more than ten different political organizations have nominated candidates for President in each of the four elections since 2001) and low popularity (usually around 20% - 30% approval ratings). Each of these administrations has also shared mostly cordial relationships with neighboring countries.

Humala’s presidency ended on July 28, 2016. The first round of presidential elections was held on April 10, 2016. A second round between candidates Ms. Keiko Fujimori and Mr. Pedro Pablo Kuczynski was necessary as none of the candidates obtained more than 50% of the valid votes. The second round was held on June 5, 2016, and Pedro Pablo Kuczynski was elected president for the 2016-2021 term with 50.12% of the vote. Kuczynski’s presidential period started in July 28, 2016, with high economic expectations due to the highly skilled technical team that backed him and the government. However, the Lava-Jato case that started in Brazil has put on hold on-going infrastructure projects in Peru that started during the last two governments ² . Moreover, in midst of the Lava-Jato case investigations, in December 2017 a Presidential Vacancy motion was proposed by Congress. The vote did not succeed because only 79 of 87 votes required were obtained. Furthermore, in March 2018, a second Presidential Vacancy motion was presented by Congress. On March 21 ^ST 2018 Pedro Pablo Kuczynski presented his resignation as President to Congress amid high political turmoil. His resignation was accepted on March 22. On March 23 Martin Vizcarra (Kuczynski’s former first vice-president) assumed as President, as provided in the Constitution. While the three major international credit rating agencies (Moody’s, S&P and Fitch) remarked that general macroeconomic policies are not expected to change under the new government, any disruption of large-scale projects and a high degree of political uncertainty could affect Peru’s GDP and deteriorate the financial situation of some of Credicorp’s clients.

² In December 2016 the United States Department of Justice revealed that Odebrecht, the largest Brazilian construction company, had secured around 100 projects in 12 countries (including Peru, Colombia, Ecuador, Panama, Dominican Republic, etc.) using bribery and corruption. Since early 2017 Peruvian prosecutors have investigated the case which allegedly implicated former and current local authorities.

Notwithstanding, during the past 17 years Peru has experienced a period of relative economic and political stability, especially compared to the period between 1980 and 2000. This stability has been reflected in Peru’s average growth rate of 5.1% for GDP and 5.5% for Domestic Demand (2001-2017); four consecutive democratic transitions; a relatively consistent free-market approach to economic policy; and growth in GDP per capita, which reached US$6,598 in 2017 (equivalent to S/ 21,386 at an exchange rate of S/ 3.241), according to the International Monetary Fund (IMF). Nevertheless, political risk is present in any Peruvian presidential election because it is possible that a radical candidate with more interventionist economic policies could prevail. Ollanta Humala was elected in 2011 on a far-left policy platform, which was cast aside after he assumed office. Moreover, in the 2016 first round Presidential Elections, candidate Veronika Mendoza, also with a leftist policy platform, came in third place amid promises of curbs on mining projects and renegotiating gas export contracts. Hence, there is a sizeable portion of the electorate still demanding an economy that is more reliant on public spending. Therefore, there remains a risk of significant political and economic change.

Peru also has a history of domestic terrorism. Between the late 1970s and the early 1990s, both Shining Path (Sendero Luminoso in Spanish) and Movimiento Revolucionario Tupac Amaru (“MRTA”) conducted a series of terrorist attacks that caused thousands of casualties and affected normal political, economic and social activities in many parts of the country, including Lima, the capital of Peru. In 1992, the leader of Shining Path, Abimael Guzman, was captured and later sentenced to life in prison (a new trial affirmed the sentence in 2006). By the end of the 1990s, most other members of Shining Path, as well as MRTA, were also captured and sentenced to prison terms. However, in late 1996 a group of MRTA members stormed the residence of Japan’s Ambassador to Peru and held a group of politicians, diplomats and public figures hostage for approximately four months. In April 1997, a military operation put an end to the hostage situation. All 14 terrorists died in the confrontation, while all but one hostage survived. Since then, and for the following 20 years, terrorist activity in Peru has been mostly confined to small-scale operations in the Huallaga Valley and the VRAEM (Valleys of Rivers Apurimac, Ene and Mantaro) areas, both in the Eastern part of the country. In 2012, the Peruvian government captured Florindo Flores, one of the last remaining leaders of Shining Path, which substantially weakened the organization’s activities in the Huallaga Valley.

Despite these efforts, terrorist activity and the illegal drug trade continue to be significant challenges for Peruvian authorities. The Huallaga Valley and VRAEM constitute the largest areas of coca cultivation in the country and thus serve as a hub for the illegal drug trade. Any violence derived from the drug trade or a resumption of large-scale terrorist activities could hurt our operations.

After serving 25 years in prison due to terrorist activity, a total of seven members from Shining Path and two from MRTA were released in 2017.

Another source of risk is related to political and social unrest in areas where mining, oil and gas operations take place. In recent years, Peru has experienced protests against mining projects in several regions around the country. Mining is an important part of the Peruvian economy. In 2017 it represented approximately 10% of Peru’s GDP and approximately 60% of the country’s exports, while oil and gas represented 2% of Peru’s GDP and 7% of Peru’s exports according to the Peruvian Central Bank (BCRP by its Spanish initials). On several occasions, local communities have opposed these operations and accused them of polluting the environment and hurting agricultural and other traditional economic activities. In late 2011 and throughout 2012, social and political tension peaked around Conga, a gold mining project in the northern region of Cajamarca. The launch of Conga, which involved investments of approximately US$4.5 billion, failed because of the protests. Peru’s government commissioned an Environmental Impact Study developed by international experts which introduced recommendations for the project.

Delays or cancellations of mining projects could reduce economic growth and business confidence, thereby hurting the financial system both directly (many mining projects are at least partially financed by local financial institutions) and indirectly (overall economic activity could decelerate).

(2)  It may be difficult to serve process on or enforce judgments against us or our principals residing outside of the United States

A significant majority of our directors and officers live outside the United States (principally in Peru). Most of our assets and those of our principal subsidiaries are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon us or our principals to initiate a civil suit under the United States securities laws in United States courts. We have also been advised by our Peruvian counsel that liability under the United States federal securities laws may not be enforceable in original actions in Peruvian courts. In addition, judgments of United States courts obtained in actions under the United States federal securities laws may not be enforceable. Similarly, our Bermuda counsel have advised us that courts in Bermuda may not enforce judgments obtained in other jurisdictions, or entertain actions in Bermuda, against us or our directors or officers under the securities laws of those jurisdictions.

In addition, our Bye-laws contain a broad waiver by our shareholders of any claim or right of action, both individually and on our behalf, against any of our officers or directors. This waiver limits the rights of shareholders to assert claims against our officers and directors for any action taken by an officer or director. It also limits the rights of shareholders to assert claims against officers for the failure of an officer or director to take any action in the performance of his or her duties, except with respect to any matter involving willful negligence, willful default, fraud or dishonesty on the part of the officer or director.

(3) Our ability to pay dividends to shareholders and to pay corporate expenses may be adversely affected by the ability of our subsidiaries to pay dividends to us

As a holding company, our ability to make dividend payments, if any, and to pay corporate expenses will depend upon the receipt of dividends and other distributions from our operating subsidiaries. Our principal operating subsidiaries are BCP, BCP Bolivia, Grupo Pacifico, ASB, Prima AFP and Credicorp Capital. Subject to certain reserve and capital adequacy requirements under applicable regulations, we are able to cause our subsidiaries to declare dividends. If our subsidiaries do not have funds available, or are otherwise restricted from paying us dividends, we may be limited in our ability to pay dividends to shareholders. Currently, despite the minimum capital requirements, there are no restrictions on the ability of BCP, BCP Bolivia, Grupo Pacifico, ASB, Prima AFP or Credicorp Capital to pay dividends abroad. In addition, our right to participate in the distribution of assets of any subsidiary, upon any subsidiary’s liquidation or reorganization (and thus the ability of holders of our securities to benefit indirectly from such distribution), is subject to the prior claims of creditors of that subsidiary, except where we are considered an unsubordinated creditor of the subsidiary. Accordingly, our securities will effectively be subordinated to all existing and future liabilities of our subsidiaries, and holders of our securities should look only to our assets for payments.

In addition, the value of any dividend paid by our operating subsidiaries that declare dividends in a currency different from Credicorp’s dividends (e.g. ASB, BCP Bolivia, Credicorp Capital Holding Chile, and Credicorp Capital Holding Colombia) is subject to the impact of the depreciation of the dividend’s currency against Credicorp’s functional currency. This would have a negative impact on our ability to pay dividends to shareholders. For further details about Credicorp’s Dividend Policy refer to Item 8. Financial Information – 8.A Consolidated Statements and Other Financial Information – (3) Dividend Policy.

Since January 1, 2014, the functional currency of our financial statements has been the Sol; however, Credicorp’s subsidiaries generate revenues in Soles, U.S. Dollars, Bolivian Pesos, Colombian Pesos, and Chilean Pesos. Mainly in BCP, BCP Bolivia, ASB, Credicorp Capital Colombia and Credicorp Capital Chile are particularly exposed to foreign exchange fluctuations. As a result, the fluctuation of our functional currency against other currencies could have an adverse impact on our results. In addition, any exchange controls implemented in the countries in which we operate may adversely affect our financial condition and results of operations.

The Peruvian government does not impose restrictions on a company’s ability to transfer Soles, U.S. Dollars or other currencies from Peru to other countries, or to convert Peruvian currency into other currencies. Nevertheless, Peru has implemented restrictive exchange controls in its history, and the Peruvian government might in the future consider it necessary to implement restrictions on such transfers, payments or conversions. For further details see “Item 10. Additional Information- 10.D Exchange Controls”.

The interest income we earn on our interest-earning assets and the interest expense we pay on our interest-bearing liabilities, could be affected by changes in domestic and international market interest rates, which are sensitive to many factors beyond our control, including monetary policies and domestic and international economic and political conditions.

We have implemented several policies to manage the interest rate risk exposure and seek proactively to update the interest rate risk profile to minimize losses and optimize net revenues; however a sudden and/or significant volatility in market interest rates could have a material adverse effect on our financial condition and results of operations. For further detail see “Item 11. Quantitative and Qualitative Disclosures about Market Risk – (9) Sensitivity to Changes in Interest Rates

We also face foreign exchange risk on credit that we extend through our banking business, which is primarily conducted through BCP. To address this risk, BCP’s Foreign Exchange Credit Risk Management identifies borrowers that may not meet their debt obligations due to currency mismatches by performing a sensitivity analysis of the credit rating of companies and the debt-service capacity of individuals. Then, we classify borrowers according to their level of foreign exchange credit risk exposure. We closely monitor these clients and, on an ongoing basis, we revise our risk policies to underwrite loans as well as to manage our portfolio of foreign currency denominated loans; however, these policies may not sufficiently address our foreign exchange risk, resulting in adverse effects on our financial condition and results of operation.

We have taken steps to manage the gap between our foreign currency-denominated assets and liabilities in several ways, including closely matching their volumes and maturities. Nevertheless, a sudden and significant depreciation of the Sol could have a material adverse effect on our financial condition and results of operations. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk - (10) Foreign Exchange Risk”.

(5)   Regulatory changes and adoption of new international guidelines to sectors in which we operate could impact our earnings and adversely affect our operating performance

Because we are subject to regulation and supervision in Peru, Bolivia, Colombia, Chile, the Cayman Islands, the United States of America, and Panama, changes to the regulatory framework in any of these countries or changes in tax laws could adversely affect our business.

Banking

We are, most directly, subject to extensive supervision and regulation through the SBS’s Banking and Insurance System Law (Ley General del Sistema Financiero y del Sistema de Seguros y Orgánica de la Superintendencia de Banca y Seguros) and the Regulation of the Consolidated Supervision of Financial and Mixed Conglomerates (Reglamento para la Supervision Consolidada de los Conglomerados Financieros y Mixtos).

The SBS and the Peruvian Central Bank supervise and regulate BCP and Mibanco’s operations. Peru’s constitution and the SBS’s statutory charter grant the SBS the authority to oversee and control banks and other financial institutions, including pension funds and insurance companies. The SBS and the Peruvian Central Bank have general administrative responsibilities over BCP, including defining capital and reserve requirements. In past years, the Peruvian Central Bank has, on numerous occasions, changed the deposit reserve requirements applicable to Peruvian commercial banks as well as the rate of interest paid on deposit reserves and the amount of deposit reserves on which no interest is payable by the Peruvian Central Bank. Such changes in the supervision and regulation of BCP may adversely affect our results of operations and financial condition. See “Item 4. Information on the Company — 4.B Business Overview — (9) Supervision and Regulation — 9.2 BCP and Mibanco”. Furthermore, changes in regulation related to consumer protection made by these agencies may also affect our business.

The Superintendency of the Securities Market (Superintendencia del Mercado de Valores or SMV by its Spanish initials) also supervises some of our subsidiaries such as BCP, Credicorp Capital Sociedad Agente de Bolsa (Credicorp Capital Bolsa) and Credicorp Capital Sociedad Administradora de Fondos (Credicorp Capital Fondos).

In Colombia, we are subject to supervision and regulation through the Superintendency of Securities and Insurance (SFC - Superintendencia Financiera de Colombia) and the Colombian Stock Market Self-regulator (AMV - Autorregulador del Mercado de Valores de Colombia). In Chile, we are subject to supervision and regulation through the Commission of Financial Market from Chile (CMF - Comisión del Mercado Financiero). See “Item 4. Information on the Company — 4.B Business Overview — (9) Supervision and Regulation — 9.5 Credicorp Capital”.

Changes in U.S. laws or regulations applicable to our business, or the adoption of new regulations, such as under the Foreign Account Tax Compliance Act (FATCA) or the Dodd-Frank Wall Street Reform and Consumer Protection Act, may have an adverse effect on our financial performance and operations.

We are also regulated by the United States Federal Reserve System, which shares its regulatory responsibility with the State of Florida Department of Banking and Finance - Office of Financial Regulation, with respect to BCP’s Miami agency, and by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority, Inc. (FINRA), with respect to Credicorp Capital Securities, a U.S. broker dealer.

Similarly, we are regulated by other governmental entities in other jurisdictions. In the Cayman Islands, we are subject to the supervision and regulation of the Cayman Islands Monetary Authority (CIMA). In Bolivia, we are subject to the supervision of the Financial System Supervisory Authority (ASFI by its Spanish initials) that has assumed all regulatory functions held previously by the Superintendency of Banks and Financial Entities and the Superintendency of Pensions, Securities and Insurance. Nonetheless, in 2010 the Insurance and Pensions sectors have come out of this regulation and have their own Supervision Authority: Pensions and Insurance Inspection and Control Authority (Autoridad de Fiscalización y Control de Pensiones y Seguros – APS)

Finally, in Panama, we are subject to the supervision of the Superintendency of Banks of Panama and the regulatory framework set forth in the Decree Law 9 of February 25, 1998. Changes in the supervision and regulation of our subsidiaries in other countries may adversely affect our results of operations and financial condition.

Taxation

For Peruvian Regulation see Item 10.Additional Information – 10.E. Taxation.

The Chilean Statutory Income Tax rate to resident legal entities is 25% under the attribution regime and 27% under the semi-integrated regime (25.5% for semi-integrated regime only for 2017).

On the other hand, foreign resident individuals or legal entities are subject to a 35% dividend withholding tax. This tax applies at the moment of the effective remittance of the dividend and the corporate income tax can be used as a credit. In case of non-treaty country resident shareholders, the corporate tax credit is limited to 65% of the corporate income tax associated to such dividend. Therefore, in this case, the total tax burden for foreign taxpayers, subject to a 35% tax rate, will be of 44.45%. Nonetheless, the “65% limit” does not apply to those investors domiciled or resident in a country with which Chile has a Double Taxation Treaty in force. Additionally, a transitory rule provides that this benefit will also be applicable to those investors who are residents of countries with which Chile has a Double Taxation Treaty subscribed and pending ratification, to the extent that the treaty was signed prior to January 1, 2017. This transitory rule would be in effect until 2019.

If the Chilean entity has chosen the attributed regime, the corporate tax will be fully creditable, regardless of the country of residence of the shareholder.

The Group chose the “Income Tax semi-integrated system”. The additional tax rate has not been changed.

The Colombian statutory income tax rate is 34% (33% as from 2018 and onwards). A temporary income surtax of 6% and 4% was introduced for fiscal year 2017 and 2018, respectively. This surtax will apply only from a tax base equal to or greater than 800,000,000 Colombian pesos, approximately US$268,096.

As of 2017 distribution of dividends to non-residents is subject to a 5 percent withholding tax, which will be increased to 35 percent if dividends are distributed out of previously untaxed earnings after the 5% percent withholding tax is assessed.

Profits earned up to December 31, 2016, are not subject to the 5 percent withholding tax on dividends, even though the distribution occurs from and after January 1, 2017.

For details on Income tax review by the Tax Authorities on the jurisdictions in which we operate, please refer to note 18 (d) of the consolidated financial statements.

Insurance

Our Property and Casualty (P&C) and Life insurance business is carried out by Pacifico Seguros y Reaseguros S.A., which is part of Grupo Pacifico. The insurance business is subject to regulation by the SBS. New legislation or regulations may adversely affect Grupo Pacifico’s ability to underwrite and price risks accurately, which in turn would affect underwriting results and business profitability. Grupo Pacifico is unable to predict whether and to what extent new laws and regulations that may affect its business will be adopted in the future.

On April 14, 2016, the Congress of the Republic of Peru (“Congress”) approved a law that modifies some aspects of the nation’s private pension system. The new law, which was promulgated on April 21, 2016, might continue to have a negative effect on part of Pacifico’s annuities business, which is composed of retirement and disability and survivorship. Retirement annuities, which represents approximately 1.9% of Pacifico’s total gross premiums earned in 2017, is the only line of business that has been affected by the change in regulation thus far.

Grupo Pacifico is also unable to predict the timing of the adoption of any new laws and the effects any such new laws or regulations may have on its operations, profitability and financial condition in future years. However, we still expect Peru to adopt new legislation in the coming years, similar to the measure enacted by the European Union through Solvency II, which sought to further reduce the insolvency risk faced by insurance companies by improving the regulation regarding the amount of capital that insurance companies in the European Union must hold.

Our operating performance and financial condition depend on Grupo Pacifico’s ability to underwrite and set premium rates accurately across a full spectrum of risks. In order to be profitable, Grupo Pacifico must generate sufficient premiums to offset losses, loss adjustment expenses and underwriting expenses.

To price premium rates accurately, Grupo Pacifico must:

If Grupo Pacifico fails to assess the risks that it assumes accurately or does not accurately estimate its retention, it may fail to establish adequate premium rates. Failure to establish adequate premium rates could reduce income and have a material adverse effect on our operating results or financial condition. Moreover, there is inherent uncertainty in the process of establishing life insurance reserves and property and casualty (P&C) loss reserves. Reserves are estimates based on actuarial and statistical projections at a given point in time of what Grupo Pacifico ultimately expects to pay out on claims and the related costs of adjusting those claims, based on the facts and circumstances then known. Factors affecting these projections include, among others: (i) in the case of life insurance reserves, changes in mortality/longevity rates, interest rates, persistency rates and regulation; and (ii) in the case of P&C loss reserves, changes in medical costs, repair costs and regulation. Any negative effect on Grupo Pacifico could have a material adverse effect on our results of operations and financial condition.

Pension fund

Despite the fact that private pension fund administrators have always been closely regulated by the SBS, in 2012, the Peruvian government passed a Law to Reform the Private Pension System (SPP by its Spanish initials). The reform aimed to expand coverage for individuals (referred to as “affiliates”), create greater competition, and reduce administration fees in the SPP. The Law to Reform the SPP is being implemented in phases. See “Item 4. Information on the Company – 4.B. Business Overview – (9) Supervision and Regulation – 9.7 Prima AFP”.

(6)   A deterioration in the quality of our loan portfolio may adversely affect our results of operations.

Given that a significant percentage of our income is related to lending activities, a significant deterioration of loan quality would have a material adverse effect on our business, financial condition and results of operations. We are subject to concentration default risks in our loan portfolio. Problems with one or more of our largest borrowers may adversely affect our financial condition and results of operations. While loan portfolio risk associated with lending to certain economic sectors or clients in certain market segments can be mitigated through adequate diversification, our pursuit of opportunities in which we can charge higher interest rates, and thereby increase revenue, may reduce diversification of our loan portfolio and expose us to greater credit risk.

In addition, loan concentration in commercial sectors is particularly salient in Peru and significant deterioration in such sectors may have a material adverse effect on our business, financial condition and results of operations. Our current strategy includes increasing our exposure to market segments with heightened credit risk, including middle-market and consumer segments, such as unsecured small companies and consumer loans and consumer mortgages, which have higher risk profiles as compared to loans to large corporate customers. Given the changing composition of our loan portfolio and possible adverse changes in the environment in which we operate, our future results may differ significantly from our past results.

(7)   Our banking and capital market operations in neighboring countries expose us to risk related to political and economic conditions.

BCP Bolivia, Credicorp Capital Holding Colombia and Credicorp Capital Holding Chile expose us to risk related to Bolivian, Colombian and Chilean political and economic conditions, respectively. Most economies in Latin America and the Caribbean experienced low economic growth in 2017, due to: (i) weak global demand, (ii) a high political polarization, and (iii) sluggish investment. Significant changes to Bolivian, Colombian and Chilean political and economic conditions could have an adverse effect on our business, financial condition and results of operations.

Bolivia

In October 2014, Evo Morales was reelected as President of Bolivia for a third five year term. During this third term, the government is expected to continue the economic policies and reforms of the first two presidential terms of Mr. Morales, which concentrated on (i) redistribution programs through different bonus schemes, (ii) deepening the industrialization of strategic economic sectors, and (iii) closing Bolivia’s infrastructure gap. Given the government’s high dependence on income from exports of natural gas to Brazil and Argentina, declines in the price of the gas exported (which is linked to the price of oil) could strain government finances and reduce its ability to continue the high levels of public spending of the last several years.

In February 2016, the government called up for a referendum on whether President Evo Morales could serve as president for a fourth term. With 51.30% votes against the approval of a third term, Movimiento al Socialismo, (President Morales’ political party) will have to nominate a new presidential candidate for the next presidential election. However, in November 2017, the Plurinational Constitutional Court, in a controversial decision, authorized Evo Morales to run again in the presidential elections scheduled for November 2019. Political instability ahead of the 2019 elections could lead to a reduction on foreign investment and a deterioration in the investment climate in Bolivia.

Additionally, the financial services law (Ley de Servicios Financieros N° 393), which was enacted in 2013, established lending quotas and caps on interest rates that could negatively impact interest margins on banks and reduce their ability to generate enough capital to maintain the growth rates in their lending portfolios experienced during the last several years.

During 2017, Bolivia’s macroeconomic indicators continued to deteriorate. GDP growth was a healthy 4.3% and among the highest rates in the region, but below the average growth rate of the last five years and below the budgeted growth rate of 4.8%. Also, in 2017 and for a third consecutive year, Bolivia experienced both fiscal and current account deficits due to lower exports and increased government spending. Inflation in 2017 was the lowest since 2009 at 2.7%, well below the Central Bank´s target of 5.3%. On the other hand, as of December 2017, international reserves represented 28% of GDP (US$10.261 billion), having increased by 1.8% relative to 2016.

Colombia

The Colombian economy continued to slow down last year, particularly as a result of the negative effect on private consumption from the tax reform that came into force in January 2017, which increased the value added tax from 16% to 19%. The decision to implement a new tax reform was based on the need to adjust the fiscal accounts to lower oil prices. This, jointly with a high political polarization after the peace deal with the FARC guerrillas, drove economic sentiment to low levels during the year. GDP grew by approximately 1.7% in 2017. External and fiscal imbalances continued to correct last year. Regarding external accounts, a slight recovery in oil prices and sluggish domestic demand led the current account deficit to narrow from 4.4% of GDP in 2016 to approximately 3.6% in 2017. On the fiscal front, tax reform and lower public spending allowed the government to meet its fiscal deficit target of 3.6% of GDP last year, compared to 4.0% in 2016. Inflation reached 4.1% in 2017, 1.7 percentage points (“pp”) below the figure recorded in 2016 amid a reversion of temporary factors that affected prices that year, a stabilization of the foreign exchange, and a wider output gap. Standard & Poor’s, cut Colombia’s sovereign long-term foreign currency rating from BBB to BBB- due to lower potential growth and fiscal challenges from 2019 onwards. Overall, considering that both presidential and Congressional elections will be held in 2018, expectation is that activity is likely to remain slow for some additional months until economic agents are familiar with the president and his policies.. Likewise, proposals by candidates on the fiscal front will be key for avoiding further rating actions as the fiscal path set in the fiscal rule for the upcoming years is demanding. Currently, the consensus expects continuity in economic policy as the most likely scenario.

Chile

Chilean GDP grew by approximately 1.5% in 2017 as compared to 1.6% GDP growth for 2016. Throughout the year, economic activity remained sluggish amid certain one-off events such as La Escondida labor strike in early-2017 and overall weakness in different sectors. Although some leading indicators reversed their downward trend by the end of last year, pessimism in confidence indicators (consumer and business) continued to affect private consumption and investment figures. Particularly, the construction sector still acted as a drag on the economy, leading aggregate investment to contract for the fourth year in a row. The reform agenda proposed by the Bachelet administration added to the uncertainty, particularly in respect of social security area (pensions). Importantly, in December 2017 Sebastian Piñera (Chile Vamos Coalition, center-right) succeeded against Alejandro Guillier (Fuerza de la Mayoria, left) in the presidential election. President Piñera aims to introduce policy changes to several areas, including pensions (including, among other things, to increase by 4 percentage points the monthly contributions directed to individual accounts and to incentivize people to postpone their retirement age), tax system (including, among other things, to reintegrate the tax regime and to reduce the corporate rate from 27% to 24-25%) and infrastructure (including, among other things, to promote public to private partnership agreements focused on highways, ports, and airports). That said, the new Congress composition will limit president-elect Piñera’s ability to implement his main reform objectives as no coalition will run an absolute majority. Finally, certain imbalances remain in the economy with the fiscal deficit standing at 2.8% of GDP, the current account deficit reaching 1% of GDP, and inflation lying at 2.3%.

(8)   Our trading activities expose us to volatility in market prices, declines in market liquidity or fluctuations in foreign currency exchange rates, which may result in losses that could have a material adverse effect on our business, financial condition and results of operations.

The securities and derivative financial instruments in our trading portfolio may cause us to record gains or losses, when sold or marked to market, and may fluctuate considerably from period to period due to numerous factors that are beyond our control, including foreign currency exchange rates, interest rate levels, the credit risk of our counterparties and general market volatility. These losses from trading activities could have a material adverse effect on our business, financial condition and results of operations. In this sense, risk is inherent in the Group’s trading activities but it is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Group’s continuing profitability.

(9)   Natural disasters in Peru could disrupt our businesses and affect our results of operations and financial condition.

We are exposed to natural disasters in Peru, such as earthquakes, floods and mudslides. Earthquakes in Peru are common occurrences as the country is located in a seismic zone: the interface between the Nazca and South American tectonic plates. Peru has been adversely affected by earthquakes in the past, including a 7.9 magnitude earthquake that struck the central coast of Peru in 2007. The country is also vulnerable to El Niño, which provokes floods and mudslides in the north and central Andean regions. Due to its very strong intensity, the 1997-1998 El Niño destroyed crops and infrastructure equivalent to 2.2% of GDP (Gross Domestic Product). Heavy rains caused by El Niño have severely damaged infrastructure in early 2017. This weather phenomenon will affect negatively Peru’s GDP and may affect the financial situation of some of Credicorp’s clients.

Similar natural disasters or other types of disaster could impair our operational capacity. Our business continuity plans include emergency response, disaster recovery, operations continuity, crisis management, data protection and recovery, and critical systems redundancy. Although we test our business continuity plans annually, these plans may prove to be ineffective which could have a material adverse effect on our ability to carry out our businesses, especially if an incidence or disaster affects computer-based data systems or damages customer or other data. In addition, if a significant number of our employees were affected by the natural disaster, our ability to conduct business could be impaired.

Our subsidiary Grupo Pacifico is further exposed to risks associated with natural disasters. To protect Grupo Pacifico’s solvency and liquidity, our insurance business historically has obtained reinsurance for a substantial portion of its earthquake-related risks through automatic quota share and excess loss treaties; however, there can be no assurance that a major catastrophe would not have a material adverse impact on our results of operations or financial condition or that our reinsurance policies will be an effective hedge against our exposure to risks resulting from natural disasters.

(10) We operate in a competitive banking environment that may limit our potential to grow, particularly in the medium term, as more foreign banks establish or expand operations in Peru.

BCP has experienced increased competition, including increased pressure on margins. This is primarily a result of the following:

Larger Peruvian companies have gained access to new sources of capital through the local and international capital markets, and BCP’s existing and new competitors have increasingly made inroads into the higher margin, middle market and retail banking sectors. Such increased competition, with entrants who may have greater access to capital at lower costs, has affected BCP’s loan growth as well as reduced the average interest rates that BCP can charge its customers.

Competitors may also dedicate greater resources to, and be more successful in, the development of technologically advanced products and services that may compete directly with BCP’s products and services. Such competition would adversely affect the acceptance of BCP’s products and/or lead to adverse changes in the spending and saving habits of BCP’s customer base. If competing entities are successful in developing products and services that are more effective or less costly than the products and services developed by BCP, BCP’s products and services may be unable to compete successfully. BCP may not be able to maintain its market share if it is not able to match its competitors’ loan pricing or keep pace with their development of new products and services. Even if BCP’s products and services prove to be more effective than those developed by other entities, such other entities may be more successful in marketing their products and services than BCP because of their greater financial resources, higher sales and marketing capacity or other similar factors.

As a result of Peru’s strong economic growth, which has outpaced growth by nearby countries, some banks have sought and obtained authorization to open representative offices in Peru. With the increased competition, more individuals will have access to credit, and the percentage of the population using banking services will likely climb. This will eventually put downward pressure on interest rates. Any negative impact on BCP as a result of increased competition could have a material adverse effect on our results of operations and financial condition. See “Item 4. Information on the Company – 4.B. Business Overview – (6) Competition”.

(11)   Economic and market conditions in other countries may affect the Peruvian economy and the market price of Peruvian securities.

Economic conditions in other countries and developments in international financial markets can affect Peru’s economic growth. The country’s exports are highly concentrated in the mining industry; with tax revenues from the sector that peaked at 14% in 2007, and in 2017 they represented 3.4% of total tax revenues. In addition, gold and copper exports represented 48% of all shipments in 2017. Therefore, Peruvian trade responds significantly to fluctuations in metal prices, especially gold and copper, which fell 36.6% and 41.7%, respectively, between December 2012 and December 2015. This turned a US$6.4 billion trade surplus in 2012 into a US$2.9 billion trade deficit in 2015. In contrast, 2017 registered a US$6.3 billion trade surplus (2016: US$ 1.9 billion) due to a US$5.6 billion increase in copper exports since 2015 (the exported volume of copper increased 48.5%) and US$1.3 billion increase in gold exports since 2015 (average export prices of gold increased 8.4%). In 2017 the price of copper increased 32% and stood at its highest price in three years, and the terms of trade increased 7.3%, the first positive result in six years.

In addition to changes in prices, Peru is also vulnerable to fluctuations in foreign demand, especially from the United States and China. A more pronounced economic slowdown in China over the next few years poses a risk to Peruvian growth as it may impact exports and foreign direct investment. Lower growth in Latin America can also impact the Peruvian economy and our business, especially with regard to Chile, Colombia, Bolivia and Panama, where we have operations, as well as Brazil and Mexico, which have a broad impact throughout the region because of their size. Moreover, regarding the Trans-Pacific Partnership (TPP), after long held negotiations between the Trade ministers of the 12 Asia-Pacific countries, a final agreement was signed on February 4, 2016. The free trade agreement would enter into force 60 days after the date in which all original signatories have notified the Depositary of the Agreement (responsible for receiving and disseminating documents) of their approval of the amendment in accordance with their respective applicable legal procedures. However, because the President of the United States has indicated that the United States would not ratify the agreement, the state of the TPP execution remains uncertain.

Furthermore, financial conditions in global markets also affect the economy, affecting interest rates for local corporate bonds and influencing the exchange rate. Monetary policy tightening in developed economies, particularly on the part of the Federal Reserve System in the United States, could affect economic activity in Peru to the degree that it strengthens the dollar and increases interest rates, thereby reducing access to funding for some local businesses. Also, since the Peruvian economy still has some level of dollarization (29.1% of loans and 39.9% of deposits as of December 2017), potential balance sheet effects should also be contemplated since a higher exchange rate could increase debt burdens for individuals and businesses that have taken loans in dollars but earn their income in local currency.

However, the BCRP has taken steps to foster de-dollarization and thus reduce this vulnerability by defining in January 2015 the so-called “De-dollarization Program” that implies additional foreign currency reserve requirements on financial institutions when:

In the context of the aforementioned “De-dollarization Program”, Credicorp’s main subsidiary BCP Stand-alone has reduced significantly the level of foreign exchange risk on credit risk, which in turn reduces the impact mentioned in this risk factor. For further details, see “Item 4. Information on the company – 4.B Business Overview – (9) Supervision and Regulation – 9.2 BCP and Mibanco – 9.2.7 The Peruvian Central bank monetary and macro prudential policy”.

These targets were complemented by the addition of two new types of Currency Report Operations (known as Repo). The instruments complemented the de-dollarization process by:

(12) A failure in, or breach of, our operational or security systems, fraud by employees or outsiders, other operational errors, and the failure of our system of internal controls to discover and rectify such matters could temporarily interrupt our businesses, increasing our costs and causing losses.

We have defined and implemented governance with specific roles for risk and control assessment, monitoring and awareness programs, security initiatives, business objectives, corporate alignment and regulatory compliance with banking, credit card, insurance and pension fund industry requirements in Peru, Bolivia, Chile, Colombia, Panama, the Cayman Islands and the United States.

Although we have a strong IT infrastructure and highly-skilled professionals managing our IT operations, our risk exposure could be significant. We are still vulnerable to failure of our operational systems and to cybersecurity threats.

Credicorp has not experienced any material losses related to cyber-attacks or operational instability. Credicorp is continuously working and investing resources in maintaining and updating control processes in order to prepare and adapt to new technologies and to strengthen our cyber and operational security. As a matter of policy, Credicorp maintains an investment protection program to ensure that the group has the technologies and processes it needs to keep its operations and assets safe. However, our use of the internet and telecommunications technologies to conduct financial transactions, as well as the increased sophistication and activities of organized criminals, hackers and other external parties, could potentially impact the confidentiality, integrity and availability of critical information.

A failure in, or breach of, our operational or cybersecurity systems could temporarily interrupt our business, increasing our costs and causing losses. Temporary interruptions or failures in hardware and software that support our business and customers’ transactions could result in regulatory fines, penalties, and reputational loss. Like other financial institutions and global companies, we constantly strive to provide more, and better, functionality to our customers; expanding our mobile and internet based products and services, and thus increasing our footprint and visibility. Also, like most significant financial companies, we are regularly the target of attempted cyber-attacks that use increasingly sophisticated techniques; we use sophisticated tools available to us and undertake to keep and maintain our operations sound and safe.

As are other financial institutions, we are susceptible to, among other things, fraud by employees or outsiders, unauthorized transactions by employees and other operational errors (including clerical or record keeping errors and errors resulting from faulty computer or telecommunications systems). While we believe that we maintain a system of internal controls designed to monitor and control operational risk, we cannot assure you that our system of internal controls will be entirely effective. Losses from the failure of our system of internal controls to discover and rectify such matters could have a material adverse effect on our business, financial condition and results of operations.

Credicorp has developed recovery strategies (disaster recovery plans and operational continuity plans) and response plans (incident management and crisis management) that, in the face of risk situations that interrupt the main products and services, may mitigate the financial, legal and reputational impact. We are aware that new threats may be presented, but the company is constantly working to strengthen response mechanisms and recovery strategies to be more resilient to this kind of events.

(13) Our anti-money laundering and anti-terrorist financing measures might not prevent third parties from using us as a conduit for such activities and could damage our reputation or expose us to fines, sanctions or legal enforcement, which could have a material adverse effect on our business, financial condition and results of operation.

We comply with applicable anti-money laundering and anti-terrorist financing laws and regulations. Also, we have developed various policies and procedures, under a comprehensive approach based in international practices, including internal controls and “know-your-customer” procedures, aimed at preventing money laundering and terrorist financing. Our anti- money laundering policies and procedures are based upon, and comply with the applicable law of our different operations. However, such measures, policies and procedures may not be completely effective in preventing third parties from using us as a conduit for money laundering (including illegal cash operations) or terrorist financing without our knowledge. If we were to be associated with money laundering (including illegal cash operations) or terrorist financing, our reputation could be impacted, and/or we could become subject to fines, sanctions or legal enforcement (including being added to any “blacklists” that would prohibit certain parties from engaging in transactions with us), which could have an adverse effect on our business, financial condition and results of operation. To mitigate the above-mentioned risk our Corporate Compliance Division has established several programs to strengthen the ethical behavior of Credicorp. For further details see “Item 4. Information on the Company — 4.B Business Overview — (2) Corporate compliance”

(14) Acquisitions and strategic partnerships may not perform as expected, which could have an adverse effect on our business, financial condition and results of operation.

Acquisitions and strategic partnerships, including those made in our investment banking and insurance businesses, may not perform as expected since our assessment could be based on assumptions with respect to operations, profitability and other matters that may subsequently prove to be incorrect. Future acquisitions, investments and alliances may not produce the anticipated synergies or perform in accordance with our expectations, which could have an adverse effect on our business, financial condition and results of operation.

(15) Reinsurance is an important tool in risk management of any primary insurance company and as such, it allows achieving a level of risk diversification that in turns helps to reduce losses. But, we face the possibility that the reinsurance companies will be unable to honor their contractual obligations.

Credicorp assumes reinsurance risk in the normal course of business for our insurance contracts when applicable. Premiums and claims on assumed reinsurance are recognized as revenue or expenses in the same manner as they would be if the reinsurance were considered direct business, taking into account the product classification of the reinsured business.

To mitigate the above-mentioned risk, Credicorp’s requirements in regard to reinsurer counterparty credit risk are higher than local regulatory requirements, as set by Grupo Pacifico’s risk management unit and approved by the Risk Management Committee.

(16) Risks not contemplated in our insurance policies may affect our results of operation.

We maintain insurance in amounts that we believe to be adequate to cover risks related to our operations including, among others, general banking liability insurance for our business, general professional liability for services we provide, general directors and officers liability for our directors and executives and general liability against fraudulent activity. However, it is possible that the terms and conditions of the insurance policies we have will not cover a specific event or incident or that our insurance will cover only part of the losses that we may incur.

If any uninsured events occur with respect to a significant portion of our operations, such lack of coverage could have a material adverse effect on our financial conditions and results of operations. Additionally, if we are unable to renew our insurance policies from time to time or losses or other liabilities occur that are not covered by insurance or that exceed our insurance limits, we could be subject to significant unexpected additional costs which could adversely affect our business.

ITEM 4. INFORMATION ON THE COMPANY

Credicorp Ltd. is a limited liability company that was formed in Bermuda on October 20, 1995 to act as a holding company, to coordinate the policy and administration of our subsidiaries BCP, ASB, BCP Bolivia, Grupo Pacifico and Credicorp Capital. We currently hold, directly and indirectly, 97.7% of BCP, 100% of ASHC, 95.84% of BCP Bolivia and 98.5% of Grupo Pacifico. See “Item 4. Information on the Company — 4.C Organizational Structure”.

Our principal activity is to coordinate and manage the business plans of our subsidiaries in an effort to implement a universal banking service mainly in Peru, Bolivia, Colombia and Chile and to develop our insurance and investment banking businesses. Though we primarily focus on the aforementioned countries, we also make limited investments in other countries in the same region. Our registered address is Clarendon House, 2 Church Street, Bermuda. The management and administrative office (i.e., principal place of business) of our subsidiary, Banco de Credito del Peru, is located at Calle Centenario 156, La Molina, Lima 12, Peru, and the phone number is +51-1-313-2000.

As of December 31, 2017, our total assets were S/ 170.5 billion and our net equity was S/ 21.8 billion. Our net income attributable to our equity holders in 2015, 2016 and 2017 was S/ 3,092.3 million, S/ 3,514.6 million and S/ 4,091.8 million, respectively. See “Item 3. Key Information — 3.A Selected Financial Data” and “Item 5. Operating and Financial Review and Prospects”.

During 2012, Credicorp, as part of our strategic plan, initiated the creation of a regional investment banking platform. On April 27, 2012, Credicorp acquired a 51% stake in Correval S.A. Comisionista de Bolsa, a brokerage entity established in Bogota, Colombia, for approximately US$72.3 million (approximately S/246.6 million). On July 31, 2012, Credicorp acquired 60.6% of IM Trust S.A. Corredores de Bolsa, an investment banking entity established in Santiago, Chile, for approximately US$131.5 million (approximately S/447.1 million), For our investment banking operations in Peru, we created Credicorp Capital Peru S.A.A. (formerly BCP Capital S.A.A.), a company incorporated in Peru that was established in April 2012 through the split of an equity block of BCP. Assets transferred included Credicorp Capital Bolsa, Credicorp Capital Titulizadora, Credicorp Capital Fondos and BCP’s investment banking activities. The equity block split had no effect on Credicorp’s consolidated financial statements; no gains or losses arose from it.

On September 25, 2014, Credicorp announced that its subsidiary PPS had reached an initial agreement with Banmedica S.A. (“Banmedica”, a Santiago Stock Exchange listed company with a market capitalization of US$1,317 million as of September 25, 2014), to develop businesses in the healthcare industry in Peru and further providing medical services, health insurance and health plans. This transaction reflects Credicorp’s strategy to capitalize on PPS’s in-depth knowledge of the Peruvian market and Banmedica’s extensive know-how and successful experience in the health care industry. On December 30, 2014, PPS signed the final agreement with Banmedica to enter into the healthcare market in Peru. Based on this agreement, Credicorp lost control of its subsidiary Pacifico Entidad Prestadora de Salud (Pacifico EPS), which became an associate. This agreement came into effect on January 1, 2015.

The agreement has two major parts:

This transaction resulted in profits of S/99 million, which is recognized in “Net gain on sales of securities” in the consolidated statements of income.

At Grupo Credito’s shareholder meeting held on February 11, 2015, shareholders approved the terms of split of equity block of Grupo Credito in favor of Credicorp Capital Holding Peru S.A., a company incorporated on September 3, 2014 and a subsidiary of Credicorp Capital Ltd. (“Credicorp Capital”). The equity block was composed of the investment that Grupo Credito held in Credicorp Capital Holding Peru, whose net equity was approximately S/511.3 million as of May 31, 2015. As a result, Grupo Credito reduced its share capital by approximately S/491.7 million. Credicorp Capital Holding Peru also increased its share capital by about S/491.7 million and issued 491,686,830 new shares with a nominal value of S/1.00 each in favor of Credicorp Ltd (shareholder of Grupo Credito). In October 2015, Credicorp’s Board of Directors approved the transfer of the shares to Credicorp Capital, finishing the reorganization process to regroup, under Credicorp Capital, all the investments in subsidiaries related to capital markets.

On March 20, 2014, Credicorp, through its subsidiary Edyficar, acquired a 60.68% stake in Mibanco, Banco de la Microempresa S.A. (Mibanco), a local bank that specialized in the micro and small entities sector, for approximately S/504.8 million or US$179.5 million, in cash. On April 8, 2014, Grupo Credito S.A. and Edyficar, subsidiaries of Credicorp Ltd., acquired from the International Finance Corporation (IFC) an additional 6.5% stake in Mibanco (5% through Grupo Credito S.A. and 1.5% through Edyficar) for approximately S/54.1 million. In addition, Credicorp’s subsidiaries made a Public Tender Offer (Oferta Publica de Adquisicion or OPA by its Spanish initials) to non-controlling shareholders of Mibanco pursuant to the Capital Markets Law. Credicorp acquired an additional 18.56% of Mibanco’s capital stock for approximately S/153.6 million; and in September 2014, acquired an additional 1.19% for approximately S/10 million. As of December 31, 2014, Credicorp held 86.93% of Mibanco’s capital stock and paid an aggregate of approximately S/722.5 million. A merger transaction between Edyficar and Mibanco, which involved a spin-off of the majority of the assets and liabilities of Edyficar, was made effective on March 2, 2015. No gains or losses were recognized in the income statement. As of the merger day, Credicorp held 95.36% of the new Mibanco's capital stock.

On May 12, 2016, Banco de Credito del Peru (BCP) sold its shares of Banco de Credito de Bolivia (“BCP Bolivia”) to ICBSA, an indirect subsidiary of Credicorp Ltd., through a book auction over the Bolivian Stock Exchange. This transfer was part of the rearrangement of Credicorp’s organizational structure in Bolivia to efficiently manage its investments in that country and to comply with applicable Bolivian rules and regulations. The transaction was executed over the Bolivian Stock Exchange. A total of 43,237 shares were sold at a price of Bs.25,811 per share, which account for Bs.1,115,990,207 of revenue, equivalent to US$162,680,788.19. To finance the acquisition by ICBSA, Grupo Credito S.A. (shareholder of this company and subsidiary of Credicorp Ltd.) made a capital contribution in Bolivianos to ICBSA equivalent to US$163 million.

On September 30, 2016, Credicorp Capital, through its holding subsidiaries, concluded the acquisition of the non-controlling interest, which it did not own, in its operating subsidiaries Credicorp Capital Colombia S.A. (“Credicorp Capital Colombia”, formerly Correval) and Inversiones IMT S.A. (currently eliminated, and replaced as an operating subsidiary by Credicorp Capital Chile S.A. (“Credicorp Capital Chile”)). During this acquisition process and after the approval of its Board of Directors, Credicorp made several capital contributions totaling US$120,146,350 to Credicorp Capital, which, in addition to other available resources, allowed its subsidiary to proceed with the aforementioned acquisitions.

In January 2017, Credicorp’s Board of Directors approved the transfer of 9% of BCP’s total shares to Grupo Credito (Credicorp’s Peruvian wholly owned subsidiary) through a capital contribution, to facilitate Credicorp’s future investments in Peru without modifying the controlling structure of BCP. The total amount paid for all the shares was S/3,505,916,484.50. Under the new structure, Credicorp directly holds 3.7% of BCP’s total shares and, in conjunction with its subsidiary Grupo Credito, continues to control the same 97.7% of such shares without modifying the internal governance structure. This modified organizational structure did not affect the way Credicorp and BCP manage their day-to-day operations, and Credicorp’s dividend policy has not changed as a result of this transaction.

At the respective mandatory Annual Shareholders' Meetings of PPS and Pacifico Vida, each held on February 23, 2017, the merger between PPS and Pacifico Vida was approved, pursuant to which PPS will transfer all of its equity to Pacifico Vida (including the transfer of all assets, rights, obligations and other legal relationships deriving from or linked to such assets and liabilities), all in accordance with the absorption merger form contemplated in section 2 of article 344 of the General Companies Law. The merger came into effect on August 1, 2017, when the respective Public Deed of Merger was granted, which occurred after the Superintendent of Banking, Insurance and AFP issued the corresponding Merger authorization. As a result of the dissolution of PPS, the company's shares were excluded from the Public Securities Market Registry and delisted from the Lima Stock Exchange, without the obligation to make a Public Offering by exclusion. The merger permits Credicorp to realize synergies in its decision-making process and through the integration of all its insurance business lines. The closer proximity between companies also allows Grupo Pacifico to improve its value proposition to customers, who seek integral insurance solutions. No gains or losses were recognized in the income statement.

(1) Credicorp operating segments

We are the largest financial services holding company in Peru. For management purposes, Credicorp is organized into four operating segments based on our products and services. 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. We conduct our financial services business through our operating segments as follows: banking, insurance, pension funds and investment banking.

The terms “Peruvian commercial bank,” “Peruvian insurance company” and other similar terms used in this Annual Report do not include the assets, results or operations of any foreign parent company or foreign subsidiary of such Peruvian company.

Our banking business, in terms of 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’s Wholesale Banking Group (WBG); (ii) retail banking activities, including our SME-Business, SME-Pyme, mortgage, consumer financing, credit card and wealth management segments, which are carried out by BCP’s Retail Banking & Wealth Management Group (RB&WM); (iii) treasury activities, including money market trades, foreign exchange trading, derivatives and proprietary trading; (iv) micro-lending, which is conducted through Mibanco; (v) wholesale and retail banking activities in Bolivia; and (vi) private banking, asset management and proprietary investment activities, which we perform through ASB, a Cayman Islands licensed bank.

The majority of our banking business is carried out through BCP Stand-alone, which together with Mibanco, held 32.6% of the Peruvian market share in loans and 32.5% market share in deposits, as of December 31, 2017. A portion of our banking business is also carried out by ASB. We conduct banking activities in Bolivia through BCP Bolivia, a full service commercial bank, which as of December 2017 increased its market share in loans and deposits reaching 9.6% and 9.8% respectively. BCP Bolivia is fourth with respect to loan market share and fifth with respect to deposit market share in the Bolivian banking system.

We apply uniform credit policies and approval and review procedures, which are based on conservative criteria adopted by BCP, to all of BCP subsidiaries. Our Chief Operating Officer (COO) is in charge of setting the general credit policies for our different business areas. These policies are set within the guidelines established by the laws and regulations of the markets in which we operate (see “Item 4. Information on the Company – 4.B Business Overview - (9) Supervision and Regulation”) and the guidelines set forth by our Board of Directors.

Our deposit-taking operations are principally managed by BCP’s RB&WM group and ASB’s private banking group. See “Item 4. Information on the Company – 4.B Business Overview - (10) Selected Statistical Information — 10.4 Deposits”.

1.1.1 BCP and Subsidiaries

(1) General

BCP Consolidated consists of a group of subsidiaries offering specialized financial services, which complement BCP’s commercial banking activities. In addition to its local subsidiaries, BCP has an agency in Miami and a branch in Panama. See Item 4. Information on the Company – 4.C Organizational Structure – (2) BCP.

BCP’s activities include wholesale banking, retail banking and wealth management and treasury. As of December 31, 2017, the consolidated operations of BCP ranked first among Peruvian banks in terms of total assets (S/ 139.5 billion), total loans (S/ 91.6 billion), deposits (S/ 85.5 billion) and net equity (S/ 15.6 billion).

As of and for the year ended December 31, 2017, BCP contributed with 81.9% of our total assets, 71.8% of our net income and 70.8% of our net equity attributable to Credicorp’s equity holders. BCP’s operations are supervised and regulated by the SBS and the Peruvian Central Bank.

The following table shows the client segmentation of BCP and Mibanco. This segmentation was a result of an analysis, which addressed multiple factors such as the size and volume of activity for each client, our clients’ affiliation with other companies or groups, the degree of follow-up required, and their credit ratings.

(2)  BCP Stand-alone - business segments

(2.1) Wholesale Banking Group (WBG)

Our Wholesale Banking Group competes with local and foreign banks. BCP Stand-alone’s traditional long-term relationships with medium-sized and large corporate companies provide WBG with a competitive advantage.

WBG obtained lower loan growth, posting average daily balances of S/ 39,029 million in 2015 (a 21.8% year-over-year increase), S/ 41,793 million in 2016 (a 7.1% year-over-year increase) and S/ 40,964 million in 2017 (a -2.0% year-over-year decrease). It also maintained its leadership in the wholesale banking market with a 39.7% market share ^[3] in loans. It has also established longstanding client relationships with virtually all of the major industrial and commercial groups in Peru. WBG provides its customers with cash management solutions, short- and medium-term loans in local and foreign currencies, foreign trade-related financing and lease and project financing.

WBG is divided into the following two divisions:

(i) Corporate and International Division (CID)

³ Source: Superintendence of Banking, Insurance and Pension Funds for all market share figures showed in this document for BCP Stand-alone and considering (i) total Peruvian Financial System, excluding Banco de la Nacion (Estate-owned bank); and (ii) using BCP’s client segmentation.

BCP Stand-alone continues to meet the needs of its corporate clients, assisting them with financial services, cash management solutions and short- and medium-term financing through the CID. As a result, BCP Stand-alone’s corporate banking loans grew from S/ 25,747 million in 2015 to S/ 28,162 million in 2016, but decreased to S/ 26,807 million in 2017.

The lower pace of the CID’s growth is due to (i) intense competition from foreign banks, which finance their operations at lower costs due primarily to the fact that our monetary authority has high reserve requirements for foreign currency for local banks and (ii) the problems derived from the “ Lava Jato ” case and from the effects of El Niño, which caused a lower economic growth. Nevertheless, BCP has a leading position in the Peruvian banking system with the 42.8% of the market share for loans.

The CID offers a broad range of products and tailors its product offerings to meet each client’s unique requirements. In general, this division is expected to offer high-value-added products, advisory and financial services, particularly cash management solutions, at competitive prices.

The CID’s financing is provided to fund capital expenditures and investments, sales, international trade and inventories. To finance capital expenditures, the CID offers medium and long-term financing, financial lease and project finance.

(ii) Middle-Market Banking Division (MMD)

MMD provides banking services targeted to medium-sized companies from various economic sectors. The products offered to middle-market clients are similar to those offered to corporate banking clients. The major types of products are:

The MMD has continued to make progress toward implementing its strategic goals by:

The MMD loan portfolio reached S/ 13,282 million in 2015, S/ 13,631 million in 2016 and S/ 14,157 million in 2017. As of December 31, 2017, BCP had a market share of 35.3% in this segment.

We believe that middle-market companies have benefited from the overall economic improvements in Peru over the past few years. Loan quality problems have been addressed through procedures and organizational changes that have focused on improving the loan approval and credit-risk assessment processes.

(iii) Support areas

International banking unit

The International Banking Unit focuses on obtaining and providing short-term funding for international trade. Medium-term lines of credit funded by international commercial banks and other countries’ governmental institutions are also provided to clients. In addition, this unit earns fees by confirming letters of credit and guarantees issued by international banks and other fees as a result of the international payment and trade finance business. The International Banking Unit also promotes international trade activities with its local clients by structuring trade products and services, organizing and sponsoring conferences and advising customers through a wide range of trade products.

BCP maintains business relationship with correspondent banks, development banks, multilateral and export credit agencies in different countries around the world. At present, BCP manages credit lines for foreign trade transactions, working capital and medium and long-term investment projects.

BCP’s import business volume amounted to S/ 38.8 billion in 2015, S/ 46.1 billion in 2016 and S/ 51.2 billion in 2017 and the export business reached a volume of S/ 45.8 billion in 2015, S/ 57.2 billion in 2016 and S/ 64.2 billion in 2017.

Cash management and transactional services unit

Our Cash Management and Transactional Services Unit is in charge of developing transactional services that handle the exchange of information and money transfers among corporations, midsized companies, institutions and micro-business companies. Services managed by this unit include collections (automated trade bill collection), automated payments (loans to personnel and suppliers’ accounts, reverse factoring and money transfers), electronic office banking, electronic lending solutions and cash management through checking accounts with special features.

(2.2) Retail Banking & Wealth Management Group (RB&WM)

At the end of 2017, RB&WM related loans represented 46% of BCP’s total loans, while deposits accounted for 63% of BCP’s total deposits.

With the segmentation of its retail client base, BCP is able to focus on cross-selling its products and improving per-client profitability. The RB&WM Group has undertaken several projects to improve one-on-one marketing techniques and tools for the sale of its products to profitable market segments. BCP’s management expects the RB&WM businesses to continue being one of the principal growth areas for BCP’s activities.

The affluent segments are targeted by the Wealth Management Division and are divided between BCP’s private banking unit (“BCP Banca Privada”) and BCP´s super affluent unit (“Enalta”).

Customers in BCP’s “mass affluent” segment receive a differentiated value proposition that includes: dedicated customer services channels, such as specialized account managers, preferential service by tellers at branches and call center phone banking, and preferential interest rates on loans. Approximately 50% of the mass affluent clients are serviced through specialized account managers responsible for improving per-client profitability and achieving long-term relationships through personalized service, cross-selling and share of wallet strategies. BCP has approximately 352,074 mass affluent customers.

Our Consumer Banking Division is in charge of developing strategies for the retail customers who are not included in affluent banking or small business banking. Its customer base consists of approximately 7 million medium to low income individuals. Consumer Banking focuses on customers who receive their payroll through BCP (which represent slightly more than 1.1 million clients). Its strategies vary from basic acquisition of new accounts for wage-earners with special terms regarding fees and interest rates, to more sophisticated, aggressive cross-sell and retention programs that expand benefits to non-banking products (i.e., access to discounted products) and access to payroll advances.

BCP’s SME-Business and SME-Pyme Banking Segments serve approximately 589,270 clients. Customers are divided into two groups with different business models, services levels, and product access. SME-Business serves approximately 14,332 clients directly managed by the bank and SME-Pyme serves approximately 574,938 small business clients.

As of December 31, 2017, BCP was the largest mortgage lender in Peru with a market share of 30.31%. This was largely the result of the consolidation of major process improvements in credit disbursement started in 2016, extensive marketing campaigns and a deeper integration with BCP’s real estate business.

BCP expects the mortgage lending business to continue growing because of:

As of December 31, 2017, mortgage loans accounted for 16% of Credicorp’s total loan portfolio, with an average LTV (loan-to-value) of 67%. All of our mortgage-financing programs are available to customers with a minimum monthly income of S/1,500. The maximum maturity of the mortgage loans BCP offered was 25 years.

One of the product lines responsible for present and future growth is MiVivienda. MiVivienda program provides government funded loans to purchasers of properties valued up to S/405,000. Under the program, BCP extended mortgages with a maximum amount up to 90% of the appraised value of a property (in local currency) and monthly mortgage payments that did not exceed 40% of the client’s stable net income. With this program, BCP is targeting middle income customers who buy their first home and offer the customers access to government assistance with their down payment. Mortgage loans to this sector represent approximately 16.3% of Credicorp’s total mortgage loans and 2.6% of Credicorp’s total loans.

Mortgage loans are associated with low losses because of their low LTV, and they have the added benefit of generating opportunities for cross selling other banking products, which has had a positive impact on Credicorp’s results.

BCP´s outstanding balances grew S/ 130 million between 2015 and 2017, but decreased 1.2% between 2016 and 2017. As of December 31, 2017, BCP maintained market share at 21.5% and 2018 is expected to be a year of growth based on a higher demand for loans. In addition to interest income, BCP derives income from maintenance, retailer transaction merchant, finance and credit card penalty fees.

In the credit card business, BCP continued to apply segmented strategies. BCP offers value to low-end customers by giving them access to credit and value to its medium and high-end customers through loyalty programs such as the partnership with LATAM airline. The loyalty programs in the high-end customers have very good results, both in points that clients gained and in the points redemeed, increasing customer loyalty and credit card use.

To keep a healthy credit card portfolio, very strict policies of activation and use and enforced, eliminating credit cards that do not generate value to BCP and allowing for a more efficient use of capital and reducing IT costs. At the end of 2017 we had 683,245 of primary credit cardholders.

In regards to installment loans, outstanding balances grew S/ 204 million. Between 2015 and 2016 growth was 1.4%. In addition to interest income, BCP earns non-interest income. In order to increase penetration in the lower income segments, in 2017 BCP offered loans in lower amounts and short debt maturities, as part of a low and grow strategy which allows to serve these segments and permits to explore the segments in a profitable way. For a second year BCP has improved prospecting techniques, income forecasting and optimized scoring models allowing it to increase pre-approved and approved loans. 80% of sales of credit cards and installment loans are the result of pre-approved operations which facilitates proactive sale on cost effective distribution channels.

In 2017 we launched the digital channel for the distribution of installment loans. Through the digital channel we sold approximately 11% of the total installment loans originated in the year.

(2.3) Treasury

Treasury, Foreign Exchange, Derivatives and Proprietary Trading

BCP’s Treasury function is managed through three different units in order to have strong governance, the Assets and Liabilities Management (ALM) group, the trading unit (comprised of the Foreign Exchange, Derivatives and Proprietary Trading units) and the Foreign Exchange and Derivatives Distribution Unit.

The ALM group is responsible for managing BCP’s balance sheet and for taking reasonable interest rate and liquidity risks under the oversight of our Asset and Liabilities Committee (ALCO). ALM is also responsible for maintaining our liquidity asset portfolio and compliance with Liquidity Coverage Ratio (LCR) and Common Equity Tier 1 (CET1) ratio under Basel III standards. In addition, the ALM group is an active participant in money and debt capital markets, oversees reserve requirements, manage BCP’s liquidity and the bank’s balance sheet. The ALM group has been active in auctions held by the Peruvian Central Bank for certificates of deposit as well as in financing its funding needs through certificates of deposit, interbank transactions and guaranteed negotiable notes, among other instruments.

BCP’s Foreign Exchange (FX) Unit offers spot FX operations for its clients in Soles, G-10 and, Latin-America currencies and actively participates in FX transactions related to the different instruments designed by the Central Bank of Peru in the local currency market.

BCP’s Derivatives Unit offers FX forwards, FX options, interest rate swaps, cross currency swaps, as well as tailor-made derivatives for our customers in Peru and Latin-America. A strong team of highly trained market professionals, with years of experience in various markets, allows BCP to provide sounds and cost-effective financial solutions to its customer base. To minimize risks, BCP’s Derivatives Unit is closely monitored by BCP’s Treasury Risk Unit.

BCP’s proprietary trading consists of short-term investments in securities (corporate and governmental), which includes instruments from various countries. In the case of Peru, BCP is one of the main liquidity providers in the government bond local market where it is part of the Market Maker Program of the Ministry of Economy of Peru.

BCP’s FX and Derivatives Sales Unit helps both individuals and companies with their foreign exchange needs (spot and hedging) through all BCP’s channels (sales desk, branch network, agents and electronic channels). The broad portfolio of foreign exchange products provided to its ample client base has allowed the Unit to position itself as the most important in the FX business in the Peruvian market.

(2.4) Lending policies and procedures

The Bank has adopted a risk appetite framework and established objective metrics and thresholds to periodically monitor the Bank’s evolving risk profile. The framework was approved by the Board of Directors, and will be managed and monitored by the Risk Management Unit within the Bank’s Central Risk Management Group. The adoption of a risk appetite framework reflects the Bank’s commitment to aligning its forward-looking business strategy with its corporate risk vision.

BCP’s uniform credit policies and approval and review procedures are based upon conservative criteria and are uniformly applied to all of its subsidiaries. These policies are administered in accordance with guidelines established by the Peruvian financial sector laws and SBS regulations. See “Item 4. Information on the Company – 4.B Business Overview - (9) Supervision and Regulation – 9.2 BCP and Mibanco”.

BCP’s credit approval process is based primarily on an evaluation of each borrower’s repayment capacity and commercial and banking references. BCP determines a corporate borrower’s repayment capacity by analyzing the historical and projected financial condition of the company and of the industry in which it operates. Other important factors that BCP analyzes include the company’s current management, banking references, past experiences in similar transactions, and the quality of any collateral to be provided. In addition, BCP’s credit officers analyze the corporate client’s ability to repay obligations, determine the probability of default of the client using an internal risk rating model, and define the maximum credit exposure that BCP wants to hold with the client.

BCP’s individual and small business borrowers are evaluated by considering the client’s repayment capacity, a documented set of policies (including, among other issues, the client’s financial track record and the degree of knowledge of the client), and credit scores, which assign loan-loss probabilities relative to the expected return of each market segment. In BCP, about 80% of credit card and consumer loan application decisions, and about 50% of SME loan application decisions, are made through automatic means. Mortgage and the remaining portions of small business and consumer loan application decisions are made by credit officers who use credit scores and profitability models as inputs for their evaluations and report to a centralized unit.

Our success in small business and personal lending areas depends largely on BCP’s ability to obtain reliable credit and client information about prospective borrowers. BCP counts with a vast transactional information that is heavily used in credit risk models. On the other hand, the SBS has an extensive credit bureau, which has expanded its credit exposure database service to cover businesses and individuals that have borrowed any amounts from Peruvian financial institutions. This database includes risk classifications for each borrower: “Normal,” “Potential Problem,” “Substandard,” “Doubtful” and “Loss.”

BCP has a strictly enforced policy that limits the lending authority of its loan officers. It also has procedures to ensure that these limits are adhered to before a loan is disbursed. Under BCP’s credit approval process, the lending authority for Wholesale Banking is centralized into a specialized credit risk analysis division; and there exists another specialized credit risk analysis division for Retail Banking. These divisions are operated by officers that have specific lending limits. In addition to the controls built into the loan approval workflow systems, the credit divisions and BCP’s internal auditors regularly examine credit approvals to ensure that loan officers and credit analysis officers are complying with lending policies.

In accordance with international standards, BCP has established the limit of the lending authority based on risk rating (probability of default) and particular guarantees of the borrower. Requests for credit facilities in excess of the limits set for Credit Officers are reviewed by the Chief Operating Officer, Credit Risk Committee, Executive Committee or, if the amount requested is sufficiently large, by the Board of Directors.

In addition, BCP has approved concentration limits by industry, based on its target market share and loan portfolio participation.

BCP believes that an important factor to maintain the quality of its loan portfolio is the selection and training of its loan and risk officers. BCP requires loan officers to have degrees in economics, accounting, business administration or related fields from competitive local or foreign universities. In addition, training at the very beginning is based on a three-month “Bank Specialization Program”. Trainees in this program are taught all aspects of banking and finance. After the training program finishes, trainees are hired as loans officers and receive specialized training in credit risk. Loan officers also receive training in specific matters throughout their careers at BCP and also through a comprehensive training program called “Triple A”. Laterally-hired officers generally are required to have prior experience as loan officers.

BCP operates in substantial part as a secured lender. As of December 31, 2017, approximately S/41.9 billion of our loan portfolio and off-balance-sheet exposure were secured by collateral, which represents 44.9% of the total loan portfolio based upon our unconsolidated figures (excluding BCP Panama and BCP Miami, branch offices located overseas), as compared to 48.6% in 2016 and 54.0% in 2015.

Liquid collateral is a small portion of BCP’s total collateral. In general, when BCP requires collateral for the extension of credit, it requires collateral valued at between 110% and 150% of the principal amount of the credit facility granted. The appraisal of illiquid collateral, in particular real estate assets, machinery and equipment, is performed by independent experts.

Pursuant to a Peruvian regulation (Article 222° under Law No. 26702) that became effective in December 1998, the existence of collateral does not affect the loan classification process. For Peruvian accounting purposes, secured loans (or the portion of any loans covered by collateral) that are classified in Class “B”, “C,” or “D” risk categories or that are otherwise classified as substandard loans (see “Item 4. Information on the Company - 4.B Business Overview - (10) Selected Statistical Information – 10.3 Loan Portfolio – 10.3.7 Classification of the Loan Portfolio”) have a lower loan loss provision requirement than similar unsecured loans. If a borrower is classified as substandard or below, then BCP’s entire credit exposure to that borrower is so classified.

BCP’s internal audit division conducts selected revisions and analyses on borrower’s financial statements, consistent with the local banking regulations of the jurisdictions in which it operates.

(2.5) Transformation

In October 2015 the InnovaCXion Center was launched with the mission of improving customer experience through digital innovations.

At the end of 2016, BCP decided to launch a Digital Transformation initiative that included, besides the InnovaCXion Center, the following units: IT Division, Customer Experience Area, Strategic Information Analysis and Governance Area, and Change Management.

During 2017, BCP chose to merge its Digital Transformation initiative and its Cultural Transformation initiative, Samay, both of which were developing on their own track. The objective was to manage a single Transformation initiative, so the bank could “Bring our customers’ dreams to live”.

In order to accelerate our Transformation initiative, new work streams were incorporated: Digital Risk, Digital Operations, Distribution Channels, and Governance.

BCP considers its technology platform as one of its main competitive strengths and continues to invest in this area to maintain a competitive position in the banking sector. During 2012, IT changed its operating model, outsourcing the administration and operation of the IT infrastructure, application development and maintenance of some of the applications to three companies, who are leaders in their field: IBM, Tata Consulting Services and Everis. During the following years, IT has continued to expand the scope of its services. As a result, in 2017, IT maintained the delivery level for projects/requirements compared to 2016 (delivering 73% more than in 2011), met its time-to-market objectives (since 2011), and strengthened its contingency and business continuity plan. Today IT is focused on accompanying the business in its digital transformation, incorporating into its processes the use of agile methodologies to achieve the speed and early feedback the environment demands. Under this new approach, 30% of the most significant projects of BCP applying agile methodologies.

BCP’s investments in IT reached S/185.2 million in 2015, S/227 million in 2016 and S/260.5 in 2017. BCP’s expenses on IT totaled S/648.1 million in 2015, S/702 million in 2016 and S/705.2 in 2017. Although the bank has been making important investments related to its digital transformation, continuous control and optimization efforts have led us to obtain similar expenses levels than 2016. Finally, as a result of the new operating model, our ratio of IT expenses as a percent of revenues improved from 9.4% in 2011, to 8.13% in 2016 and 8.09% in 2017.

The InnovaCXion Center is focused on changing the way we work through Agile and learning new human centered design methodologies to achieve a WOW! experience in our customer journeys, which refer to the set of touchpoints with the bank before, during, and after the experience of a product or service. A WOW experience means that we are focused on make our clients feel a high level of client satisfaction when using our products and services, and in general when they interact with us. During 2017, we developed further on the following i) digital performance bonds, which reduced the time for delivering the product to clients from 2 days to a few hours; ii) the loans project, which is a platform that evaluates customers’ credit needs online; iii) peer-to-peer payments App YAPE; and iv) the Remote Investment Advisory, a digital platform that enables clients to get investment advisory.

The Customer Experience Area focuses on improving customer journeys’ satisfaction through non-digital tools. Currently, 7 key customer journeys have been identified and 3 of them have already been addressed with positive results.

This area comprises the following teams:

The main objective of our Strategic Analysis team is to optimize processes, products or services in the organization based on data analysis, and techniques such as statistics and data processing. In 2017, the team continued to develop use cases and advanced statistical models such as pricing optimization, fraud detection, demand projection, and installed capacity optimization for our call center.

BCP continues to develop strategies to approach different retail customer groups through our customized outreach strategy known as Customer Relationship Management (CRM). This has enabled BCP to reach customers proactively and provide them with personalized offers and terms, in a timely manner while using cost effective channels and maximizing efficiency.

The CRM team is responsible for developing and distributing an adequate service through the different channels such as telemarketing, sales forces, Sales and Service Advisors, ATM, and Online Banking. During 2017, the team continued to increase the volume and complexity of the operations, starting the CRM Transformation project that will enable a customer 360 view and real-time campaigns.

This team develops projects that enable us to process large volumes of information, of varied typologies, and at a great speed. In 2017, the team continued the project to transform the Data Architecture, having already implemented the new big data technologic platform.

In April 2017, Crecemas BCP was launched, the first big data product of BCP that provides analytical information to businesses about their customers, competitors, and economic sector.

The team focuses on maximizing the sales through digital channels and optimizing digital marketing efforts. Big data and web analytics are used for granular analysis of all the activities that are implemented.

In 2017, our Center of Excellence built a data lake, a storage repository holding a vast amount of raw data . Currently, the Center of Excellence has been working on populating the data lake, an asset that in the future will enable us to develop better use cases.

1.1.2 BCP Bolivia

BCP Bolivia’s activities include wholesale banking and retail banking. As of December 31, 2017, the operations of BCP Bolivia in terms of total assets (S/9,118.3 million), total net loans (S/6,089.3 million), deposits (S/8,048.3 million) and net equity (S/636.7 million).

At the end of 2017, BCP Bolivia’s loans represented approximately 9.6% of total loans in the Bolivian financial system. BCP Bolivia’s deposits represented approximately 9.8% of total deposits in the Bolivian financial system.

The following table shows the client segmentation of BCP Bolivia. This segmentation was a result of an analysis, which addressed multiple factors such as the size and volume of activity for each client, our clients’ affiliation with other companies or groups, the degree of follow-up required, and their credit ratings.

1.1.3 Atlantic Security Bank (ASB)

ASB is a Cayman Islands licensed bank that engages in private banking, asset management and proprietary investment. It was incorporated in September 1984 in the Cayman Islands and principally serves Peruvian-based customers. ASB has an international licensee branch in Panama, through which it conducts all commercial business

As of December 31, 2017, ASB had total assets of S/6,651.7 million and shareholders’ equity of S/874.1 million. Furthermore, as of December 31, 2017, ASB had approximately 2,759 customers, 93% of whom were Peruvian. ASB deposits reached S/5,218.4 million in 2017.

At the end of November 2017, ASB concluded the acquisition of Correval Panama, S.A., a subsidiary of a group related party, Credicorp Capital Colombia S.A. Correval Panama serves as a brokerage company with operations in Panama and the international market. Its activities are regulated by the “Superintendencia de Mercado de Valores de Panama”. With this acquisition, ASB looks to improve and consolidate processes, services and operations in its Panamanian branch and also improve its services and products related to brokerage activities.

ASB trades on its own account primarily by making medium-term investments in investment grade fixed-income securities and sovereign debt. Non-investment grade fixed-income securities fall behind investment grade securities in terms of portfolio allocation, while equity and hedge-fund positions, though present, are less relevant. As of December 31, 2017, ASB’s investment portfolio was S/3,242.7 million.

Third-party asset management is an important activity for ASB. Total assets under management (AuM) reached S/17,608.2 million as of December 31, 2017, compared to S/14,921.3 million as of December 31, 2016 and S/12,359.8 million as of December 31, 2015. These assets comprise a range of unsolicited securities and ASB acts as an intermediary in the management and custody of such assets in fixed income and variable income securities.

ASB also maintains total loans, which amounted to S/2,638.7 million at year-end 2017, and approximately 93% of these loans were guaranteed by customers’ deposits and investments.

ASB’s overall investment strategy, the general profile of its investment portfolio and its specific investment decisions, are reviewed on a monthly basis by an investment committee. Its credit risk by counterparty, including direct and indirect risk, is evaluated on a consolidated basis and covers all activities that generate credit exposure such as interbank placements, commercial loans and securities investment. Market, liquidity and operational risks are monitored by ASB’s Risk Management Unit, which in turn reports to and is supervised by a Corporate Risk Committee, an Asset-Liability Committee and the Board of Directors.

1.2 Insurance

We conduct our insurance business exclusively through Grupo Pacifico that operates in Peru and Bolivia, which is the second largest Peruvian insurance company in terms of premiums. Grupo Pacifico provides a broad range of insurance products focusing on three business areas: property and casualty (P&C), life and pension through Pacifico Seguros, and health insurance through Pacifico EPS, which also conducts private hospital operations. Grupo Pacifico, like other major Peruvian insurance companies, sells its products both directly and through independent brokers, agents, banking channels and sponsors.

In 2015, Grupo Pacifico signed an agreement with Banmedica to participate as equal partners in the health insurance business. This association includes the private health insurance business managed by Pacifico Seguros, the corporate health insurance for employees sold by Pacifico EPS, and medical subsidiaries that provide medical services.

As a result, Grupo Pacifico transferred the majority control of Pacifico EPS to Banmedica. Therefore, Pacifico EPS and the medical subsidiaries no longer consolidate with Pacifico Seguros for accounting purposes, and are reported as an investment in associates. Nevertheless, at the end of January 2018, UnitedHealth Group Inc signed a definitive agreement to buy Chilean healthcare company Banmedica SA for US$2.8 billion. With the closing of the transaction, UnitedHealth Group now owns 96.8% of Empresas Banmedica.

On August 1, 2017, the merger between Pacifico Vida and Pacifico Seguros Generales went into effect after the approval of the Superintendence of Banking, Insurance and AFP (SBS) and the subscription of the respective Public Deed.

Therefore, Pacifico Vida has acquired all of the rights and obligations of Pacifico Seguros Generales. Additionally, the resulting company shall be named Pacifico Compañia de Seguros y Reaseguros, with abbreviated name "Pacifico Seguros". This merger allows Pacifico Seguros to strengthen its assets and improve solvency and regulatory indicators, providing greater support for its obligations.

1.3 Pension funds

Credicorp conducts all of its pension fund activities through its private pension fund administrator Prima AFP. Prima AFP manages pension funds through individual capitalization accounts, providing its affiliates with retirement, disability, survival and burial benefits. See “Item 4. Information on the Company - 4.B Business Overview - (5) Review of 2017 – 5.2.5 Prima AFP” and “Item 4. Information on the Company - 4.B Business Overview - (9) Supervision and regulation – 9.7 Prima AFP” for more information about this business.

1.4 Investment banking

The integration of Latin American markets is a strategic focus for Credicorp. The creation of MILA (by its Spanish initials), a Latin American integrated market shared among Chile, Colombia and Peru, has opened up opportunities to further integrate asset management, brokerage and corporate finance cross-border operations. This can offer benefits for companies that have a significant presence in these markets. Since the formation of MILA, Credicorp’s investment banking business units grouped under Credicorp Capital have been very active. Credicorp Capital carries out its operations in the region through Credicorp Capital Peru, Credicorp Capital Colombia and Credicorp Capital Chile, holding a considerable market share in the Peruvian, Colombian and Chilean markets, respectively. Our main business lines are asset management, sales & trading and corporate finance.

Asset management

Through the regional platform provided by MILA, we offer a wide array of products, including mutual funds, alternative funds and portfolio management, as well as structured products, to a broad base of clients, including clients in our retail, private and high net worth, corporate and institutional segments.

Sales & trading

Our regional investment banking platform has an active role in secondary markets, particularly equity and fixed income products, as well as exchange rate products and derivatives. Participation in the placement of equity and debt instruments, vis-à-vis our corporate finance team, is becoming equally relevant.

Corporate finance

Corporate finance provides advisory services to structure mid- and long-term financing and structure and place equity and fixed income instruments in capital markets. It also offers a wide range of financial advisory services and advisory services for mergers and acquisitions.

(2) Corporate compliance

Our Corporate Compliance programs cover all Group companies and have been developed under a comprehensive approach based on international best practices and the principles and ethical values of the corporation.

Compliance is responsible for managing the following corporate programs:

The management model of the corporate program includes the appointment of Compliance Officers in each company of the Credicorp Group, each of whom reports to the Corporate Compliance Officer of Credicorp, who in turn reports to the Board of Directors and has full autonomy to carry out its duties independently.

The Corporate Compliance Division establishes policies, guidelines and controls that regulate compliance programs to provide reasonable assurance of compliance with local and international standards, mitigation of conduct risks and strengthening of the ethical behavior and values ​​of Credicorp, all with the aim of protecting the reputation and business of Credicorp.

In 2017, the Corporate Compliance Division focused on developing an advanced management model integrating compliance processes into the business and the culture of the organization. This allows us to provide immediate business advice, generate value and provide alternative solutions, and to be innovative in how we apply the benefits of big data and analytics to improve efficiency and effectiveness in the identification of financial crimes and the reduction of non-financial risk.

Fiscal Transparency

Fiscal Transparency oversees the implementation of Foreign Account Tax Compliance Act (FATCA) & Common Reporting Standard (CRS), regulations for Exchanging Tax Information that apply to all Credicorp Financial Institutions. Understanding FATCA & CRS requirements and having a comprehensive FATCA & CRS compliance program is essential for financial institutions (FI) to limit non-compliance risk and meet the obligations set out by the relevant Intergovernmental Agreements (IGAs), the Internal Revenue Service (IRS) and the Organization for Economic Co-operation and Development (OECD). Beyond compliance, Fiscal Transparency initiatives represent a prime opportunity for FI´s to enforce a business culture that promotes the reduction of tax evasion globally.

FATCA implementation at Credicorp: Credicorp has FI´s located in countries under IGA Model I (Bahamas, Luxembourg, Colombia, Cayman Islands and Panama), IGA Model II (Bermuda and Chile), and General Regulation (Bolivia). Obligations of FIs in those locations include complying with Client Due Diligence, Client Annual Reporting and Financial Counterparties Exchange of Status Information.

In the case of Peru, it still holds the category of “Country with an agreement in substance” while the Peruvian government and the Department of Treasury of the US continue with the negotiations to subscribe an IGA. However, the jurisdiction is treated as having an In-Effect agreement and all Peruvian FIs must comply with FATCA obligations.

CRS implementation at Credicorp: Credicorp has FIs located in countries that started CRS implementation in 2016 and that issued their first multiple report in 2017 (Colombia, Cayman Island and Luxembourg). Panama and Chile initiated Client Due Diligence obligations in 2017 and are expected to begin Client Annual Reporting in 2018.

In the case of Peru, in 2017 the Ministry of Economy and Finance (MEF) announced his the intention to subscribe to a CRS agreement; however, to do so, Peru first must become a member of the Organization for Economic Cooperation and Development (OECD). Meanwhile, the Peruvian government is working to promote legislative changes to make possible to meet the OECD requirements to acquire the full member status.

(3) Internal Audit

According to our mission, during 2017 we focused on creating a permanent framework through which we evaluate the effectiveness and efficiency of Credicorp's risk management, control and governance processes, with the aim of improving and protecting the value of the corporation, providing assurance, advice and analysis based on risk. For this purpose, the audit unit formulates the Annual Audit Plan using the Risk Based Audit methodology, which is aligned with the Rules of the IIA Institute of Internal Audit Global and approved by the Peruvian Superintendency of Banks, Insurance and Pension Funds.

During 2017 the result of the internal evaluation, in compliance with Standard 1311 of the IIA for the sixth consecutive year, was "Generally Compliant" (highest possible rating according to the IIA) as a result of the Quality Assurance and Improvement Program. It should be noted that in September 2013, we obtained the International Quality Certification for the Internal Audit Activity with a "Generally Compliant" rating granted by the IIA in the External Quality Assessment, in accordance with Rule 1312 of the IIA. This shows that it complies with the International Standards for Professional Practice, the Fundamental Principles and the IIA Code of Ethics. Currently the Internal Audit Unit (UAI) is managing the new external evaluation (after 5 years) with the Global IIA, which demonstrates its commitment to continuous improvement and compliance with the standard.

In 2017 the Internal Corporate Auditor (CAE) participated as a member of the Financial Services Guidance Committee (FSGC) of the IIA, whose mission is to strategically direct the development of the International Framework for Professional Practice of Internal Auditing (IPPF for its acronyms in English) to support the advancement of professional auditing practice in the global financial services industry by identifying, prioritizing, launching and, ultimately, approving guidelines specifically geared to the special needs of internal auditors who provide services to the financial services industry. In December 2017, the Committee published the first specialized Guide on the Audit of Liquidity Risk.

In September 2017, the Manager of the Internal Audit Unit of ​​the Pacific Group, Mr. Guillermo Zegarra, was appointed as Chaiman of ISACA Lima - Chapter, an association that brings together professionals in information technology (IT) in fields such as information security, IT management, IT risks, IT audit and cybersecurity.

During 2017, 14,572 hours of training were provided with an average of 72 hours / per auditor (above the 40 hours / per auditor recommended by the international practices) in topics related to fraud prevention, the new IFRS 9 on recognition and measurement of financial instruments, new cybersecurity frameworks such as the one of IIA, NIST or the FFIEC, internal quality assessment, data analytics, money laundering, validation of models and other topics of financial and operational audit.

(4) Strategy

Credicorp was established to create a financial group that benefits from synergies among the Group’s companies and our companies’ boards.

Credicorp endeavors to become a leader in each market where we operate. In December 2017, we announced to the market that to enhance the management of Credicorp’s subsidiaries, the Board of Directors unanimously resolved, at its meeting held on Wednesday, December 20 to organize Credicorp’s subsidiaries in four Lines of Business:

1. Includes Banco de Credito del Peru-BCP and Banco de Credito de Bolivia

2. Includes MiBanco and Encumbra

3. Includes Grupo Pacifico and Prima AFP

4. Includes Credicorp Capital, Wealth Management of BCP and Atlantic Security Bank.

This change was effective since April 1 ^st , 2018.

We have an international presence, offering a diversified business portfolio:

Furthermore, our long-term strategy consists of four strategic pillars: efficient growth; adequate risk management; focus on client satisfaction; and profitability. We seek to achieve an optimal balance of market share, profitability and operating efficiency.

Long-term strategy

Focus on client satisfaction: We are highly dedicated to providing products and services that offer strong value propositions for the clients we serve through each of our businesses. Our main value proposition will be a digital banking initiative that would allow us to get to know and satisfy our customers through a prompt digital solution.

We will continue to educate, and inform our customers by helping them understand the different financial products and services they can access through our distribution channel network and sales force.

We have improved our communication with clients to keep them well informed of the products and services we launch and the product enhancements we implement. We continuously upgrade our platform in response to questions, complaints and requests from customers.

Adequate risk management: This strategic pillar of Credicorp’s strategy is based on the corporate principles approved by the Corporate Governance Committee: involvement of executive management; independence of the risk functions; corporate governance, including risk appetite, corporate risk policies, and risk-adjusted performance measures; and sufficiency and quality of resources dedicated to the risk management role.

Credicorp is committed to applying best practices to assess, quantify and manage the different risks to which we are exposed to, such as credit, market, compliance and operational, reputational, and insurance underwriting risks. We are constantly fine-tuning our models for risk management and our stress-testing methodologies. Our strategy is based on implementing an advanced and fully integrated risk management approach to achieve sustainable growth and enhanced profitability.

In the area of credit risk management, we have implemented enhanced risk-adjusted pricing models and in-house credit models (origination, scoring, behavioral and collection models) that maximize the use of our proprietary information and knowledge about the Peruvian system. These are essential sources of competitive advantage. We have also developed a risk monitoring process that provides a timely and comprehensive picture of risk exposures across risk types and from multiple business lines.

Efficient Growth: Credicorp promotes consciousness in our management of expenses and investments based on: i) productivity management; ii) the establishment of new mechanisms for approving, managing and reporting budget execution; and iii) process improvement. Our efficient growth will be based on the Jaw concept; this means it will be focused on managing the gap between income growth and expenses growth, in an effort to achieve higher growth in income than in expenses.

Profitability: We will continue to manage our businesses with the objective of maximizing our shareholders’ sustainable return on equity.

(5) Review of 2017

The following table provides certain financial information about our principal business segments as of and for the year ended December 31, 2017 (see Note 29 to the Consolidated Financial Statements):

5.1 Consolidated contributions

The following table sets forth the contribution to the consolidated net income attributable to our equity holders by each of our principal subsidiaries:

The following table shows our main subsidiaries’ percentage contribution to our total assets, total revenues, net income and net equity attributable to Credicorp´s equity holders for the year ended December 31, 2017:

The following table shows the main subsidiaries’ percentage contribution of BCP Consolidated to its total assets, total revenues, net income and net equity attributable to BCP’S Consolidated for the year ended December 31, 2017: