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Credicorp Ltd
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Good morning, everyone. I would like to welcome all of you to Creditcorp Ltd, Fourth Quarter 2021 Conference Call. We now have all our speakers in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of today's presentation, we will open the floor for questions. If you would like to ask a question, [Operator Instruction]. If you have connected to the call using the HD web phone on your computer, [Operator Instructions]. If you're using a speakerphone, [Operator Instructions]. With us today is Gianfranco Ferrari, Chief Executive Officer, Cesar Rios, Chief Financial Officer, Francesca Raso, Chief Innovation Officer, Reynaldo Llosa, Chief Risk Officer, Diego CuVerro, Head of Universal Banking, Cesar Rivera, Head of insurance and pensions, and Milagros Ciguenas, Investor Relations Officer. And now it is my pleasure to turn the conference over to Credicorp's Chief Financial Officer, Mr. Cesar Rios. Mr. Rios, you may begin.
Thank you very much. Good morning and welcome to Creditcorp 's Conference Call on our earnings results for the Fourth Quarter of 2021. I hope you and your families are healthy. The latest available official data shows that the economic activity grew 3.5% year-over-year in Northern [Indiscernible] on 1.3% compared to the figure reported in November 2019. Our estimates indicate that in the fourth quarter of '21, the economy expanded around 3.3% year-over-year and 1.8% in the benchmark comparison with 2019. Consequently, real GDP rebounded around 13% in 2021, which was better than initially expected in a context marked by record highs for corporate prices, expansive monetary policy, and fiscal policies and high liquidity, both internationally and locally. Regarding the sanitary situation Omicron daily infectious has increased rapidly. And are currently at level [Indiscernible] four times higher than in the peak of the previous week. Mortality rates however are significantly lower but daily [Indiscernible] we present just depends on those who reduce them at the previous wage [Indiscernible]. This evolution reflects the progress of the whole vaccination program.
So which 84% of the population, 12 and older has received at least two doses. If mortality rates stay low, the economic impact of new COVID-19 wake should be limited for an uptake in employee [Indiscernible] and supply chain delays, more sweeping impact such as lock downs are not expected. Next slide, please. Inflation has wield its hit across the globe, driven by shortages of both providence, which supply chain and increases in international prices for oil, metals, and grain commodities. This inflationary environment puts pressure on central banks around the world. With regards to Peru, consumer inflation we suspected to stand a 3% at the end of 2022, gross to 6.4% at the end of 2021. In this context Peru will capitalize on the designation of a team of highly regarded for flesh remarks, a central Bank quarter most these new board led by Julio Velarde is expected to effectively [Indiscernible] the Central Banks or leases to control inflation. Accordingly, the Central Bank cost rates is policy rate by 275 basis points follows these rate currencies expand our 3% we expect additional crisis all-in measures are the update included increasing in bank reserve requirements.
Regarding the exchange rate, its recent decline was driven by reduced perception of political uncertainty and a record chase softness. This decline, we'll also have an impact in new slowing down inflation in 2022. Moreover, net international reserves stand at $78 billion at the beginning of February, which is close to its record high. The [Indiscernible] attract those [Indiscernible] with the card decline in the fiscal deficit, which went from representing 8.9% of GDP in 2020 to 2.6% in 2021 is concerned on reflected in less volatility of the rules following long-term growth rates.
Finally, on the political side, President Castillo, has yet appoint a new cabinet, as the last Prime Minister who signed after the just four days in office. Political instability lingers in Peru. But our economic fundamentals remain strong. Next slide, please. In Creditcorp, we continue to foster financial inclusion and business growth, while we consolidate our return to profitability. In 2021, we included over 1 million individuals in the financial systems of Peru, Colombia, and Bolivia. Furthermore, over 5 million individuals on micro-businesses have benefited from ABC, our Financial Education program at BCP and Pacifico. In the fourth quarter of 2021, our multi-channel distribution model continued to evolve. By year-end, digital transactions for BCP accounted for 51% of total transactions and 44% of disbursements have Mibanco were executed to alternative channels.
Our anticipation client needs and past fracking of black investments on the digital chrome have allowed us to enhance user experience in a context of heightened demand for digital transactions on services. [Indiscernible] show loan growth measured in quarter-end balance remained flat. If we isolate the negative exchange rate effect, the 4.2% uptick in a software launch were offset by 11.2% drop in government programs portfolio. Core income which is composed of net interest income, fee income, and FX transactions expanded 2.9% due to low in a structural allowance and a lower cost deposit mix due to seasonal transactional activity and higher FX volatility prospectively. Provisional expenses dropped to exceptional low level at this quarter, driven by improvements in payment behavior, higher recoveries of written-off loans, lower risk origination volumes and improved GDP levels that are captured in expected loss models this led the cost of risk to drop to point 34%. insurance underwriting results were turning to pre -pandemic levels this quarter, driven mainly by an increase in net spending premiums in both life and property and casualty businesses, and a decrease in product and casualty claims. Expenses were higher this quarter, driven by an uptake in transformation expenses, variable compensation, and due to the usual whole quarter expense increase seasonality. In this context, Credicorp's net income was 1,061 million solid, which represents an ROE of 16.4% at quarter end. In full-year terms, core income expanded 13.8%, driven by higher net into a single in line with an uptake in the structured portfolio, rising rates and lower costs funding structure.
The income gains, which were triggered by higher volumes of transactional activity but negatively impacted by regulatory restrictions for fees. And an increase in net gains on FX transactions, due to better pricing capabilities on more volatility. The cost of risk dropped 8.82% in an environment characterized by higher-than-expected growth in economic activity, positive payment behavior, and a reduction of the volumes of riskier portfolios. The affirmed mentioned factors were partially offset by the negative insurance underwriting results, due to higher COVID related claims, and an increase in transformational expenses, as a result, Credicorp's net income was 3,5855 million solace in 2021, which reflects an ROE of 13.9%.
Finally, our balance sheet remains strong with ample liquidity and adequate capital ratios. Next slide, please. We continue to advance in our sustainability journey. This quarter MSCI informed us that our ESG rating had been elevated to the leaders’ category with a score of double pay. These newest score recognizes Credicorp clear shipping managing the most significant [Indiscernible] an opportunity [Indiscernible] industry. Additionally, Credicorp was selected to form part of SMP, DVL, general ESG index. A represent that the ESG benchmark of the Peruvian equity markets. environmental front, we developed sustainability financial framework that we align with international standards and became the first Mibanco chain being strong there is some P rating for these kind of framework. Additionally, our subsidiaries continued throughout the year to commitment to combat climate change. In this regard, with it is worth noting that clearly core capital asset management became our PCFG support. In the social front, we have been recognized by prestigious institutions for our efforts on the financial inclusion, dedication and gender equity for us.
Regarding over us, we continue to develop policies, codes, and structures that are aligned with international based practices. In the past few years, we have focused on improving our year disclosure. We are pleased to report that we will be publishing our 2021 Annual and Sustainability Report, which is aligned with international sustainability reporting as stand up, such as SASB and DRI.
Next slide, please. Regarding [Indiscernible] the fourth quarter of '21 BCP consolidated its return to profitability. Quarter-over-quarter were sold, were driven by an increase of 4.5% in fee income. This was attributable to an app seeking a structure relaunch mainly through retail banking and 7.5% growth in fee income, which was fueled by an increase in transaction volumes to new services and digital channels. This quarter gains in it pays transaction where you notionally high, which reflects our ability to leverage intelligence capability in a volatile at high Capex markets. Therefore, was offset by higher provisions, which [Indiscernible] at very low level. Additionally, operating expenses increased due to seasonality. In this context, return of [Indiscernible] with [Indiscernible] at 20.7% this quarter. On a full-year basis, a 9.9% growth incurring to was fueled by growth in net interest income, which was driven by a 16.1% [Indiscernible] in a structurally launched, measured in quarter end balances. Our resourcing growth by leveraging data analytics and timing tune with smallest to help us penetrate new SMEs [Indiscernible] segment on drive sell through digital channels. In fact, by year-end, digital sales represented 34% of total sales, while 71% of unsecured consumer launch where this goes to digital channels. In addition, our efforts towards over the last few years to optimize our balance sheet, has led to a reduction in our handy costs. Another aspect that drove through year growth in core income was the 20% increase in fee income, which accrued despite the challenging regulatory environment and was driven by expansion in transaction volumes.
Finally, in a context marked by an essentially old cost of risk BCB's reduced that an improved in profitability despite higher personnel expenses, that reflect the normalization of variable compensation reduced in 2020. Also, these better results were able to offset the higher investment in digital transformation. As a result, BCP registered a return average equity of 19.7% in 2021.By year-end BCP's core equity tier one ratio is -- stood at 11.8%, which is within internal limits. At BCP, Bolivia, our risk for the time remains low in an uncertain macroeconomic environment. In this context, our delinquency rate was below 1%, one of the lowest in the market. Next slide, please. Over the last year, Yape users has grown exponentially. At the end of 2021, talked about 8 million users, 54 of whom are active uses that make at least one transaction per month. The Yape crit's an important level for growth in financial inclusion and is used by 38% of Yape fees.
You can open a mobile wallet with a national identification number. Of total Yape users, 19% are SMEs clients. Our focus moving forward will be capturing new users in this segment were 90% of transactions are still made in cash. Yape is a natural conduit for financial inclusion and also brings new clients into the BCP folds. Yape's indicators for frequency of use and number of transactions continue to rise. Today, active users executed an average of 12.7 transactions a month compared to 8.2 in December last year, total monthly transactions reach $58 million, with a transacted volume of 3.7 billion sold. Next slide, please. 2021 has been a year of recovery and growth for both Mibanco, Peru, and Colombia. And the strength accelerated in the last quarter. Regarding Mibanco, Peru, the Hybrid model showed signs of consolidation and boosted commercial productivity and efficiencies.
This model gave [Indiscernible] to follow centralized assessments capabilities in 2021 now become efficiency processing formation on potential [Indiscernible] for CPM for most of the sources. And consequently, due growth that risk profile or structurally portfolio. In addition, Mibanco channel as I couldn't be more cost-effective overall. These capabilities coupled with economic equality and year -- and end-of-year seasonality propel the structural disbursement levels to record highs last quarter. In his context, this quarter, Mibanco consolidated these recorded the quarter-over-quarter analysis shows a structural alienation reached a record high and grew 5% point in average daily balances alongside yields on loans grows triggered by enhancing pricing capabilities. These positive dynamics were partially offset by an increase in cost of funds in the [Indiscernible] of recently to of rate hikes that have sold our net interest income grew by 2.5% despite [Indiscernible] fees restrictions already income [Indiscernible] growth in line with an uptick in bank assurance commission, which was driven by growth in origination levels and a decrease in commissions paid to commercial costs. In this context, core income grew 4.4% quarter-over-quarter.
Lastly, Mibanco's loan provision significantly dropped this quarter due to model adjustments lowered recently in nation and improvements in collections, which reflect the more favorable economic environment after COVID 19 restrictions [Indiscernible] At Mibanco Colombia, we're sold were driven by higher origination volumes and lower provisions. In 2021, we increased our commercial losses and maintain productivity, thus boosting our presence in the Colombian microfinance market. Next slide please. The insurance business has consolidated this recording from quarter-over-quarter perspective. We will put Pacifico's insurance have the writing results for term to pre-pandemic level this quarter. These results were driven by solid growth in net term in premiums in bulk live and products on cash at the businesses and by a decreasing profit cash-fault declaims. The afore -mentioned dynamics were partially offset by an increase in the mid-claims in the life business driven by an increase in IBNR reserves. Our corporate health Insurance and medical service businesses where this takes lower [Indiscernible] attributable to grow in IBNR claims, in corporate health insurance. This cargo was partially offset by Soli results in medical services in line increase revenues from outpatient services. All in all group of Pacifico's return on equity stood at 11.8%.
Finally, [Indiscernible] posted a 12% net income growth quarter-over-quarter, driven by our recall in the investment performance of reserve fund. On a full-year basis, Grupo Pacifico 's insurance and they written results, ended up in negative territory after [Indiscernible] rose considerably during the second wave of COVID-19. The [Indiscernible] was partially offset by solid earning premium growth in both life and production casual businesses, associated mostly with increasing premium levels from disability and survivorship insurance, and the positive evolution of our digital channels.
The strong performance of medical services also helped boost the consolidated or solids. finally, pretty much 2021 earnings fell 1.4%, which was as pure by higher expenses for strength the company IT infrastructure. These investments position the company to 100 and unprecedented level of service requests for a term of its channels. Next slide, please.
In 2021, regional consolidation of our investment banking and wealth management business continued to be in production on a quarterly basis for so, what driven by 0.5% growth in assets under management measured in U.S. dollars. This evolution was triggered by 2.6% growth in wealth management, which was fueled by non-uptick in brokerage fund volumes. Regarding income contribution, positive results in asset and wealth management business were offset by a contractual and capital markets.
After narrative consult were reported for a fixed income profit portfolio due to lower gains from market operation. This led to contribution of investment banking and wealth management line of business to fall, -5.6% quarter-over-quarter. In full-year figures, assets under management [Indiscernible] -7.2% construction. Mainly with two significant Peruvian mutual funds outflows, which were partially redirected to our offshore platform at lower fees. After taking long term income generation, the expansion in income, mainly driven by the asset management and wealth management, was partially attenuated by acontractual in capital market, which led to investment banking of wealth management line of business to reduce their growth of 8.4%. Regarding our transformation process in 2021, we achieved significant milestones that we allow us to optimize operating processes and lay the foundation for its capability.
Among these, [Indiscernible] [Indiscernible] changing it's domiciled from Panama and degrating score banking systems to the cloud. Finally, we implemented a shared service center in Colombia, where we have successfully migrated over 70% of our target processes in one year. Next slide, please. Now, I will discuss Creditcorp consolidated performance of the asset side for a quarter-over-quarter perspective. The asset mix became more profitable in line with a 2.7% expansion in structurally launch, which was driven by retail banking and Mibanco. Year-over-year the structure relaunch grew 14.1% and this result was fueled mainly by wholesale banking, which reduced the road economic reactivation, and a strong campaign in the agriculture and fishing sectors.
On the liability side, in quarter-over-quarter perspective, grown in low-cost deposits remained flat, while all order funding sources failed by 4.9%, which allow us to maintain our low funding costs. Year-over-year it is important to highlight that low-cost deposits grew by 10.5%. while several [Indiscernible] deposit is drop 48.1% in line. With an economic relief policy that [Indiscernible] fund for withdrawal. All these led to a decrease in our funding cost, which stood at 1.24% this quarter. On a full-year basis, the funding cost increased about 49 basis points to stand at 1.29%. This was driven by the core mentioned growth in low cost deposit, and by the optimization of the [Indiscernible] funding costs at BCP in a context of low interest rates. Next slide, please. This quarter, both the structural relaunch portfolio and payment behavior continued to evolve favorably at a Creditcorp level. Consequently, both the structural NPL ratio and the structural cost of risk improved. Loan volumes and on-time payments remaining strong in our banking businesses.
This positive evolution was attributable to economic reactivation growth and individual liquidity due to government release and an increased transactional activity. Additionally, NPL's balance were favored by higher write-offs, mainly from Mibanco. Therefore, mentioned, it was partially offset by higher delinquencies in SME [Indiscernible] segment, which was attributable to clients for also halt government programs loans. In discount base, Credicorp's structurally NPL stood a 4.9%, which represented a quarter-over-quarter reduction of 30 basis points. Provisions continued to follow a downward trend across our banking businesses reaching record lows this quarter. This improvement was driven by positive payment behaviors, lower risk levels, and higher write-off. Mainly and definitely [Indiscernible] Therefore management was partially offset by an increase in provisions and [Indiscernible] banking after a limited number of corporate clients advanced to higher stage of [Indiscernible]. In this scenario, Creditcorp 's structural cost of weights constructed for 0.54% to 0.22% quarter-over-quarter.
On a full-year basis, we have registered a significant lower provisional expenses in a context of better than expected economic activity, posted payment indicators, which reflect an uptick in client’s liquidity and decrease in ways and the loan origination levels. As long as planned, it's mainly to lower risk repay products in this context, is structural cost of risk drop from 5.12% to 0.89%. The level of structural allowances for loan losses at year-end was equivalent to 6.4% for Credicorp's loan portfolio. In our government program portfolio, grace periods are higher and reprogramming facilities conclude, we have a healthy client base and delinquency is concentrated in early stages. Nevertheless, over new loans in later stages of our real [Indiscernible] being recorded, through stage warranties.
Next, slide please. Creditcorp 's NIM, continue an upward trend to stand at 4.25% this quarter, in line with a more profitable asset mix. Risk-adjusted NIM increased nine basis points quarter-over-quarter to stand up 4.04%. In a full-year term, net interest income expanded 9.2% fueled by the structural loan growth and an uptick in low-cost deposits and an optimization of wholesale funding. Core income increased 2.9% quarter-over-quarter, which was primarily driven by 8.1% growth in fee income. Fee income was boosted by an uptick in consumption of POS transactions. [Indiscernible]. It is known that growth in consumption was driven by the small establishment will generate higher fees.
Finally, net gains and [Indiscernible] transaction increase 12.8% quarter-over-quarter in a context of high FX productivity, improved pricing and distribution capabilities. On a full-year basis core income expanded 13.8%, which was primarily attributable to growth in net interest income and secondarily to an increasing fee income due to higher transactional liquidity. We can come close the year above, pre-pandemic level despite recent regulatory restrictions. Next slide please. On full-year basis, Credicorp's efficiency ratio improved 40 basis points year-over-year. Improvements were mainly driven by the positive evolution of operating income in the micro finance and insure pension line of businesses. This evolution off-set higher expenses at BCP stand-alone related to digital transformation.
The Mibanco operating income grew 19% in 2021, while operating expenses will 5%. Expenses remain under control, which reflects in large part the [Indiscernible] of Mibanco has made consolidated with high-growth business [Indiscernible]. Pacifico's income registered growth this year after it won two additional tranches of the SISCO five tender for AFP related couriers. The premium rate for this tender was higher than the rate under SISCO four the previous biannual program. If we exclude our investments in disruptive initiatives such as Yape and de portafolio [Indiscernible] from calculation based efficiency ratio stands up 44.3%, which is 160 basis points below the reported wage.
Next slide, please. Our ROE stood at pre-pandemic levels at semester end. We are at the top end of a challenging two-year period, which was marked by a sanitary crisis and they'd be sold of potential instability. We manage the weighs on our roles by leveraging our strong balance sheet and to that bankers for opportunities for [Indiscernible] has strengthened competitive position. First, we decided to accelerate these all investments through the crisis and have level rash capabilities to penetrate new segments as we consolidate our market leadership. Over the past 2 years, our structurally loan portfolio grew 11.5%. During the same period, we reported enough work in the expansion of 66.6% in our low cost deposit base.
This coupled with adequate management of wholesale funding in a context of favorable interest rate, we provide a funding cost advantage, as we move into a cycle of interest rates hikes. Second, we steer our loan portfolio towards a better, which provide mining, hunting, our underwriting models and shifting some products from revolving to non-revolving facilities in both the SME and consumer segments. Third, we optimize fee income by leveraging price intelligence and focusing in building transaction capability. Through Yape alone, the number of months’ transactions rose by 24 in the last two years. Fourth, although our insurance business was barely hit, related foundations to increase profitability by strengthening our digital and bank [Indiscernible] channel developing business at the base of the pyramid and refining our pricing and risk models.
Finally, we accelerated investment on revisit our operating models to improve efficiency. [Indiscernible] consolidation of this hybrid model is this already showing tangible results in these products, where we'll capitalize on our [Indiscernible], competitive positions to 2022 and beyond. Next slide, please. Against this backdrop, we shared the following expectation for 2022, assuming that the current COVID-19 wave will have a limited on transitory impact on economic activity. We expect the [Indiscernible] GDP to grow around 2.5%. In terms of how our loan portfolio, we expect lending activity to follow dynamics similar to those influencers. In this context, we expect our structural loan portfolio which excludes Reactiva launched to grow between 8, 10% in average daily balances. Revolutions in total loans will depend on the pace of which Reactiva balances are more tied. Regarding NIM, we expect interest rates to continue that upward trajectory as our loan book shift more towards [Indiscernible]. Accordingly, we expect NIM to situate between 4.3 and 4.6%.
We anticipate that the cost of risk, which will trade between 0.8% on 1.1% as positive payment trends continue and we leverage our enhanced intelligence capabilities. In 2022, we will continue to invest heavily in our disruptive ecosystem. As such, we expect our efficiency ratio to stand between 45% and 48%. It is important to know that we estimate that, instructive expenses will impact the efficiency ratio by a [Indiscernible] 300 basis points. We expect our insurance underwriting result to end the year slightly above pre-pandemic levels, provided that no additional material impacts from the sanitary situation arise. As a result, we expect our ROE to be situated between 15.5 and 17.5%. This improved prospects for profitability will allow us to continue doubling down transformation investments and increased dividend payouts. With these comments, I will like to start the Q&A session.
Thank you very much. We will now begin the question-and-answer session. If you would like to ask a question [Operator Instructions] If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We will pause for just a moment to allow everyone the opportunity for questions. We also ask that you please only ask one question at a time. After each question has been addressed by our speakers, you will then be allowed to ask as many follow-ups as needed. But again, please only ask one question at a time. Thank you. And the first question today will come from Ernesto Gabilondo with Bank of America. Please go ahead.
Hi. Good morning, Gianfranco and Cesar, good morning to all your team and good morning everyone. Thanks for the opportunity to take questions. My first question is on your net interest margin. I will like to understand the potential drivers behind the NIM expansion for this year like high rates or how much additional high. So you're expecting? I don't know an increased exposure from retail loans and Mibanco and maybe some are more decisions in directive alone. So anything that you can give us on the NIM expectations, I think will be helpful.
Sorry, I was in mute. It's Gianfranco, good morning. Many systems have very useful, but yes, go ahead, Cesar with some closing remarks.
yes.
Thank you, Gianfranco. I think, as I've mentioned previously, I think we're going to have a several forces at the same time. We are going to have a backdrop of an increased interest rate. We have had significant increased during 2021, 275 basis points, and we expect that these trends to continue probably with additional one hundred 100 additional basis brands of points through the year. This is going to be translated gradually to a higher nominal interest rates in our portfolio, coupled with an increase in cost of funds, particularly in Mibanco. As a result, we state than an increasing net margins driven by these underlying trends and a gradual transition to more retail portfolio. We need to consider also, that during 2020, 2021 we have been originated lower risk, lower yield in loans. So we need to gradually increase the rates reflecting a more normal portfolio through the 2022.
Thank you very much, Cesar. I'm just -- my second question is on operating expenses. As you mentioned in your remarks, you're expecting to do digital investments this year. So how should we think about the OPEX growth? I think last year was around 16%. Should we expect a similar growth this year? Considering next year's -- when do you expect this OPEX world to normalize? I don't know if it would be reasonable to expect the OPEX world more in line inflation in the next years.
Thank you. I think first it's important to understand the dynamics of the 2022 and realized emphasizing that in 2022, we have the impact or significant high operating values that carries additional costs, we expect this continues -- this trend to continue. In 2022, we also normalize the variable compensation that was severely [Indiscernible] during 2020 and these trends is going to continue base on a top-line, bottom-line results in our main businesses. And the other factor that I think as going to make that our expense is going to grow more. Secondly, more than a inflation is that we are a companion. The increasing volumes in different channels with significant additional expenses in transformation investments. So as I mentioned previously, the impact in cost to income is going to almost double considering the margin investments that we expect in transformation initiatives. So we are going to maintain a good control of the cost to income ratio, but we are going to squaring is still our growth being expenses above inflation.
Well, I understand perfectly this year, but thinking more about the medium-term, like for next year, should we continue to have this same pace of growth or next year should be going back to grow in line with inflation.
First, I think our expenses shooting grow in [Indiscernible] expansion, but in line with the volume of business and operational efficiencies. We expect to have a significant additional investment in transformation initiative for at least 2, 3 years and after that we are going to see less impact of these additional expenses are more clearly the positive impact of the income that these investments bring to the book.
Okay. perfect. [Indiscernible] Thank you very much.
Ernesto, so maybe just to add up on what Cesar mentioned. I would say that we have to separating in two the expense and the expenses accounts. One is the one that is related to growth, and as Cesar mentioned before, the number of transactions and activities that we have seen through 2021, I would say that it's going to keep up this part of the strategy we've started five to seven years ago, the war on cash strategy that has grown a lot because of obvious reasons which is the pandemic. That trend should continue, but obviously, that growth expense. That growth in expenses, sorry, is highly correlated to the growth in income and fee income basically. The only part is the investors we're doing on the digital transformation and on the new ventures. And even though I believe we have an aggressive [Indiscernible], which we will share with you in March. Obviously, that's stage gated targets investment as far as investments flow, well, we will keep investing. Obviously, they don't inform why the way we expect to prevent perform, we will reduce investment or even shutdown those -- those centers.
Thank you, Gianfranco.
Thank you. And the next question will come from Jason Mollin with Scotiabank. Please go ahead.
Hello. My question really is a follow-up on part of the first question's which is on expenses and efficiency. And in particular, that digital transformation and the hybrid model. I mean how you're viewing the ability of the bank and the group to really bring, let's call it the non-physical network expenses. How to incorporate those even more and how we should see like, is that really going to be still negatively impacting for multi-years this investment in digital transformation. And if you can repeat the medium and long-term efficiency ratio targets. Thank you.
Could you answer the part on the digital investments and complementary would [Indiscernible]
Maybe you could give a sense of like in 2022 and 2023 are we going to see similar level that we saw in 2021 and '20? Should they be trending down? How should we think about those and how they -- you mentioned the growth portion of expenses increasing and the digital transformation. Maybe you can give us a sense of what corresponds to each portion?
I'll share the view in terms of our strategic intent and then Cesar will slowly compliment me in terms of net cost. The way we're viewing our transformation towards nonphysical channel is by expanding our customer based in the retail and in SME business. And we are approaching this on a customer journey type of view, which is first acquire the customer and then continue with their transaction. The daily transaction and then their mixed product sale related to a gross selling and on a good solid relationship. Therefore, this is a multi-year journey and we are beginning to analyze and to control the multi-channel kind of view. So we start directing customers towards only non-physical channels and to have a better service level around that.
Maybe just to complement that holes into the details, Jason. A complete example of what can be achieved is, what's going on in the Mibanco. In Mibanco, we are in the process of deploying Hybrid model. And then last quarter, we got the record level in terms sales month by month with roughly 15% of net sales force. And that's because we're leveraging on the digital investments we've done in the past at Mibanco. So that's kind of a couple of what we're trying to achieve, obviously. Some investments are far more clear in terms of their results. Our short-term results there [Indiscernible] longer -- longer Taylor are being done with a longer -- longer-term view. Clients.
Maybe I can simply media and brands. Neogen, [Indiscernible]. We have been very successful in Ken Frankel though in migrating, actually fell by the COVID-19 reality in migrating transactions from the physical to the digital networks. So a transaction in the branches, they used to be 7% of the total transactions of DCB, the monetized transactions as of today, they are only 2% and the number is has reduced from $7 million or something to $4 point something millions of transactions -- of monetary transactions. While at the same time the digital channels have blown out now that growing more than two times. So now we have to work actually in continuing these migration, not only in transaction, but also in sales and services and that will be much more efficient in the future.
Thank you very much.
Okay.
Thank you. And the next question will be from Tito Labarta with Goldman Sachs. Please go ahead.
Hi. Good morning, thank you for taking my question. My first question is on your cost of risk, You show guidance between 0.8 to 1.1 increasing a bit from 2021 per day and well below historical levels. If you can give us a little bit more color on that in terms of your expectations for asset quality. Does this imply your coverage will come down at all? And beyond 2022, do you expect us to normalize back closer to the historical levels, closer to 1.8% to 2%, you can get some more color on that? Thank you.
Reynaldo, can you answer that.
Regarding these -- these years’ expectations. I would say it's a mix of the high level of provisions we made in 2020, and also, there are good performance in all portfolios in every market we've been watching in 2021. So I would say this year we will continue seeing good results based on those two factors. Regarding the future, probably these numbers will start rising a little bit in starting 2023, getting close to pre-COVID recovery levels,that's our expectation as of today?
Okay. Thank you, one follow-up there on the coverage ratio. Do you see that it's around a 115%, do you think that would come down a bit this year or keep around those levels?
Well, we -- in all metrics. We -- we have a different approach in terms of the structural numbers and that all numbers decent 1-15 includes the government, the government loans, and those non-mergers probably going to be impacted. But there we have -- as you know, a big coverage of state guarantees, so we don't have that number very closely. And the number we have in terms of coverage as of December 2021, of 132%, it is still above what we had in 2019. And I think we will look quarter-over with a number, it might go down a little bit in 2022, but it's still at pretty good and sound levels.
Okay. That's very helpful. Thank you for that. And then my second question is, on your digital initiatives, particularly Yape, you show over 8 million clients little bit more than half are active. Can you provide maybe some more color on your expectations? How does that client base growth from here? What are -- what percentage of those clients are BCP clients first non BCP clients, and if we have any other metrics that you can give, like with the average revenue per client. Any loans from Yape deposits, any unit economics are numbers that you can help us quantify how your outpatient grow.
Francesca, can you get that one?
Yes. I'll take that question. About a third of the customers for Yape are non BCP customers, and what we are continually doing is finding new ways to monetize them more than just transaction in terms of the P2P or the P2M model. We are beginning to see a very high transaction rate in terms of top-ups, which is top-ups for cell phones. And we are going to begin distributing for the lower end of the segment, that is a highly transactional. We're also moving towards a more of a super app type of view where we think we can deliver high-value products on the lower end of the scale for retail. In terms of taxes to good quality pounds for our lower-end segment of the retail market.
Alright, thanks for that. And anything that you can give on like revenues per client or loans per client, or deposits. And how you think that would evolve?
Not at the current time because this is something that we are beginning to view in terms of monetization per customer. Today we've been focused on growth -- on growing the customer base and having a lot of transactions, having active customers. So during 2022 so we will be seeing those metrics.
Okay. Thank you very much.
Tito actually, as this is Gianfranco, actually, we're organizing city digital day I believe it's march 15 in New York. So all of you more been invited to attend and we will be much more specific on order issues also but obviously on Japan.
Great. Thanks, Gianfranco. I hope to be there.
Thank you, and the next question will be from Olavo Arthuzo with UBS, please go ahead.
Good morning, everybody, thank you for taking my question. Actually, I wanted to hear from you about this strategy with the subsidiaries of the group. I mean, up their 2020 [Indiscernible] of BCP stand-alone. These new return to the trains we show while some operations like before we are SISCO Creditcorp Capital, higher steel lagging behind with the stability well, the beyond, the cost of capital is afraid. So I basically wanted to understand what is the banks strategy for subsidiaries. I mean, what is the plan to foster these operations for the next few years? Or isn't the case of an M&A. I don't know if these indicates it’s in the bank's pipeline of potential divestment's? Thank you very much.
Olavo, sorry. This is Gianfranco. We didn't get the first part of your statement/question? Could could you repeat that one? Because at least I didn't get it.
Yes. No problem. I just wanted to know to have some more color about this fixation of yours for the next few years about the subsidiary of group, like BCP Bolivia, Pacifico, Credicorp. Because they are delivering profitability well below the cost of capital of these operations. So I wanted to hear from you what is basically is your plan for the next few years to show potential rebound of these operations, or I don't know if the case, but is in the bank [Indiscernible] a potential for investment for these operation? I don't know if you've understood me. If you don't, I'll repeat it then.
Yes. No -- yes thank that was clearer. I'll take that one actually, what we foresee is that all of -- all of our subsidiaries will be above cost of capital by year-end this year, with the exception of obviously their digital ventures and Bolivia. Bolivia as you would -- I don't know how much aware you're about Bolivia but Bolivia the business environment is quite complicated and the banking environment specifically is quite complicated. Actually, I would say much more complicated the business environment in general. So having said that, we've been in Bolivia for the last over the last 25 years. We do believe that we have a strong franchise there. What we're doing is trying to become much more efficient and hoping to better [Indiscernible] to Bolivia and obviously in that unfriendly environment is quite complicated to do a transaction a merger on accusation or [Indiscernible] subsidiary because of environmental that's where we stand today.
Okay. Very, very clear. [Indiscernible] few by me, both my questions, it's very quick. It's about the payout ratio for the year, so you can do the profitability balance sheet in the last year to six stations imply it on the guidance for this year. What could we expect about the dividend distribution for this year.
Are you talking about dividend, sorry the connections are quite bad.
Yes, sorry. It could be from my side. Just [Indiscernible] very, very [Indiscernible] It's about the fields ratio for this year --
Yeah, yeah.
You showed --
Yeah.
Okay.
Got it, thank you. So we cannot provide our payout ratio as of today. What we've told the market always, and this is the policy we have, is that what we do is we -- based on the budget of growth, specifically on the banks, we set up the capital requirements, for sustaining that growth. After that, the excess profits we get from the subsidiaries either are low, important M&A transactions inside what we do, we pay dividend. The dividend announcement should be stated by the board I brings a little bit members. You'd said very neutral since I you can help me with that. Hey, Bill, sorry. In April and we will meet the public. What I would think that what is important is that philosophy on the probably the policy we have around dividend as ratios.
Thank you very much, Franco. Very clear.
Thank you. And the next question will be from Andres Soto with Santander. Please go ahead.
Good morning to all and thank you for the opportunity to ask questions, maybe follow up on that last response item, Frankel, you say your dividend payout will depend on the capital levels and be subsidiaries levels. And you will plan to distribute any excess of that. Why did those minimum thresh holds that you have said for your subsidiaries, for the purpose of distributing dividends to a parent company, and from the parent combined shareholders.
Cesar, can you take that one please?
Yes. I think the main restrictions came from the banks in the case of BCP have core equity Tier 1 of around 11% of the minimum point that is the declaration of the dividend. In the case of Mibanco, Peru and Mibanco, Colombia is 15% under the same rules. And a -- for this year, we are maintaining the profits and some vehicles in particular like Pacifico, who has endured some -- some losses. That's the basic rules. And according to what Gianfranco mentioned, we serve funds for M&A expectations, the Krealo project and the risk is going to be paid dividends and our expectation is to have a sustainable an increase dividends declared at the beginning of the year.
Thank you, Cesar. And can you remind us what is the size of that fund that you had said that's our rainy day fund and also for M&E purposes, how much is that?
Yes.
Like it used to be a [Indiscernible] level?
Yes. At this point, we have a liquid forms funds, all the amount that we rise from the bond issue during the crisis. This is the $500 million and above that, we are going to maintain strong additional excess liquidity, that I will say on a relative small amount, not in the vicinity of 2 billion solid that we had in 2019. If you see our balance sheet, you are going to see a lot of cash, but we also have the bond and we have all the position of reserve and that when we are considering some liability management operations down the road.
Perfect. Thank you so much, Cesar.
Thank you. The next question will be from Jorg Friedman from Citi. Please go ahead.
Thank you very much for taking my question. Have two questions. The first one, related to the prospects for your credit growth this year. You're highlighting in the presentation that you expect loan growth in the structural portfolio to be at about 8% to 10%. But with real GDP, you have only 2.5% last year, GDP grew 13%, and of course, you departed from higher basis but the portfolio grew only 3% slightly below that. So how do you believe you can achieve these levels of growth in light of the deceleration in the economy, and what could be the drivers for that and whether I know competition might get more intense or not? Thank you.
Diego, can you take that one on DCP are complementary [Indiscernible].
Yes, for sure. I tell you we have to separate the loan portfolio when you include the [Indiscernible] government back portfolio no. We expect that that portfolio, including Reactiva is not going to grow that much and the opportunities to substitute those guys -- those loans that are going to be repaid this year. So we see a great opportunity in the [Indiscernible] segment, especially. That is going that portfolio is going to be amortized and we're going to slip [Indiscernible] relevant part of that portfolio with higher margins. And also we expect the -- also we expect significant strong demand in the mortgages and consumer segment because we are looking at -- what we're seeing is that levels are getting up to pre-COVID levels not in terms of the size of portfolio. So most of the growth comes from the recovery to pre-COVID levels but they are relevant part comes from substituting in the direct your portfolio.
Just to complement Diego's comment as Mibanco's emergent before and last quarter, there's seasonality at Mibanco but last quarter was a record quarter. It's started as a competitive quarter. We expect the micro SMEs to keep growing. Those were the segment as working the most longer COVID crisis. We are seeing a lot of activities there, so that will complement also what Diego just mentioned.
Perfect and just a follow-up there. How much do you think Mibanco could represent in terms of total loans? It represents approximately 10% of the total portfolio nowadays, not sure if you have an ambition of having bigger participation of Mibanco in the future.
The answer is yes, but this in the long run. We strongly believe that one of the main avenues for growth of Creditcorp, is growing in microfinance. Not necessarily only in Peru, but also in Colombia, where we are operating today. Still a tiny operation, but we're very, very happy with the results of that operations. So we -- we may be quite active in other countries in LATAM in the upcoming years.
And my second question very quickly is on the effective tax rate, we had some volatility of effective tax rates during the past quarters. So just wondering to come up with your guidance, what you are envisioning for the effective tax rate in currently 2022. Thank you.
As you mentioned, we have had a lot of volatility throughout last year at some point we reached 4.14 solace per dollar at year-end, we were around 4 now with all the volatility, we are in 384. we think that we are going to be around these figures that are below, that was going to less our expectation only a couple of months ago. But I think at this moment we have to counter forces, the political risks with upward pressure and a significant balance surplus in the commercial front as opposed to this and that downward pressure. The combination of both to suggest have that we are going to be around these levels.
I'm sorry, which levels? I missed that part.
We are we're now at 384 in this vicinity.
Okay. Perfect. Thank you.
Thank you. The next question will come from Alonso Garcia with Credit Suisse. Please go ahead.
Hi. Good morning, everyone. Thank you for taking my question. It's actually a follow-up on the margin side. First, I mean, just wanted to -- if you could remind us of your sensitivity to every 100 basis points increase in the target interest rate. And second, you mentioned the press release that you see some pricing pressure in the quarter affecting the wholesale portfolio. So I just wanted to hear from you view, continue to see that pressure on pricing for 2022 in the wholesale segment, and if you see -- and if you are starting to see this kind of pressure also in other segments over the portfolio. Thank you.
Maybe I can take that one.
It's okay. Yes. No, Diego.
Sorry.
Yes.
[Indiscernible] idea and after that you can complement me. Yes, we have [Indiscernible] a sensibility of the portfolio that implies around [Indiscernible] basis points in NIM let's say, if we increase the rates in a parallel movement is a little bit below $200 million solid at this point, assuming a parallel move in the [Indiscernible] and as you imagine, this is an accumulate because effect over the years that's recent [Indiscernible] of our portfolio. We are seeing. Gralise translation indigenous rates in the wholesale portfolio with ratios, but we are seeing the translation on high interest rate and we foresee some delay in the translation on the higher rates of the consumer portfolios and revolving lines that is going to happen but with some delayed, that's what traditional happened with our portfolio. The decrease is a with some delay and increases also with some delays in the higher rates and revolving lines. So truly here we're going to be the driver translation of the increase, the interest rate that we are seeing right now.
So good to clarify, 10 basis points plus 7 basis points for every 100 basis points inquiries, correct?
In mid.
Yes.
The sensibilities in mid.
Yes.
Basis points in [Indiscernible] Yes.
Positive for every 100 basis points to increase?
Yes. Parallel movements.
Okay. Thank you.
Thank you. And the next question will be from Yuri Fernandes with JP Morgan. Please go ahead.
Hello, good morning. And thank you for the [Indiscernible] of asking the questions. I have a follow-up on margins on these repricing topic. If you can provide some color on active aligns for the guys that are buying. Are you able to move the price to the normal average, like to the historical Pre-COVID level? Or are you facing some kind of resistance from clients to move prices up again? And I guess my point here is, to try to understand your NIM expansion, right. Because your guidance for 20 to 60 bps in expansion this year and basically my question is regarding 2023, right? So we should -- we should expect your NIMs to keep evolving to 20 to 50 bps every year. So maybe by 2023 / 2024, we may see margins up back again for those 5% - 5.5% levels. And I guess with pricing here on Reactiva is important to understand that space right before you'll be able to reach that faster, or it will take some more time and I can ask another your question, later. Thank you.
I will take that one. Yuri, great question because it helps us in the follow-up on what we mentioned in the last call. We've already seen -- actually, I believe it's close to 45% of what disburse in Reactiva for waiting repaid. That's where one important piece information. The only one is that strategically or essentially at Mibanco, where the difference in rates as compared to the provisional loan, it was important, it was large. We've seen already a lot of activity, as I mentioned, the last quarter, and we haven't seen any negative impact in terms of their willingness of those clients to get their new loans at market conditions, so we really do not expect any noise (ph ) going forward. And obviously, the further we move in the year, more of the Reactiva loans will be repaid and we should be back to normal by year-end. And maybe anything between 35 to 35% of the total Reactiva loans have been, have been refinance. And that's up that will trickle down on as we look forward. We fully in the second part of your question, we do expect lanes to go back to normal because of reasons, Cesar mentioned before, and I will be a little more specific in my final remarks.
Was it clear?
Yes. Sorry. To compliment what Gianfranco is exactly what he said. The only thing that I want to remember you is that the cumulative effect of the increase in rates from our time because you reprice the portfolio gradually, so we will see an increase in outline interest rates for a couple of years very clearly [Indiscernible]
That's pretty clear in Cesar and Gianfranco, super-clear. Can I just ask some fees, we discussed expenses and margins, but these are [Indiscernible] so my question is should we expect fees to grow more or less regarding like similar to our loan growth, just checking the pace of the growth because this year, as you said, was a normalization for volumes and fees grew 20%, but I'm not sure how fast can fees grow. It doesn't venture. Thank you.
Yes, I would like to remember that during 2020, we have an almost 114 on something base of February restricted level of activity in the country. So the transaction of volumes dropped significantly. In these regard the figures that you see in 2021 are a reflection of the recovery of these volumes or activity and transactional couple with increase a capability, distribution capabilities developed. So we're not going to see these kinds of additional rebounds down the road. But we see, that the fee income probably is going to grow a little bit faster than before the pandemic, which were very low -- a very low single-digits propelled, but our increased transactional capabilities. But not a repetition of the 2021 that is rebound from exceptionally low levels at the beginning of 2020.
Perfect. Thank you very much.
Thank you. And the next question will come from Carlos Gomez with HSBC New York. Please go ahead.
Hello, good morning and thank you for taking my question. You refer to the reduction in fee from asset management because of outflows from mutual funds in Peru and the fact that some of this money has gone to offshore accounts. Can you quantify that and can you tell us if that has continued? And when I say quantify, can you tell us how much the funds will be charging in Peru and how much they will be charging in your offshore capabilities. And I know it's only one question, but I noticed that we're getting to the nobody has asked you about politics and you don't have a government. What do you expect from the public sector? And again, in the past few week after macro stability and mothering thrown is speedier scenario for the next three years. Thank you so much.
Good morning. I'll start with the second part of your other -- your second question. So I'm actually I'm surprised you're asking that question because we're in are very stable political and macroeconomic conference. Absolute the level of uncertainty is very high. As a thought, we don't have a Prime Minister as we speak, today, there's been a lot of noise. There's no clarity whatsoever on the next -- what the next carrying it's going to be. And therefore, the road map of new slogan going forward, is going to be -- which is a PD because at a country on the macro finance as Cesar mentioned at the beginning of the presentation, we are having tailwinds. The level of commodity prices, specifically copper is at significant record level. We are at record level up for conversion. Therefore, the commercial -- both the fiscal deficit and commercial balance and so on, have been very positive last year. We could be growing instead of 2.5% in this year and maybe doubled that number on why it's more important on -- I believe they just come in before or is more important than these have on 2.5 of GP growth, the level of poverty is not use. Whereas a 5% or more a little forward to easily do. I look forward to social impact of that [Indiscernible is much more relevant. I don't know if I got that second part of your question. Sorry for not being most specific, but that's where we started today. Maybe, Cesar, you can answer the first one? the first part, sorry.
As you mentioned, Carlos, we have had severe impact during the election period and we lost almost 50% of big mutual funds in Peru, this is more than $2 billion equivalent of funds that where we draw. And we have actual significant part of these in our international platforms. But we had to exchange our 100 basis points fees for a quarter of that being a non-proprietary distribution fee that we can collect in International plaza. So we have an impact in this regard, and I will answer also to highlight that at the beginning of the process. The P&L impact was muted because we charge every withdrawal fees or load fees. But down the road, we have a less profitable base that we need to rebuild. But the impact has been relevant.
And has the outflow continued into this year?
No, No, if we monitor carefully, they are also some different funds that transfer it in from different vehicles to outside. And in the last more than a half [Indiscernible], the field have a small or even positive in specific weeks.
Thank you. And if I can follow up on the politics, do you expect this administration to continue for the next 3 years and do you expect any legislative changes that could affect the bank or do you just don't know?
Unfortunately, I do not have a crystal ball.
[Indiscernible] Thank you so much.
The next question will be from Sergey Dubin with Harding Loevner. Please go ahead.
Good morning. Thanks for the call. I have a question and just confirm some facts. So the first fact I want to confirm is what is the percentage of the Reactiva loans as a percentage of your total loans today.
Is that the average?
Yes.
It's around 13%.
Okay, it's 13% percent and you -- yes, you expect that to decline to roughly what level by the end of 2022.
That should be around maybe eight -- this is a rough number. I don't know, Cesar, do you have DoD and September, the expectations? That should be --
Yes.
Maybe 8% impact.
Which we -- we don't have [Indiscernible] specific programs. We should have a reduction of around half. Only a smart precision, 13% is Mibanco and BCP, slightly higher between 14% and 18% depending on retail or wholesale.
I'm talking about the consolidated level right now. So roughly speaking, from 13% to 8%, correct?
Yes, roughly yes.
Okay.
Just to be very specific specific unless there's a change on government as of today, that's the expectation.
Got it. So given that and given all that you talked about with respect to the rates are already so if I look at the chart on page five that you show right. So you showed that the rates went from even from September '21 to January '22, they went from 1% to 3%, so that's an increase of 200 bps. And you said, there's potential for another 100 bps increase this year, so cumulative, you're looking at 300 basis points of cumulative increase over the course of call it 18 months or so. So help me understand. I know you talked about the sensitivity of 7 bps of NIM expansion through your 100 bps in rates. But qualitatively, I'm not sure I understand why is it so low because you have 60% of your deposits is basically low cost, what I would call capital deposits, right? And a big chunk of your loan book is corporate loans we should reprice fairly quickly. So why don't you have higher interest rates sensitivity, and why don't you have higher NIM expansion?
Probably I can take that. I think two different stories in the case of Mibanco, most of the funding or Mibanco is wholesale funding. And the fact that these retail funding has also relatively high sensitivity. We saw the expansion in Mibanco is more leverage. And this is about the answered indicates of BCP. We have the two portfolios the dollar portfolio has going to have an increase, but much more muted, and we have a significant part of the portfolio in dollar have BCP as you can of remember, around 40%. Third-parties in Soli and in the Soli portfolio has duration of 2.2 years. So we are going to see a full impact in 2023, I am not the [Indiscernible]. Mibanco has sensibility due to to the funding of structural, indicating could be global portfolio that it's not going to have 200 basis points increase, and you have the solar portfolio and the solar portfolio a hazard ratio of 2.2%. So gradually we are going to pass through these interest rate. And it's going to be our last in the high rates and revolving portfolios in which you don't have the rates gradually back in turn quarter-by-quarter on gradually over time. I don't know if that helps.
Yeah that's actually a very good insight and I wish you articulated that upfront because I don't think it was very clear, but not now it is clear. Just one follow-up question. So when you talked about dollar portfolio in BCP, first of all, what's the duration of that dollar portfolio? And second, basically that portfolio is re-pricing Northwest [Indiscernible] rate for a but with U.S. What is it like -- what kind of benchmark is that [Indiscernible] or what is it tied to and how does it reprice? Thanks.
Okay. The duration of the dollar portfolio is shorter. Most of the rates are fixed. That are fixed at the beginning based on lack of reference, that is going to be great to [Indiscernible], as we speak.
So it is tied to Libor, right? And it has shorter duration?
Yes.
Okay, understand.That's -- that's very clear now, Thank you.
Thank you. And the next question will be from Alonso Aramburu with BTG. Please go ahead.
Hi. Good morning. Thank you for the call. I wanted to follow up on expenses. It seems like the guidance on efficiency in slice, somewhere around double-digit growth of expenses. You had mentioned last year some initiatives like going to hybrid favor force of reduction -- I would with reduction of office space. And we'd like to have the physical and net workers has as well -- where you stand, would you stand in those in initiatives and are you comes from those to help on the efficiency side this year.
Cesar can you take it or [Indiscernible] I don't know whoever. Go ahead, Cesar.
I mentioned previously, we are working in the reduction of the footprint that when we reduced the footprint as we mentioned, before, we have at least 3 basic components. One is the strictly linked to the basic infrastructure, and this is already take out directly.Another third of grossing not really came from the central services that goes with the client. And at the beginning, what we are doing is very, very careful not to reducing selling capability. So we will distribute in the surrounding areas with a lot of models and some monitor that we don't lose a distribution capability. This is a factor and as we mentioned before, the traditional expenses are growing slowly but in line with transactional activity, whereas paying a more and I think significantly more, and the one to talk towards that is Gianfranco, also displaying a clearly was the transformational ones that we need to see in another bucket.
Okay. So the net benefit from these reductions of our office space and this couple things is not significant than at least in the short term? Is that sir?
Yeah. That's the correct.
And maybe can I ask a simple question -- Okay, can I ask a simple question about Yope. I believe they were planning on offering micro loans. Can you comment on where you stand in that plan?
Francesca?
Sorry. Can you repeat the question on micro loans?
Yes. [Indiscernible] why would [Indiscernible].
Okay. So what we're planning to do for the couple next two quarters, again, you've seen BCC's analytical models use Yopay as a distribution channel to understand the type of loan, the amount of loan the duration of the loan, the type of customer that will prepare these type of final and to begin to understand the business model around a Yopay as a distribution channel.
Okay. Thank you.
Ladies and gentlemen, this concludes our question-and-answer. I would now like to turn the conference back over to Mr. Mr. Gianfranco Ferrari, Chief Executive Officer, for closing remarks.
Thank you, after the [Indiscernible] in previous meetings and calls at the end of 2021, we consolidated our return to pre-pandemic profitability levels after 2 years of unprecedent challenges. We're in the process of closing this chapter is [Indiscernible] belief that adequately manage to risks and fine-tune our capacity to see potential growth and profitability in all of our businesses. I'm convinced that by following our purpose and we are firming our strategy is a clear focus on digital transformational and sustainability.
We have effectively steered our business through choppy waters. Moving forward, uncertainty will continue on the sanitary, macroeconomic, and political trends. And we'll continue to manage gauge as exactly as we have in the past. We've said, there's one point that we mustn't lose sight of, as fundamentals remains strong. As you have seen in our guidance reaching 2022 as a transitional year, in which cost of risk will remain low in comparison to pre COVID levels. But we'll get back to normal by 2023. During this transition, we expect NIM to be covered for several reasons.
First, an increase in reference rate in line with central bank friends worldwide. Also, a reduction in government sponsored loans and finally an increase in income on level currency loans. In the energy level shown in the last two quarters of 2021, we expect to maintain a sustained our lead in the high teams in the loan book. To make this possible, we will continue investing in digitalizing our traditional businesses earning disrupting ventures. That's great, [Indiscernible] we see beyond our original content. We have also set our sights on the global [Indiscernible], for consumer behavior, are new technologies that offer on parallel opportunities in the medium-term to provide better products and services more efficiently and more proportionately to drive financial inclusion.
Now we're under market. At the onset of the pandemic. We were free to reaffirm our digital certainty and accelerated our investments on the front. Over the past [Indiscernible] we are closely examined trade follow-ups, innovation model, and use its governance to strengthen our competitive to develop. If we combine the agility at technology of these ventures with a competitive advantages of our appropriate, we will strengthen Credicorp's leadership. We will short this journey on our new additional of innovation management, how our investor digital date, which we will be hosting on much 16 in New York, on March 16th in London. I would like to invite you all to this event. It will really be a pleasure to see you all again. Finally, I would like to take the opportunity to share with you and after 22 years at BCP and the last 4 as COO, I am thrilled and motivated to assume that leadership of [Indiscernible], as I work hand-in-hand with our topnotch team. Our passion for innovation focus on clients and most of all, our commitment to the parties where we operate with my regular efforts to fulfill our purpose, to contribute to improving lives by accelerating the changes that our country's need. Thank you very much.
And thank you, sir. And thank you, ladies and gentlemen. This now concludes today's presentation. You may now disconnect. Take care.