Humala's plans could seriously affect private pension fund system - Credicorp

- Wednesday, May 11, 2011

Humala's plans could seriously affect private pension fund system - Credicorp

Peru's private sector pension fund system could be seriously affected if left-leaning presidential candidate Ollanta Humala goes ahead with what is stipulated in his presidential program, Walter Bayly, CEO of the country's largest financial services group, Credicorp (NYSE: BAP), told a conference call.

Despite that Humala has denied that he has any intention of touching pension funds, the market fears he might force the country's private pension fund managers (AFPs) to buy public sector debt - or even nationalize the system - if he wins the second round of the presidential elections.

Last month, finance minister Ismael Benavides said the government would "armor" Peruvians' savings managed by AFPs before the change in government, which prompted Humala to say he would not touch those funds.

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"It's not very clear whether they [Humala] will go ahead with that because it has received a very negative reaction from the public, but nevertheless it's clearly stated in the document that the private pension fund system will not continue to exist as it is today," Bayly said.

A runoff election between Humala and Keiko Fujimori is set to take place on June 5. Last month's polls gave Humala a six-point lead, but the latest ones show his advantage has nearly disappeared.

Credicorp owns the largest of the country's four private pension fund managers, Prima AFP.

"We're a financial institution that has a direct correlation with the country's growth. We think that there will be an initial loss of confidence that will hopefully be regained over a period of time, but that slowdown will seriously affect our businesses," Bayly said.

On Tuesday (May 10), the group lowered its 2Q11 ROE guidance to around 20% from its previous 22-23% forecast, due to political uncertainty.

Credicorp also owns Peru's largest lender, Banco de Crédito del Perú (BCP), and operates in the life, P&C and health insurance markets under the name Pacífico Insurance Group.