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Credicorp(NYSE: BAP)
Q4 2021 Earnings Call
Feb 08, 2022, 9:30 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning, everyone. I would like to welcome all of you to Credicorp Ltd. fourth quarter 2021 conference call. [Operator instructions] With us today is Gianfranco Ferrari, chief executive officer; Cesar Rios, chief financial officer; Francesca Raffo, chief innovation officer; Reynaldo Llosa, chief risk officer; Diego Cavero, head of universal banking; Cesar Rivera, head of insurance and pensions; and Milagros Cigueñas, 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.
Cesar Rios -- Chief Financial Officer
Thank you very much. Good morning, and welcome to Credicorp's conference call on our earnings results for the fourth quarter of 2021. I hope you and your family are healthy. The latest available official data shows that economic activity grew 3.5% year over year in November and 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, Peru's real GDP rebounded around 13% in 2021, which was better than initially expected in the context marked by the record high for copper prices, expansive monetary policy and fiscal policies and high liquidity, both internationally and locally. Regarding the sanitary situation, omicron daily infections have increased rapidly. And now quarantine, as record levels of four times higher than in the peak of the previous wave.
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Mortality rates, however, are significantly lower. In fact, daily deaths in Peru represent just tenth of those registered at the previous wave. This evolution reflects the progress of the Peru vaccination program through which 84% of the population, 12 and older, has received at least two doses. With mortality rates stay low, the economic impact of new COVID-19 wave should be limited to an uptick in employee absenteeism and supply chain delays.
More sweeping impact such as lockdowns are not expected. Next slide, please. Inflation has reared its head across the globe, driven by shortages of inputs, problems with 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 is expected to expand at 3% at the end of 2022 versus 6.4% at the end of 2021. In this context, Peru will capitalize on the designation of a team of highly regarded professionals at Central Bank [Inaudible]. This new board led by Julio Emilio Velarde is expected to effectively steer the Central Bank's policies to control inflation. Accordingly, the Central Bank has raised its policy rate by 275 basis points as follows.
This rate currently stands at 3%, and we expect additional increases. Other measures adopted included increasing in bank reserve requirements. Regarding the exchange rate, its recent decline was driven by reduced perception of political uncertainty and a record trade surplus. This decline will also have an impact in 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 aforementioned factors, coupled with a fast decline in the fiscal deficit, which went from representing 8.9% of GDP in 2020 to 2.6% in 2021, has eased concerns and reflected in less volatility of Peru's sovereign long-term bond rates. Finally, on the political side, President Castillo has yet appointed a new cabinet as the last prime minister resigned after just four days in office. Political instability lingers in Peru, but our economic fundamentals remain strong.
Next slide, please. In Credicorp, 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 and micro businesses has benefited from ABC, our financial education program at BCP and Pacifico.
In the fourth quarter of 2021, our multichannel distribution model continued to evolve. By year end, digital transactions at BCP accounted for 51% of total transactions and 44% of disbursements at Mibanco were executed to alternative channels. Our anticipation of client needs and fast tracking of investments on the digital front has allowed us to enhance user experience in the context of heightened demand for digital transactions and services. Our quarter-over-quarter results show loan growth measured in quarter-end balances remained flat.
If we isolate the negative exchange rate effect, a 4.2% uptick in structural loans were offset by a 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 growth in structural loans and a lower term deposit mix due to seasonal transactional activity and higher FX volatility, respectively. Provisional expenses dropped to exceptionally low level 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 0.34%.
Insurance underwriting results, performance in pre-pandemic levels this quarter, driven mainly by an increase in net earning premiums in both life and property and casualty businesses and a decrease in property and casualty claims. Expenses were higher this quarter, driven by an uptick in transformation expenses, variable compensation and due to the usual fourth-quarter expense increased seasonality. In this context, Credicorp's net income was PEN 1,061 million, which represents an ROE of 16.4% at quarter end. In full-year terms, core income expanded 13.8%, driven by higher net interest income, in line with an uptick in the structured portfolio, rising rates, and lower cost funding structure.
Fee 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 the FX transaction due to better pricing capabilities and more volatility. The cost of risk dropped 0.82% in an environment characterized by higher-than-expected growth in economic activity, positive payment behavior, and a reduction in the volumes of risky portfolios. The aforementioned 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 PEN 3,585 million 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 has been elevated to the Leader category with a score of AA.
This new score recognizes Credicorp's leadership in managing the most significant risk and opportunities in the industry. Additionally, Credicorp was selected to form part of the S&P/BVL Peru General ESG Index, a representative ESG benchmark of the Peruvian equity market. In the environmental front, we developed a sustainability financial framework that is aligned with international standards and became the first LatAm bank to obtain a Strong S&P rating for this kind of framework. Additionally, our subsidiaries continue to adhere to commitments to combat climate change.
In this regard, it is worth noting that Credicorp capital asset management became a TCFD supporter. In the social front, we have been recognized by prestigious institutions for our efforts on the financial inclusion, education, and gender equity fronts. Regarding governance, we continue to develop policies, codes, and structures that are aligned with international best practices. In the past few years, we have focused on improving our ESG disclosure.
We are pleased to report that we will be publishing our 2021 annual and sustainability report which is aligned with international sustainability reporting standards such as SASB and GRI. Next slide, please. Regarding universal banking, in the fourth quarter of '21, BCP consolidated its return to portability. Quarter-over-quarter results were driven by an increase of 4.5% in core income.
This was attributable to an uptick in structural loans 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, daily [Inaudible] transactions were unusually high which reflects our ability to leverage intelligent capability in a volatile FX market. The aforementioned was offset by higher provisions which are still at very low level. Additionally, operating expenses increased due to seasonality.
In this context return on average equity stood at 20.7% this quarter. On a full-year basis, a 9.9% growth in core income was fueled by growth in net interest income, which was driven by a 16.1% uptick in structural loans measured in quarter-end balances. Our results improved by leveraging data analytics and finely tuned risk models to help us penetrate new SMEs, subsegments and drive sale to digital channels. In fact, by year end, digital sales represented 34% of total sales, while 71% of unsecured consumer loans were disposed to digital channels.
In addition, our efforts over the last few years to optimize our balance sheet has led to a reduction in our funding costs. Another aspect that drove full-year growth in core income was the 20% increase in fee income which occurred despite the challenging regulatory environment and was driven by expansion in transaction volumes. Finally, in a context marked by an exceptional low cost of risk, BCP registered 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 on average equity of 19.7% in 2021. By year end, BCP's core equity tier one ratio stood at 11.8%, which is within internal limits. At BCP Bolivia, our risk appetite 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 usage has grown exponentially. At the end of 2021, total 8 million user, 54% of whom are active users that make at least one transaction per month. The Yapecard is an important lever for growth in financial inclusion and is used by 38% of Yape users.
You can open a mobile wallet with a national identification number. Of total Yape users, 19% are SME plans. Our focus moving forward will be encapturing new users in this segment, where 90% of transactions are still made in cash. Yape is a natural conduit for financial inclusion and also brings new clients into the BCP fold.
Yape's indicators for frequency of use and number of transactions continue to rise. Today, active users executed an average for 12.7 transactions a month compared to 8.2 in December last year. Total monthly transactions reached 58 million with a transacted volume of PEN 3.7 billion. Next slide, please.
2021 has been a year of recovery and growth for both Mibanco Peru and Colombia, and this trend accelerated in the last quarter. Regarding Mibanco Peru, the hybrid model shows signs of consolidation and it boosted commercial productivity and efficiencies. This model we pass with platform to further centralize assessment capabilities in 2021. Now we can efficiently process information on potential loan recipients from multi-resources and consequently improve the risk profile for the structural portfolio.
In addition, Mibanco embraced digital channels as a conduit for cost-effective loan growth. These capabilities coupled with economic recovery and year -- and end-of-year seasonality propelled the structural disbursement levels to record high last quarter. In this context, this quarter Mibanco consolidated this recovery. The quarter-over-quarter analysis shows structural origination reached a record high and grew 5.4%% in average daily balances, alongside yields on loans growth triggered by enhanced pricing capabilities.
These positive dynamics were partially offset by an increase in cost of funds in the context of recent interest rate hikes. As a result, our net interest income grew by 2.5%. Despite mandatory fee restrictions, other income also improved in line with an uptick in bancassurance commission, which was driven by growth in origination levels and a decrease in commissions paid to commercial partners. In this context, core income grew 4.4% quarter over quarter.
Lastly, Mibanco's loan provision significantly dropped this quarter due to model adjustments, lower risk origination, and improvements in collections, which reflect the more favorable economic environment after COVID-19 restrictions ceased. At Mibanco Colombia, results were driven by higher remuneration volumes and lower provisions. In 2021, we increased our commercial muscle and maintain productivity, boosting our presence in the Colombian microfinance market. Next slide, please.
The insurance business has consolidated its recovery from a quarter-over-quarter perspective. Grupo Pacifico's insurance underwriting results returned to pre-pandemic levels this quarter. These results were driven by solid growth in net earning premiums in both life and property and casualty businesses and by a decrease in property and casualty claims. The aforementioned dynamics were partially offset by an increase in the net claims in the life business, driven by an increase in IBNR reserves.
Our corporate health insurance and medical services business registered lower earnings attributable to growth in IBNR claims in corporate health insurance. This factor was partially offset by solid results in medical services, in line with increased revenues from outpatient services. All in all, Grupo Pacifico's return on equity stood at 11.8%. Finally, Prima posted a 12% net income growth quarter over quarter, driven by a recovery in the investment performance of the reserve fund.
On a full-year basis, Grupo Pacifico's insurance and the writing results ended up in negative territory after light claims rose considerably during the second wave of COVID-19. This impact was partially offset by solid earned premium growth in both life and property and casualty businesses associated mostly with increasing premium levels from disability and survivorship insurer and the positive evolution of our digital channels. The strong performance of medical services also helped boost the consolidated results. Finally, three-months 2021 earnings fell 1.4%, which was expired by higher expenses to strength the company IT infrastructure.
These investments position the company to handle unprecedented level of service requests to alternative channels. Next slide, please. In 2021, regional consolidation of our investment banking and wealth management business continued to gain traction. From a quarterly basis consolidation was 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 an uptick in brokerage fund volumes. Regarding income contribution, positive results in asset and wealth management business were offset by a contraction in capital markets after negative results were reported for a fixed income proprietary portfolio due to lower gains from market operations. This led to contribution of investment banking and wealth management line of business to hold minus 5.6% quarter over quarter.
In full-year figures, assets under management registered a minus 7.2% contraction, mainly due to significant Peruvian mutual fund outflows which were partially redirected to our offshore platform at lower fees, affecting long-term income generation. The expansion in income, mainly driven by asset management and wealth management was partially attenuated by a contraction in capital markets, which led to investment banking and wealth management line of business to register growth of 8.4%. Regarding our transformation process. In 2021, we achieved significant milestones that will allow us to optimize operating processes and lay the foundation for scalability.
Among these ASB Bank called Absorb ASB, changing its domicile from Panama and migrating its core 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 Credicorp's consolidated performance on the asset side from a quarter-over-quarter perspective.
The asset mix became more profitable in line with 2.7% expansion in structural loans, which was driven by retail banking and Mibanco. Year over year, the structural loans grew 14.1%. This result was fueled mainly by wholesale banking, which registered broad economic reactivation and strong campaigns in the agricultural and fishing sectors. On the liability side, from a quarter-over-quarter perspective, growth in low-cost deposits remained flat while all other funding sources fell by 4.9%, which allowed us to maintain a low funding cost.
Year over year, this is important to highlight that low-cost deposits grew by 10.5%, while severance indemnity deposits dropped 48.1%, in line with an economic relief policy that freed up this fund for withdrawal. All this led to a decrease in our funding cost, which stood at 1.24% this quarter. On a full-year basis, the funding cost decreased about 49 basis points to stand at 1.29%. This was driven by the aforementioned growth in low-cost deposits and by the optimization of the wholesale funding cost at BCP in the context of low interest rates.
Next slide, please. This quarter, both the structure in our portfolio and payment behavior continued to evolve favorably at a very core level. Consequently, both the structural NPL ratio and the structural cost of risk improved. Loan volumes and on-time payments remain strong in our banking businesses.
This positive evolution was attributable to economic reactivation, growth in individual liquidity due to government release and an increased transactional activity. Additionally, NPL's balance were favorable by higher write-offs mainly from Mibanco. The aforementioned was partially offset by higher delinquencies in SME Pyme segment, which was attributable to clients who also hold government programs loans. In this context, Credicorp's structural NPL stood at 4.9% which represented a quarter-over-quarter reduction of 30 basis points.
Provisions continue to follow a downward trend across our banking businesses, reaching record lows this quarter. This improvement was driven by positive payment behavior, lower risk levels, and higher write-offs, mainly in the SME-Pyme segment and Mibanco. The aforementioned was partially offset by an increase in provisions of wholesale banking after a limited number of corporate clients advanced to higher stationed delinquency. In this scenario, Credicorp's structural cost of risk contracted for 0.54% to 0.22% quarter over quarter.
On a full-year basis, we have registered significant lower provision expenses in a context of better-than-expected economic activity, positive payment behaviors which reflect an uptick in client liquidity, a decrease in risk, and the loan mobilization level as loan expanded mainly to lower risk retail powers. In this context, its structural cost of risk dropped from 5.12% to 0.89%. The level of structural allowances for loan losses at year end was equivalent to 6.4% of Credicorp's loan portfolio. In our government program portfolio, grace periods expire, 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 arrears are being recovered through estate warranties. Next slide, please. Credicorp'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 at 4.04%.
On a full-year term, net interest income expanded 9.20% fueled by the structural loan growth and 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 bolstered by an uptick in consumption through POS transactions with debit card in establishment. It is known that growth in consumption was driven by the small establishment will generate higher fees.
Finally, net gains and FX transaction increased 12.8% quarter over quarter in a context of high FX volatility, 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 increase in fee income due to higher transactional activity. Income closed the year above the pandemic levels despite recent regulatory restrictions. Next slide, please.
On a 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 microfinance and insurance pension line of businesses. This evolution offsets higher expenses at BCP stand-alone related to digital transformation. At Mibanco, operating income grew 19% in 2021, while operating expenses grew 5%.
Expenses remain under control, which reflects, in large part, the inroads that Mibanco has made and consolidated with hybrid business model. Pacifico's income registered growth this year after it won two additional tranches of the CISCO 5 tender for AFP-related couriers. The premium rate for this tender was higher than the rate -- and the Cisco 4, for the previous annual program. If we exclude our investments in disruptive initiatives, such as Yape and the portfolio Krealo, from the calculation base, the efficiency ratio stands at 44.3%, which is 160 basis points below the reported ratio.
Next slide, please. Our ROE stood at pre-pandemic level at semester end. We are at the top end of a challenging two-year period. which was marked by a sanitary crisis and episodes of potential instability.
We managed the risk and arose by leveraging our strong balance sheet and took advantage of opportunities to emerge with a strengthened competitive position. First, we decided to accelerate digital investments through the crisis and have leverage capabilities to penetrate new segments as we consolidate our market leadership. Over the past two years, our structural loan portfolio grew 11.5%. During the same period, we reported noteworthy 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 will provide a handing cost advantage as we move into a cycle of interest rate hikes. Second, we steer our loan portfolio toward a better risk profile while enhancing our underwriting models and shifting some products from revolving to nonrevolving facilities in both the SME and consumer segments. Third, we optimized fee income by leveraging price intelligence and focusing on building transaction capabilities. To Yape alone, the number of multi transactions rose by 20-fold in the last two years.
Four, although our insurance business was severely hit, we lay the foundations to increase profitability by strengthening our digital and bancassurance channel, developing business at the base of the pyramid, and refining our pricing and risk models. Finally, we accelerated investments and revisited our operating models to improve efficiency. Mibanco's consolidation of this hybrid model is already showing tangible results in this front. We will capitalize on our fortified competitive positions to 2022 and beyond.
Next slide, please. Against this backdrop, we shared the following expectations for 2022: Assuming that the current COVID-19 wave will have a limited and transitory impact on economic activity, we expect Peru GDP to grow around 2.5%. In terms of our loan portfolio, we expect lending activity to follow dynamics similar to those in co-lending. In this context, we expect our structural loan portfolio, which excludes Reactiva loans, to grow between 8% and 10% in average daily balances.
The evolution in total loans will depend on the pace at which the Reactiva balances are amortized. Regarding NIM, we expect interest rates to continue their upward trajectory as our loan book shift more toward retail. Accordingly, we expect NIM to situate between 4.3% and 4.6%. We anticipate that the cost of risk will fluctuate between 0.8% and 1.1% as positive payment trends continue and we leverage our enhanced intelligence capabilities.
In 2022, we will continue to invest heavily in our disrupted ecosystem. As such, we expect our efficiency ratio to stand between 45% and 48%. It is important to note that we estimate that these rapid expenses will impact the efficiency ratio by around 300 basis points. We expect our insurance underwriting result to end the year slightly above the pandemic levels provided that no additional material impact from the sanitary situation arise.
As a result, we expect our ROE to be situated between 15.5% and 17.5%. These improved prospects for profitability will allow us to continue doubling down on transformation investments and increased dividend payouts. With this comment, I would like to start the Q&A session.
Questions & Answers:
Operator
Thank you very much. [Operator instructions] And the first question today will come from Ernesto Gabilondo with Bank of America. Please go ahead.
Ernesto Gabilondo -- Bank of America Merrill Lynch -- Analyst
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 would like to understand the potential drivers behind the NIM expansion for this year. Like higher rates or how much additional hikes are you expecting? I don't know, an increased exposure from retail loans and Mibanco? And maybe some amortizations in directive alone. So anything that you can give us on NIM expectations, I think, would be helpful.
Gianfranco Ferrari -- Chief Executive Officer
Sorry. I was on mute. It's Gianfranco. Good morning.
Many systems have very useful – yes. Go ahead, Cesar. I'll give some closing remarks again.
Cesar Rios -- Chief Financial Officer
Thank you, Gianfranco. I think as I mentioned previously, I think we are going to have several forces at the same time. We are going to have a backdrop of increased interest rate. We have had a significant increase during 2021, 275 basis points.
And we expect that this trend to continue probably with additional 100 -- 100 additional basis points through the year. This is going to be translated gradually to higher nominal interest rates in our portfolio, coupled with an increase in cost of funds, particularly in Mibanco. As a result, we expect an increase in unit margin driven by this underlying trends and a gradual transition to more retail portfolio. We need to consider also that during 2020 and 2021, we have been originated lower risk, lower yield loans.
So we need to gradually increase the rates, reflecting a more normal portfolio through the 2022.
Ernesto Gabilondo -- Bank of America Merrill Lynch -- Analyst
And just my second question is on operating expenses. As you mentioned in your remarks, you're expecting to do digital investment 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? And considering next years, when do you expect this opex growth to normalize? I don't know if it would be reasonable to expect the opex growth more in line inflation in the next years.
Cesar Rios -- Chief Financial Officer
I think first, it's important to understand the dynamics of the 2022. I would like to emphasize that in 2022, we have the impact of significant higher operating volumes that carries additional costs. We expect this continue -- this trend to continue. In 2022, we also normalize the variable compensation that was severely cut during 2020.
And this trend is going to continue based on top line and bottom-line results in our main businesses. And the other factor that I think I'm going to make that our expenses are going to grow certainly more than inflation is that we are accompanying the increase in volumes in different channels with a significant additional expenses in transformation investments. So as I mentioned previously, the impact in cost to income is going to almost double considering the marginal 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 experience still a growth in expenses above inflation.
Ernesto Gabilondo -- Bank of America Merrill Lynch -- Analyst
And this -- well, I understand perfectly this year, but thinking more about the medium term, like for the next year, should we continue to have the same pace of growth or next year should be, again, going back to grow in line with inflation?
Cesar Rios -- Chief Financial Officer
First, I think our expenses shouldn't grow in line with expansion, but in line with the volume of business and operational efficiencies. We expect to have significant additional investments in transformation initiatives for at least two, three years. And after that, we are going to see less impact of these additional expenses and more clearly the positive impact of the income that these investments bring to the book.
Ernesto Gabilondo -- Bank of America Merrill Lynch -- Analyst
OK. Perfect. Just --
Gianfranco Ferrari -- Chief Executive Officer
Ernesto, maybe just to add on what Cesar mentioned, I would say that we have to like separate in two the expenses account. One is the one that is related to growth. And as Cesar mentioned before, the number of transactions and activity that we have seen through 2021, I would say that it's going to keep up. This is part of the strategy we started, I don't know, five, seven years ago, the war on cash strategy, that has grown a lot because of -- for obvious reasons, which is the pandemic.
That trend should continue. But obviously, at a growth expense that growth in accessory is highly correlated to the growth in fee income and -- fee income basically. The other part is the investments we're doing on the digital transformation and on the new ventures. And even though we're -- I believe we have an aggressive plan there, which we will share with you in March, obviously, that's a stage-gated type of investment.
As far as the investments go well, we will keep investing. Obviously, they don't perform the way we expect them to perform, we will reduce investment or even shut down those ventures.
Ernesto Gabilondo -- Bank of America Merrill Lynch -- Analyst
Thank you, Gianfranco.
Operator
Thank you. And the next question will come from Jason Mollin with Scotiabank. Please go ahead.
Jason Mollin -- Scotiabank -- Analyst
Hello. My question really is a follow-up on part of the first questions, which is on expenses and efficiency. Where -- and in particular, the digital transformation and the hybrid model, I mean how are you viewing the ability of the bank and the group to really bring, let's call it, the nonphysical network expenses, how to incorporate those even more? And how we should see -- like is that really going to be still negatively impacting for multiyears this investment in digital transformation? And if you can repeat the medium- and long-term efficiency ratio targets? Thank you.
Cesar Rios -- Chief Financial Officer
Sure. Francesca, could you answer the part on the digital investments? I'll complement the --
Jason Mollin -- Scotiabank -- Analyst
Yes. I mean, maybe you could give a sense of -- like in 2022 and 2023, are we going to see similar levels 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?
Francesca Raffo -- Chief Innovation Officer
I'll share the view in terms of our strategic intent and then Cesar will tell you -- complement me in terms of the -- as a cost. The way we are viewing our transformation toward nonphysical channel is by expanding our customer base in the retail and in the 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 the next product sale related to cross-selling and a good solid relationship. Therefore, this is a multiyear journey, and we are beginning to analyze and to control the multichannel kind of view.
So we start directing customers toward only nonphysical channels and to have a better service level around that.
Gianfranco Ferrari -- Chief Executive Officer
Maybe just to complement that, I'll go into the details, Jason, I completely accept our -- that we achieved is what was going on in Mibanco. In Mibanco, we are in the process of deploying a hybrid model. And the last quarter, we got record level in terms of sales month by month, with roughly 18% of less sales force. And that's because we are leveraging on the digital investments we've done in the past at Mibanco.
So that's a kind of example of what we're trying to achieve. Obviously, some investments that are more clear in terms of the results or short-term results where there are orders that would be a longer channel -- that are being done with a longer-term view. Go ahead, [Inaudible].
Diego Cavero -- Head of Universal Banking
Maybe I can complement Gianfranco, I'm Diego Cavero. We have been very successful in [Inaudible] in migrating -- actually fueled by the COVID-19 reality in migrating transactions from the physical to the digital networks, OK? So transactions in the branches, they used to be 7% of the total transactions of BCP, the monetary transactions. As of today, they are only 2%. And the number has reduced from 7 million or something to 4-point-something million of transactions -- monetary transactions.
While at the same time, the digital channels have blown out now, that has grown more than two times. So now we have to work actually in continuing this migration, not only in transaction, but also in sales and services. And that will be much more efficient in the future.
Jason Mollin -- Scotiabank -- Analyst
Thank you. Very much.
Cesar Rios -- Chief Financial Officer
OK.
Operator
Thank you. And the next question will be from Tito Labarta with Goldman Sachs. Please go ahead.
Tito Labarta -- Goldman Sachs -- Analyst
Hi. Good morning. Thank you for taking my question. My first question is on your cost of risk.
You showed guidance between 0.8% to 1.1%, increasing a bit from 2021, but 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 this to normalize back closer to the historical levels, closer to 1.8% to 2%? So if you can give some more color on that? Thank you.
Cesar Rios -- Chief Financial Officer
Reynaldo, can you answer that?
Reynaldo Llosa -- Chief Risk Officer
Yes. Tito, regarding this year's expectations, I would say it's a mix of the high level of provisions we made in 2020. And also the 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. And starting 2023, getting close to pre-COVID levels. That's our expectation as of today.
Tito Labarta -- Goldman Sachs -- Analyst
OK. Just one follow-up there. On the coverage ratio, do you see that -- it's around 115%. Would -- do you think that would come down a bit this year or kind of keep it around those levels?
Cesar Rios -- Chief Financial Officer
Well, we -- as in all metrics, we have a different approach in terms of the structural numbers and the total numbers. This 115% includes the government loans and those numbers are probably going to be impacted. But there we have, as you know, a big coverage of state guarantees, so we don't look 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'll look comfortable with that number. It might go down a little bit in 2022, but it's still at pretty good and sound levels.
Tito Labarta -- Goldman Sachs -- Analyst
OK. That's very helpful. And then my second question is on your digital initiatives, particularly, Yape. You show over 8 million clients, a little bit more than half are active.
Can you just provide maybe some more color on your expectations for how does that client base grow from here? What are -- what percentage of those clients are BCP clients versus non-BCP clients? And if you have any other metrics that you can give, like what the average revenue per client, any loans from Yape deposits? Any unit economics or numbers that you can help us quantify how Yape should grow?
Gianfranco Ferrari -- Chief Executive Officer
Francesca, can you take that one?
Francesca Raffo -- Chief Innovation Officer
Yes. Tito, 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 pop-ups, which is pop-ups for cellphones. And we are going to begin distributing for the lower end of the segment that is highly transactional. We're also moving toward 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 access to good quality pounds for a lower-end segment of the retail market.
Tito Labarta -- Goldman Sachs -- Analyst
All right. And anything that you can give on like revenues per client or loans per client or deposits and how you think that would evolve?
Francesca Raffo -- Chief Innovation Officer
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 and growing the customer base, and having a lot of transactions, having active customers. So during 2022, we will be seeing those metrics.
Tito Labarta -- Goldman Sachs -- Analyst
OK. Thank you very much.
Gianfranco Ferrari -- Chief Executive Officer
Tito, actually -- Tito, this is Gianfranco. Actually, we are organizing a city digital day, I believe it's March 15 in New York, so more than -- all of you more than invited to attend, and we will be much more specific on other issues also, but obviously, on Yape.
Tito Labarta -- Goldman Sachs -- Analyst
Great. Thanks, Gianfranco. I hope to be there.
Operator
Thank you. And the next question will be from Olavo Arthuzo with UBS. Please go ahead.
Olavo Arthuzo -- UBS -- Analyst
Good morning, everybody. Thank you for taking my question. OK. Actually, I wanted to hear from you about the strategy with the subsidiaries of the group.
I mean, after 2020, the ROE of stand-alone basically returned to the 20s we show while some operations like Bolivia, Pacifico, Credicorp Capital are still lagging behind with the profitability. Well, well below the cost of capital of this operation. So I basically wanted to understand what is the bank's strategy for these subsidiaries? I mean, what is the plan to foster this operation for the next few years? Or is in the queues of an M&A, I don't know if this is in the case -- is in the bank's pipeline, a potential divestment?
Gianfranco Ferrari -- Chief Executive Officer
Olavo, sorry, this is Gianfranco. We didn't get the first part of your statement/question. Could you repeat that one? Because at least I didn't get it.
Olavo Arthuzo -- UBS -- Analyst
Yes. No problem. I just wanted to know -- to have some more color about the expectations of yours for the next years about the subsidiary of the group, like BCP Bolivia, Pacifico because they are delivering a profitability well below the cost of capital of these operations. So I wanted to hear from you what is basically at your plans for the next few years to show potential rebound of these operations? Or I don't know if this is the case, but if it is in the bank pipeline, a potential divestment for this operation? I don't know if you understood me clear, I was --
Gianfranco Ferrari -- Chief Executive Officer
Yes. Yes. Thank you. That was clearer.
I'll take that one. Actually, what we foresee is that all of our subsidiaries will be above cost of capital by year end this year with the exception of obviously the digital ventures and Bolivia. Bolivia as you -- I don't know how much aware you are about Bolivia, but Bolivia, the business environment is quite complicated, and the banking environment specifically is quite complicated. I would say, much more complicated than the business environment in general.
So having said that, we have 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 trends to coming to Bolivia. And obviously, in that -- and friendly environment is quite complicated to do a transaction, a merger, an acquisition or sell the subsidiary because of environment.
So that's where we stand today.
Olavo Arthuzo -- UBS -- Analyst
OK. Very, very clear. And now if I may pose my second question. It's very quick.
It's about the payout ratio for this year. So given the profitability balance in the last year's expectations implied in the guidance for this year, what could we expect about these -- the distribution for this year?
Gianfranco Ferrari -- Chief Executive Officer
Are you talking about the dividends? Sorry, but the connection is quite bad.
Olavo Arthuzo -- UBS -- Analyst
Yes. Sorry. It could be from my side. Gianfranco, I'll be very, very quick.
It's about the payout ratio for this year. You showed [Inaudible] I mean -- OK.
Gianfranco Ferrari -- Chief Executive Officer
Yes. No. I got it. So we cannot provide the payout ratio as of today.
What we've told the market always and this is the position 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, if there are no important M&A transactions inside, what we do is pay dividend. The dividend announcement should be stated by the board. I really don't remember if it's February or April.
Cesar, you can help me with that?
Cesar Rios -- Chief Financial Officer
April.
Gianfranco Ferrari -- Chief Executive Officer
Sorry, in April. Then we will make it public. But I would think that what is important is the philosophy and the solution we have around dividend and payout ratio.
Olavo Arthuzo -- UBS -- Analyst
Thank you very much, Gianfranco. Very clear.
Operator
Thank you. And the next question will be from Andres Soto with Santander. Please go ahead.
Andres Soto -- Santander -- Analyst
Good morning to all, and thank you for the opportunity to ask questions. Maybe a follow-up on that last response. Gianfranco, you said your dividend payout will depend on the capital levels at the subsidiary levels and you will -- are trying to distribute any excess of that. What are those minimum thresholds that you have set for your subsidiaries for dividend -- for the purpose of distributing dividends to parent company and from the parent company to shareholders?
Gianfranco Ferrari -- Chief Executive Officer
Cesar, can you take that one, please?
Cesar Rios -- Chief Financial Officer
Yes. Yes. I think the main restrictions came from the banks. In the case of BCP is a core equity Tier 1 of around 11% at the minimum point that is the declaration of the dividend.
In the case of Mibanco, Peru and Mibanco Colombia is 15%, and it's the same rules. And for this year, we are maintaining the profits in some vehicles, in particular, like Pacifico, who have endured some losses. And that's the basic rules. And according to what Gianfranco mentioned, we reserve funds for M&A expectations, the Krealo project, and the rest is going to be paid as dividends.
And our expectation is to have a sustainable and increased dividend declared at the beginning of the year.
Andres Soto -- Santander -- Analyst
And can you remind us what is the size of that? You have said a rainy day fund and also for M&A purposes? How much is that? And the market used to be [Inaudible] level?
Cesar Rios -- Chief Financial Officer
Yes. Yes. we have -- At this point, we have in liquid funds, all the amount that we raised from the bond issue during the crisis. This is the $500 million and above that we are going to maintain some additional excess liquidity.
But I will say, a relatively small amount, not in the vicinity of the PEN 2 billion 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 a reserve and that one we are considering some liability management operations down the road.
Andres Soto -- Santander -- Analyst
Perfect. Thank you so much, Cesar.
Operator
Thank you. The next question will be from Jorg Friedemann from Citi. Please go ahead.
Jorg Friedemann -- Citi -- Analyst
Thank you very much for taking my question. I have two questions. The first one related to the prospects for your credit growth this year. You are highlighting in the presentation that you expect loan growth in the structural portfolio to be at about 8% to 10%, but with a real GDP of only 2.5%.
Last year, GDP grew 13%, and of course, you departed from a 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 would be the drivers for that and whether competition might get more intense or not?
Gianfranco Ferrari -- Chief Executive Officer
Maybe, Diego, you can you take that one on BCP and I'll complement Mibanco.
Diego Cavero -- Head of Universal Banking
Yes. Yes. For sure. Actually, we have to separate the loan portfolio when you include the Reactiva government-backed portfolio, no? We expect that that portfolio, including Reactiva, is not going to grow that much and the opportunity is to substitute those kinds -- those loans that are going to be repaid this year.
So we see a great opportunity in the Prima segment, especially, that is going -- that portfolio is going to be amortized. And we are going to substitute a relevant part of that portfolio with higher margins. And also, we expect that -- also we expect a significant -- a strong demand in the mortgages and in the consumer segment because we are looking -- what we are seeing is that levels are getting up to pre-COVID levels in terms of the size of portfolio. So most of the growth comes from recovery to pre-COVID levels, but a relevant part comes from substituting the Reactiva portfolio.
Gianfranco Ferrari -- Chief Executive Officer
Just to complement Diego's comment. As Mibanco as I mentioned before, the last quarter, no, there's a seasonality at Mibanco, but -- last quarter was a record quarter. It started as a record quarter. We expect the microfinance and SME businesses to keep growing.
That was -- those were the segments that were hit the most along COVID crisis. We are seeing a lot of activity there. So that will complement also what Diego just mentioned.
Jorg Friedemann -- Citi -- Analyst
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. I'm not sure if you have an ambition of having a bigger participation of Mibanco in the future?
Gianfranco Ferrari -- Chief Executive Officer
The answer is yes, but it's in the long run. We strongly believe that one of the main avenues for growth at Credicorp 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 happy with the results of that operation. So we may be quite active in other countries in LatAm in the upcoming years.
Jorg Friedemann -- Citi -- Analyst
Perfect. 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 2022?
Gianfranco Ferrari -- Chief Executive Officer
Cesar?
Cesar Rios -- Chief Financial Officer
Yes. As you mentioned, we have had a lot of volatility during last year. At some point, we reached PEN 4.14 per dollar at year end, we were around PEN 4. Now, with all the volatility we are in PEN 3.84.
We think that we are going to be around these figures that are below that was going to -- was our expectation only a couple of months ago. But I think -- at this moment, we are -- to have two counterforces, the political risk with upward pressure, and a significant balance surplus in the commercial front as a positive and downward pressure. The combination of both suggests us that we are going to be around these levels.
Jorg Friedemann -- Citi -- Analyst
Sorry, which levels? I missed that part.
Cesar Rios -- Chief Financial Officer
We are now at PEN 3.84, in this vicinity.
Jorg Friedemann -- Citi -- Analyst
OK. Perfect. Thank you.
Operator
Thank you. The next question will come from Alonso Garcia with Credit Suisse. Please go ahead.
Alonso Garcia -- Credit Suisse -- Analyst
Hi. Good morning, everyone. Thank you for taking my question. It's actually a follow-up on the margin side.
First, I mean, I just wanted to -- if you could remind us of your sensitivity to every 100 basis points increase in the Peruvian interest rate? And second, I mean, you mentioned in the press release that you see some pricing pressure in the quarter, affecting especially the wholesale portfolio. So I just wanted to hear from you if you continue to see that pressure on pricing for 2022 in the wholesale segment. And if you see -- and you are starting to see this kind of pressure also in other segments of the portfolio.
Gianfranco Ferrari -- Chief Executive Officer
Cesar?
Cesar Rios -- Chief Financial Officer
Maybe I can take that one. Yes, we are [Inaudible] a lot of competition. Sorry.
Diego Cavero -- Head of Universal Banking
[Inaudible] just one on the [Inaudible].
Cesar Rios -- Chief Financial Officer
[Inaudible] ideas, and after that you can complement me. Yes, we have a sensibility of the portfolio that implies around several basis points in NIM. Let's say, if we increase the rates in a parallel movement, it's a little bit below PEN 200 million at this point, assuming a parallel move in the [Inaudible]. And as you imagine, this is an accumulative effect over the years.
That's the sensibility of our portfolio. We are seeing [Inaudible] translation in the -- this rates in the wholesale portfolio with pressures, but we are seeing the translation of higher interest rate. And we foresee some delay in the translation on the higher rates of the consumer portfolio, the revolving lines that is going to happen, but with some delay. That's what traditionally happens with our portfolio.
The decrease is with some delay and increase is also with some delays in the higher rates and revolving lines. So through the year, we are going to be the driver translation of the increase in interest rate that we are seeing right now.
Alonso Garcia -- Credit Suisse -- Analyst
Understood. So just to clarify, seven basis points. Plus seven basis points for every 100 basis points increase, correct?
Cesar Rios -- Chief Financial Officer
In NIM. Yes, the sensitivity in NIM. Basis points in NIM.
Alonso Garcia -- Credit Suisse -- Analyst
Yes. Positive for every 100 basis points increase?
Gianfranco Ferrari -- Chief Executive Officer
Yes. Parallel movements.
Alonso Garcia -- Credit Suisse -- Analyst
OK. Thank you.
Operator
Thank you. And the next question will be from Yuri Fernandes with J.P. Morgan. Please go ahead.
Yuri Fernandes -- J.P. Morgan -- Analyst
Hello. Good morning, and thank you for the pretense of asking the questions. I have a follow-up on margins on this repricing topic. If you can provide some color on Reactiva for the guys that are buying either way which should move the price to the normal average, like to historical pre-COVID levels, 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 you are guiding for 20 to 50 bps in expansion this year.
And basically, my question is regarding 2023, right? If we should expect the earnings to keep evolving 20 to 50 bps every year so maybe by 2023, 2024, we may see margins back again to those 5%, 5.5% levels? And I guess, with pricing here on Reactiva, it's important to understand that space, right, if you'll be able to reach that faster or it will take some more time? And I can ask another question later.
Gianfranco Ferrari -- Chief Executive Officer
Sure. I'll take that one. Yuri, great question because it helps us in a follow-up on what we mentioned in the last call. We've already seen -- actually, I believe, it's close to 25% of what we disbursed in the Reactiva has already been repaid.
That's one important piece of information. The other one is that specifically -- especially at Mibanco, where the difference in rates -- of the field rates as compared to the traditional loan rates were important, was large, we've seen already a lot of activity, as I mentioned in the last quarter. And we haven't seen any negative impact in terms of the willingness of those clients to get their new loans at market conditions. So we really do not expect any noise going forward.
And obviously, the further we move in the year, the more of the Reactiva loans will be repaid and we should be back into normal by year end. And maybe, I don't know, anything between 25% to 35% of the total Reactiva loans have been refinanced and that's -- that will trickle down as we move forward. We -- to the second part of your question, we do expect NIMs to go back to normal because of the reasons as Cesar mentioned before, and I'll be a little bit more specific in my final remarks.
Yuri Fernandes -- J.P. Morgan -- Analyst
No. It's very clear.
Cesar Rios -- Chief Financial Officer
Yes. Sorry. To complement what Gianfranco -- it's exactly what he says. The only thing that I want to remember you is that the cumulative effect of the increase in rates over time because you reprice the portfolio gradually.
So we will see an increase in top-line interest rates for a couple of years very clearly -- of the portfolio reprices.
Yuri Fernandes -- J.P. Morgan -- Analyst
That's pretty clear, Cesar and Gianfranco. Super clear. Can I just ask on fees? We discussed expenses, NII, margins, but fees are missing. So my question is should we expect fees to grow more or less regarding similar to your loan growth? Just checking the pace of fee 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 in 2022?
Gianfranco Ferrari -- Chief Executive Officer
Go ahead, Cesar.
Cesar Rios -- Chief Financial Officer
Yes. I would like to remember that during 2020, we have almost 114 or something based off severely restricted level of activity in the country. So the transactional volumes dropped significantly. In this regard, the figures that you see in 2021 are a reflection of the recovery of these volumes of activity and transactional, coupled with increased capabilities, the distribution capabilities we have developed.
So -- we are not going to see this kind of additional rebounds down the road. But we see that the fee income probably are going to grow a little bit faster than before the pandemic, and which were very low -- at very low single digits. Propelled that -- our increased transactional capabilities, but not a repetition of the 2021 that is a rebound from exceptionally low levels at the beginning of 2020.
Yuri Fernandes -- J.P. Morgan -- Analyst
Perfect. Thank you very much.
Operator
Thank you. And the next question will come from Carlos Gomez with HSBC New York. Please go ahead.
Carlos Gomez -- HSBC -- Analyst
Hello. Good morning, and thank you for taking my question. You referred to the reduction in fees from asset management because of outflows from mutual funds in Peru and the fact that some of this money has gone to offshore account. 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 would 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 are getting to the end and 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, you have talked about this macro stability and muddling through is a speedier scenario for the next three years. Thank you so much.
Gianfranco Ferrari -- Chief Executive Officer
Carlos, I'll start with the second part of your -- your second question. And actually, I'm surprised you're making that question because we're in a very stable political and macroeconomic country. Actually, the level of uncertainty is very high. We have -- as a matter of fact, we don't have a prime minister as we speak today.
There's been a lot of noise. There is no clarity whatsoever on the next -- what the next cabinet is going to be, and therefore, what the -- the road map of the government going forward, it's going to be, which is a pity because as a country on the macro side that Cesar mentioned at the beginning of the presentation, we are having tailwinds. The level of commodity prices, specifically copper, is at -- basically at record levels. We are at record levels of production.
Therefore, the -- both the fiscal deficit, the commercial balance, and so on have been very positive last year. So we could be growing instead of 2.5% this year at maybe double that number. And that is more important. And I made this comment before -- or is more important, it's about 2.5% of GDP growth, the level of poverty is not reduced, whereas at 5% or more, the level of poverty is reduced.
Therefore, the social impact of that growth is much more relevant. I don't know if I got the second part of your question. Sorry for not being more specific, but that's where we stand today. Maybe, Cesar, you can answer the first one -- first part, sorry?
Cesar Rios -- Chief Financial Officer
Yes. Yes. As you mentioned, Carlos, we have a severe impact during the election period, and we lost almost 50% of the mutual funds in Peru. This is more than $2 billion equivalent of funds that were withdrawn.
And we have such significant part of this in our international platforms. But we have exchanged 100 basis point fees for a quarter of that in a nonprofitary distribution fees that we can collect in the international platform. So we have an impact in this regard, and I will also wanted to highlight that at the beginning of the process, the P&L impact was muted because we charge early withdrawal fees or low fees. But down the road, we have a less profitable base that we need to rebuild.
But the impact has been relevant.
Carlos Gomez -- HSBC -- Analyst
And has the outflow continued into this year?
Gianfranco Ferrari -- Chief Executive Officer
No.
Cesar Rios -- Chief Financial Officer
No. it's a -- we monitor carefully the outflows from different funds, the transference from different vehicles to outside. And in the last more than a half, I say the fees are pretty small or even positive in specific weeks.
Carlos Gomez -- HSBC -- Analyst
Thank you. And if I can follow up on the politics. Do you -- again, do you expect this administration to continue for the next three years? And do you expect any legislative changes that could affect the bank? Or do you just don't know?
Gianfranco Ferrari -- Chief Executive Officer
Unfortunately, I do not have a crystal ball.
Carlos Gomez -- HSBC -- Analyst
[Inaudible]. Thank you so much.
Operator
The next question will be from Sergey Dubin with Harding Loevner. Please go ahead.
Sergey Dubin -- Harding Loevner LP -- Analyst
Good morning. Thanks for the call. I have a question and just confirms on facts. So the first fact I want to confirm is what is the percentage of Reactiva loans as a percentage of your total loans today?
Gianfranco Ferrari -- Chief Executive Officer
OK. It's around 13%, Sergey.
Sergey Dubin -- Harding Loevner LP -- Analyst
OK. So it's 13% and you -- yes. You expect that to decline to roughly what level by the end of 2022?
Gianfranco Ferrari -- Chief Executive Officer
That should be around maybe -- I don't know, Cesar, if you have the exact number? The expectations? That should be, maybe to 8%?
Cesar Rios -- Chief Financial Officer
We don't have a specific program. We should have a reduction of around half. Only a small precision. 13% is Mibanco and BCP is slightly higher.
Between 14% and 18% depending on retail or wholesale.
Sergey Dubin -- Harding Loevner LP -- Analyst
Yeah. Yeah. I'm talking about the consolidated level right now. So roughly speaking, from 13% to 8%, correct?
Gianfranco Ferrari -- Chief Executive Officer
Yes. Roughly. Yes. Just to be very -- sorry, just to be very specific, unless there is a change in the conditions by the government.
As of today, that's the expectation. Yes.
Sergey Dubin -- Harding Loevner LP -- Analyst
OK. Yes. OK. Got it.
So given that and given all that you talked about with respect to the rates already, so if I look at the chart on Page 5 that you showed, 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 to 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, cash deposits, right? And a big chunk of your loan book is corporate loans, which should reprice fairly quickly. So why don't you have higher interest rate sensitivity? And why don't you have higher NIM expansion?
Cesar Rios -- Chief Financial Officer
OK. Probably I can take that. I think two different stories. In the case of Mibanco, most of the funding of Mibanco is a wholesale funding.
And the part that is retail funding has also a relatively high sensibility. So the expansion in Mibanco is more irate, and this is part of the answer. In the case of BCP, we have 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 dollars at BCP, as you can remember, around 40%. Dollar part is in solid. I mean, the soles portfolio, you have a duration of 2.2 years. So we are going to see the full impact in 2023.
And I don't know if I'm clear. You have Mibanco has less sensibility due to the funding structure. In the case of BCP, you have dollar portfolio that is not going to have 200 to 100 basis points increase, and you have the soles portfolio, and the soles portfolio has a duration of 2.2%. So gradually, we are going to pass through this interest rate and it's going to be a lot in the high rates and revolving portfolios in which you don't have the rate gradually, but in turn quarter by quarter and gradually over time.
I don't know if that helps.
Sergey Dubin -- Harding Loevner LP -- Analyst
Yes. That's actually a very good insight. And I wish you articulated that upfront because I don't think it was very clear, but now it is clear. Just one follow-up question.
So when you talked about dollar portfolio and BCP, first of all, what's the duration of that dollar portfolio? And second, basically, that portfolio is repricing not with soles rates, right, but with U.S. -- what is it -- like what kind of a benchmark? Is that LIBOR? Or what is it tied to? And how does it reprice?
Cesar Rios -- Chief Financial Officer
OK. The duration of the dollar portfolio is shorter. Most of the rates are fixed, but are fixed at the beginning based on life of reference. That is going to be great to [Inaudible] as we speak.
Sergey Dubin -- Harding Loevner LP -- Analyst
So it is tied to LIBOR, right? And it's shorter duration.
Cesar Rios -- Chief Financial Officer
Yes.
Sergey Dubin -- Harding Loevner LP -- Analyst
OK. Understand. That's very clear now. Thank you.
Operator
Thank you. And the next question will be from Alonso Aramburu with BTG. Please go ahead.
Alonso Aramburu -- BTG Pactual -- Analyst
Hi. Good morning. Thank you for the call. Yes.
I wanted to follow up on expenses. It seems like the guidance on efficiency implies somewhere around double-digit growth of expenses. You had mentioned last year some initiatives like going to a hybrid labor force with reduction of office space and reduction of the physical network as well. I mean, where you stand -- would you stand in those initiatives? And are you confident those to help on the efficiency side this year?
Gianfranco Ferrari -- Chief Executive Officer
Cesar, can you take it? Or Diego. Go ahead, Cesar.
Cesar Rios -- Chief Financial Officer
OK. As we mentioned previously, we are working in the reduction of the footprint. But when we reduce the footprint, as we mentioned before, we have at least three basic components. One is, be strictly linked to the basic infrastructure, and this is already taken out directly.
Another third approximately comes from central services that goes with the client. And at the beginning, what we are doing is very careful not to reducing selling capabilities. So we redistribute in the surrounding areas with a lot of models and monitor that we don't lose a distribution capability. So this is a factor -- and as we mentioned before, the traditional expenses are growing slowly, but in line with transactional activity.
We are spending more, it might be significantly more. And the other factor that Gianfranco also explained clearly was the transformational ones that we need to see in another part.
Alonso Aramburu -- BTG Pactual -- Analyst
OK. So the net benefit from these reductions of office space and physical footprint is not significant, at least in the short term? Is that fair?
Gianfranco Ferrari -- Chief Executive Officer
Yes. That's correct.
Alonso Aramburu -- BTG Pactual -- Analyst
And can I ask a second question?
Gianfranco Ferrari -- Chief Executive Officer
It is, Alonso.
Alonso Aramburu -- BTG Pactual -- Analyst
OK. Can I ask a second question about Yape? I believe you were planning on offering micro loans. Can you comment on where you stand in that plan?
Gianfranco Ferrari -- Chief Executive Officer
Francesca?
Francesca Raffo -- Chief Innovation Officer
Sorry. Can you repeat the question on micro loans?
Alonso Aramburu -- BTG Pactual -- Analyst
Yes. Through Yape.
Francesca Raffo -- Chief Innovation Officer
OK. So what we're planning to do for the couple -- next two quarters is to begin using BCP's analytical models and use Yape 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 this type of panel and to begin to understand the business model around Yape as a distributed channel.
Alonso Aramburu -- BTG Pactual -- Analyst
OK. Thank you.
Operator
Ladies and gentlemen, this concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Gianfranco Ferrari, chief executive officer, for closing remarks.
Gianfranco Ferrari -- Chief Executive Officer
Thank you. As predicted in previous meetings and calls, at the end of 2021, we consolidated our return to pre-pandemic profitability levels after two years of unprecedent challenges. We're in the process of closing this chapter in a firm belief that we have adequately managed risk and fine-tuned our capacities to seize potential growth and profitability in all of our businesses. I am convinced that by following our purpose and reaffirming our strategy with a clear focus on digital transformation and sustainability, we have effectively steered our business through choppy waters.
During COVID, the certainty will continue on the sanitary macroeconomic and political trends, and we will continue to manage it as adeptly as we have in the past. We said there's one point that we mustn't lose sight of. Our fundamentals remain strong. As you have seen in our guidance, we see 2022 as a transitional year, which cost of risk will remain low in comparison to pre-COVID levels will gear back to normal by 2023.
During this transition, we expect NIM to recover on several reasons. First, an increase in reference rates in line with the Central Bank brands worldwide. Also, a reduction in government-sponsored loans, and finally, an increase in resales and local currency loans. In the profitability level shown in the last two quarters of 2021, we expect to maintain a sustained ROE in the high teens in the long run.
To make this possible, we will continue investing in digitalizing our traditional businesses and in disrupting ventures. At Credicorp, we see beyond our original content. We have also set our sights on the goal of [Inaudible] for consumer behavior and new technologies that offer unparalleled opportunities in the medium term to provide better products and services more efficiently, and more importantly, to drive financial inclusion in our underset market. At the onset of the pandemic, we were pleased to reaffirm our digital strategy and accelerated our investments on this front.
Over the past semester, we have closely examined Credicorp's innovation model and regroup its governance to strengthen our capacities to develop profit venture. If we combine the agility and technology of these ventures with the competitive advantages of our [Inaudible], we will strengthen Credicorp's leadership. We will share this journey and our new vision of innovation management at our Investor Digital Day, which we will be hosting on March 15 in New York and March 16 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 that after 26 years at BCP and the last four as CEO, I am thrilled and motivated to assume the leadership of Credicorp but I work hand in hand with our top-notch team. Our passion for innovation, focus on plannings, and most of all, our commitment to the companies where we operate with regular efforts to fulfill our partners, to contribute to improving life by accelerating the changes that our countries need. Thank you very much.
Operator
[Operator signoff]
Duration: 81 minutes
Call participants:
Cesar Rios -- Chief Financial Officer
Ernesto Gabilondo -- Bank of America Merrill Lynch -- Analyst
Gianfranco Ferrari -- Chief Executive Officer
Jason Mollin -- Scotiabank -- Analyst
Francesca Raffo -- Chief Innovation Officer
Diego Cavero -- Head of Universal Banking
Tito Labarta -- Goldman Sachs -- Analyst
Reynaldo Llosa -- Chief Risk Officer
Olavo Arthuzo -- UBS -- Analyst
Andres Soto -- Santander -- Analyst
Jorg Friedemann -- Citi -- Analyst
Alonso Garcia -- Credit Suisse -- Analyst
Yuri Fernandes -- J.P. Morgan -- Analyst
Carlos Gomez -- HSBC -- Analyst
Sergey Dubin -- Harding Loevner LP -- Analyst
Alonso Aramburu -- BTG Pactual -- Analyst
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