2017 ANNUAL REPORT

2017 ANNUAL REPORT

This document contains accurate and sufficient information with regard to the business

development of Banco de Comercio in 2017. Without prejudice to the liability of the issuer,

the undersigned take on responsibility for the contents hereof, pursuant to the legal

provisions in force.

Lima, March 2018

Aron Kizner Zamudio

General Manager

Luis Alberto Guevara Flores

Manager of the Management & Finance Division

TABLE OF CONTENTS

1. LETTER FROM THE CHAIRMAN OF THE BOARD ......................................................... 9

2. LETTER FROM THE GENERAL MANAGER ................................................................... 11

3. SENIOR & MANAGEMENT TEAMS .............................................................................. 13

4. INTERNATIONAL CONTEXT .............................................................................................. 14

4.1 WORLD ECONOMY ...................................................................................................... 14

4.2 LATIN AMERICAN ECONOMY ................................................................................... 16

5. DOMESTIC CONTEXT .......................................................................................................... 19

5.1 MACROECONOMIC VARIABLES .............................................................................. 19

5.2 BANKING SYSTEM ....................................................................................................... 23

6. BANCO DE COMERCIO ...................................................................................................... 28

6.1 LEGAL FRAMEWORK ................................................................................................. 28

6.2 DESCRIPTION OF THE HOLDING COMPANY BANCO DE COMERCIO IS

PART OF ..................................................................................................................................... 29

6.3 OPERATIONS & DEVELOPMENT OF THE BANK ................................................. 30

6.4 VISION & MISION .......................................................................................................... 31

7. MANAGEMENT REPORT .................................................................................................... 32

7.1 INCOME STATEMENT ................................................................................................. 32

7.2 TOTAL LOANS .............................................................................................................. 33

7.3 DEPOSITS ....................................................................................................................... 34

7.4 FINANCIAL INDICATORS ........................................................................................... 35

7.5 RISK CLASSIFCATION ................................................................................................ 36

8. BUSINESS UNITS ................................................................................................................. 37

8.1 ENTERPRISE BANKING .............................................................................................. 37

8.2 INSTITUTIONAL BANKING ......................................................................................... 38

8.3 INTERNACTIONAL BUSINESS & SPECIALIZED PRODUCTS ........................... 39

8.4 PERSONAL BANKING & INSTITUTIONAL AGREEMENTS ................................ 39

8.5 TREASURY ..................................................................................................................... 41

9. SUPPORT UNITS .................................................................................................................. 42

9.1 HUMAN RESOURCES MANAGEMENT ................................................................... 42

9.2 TECHNOLOGY DIVISION ............................................................................................ 44

9.3 OPERATIONS DIVISION .............................................................................................. 44

9.4 PROCESS MANAGEMENT ......................................................................................... 45

9.5 GLOBAL RISK MANAGEMENT ................................................................................. 46

9.6 MONEY LAUNDERING PREVENTION SYSTEM .................................................... 47

10. MISCELLANEOUS ............................................................................................................ 48

10.1 LISTING ON THE STOCK MARKET .......................................................................... 48

10.2 SIGNING OF THE AUDITED FINANCIAL STATEMENTS ..................................... 48

10.3 FINANCIAL INFORMATION PREPARATION & REVISION – NEW PEOPLE IN

CHARGE ..................................................................................................................................... 49

10.4 LEGAL, ADMINISTRATIVE, OR ARBITRARY PROCEDURES ........................... 49

10.5 CULTURE & SOCIAL RESPONSIBILITY ................................................................. 49

10.6 GOOD CORPORATE GOVERNMENT ...................................................................... 51

10.7 BRANCH & OFFICES NETWORK ............................................................................. 51

1. LETTER FROM THE CHAIRMAN OF THE BOARD

Dear friends,

In the name of the Board of Banco de Comercio, I am pleased to present you with our

2017 Annual Report, which summarizes the performance of our management and the

main achievements obtained over the year.

In an international economic context marked by greater dynamism in terms of global

GDP1, both within the advanced as well as the emerging economies — the latter due

to favorable international economic conditions and an increase in commodity prices—

the Peruvian economy recorded a

growth of 2.5%, led mainly by the

primary sector with 3.06%

(stimulated by the mining and

hydrocarbon sectors with 3.19%,

agriculture and livestock with

2.62%, and fishery with 4.67%).

The economic activity, in turn,

showed signs of recovery in

internal demand, due to increased

dynamism in public and private

investment (6.0% and 0.6%,

respectively). Furthermore, the

Peruvian capital market recorded

higher trade volumes at the Lima

Stock Exchange (BVL, by its

Spanish initials) (US$ 8,94 billion),

which led to an increase in the

general BVL index of 28.3%, which

shows that trust among investors

has been recovered.

As for the performance of the

sector, the banking system

recorded an annual growth in terms

of its direct loans of 4.3%,

increasing its rate of expansion

during the second semester, in line

with the recovery of internal

demand in the country. The growth in terms of loans was led by financing to corporate

1 In 2017, a 3.7% growth was obtained in the global economy; the highest growth rate since 2011.

enterprises (7.4%) and micro enterprises (7.9%); whereas consumer loans expanded

by 5.2%, as a result of a growth in loans and credit cards.

It should be mentioned that, as part of the new process to formulate the Strategic Plan

for the 2017-2019 horizon, the vision of the Bank changed to «to be recognized for

offering our clients the best experience in financial services, accompanying them in

every stage of their lives or development», in order to generate value in time, to boost

the business and to provide an innovative experience in our services, based on the

general strategic objectives in the long term.

In my opinion, this has been a year of consolidation for our Institution. At the beginning

of 2017, the risk rating companies Equilibrium SA and Pacific Credit Rating SAC

decided to raise the category assigned as an entity to Banco de Comercio from B to

B+, as well as the risk ratings of long-term deposits and subordinated bonds; we

obtained the renewal of the ASA certification for three years, which allows us to

maintain a lower capital requirement for operational risk of PEN 14.0 million; we

reached an annual net profit of PEN 33.9 million - the highest in the history of the Bank

(7.2% higher than the previous year) -, with higher growth in direct loans and market

share. In this way, we continued to meet our objectives by once again obtaining a

record level of net income, based on the higher volume of business and the efficient

use of resources. This result reflects the teamwork of the Board of Directors,

Management and all of the employees of the Bank. In this sense, I value the institution

for its capacity to increase its strengths through the opportunities that arise in the

market and I recognize the talent and determination of our employees, who were the

basis for achieving better economic and financial indicators throughout the current

year, under the premise of providing maximum satisfaction to our customers.

Finally, I would like to take this opportunity to extend my deep appreciation to our

shareholders, the Bank Management and to each of the employees of our beloved

Institution, both on my behalf and on behalf of the Board of Directors. I would also like

to express our appreciation for their commitment and for believing in Banco de

Comercio.

Sincerely,

Carlos Adrián Linares Peñaloza

2. LETTER FROM THE GENERAL MANAGER

The year 2017 brought us several

challenges - both at the domestic

and the external levels - which

Banco de Comercio has been able

to successfully take on through the

implementation of actions, projects

and initiatives aligned with our

Strategic Planning.

Always attentive to our mission of

"Providing innovative solutions in a

cordial, timely and professional

manner in order to accompany our

clients in achieving their

aspirations and goals," we have

paid close attention to the

achievement of the specific

strategic objectives of

strengthening effective wealth,

achieving increasing levels of

profitability, positioning the Banco

de Comercio brand and achieving

greater efficiency in the use of

resources and risk management.

Thanks to this perseverance, we

can report important

achievements, among which we

wish to highlight the achievement

of a better risk classification (from B to B+) by the risk classification companies

Equilibrium SA and Pacific Credit Rating SAC, both for the Bank as an entity and for its

debt instruments; the renewal for three years of the certification for the use of the

Alternative Standardized Approach (ASA) for the calculation of the equity requirement

for operational risk (which implies a lower equity requirement of PEN 14.0 million); the

highest accumulated net income in the history of the Bank (7.2% higher than the

previous year).

In 2017, a growth of 13.4% in direct loans was registered, which has allowed

increasing the market share from 0.59% to December 2017 (0.54% in December

2016). Businesses focused mainly on the non-revolving consumer segment, which

showed a growth of 18.4%, mainly in the segment of members of the Armed Forces

and National Police, which increased by PEN 175 million. Mortgage loans and foreign

trade expanded by 26.2% and 10.9%, respectively. There was also a growth of PEN

129 million in deposits, through promotional campaigns, offering terms and rates

suitable for the personal segment.

The indicators achieved in 2017 were encouraging for our institution: we were able to

reduce delinquencies, optimize liquidity, maximize our operating capacity and

rationalize administrative expenses, applying policies of prudence in the granting of

loans, improving the structuring of products and services, as well as the processes that

support them, which shows a responsible and efficient management in the use of

resources. As a result, a return on equity of 13.2% was obtained, a level of coverage of

provisions for the high-risk portfolio of 125.8%, and a delinquency level of 3.1%. In

turn, during the fiscal year, the global capital ratio was 12.1%, while the operating-

efficiency indicator stood at 33.5%.

These results reaffirm our commitment to national development and dedication to the

progress of Peruvian families, offering more and better services to our clients and

users. That is why we believe in the future of this great country, in the capacity of the

Peruvian people and in the value of the solid foundations of the national economy. We

will continue to evolve and persevere in our efforts to be recognized for offering the

best financial services experience to our clients, through innovative solutions and the

passion for service of our employees.

I would like to express my gratitude to the Board of Directors for their valuable

involvement in the construction of an increasingly solid, modern and efficient institution,

as well as to the personnel of the Bank for their commitment and efforts that allow us to

continue to grow and face the future with great optimism.

Sincerely, Aron Kizner Zamudio

3. SENIOR & MANAGEMENT TEAMS

The 2017 Senior Team was made up as follows:

Name Position Since

Carlos Adrián Linares Peñaloza Chairman

Ricardo Palomino Bonilla Vice Chairman

Ferruccio Giuliano Cerni Bejarano Director

Gladys Edith Herrera Castañeda Director

Ernesto Mitsumasu Fujimoto Director

Luis Alberto Velarde Yañez Director March 24, 2017

The following people were also part of the 2017 Senior Team:

Name Position Up to

Eduardo José Sánchez Carrión Director March 15, 2017

2017 MANAGEMENT TEAM

Name Position Since

Aron Kizner Zamudio General Manager

Néstor Alberto Plasencia Angulo Manager of the Internal Auditing Division

Luis Alberto Guevara Flores Deputy Manager of the Administration and Finance Division

Fernando Soto La Torre Manager of the Enterprise Banking Division

Mario Enrique Cifuentes Vásquez Deputy Manager of the Personal Banking & Institutional Agreements Division February 2017

José David Alejandro Campodónico Rojas Deputy Manager of the Operations Division

Mario Alfredo Ballón García Deputy Manager of the Human Resources Division

Rosa Esther Guevara Heredia Manager of the Risk Division

Alfonso Herminio Gerónimo Vásquez Deputy Manager of the Technology Division February 2017

Carmen Rosa Ganoza Ubillús Head of the Legal Department

María Alejandra Castillo Vargas Head of the Marketing Department

Marina Lucrecia Lastarria Gibaja Head of the Process Management Department

Americo Vidalón Deputy Manager, Compliance Officer

It should be mentioned that Marisa del Carmen Freyre acted as Personal &

Institutional Agreement Manager up to January 27, 2017, while Carlos Bechet

Bustamante was in charge of the Technology Division up to January 13, 2017.

4. INTERNATIONAL CONTEXT

4.1 WORLD ECONOMY

In 2017, according to the International Monetary Fund (IMF)2, the world economy grew

by 3.7%, due to an increase in global trade over the last few months and a recovery in

terms of investment, particularly as far as it regards the advanced economies. This

2 IMF, last update: January 2018.

growth is mainly concentrated in Europe, Asia, and some of the emerging economies

(Brazil, China, and South Africa).

The US economy grew by 2.3% in 2017, which is higher compared to the growth rate

achieved in 2016, due to a large increase in consumer spending and imports, as well

as increased investment in the business sector.

The Eurozone, in turn, recorded a 2.5% growth in 2017 —its best growth rate in a

decade— in a context marked by uncertainty generated by Brexit, the revival of

political unrest and terrorist threats. At the same time, inflation increased to 1.4% year-

over-year as of December, which is below its target inflation of 2%.

Growth in the United Kingdom stood at 1.5% in 2017. This is the result of slower

growth in private consumption, as the decreased value of the pound affected the actual

income per household.

Japan recorded an economic growth of 0.5%, which slowed down however, mainly

over the last quarter. In this context, an increase in domestic consumption was

observed, as well as in exports, however, the effect was counteracted by a larger

growth of imports.

China, on the other hand, recorded an economic growth of 6.9% in 2017, which can be

associated with an increase in sales of consumer goods as well as to greater

dynamism in foreign trade. This reflects stronger-than-expected growth, supported by a

decrease in political tensions and reforms in terms of supply.

4.2 LATIN AMERICAN ECONOMY

According to the IMF forecast, the economy in Latin America and the Caribbean (LAC)

grew by 1.3% in 2017. As of the second quarter, the growth rate of the economic

activity remained positive in all of the countries in the region, with explicit goals in

terms of inflation. In several of them, the growth rate slightly exceeded the rate

recorded for the previous quarter.

In Brazil, GDP grew by 1.1% in 2017, and, despite this lower-than-expected growth,

Latin America’s largest economy has gotten out of the tough recession it had been

facing since 2014, according to official data issued by the Central Bank. The fiscal

deficit shrank, while job creation was weakened due to the start of a labor reform.

Inflation stood at 2.95%, caused by an adjustment in food prices.

The Mexican economy grew by 2.1% in 2017, which is the highest growth rate

estimated by the Bank of Mexico, which had estimated between 1.8% and 2.3% growth

for the year in question. The World Bank attributes this development, apart from an

improved economic situation in terms of the financial markets, to a strong recovery of

foreign trade, due to accumulated devaluation of the Mexican peso compared to the

dollar.

Commodity Market

The Latin American region is made up of countries that export energy goods, mainly oil,

and metals (gold, silver, copper, zinc, and iron). Final consumer goods such as soy,

sugar, and coffee, stand out as well.

During the last quarter of 2017, the WTI oil price increased by 17%, and, in December,

its average price stood at US$ 52 per barrel. This strong increase in oil prices recorded

over the past three months reflected the gradual reduction of the surplus offer, as a

result of the hurricanes that affected the United States, as well as the cuts in production

imposed by the OPEC and other main producers (such as Russia), as well as of some

geopolitical factors. However, this price increase was limited by the expectations that

crude-oil production by the United States would continue to grow, counteracting the

efforts made by the OPEC to balance the global market.

The risk factors in terms of oil prices for this year continue to be high. The risks of a

decrease are associated with the estimates of a growth in crude oil production in the

United States and with the fact that the increased production exceeds the expected

production in the lowest-cost countries (such as Iran, Iraq, Saudi Arabia, Kuwait, and

Russia). Among the risks of an increase, a rapid recovery of demand —particularly from

Asia— stands out, as well as additional decisions by the OPEC regarding production

cuts.

In December, the average gold price reached US$1,264 per ounce, which is 6.12%

higher than the level reached in December 2016. Over the past three months, the price

of gold has remained volatile, albeit with little variation. The increase in the price of

gold is explained by higher geopolitical risks, by the depreciation of the dollar and by

the prospects that real interest rates will remain low due to the gradual adjustment

policy applied by the US Federal Reserve (Fed). Another factor contributing to the

increase in gold prices was the growing demand for investment in bars and coins,

jewelry and technology. Therefore, the Central Reserve Bank of Peru (BCRP, by its

Spanish initials) shows that the projection for 2018-2019 would remain close to the

current levels. The risks in this projection are largely associated with the performance

of the dollar and, therefore, with future policy decisions made by the Fed that are not

market driven.

In December, copper prices reached a monthly average of US$ 309 per pound, which

is 20.66% higher than in December 2016. The recent rise is also supported by the

return of investors to the futures markets, which shows expectations of a rise in the

price of the metal, motivated by the positive figures of copper consumption in China

and the drop in inventories on the stock market.

According to the BCRP, a slight downward correction in prices is to be expected. This

projection is consistent with the expected inflow of new capacity in 2018 and assumes

that unplanned production cuts would decrease to their historical average. The main

factors of uncertainty in the projection are associated with the evolution of Chinese

demand and unanticipated labor demand that could cut supply.

5. DOMESTIC CONTEXT

5.1 MACROECONOMIC VARIABLES

The Peruvian economy3 grew by 2.5% in 2017, which is less than the 3.9% growth

rate recorded in 2016. The result can be explained mainly by the primary sector, with

3.06% —stimulated by the mining and hydrocarbon sectors (3.19%), agriculture and

livestock (2.62%), and fishery (4.67%) —. On the other hand, the economic activity

showed signs of recovery in terms of internal demand, which can be attributed to the

increased dynamism of public and private investment (6.0% and 0.6%, respectively).

3 Economic performance is measured based on Gross Domestic Product (GDP).

By type of expenses, in December 2017, domestic demand recorded a growth of 1.0%

compared to December 2016. It is worth indicating that private investment registered

positive growth in the last quarters of the year, reflecting the recovery of business

confidence, terms of trade and the recovery of mining investment.

As for private consumption, some recovery in its growth rate was observed after the

negative events that affected its evolution in the first half of the year.

Inflation, Exchange Rate, and the Foreign Sector

At the closure of December 2017, year-on-year inflation4 stood at 1.36%, according to

the figures published by the INEI. Furthermore, the BCRP shows that subjacent

inflation5 continues its decreasing trend, falling from 2.87% in December 2016, to

2.15% in December 2017.

The average interbank closure exchange rate stood at PEN 3.246 per dollar at the

closing of December 2017, which meant an annual decrease of 4.4%. However,

during 2017, the Central Reserve Bank of Peru (BCRP, by its Spanish initials),

4 Inflation is measured as the annual variation in the Consumer Price Index (CPI).

5 Underlying inflation does not include the CPI estimates for Food and Energy, as these two sectors are

highly volatile.

intervened with open-market operations, in order to reduce the volatility of the dollar.

This way, net acquisitions at the negotiation table increased to US$ 5.25 billion.

As for the foreign sector, according to the BCRP, for the 2017 period, the Peruvian

economy recorded a trade surplus of US$ 5.61 billion, which is the highest level

observed since 2012, and which mainly reflects a higher number of exports

throughout the year. The latter increased to US$ 44.44 billion, which is an increase of

20.03% compared to the previous year. Per type of product, traditional exports

recorded an expansion of 25.11%, whereas non-traditional exports fell by 7.65%

compared to 2016.

Imports, in turn, increased to US$ 38.83 billion, which is higher than the amount

achieved over the previous year, due to an increase in the delivery of capital goods

and consumables.

2011 2012 2013 2014 2015 2016 2017*

EXPORTS 46,376 47,411 42,861 39,533 34,414 37,020 44,435

Traditional Products 35,896 35,869 31,553 27,686 23,432 26,137 32,700

Non-traditional Products 10,176 11,197 11,069 11,677 10,895 10,782 11,607

Others 304 345 238 171 87 101 128

IMPORTS 37,152 41,135 42,248 40,809 37,331 35,132 38,827

Consumer Goods 6,734 8,252 8,843 8,896 8,754 8,614 9,394

Consumables 18,332 19,273 19,528 18,815 15,911 15,140 17,801

Capital Goods 11,730 13,347 13,664 12,913 12,002 11,113 11,352

Other Goods 356 262 213 185 664 265 280

TRADE BALANCE 9,224 6,276 613 -1,276 -2,917 1,888 5,608

EXCHANGE TERMS 112.8 110.5 104.2 98.5 92.3 91.6 98.2

NIR* 48.8 64.0 65.7 62.3 61.5 61.7 64.7

Source: BCRP

* NIR in billions of dollars

Foreign Sector: Trade Balance(in Millions of Dollars FOB)

Monetary Policy

In annual terms, the reference rate was reduced from 4.25% to 3.00% (125 BPS),

added to the monetary policy of expansive offer as a stimulus to the economy, while

inflation was reduced to 1.36% per annum.

In fact, the BCRP has been decreasing the legal reserve rate over the year with the

aim of making financial and credit conditions more flexible. The marginal legal reserve

rate in soles fell from 6.5% at the end of 2016 to 5.0% in December 2017; while the

rate in dollars fell from 70% to 40% and up to 39% by January 2018.

Fiscal Policy

The Ministry of Economy and Finance (MEF) formulated a moderately expansive

fiscal policy for 2017. The deficit of the non-financial public sector registered 3.2% of

GDP as of December 2017, showing a growing trend.

At the beginning of 2017, the MEF expected to close the year with a fiscal deficit of

2.5%; however, the Executive proposed a new fiscal deficit trajectory and the

Congress approved the extension of the objective to 3.0%, foreseeing greater

expenses for reconstruction.

The growing trend of the fiscal deficit at the end of 2017 is due to higher non-financial

expenditures and lower general government revenues.

Meanwhile, the current revenues of the general government totaled PEN 12.81 billion

and increased by 11.0% inter-annual in December, which mainly reflected a higher tax

collection (13.8%). However, revenues were insufficient to meet the target set by the

MEF.

5.2 BANKING SYSTEM

Direct Loans

As of December 31, 2017, the banking system loans stood at PEN 245.6 billion with

an annual growth of 4.9%. This development in terms of loans can be explained by

the dynamism of loans to microenterprises and corporate loans with annual growth

rates of 7.9% and 7.4%, respectively. On the other hand, loans in medium-size

companies registered an annual contraction of 1.5% with respect to December 2016.

As of December 2017, credit dollarization stood at 32.9%, in line with the de-

dollarization measures promoted by the BCRP. Meanwhile, in December, loans in

soles totaled PEN 164.709 million, PEN 4.295 million higher than in December 2016.

The growth of direct loans is mainly due to the contributions of the four main banks in

the system (BCP, BBVA, Scotiabank and Interbank), whose concentration for

December 2017 was 82.9% of total loans; maintaining a similar level of market

concentration with respect to December 2016 (83.0%).

As of the closing of December 2017, the economic sectors that showed the greatest

growth in terms of their direct loans were mining, mortgage and consumer, which

registered an annual increase of 31.6%, 7.2% and 5.2%, respectively. In contrast, the

fishing and construction sectors registered negative annual growth rates of 21.2% and

5.4%, respectively.

Segment Dec-13 Dec-14 Dec-15 Dec-16 Dec-17Accumulated ChangeAnnual Change

Agriculture & Livestock 4.3 4.9 6.2 6.4 6.8 6.8% 6.8%

Fishery 1.5 1.2 1.3 1.3 1.0 -21.2% -21.2%

Mining 6.7 6.4 8.0 6.5 8.6 31.6% 31.6%

Manufacturing 26.3 30.8 34.4 35.4 35.5 0.2% 0.2%

Construction 3.7 4.8 5.3 5.2 4.9 -5.4% -5.4%

Trade 25.9 29.2 34.5 35.5 37.0 4.2% 4.2%

Services 43.0 49.8 60.7 64.6 66.3 2.7% 2.7%

Consumption 29.6 33.2 39.1 42.0 44.1 5.2% 5.2%

Mortgage 28.6 32.9 37.0 38.5 41.3 7.2% 7.2%

Banking 169.6 193.1 226.6 235.4 245.6 4.3% 4.3%

Source: SBS

Banking System: Loans by Economic Sector

(in Billions of Soles)

Deposits

Bank deposits as of December 2017 totaled PEN 229.4 billion, an increase of 9.1%

compared to the same period in 2016. As of December 2017, the four largest banks,

including BCP, BBVA, Scotiabank and Interbank, accounted for 82.2% of total

deposits.

Deposits in local currency registered a balance of PEN 131 billion, with an annual

growth of 19.0% compared to December 2016. In addition, as of December 2017, total

deposits in foreign currency were recorded at PEN 98.3 billion, a decrease of 1.8%

compared to December 2016.

Deposits continued to expand over the past twelve months in most financial

institutions, due to higher fund-raising in local currency. On the other hand, deposits in

foreign currency continued to fall due to withdrawals - mainly by AFPs and

construction companies. As a result, the dollarization level of total deposits decreased

by 4.7 percentage points to 42.9% at the end of December 2017.

In terms of savings deposits, in the month of December 2017 a total of PEN 63.2 billion

was reached, which represented an increase of 7.7% annually. Also, in term deposits, a

total of PEN 84.7 billion was registered, while demand deposits were at PEN 65.9 billion;

in both cases a year-on-year growth of 15.1% and 4.9% was obtained, respectively.

Financial Indicators

Regarding the quality of the portfolio of the banking system, the delinquency rate was

3.04% as of December 2017, above the 2.80% obtained at the end of December

2016. In a context of slower economic growth and decreased dynamism in the direct-

loan portfolio, the payment capacity of companies and families has been affected,

which is reflected in a deterioration of the portfolio of the banking system and an

increase in non-performing loans over the past few years.

The deterioration of the portfolio of the banking system has been produced mainly by

loans to small and medium-size companies, as well as consumer loans, segments

that to December 2017 registered a delinquency rate of 9.0%, 7.10% and 3.64%,

respectively. On the other hand, mortgage loans were not unrelated to this

deterioration -although in a lesser proportion- increasing their delinquency rate from

2.28% in December 2016 to 2.76% in December 2017.

By type of bank, Banco Azteca and Banco Falabella registered the highest

delinquency rates in the system, at 9.24% and 5.71%, respectively. These entities are

focused on the granting of consumer loans.

As of December 2017, the average return on equity (ROAE) of the banking system

was 18.36%, which is lower than the ROAE reported in December 2016, but with

higher net profits. It is worth mentioning that the sixteen banks of the system

increased their profits and that, in spite of a higher interest expense (mainly due to

obligations with the public and reporting operations with the BCRP), there was a lower

growth in interest income, thus improving the financial margins of the banking entities.

In addition, there was a decrease in foreign exchange earnings and a slight increase

in administrative expenses. It is worth mentioning that the utilities of the banking

system totaled PEN 7.46 billion in December 2017 (an increase of 4.2% compared to

the previous year).

On the other hand, the global capital ratio of the banking system increased from

15.01% in December 2016 to 15.16% in December 2017; a healthy level of leverage

in any shock of the economy. The capitalization of profits, capital contributions and the

placement of subordinated bonds helped the banking system strengthen its assets.

Interests Rates

As of December 2017, in local currency, the average lending interest rate stood at

15.91%, which is 125 basis points below the lending interest rate registered at the end

of the 2016 period. The borrowing interest rate in local currency also declined slightly.

In addition, in foreign currency the average lending interest rate was of 6.65%, 91

basis points below the registered lending interest rate at the end of the 2016 period,

while the borrowing interest rate rose slightly.

6. BANCO DE COMERCIO

6.1 LEGAL FRAMEWORK

Banco de Comercio was founded as part of the corporate reorganization process of

former Banco de Comercio, now Administradora del Comercio S.A., through a Public

Deed recording Simple Reorganization and Change of Name and of Corporate

Purpose, Partial By-Laws Amendment as well as Incorporation of a Banking Entity,

dated August 18, 2004, issued before Sandro Raúl Mas Cárdenas, Notary Public in

and for Lima, who substituted for the principal Notary Public, Javier Aspauza

Gamarra, and by a Public Deed recording Compliance with the Condition Precedent,

dated August 31, 2004, issued before Javier Aspauza Gamarra, Notary Public in and

for Lima, both filed with Entry A00001 in Record 11683434 of the Registry of Legal

Entities of Registry Office IX in Lima.

The organization and functioning of the Bank were authorized by the Superintendence

of Banking and Insurance, by means of Resolution 1105-2004 of July 9, 2004 and

SBS Resolution 1466-2004 dated August 25, 2004, respectively.

The Bank has its legal domicile on Avenida Canaval y Moreyra No. 452-454, San

Isidro, Lima, Peru. The number of its telephone exchange is 513-6000. Banco de

Comercio has one Head Office, twelve branch offices located in Lima and four branch

offices distributed among the provinces of Arequipa, Pisco, Piura, and Iquitos. In

addition, nineteen special information offices are located in a variety of public and

private institutions.

As of December 31, 2017, the subscribed, paid and capital stock of Banco de

Comercio was PEN 219,476,766. Such capital is represented by 219,476,766

common shares with a nominal value of one sol (PEN) each.

The founding partners of Banco de Comercio were Administradora del Comercio S.A.

(with a contribution of PEN 35,344,000) and Almacenera Peruana de Comercio S.A.

(with a contribution of PEN 500); both legal entities organized under the laws of Peru.

During the General Shareholders’ Meeting held by Banco de Comercio, dated

November 10, 2004, an increase of the capital stock of the Bank by PEN 16,550,000

was agreed upon. This growth increased the capital stock from PEN 35,344,500 to

PEN 51,894,500, by converting shares into obligations created by the second

issuance of 500 subordinated bonds by Banco de Comercio, with a nominal value of

US$ 5,000,000, owned by the Pension Savings Bank of the Military Police. The

agreed capital stock increase and the resulting partial by-laws amendment, approved

by the Superintendence of Banking and Insurance, by means of SBS Resolution

2134-2004 dated December 30, 2004 and SBS Resolution 6-2005, dated January 5,

2005, were converted into a public deed on February 16, 2005 by Javier Aspauza

Gamarra, Notary Public in and for Lima, and were recorded with Entry B00001 in

Record 11683434 of the Registry of Legal Entities of Registry Office IX in Lima.

Currently, the main shareholder of Banco de Comercio is the Pension Savings Bank

of the Military Police (CPMP, by its Spanish initials), an institution set up as a legal

entity with public rights, organized under the laws of Peru, resulting from a transfer of

shares to the CPMP by Administradora del Comercio S.A., on January 14, 2005,

following approval from the Superintendence of Banking and Insurance, through SBS

Resolution 8-2005, dated January 10, 2005. Its current share is of 99.99%.

As of December 31, 2017, share ownership was as follows:

Ownership Number of Shareholders % share

< 1% 1 0.01

1% - 5% 0 0.00

5% - 10% 0 0.00

> 10% 1 99.99

Total 2 100.00

6.2 DESCRIPTION OF THE HOLDING COMPANY BANCO DE

COMERCIO IS PART OF

Banco de Comercio is part of the holding company led by the Pension Savings Bank

of the Military Police (CPMP), an institution responsible for administering the Pension

Fund of the Personnel of the Peruvian Armed Forces and the Police Force (FFAA –

PNP, by its Spanish initials).

The CPMP was created on December 17, 1974, by virtue of Decree Law 21021, with

the objective of «administering the Pension and Compensation Payment System of its

members», in accordance with the provisions established in Decree Law 19846 of the

Single Unified Pension Regime of the Military and Police Staff. As of January 1, 1974,

to date, CPMP pensioners include both the personnel graduated from the training

schools and the members of the Peruvian Armed Forces and the Police Force.

Investments made by the CPMP were mainly focused on a variety of economic

sectors within the Peruvian economy, including tourism, finance and real-estate. With

regard to the real-estate sector, the CPMP invested in business centers, shopping

malls and housing; the latter were directed at sectors A, B, and C of the population.

Other members of the CPMP holding company are Almacenera Peruana de Comercio

S.A. (ALPECO), founded on July 6, 1981, which operates as a simple storage

warehouse, and Inversiones Banco de Comercio S.A. (INVERPECO), founded on

November 5, 1980, which main activity is buying and selling real estate.

Another member of the CPMP holding company is Administradora del Comercio S.A.

(former Banco de Comercio), founded on January 5, 1967. The current objective of

the company is to carry out all types of collection operations and services, as well as

judicial and prejudicial recoveries, consultancy in debt refinancing and portfolio

trading, as well as billing portfolio management upon the request of third parties.

6.3 OPERATIONS & DEVELOPMENT OF THE BANK

Banco de Comercio is a private enterprise engaged in all the banking activities

permitted under Law 26702, the General Law of the Financial System and Insurance

System and Organic Law of the Superintendence of Banking, Insurance and Private

Pension Fund Administrators. In addition, all other complementary and regulatory

provisions establishing the requirements, the rights, the guaranties, the restrictions

and other conditions with regard to its functioning to which private legal entities and

companies that operate within the financial and insurance systems are subject, also

apply to the Bank.

In accordance with the Unified Single International Industrial Classification (CIIU, by

its Spanish initials), Code 6519 corresponds to Banco de Comercio, which refers to

other types of monetary intermediation; a category that includes the monetary

intermediation performed by monetary institutions other than the central banks.

Included herein are the activities performed by the commercial banking segment, by

discount banks and savings banks, as well as institutions specialized in granting loans

for home buying, which also receive deposits.

Finally, it needs to be mentioned that the time of permanence of the Bank is indefinite.

6.4 VISION & MISION

The following is stated in the guidelines established in the 2017–2019 Institutional

Strategic Plan:

VISION

Generating a vision involves understanding the nature of the business in which the

organization operates. Defining a specific future is a challenge to the organization

itself, while acquiring the ability to disseminate the vision serves as a guide and

motivation to its employees to seek to achieve that vision. The long-term vision of the

Bank is as follows.

―Be recognized for offering our clients the best experience in financial

services, accompanying them in every stage of their lives or

development‖.

MISION

The strategic mission is to apply and implement the strategic intent and, in short, it

must specify the markets and the products with which the organization intends to

serve these markets, efficiently leveraging its resources, skills, and competencies.

The mission of the Bank is defined as follows:

―Providing innovative solutions in a cordial, timely and professional

manner in order to accompany our clients in achieving their aspirations

and goals.‖

7. MANAGEMENT REPORT

7.1 INCOME STATEMENT

In 2017, Banco de Comercio recorded a net profit of PEN 33.9 million, the highest

level of profits since the beginning of operations of the entity. Compared to the 2016

period, this showed an increase of 7.2% in net results, mainly explained by the

increase in interest income from credit operations.

With this level of net profit, capital profitability (ROAE) ended at 13.2%. Operation

results6 recorded a level of S/ 47.6, which is 17.0% higher compared to the amount

recorded for 2016, which was of S/ 40.7 million.

Categories 2016 2017 Var. 17-16

Interest Revenue 188.7 213.4 24.7

Interest Expense 58.1 68.1 10.0

Gross Financial Margin 130.6 145.3 14.7

Direct Loan Provisions 18.8 15.7 -3.1

Net Financial Margin 111.8 129.6 17.8

Financial Service Income 15.8 12.7 -3.2

Financial Service Expenditure 12.2 12.8 0.6Services Income & Expenditure - Net

Financial Margin115.5 129.5 14.0

Trading Results (ROF) 4.6 3.3 -1.3

Operating Margin 120.1 132.8 12.7

Administrative Expenditure 70.5 72.5 2.0

Depreciation & Amortization 6.5 8.2 1.7

Net Operating Margin 43.1 52.1 9.0

Asset & Provision Valuation 2.4 4.5 2.1

Operating Income 40.7 47.6 6.9

Other Income & Expenditure 5.1 0.0 -5.2

Income before Taxes 45.8 47.6 1.7

NET PROFIT 31.6 33.9 2.3

Source: Management & Finance Division

Income Statement (in Billions of Soles)

6 Profits before taxes and from extraordinary income

Interest income increased 13.1% compared to 2016, as a result of higher revenues

from non-revolving consumer loans, associated with the greater dynamism of this loan

portfolio. On the other hand, interest expenses presented an expansion of 17.2%

compared to 2016, mainly due to the capture of deposits from individuals in national

currency. As a result, the gross financial margin registered an annual growth of

11.2%.

Regarding administrative expenses, at the end of the 2017 fiscal year, these

accumulated PEN 72.5 million; with respect to the 2016 fiscal year, they represented

an increase of PEN 2.0 million in expenses, in line with the growth of the businesses.

It is important to mention that the Management of the Bank has maintained a

continuous policy of control and rationalization of expenses, which has allowed a more

efficient use of the institution's resources. Thus, the ratio of administrative expenses to

financial revenues fell to a level of 33.5% as of December 2017, compared to 36.5%

in December 2016.

7.2 TOTAL LOANS

As of December 2017, the balance of direct loans of Banco de Comercio was of PEN

1.44 billion, with an annual growth of PEN 170.3 million. The dynamism of the loan

portfolio was largely explained by the expansion of financing to individuals, mainly

through payroll discount loans and mortgage loans. He also highlighted the increase

in financing operations to companies through the foreign trade product. In contrast,

there was a reduction in credit card transactions.

On the other hand, the balance of indirect loans was PEN 123.6 million, lower by PEN

31.1 million compared to the closing of the previous year, associated to a lower

economic growth in the real estate and construction sector.

2016 2017 Var. 17-16

Direct Loans 1,270.7 1,441.0 170.3

Current account overdrafts 0.3 0.2 0.0

Credit cards 2.5 2.2 -0.3

Discounts 4.0 5.8 1.8

Loans 1,131.8 1,285.1 153.4

Leasing 5.3 7.8 2.5

Foreign trade 91.0 100.2 9.1

Mortgage 28.1 34.8 6.7

Other 7.8 4.9 -2.9

Indirect Loans 154.7 123.6 -31.1

Endorsements - - 0.0

Letters of guarantee 146.5 116.0 -30.6

Letters of credit 7.8 7.6 -0.1

Bank acceptances 0.4 - -0.4

TOTAL 1,425.4 1,564.7 139.3

Source: Management & Finance Division

Loans by Product

(in Millions of Soles)

7.3 DEPOSITS

The balance of deposits and obligations recorded by the Bank was of PEN 1.45

billion, which was higher than the balance at PEN 144.8 million registered for the

previous year, which can be explained by the higher deposit balance in PEN 134.2

million with respect to December 2016.

In an analysis by type of product, this growth was mainly due to an increase in

personal term deposits of PEN 146.2 million. In contrast, savings deposits decreased

by PEN 11.7 million.

Rubro 2016 2017 Var. 17-16

Deposits 1,275.2 1,409.4 134.2

Demand 102.9 101.7 -1.2

Savings 200.4 188.7 -11.7

Term 762.0 908.2 146.2

CTS 209.5 210.5 1.1

Other Obligations 31.6 42.2 10.6

TOTAL 1,306.8 1,451.6 144.8

Source: Administration & Finance Division

Deposits & Obligations by Product

(in Millions of Soles)

7.4 FINANCIAL INDICATORS

The portfolio quality ratios of Banco de Comercio improved during 2017. The level of

delinquency was 3.07% at the end of this year, which was below the level registered

at December 2016 (3.34%); this result is caused by greater prudence in the granting

of loans, better management in the recovery, as well as the portfolio write-offs made.

On the other hand, the level of provisions of the direct-loan portfolio was of PEN 68.2

million, which meant a provisioning level of 154% of the delinquent portfolio and

125.8% of the high-risk portfolio.

With regard to liquidity indexes – in both local and foreign currency - the SBS

requirements were fully met7; as of December 2017, the liquidity index in local

currency was 32.5%. On the other hand, the foreign currency liquidity index reached

68.4%.

As for operational management indicators, they improved compared to December

2016. The ratio of administrative expenses to financial income showed an

improvement from 36.5% to 33.5% in December 2017, reflecting the continuous policy

of control and rationalization of expenses and the most efficient use by the institution

of its resources.

Regarding the level of solvency, the global capital ratio8 was set at 10.6%, which was

below the ratio recorded as of December 2016 (11.8%). It is worth mentioning that, as

a result of the equity strengthening measures, such as the capitalization of profits and

the reduction of exposure in subsidiaries, the effective equity amounted to PEN 298.5

million, which allowed for business continuity.

Finally, the profitability of Banco de Comercio, measured through the ROAE, was

13.2% and ROAA 1.8% at the end of 2017, lower than the yield obtained in December

2016 (ROAE 14.1% and ROAA 1.8%). It should be noted that in 2017 no

extraordinary income was generated from the sale of disposable assets.

7 Limits in domestic and foreign currency of 8% and 20%, respectively

8 The adjusted Basel Index includes the requirement established by Basel III for additional effective capital

Main Indicators 2016 2017

Portfolio Quality

Past-due portfolio / Gross loans 3.34% 3.07%

High-risk portfolio / Gross loans 4.24% 3.76%

Provisions / Past-due portfolio 161.8% 154.0%

Provisions / High-risk portfolio 127.5% 125.8%

Liquidity

Liquidity Index in domestic currency 22.2% 32.5%

Liquidity Index in foreign currency 79.8% 68.4%

Leverage

Global capital ratio 13.7% 12.1%

Adjusted global capital ratio 11.8% 10.6%

Total Liabilities / Assets (times) 6.4 6.2

Management

Operating cost / Financial income 36.5% 33.5%

Operating cost / Total income 33.7% 31.6%

Operating cost / Financial margin (*) 53.7% 50.1%

Profitability

Financial margin (*) / Financial income 68.0% 66.7%

Net profit (ROA) / Total assets 1.79% 1.77%

Net profit (ROE) / Equity 14.1% 13.2%

(*) The Financial Margin includes ROE and the Deposit Insurance Fund

Source: Administration & Finance Division

Financial Indicators

(%)

7.5 RISK CLASSIFICATION

As of March 2017, Banco de Comercio received the following risk ratings, granted by

Pacific Credit Rating and Equilibrium:

Pacific Credit Rating Equilibrium

Financial Strength B B

Category Definition

Solvent company with great intrinsic financial strength,

adequately positioned within the system, total coverage

of existing risks and little vulnerability to some future

risks.

The entity has a good financial and economic structure

and good capacity to pay its debts within the terms and

conditions agreed, but it may deteriorate slightly in case

of changes within the entity, its industrial sector, or the

economy.

Short-Term Deposits Category II EQL 2-.pe

Category Definition

Good quality. Very low probability of non-compliance

with the terms agreed. Very good payment capacity.

Even in the worst-case economic scenario, the risk of

non-compliance is low.

Good quality. The entity reflects good capital and

interest payment capacities within the terms and

conditions agreed.

Medium & Short-Term Deposits pA BBB+.pe

Category Definition

Deposits in entities with good credit quality and

adequate protection factors, but greater and more

variable risks in periods of low economic activity.

The company reflects adequate capacity to pay capital

and interest within the terms and conditions agreed.

Payment capacity in this category is more sensitive to

possible negative changes in the economic context than

in the higher categories.

Subordinated Debentures pA BBB-.pe

Category Definition

Deposits in entities with good credit quality and

adequate protection factors, but greater and more

variable risks in periods of low economic activity.

The company reflects adequate capacity to pay capital

and interests within the terms and conditions agreed.

Payment capacity in this category is more sensitive to

possible negative changes in the economic context than

in the higher categories.

It is worth noting that the ratings mentioned above are subject to permanent revision, in

accordance with the applicable laws. The risk ratings granted do not represent a

recommendation for buying, retaining or selling the securities issued by Banco de

Comercio.

8. BUSINESS UNITS

8.1 ENTERPRISE BANKING

In a context of slower economic growth, the operations performed by Enterprise

Banking were focused on companies with a sound financial position, mainly in

economic sectors with higher growth perspectives, where an annual growth of 21.5%

was obtained, in line with the objective of achieving greater dynamism in terms of the

loan portfolio that contributes to improve the portfolio quality as well as the

delinquency levels.

As of December 2017, loan stock amounted to PEN 414 million, PEN 291 million of

which corresponded to direct loans, mainly serving sectors such as services, trade

and industry and to a lesser extent by participating in activities related to the mining,

construction, textile and fishery sectors.

In 2017, a Commercial and Evaluation Model was implemented to highlight the value

proposition of the Bank, generating customer satisfaction and loyalty, which enabled

an improvement in market share in the target segments served by Enterprise Banking.

It should be specified that guidelines were established aimed at a credit evaluation

focused on the risk appetite of the Bank. As a result, an improvement was obtained in

the delinquency and savings levels in provisions expenses showed a performance

that was significantly better compared to the closing of 2016.

8.2 INSTITUTIONAL BANKING

This area is oriented towards the search for integrated solutions for the leading public

and private institutions in the country, for which financing is offered for infrastructure

projects, as well as for agreements aimed at collecting and gathering excess liquidity.

Our main clients are found in the educational sector, but also include professional

schools, municipality governments, cooperatives, and rural savings banks, among

others. To this end, we apply interest rates that are competitive in the market and

have allowed for maintaining an important position in the institutional segment.

Furthermore, this business unit contributes directly to the generation of collateral

businesses, resulting from the so-called cross-selling strategy for Personal Banking

products such as payroll deduction loans, Employment Termination Compensation

(CTS, by its Spanish initials) deposit collections, credit cards, and mortgage loans.

At the closing of 2017, the total deposit balance was of PEN 187 million, made up of

institutional funds, collection, and demand deposits.

8.3 INTERNATIONAL BUSINESS & SPECIALIZED PRODUCTS

During 2017, a strategy was implemented to build loyalty and diversify relations with

correspondent banks, aimed at developing long-term relationships and generating

mutually beneficial business opportunities. This allowed for a 27.5% growth in new

lines of credit, which were used to service the foreign trade business for Import Letters

of Credit and Comex Financing.

In addition, the network of international correspondents was diversified with the entry

of BMCE International, Spain; Banco de la Provincia de Buenos Aires, Argentina;

Bankia, Spain; Axis Bank, India; Shinhan Bank, South Korea, Yes Bank, India, Banco

Nacional de Bolivia BNB, Bolivia, with the aim of adequately meeting the needs of our

clients.

Our participation in international events has allowed for s to reinforce the image of

Banco de Comercio, developing and strengthening the relationship with

correspondent banks, which has favored the maintenance, management, obtaining

and achievement of important improvements in financial conditions in favor of our

bank, as well as the generation of alliances with financial institutions and companies

related to the correspondent banking business.

8.4 PERSONAL BANKING & INSTITUTIONAL AGREEMENTS

2017 was a positive year for the Retail Banking and Institutional Agreements Division,

as it achieved the greatest growth in the last five years, with an increase in loans of

PEN 175 million in its active products (mainly in agreements) and a growth of PEN

129 million in deposits, generating an important increase in its income and profitability.

Furthermore, the indicators of delinquency and provisions remained around 1.57%

and PEN 16.8 million, which is below the average of the system for consumer loans.

In terms of the traditional Personal Banking products, we continued with our strategy

of creating synergy between segments, promoting the placement of MiVivienda loans,

as well as and consumer loans with free availability, including payroll-deduction and

pignorative loans.

In 2017 we promoted new loans under existing agreements and incorporated new

companies and entities. This way, we achieved a growth of 6.56%.

In addition, we generated a significant increase in the balance of MiVivienda mortgage

loans, which showed an annual growth of 23.8%.

Throughout the year, our passive products showed an increase of 13.4%, mainly in

term deposits and CTS.

The objectives proposed for loans granted to the Peruvian Armed Forces (FFAA) and

Police Force (PNP) segments were met through the implementation of new strategies,

strengthening the channels, products and coverage, as well as the performance of the

commercial team.

Our traditional identification with these institutions goes beyond the commercial

sphere, as we also participate in various military, sports and social activities and

provide our financial education and dissemination programs at the premises of both

the FFAA and the PNP.

8.5 TREASURY

In 2017, the Treasury Department granted interbank loans in local currency for a total

amount of PEN 11.61 billion, while PEN 44 million were received, with a total amount

of interbank loans granted in foreign currency of US$ 357 million, as opposed to an

amount received of US$ 6 million. Furthermore, PEN 6.82 billion were invested in

BCR term deposits in fixed-interest operations, whereas balances of PEN 7 million in

CDS BCRP, and PEN 50 million are kept in Treasury bills.

As for exchange operations, in 2017, purchases were performed for an amount of

US$ 154.6 million, US$ 110.7 million of which correspond to operations performed by

the Treasury Department with financial entities, US$ 30.9 million to clients of the

Enterprise Banking segment and US$ 13.6 million to Personal Banking clients. It is

worth mentioning that PEN 1.2 million was obtained from foreign exchange profits.

Finally, it can be concluded that the Treasury Department met all the requirements

demanded by the regulatory bodies (BCRP and SBS), such as reserve and liquidity

index controls.

9. SUPPORT UNITS

9.1 HUMAN RESOURCES MANAGEMENT

As of December 31, 2017, Banco de Comercio had 674 people on its payroll, whereas

at the end of 2016, the Bank employed a total number of 675 people.

2016 2017

Managers 6 6

Officers 289 282

Employees 343 345

Others 37 41TOTAL 675 674

Number of Personnel

In 2017, important goals were achieved in Human Resources Management.

Training

In 2017, a total of 29,819 hours of effective training were performed, which means an

8% growth compared to 2016. Likewise, each employee received 43.5 hours of

training with an average investment of PEN 523, which led to the highest hours of

training per employee ratio achieved in the past four years.

Performance Management

In 2016, performance objectives and goals were assigned to 99.6% of the Bank

personnel, which is a highly positive figure considering the fact that it is the third year

during which this model has been employed for all of the personnel.

On the other hand, 91% of the Bank managers were trained in employee performance

management tools, which reinforced their leadership competencies and abilities to set

objectives, follow-up and feedback aimed at the development of their employees.

For the second year, a series of training and development programs were established

entirely based on the performance results of the previous year. In addition, the

performance results could also be aligned with the other human resources processes,

such as, Career Plan Management, Succession Plan Management, Recruitment and

Internal Selection, among other processes. This way, an attempt was made to

promote a culture of development based on performance results.

Career Path

Two comprehensive training programs were implemented specifically aimed at

promoting career path development.

The Star Advisory Program: This program is aimed at preparing the Service

Advisors, Service Assistants and Call Center Assistants to participate in

processes performed by the different commercial areas of the Bank. At the end

of 2017, 48% of the participants in the Program (16 out of 33 employees) were

promoted after participating in internal selection processes.

Lead Advisor Program: aimed at Business Advisors, Service Managers and

Heads of Special Office Services, with the aim of preparing them for following

the career path to the position of Agency Manager. The following modules

were covered: Products, Product Assessment, Use of Applications,

Commercial Competencies, Results Orientation, Leadership, Excellence in

Service, and Innovation.

Culture Management

After carrying out a detailed diagnosis that allowed for discovering the strengths and

main barriers to the achievement of a culture of innovation, transversal training was

carried out (more than 1,600 hours of exclusive training in this subject), oriented

towards the strengthening of both technical as well as soft skills among the

employees.

Social Responsibility

The Social Welfare team started the so-called "Open a Smile" (Destapa una Sonrisa)

campaign. This project took place throughout 2017 and consists of the collection of

plastic lids, which are then donated to the "Christal Angels" (Angelitos de Cristal)

program, sponsored by the National Institute of Child Health, to support the treatment

of children suffering from epidermolysis bullosa.

This campaign, which has successfully registered the participation of all of the

divisions of the Bank, has a twofold objective: to develop a culture that respects the

environment, since plastic lids are recycled, and to provide solidarity support to

society.

9.2 TECHNOLOGY DIVISION

The Technology Division has improved its internal processes and strengthened its

governance and management structure with the creation of the Strategic Committee

on Information Technologies, a permanent advisory and management body to the

General Management, to establish the strategic link between the organization and

information technology (IT) management.

In order to meet the needs of the Bank in a more effective manner, the Technology

Division has modernized its Demand Management process by implementing more

agile methods, both in terms of projects and in the software development lifecycle,

causing the performance of its service capacity to be visible to the different business

units.

The IT strategy on application transformation focused on optimizing processes and

generating operational efficiency, with improvements in portfolio products and

agreements, incorporating secure Pin Pad transactions, development of online

transfers with the electronic clearinghouse and a new collection platform for multiple

services. In addition, the ERP platforms, as well as the signatures and powers-of-

attorney module were renewed.

In 2017, the Bank started the process of digital transformation, for which it hired an

international consulting firm that helped define a digital roadmap, which is being

successfully implemented.

In addition, in order to deliver value to the business and improve user experience, the

mobile application for customers (questions and transfers) and the mobile application

for prospecting for customers of the agreement products were implemented.

Finally, as part of the technological renovation strategy, the Bank decided to renew its

central computers, acquiring IBM Power 8 servers, which will allow for a 50% increase

in the current computing capacity, providing improved productivity by reducing the

amount of time required for processing.

9.3 OPERATIONS DIVISION

The Operations Division, which as a support area is responsible for processing all of

the operations performed by the Bank, has the mission of ensuring efficient and timely

operational support for the financial products and services offered by the Bank to

customers and users, within the framework of basic accounting principles, laws and

operational standards.

Thanks to the controls established in the Operations Division, the support of the

Management of the Bank, through our Board of Directors and the Internal Audit

Department, we can state that this Division has competently managed the

identification, treatment and control of the risks inherent to each process, thus

achieving the proposed objective, which is in line with the Comprehensive Risk

Management Policies, Business Continuity Management and Information Security of

the institution.

With the availability of a group of collaborators that work as a team, with their personal

and professional qualities and wide experience in the financial system, we have

managed to meet the needs of our clients with a high degree of satisfaction and

quality, which has allowed for us to be recognized by external institutions, thus

fulfilling the objective set by our Institution.

9.4 PROCESS MANAGEMENT

The year 2017 was a challenging period for the Bank in terms of process

improvement. We focus on optimizing processes aligned with strategic objectives and

focused on customer satisfaction, making use of approaches aimed at continuous

process improvement such as Lean, Six Sigma, and DMAIC, which are being applied

to improve efficiency and productivity. These approaches were worked out by

conducting workshops with the active participation of multifunctional teams, as well as

by using the so-called design thinking methodology.

Thanks to this new way of working, with the contributions of each of those involved in

the process and based on the needs of the customers, we were able to optimize

various processes, identifying the root cause of the problem, eliminating waste,

improving service times and making them more agile. The main achievements have

been:

In the process of acquiring customers and opening accounts, with the

support of the workshop, the contributions of all the participants were

collected, reducing service times by 80%, which is highly valued by the

customer.

In the process of personal loans under agreements with companies, we

managed to reduce the time for the constitution of an agreement by 50%.

The 2017 fiscal year was the first one in which this system was applied to processes

improvement, which resulted in benefits, since all different fronts were reviewed:

organization, policies, procedures, forms and - most importantly - the participation of

those involved in the process. By 2018, we will incorporate other tools to further

streamline the operations of the Bank.

9.5 GLOBAL RISK MANAGEMENT

Banco de Comercio manages risks with the objective of identifying, evaluating,

mitigating and responding to the contingencies that affect the goals established in the

Strategic Plan of the Bank. To this end, the Bank has defined its Risk Appetite and

Capacity, and establishes limits, which are monitored, and the evolution of these risks

is duly observed and timely disseminated within the institution, in order to quickly

establish corrective measures and align quickly, if necessary.

The Bank also is also permanently focused on strengthening the risk culture by

maturing their identification and mitigation in the institutional processes, and manages

the different risks through policies approved by the Board of Directors, based on the

regulations issued by the regulatory bodies, in accordance with the typical

characteristics of the business of the Bank and the risk appetite, which are described

in the manuals containing the Policies and Procedures in force.

The organizational structure of the Bank is in accordance with the size of the

company, in order to properly deal with risk management, for which the Board of

Directors has been established as the highest organ. The Bank also has a Risk

Committee which is set up as a global committee in charge of taking decisions with

regard to the most important risks to which the Bank is exposed, while it is also

responsible for approving the policies and the organization for Global Risk

Management. The Bank also has a Credit Risk Committee as a supporting entity for

the Board of Directors, which is in charge, among other functions, of taking the

decisions that correspond to the significant credit risks that may affect the Bank.

Banco de Comercio has consolidated a risk culture, as well as credit risk management

in three segments:

a. Loan agreements for FFAA and PNP members.

b. Consumer loans and mortgage loans.

c. Loans granted to medium, large and corporate enterprises.

Each of these segments has a model developed especially to serve its clients. We

have admission policies in accordance with the profile of each of the segments

outlined above, which are permanently assessed.

These policies and strategies are strengthened with efficient follow-up of the loan

portfolios throughout the validity of the loan, which, in turn, allows for coordinating the

activities with the Business and Collection and Recovery areas.

It should be noted that in March, Banco de Comercio obtained the renewal of the

authorization from the SBS to use the Alternative Standardized Approach (ASA) for

the Calculation of Effective Equity for Operational Risk until May 2020, thus

consolidating its maturity in the implementation of best practices for operational risk

management, business continuity and information security.

In terms of liquidity risk, measurement models adjusted to the requirements of the

Basel III Accords have been adapted, implemented by measuring the Liquidity

Coverage Ratio (LCR), for which limits and alerts have been established, within the

levels of appetite and risk capacity, allowing for adequate risk management, in

addition to other indicators related to sources of financing and quality of liquid assets.

For interest-rate risk, internal models, limits and early warnings are available, which

allow for adequate management within the established appetite and capacity levels. In

addition, constant monitoring of the indicators of Earnings at Risk (EaR) and Value at

Risk (VaR) is carried out.

9.6 MONEY LAUNDERING PREVENTION SYSTEM

In 2017, the ML/FT Risk Prevention and Management System implemented by the

Bank has functioned adequately thanks to the active participation by the staff of the

various areas of the institution, in executing the different activities contemplated by

this system, together with the permanent support provided by the Board of Directors

and the General Management for their compliance.

Likewise, the ML/FT Risk Committee and the Compliance Office have reviewed, as

part of the process of continuous improvement, the various aspects related to the

prevention system of the Bank to ensure its proper functioning, while recommending

the performance of a series of activities to strengthen the training processes of staff,

knowledge of our clients, employees, suppliers and other counterparties, as well as

the identification, communication and review of warning signals, as a prior step to the

identification of unusual and/or suspicious transactions, among others.

During this period, attention has also been given to the various regulations related to

the prevention and management of ML/FT risks issued by the Superintendence of

Banks and Insurance Companies (SBS, by its Spanish initials), and the corresponding

implementation activities have been carried out.

Among the main activities carried out during the year to strengthen staff knowledge

regarding AML/CFT procedures (SPLAFT, by its Spanish initials), it is worth

mentioning the so-called SPLAFT Trivia, which consisted of visiting several Bank

offices and agencies by surprise and selecting different people to ask them questions

related to the procedures of the ML/FT prevention system and, if necessary, giving

them feedback, including the awarding of prizes to staff who answered correctly, as

well as face-to-face training of front office staff, as a complement to the virtual

trainings. In addition, it is important to highlight the performance of an Anonymous

Client test, aimed at evaluating compliance with the main controls related to the

prevention of ML/FT, in the process of establishing clients.

With regard to our Sentinel Trading Compliance and Risk system, used by the

Compliance Office for the identification of warning signals and risk rating of customers

(LA/FT scoring), two new alert signal criteria were incorporated, aimed at monitoring

transactions carried out with cash dollars and for larger amounts.

10. MISCELLANEOUS

10.1 LISTING ON THE STOCK MARKET

The values registered in the Public Registry of the Stock Market, as of December 31,

2017, under the mnemonic BANCOMC1, are as follows: PEN 219,476,766 in shares

with a nominal value of PEN 1.00, with a capitalization of PEN 219,476,766.

The Bank has no current price on the Stock Market.

To date, the total amount of subordinated bonds issued during previous years is PEN

40,310,000.

The average price of these values at the closing of 2016 is detailed below:

10.2 SIGNING OF THE AUDITED FINANCIAL STATEMENTS

The financial statements corresponding to the 2017 fiscal year were audited by Caipo

y Asociados S. Civil de R.L., an independent member of KPMG International.

Banco de Comercio Fixed Interest

Average

ISIN Code Nemonic Year - Month Opening Closure Maximum Minimum price % % % % %

PEP11900D023 BNCOM0BS22 2017 - 09 100.1350 100.1350 100.1350 100.1350 100.1350

PEP11900D049 BNCOM0BS24 2017 -09 93.1317 93.1317 93.1317 93.1317 93.1317

2017 PRICES

10.3 FINANCIAL INFORMATION PREPARATION & REVISION – NEW

PEOPLE IN CHARGE

Those responsible for preparing and revising the financial information for the 2017

period are the General Manager, Aron Kizner Zamudio; the Administration and

Finance Division Manager, Luis Alberto Guevara Flores; the Head of the Legal

Department, Carmen Rosa Ganoza, and the General Accountant, Nicanor Edgar

Choque de la Cruz.

10.4 LEGAL, ADMINISTRATIVE, OR ARBITRARY PROCEDURES

El Banco de Comercio and its subsidiary Inversiones Banco de Comercio S.A. do not

have any legal, administrative or arbitrary procedures started against or in favor of

them that might significantly affect their operation results and financial position.

10.5 CULTURE & SOCIAL RESPONSIBILITY

In 2017, Banco de Comercio maintained a policy aimed at supporting the different

activities organized by the Peruvian Armed Forces (FFAA) and the Peruvian Police

Force (PNP) through topics relating to education and social responsibility, among

others.

Financial education for the Peruvian Armed Forces & the Police Force

Banco de Comercio, always trying to even further strengthen the links with the

Peruvian Armed Forces and the Police Force, developed a project on financial

education which consists in giving free talks to a variety of units and offices, in order to

improve the culture of good use of financial products and services, for the benefit of

the personnel working for those institutions. The idea of the course is to provide the

staff with basic knowledge in terms of loans, savings, credit cards, in addition to giving

advice. Since the initiative was implemented, only two months after the initiative was

implemented, three talks have already been conducted which were attended by

approximately 120 PNP and FFAA Officers.

The aim for next year is to conduct ten talks and to include more than 500 PNP and

FFAA Officers.

This initiative was led by the Quality Unit of the Marketing Department.

Social responsibility towards the FFAA & the PNP

THROUGH DONATIONS

Banco de Comercio, committed to social aid activities, financially supported the "Stella

Maris" Association, a non-profit social welfare institution made up of the wives of

Peruvian Navy officers (MGP, by its Spanish initials) and is constantly working

towards its main objective: to contribute to the welfare of MGP junior staff and their

families, as well as to carry out civic action activities within society. On this occasion,

the Bank participated in the benefit concert, which was aimed at raising funds for the

remodeling of the gastroenterology area of the Naval Medical Center ―Cirujano Mayor

Santiago Távara.‖

In December, the Bank donated bicycles and balls to the Board of Directors of the

Women's Committee of the Peruvian National Police, which is a non-profit

organization, to be raffled off among the children of the PNP staff for the Christmas

holidays. In addition, throughout 2017 Banco de Comercio continued its commitment

to support the activities of the Committee.

With the aim of bringing a moment of joy to the children of the native communities of

the Valley of the Apurimac, Eme and Mantaro Rivers (VRAEM, by its Spanish initials),

the Ministry of Defense and the Joint Command of the Armed Forces organized a

Christmas celebration that included the distribution of gifts, the donation of educational

materials and the inauguration of children's games.

On this occasion, Banco de Comercio visited the community of Puerto Ocopa, where

it donated children's games for the La Inmaculada School and the village of Puerto

Ocopa.

In order to foster unity and strengthen the family bond, Banco de Comercio

participated in the Christmas activities of the police and military family. On this

occasion, the institution donated food baskets, panettones, and toys, among others,

which were distributed among those who attended the festivities.

WE IDENTIFY WITH THE FFAA & THE PNP

As Banco de Comercio identifies with the FFAA and the PNP segment, we organized

several activities aimed at highlighting the human side of its members.

For Mother´s Day, Banco de Comercio donated several presents to the Navy, the Air

Force, the army, and the Police Force, in order for them to be raffled during the party

organized to honor the mothers on their day.

The Women’s Committee of the Police and the PNP Welfare Division received the

support from our Institution to organize the Father’s Day celebration as a way to

acknowledge the work performed by the police fathers. Gifts were delivered and

raffled among the officers and sub-officers present at the celebration.

PRESENCE OF BANCO DE COMERCIO IN SPORTS ACTIVITIES

Committed to sports activities, our Institution supported the participation of the higher

basketball team of the School for Peruvian Air Force Officers (EOFAP, by its Spanish

initials) in the Lima Basketball Champions League, aimed at promoting and increasing

participation in sports activities by its personnel. The Bank donated the complete

sports uniforms for the EOFAP team.

10.6 GOOD CORPORATE GOVERNMENT

Banco de Comercio continues to consider the implementation of Good Corporate

Governance practices a priority, thus providing an environment control and balance,

which is needed to reinforce good business practices. Thus, in recent years, we have

witnessed a double movement that places Corporate Government in the spotlight,

incorporating a process of strengthening and improvement, in order to participate in

the Good Corporate Governance Index (GCGI) of the Lima Stock Exchange (BVL).

In accordance with this alignment process, and considering the new Regulations on

Good Corporate Governance and Global Risk Management, approved through SBS

Resolution 272-2017, in 2017, the Bank has improved its standards, by submitting

them to a thorough revision. As a result, the efforts made by Banco de Comercio to

adopt and apply the Good Corporate Government practices, have become clear.

10.7 BRANCH & BRANCH OFFICES NETWORK

Banco de Comercio has a main office in San Isidro, Lima, ten branch offices in Lima,

and four branch offices located in the interior of the country, in the provinces of

Arequipa, Pisco, Piura, and Iquitos. In addition, twenty-one specialized and

information offices are located inside a variety of public and private institutions.

It is worth mentioning that in 2017 the special branch office Negrita9 was closed down

for strategic and market reasons. Furthermore, the Pisco and Iquitos10 offices were

relocated to areas with greater business potential.

9 Located on Avenida Venezuela Mz. C Lote 3-B, Arequipa.

10 Located on Calle Callao 172-176, Pisco; and Jr. Arica 455, Iquitos.

Branches in Lima

Office Address Business Hours Telephone

ArenalesAv. Arenales 797, Santa Beatriz,

Cercado de Lima

Mon-Fri: from 9:15 AM to 6:00 PM  

Saturday: from 9:30 AM to 12:30 PM 513-6003

ChacarillaCalle Monterrey 188 C.C. Caminos del

Inca, Surco

Mon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM 513-6004

Faucett Av. Elmer Faucett 525, San MiguelMon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM 513-6005

Jesus María Av. General Garzón 1299, Jesús MaríaMon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM 513-6006

Jockey

Plaza

C.C. Jockey Plaza, Centro Financiero

Interior, Número CF-B11, Surco

Mon-Fri: from 10:00 AM to 6:00 PM 

Saturday: from 10:00 AM to 1:00 PM513-6020

Lampa Jr. Lampa 560, Cercado de LimaMon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM 513-6008

MirafloresAv. Paseo de la República 4870,

Miraflores

Mon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM 513-6009

San Borja Calle Morelli 201, San BorjaMon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM 513-6011

San Isidro Av. Canaval y Moreyra 454, San IsidroMon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM 513-6000

Santa Anita Calle Las Alondras 269, Santa AnitaMon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM 513-6012

Simón

Salguero

Calle Simón Salguero s/n Cdra. 5 Esq. c

/ Sor Tita, Surco

Mon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM513-6007

Branches in the Interior of the Country

Office Address Business Hours Telephone

Arequipa Av. Ejército 711, YanahuaraMon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM (054)604-400

Iquitos Jr. Arica 455Mon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM (065)223120

Pisco Calle Callao 172-176, PiscoMon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM 513-6023

Piura Calle Libertad 905, PiuraMon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM (073)606-161

Specialized Branch Offices in Lima and in the Interior of the Country Office Address Business Hours Phone No.

La Marina Central Bazaar Av. Venezuela Cdra. 34 s/n, San MiguelMon-Fri: from 9:15 AM to 6:00 PM

Saturday: from 9:15 AM to 1:00 PM 513-6025        

Army Headquarters Av. Boulevard s/n, San Borja Mon-Fri: from 9:00 AM to 5:30 PM 513-6014        

Air Force HeadquartersAv. 28 de Julio s/n 1º piso, Block B y

ventanilla extendida Block A, Jesús MaríaMon-Fri: from 8:00 AM to 4:30 PM 513-6015        

Municipality of Lince Av. José de Zela 480, LinceMon-Fri: from 8:00 AM to 5:00 PM 

Saturday: from 9:00 AM to 1:00 PM 513-7051

Municipality of La MolinaCalle Chalana 152, Urb. Las Lagunas, La

Molina.

Mon-Fri: from 8:30 AM to 6:00 PM 

Saturday: from 9:30 AM to 1:15 PM 513-6016

Universidad Nacional Federico

Villarreal (UNFV) - Graduate

Jr. Camaná Cdra.11, Cercado de Lima.

Interior de la escuela de Post Grado de la

Universidad Nacional Federico Villareal

Mon-Fri: from 9:30 AM to 8:00 PM 

Saturday: from 9:30 AM to 12:30 PM 513-6019        

Universidad Inca Garcilaso de

la VegaAv. Arequipa 3610, San Isidro Mon-Fri: from 8:00 AM to 8:00 PM 513-6024

Universidad Inca Garcilaso de

la VegaAv. Bolívar 165, Pueblo Libre Mon-Fri: from 8:00 AM to 4:00 PM 513-6026

SedaparCalle Virgen del Pilar 1701, Cercado de

Arequipa

Mon-Fri: from 7:30 AM to 5:30 PM 

Saturday: from 9:30 AM to 12:00 PM (054)604-414

Arequipa Public Lighting

Services (SEAL, by its

Spanish initials)

Calle Consuelo 310 - Cercado de Arequipa Mon-Fri: from 7:45 AM to 4:45 PM (054)224-902

Universidad Alas Peruanas

Av. Paseo de la Cultura s/n.Urb. Daniel

Alcides Carrión G-14. Distrito de José

Luis Bustamante y Rivero, Arequipa. 

Mon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM

513-6000

Anexo 4542

Information Branch Offices in Lima and in the Interior of the Country

Office Address Business Hours Phone No. Extension

Callao Naval Base Base Naval del Callao - Callao Mon-Fri: from 9:00 AM to 3:00 PM 513-6000 4246

Air Group No. 8 Av. Elmer Faucett s/n, Callao Mon-Fri: from 8:30 AM to 5:00 PM 513-6000 4245

Las PalmasAv. Jorge Chávez s/n, Surco (ubicada dentro

de la Base Aérea Las Palmas)Mon-Fri: from 8:30 AM to 5:00 PM 513-6000 4810

Ministry of the InteriorPlaza 30 de Agosto s/n, Urb. Córpac, San

IsidroMon-Fri: from 8:00 AM to 4:00 PM 513-6000 4248

Informative Office of the

Peruvian Army

Intelligence School

(COEDE)

Av. Escuela Militar s/n, Chorrillos.  Escuela

Militar de Chorrillos - Puerta PrincipalMon-Fri: from 9:00 AM to 6:00 PM 513-6000 3532

CuscoAv. Tomasa Tito Condemayta 162-A2

Wanchaq, Cusco

Mon-Fri: from 9:15 AM to 6:00 PM

Saturday: from 9:30 AM to 12:30 PM084-256475 --

Huancayo Av. Giraldez 440, HuancayoMon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM513-6000 4890

Chiclayo Calle Vicente de la Vega 1148, ChiclayoMon-Fri: from 9:15 AM to 6:00 PM

Saturday: from 9:30 AM to 12:30 PM513-6000 4880

Trujillo Jr. Independencia N° 179, Lote A-1, interior B Mon-Fri: from 9:15 AM to 6:00 PM 

Saturday: from 9:30 AM to 12:30 PM513-6000 4886