DETERMINANTS OF THE COST OF CREDIT AND SEGMENTATION OF PERUVIAN BANKING IN THE PERIOD 2010-2019

Abstract

The main objective of this research was to establish how the determinants of the cost of credit affected the behavior of the national banking market in the period of analysis. As well as validating that the segments with the highest cost of credit are not the most profitable in Peruvian banking. The research will seek to develop a greater theoretical understanding of the variables that determine the credit profit margins of Peruvian banks, analyzing the concepts of concentration, segmentation, risk and profitability of the market, showing the mechanisms that different banks use in defining their target customer segments. As an analysis methodology, the Superintendency of Banking and Insurance and AFPs were used as a source of information, which allowed for 560 quarterly observations of the banking market in the period 2010-2019, to validate the relationship between the cost of credit of the banks and their determinants such as financial, credit and operational costs, as well as banking segmentation of clients according to their risk profile. A Panel Data econometric model was used with fixed effects with autoregressive terms. The results show us that there is a positive relationship between the determinants and the cost of credit, especially in terms of the credit cost (risk level) with a probability of 30.9% (95% CI: 0.1694-0.449) and the operating cost with a probability of 63.7% (95% CI: 0.4215 – 0.854) affecting the cost of bank credit. Likewise, it was found that the institutions carried out their credit operations based on the defined segmentation of their target clients. Thus, uncertainty and segmentation play a vital role in the cost of credit in the Peruvian financial market.

KEYWORDS: banking, economic concentration, profitability, risk.