(Updates with additional detail)

May 9 (Reuters) - Credicorp, one of Peru's largest financial holding companies, on Thursday posted a first-quarter net profit of 1.512 billion soles ($409.76 million), up 9% from the year-ago period as the bank freed up funds previously retained due to the El Nino weather phenomenon.

The group reversed around 250 million soles in funds previously set aside for provisions, meant to cover potential losses on non-payment of loans.

Executives

said in February

that the periodic El Nino effect, which warms the Pacific Ocean and fuels tropical cyclones, floods and rainfall across the Americas and elsewhere, had begun to fade.

Net interest income, the difference between what banks earn on loans and dole out to pay down liabilities, increased 9.4%, driven by a shift in the loan book toward retail and a repricing of dollar-denominated loans.

Credicorp's return on equity (ROE) dipped slightly to 18.2% in the quarter, though the firm has said it is targeting a "sustainable" ROE at 18% by 2025.

Its cost of risk, an indicator of expected losses, meanwhile rose 30 basis points year-over-year to 2.3% while non-performing loans rose to 6.2% of the loan book in the period.

The results "reflect diverse revenue streams, seasonally low expenses and a reversal of provisions set aside for El Nino last quarter," Chief Financial Officer Cesar Rios said in a statement.

The release came as Peru's central bank

cut its benchmark interest rate

by 25 basis points to 5.75% on Thursday, with inflation coming within the monetary authority's target range. (Reporting by Kylie Madry; Editing by Brendan O'Boyle)