Intercorp Financial Services Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Peru's Economy: Peru's GDP growth accelerated in the third quarter with cumulative growth of 3.3% as of August, driven by consumption-related sectors and private investment. Macroeconomic fundamentals remain stable with low inflation and a strong sol.
• IFS Performance: Sustained strong core results and profitability with an ROE of around 16%, despite a PEN 78 million provision related to Rutas de Lima. Interbank saw reversal of provisions related to Integratel. Accumulated earnings up 81% y-o-y.
• Loan Portfolio: Total loan portfolio expanded by over 5% y-o-y, outperforming the market. Higher-yielding loans grew 7% over the past year and 3% in the last quarter.
• Revenue and Expenses: Revenues grew 9% y-o-y, with fee income up 8% cumulatively. Expenses increased by 6% y-o-y due to strategic investments. Cost-to-income ratio at 37.7%.
• Synergies: Interbank and Izipay capture joint business opportunities, PLIN deepens user engagement. Interseguro leverages synergies with Inteligo and Interbank. Inteligo's assets under management at new highs.

Segment Performance

• Interbank: Grew in higher-yielding loans, particularly in consumer and small business segments, now representing 22% of the loan portfolio. Stronger net interest margin and better-than-expected cost of risk have driven a solid improvement in risk-adjusted NIM.
• Interseguro: Continued to grow its core business with solid performance in private annuities and life insurance, even after the negative impact from Rutas de Lima this quarter. Leverages synergies with Inteligo and Interbank.
• Inteligo: Wealth Management segment continues to grow in double digit, achieving new record high in assets under management.
• Overall, accumulated net income is up by 81% compared to the same period last year, accumulating 17.4% ROE, which would have been 18.3% excluding the one-off from Rutas de Lima. Net income from the quarter was PEN 456 million with an ROE of around 16%.

Guidance

• ROE: For the first 9 months of 2025, ROE stands at 17.4%, and expected to be closer to 17% by year-end, excluding Rutas de Lima impact.
• Loan Growth: Loan portfolio grew 5% y-o-y, expected to remain at similar levels by year-end.
• NIM: Expect a slight recovery in NIM over the remainder of the year, helped by lower cost of risk.
• Long-Term: Well positioned to continue executing growth strategy, maintaining profitability and leadership in Peruvian market.

Risks

• Political and Market Volatility: Political uncertainty and global market volatility remain risks.
• Rutas de Lima: Legal proceedings related to Rutas de Lima continue, with uncertainty around timing and amount of recovery. Remaining exposure less than 1% of investment book but still a concern.
• Pension Withdrawals: Potential impact on consumer loan disbursements due to pension fund withdrawals, though expected to be a short-term effect.

Question and Answer

• Q: Regarding the impairment of Rutas de Lima exposure and outlook for the fourth quarter, and the impact of pension withdrawals on retail growth?

A: Exposure has 40% impairment booked, legal proceedings ongoing with no precise outlook yet. Pension withdrawals have short-term effects but also positive impacts on funding and consumption, with growth expected to resume after short-term impact.

• Q: Expected loan growth for 2025 and 2026, especially acceleration of credit card loans and effect on NIM?

A: Expect to continue accelerating loan growth, with consumer loans growing ahead of GDP multiplier. Risk appetite increased, NIM to be positively affected by growth in credit cards and SMEs and lower cost of funds.

• Q: Expectation for corporate level disbursements in Peru in 2026 as a presidential election year?

A: No large projects expected in the coming months, corporate disbursements likely to be more on working capital replenishment and refinancing, with limited high growth.