Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Intercorp Financial Services Inc (IFS, Financial) reported a significant improvement in net income, doubling from the previous quarter to PEN286 million.
- The company's core banking franchise showed strong growth in commercial banking, with a notable increase in market share for loans and deposits.
- IFS's cost of risk decreased by 70 basis points quarter-over-quarter, indicating better risk management and a downward trend in risk indicators.
- Digital transformation efforts are paying off, with over 80% of retail banking customers now using digital channels and a high Net Promoter Score (NPS) of 61%.
- Interseguro, the insurance arm, saw a 25% year-over-year growth in premiums, maintaining market leadership in annuities and showing strong performance in individual life insurance.
Negative Points
- Despite improvements, IFS's net income is still below the levels of a year ago, indicating that the company has not fully recovered to its previous performance.
- The wealth management business remains volatile, with investment portfolio performance not meeting expectations, leading to lower-than-expected returns.
- Consumer loans showed a decrease of 2.1% year-to-date and 7% year-over-year, reflecting ongoing challenges in this segment.
- The cost of funds, although improving, remains a concern, with a need for continued proactive management to maintain efficiency.
- The company's exposure to higher-risk segments, particularly in consumer lending, has led to a higher cost of risk, which, although decreasing, is still a significant factor.
Q & A Highlights
Q: My first question will be on the wealth management business. We continue to see that the earnings are very volatile. Can you share your thoughts on strategies to manage more stable earnings in this subsidiary?
A: (Bruno Ferreccio, CEO, Inteligo SAB) We've been seeing strong growth in assets under management, which should continue to build fee income. We've increased our fixed income holdings and are booking them to avoid monthly P&L impacts. We've also been derisking our portfolio carefully to avoid realized losses.
Q: On asset quality, we noticed the NPLs increased quarter-over-quarter. Do you share the same concerns about the microfinance sector and some specific SMEs and retail segments remaining challenging in the second half?
A: (Luis Felipe Castellanos, CEO, Intercorp Financial Services) Our cost of risk is coming down due to actions taken last year, targeting lower-risk customers, and a mild economic recovery. We expect this improvement to continue. (Michela Casassa, CFO, Intercorp Financial Services) Our portfolio has derisked, especially in consumer loans, and our conservative approach in commercial loans has kept our PDL ratios low.
Q: Could you elaborate on the potential drivers for achieving ROEs above 12% in the second half?
A: (Luis Felipe Castellanos, CEO, Intercorp Financial Services) The improvement in cost of risk and cost of funds will positively impact ROE. We expect Interbank's and Inteligo's ROE to boost in the second half due to these factors.
Q: What was your experience with the performance of the Reactiva program, and how do you see the financial system in general?
A: (Luis Felipe Castellanos, CEO, Intercorp Financial Services) The Reactiva program had a positive experience, and the financial system is well-regulated and capitalized. (Carlos Tori, CEO, Interbank) Reactiva had low credit losses, and Impulso MyPeru, which has a different structure, also shows positive results with low credit losses.
Q: Can you explain the decision to integrate Izipay and not have it as a separate segment anymore?
A: (Carlos Tori, CEO, Interbank) The integration fosters synergies with our commercial banking segment and payment systems. The stand-alone financials of Izipay no longer reflect the actual results due to these synergies.
Q: Regarding loan growth and margins, how much of the expected improvement in NIM is on the asset side versus the funding side?
A: (Michela Casassa, CFO, Intercorp Financial Services) Most of the recovery should come from the cost of funds. Yield on loans might stabilize as consumer loan portfolio decreases and Impulso MyPeru loans are replaced with higher-yield loans.
Q: When do you expect a pickup in growth in the credit card business?
A: (Carlos Tori, CEO, Interbank) We've been issuing more cards and seeing good activation, but financing usage is low due to high liquidity in the consumer segment. We expect more financing on new cards in the coming months.
Q: How do you see your loan book over the medium term, especially regarding your exposure to consumer lending?
A: (Luis Felipe Castellanos, CEO, Intercorp Financial Services) We aim for a balanced portfolio strategy, maintaining a 50% commercial and 50% retail mix. We will review this in our upcoming strategic planning process.
Q: What are the sustainable levels for NIM and cost of risk to target your 18% ROE for the consolidated entity?
A: (Michela Casassa, CFO, Intercorp Financial Services) Cost of risk should be closer to 3%, slightly above, in the mid-term. We expect to end the year with cost of risk around 3.5%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
