Intercorp Financial Services(IFS) - 2024 Q4 - Annual Report

Risk Management - Interbank aims for sustainable long-term growth by balancing risk policies and profitability [1483] - The main types of risks managed by Interbank include credit, market, liquidity, and operational risk [1485] - Interbank employs a Statistical Rating System to classify companies based on their expected default probability, focusing on those with at least S/3.0 million in annual sales [1498] - The Watchlist System categorizes clients with potential risks into four categories, including surveillance and guarantee [1501] - Interbank's risk management tools for small business banking include collection scores to define collection strategies during the early stages of default [1508] - The Non-Performing Assets Monitoring System helps evaluate overdue companies and focus recovery efforts on high-risk loans [1502] - Interbank's operational risk management follows Basel standards and is integrated into its digital transformation process, aiming for sustainable and efficient risk management [1537] - Interseguro employs a three-step process to mitigate credit risk, including regulatory limits on investment types and minimum credit ratings [1542] - The company has established a risk management structure that includes key risk indicators (KRI) monitored by senior management and the Integral Risk Management Committee [1555] - Interseguro's operational risk management aims to reduce operational losses and identify potential process risks [1557] - Inteligo's operational risk management follows Basel III regulations, utilizing a standardized approach to identify and mitigate risks [1585] Loan Approval Processes - The approval levels for commercial loans vary significantly, with amounts exceeding U.S.$70 million requiring two directors' presence at the committee meeting [1496] - In small business banking, credit approval is determined by cash flow and credit history, with amounts up to U.S.$272,000 requiring only a Risk Manager's approval [1506] - Retail banking approvals utilize a parameterized decision-making system, with credit card approvals requiring a minimum of U.S.$34,538 for the Vice President of Risk Management [1511] - The company has developed a credit risk scorecard system to classify applicants based on leverage ratio, debt service, and collateral quality [1563] Financial Performance - Interbank's total assets as of December 31, 2024, amounted to S/68,785.2 million, with a significant portion in loans net of unearned income totaling S/49,337.9 million [1525] - The total liabilities of Interbank as of December 31, 2024, were S/55,871.8 million, with deposits and obligations constituting S/44,070.9 million [1525] - As of December 31, 2024, Interseguro's Value at Risk (VaR) for its investment portfolio was S/600.6 million, a decrease of 4.9% from S/605.5 million in 2023 [1545] - The investment portfolio increased by more than S/891.5 million from December 31, 2023, despite a decrease in VaR due to the absence of high-risk instruments [1545] - Interseguro's total interest-bearing liabilities amounted to S/14,517.3 million as of December 31, 2024, with a marginal gap of (855.0) million [1549] - The company recorded a 0.01% non-performing loan ratio in its wealth management segment as of December 31, 2024, indicating effective credit risk management [1560] - Interseguro's investment portfolio increased by more than S/1,458.1 million from December 31, 2022, to December 31, 2023, leading to increased exposure to market risk [1546] Risk Exposure and Monitoring - The interest rate risk tracking is reported to the Integral Risk Management Committee, with a marginal gap of (22,527.6) million for December 31, 2024, indicating a substantial exposure [1525] - The accumulated gap for interest rate risk as of December 31, 2024, was (22,527.6) million, reflecting the potential impact of interest rate movements on the valuation of assets and liabilities [1525] - Interbank's liquidity risk is managed by the Vice President of Capital Markets, with oversight from the Integral Risk Management Committee, which defines acceptable risk levels [1534] - The total VaR for Interbank's trading book was S/0.9 million as of December 31, 2024, showing a reduction in risk exposure compared to previous years [1527] - Interbank's foreign exchange position includes both spot and derivative positions, with daily monitoring to manage exposure levels by currency [1532] - The interest rate risk was reduced due to the exit of Interbank's treasury position and a lower net position in forwards, contributing to a decrease in overall risk [1528] - As of December 31, 2024, Inteligo's total Value at Risk (VaR) decreased to S/50.4 million, down S/35.7 million from December 31, 2023, primarily due to improved stock market conditions and easing inflation [1570] - The VaR for interest rate risk decreased to S/9.9 million as of December 31, 2024, a reduction of S/2.8 million compared to the previous year [1570] - The price risk VaR significantly dropped to S/39.6 million as of December 31, 2024, down S/30.8 million from December 31, 2023 [1570] - Inteligo's loan portfolio is monitored monthly by the Risk Unit to ensure early detection of credit performance deviations, maintaining a healthy loan portfolio [1564] - The company has established maximum exposure limits for its investment portfolio, calculated monthly to manage risks associated with individual issuers and investment types [1577] - Inteligo's liquidity risk is low, as most deposits are historically renewed, and over half of the investment portfolio can be easily liquidated [1581] - The average loan term is less than one year, contributing to the stability of funding sources for Inteligo [1581]