Intercorp Financial Services(US:IFS)2024-08-15 19:24Financial Data and Key Indicators Changes - The company reported a net income of S/ 286 million for Q2 2024, more than doubling from the previous quarter, although still below year-ago levels [15][36] - Return on equity (ROE) improved to 11.2%, up 400 basis points from the previous quarter [13][36] - Cost of risk decreased by 70 basis points quarter-over-quarter and more than 120 basis points from the peak in Q4 2023 [13][19] Business Line Data and Key Indicators Changes - Interbank's market share in consumer banking loans reached 21.8% and total deposits at 13.6%, ranking third in the Peruvian financial system [12] - Wealth management assets under management grew 15% year-over-year, reaching a historical maximum of $6.8 billion [31] - Insurance premiums increased by 8% quarter-over-quarter and around 25% year-over-year, with individual life growing 18% year-over-year [30] Market Data and Key Indicators Changes - The Peruvian economy showed signs of recovery with GDP growth of 5.3% in April and 5% in May 2024, leading to an expected GDP growth of around 3% for the year [5][9] - Inflation decreased to 2.3% in June, within the Central Bank's target range, reflecting successful control of inflation [9][10] - The total system consumer loans decreased by 2.1% year-to-date and 7% year-over-year, indicating ongoing challenges in this segment [10] Company Strategy and Development Direction - The strategic priority remains achieving digital excellence and becoming the leading digital platform with profitable growth [7] - The company is focused on enhancing synergies among its businesses and continuously developing analytical capabilities [7] - The integration of Izipay into the banking operations aims to leverage synergies and improve overall performance [56] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the macroeconomic environment and its positive impact on the company's results [5][6] - The expectation for ROE to exceed 12% in the second half of the year is based on improved cost of risk and market conditions [34][43] - Management highlighted a cautious approach to lending, particularly in the microfinance sector, while targeting lower-risk customers [42][46] Other Important Information - Interbank received multiple awards from Euromoney, including Peru's Best Bank and Best Digital Bank, reflecting strong performance and commitment to corporate responsibility [8][32] - The company has completed an initial climate risk assessment and expanded its sustainable loan portfolio to over $200 million [31][32] Q&A Session Summary Question: Insights on wealth management earnings volatility and future strategies - Management noted strong growth in assets under management and plans to stabilize earnings through increased fixed income holdings and de-risking the portfolio [37][39] Question: Concerns about asset quality and NPLs - Management acknowledged the increase in NPLs but emphasized a downward trend in cost of risk due to a cleaner portfolio and targeting lower-risk customers [42][44] Question: Drivers for achieving ROE above 12% in the second half - Management indicated that continued improvement in cost of risk and a stable economic environment would positively impact ROE [43][46] Question: Experience with Reactiva program and financial system concerns - Management expressed confidence in the stability of the Peruvian financial system, highlighting strong regulation and limited exposure to failing institutions [50][51] Question: Integration of Izipay into banking operations - Management explained that integrating Izipay allows for better synergies and reflects the evolving nature of the business, moving away from treating it as a separate segment [56]