Intercorp Financial Services(US:IFS)2022-08-16 23:00Financial Data and Key Metrics Changes - Intercorp Financial Services reported earnings of $251 million for Q2 2022 and $655 million for the first half of the year, impacted by a loss in the investment portfolio of $147 million in Q2 and $171 million in the first half [19][20] - The quarterly Return on Equity (ROE) stands at 11%, with a first half ROE of 14.2%, affected by the investment portfolio losses [20][63] - The banking, insurance, and payments segments reported strong ROEs of 19.4%, 31.6%, and 26.9% respectively for the quarter [20] Business Line Data and Key Metrics Changes - Banking showed double-digit growth in net interest income and fees, with a client base growth of nearly 20% year-over-year [21] - Insurance profits nearly doubled quarter-over-quarter, with a 27% increase in interest income [22] - The payments segment, particularly Izipay, demonstrated profitability with a 27% ROE for the quarter [23] Market Data and Key Metrics Changes - The Central Bank increased the policy rate by 50 basis points to 6.5%, with inflation decreasing slightly to 8.7% in July [12][34] - The exchange rate fluctuated, reaching PEN3.83 per dollar, while the overall economic growth for June was reported at 3.4% [11][34] Company Strategy and Development Direction - The company is focused on a two-tier digital strategy to enhance growth and operational efficiency [16][32] - There is an emphasis on sustainability initiatives and financial inclusion for Peruvians [60][61] - The payments ecosystem is being developed to leverage synergies among various digital payment platforms [59] Management's Comments on Operating Environment and Future Outlook - The management highlighted a challenging macroeconomic environment with high inflation and political uncertainty affecting consumer confidence [10][9] - Despite these challenges, the company remains resilient, with expectations for recovery in investment performance and continued growth in core banking operations [13][14] Other Important Information - The company has seen a significant reduction in the number of branches, optimizing its operational footprint by over 40% since 2016 [29] - The capital position remains strong, with a Core Tier 1 ratio of 11.1% and a total capital ratio of 15.2% [31][62] Q&A Session Summary Question: What was behind the loss in the wealth management business? - The loss was primarily market-related, affecting both equity and fixed income investments due to significant volatility in the markets [73][74] Question: What are the expectations for asset quality and MPL ratios? - The company anticipates a return to pre-pandemic MPL levels by year-end or early next year, with ongoing adjustments to underwriting standards [80][82] Question: What is the profitability level of digital channels like Izipay, Plin, and Tunki? - Izipay is already profitable, while Tunki is not yet profitable but has low acquisition costs and is growing steadily [84][90] Question: What are the growth expectations for the payments business? - The payments business is expected to continue growing, with a focus on increasing transaction volumes and expanding services offered to merchants [102] Question: What is driving the slower growth in payroll loans compared to other consumer loans? - The slower growth is attributed to disciplined pricing strategies amidst rising costs of funds and a focus on sustainable growth [107][110] Question: What are the expectations for risk-adjusted NIM for the rest of the year? - The company expects NIM to continue improving but at a more moderate pace, with risk-adjusted NIM likely stabilizing due to mixed influences [117][118]