Intercorp Financial Services(IFS) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Intercorp Financial Services (IFS) reported a return on equity (ROE) of 17.4%, reflecting a strong recovery in core business despite negative impacts on the investment portfolio [15][58] - Earnings grew over 50% on a quarterly basis, driven by strong growth in the core banking business and partial recovery of insurance and wealth management investment portfolios [16] - Yearly earnings decreased by 24%, primarily due to extraordinary results in the first quarter of 2021 that were not replicated this year [16] Business Line Data and Key Metrics Changes - At Interbank, ROE reached 19.1%, with significant growth in consumer finance and SME, particularly in credit cards and personal loans, which increased by 41% year-on-year [17] - Interseguro's earnings grew almost threefold quarter-on-quarter, with ROE at 15.7% and gross premiums plus collections increasing by 26% year-over-year [18] - Inteligo faced challenges with its investment portfolio, resulting in a slight decrease in assets under management due to negative mark-to-market valuations [19] Market Data and Key Metrics Changes - The efficiency ratio for IFS remained healthy at 37%, despite negative impacts from the investment portfolio [21] - Total revenue for IFS grew double-digit on a quarterly basis, with Interbank's revenues increasing by 16.5% year-over-year when excluding extraordinary gains from the previous year [22] - The cost of risk was reported at 1.4%, below the guidance of 1.8% and still below pre-COVID levels [39] Company Strategy and Development Direction - The company announced the acquisition of a 50% stake in Izipay, completing 100% ownership, which is expected to enhance its competitive positioning in the payments landscape in Peru [12][27] - IFS is focused on a two-tier digital strategy to foster growth, emphasizing digitalization of core activities and new growth initiatives [43][44] - The company aims to empower Peruvians to achieve financial well-being through its services and products [12] Management's Comments on Operating Environment and Future Outlook - The management highlighted a volatile macro and political scenario in Peru, with GDP growth expectations between 2.5% and 3% for the year [9][31] - Political uncertainty is expected to persist, impacting public and private investment recovery [10] - Despite challenges, the company remains resilient, with a strong recovery in core banking and sound risk indicators [10][31] Other Important Information - The company reported a significant increase in digital customer engagement, with 65% of customers interacting digitally in the last 30 days [48] - Inflation in Peru reached 8% as of April, with the Central Bank's reference rate increasing to 5% [32] - The company is committed to sustainability efforts, focusing on inclusion, environmental finance, and corporate governance [54][56] Q&A Session Summary Question: Sensitivity of IFS's net interest income to interest rates - Management indicated a neutral to positive effect from a 100 basis point increase in soles rates, while a similar increase in dollars would have a negative impact of around $4 million to $5 million [71][72] Question: RappiBank joint venture evolution - The RappiBank initiative has seen close to 60,000 credit cards placed, but management is refining the value proposition due to challenges in customer loan uptake [75][78] Question: Loan growth and asset quality impact from inflation and interest rates - Management expressed confidence in maintaining strong ROE levels, with sustainable ROE projected at over 18% in the coming years [90][91]