Intercorp Financial Services(US:IFS)2021-11-14 06:53Financial Data and Key Metrics Changes - Intercorp Financial Services reported record earnings of PEN 551 million in Q3 2021, with a return on adjusted equity (ROE) of 23.1% [16] - The nine-month cumulative earnings reached PEN 1,535 million, with a 22% ROE and a 2.3% return on assets [17] - Revenues grew nearly 18% in the nine-month period, with an efficiency ratio of 32% [17] Business Line Data and Key Metrics Changes - At Interbank, earnings were PEN 299 million with an ROE of 18.6%, and retail loans grew 3.6% in the quarter, gaining 10 basis points market share to 18.8% [18] - Interseguro's gross premiums plus collections grew almost 17% quarterly and 90% year-over-year, with a market-leading share of 29.7% in annuities [19] - Inteligo's profit surged due to mark-to-market on investments, with assets under management and deposits growing 4.2% quarter-over-quarter and 22.8% year-over-year [20] Market Data and Key Metrics Changes - Economic activity in Peru has started to decelerate, with GDP growth estimates for 2022 ranging from 1.5% to 2% [24] - Political uncertainty continues to impact growth, particularly in private investment [24][26] - The exchange rate and inflation are influenced by political uncertainty and international pressures, with inflation in Peru slightly below its Latin American peers [26] Company Strategy and Development Direction - The company aims to grow sustainably and empower Peruvians to achieve financial well-being, focusing on digital strategies and adapting to changes [13] - A strong balance sheet with capital and liquidity levels significantly better than pre-COVID levels is emphasized [22] - The company continues to focus on efficiency and branch rationalization, with a low efficiency ratio of 32% [48] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to a new normality in 2022, despite ongoing political challenges and low consumer confidence [9][11] - The company expects retail loans to continue growing, while commercial loans may decrease due to Reactiva loans and investment slowdowns [76] - Cost of risk is anticipated to normalize but remain below pre-COVID levels, with a sustainable ROE target of around 18% [82] Other Important Information - An extraordinary dividend of $0.65 per share was approved, optimizing the capital structure given the comfortable capital position [69] - The company has seen significant digital adoption, with 79% of customers interacting digitally in the last 30 days [38] Q&A Session Summary Question: Loan growth and net interest income expectations - Management noted that loan growth was flat due to Reactiva loans amortizations, but retail loans grew 3.6% [74] - For next year, similar trends are expected with retail growth and commercial loan decreases due to Reactiva [76] - Net interest income is expected to increase slightly above loan growth due to rising rates and improved credit card portfolio risk [77] Question: Cost of risk normalization - Cost of risk is below pre-COVID levels, with expectations for gradual increases but not reaching pre-COVID levels soon [81] Question: Political uncertainty impact - Political uncertainty remains a concern, affecting consumer and business confidence [87] Question: Deposit dynamics and strategy - The increase in retail deposits is attributed to aggressive digital strategies and participation in government cash distribution [88][90] Question: Efficiency ratio expectations - Efficiency is expected to remain under pressure due to digital investments, with a target of below 40% for IFS as a whole [97] Question: Reactiva loans strategy - The company is offering replacement loans for Reactiva loans, particularly focusing on medium-sized enterprises [99][102] Question: Digital payment solutions monetization - Monetization strategies for digital solutions like Plin and Tunki include merchant partnerships and service payments [108][109]