Intercorp Financial Services(IFS) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Intercorp Financial Services reported record earnings of PEN 528.7 million in Q1 2021, with a return on adjusted equity of 23.7% [15][53] - Earnings growth was observed across all subsidiaries, supported by lower provisions and strong investment results [15][19] - Cost of risk was reported at 1.8%, below pre-COVID levels, indicating improved credit quality [33][39] Business Line Data and Key Metrics Changes - At Interbank, there was a strong recovery in earnings due to lower provisions and higher investment results [15][16] - Retail loans resumed growth, with a strong deposit franchise holding a 40.1% market share in retail deposits [16][46] - Interseguro experienced a profit surge driven by higher investment results, with gross premiums and collections up 14.3% quarterly and 25% yearly [17][48] - Inteligo reported a return on adjusted equity of 30.7%, with significant growth in fee income and assets under management [18][51] Market Data and Key Metrics Changes - Economic activity in Peru is recovering, with GDP growth estimated at nearly 20% for March 2021, supported by public investment and private consumption [9][10] - The Central Bank maintained its policy rate at 125%, reflecting limited inflationary pressures [10] - The liquidity in the financial system improved due to funds from private pension funds and the Reactiva Peru program [23] Company Strategy and Development Direction - The company remains focused on helping customers during challenging times and aims for profitable growth through efficient resource deployment [13][20] - Digital transformation is a key strategy, with 78% of the customer base being digital users, and 57% being 100% digital customers [30][31] - The company is committed to maintaining a strong balance sheet with improved liquidity and capital levels compared to pre-COVID [20][56] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience amid uncertainty, emphasizing the importance of experience and skills in navigating challenges [12][13] - The outlook for 2021 includes expectations for low double-digit GDP growth and a focus on efficiency and branch rationalization [10][41] - Management anticipates a gradual recovery in retail loan growth and an improvement in net interest income as economic conditions stabilize [60][62] Other Important Information - The company is monitoring legislative changes, including proposals from the Central Bank regarding interest rates and fees, which are not expected to significantly impact operations [72][75] - The company is actively engaged in legal procedures regarding the constitutionality of new laws affecting the financial sector [11][75] Q&A Session Summary Question: How to think about earnings for the next quarters considering this quarter was driven by high market-related revenues? - Management acknowledged that market-related results should normalize, but expects retail portfolio growth to drive revenues, offsetting potential increases in expenses [59][60] Question: Can you elaborate on the recovery of credit cards and the impact of pension fund withdrawals? - Management noted a recovery in credit cards linked to macroeconomic activity and improved risk assessment, with expectations for gradual growth in the portfolio [64][65] Question: How is the bank positioning itself in terms of liquidity and risk-taking during this period of uncertainty? - Management emphasized reinforcing liquidity positions, maintaining strong capital levels, and cautious underwriting standards during uncertain times [69][70] Question: What is the impact of Central Bank proposals on interest rates and fees? - Management indicated that the impact would be minimal, estimating less than PEN 40 million in revenue impact, but expressed concern over potential effects on payment behavior [72][75]