Intercorp Financial Services(US:IFS)2024-02-13 19:52Financial Data and Key Metrics Changes - Cost of funds remained flat at 4.2%, showing the first impacts of a decrease in the soles rate [1] - Quarterly return on investment portfolio was extraordinarily high at 7.2%, mainly due to dividends received [2] - EBITDA contracted due to margin compression in a competitive landscape [3] - Cost of risk for the bank remained high at 5.2%, with retail cost of risk at 8.3% [50] - ROE for the full year 2023 stood at 11.3% [67] Business Line Data and Key Metrics Changes - Banking saw a 10% growth in total revenues, with net interest income growing 13% [49][52] - Wealth management experienced a significant increase in assets under management, with a 4% quarterly growth [54] - Insurance business posted solid investment results, with individual life and private annuities growing by 6% and 40% respectively [94] - Payments segment saw a 25% year-over-year increase in Izipay merchants, reaching 1.3 million [95] Market Data and Key Metrics Changes - The Peruvian economy is expected to recover with a GDP growth of around 3% in 2024 [45] - Inflation decreased consistently during the second half of 2023, with the central bank reducing the soles reference rate by 100 basis points [42][64] - Market share in retail deposits reached 15.1%, with significant growth in payroll inflows and sales financing [73] Company Strategy and Development Direction - The company aims to become the leading digital financial services solution, focusing on operational excellence and advanced analytics [41] - There is a strong emphasis on digital transformation, with digital investments increasing fivefold over the past five to seven years [36] - The strategy includes increasing transactional volumes and offering additional services to merchants [3] Management's Comments on Operating Environment and Future Outlook - Management expects the second half of 2023 to be better than the first half, despite potential disruptions from El Nino [8] - The company anticipates a continued path to recovery towards midterm targets in core profitability, with an IFS ROE above 12% for 2024 [5] - Cost of risk is expected to remain high in 2024 but should trend downwards thereafter [9][57] Other Important Information - The company has been included in the MSCI small cap index [77] - The efficiency ratio at IFS is expected to remain around 37%, one of the best in the region [57] Q&A Session Summary Question: How should we think about OpEx growth this year? - Management indicated that OpEx growth should be in line with inflation, with continued investments in technology and disruptive initiatives [7] Question: What is the outlook for cost of risk? - Cost of risk is expected to remain high in 2024 but should normalize in the following years, with a target of below 4.3% [9][81] Question: What are the expectations for NIM? - NIM is expected to be stable and above 5.5%, influenced by cost of funds and changes in the loan portfolio mix [82] Question: When should we expect ROE to normalize? - ROE is expected to start normalizing after 2024, with a target of around 18% in the medium term [105]