Intercorp Financial Services Inc. (IFS) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong financial performance, including a significant increase in net income and ROE, improved cost of risk, and growth in retail banking customers. Despite a slight decline in loan yields, other financial metrics like AUM and insurance premiums show robust growth. The Q&A session supports this positive outlook, with expectations for improved NIM and manageable OpEx growth. The market cap indicates a potential positive reaction, likely in the 2% to 8% range, given the overall strong financial health and optimistic guidance.
Key Financial Performance
Net Income PEN 580 million at IFS with an ROE of around 21%, double what was reported a year ago and 30% higher than the last quarter. This growth was driven by solid investment results and strong performance in core businesses.
Cost of Risk 2.5%, which is 150 basis points below last year. This improvement is attributed to a better portfolio mix and improved client payment behavior.
Cost of Funds Improved by 40 basis points year-over-year, primarily due to a better funding mix.
Retail Primary Banking Customers Grew 10% in the last year, reflecting strengthened primary banking relationships.
Other Income in Wealth Management Grew 5.3x year-over-year, driven by strong investment performance.
Written Premiums in Insurance Increased by 77% year-over-year due to growth in private annuities and life insurance.
Consumer Portfolio Growth Cash loan disbursements increased by 80% year-over-year, and credit card turnover rose 15% year-over-year. However, the overall consumer portfolio expanded by only 0.6% in the last quarter due to cautious supply and demand dynamics.
Total Loans Grew 6% year-over-year, outperforming the system by a multiple of around 3x, resulting in a gain of 30 basis points in total market share.
Loan Yields Declined 70 basis points year-over-year to 9.9%, but remained stable versus the first quarter. This was due to lower market rates and loan book mix.
Assets Under Management in Wealth Management Grew 14% year-over-year, reaching new highs of $7.8 billion, supported by strong client engagement and market performance.
Contractual Service Margin in Insurance Grew 17% year-over-year, mainly driven by individual life insurance.
Short-term Insurance Premiums Grew by over 110%, driven by disability and survivorship premiums acquired through a 2-year bidding process from the Peruvian private pension system.
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Operating Highlights
Digital Excellence: IFS aims to become the leading digital platform in Peru, focusing on advanced analytics and customer experience.
PLIN Metropolitano: Launched to expand use cases and accelerate adoption of digital payments.
Interfondos App: Enhanced to act as a digital adviser for mutual funds clients.
Market Share Growth: Interbank gained 90 basis points in commercial banking market share, driven by focus on midsized companies and synergies with Izipay.
Wealth Management Expansion: Inteligo's assets under management grew 14% year-over-year, reaching $7.8 billion.
Insurance Growth: Interseguro saw a 77% year-over-year increase in written premiums, driven by private annuities and life insurance.
Cost of Risk: Quarterly cost of risk stood at 2.5%, 150 basis points below last year.
Funding Mix: Cost of funds improved by 40 basis points year-over-year due to a better funding mix.
Loan Growth: Total loans grew 6% year-over-year, outperforming the system by 3x.
Sustainability Initiatives: IFS advanced renewable energy efforts and trained corporate banking executives in Climate Technologies.
Inclusive Growth: Supported over 1.2 million entrepreneurs through Izipay and provided financial training to 3,600 entrepreneurs.
Diversity and Inclusion: Interbank ranked #2 in Great Place to Work Diversity, Equity, and Inclusion ranking.
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Risk or Challenges
Market Conditions: The international context and next year's presidential elections in Peru could introduce volatility, potentially impacting the company's operations and financial performance.
Consumer Loan Growth: The growth of the consumer portfolio has been slower than expected, reflecting both supply and demand dynamics. Ongoing liquidity events, such as several funds withdrawals, have provided extra liquidity to clients, reducing their need for additional credit.
Competitive Pressures: The consumer lending environment remains challenging, especially in a more competitive market, which could impact the company's ability to grow its retail portfolio.
Regulatory and Economic Uncertainty: Global uncertainty and potential regulatory changes could affect the company's operations and financial stability. Additionally, the Central Bank's cautious approach to easing rates may delay financial system recovery.
Strategic Execution Risks: The slower-than-expected recovery in consumer loans and the cautious approach to growth in higher-yielding segments may hinder the company's ability to meet its strategic growth targets.
Supply Chain and Operational Challenges: The company faces challenges in maintaining a low cost of risk and stable NIM amidst slower consumer loan growth and lower market rates, which could pressure margins.
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Guidance & Outlook
Peruvian Economy Growth: The Peruvian economy is projected to grow by 3.1% in 2025, driven by private investment and consumption. The Central Bank has revised its internal demand forecast upward from 3.5% to 4.5%.
Private Investment and Consumption: Private investment is expected to grow by 5% this year, supported by self-construction, improved financial conditions, and higher business confidence. Private consumption remains dynamic, fueled by wage growth and employment recovery.
Loan Growth: Total loans are expected to grow around 5% in the second half of 2025, mainly driven by retail lending.
Net Interest Margin (NIM): NIM is expected to show a slight recovery in the second half of 2025, despite ongoing pressure.
Cost of Risk: Cost of risk is expected to remain well below guidance, helping to offset lower margins.
Return on Equity (ROE): The year-end ROE is expected to normalize closer to 17%, following a strong first half performance of 18.4%.
Wealth Management Growth: Assets under management in Wealth Management are expected to continue growing at a healthy pace, supported by market performance and client engagement.
Insurance Growth: Insurance premiums, particularly in private annuities and life insurance, are expected to continue growing, supported by diversification in distribution strategies and digital channels.
Digital Strategy: The company aims to enhance digital adoption and self-service capabilities, with a focus on increasing primary banking relationships and digital transactions.
Sustainability Initiatives: The sustainable loan portfolio has reached EUR 400 million, with continued focus on renewable energy and inclusive growth initiatives.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What are the expectations for NIM (Net Interest Margin) in the second half of the year and beyond, especially with the potential acceleration of the retail segment?
A:NIM is expected to improve in the second half of the year due to changes in portfolio mix and the repayment of a sub bond in July, which had a 10 basis point impact on NIM. While the target of 5.4% may not be reached, it should be close. For 2026, the trend of more consumer loans is expected to positively impact yields and NIM, with some room for improvement in the cost of funds.
Q:What is the guidance for asset quality and cost of risk, especially as growth in the retail segment resumes?
A:The cost of risk is currently at 2.5%, below the guidance of around 3%. As the consumer loan book resumes growth, a slight increase in the cost of risk is expected in the coming quarters and in 2026. The speed of this increase will depend on the quarter-by-quarter growth of the consumer portfolio.
Q:How should we think about OpEx (Operating Expenses) growth for the second half of the year and for 2026?
A:OpEx growth is driven by investments in technology, personnel, and marketing. For the second half, expenses will continue to grow, with technology and personnel being key drivers. For 2026, OpEx growth is expected to normalize and grow slightly above inflation, depending on business and transaction growth. The medium-term efficiency target remains at 40% for the bank and below 37% for IFS.
Q:What are the trends in credit card turnover and cash loan disbursements?
A:Credit card turnover has increased by 15%, which will eventually contribute to interest-earning assets. Cash loan disbursements have also increased, indicating a gradual growth in the consumer book.
Q:What are the main drivers of the increase in expenses?
A:The increase in expenses is attributed to investments in technology, personnel, and marketing. Technology investments include analytics and Gen AI, while personnel costs are due to filling senior positions in technology, analytics, and banking. Marketing expenses are tied to business growth, such as credit card turnover.
Q:What is the medium-term efficiency target for the bank and IFS?
A:The medium-term efficiency target is 40% for the bank and below 37% for IFS.
Q:How should we think about OpEx growth beyond 2026?
A:OpEx growth beyond 2026 will depend on business and transaction growth. While the rate of increase may not be as high as this year, it will continue to grow, driven by investments in analytics, Gen AI, and other business-related factors.
Q:Review of Unclear Management Responses
A:Management avoided providing specific numerical estimates for NIM in 2026 and the exact rate of OpEx growth beyond 2026. Their responses were general, emphasizing trends and dependencies on business growth without offering precise details.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Bank demand
BofA Securities
CEO GM
Carlos Jose
Cost deposit
Deposits funding
Division Unidentified
ET Intercorp
Ernesto María
GDP context
GM Ramat
Gabilondo Márquez
Grande Chief
Inc Carlos
Interbank momentum
Interseguro expansion
Izipay gain
Jose Tori
Lopez Torres
María Gabilondo
Márquez BofA
NIM Izipay
Officer Ernesto
Officer Lopez
PLIN engagement
Peru outlook
Peru volatility
ROE result
Ramat Chief
Research Division
Securities Research
consumption
dynamism
point market
IFS Transcript
Intercorp Financial Services Inc. (IFS) Q1 2026 Earnings Call Transcript
Positive5-12
The earnings call highlights strong financial performance with a 10% revenue increase and a 15% rise in net income, driven by higher loan volumes and improved net interest margins. The loan portfolio's 12% growth and improved ROE to 18% are promising. Despite a 5% rise in operating expenses, these investments support digital transformation. The absence of negative insights from the Q&A suggests a generally positive sentiment. Given the company's market cap of $2.55 billion, these positive indicators suggest a likely positive stock price movement in the next two weeks.
Intercorp Financial Services Inc. (IFS) Q4 2025 Earnings Call Transcript
Positive2-12
The earnings call highlights strong financial metrics, including 11% growth in retail primary banking customers and a 61% increase in insurance premiums. The Q&A reveals management's confidence in handling risks and achieving growth, despite political uncertainties. The company's focus on digital strategy and sustainable loan portfolios further supports a positive outlook. While there are concerns about market share loss and political risks, the overall sentiment remains positive, indicating a likely stock price increase in the short term.
Intercorp Financial Services Inc. (IFS) Q3 2025 Earnings Call Transcript
Positive11-7
The earnings call presents strong financial performance with significant net income growth, improved NIM, and low cost of risk. Despite some uncertainties like the Rutas de Lima impairment, the impact is minimal. Positive trends in loan portfolio growth, insurance premiums, and wealth management assets support a favorable outlook. Additionally, strategic investments and digital engagement indicate a robust future. While management's vague responses on certain issues may raise concerns, the overall sentiment is positive, suggesting a likely stock price increase of 2% to 8%.
Intercorp Financial Services Inc. (IFS) Q2 2025 Earnings Call Transcript
Positive8-15
The earnings call reveals strong financial performance, including a significant increase in net income and ROE, improved cost of risk, and growth in retail banking customers. Despite a slight decline in loan yields, other financial metrics like AUM and insurance premiums show robust growth. The Q&A session supports this positive outlook, with expectations for improved NIM and manageable OpEx growth. The market cap indicates a potential positive reaction, likely in the 2% to 8% range, given the overall strong financial health and optimistic guidance.
IFS Report
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