Intercorp Financial Services Inc. (IFS) Q4 2025 Earnings Call Transcript
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Overview
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.
Key Financial Performance
Net Income Record net income of PEN 1.9 billion, marking a 49% increase compared to the prior year. This growth was attributed to recovering core results and solid profitability, despite the impact of the Rutas de Lima impairment.
Return on Equity (ROE) ROE stood at 16.8% for 2025, which would have been 18.5% excluding the Rutas de Lima impairment. This reflects strong profitability across all business lines.
Higher-Yielding Loans Loans grew 8% year-over-year, driven by increased disbursement in cash loans (23%) and small businesses (60%). This growth was supported by robust macroeconomic activity and strategic focus on higher-yielding segments.
Risk-Adjusted Net Interest Margin (NIM) Increased by 50 basis points year-over-year to 4% in the last quarter, driven by lower cost of risk and improved funding costs.
Cost of Risk Decreased to 2.1% for the year, with a quarterly low of 1.8%, marking the lowest level in 4 years. This was supported by healthier customers and improved portfolio performance.
Retail Primary Banking Customers Grew by 11% year-over-year, reflecting strengthened primary banking relationships and increased customer engagement.
Insurance Written Premiums Grew by 61% year-over-year, mainly due to growth in private annuities and life insurance.
Wealth Management Assets Under Management Achieved double-digit growth, reaching new record highs of $9.1 billion, driven by client trust and consistent engagement.
Loan Portfolio Expanded by 4% year-over-year (6.5% excluding FX effects), with notable growth in the mortgage portfolio (8%) and small business segment (25%).
Cost-to-Income Ratio Stood at 36.8% for 2025, reflecting strategic investments in technology and talent to support long-term growth.
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Operating Highlights
Digital Initiatives: IFS has launched new features like PLIN Corredores, PLIN WhatsApp, and PLIN e-commerce to enhance customer engagement and digital adoption. Retail digital customer base increased to 84%.
Wealth Management: Inteligo achieved record-high assets under management of $9.1 billion, reflecting double-digit growth and strong client engagement.
Market Position in Banking: Interbank consolidated as the third largest bank in Peru with a 16% market share in mortgages and strong growth in small business loans (25% year-over-year).
Insurance Leadership: Interseguro maintained leadership in regulated and private annuities, with written premiums growing 61% year-over-year.
Profitability: IFS achieved record net income of PEN 1.9 billion ($522 million), a 49% increase year-over-year, with an ROE of 16.8%.
Loan Growth: Higher-yielding loans grew 8% year-over-year, with strong performance in small business loans (25% growth) and mortgages (8% growth).
Cost Efficiency: Cost-to-income ratio stood at 36.8%, reflecting strategic investments in technology and leadership.
Focus on Technology and Innovation: IFS is investing in Gen AI and digital tools to enhance customer experience, improve cybersecurity, and drive operational efficiency.
Integrated Ecosystem: Synergies between Interbank, Izipay, and Interseguro are being leveraged to enhance value propositions, particularly in payments and bancassurance solutions.
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Risk or Challenges
Political and Economic Environment: The political transition in Peru and global market volatility pose potential risks. While the macroeconomic environment is stable, cautiousness is advised due to the political cycle and external uncertainties.
Rutas de Lima Impairment: The company faced a PEN 205 million impairment related to Rutas de Lima, with a residual value of PEN 74 million. This has impacted ROE and profitability, though no further material impairments are expected.
Consumer Segment Recovery: The consumer segment is recovering but has not yet reached target levels, indicating ongoing challenges in achieving desired growth.
Cost of Risk: While the cost of risk has decreased, the expansion of consumer and small business portfolios may lead to a gradual increase in risk levels.
Global Market Volatility: Global market volatility remains a concern, potentially impacting investment results and financial stability.
Strategic Investments: Increased expenses due to strategic investments in technology, cybersecurity, and GenAI capabilities could pressure cost-to-income ratios.
Loan Portfolio Growth: Loan portfolio growth is positive but remains sensitive to FX effects and market conditions, which could impact profitability.
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Guidance & Outlook
Peruvian Economy Growth: Expected growth of 3.3% for 2025, driven by dynamic consumption-related sectors, sustained private investment, and favorable commodity prices. For 2026, GDP growth is projected at 3%, supported by stronger private spending.
Internal Demand and Private Consumption: Internal demand is expected to expand by 5.4% in 2025, with private consumption rising to 3.6%. For 2026, internal demand is projected to moderate to 3.5%, with private consumption stabilizing at 3% and private investment reaching 5%.
Loan Growth: High single-digit loan growth expected in 2026, driven by both commercial banking and recovery in the consumer portfolio, aiming to outperform the system and gain market share.
Return on Equity (ROE): ROE for 2026 is expected to be around 17%, an improvement from 2025, moving closer to the mid-term target of 18%.
Cost-to-Income Ratio: Expected to maintain a cost-to-income ratio of around 37% in 2026.
Higher-Yielding Loans: Positive trend in higher-yielding loans, with an 8% growth in 2025. Continued focus on consumer and small business financing.
Insurance Business: Continued focus on long-term products, with individual life insurance showing encouraging growth. Digital premiums grew 25% in 2025.
Wealth Management: Assets under management grew 16% year-over-year in 2025, reaching new record levels. Continued double-digit growth expected.
Digital Strategy: Ongoing investments in technology, Gen AI, and innovation to enhance user experience, improve cybersecurity, and expand digital capabilities.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Should we continue to see further impact on Rutas de Lima in 2026?
A:Management believes that 80% of the provision or impairment has been completed, and they feel confident that there should not be any further impact in 2026. However, there might be some positive developments in the medium term.
Q:What type of loan growth is expected for credit cards and personal loans, and how will it affect asset quality, NPLs, and cost of risk this year?
A:Management expects higher-yielding loans like credit cards and personal loans to continue growing. This growth will likely increase the cost of risk slightly, moving closer to 2.5%, which is within the historical range.
Q:How should we think about OpEx growth this year?
A:Management expects OpEx growth to be similar to the previous year, as they continue to invest in technology, personnel, and marketing.
Q:Is there an opportunity to achieve a sustainable ROE closer to 20% like Credicorp, and when is the 18% ROE expected to be achieved?
A:Management targets a midterm ROE of 18% and believes 20% is achievable if the Peruvian system evolves as expected. They are optimistic but conservative due to political volatility and expect to achieve 18% ROE likely by 2028.
Q:What is the medium-term profitability outlook for Interseguro and Inteligo, and are there initiatives to mitigate earnings volatility?
A:Management expects a structural profitability of 20% for both businesses. Volatility is influenced by market-related investment results, but they see stable growth in fee businesses and expect 20% ROEs going forward.
Q:What is the outlook for NIM in 2026?
A:Management expects NIM to slightly increase in 2026, driven by growth in higher-yielding loan portfolios and improvements in cost of funds.
Q:How do you plan to grow funding to support high single-digit loan growth, and will funding costs increase?
A:Management focuses on growing low-cost deposits through retail banking and payment ecosystems like Izipay. They expect funding costs to remain efficient, supporting NIM expansion.
Q:What is the market share of PLIN, and how is it evolving?
A:PLIN has an estimated 15% market share in the P2P and P2M market, with Interbank holding over half of that. PLIN is growing at 40%-50% annually, and its market share is increasing.
Q:What are the competitive dynamics in consumer loans, and why has market share been lost?
A:Management attributes market share loss to slower growth in payroll loans and a cautious return to the market after 2023-2024. They are now increasing risk appetite responsibly and expect to regain market share.
Q:What are the key risks in an election year?
A:Key risks include potential political instability, delays in investments, and the election of a non-market-friendly candidate. However, management is optimistic about continued economic stability and growth.
Q:How do copper and oil prices impact GDP growth and inflation, and can they be tailwinds?
A:Higher copper prices and lower oil prices could strengthen the Peruvian sol, control inflation, and boost GDP growth, providing a positive environment for the financial system.
Q:What is stopping IFS from achieving an 18% ROE in 2026?
A:The pace of recovery in the bank's higher-yielding loan book is a key factor. While Inteligo and Interseguro performed strongly, Interbank's ROE needs to improve further to achieve 18%.
Q:Will coverage levels remain the same as higher-risk loans increase?
A:Management expects coverage levels to remain similar to 2025, with higher provisions aligning with increased cost of risk.
Q:Review of Unclear Management Responses
A:Management avoided providing a formal guidance on NIM for 2026, offering only general expectations of slight improvement. Additionally, they did not provide specific market share data for PLIN, citing the lack of official sources, and used estimations instead. They also avoided giving a clear timeline or specific factors for achieving a 20% ROE, citing political and economic uncertainties.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Consumer segment
Interbank bancassurance
Interbank record
Interseguro insurance
Investments technology
Lima impairment
NIM Consumer
PEN core
PEN income
Peru mood
Peru sol
York circumstance
account perspective
advantage experience
annuity position
approach excellence
approach risk
bank system
base case
case scenario
confidence Peru
confidence foundation
country account
decision approach
decision making
decrease cost
election period
excellence customer
experience Investments
experience productivity
face pension
focus center
foundation term
front environment
headwind way
impairment result
income decrease
inflation Peru
insurance addition
profitability
resilience
IFS Transcript
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.
Intercorp Financial Services Inc. (IFS) Q1 2025 Earnings Call Transcript
Positive5-9
The earnings call highlights strong financial performance, including record high revenue, significant net income growth, and improved ROE. Despite some concerns in the Q&A regarding consumer loan recovery and Telefonica provisions, the overall sentiment remains positive with optimistic guidance on NIM and cost of funds. The lack of a shareholder return plan is a slight negative, but the company's robust financial metrics and growth in digital and retail sectors outweigh these concerns. Given the small-cap nature of the stock, a positive market reaction is likely.
IFS Report
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