Intercorp Financial Services, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Macroeconomic Outlook: 2024 marked a recovery period for Peru, with GDP expected to grow 3.2% in 2024. Cautious outlook for 2025 due to pre-electoral year and external environment volatility.
• IFS Performance: Achieved ROE over 18% in Q4. Cost of risk decreased to 2.6%, cost of funds improved by 100 basis points.
• Interbank: Increased market share in loans and deposits, improved consumer portfolio with enhanced risk models.
• Interseguro: Leading in individual life and annuities.
• Inteligo: Assets under management at record high, 17% year-over-year growth. Focus on digital excellence to generate primary relationships and be a leading digital platform.

Segment Performance

• Banking (Interbank): Achieved growth in market shares for loans and deposits, with commercial banking gaining over 80 basis points in market share. Cost of risk stood at 2.6%, 180 basis points below the previous year. Cost of funds improved by 100 basis points year-over-year. Retail deposits market share was around 15%, ranking third.
• Insurance (Interseguro): Experienced relevant growth in core business, particularly in individual life and annuities, maintaining leadership with over 30% market share.
• Wealth Management (Inteligo): Assets under management reached an all-time high, growing 17% year-over-year. Interfondos saw over 45% growth in the last year due to digital developments, gaining market share to 16.5%.

Guidance

• Capital: Total capital ratio above 15%, core equity Tier 1 ratio above 11%.
• ROE: 2025 ROE guidance around 16%, expecting improvement from 2024's 12.6%.
• Loan Growth: Expected high single-digits growth, driven by commercial banking and consumer portfolio recovery.
• Cost of Risk: Expected around 3%, cost income ratio around 37%.

Risks

• Volatility: 2025 volatility due to pre-electoral year and external environment changes.
• Economic Uncertainty: Uncertainties in Peruvian economic policy and global economic conditions impacting business environment.

Question and Answer

Q: On fee income growth, how to think about it with loan growth, digital fees, and tax rate?

A: Fees expected high single-digits to low double-digits, with growth driven by improving consumer loan book. Digital fees mostly from digital channels. Tax rate expected slightly higher in 2025 due to mix of business segments and tax-exempt instruments.

Q: Wealth Management recovery variables?

A: Normalization of portfolio returns, NIM recovery as Fed rates adjust.

Q: Tier 2 bonds call option?

A: Planning to call 2030 Tier 2s in July using proceeds from the new $325-350 million bond issue.

Q: ROE guidance of 16% vs 4Q 18%?

A: Seasonality in IFS results, especially at Interbank, and strong investment results from Inteligo. Cautious outlook due to pre-electoral year volatility.

Q: Interbank ROE and NIM guidance?

A: ROE to improve by rebuilding consumer book and enhancing efficiency. NIM recovery tied to consumer portfolio recovery pace and Peruvian economic consolidation.

Q: Mark-to-market gains at Inteligo?

A: Across the board positive market sentiment for investments, both fixed income and equity contributed to gains.

Q: NIM guidance conservatism?

A: Cautious approach due to pre-electoral year volatility and need to see consumer group recovery consolidate before aggressive NIM growth.