Intercorp Financial Services Inc (IFS) Q1 2025 Earnings Call Highlights: A Strong Start Amidst ...

GuruFocus News

Sat, May 10, 2025, 1:07 AM 4 min read

Intercorp Financial Services Inc (NYSE:IFS) reported a strong start to 2025 with a net income of 446 million soles and a return on equity (ROE) exceeding 16%.
IFS's commercial banking segment showed significant growth, with a 19% year-over-year increase in loans, strengthening its position as the third-largest bank in Peru.
The company's wealth management segment, Inteligo, achieved a new all-time high in assets under management, growing by 16% year over year.
IFS's insurance business, Inter Seguro, experienced robust growth, particularly in individual life and annuities, maintaining its market leadership.
IFS is focused on digital excellence, with a 15% increase in retail primary banking customers and a strong emphasis on enhancing the digital experience for clients.

Negative Points

IFS's consumer loan portfolio contracted by 4.8% year over year, with a notable 9% decline in credit card loans.
The company faced a significant impact from provisions related to Telefonica, affecting its cost of risk and overall financial performance.
Despite improvements, the cost of risk remains a concern, with a slight increase due to the Telefonica impact, and potential future provisions may be required.
The Peruvian economy's growth is projected to slow in the second half of 2025 due to the pre-electoral period, which could affect IFS's growth prospects.
IFS's funding costs, while improved, may face challenges due to higher rates on medium-term financing, limiting further cost reductions.

Q & A Highlights

Warning! GuruFocus has detected 6 Warning Sign with IFS.

Q: My question is related to your guidance and your expectations for 2025, during the call you mentioned your 15% ROE. I would like to confirm if that's still your expectation. And given that you're already at that level in the first quarter which is typically seasonally low, what prevents you from expecting a higher level for this year? A: At this point, we continue maintaining our guidance views. We had a solid start to the year, however, we're not ready to change that yet, so we're remaining at that level and hopefully we'll have upside, but it's still early in the year to commit.

Q: Specifically regarding loan growth, do you have any updated view on that front? You mentioned significant improvement in investment and consumer sentiment. Can we expect an upward revision to your initial expectations for loan growth? A: We are seeing positive trends, but this has to consolidate and materialize. The consumer portfolio has not recovered yet, even though there's positive sentiment. Peruvians are not looking to get into debt now due to various market events. We do see healthy growth in the commercial group, which continues to be the main driver for this year.

Q: Do you expect any additional potential provisions for impairments from Telefonica, or are you comfortable with the provisions you did in the first quarter? A: Based on the information we have now and our analysis, what we have in the book is our best understanding of the level needed for the short to medium term, unless something drastically changes. We feel comfortable with our current provisions.

Q: Regarding your cost of risk, you have been around 2.5% the last couple of quarters. I believe the guidance was closer to 3%. Do you expect this cost of risk to remain closer to 2.5%? A: We have started to grow in the credit card and cash portfolio. If we increase risk, you will see two effects: it will affect NIM positively, but also maybe a little bit of increase in the cost of risk, taking us closer to the 3% that was on our guidance.

Q: What is the status of the Telefonica corporate case? Did you reach the desired level of coverage or can we expect higher provisions in the upcoming quarters? A: Based on our models and the current status of the Telefonica case, we think we're well covered. If something drastically changes, we'll probably have to do more, but based on the information we have now, we are comfortable with the level of provisions.

Q: Is there further room for a cost of funds improvement considering the recent decrease in the central bank rates? A: There is still some room to improve the cost of funds due to the decrease in the reference rate, but we have also issued some medium-term financing with higher rates than before. The biggest part of the cost of funds improvement is already there, but we still expect some minor decreases in the future.

Q: We saw the consumer loan portfolio contracting 4.8% year over year in the first quarter of 2025. What key indicators are you monitoring to support the view of recovery in the second half of the year? A: We are monitoring the overall performance of the economy, how salaries evolve, and consumer preferences. There is a lot of liquidity in the system right now, and we are seeing good trends in terms of usage and preference, with some increases in balance with good cost of risk.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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