Q3 2020 Intercorp Financial Services Inc Earnings Call
Please standby for me.
[music] during your conference today.
Good morning, and welcome to the Intercorp financial services third quarter 2020 conference call.
Lines have been placed on mute to prevent any background noise after.
After the presentation, we will open the floor for questions.
Time instructions will be given as to the procedure to follow if you would like to ask a question.
It is my pleasure to try to go over total find for how old Iadvise corporate communications, Sir please begin.
Thank you on with wanted everyone on today's call either go to financial services will discuss etes sort of quarter 2020, I mean, we're very pleased to have he does he said we've really pick up for you <unk> Chief Executive officer, hoping for the quarter financials had he says he says me. Good luck on <unk> Chief Financial Officer on seem to go to financial services you said.
On Sunday, Saudi Chief Executive Officer, often cups or whatever.
Ted It we do know for a true Chief Executive officer doping for legal they wouldnt be discussing that we sold but what distributed by the company yesterday. They just thoughts on webcast presentation. So companies cash on during this call. If you didn't receive a copy of the presentation on the only support the other no available on the company's website are your face up on that be two was on that.
A copy or otherwise for any reason if you need any assistance to the east coast I buy from New York I too want to for the 6369 free I would like to remind you that today's calling for me investor is on on these only there for what you have on the media will not be taken.
Please be advised that for we're looking on Siemens maybe made during this conference call. These do not account for future economic circumstances industry conditions, the company's future performance or for Nigel we thought that such statements made are based on certain assumptions for factors that could change colchicine outdoor we sold so much really for funding.
Expectations for a complete note on for we're looking to see means please refer to a quarterly report issued yesterday. It is now my pleasure to turn the call over to me says you collect <unk> Chief financial officer offering for the core financial services for her presentation.
Just got so please go ahead.
Thank you.
Good morning, and welcome everyone to either for financial services. The reported 20 company earnings call.
So let me comment briefly on day shows macro and what do you think I situation even.
He was the high point on any number of call. It 90, new cases per day have diminished significantly from over 10000 in mid August to around 2000 in weaken day, despite loosen restrictions related to social mobility economic got PVD revenue would go there we don't domestic demand oriented sectors already boasted book would be fair.
On a year on year on pad.
I really see later on during the presentation not growth, but they should start improving reflecting probably be sentimental, what's that double digit GDP growth rate into anything one on.
They limit on them continues to be the political landscape in the country. On you are all aware it who currently has a frenzy shouldn't go over me headed by price. He didn't many former head of call.
They basically the price you're gonna be skyrocketing corruption allegations came up on the two right even that day and speed at which he was implemented.
Currently there is some debate about it back on the brothers itself and he loves eating.
A couple of days ago, the new coming in but for now and needing to Nate well see some for the beaches and technical professionals.
Hey, guys do through these assets he should be up with but he day shut in congressional elections, you innately 20 for anyone a change of government in July.
Eight months away from now we continue to closely monitor the evolution of what do you think I knew you read these day in.
In this environment on how.
On T. to help customers love income crises like offering payment released when do you need less in companies as well be growth you wrapped up in loans to commercial line.
System level growth low due to 16.5% year on year for September 2020, driven by a 26.1 per cent decrease in commercial on low boosted by directing capital program. However, retail loan system level decreased 2.4% on a yearly basis driven mainly by a.
Based on the consumer finance component when mortgages have started to recover faster in are actually growing year over year. The book are showing strong growth, reaching a 22.6% year on year expansion.
Now let me start with a presentation. This time, we have divided anything for products, which include financial highlight key messages there for.
The results and take away for being I will start with a brief summary of the financial highlights on slide three to five.
The main highlights.
You difficult financial services had an improving performance in the third reported 20 with adjusted EBITDA is up to 329 million solace in adjusted for their <unk> I really 63%.
Adjusted earnings for the nine months are ready for CB 830 million on Sunday.
Yes, so for their areas are positively impacted by lower provisions on either by <unk> strong results I think that's the Rudolph and day yeah.
Thereby back to profit wasn't actually little any day goalpost and how you feel the profit WBB.
Strength has gotten better ratios at both segments adjusted efficiency ratio at 28% an improvement of 200 basis points on a quarterly basis, and 680 basis points on a yearly basis. The D train and new alliances continue to support our UK strategy on either by that so well.
Our adjusted earnings of 457 million solid positively impacted by lower provision in top line recovery, but for the 9% market share during low boosted by RAC. The revenue disbursement, what's suddenly would go green revenue, we'd had adjusted net interest income growing 5.7% in total other income 26.8.
We're saying, we just saw we covered a free.
50 basis points quarterly reduction on Gawky book for farm down 1.7 per cent.
What the legacy provision, yes steel on both brick called 11 4.5 per cent cost of risk in the third quarter.
450 basis points yearly growth in adjusted efficiency ratio.
I didn't dare say moodle solid book is going to third quarter growth, we don't on adjusted it would be up to 19.4% in the nine month 2029.
Line recovery in positive adjustment to that can you kind of assess offset higher net place and then.
Cost containment measures resulted in 14.6% year over year reduction in other expenses research.
Results for the investment increased 5.5 for same quarter over quarter and 8.5 per cent on a yearly basis with return on investment portfolio, reaching 6.2 per cent.
That said, we would all continues to be the market leader in and we deal with a 27.2% share your two day.
Good day legal entities boost driven by positive investment results nine months.
On an adjusted it would be recovered to 14.5 per se.
Pretty frequently insightful yearly growth in net profit revenue positively affected by mark to market on the investment portfolio and a continued growth in assets under management, 3% in the quarter and almost 10% year over year.
On slide five one of the good news this quarter is the top line how should we go but Nike with adjusted total revenue for our you fast growth 14.8 per cent into warfare intensely 3% year over year driving the accumulated year over year growth due for per se.
This is me thanks to our recovery in most of the revenue line, including net interest income these and other income these.
These recoveries have taken placing on three operating company with adjusted net interest income if fee income growth and 5.7 per cent is 35.5 per cent during the quarter, respectively for either a bank in a strong recovery in other income I think I said moodle and Daniel.
Expenses have continued to be under control, allowing us to flow.
Efficiency ratio by 200 basis for doing this quarter down to 28% or 71% on it could be less if they now.
Now I will focus on the key message is we would like you to say come home from D. school on like that there are five messages, which we would already be day always line.
First we have a strong liquidity and capital position, which we have substantially improved when compared to peak all these line.
Second macro expectations in banking at BBB I'd, rather use would go but income cobiz flow and stronger recoveries wealth management insurance business, which should positively impact future results.
Did you get the strength continued to support our European strategy, which translates into growth of clients and be outperforming the system.
For lower for lesions on a quarterly basis still above for the call. We'd love you believe payment behavior among interbank retail clients.
Double digit degrees of costs in the quarter I you pay for you to cost containment measures already implemented in each of the three operating companies to partially offset the top line.
Now, let me move to slide and eight and nine where we covered the first key message for related to liquidity day stations. During the third quarter. We have continued to see any growth you know total deposit base I'd eaten up by 2.6%.
Reached 26.1%, which has helped for loan to deposit ratio to stand up 99% below the seems conservative. Moreover, the locally both its racial in both GAAP and <unk> he's on helping them with the low to the book is racially solid on 115 per se well below the 120 per cent.
The system there.
I mean, an improvement he waiting for nice healthy them due to the funds coming from the private patients on as well on the unused portion of the funds coming from that wrapped up and who knows we coffee day look to benefit from the situation into gain then based on market share in retail deposits in the quarter. We continued to increase our total deposit market share.
40 basis points year over year. Moreover, we have absolutely no financial assets with 24.8 billion. So I feel good about all of which 16.3 billion solid on cash and equivalents and have around 900 million solid I used to stand alone level out of reach more than 400 million.
Our cash and equivalents, which could go for your face sounds obligations for more than three years on.
On slide nine we have a solid cash pick up on T. shirts on.
On free operating companies a price.
Since the beginning of <unk>, we have taken important measures to strength in or profit to be ready for faced a difficult and uncertain times book on described in our previous conference calls we did I thought that the topic of racial also for the end of September was 17% I think everybody compared to 15.6% on the system and the meeting.
Well, then for 6% required by just to bring down.
This means we have over 600 basis points by offering a total capital ratio of course, we did you know why was 11.4% 30 day She's boys I book, that's a recycled water race I didn't say Wudel, Oh, certainly see ratio stands at 157 per cent well above 200 per cent required well, adding value our company.
Facial racially study for per Se I gave went up on the 8% require.
The second key message for life stage and 11, you said about the recovery in the economy at BTD. He is recovering from low levels due to losses.
During the second quarter, we have seen one of the strongest net of the impact of GDP of the region declined 40%, maybe 32 per cent being made any deeper sales in June.
Well if you use that this quarter, we have continued to see our recovery on different indicators, including the mining fishing GDP as well simple function consumption. Meanwhile, expectations on economic CBD are moving towards positive growth.
Total loans to the private sector are growing 14% I thought the end of September mainly driven by relative value, excluding such effect. Both alone system later on decreasing two per cent with free they decreased 2.4% in commercial loans, excluding raptiva decreasing 4.3 per se.
On slide 11, mostly operating thing I your facts indicate basi. These developments in activity for the third quarter as well as for October I eat her back daily and credit costs, where nobody has to go over to almost 90% of free Colby, let us new disbursement of payroll deduction low to the public sector.
He has already reached free Colby Nato's why mortgages is already a ball we called it live is going towards for sensor since February.
Total fees for eat at about 80% of free Colby, let alone having reached a low 48%, enabling the same is true for you guys say wudel any day, which have seen a recovery in gross premiums to more than 90 per cent. The free copies level income how you're on assets under management, you know doberstein favorably.
Correct.
These recoveries should help our top line to recover during the following quarters otherwise.
Moving on to the 13 messages on slide 12, Oh did it does keep the ice continued to show book. If these trends supporting I thought I saw results on that look down in our air force to boost the use of how big it on solution, we have seen an acceleration of for a decent indicator.
He is on used aircraft on being a decrease in our 75 per cent of our customer base as of September I for beep on from one year ago, Honda for San Diego customers, which are value, but not using branches or contact center any longer and who use digital channel plus I've ATM in correspondent aid on.
For cashing in cash how has reached 53% on 21 points from one year ago.
Did that things have also seen a rapid increase on either but we get the reported digital sales reach for 5% in other income say Rudolph so on the digital sales reached 83%, both increasing shopping from one year ago.
We have continued to see any bought a number of new D. digital accounts being opened both for E book and small businesses. So for the end of September 50 per cent of new leasing retail saving accounts were opened digitally and 47% of business accounts.
You do get that line acquisition on retail customer reach 33% as of September compared to 21 per cent one year before after a big 65% in June this year, we believe the utilization of new accounts is mainly due to two factors on one side the extension of the Lockdown book.
Not for lazy installation won't be that and on the other side they need to cover the accounts will be able to receive the government's aid package. It faster both for medium and small businesses went up for received the patients on the book I.
Our investment to build on these antibodies. These during the last year have definitely placing on advantage for our customers and operations on the on currencies themselves.
On slide 13, we have reached 3.9 million on retail customers and on how does the south and businesses. Our retail client base has increased 15% year over year, while our commercial client base has increased 46% year over year on.
Another question retail digital customers have flow more than 80% one year, reaching 1.1 million.
I mean, they need to be paid me feature I'm on multiple bounce operating with cell phone number is already on this in more than one for 8 million clients, 78% of wage you eat, thereby ASCII accounts.
Don't get our hands up on digital solution for payment has reached 50 551000, Houston assets. The end of September and almost 700000 as of today.
On slide 14, we have signed a partnership with Robby to the leader kind of that person digital products in some kind of finishes up the agreement on that we will develop kinds of person digital growth only accessible through Rafi <unk> and the first brought in.
Already launch he said he does take into account when people see ability to make five day met with the deal.
On slide 15 to 17, the fourth key message, if we fail to lower provision registered during this quarter.
Oh free corporate level debt on Threep for CP strength, we have seen during this quarter.
On slide 15, the first coffee. This strength is that outstanding would schedule low have slightly decreased as of September on Sunday was scheduled losses were 11.8 billion sold it for 28% on the total loan book in line with the season. This number represents a seven per cent decrease versus June.
This is true for both retail and commercial portfolios. Moreover, the number of both our clients. We schedule has also degrees on.
The new inflow has been margin that you did last month, including a folder.
On slide 16, they stick on positive strength is that we are seeing an improving payment behavior among interbank line.
I saw October 96% of our total retail portfolio has already had a payment you, which means that only 4% of the retail portfolio is still on the great due mainly concentrated on credit cost structure of the schedule.
50 per cent of the return for all you have no being rescheduled and nieces reduced doing a very good bhavan behavior, almost 98% of clients are paying them for Ms. Only 0.2% has requested an additional relief during October and only 1.9% have not paid subs signing up new request.
For release, a not day. This represents a 2.1 per cent that's up for Dover, which compares to 2.6% as of July.
On the 40% of the retail portfolio, which has been rescheduled as of October 92.6% book flights on paying the installments only 1.2% has requested on additional relief during October and 6.2 per cent have not paid I gave some you know new really for me quick enough paid decently sales.
On a 7.4% for some of the older which compares to 13.6 per se I hope to line.
I see that payment behavior has been upset about credit assets as of October with percentage of payments on almost 98% for the 44% on the portfolio that's not be rescheduled well on 97 per cent for reactive rescheduling 92 per cent for unilaterally scheduling in there.
On 86% for structural risque these assets.
As for its a nice east concern on the outstanding rescheduled portfolio is small at around 800 million solids out of reach around 88% of clients happy pain during Stalin's out on the 64% that's half half day Miss already on the end of October.
On Slide 17. This third party be strength is the quarterly evolution of provision.
Cost of free for the quarter was 4.5 per cent, which compare to the starting point for Percentof. The second for looking at the cumulative cost of risk on September total cost of risk for 7.1 per cent compared to 2.5 per cent one year ago I for retail is concerned quarterly cost of risk on it.
On 5% down from 23.6 per se during the second quarter, but still above the 4.3 per cent of one year ago, driving the new latest cost of risk to 12.6% come.
Commercial banking continues to have low levels of cost of free thanks to our smaller participation on the SMB segment and watch the 0.9% in the quarter and 1.4% when a community basis.
MPL coverage for day by day as of September is up to almost 200% in for retail losses have more than 220 per cent.
It is important to having line that these coverage ratios will change in time as clients start to migrate between stages of their facilities continue to mature.
We believe provision we continue to decrease in the coming quarters, mainly thanks to the conservative approach to provisioning of the second quarter last year, the better behavior of payments are flying so far how do I said before we continue refining our calculation on expected losses during the month to come on.
We will be able to further confirms the behavior of pay me for clients.
Finally, the last of the key messages on slide 18 refers to the disciplined and proactive management of costs, we have pursued.
Before and after college stop we track for allowed us to achieve our double digit reduction in cost in the third quarter when compared to the previous year. It for me to lower efficiency ratio I effect and each of the operating company efficiency ratio day basis below 30% in the quarter with Interbody interbank I, 35%.
Good day, and improving efficiency ratios are the result of a disciplined approach to expenses throughout the company. On example, we have continued to implement our branch optimization program started in 2016 and hospitals additional 22 branches during 2020, reaching a total reduction in the number of branches.
20% from the Beacon 2016, and no more than 8%. This year. Additionally, we should be closing 15 more branches before yearend driving this number for them more.
Moreover, we have some variable cost related to credit card activity into incentive does have decreased substantially during the quarter in line with the lower GDP, but why are they should have seen that we need right. After the call we'd outbreak in the beginning of the lump on it but who wants to launch a very important cost containment for him in all operating companies you know the.
Two degrees the cost base to partially offset the negative impact on top line growth coming from the love them. We are expecting adult on decreasing the cost base fan base for <unk> of around 5% and 2020 versus 2090.
Now, let's have a closer look at somebody should only be gate wasn't drained by segment on slide 22 28 on.
On slide 20, we are showing our keybank indicators NIM decreased 30 basis points in the quarter down to 4.7 per cent when excluding the impact of flow rescheduling you need that net interest income, which accounted for 100 basis point NIM in the second quarter and 10 basis points in the third quarter.
The growth you mean west relay hit on one side to the portfolio mix with retail loans decreased in the quarter and on the other side to the relative alone at low you eat.
In that front for active alone on me, what's around 40 basis points in the for.
Total other income for 27% in the quarter, mainly driven by increases of 35.5 per cent net fee income due to our recurring transactional volume, especially in credit assets although.
Other expenses you on a sequential basis due to the recovery in some business activity line, but work on seasonably lower on a non will basis of cost containment measures remain in place.
On slide 21, our year over year loan growth has accelerated to almost 20% this quarter, mainly thanks to Directv along disbursements commercial banking group then for sensing the border in 46% in the year when retail banking decreased 2% in the quarter driven by a seven per cent construction in credit.
Our volumes there.
The strong growth in commercial loans together with a softer reduction in the retail portfolios on the system has led to an increase in our total lost market share of 30 basis points in the quarter up 12.9%.
On slide 22, we continue to help our clients to find is on working capital needs through the current crisis with resi volumes.
So at the end of September we have outstanding 6.7 billion. So looking back the loans, which have boosted our commercial loan book by 41 for sensors that first for most of these losses have been granted to the meat sites in Italy Vsan.
Increasing our portfolio, 58% in almost 200% respectively between March and September.
As of November 10, 33 reported actual auction, having already taken place in the country for a total amount of 55 billion or 92% of the total amount for me to start either.
Nobody has been able to a day 6.8 billion or 12% of the pharma, which is above its market share in commercial banking up 10%.
Defense distributions have been 2.6 billion in the 90 per cent guarantee buckets 2.1 billion only 80 per cent guarantee bucket and the rest between the 95% to 98% guarantee buckets. We have already started around 7.1 billion assets to date.
On slide 20 free.
Total deposits viewed 2.6% in the quarter and 26% year over year, allowing us to gain 40 basis points of market share when compared to the third quarter 2019.
Reaching 13.1% retail deposits grew almost 4% in the quarter and almost 20% on a yearly basis, gaining 40 basis points year over year to a record sort of being for 90% as of September you.
You touched on would you do the central Bank funding from the RAC developing new program has increased 33% on a quarterly basis in line with the funds we have led to our price.
Cost of funds on cost continued to improve reaching 1.7 per cent in this quarter a reduction of 50 basis point in the quarter in 120 basis point year over year.
This positive development came from several non factor like decreases in market rates I better funding mix and the higher funding from the Central Bank. Additionally, the yield on production was also due to the redemption on operating expenses tier one book in it.
On slide 25 for certainly see the quarterly and monthly premiums for me does they would've shortly on recovering trend in the third quarter all business lines growth will drive it I knew it is leading the recovery in premium followed by retail insurance in individual line.
Looking at October numbers, we have continued to see a strong recovery non business line even into at least on that I know it was better than we did on individual life already above pre called it level seen September interest. They would all remains the market leader in annuities would at 27.5 for market share in the quarter on slightly sales.
He doesn't want US investment portfolio reached 13.2 billion, a 4% increase on a quarterly basis and 7% on a yearly basis.
Results from investments increased 5.5 per cent on a quarterly basis, reaching a fixed on two per cent reported on because they would have investment portfolio 10 basis points above the previous year levels.
Moving to the West management segment on Slide 27 and 28.
Yeah. There you go posted very strong revenues in the third quarter explained by a positive mark to market of 77 million solid I found that in other income which grew from a positive standing on solid in the second quarter. This.
This improvement in other income has led to an increase in total revenue side and then go from 59 million solace in the third quarter of last year to 71 million solid in the second quarter on these here and 140 million so less in this quarter.
[noise] on slide 28 in 10 of those assets under management, we reach almost $20 billion in the third quarter, a 10% increase on a yearly basis.
Thanks for the strong growth in the top line and the cost containment measures implemented since my intent GAAP net profit of 111 million. So let's watch more than three and five time those from the second quarter 2020, and a third party for 29 deal respect.
On slide 30, I want to close the presentation with a brief summary of the five key messaging.
Third we have a strong liquidity and capital position, which we have substantially growth compared to free coffee levels.
Second macro expectations in banking activity I got on the retail recovering from Colby flow in stronger recoveries already in place in wealth management and insurance businesses, which should positively impact future results.
Third the digital trends continue to support that you said strategy, which translates in growth of clients and business outperforming the system for.
For lower provision on a quarterly basis still above required levels and improving payment behavior among interbank retail clients.
Hi, double digit degrees of costs in the quarter of value fast due to cost containment measures already implemented in each of the three operating companies to partially offset the top line impacts.
Thank you very much and before opening for questions I would also like to comment on the latest and very good news related to the inclusion of either for financial services in the MSC ISO New index. This month. This is on my some for your fast after one year on our New York Stock Exchange IPO in July 2090.
Now we welcome any questions you may have.
Thank you at this time, we will open the floor for your questions.
And we'll take questions from the conference call and webcast questions.
If he would like to ask a question. Please press the star key somewhat better one key on your Touchtone phone and now.
Questions will be taken in the order in which they are received.
If at any time, he would like to remove yourself from the question in queue just price the pound key.
Again task a question please press the star and one now.
For the webcast for the worst simply click the question Mark button on your webcast player.
For window will appear and then simply type your question in the box and click send.
We will pause momentarily to compile a list of questioners.
And we'll take our first question from out on this topic I will on though with Bank of America. Please go ahead. Your line is open.
Hi, good morning on Clipper Gorilla on good morning, everyone.
For the opportunity I think we're going from Congress on recovery for on ammonia again about the simple <unk>.
My first question for me on the Politico a regular growth outlook for.
Like <unk> book on the new price Theyve got an income in principle.
I'm I remember a couple of things. So you got some laws for quite different from cash.
However on a comparable I think we will not have a lot of <unk>, but good momentum, but the one can all your view on.
And then what concerns me for potential deal, where human <unk> reported no Oh like <unk> book on book one.
And then my quick question on hunger for.
For the whole deal and non risk of your portfolio can really be coal more total portfolio, how credit repeal payment on how much of the portfolio would go up during the last quarter.
Well, we do think for the love when [laughter] per cooked <unk> similar to what you saw in July on October.
Clubs, you normally position on previous some for the love we over book a corner for the Ukraine, but you're already on Bill goes provision during the first nine months on.
I think there ought to be the quick on one of human for book purposes will continue Cooper INBONE book does one Oh go to your book quickly.
Okay. HEICO said, it's really this year. Thank you very much on book is the first part of your question then on because I was hoping on the second on.
On the political outlook, obviously, its a gold company looks good for Troponin Bell refused very recent.
So so so we are monitoring the situation.
And the President who wants discounts for a couple days ago.
Oh jeez on it.
[laughter] politician is gone on incurred in Europe.
In Q not very popular on <unk> as you know.
The two huge rather the arms on trying to do understand mm is to see what actions.
He starts taking on.
On one like.
Right on opinions here.
But but I think the most relevant is to to closely monitor the actions. We've taken the for thing is that she was able to me on the new cabinets.
Which is a big old.
So on politicians and technical professionals with I think it was a positive read around but obviously given the growth going on there. We got the new government came into okay. There's not everybody's happy so do cost could be digested.
Yeah.
But if we take a closer look at the name of the key goals in cabinets, including the Prime Minister or who is in Ontario, floaters and ours is a very well known confusion and he he he has lots of experience you need LTC for.
And she is [laughter].
Correct.
I would say centre is she.
If you go to the market our market for you.
Ben you see you don't like the health Minister minutes for which you spoke very important given the condemned he's also a person with experience in GAAP carves out your view on what needs to be done and then you have the economy. So good that you Scott who is also a very solid professional on she has some experience.
Our job I mean, it's going to mean for finest before he's been here for.
Cool.
He is or net income potential losses.
Solid book income is very positive so even though local crude price happening for these days.
I think it's going to be key to continue looking at what steps are being taken I guess scared the messages around the stability.
That is required under GAAP.
Sounds just spoke to give.
Good day, they have reinstated that index shows.
Good day are something that is not negotiable than they would have been in the five months, it's one for positive on that.
I guess, they're taking what are you going on some government would take note that GAAP the country. So what's the next day, probably we won't see reported big changes.
On the key will be.
More made for discontinued.
Be very potent at co.
Oh for <unk>.
Dependence on borrowers.
Between Dod that that the legal non like they did do Serbia executive.
And on our reenacted for gave some color where were they have been for because that gets consolidated RBC. We continued to take steps in the right in the right place.
That will be key for the regulatory reasons for Margaret.
For the scrubber.
Couple group here, but it is it really that that the government is able to the strong established dispersion of borrowers Ben room on the Caribbean.
It would be the same as we had before with a covert wattenberg credit.
Hopefully I tried to book.
Book.
More on more.
Is there what's the sprays to.
How is the conversation with the.
Admissions to support the congressmen on.
And every day and so that was what was conducted in terms of the moratorium on of course, the banking that no.
Dan as you know we.
We were able to get something good was more digestible that make more sense on on very far away for you. So I'd.
I'd of study were presented from Congress the quoting the superintendency they quoted the central bank the calling for them on the outcome was appealed studies already.
Being deployed that was.
Making more sense than we've had before so on long on the Central Bank continues to be independent, which is something that God, There's zone, where spoke about that the group. We'll know a lot of the continued to two brother very active important growth the on.
And we expect that to continue zone.
For the spring the industry continues to be EPS professional line because speed would like some good relations on sensitive for medical system I can be done during the day.
Many years ago for that.
That will continue on on again with better for you holes and good day.
The technical view that with the index.
For your finance with the disorder.
Got that should also be okay news flow for for the coming months on well get for future continues.
And I guess specifically on on your question about the interest rate drops there's a good work we're going through simple just what we did with the moratorium.
That does projects are there are no you're correct.
<unk> is opening up to listen to the experts, including again between for bonds the screen band.
And on and on people from from <unk> from the Ministry of Finance already occurred to me to really come up with a consensual.
And the last I saw was.
Im a draft that was given the then for Burke.
Ah responsibility no two biscuit.
Great you required okay again, so as long as the Central Bank continues to be on.
He has been for the last 20 plus years in my view is that the period for because they need the would be the one day you prime on above book was this mitchell's for dialing back because we all know that there's lots to do in turn for a bunch of research on city GAAP Syn <unk> is widely understood and grew that route.
And how for net if you like.
Growth in more people into the system has been evidenced in other countries not so that's part of the growth that we are actively working for me the bankruptcies James Schumm with got hooked with micro finance with opinions here, Doug because all these are on board. They took on stuff that's going on but just for banks.
But but where did that in the middle of the process here on.
So we don't have a good view in terms of will be not good or not on one on one with the time you've been.
They don't come to the pension fund reported that's on that discussion, but as you know we are not all participated in doing that for insulin pump business.
You know what Weve seen it wants the money comes out of the pension funds, we have a book a good impact from the deposits coming into into the bouncing for that has been able to get on line and sure enough well go deposits given the strength of bolt on just on the fact that because the losses.
GAAP solutions already deployed.
So people are bringing money into computers on also so so that's all for something that we are very close.
So so that's good for for the first part on the let me pass it on the losses, you can wait till it up on for Rob book for the.
Thank you.
Thank you only for leap and thank you and that's on for the question I'm going back to slide 16, Okay. There we are showing the retail loan balances with payments due so basically what we are showing there is that as of October 96% of the retail loan on.
Already had fame and do so only 4% is still on Grace period, and we'll aim not do or non from from a bolt on deals on the yearend in as far as say mid east come Sara No, which is a small portfolio of 800 million solace there is still.
36% in outstanding balance that he's he grace period, which we'd also now starting to mature and there will still be on more portion of that for for beginning of next year and going to your third question related to additional provision.
I mean, what we are seeing is that.
Every month, we our aim.
Observing they became famous flight no and basically what we are doing is refining archive calculations of the aim expert criteria that we applied in the second quarter. No. So that has allowed us not this quarter on a rated to register a much lower provision and what we are expecting actually used to do cost these provision.
Two I mean gradually come on VERYX non through their fourth for that and then it 2021 to reach then the day 20 in on vertical or 2019, net but what we expect for specific in fourth quarter. You know what probably shows up what we have seen already but feel about free covered lives.
Perfect Bunkering on on their.
Moving to him for.
Thanks.
And your next question comes from the line of Chase on Moly with Scotia Bank. Please go ahead.
Thank you.
My question is on profitability and sustainable return on equity in the third quarter was an impressive recovery 60 over 16% return on equity.
Hi, Good top line growth lower loan loss provisions for all still elevated as you are saying they should probably be for a little bit and improving operating efficiency.
We did see very strong trading as part of that top line and we saw a low.
Effective tax rate can you talk about what you think it's more of a recurring level or are we on how we should think about that going forward and the current context of low interest rates and perhaps some of these.
These other factors I mean, I I don't know for the end up seeing interest rate caps, but.
Maybe higher taxes on the future what what should we be thinking about longer term profitability at i. assets.
Thank you.
Okay. Jason. Thank you very much for your question, obviously right now were to do that.
[laughter], who many bites moving on or even though as you mentioned, we had a recovery and surgical businesses I think.
Early to draw up on like a concrete conclusions. However, we do we do have a view of the trends that we expect.
Expired, obviously, we we we see profitability <unk> recalled moving again on price.
As I said to glean some normalized just because we are still in the middle of the for Ben was still with that I called on that could you be colder. So while these continued but given the information that we have no on what were seeing on.
We obviously for seed and we will have a say could win on.
And then back on hopefully its not going for a strong on as we have seen in other countries given the total although I have already profit pool and so so so it's not easy to come up with like on Recompletions on on on.
On on the exact numbers. However, let me pass it on the lot because she can build up on their contracts are those words fees on that were expected to become in the future because I was hoping for.
Yeah. Thanks for your Philippe and thank you Jason on me basically you have seen these for there and return on equity being a I mean already free high not as you mentioned there are some strain games and from trading which will not.
Repeat like on quarters non in day in the coming year, but what what we are sure about is that it during 2021 I mean, the full year no. We should be a double digit early level of again no index I guess they doubt is when we will be able to do reach the high teens, non which we believe.
He is going to be a more on on 2022 non in some of the line. The diary Bhakti naturally. These in these strengths and day in day little uncertainty that we have on on how soon we are able to get to the high teens. If I mean for sure. No first is the top line recovery Oh, we have seen already top line, but.
Coatings on fee income credit being Super go on other income has been good but there is still pressure on net interest income in mean non despite their lower cost of funds that we are see again, we are expecting a lower cost of risk. After the peak that we have seen in the second quarter line in it it will gradually converged to 2000.
And I think let us know, but one of the key variables in that is a little bit difficult to probably two day is loan growth no because that depends actually on two specific things that are being kind of hard to predict no for the speed of recovery on the consumer portfolio, which is still no probably he did.
I've seen the numbers on system level, our steels contracting and the second is the recovery of the Iraqi let alone outflows that we will able to aim to do during 2021 always had this strategy of being Super brought this interactive losses also with the idea to be able to able to make those clients.
And then a be able to start working with them. Once every out there relative to loans start to let you know but of course, no we need to see if they don't lease profile of those clients and how much of those became volume no. We are able to a retain I guess not to sound that the trends not that.
Will then drive the the arrow 11th it that I commented on at the very beginning.
That's helpful. Maybe a follow up on that in terms of tax rate. So should we be expecting something more normal to historical levels of around 25 percentage that best guess at this point and then on trading is it is it.
Is it a good idea to just take the average quarterly I mean, maybe this quarter was very high and somebody.
Some of the other quarters is your work you know weren't but on average it was on.
Book at 18, and 19 is kind of.
That kind of level of trading is that is that a reasonable expectation or it's just too hard to tell for training.
And I mean for for tax rate for sure. It is super alone on so we we should return on average due to higher level of stock if I'm not sure really because you know what's on the tax rate depends on the mix no offense between different companies, but we should be there, they're returning to higher levels in into leases here for trading income that's a little bit.
And how they're yeah. So it because it will depend on on market conditions and also so basically we will see we we are force at hoping not to be able to generate a other income in that actually the three operating companies know that we have been able to recover or not doing. These these two quarters, but I I guess its.
Total it'll be difficult to tell you that per se.
Thank you Mckellar, Thank you always for.
Thank you.
Good day.
Your next question comes from Alonso Aramburu BTG. Please go ahead.
Hi, good morning on I'm thinking for the call.
Maybe first a follow up on your recent comments nickel on loan growth on me.
Are you seeing some structural loan book.
For for Europe, now in the fourth quarter or you're not seeing that yet on related to that I guess, it's because the mix on the mix evolves, describing a whole immune evolves. When do you expect them into interest to stabilize things. He said the fourth quarter, where you're expected to stabilize for you because I continue to have some pressure into into 20 or 21.
Okay. Okay. Good morning, good morning, along for that and and thank you and what we have seen on loans already in them. So for loan growth, Okay and NBC. What's the rate cases have same day has even accelerating in October is.
I mean, there on dual am clear photo switched lower risk profile in returns on have started to to grow on radian on ROE, even yeah, I mean, I bought no free probably let us. The first one is payroll deductible loans to their public sector employees and that's very good news actually not because that has been a very resilient.
EM segment of the portfolio no we have seen lowering but they're not in the no layoffs in day in day in public sector. So basically no. We are we are already asked for for the letter at free called limits in terms of disbursements not for that probably already know growing year over year slightly but that no in a month.
The amounts to GAAP, we will continue to be the case, so that should positively impact for quarter and also I guess next year and the second for is in Florida, just no more on this is actually already growing at free coffee levels, it's only about free coffee levels in basically.
Even though we have seen a segment a because of the target on that line segment. There was a lower risk profile and that he's also a helping the growth on a freak out now so those two products I would say no low risk and in high growth have started to be not already be a box because we've never seen a dominant in that it will.
Good day, the fourth quarter and on the consumer portfolio is the one that has flow.
Sadly decrease the pace of day, one of the reduction will not be one that is that is good news.
But we don't see yet a growing in the short term non so that is the biggest question on my we have because north we are still evaluating the baby or the behavior of payment of clients knowing it is difficult to stop.
You money, if we are not shown on the behavior of payments, we have seen for a couple of months, we'll continue to be the case in in the future and not as far as commercial banking is concerned it again, there because of the huge E flow awful lot from <unk> be line no there has been a.
Kind of a I mean, a a replacement effect no because the short term on working capital needs of companies have been covered by Raptiva fun. So basically no. If you take out on funds. The overall financial in system. The lid on financial system loans are decreasing net in that it should start to recover next year.
But again, it's not something day in very short they're not in these east. What then puts pressure on mean no. You you have seen I mean, when I mean, when you take out the effect of the on the impairment not for for the rescheduling of flows a NIM continues to.
On track no of course, we they are many day heating to pick on core NIM E book, No, but that's what kinda for one off so NIM continues to go on track because steel.
Steel you will see the full impact on the low yields on Frac FEIBA in day, lower incidence of the consumer loan portfolio.
Not in any flow what cost of funds. He is helping a lot in the case of interest we still see a pressure on net interest income in mean in the in the following on.
Okay. Thank you for that I wanted to follow up with a couple of other questions. If I may one does a specific on the on just kind of research on say, we don't use that is on a one off or is that something that we must share going into fourth quarter. I can you explain exactly why the hopping on I know that for sure does make sense. If its related to call me. Doug can you just give us some color on bag on lastly, if you can.
To give us some color on the line has with its lumpy I don't know if you can do on maybe there's a number of years for GAAP, but because he peru or what you're talking about the law on China, maybe you know whatever the she's got for them. So you guys for thinking about lunching with them on what you're talking about.
Okay alone. So this will be done so for its one Carlo can help me with the first part of your question on that will come back in line.
Hello, Sure Hi, Alonso.
On the reserves is the net effect Oh.
Maybe comment on or although on on so.
On one hand, we must be a credit insurance, which has been hit bye bye bye.
Excess mortality and the normal, but that's more than compensated by a or moving this business, which is which has had a positive impact or because of oh increased mortality. So the net effect is he said release so last quarter.
For sure we have like the peak of mortality on T., we expect the fourth quarter to have a lower effect on that.
And ER for next year is all depends on on we got.
For the second way for lunch.
Okay. Thanks.
Okay, and then on on Robbie and we're very happy with the beam.
Strategic Alliance, we have some couple of them for GAAP for a couple of reasons.
Our loans for the first one is because I think it's a first it's a testament to our Air Force. You know comes on for me for nor will I know they will look for that because.
Institutions into brewed in America that they've been doing another country on.
On and on and does it fit concept in terms of Ah sending up with an organization that has kind of day book.
To build on.
Detail things it.
Together they are.
What are you, including in analytical capabilities with whats called.
For on to Cooper, we're very happy because we were able to deploy all of our capabilities in order to to to be [noise] institution, They take and do you see opportunity.
And on circle and it's it's it's an agreement whereby we will able to distribute those incentives for products grew out of the platform as you know that would be super up concept.
And it is down but on the Super up that is the largest in terms of users who are on.
It's growing and it's been growing very strongly.
Isn't a double digits, obviously with the day, if they make they had alito on.
We do too.
GAAP, but if you want because they.
They were not allowed to do we're not allowed to operate but.
But they held off after that wasn't so they continue on with strong growth.
They have.
Close to 2 million registered users.
And that continues to grow non so we're very enthusiastic in terms of the of the things we'll be able to do a we've got a big.
Right. Okay. Thank you understand EBIT I know so.
On the first for all these digital check ins like on that's already available for for what the users.
Yes, you are still going to be in the NBP testing going on to 15, but that for some some users like use Robbie already seen yeah for is on how the liquidity to who opened their accounts.
On Robbie Duncan, whose core commercially so yeah.
It's still early the deployment Bud light and started to pick up.
Okay. Thank you.
Your next question comes from the line of several scan they gave a weighted credicorp capital. Please go ahead.
Good morning, everyone. Thanks for the presentation I have three questions. The first one I believe micaela mentioned that.
That they expect opex to decline, 5% year on year on 2025.
There's just too many 19 my question would be if you could provide some indication some early indications regarding the guidance on Opex are on 2021 a share.
Second question will be on interest say boom or even to the low rates I'm just thoughts on the potential stability on those low rates or are you expecting.
Sure no changes in the allocation of the investment portfolio that.
Illegal.
Third Oh, probably be a follow up and unfortunately, we have to come back to the political.
On a topic I just want to ask on on the political side, how do you assess the dish recent events. The PPK event now they've used car ray ban and all the regulatory risk towards mid to long term GDP growth or whatever what could be the implication.
<unk> doors, they do the Peruvian economy in terms of GDP growth and potential GDP. Thank you so much.
Thank you for your question I'm confused in the second question you started talking about it because it would have been you switch to tell you will see.
No question about it does it will always digital.
Oh, sorry, it's just about interest pseudo or on the on each investment portfolio.
Okay. So.
Do something bigger lot why don't you go first and then albums Halloween for both within for food on there will come back to the political situation of course.
Okay, perfect, all or a share Afghanistan, Oh, and thanks for your question and I will comment on the on the Opex in issue I mean, as you have seen on this year and be the reduction in cost have been very strong on the right on a number of things on Haskell dot.
For sure the cost containment program that we launch was one they take on white cliffs and the lower activity now that has impacted variable cost, but also non the lower cost coming from D.A. decrease in the branch in the branch numbers on that we've been implementing over day.
Yes, no what we are aiming it seems for 2021 is that in the efficiency ratio for you faced this year has actually gone down to Super Super low levels. Even this quarter you have seen a an efficiency ratio, which is super channel So based on.
Lastly, we are aiming aiming on maintaining on efficiency ratio at that you fear that should be around that 35% that we have experienced no and that aim will mean that during next year with the recovery of activity, we should see some increases here.
Cost not because of the value of a portion of the cost base, but we will also continue to see some of the positive impacts on cost coming from the reduction in their branch net and also this year. We are we have already closed 22 branches. We will be growth. In addition to 15 and before year end, so those and 37.
On she has no will mean less cost for for next year, but what we are aiming to get enough or that guidance now I would say that goes on so there are some uncertainties in terms of day of the top line is that a our aim is to be at the free views on the pick of 11 wonderful efficiency ratio for anything for them.
Set aside for that.
Based on something on the second question book.
Yeah, he's already on our portfolio yeah rates are coming down what we do is we'll just be race of book, which we sell our new annuities. So well, we expect to do hot when rates go down it.
Rather than just changing or credit portfolio is lowering the rate of growth.
Which we sell our annuities.
I love it answers your question.
Okay. So basically it's just on on an adjustment to the rates on on the on nobody's profit rather than switching their location or materially off the portfolio right is that correct.
That's right that's right yeah.
Perfect. Thank you we want to keep on ER scripts. The sales. So so where we do is if rates go down then we were lower for the race wisler annuities.
For good on.
Then on on on the last call part of your question, our mid term to long term prospects for food to net change with these events well, usually we don't like uncertainty coming from from the situation.
However, we understand the well the market in which we operate within here for some for.
For many years on we would see different different events.
Shooting the booby on political environment are we we can come back to the ninetys to to talk on some on.
So so force and so even though we do expect search on volatility.
On the fundamentals of the countries given all that needs to be done.
On the commitment to investments that we have remained remain the same. So so we do expect that after the elections boss.
On the trend towards growth will continue.
On outlets on these are two to take advantage of the opportunities that that we should come on college station level continues to be very you know the insurance penetration continues to be very low on wealth is being created so so so our.
We focus on on come on on to differentiates us on I think it will allow us to be.
The world voice to to help the country image continued pocketbooks.
Perfect very clear thank you so much.
Good day.
We will move next to Wade Jurney Fernandez with JP Morgan. Please go ahead.
And this will lead to advocate on good morning, and I had a question on both of these new government what things that could change for for for the bank with a book to be a bit more conservative known to the elections much reduced a little bit there was kept besides maybe should we expect more loan growth for 2021.
Lower consumer calls for those perhaps.
Total on mute.
Boots on your expected losses mall does anything like that or maybe I am I being too concerned you're basically nothing changed like things are not as normal or no no change and we need for these like the more conservative easier and my second question is regarding you know like 'cause a lot about rent steps and I see best for linear.
Concerned on that topic, but what else could be reached this years like we see some expenses on the budget that'd be good on GAAP Euro maybe in a situation like this.
It's good to see I don't know like your Hep C, but three oh like a new program to help you know then there's no companies things like that.
What can you just kind of government do to gain a little bit of popular. Thank you.
Hey, Julie Thank you very much for your question.
Again, it's it's really early to tell non I I guess did you have happened on baby food I think that I will come back to bite that does for two Mike The first question.
On the.
On the cool, where we need to continue to see what actions are being taken day by day it step by step.
And in order to have a view really of what really will will change in because again it down deep on announcing the cabinet.
They give us an initial sense that discipline the separation of powers debacle disciplined on that separation of powers should continue to it's really not on a change to the two for what we had before remember conduits already had those who need to pass the losses on it.
For vetoed by the exact cookies bench, we could not come back on on on brings force Oh like with anything.
Second option. So so you would have like on a blockage or for a period of time and so so so I think that responsibility that we have is to continue to work independent model on is making sure that dog technical people in Congress understands the real.
Fix on spoke on this basis it on.
So far at least from the banking side, we've been able to get trucks on the on that front on on and we do expect that but to continue it.
It's really.
As for you to pull or be on real cute Kofi goose come out probably in confidence given what has happened that was picking up right.
We'll come down obviously this normally you situations.
So we are taking a conservative approach the bank.
But.
Because these are specific sequentially on the overall.
Although these months continues to beat up endemic on how successful is the country really managing DC given the pandemic we've been being.
Conservative in terms of opening back in our credit lines on on on I'm trying to get to your cost too much on it. So so that will be that does the thing that really book it will move the needle in terms of risk appetite for us not once for which he does situation yeah.
Savvy tight conditions continue to improve as they've been doing that there'd be some days on on bad times, what does it gets impacted it.
For the quarter on me, we'll feel comfortable.
Obviously, we'll we'll be monitoring again that got that politically value, but everything that has happened has has been like really do so so so on both the for sticks look to be in the right direction. Obviously, there's lots of things happening right now through that we need to be a very very carefully.
That will continue to be get Butch is cost control. That's what we can manage that will continue to be a we're focused on doing the very same.
Okay aggressive he continued to deploy eco solutions not because we believe that the future. We are best suited for your back on beaches are moving to triple down on on that front. So good stuff that we've been doing we will continue to be done that's cool and.
Then in terms of what can be done to get propylene as well that maybe things began to two to two to.
The game on popularity, however, I think that.
As you are well, there's there's there's a strong message has been sent by the population to Congress snow it's done about it.
It is because it's done about that they will be able to do whatever they want.
Goes we'll see that Congress gets loosened popularity, so even though they're trying to do maybe hopefully things and I think people realize that that's not the way to go on also so we do expect that dot dot there would be ideas for around that but now that everything we do.
I would go so it was more on switched on you for no but again, it's early to tell you what could be done yeah babies don't bore for help don't watch on two towards on it for me to two to two people that I can be good. So far every day every day so cuts come to.
People that were okay with the financial system up to February no, maybe there's something that could be done well for people before that I I don't know it's it's it's he told me.
Besides the bills that are already.
There we haven't seen anything you got maybe there'll be some day.
Super goes for its a very good answer thank you.
Thank you Rudy.
At this time well take the webcast questions.
I will now try to go over to fight.
Thank you operator, Oh, we have on question from the webcast, it's coming from what full I mean, this from Credicorp capital well. Thank you for the call can you explain with more detail what explains the decrease of calls for funding.
What is mainly due to less international trip on Sunday, all repricing of deposits. Thank you.
Okay. Thank you I'm going to pass it on to me too long. So she can go on for little bit of Pizza.
Yeah. Thank you for that for your question and looking at the at the average cost of funding no and I commented on that we have seen some increase in the quarter no 50 basis points in the year on 120 basis point down to 1.7 per cent the average cost of funding.
For the actually when we look at the different components, we have seen improvement seen in all of them not so basically the policies have a and come down from 2.1% when you're on a go to 1.1% for this.
This quarter, mainly thanks to a better deposits mix and non stop to decreasing rates of all components not in I mean retail commercial institutional deposits.
For both CSK on so we have seen a 50 basis point decrease year over here and I. So you to balance CSK on so we have also seen a strong decreasing the cost of funds from 4.1%. When you go to two per cent. A this year and also I guess these I mean, a number of things that we've been.
Moving to see it I mean, they they increasing market share of free Dale repricing on People's lives the.
Transaction related to aim and the maturity of day hybrid tier one both on the in also be optimization on if they have day funding coming from a balance so basically the mix of for these actions have redone. The total all in cost of funding down in.
Free matching this quarter in these should be something that when looking out for 2021, we'll have a I need for time impact because we will have the full year impact on these lower cost of funds, which will eat those flow levels and we believe for for the for you.
At this time I'm showing no further questions I would like to turn the call over to the operator.
Now appear to be no further questions over the phone at this time.
I would like to turn the floor back over to Mr. accounts, the young for any closing remarks.
Okay. Thank you very much I want to thank everyone for joining us for the coal assets you have hurt our platform is showing a nice recovery from strong interest received Oh from.
From the public 19 effect in second quarter, especially.
Our conservative approach to provisions and potential coupled with those strategic spoke was playing to our strength progress in utilization a disciplined cost control for no wants to likely see an economic recovery on a nice way.
Should this recovery continue as we expect the positive impact you know Sanchez should materialize even further.
We have built a very strong franchise with kids strength, you know segments on business is a focus although we expect for that come.
Come in from the political situation, we do believe that after the elections boost medium and long term prospects continue to be positive.
I guess first is committed to helping to on its citizens to achieve a better future. It is our dream on our responsibility. Thank you very much.
This concludes today's conference call you may now disconnect.
[noise] Oh.
[music].
[noise] Oh.
[music].
Oh.
[music].
