Q1 2021 Intercorp Financial Services Inc Earnings Call

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Good morning, and welcome to the Intercorp financial services first quarter 2021 conference call. All lines have been placed on mute to prevent any background noise. Please be advised that today's conference is being recorded.

After the presentation, we will open the floor for questions at that time instructions will be given the procedure to follow if you would like to ask a question on.

You can submit an online question at any time using the window on the webcast and they will be answered after the presentation. During the Q&A session simply type your question in the box and click submit questions. It is now my pleasure to turn the call over to Rafael Borja of inspired group, Sir you may begin.

Thank you on good morning to everyone on today's call Intercorp financial services will discuss its first quarter 2021 earnings.

We are very pleased to have with US Mr. Luis Felipe Castellanos, Chief executive for fees had a female koala financial services. When he says Michela Casassa Chief Financial Officer of Intercorp financial services. When he said at once how low vitality chief Executive focus ahead of in terms of window on when.

He started Bruno fairly true chief executive focus here of Intel legal they will be discussing the results on the web distributed by the company on Wednesday may 12th but he is also a webcast video presentation to accompany the discussion during this call.

If you read English if a copy of the presentation or the earnings report they are not available on the company's web site or you face dot com that b to download a copy.

<unk> for anybody's on if you need any assistance today. Please call inspire group in New York two went to saving 109 seeks a six I would like to remind you that today's call day for investors on analyst only therefore questions from the media will not be taken please be advised that for we're looking Siemens may be made during this conference call.

Net income for economic circumstances industry conditions, the company's future performance or financial results I thought you statements made on a based on several assumptions on factors that could change, causing actual results to materially differ from the coding expectations for a complete note on forward looking statements. Please refer to the earnings presentation on a reported.

Issued last Wednesday it is.

Now my pleasure to turn the call over to Mr. Luis Felipe Castellanos, Chief Executive Officer of Intercorp financial services for his opening remarks. Mr. Castellanos. Please go ahead Sir.

Oh, Thank you very much.

Thank you good morning, and welcome to our first quarter 2021 in school for.

I want to thank everyone for making the time to attend our call I Hope you on your families remain healthy and safe. During these times debt in many instances continued to prove to be very challenging.

Let me give you a brief overview of the health and macro situations.

On the <unk> front, we continue to face localized lockdown measures perfect country.

On wave is actually very hard with number of cases on.

Best going above the first wave.

However, the implemented measures were not on the street at the once implemented one year ago.

Provision date health alert levels hotshot on it.

Looks like the second wave starting to decrease so now most businesses Lima in several regions of the country are allowed to operate on increased capacity, although not yet at normal levels.

With 19 cases harvest started to go down and the vaccination plant East Pony early stage.

Today around 5% of the population has been vaccinated, so far or.

One 5 million people, but we are seeing the speed of vaccination.

<unk>, which is very positive in our view.

Economic activity in the country has continued to recover you will start to show improved important base effect from this moment onwards.

GDP figures for the month of March will be out tomorrow on growth is estimated to have reached almost 20% on the Banco strong public investment better terms of straight on hire private consumption, we continued to see.

To foresee a low double digit growth in GDP in 2021.

Supporting this view the central Bank sales its monthly monetary policy meeting last night on gifting policy range of an unchanged radial for 25 per cent and consideration of the limited underlying inflationary pressures.

Our last call Congress finally approved a cup to interest rates for our financial system, We do not expect major impact on our banking business from these measures I do think it will have negative effect in the financial information on Banco rotation process of Peruvians.

Legal procedures are in place to declare the anti constitutional nature of the low we will follow this process goes.

All of.

Our focus on the run off presidential election will take place next June six the most important bolsters agreed that the margin between the two candidates has narrowed significantly which makes it impossible to predict who paid next president will be there will be uncertainty in the day to hit on the strength of at least situations might be different in different ways.

Depending on the outcome.

On the DC scenario on your face.

I just purchased franchise continues to prove receipt, we remain confident that our team has experience on skills to manage through uncertain times as we have done in the past.

Our theory strategic book, which saw.

I will create a strategic focus on measures taken to enough for your prices are staging ISS to reach record earnings for.

First quarter of this year with solid results in all of our operating segments, our liquidity capitalization provision levels together with a risk management skills world class efficiency level deed on strictly on a strong presence in the minds of our clients give us confidence that our platform is low.

Positioned to continue helping peruvians with their financial needs in the future. We continue to be focused on helping our customers doing deep strength and to deploy our resources in an efficient way to maintain the possible for profitable growth.

Now, let me pass it onto Michela for a detailed review of our results. Thank you again and please remain safe.

Good morning, and welcome again to Intercorp financial services first quarter 2021 earnings call. At this time, we have to be value did a presentation in for park, which include financial highlights key messages results by segments and trends.

And take away for IBM.

I will start with a brief summary of financial highlights on slide three to five main highlights.

Intercorp financial services automation maintenance for Leap day record earnings of high standard of $28 7 million in the first quarter with a return on adjusted equity at $23 seven per se.

Earnings for Glu in our subsidiary supported by low with the leisure charges and solid results.

So on a recovery in revenue was mainly due to the insurance business. Our digital trends continue to support value fish strategy. We have continued with a disciplined approach to cost control at cash cost efficiency and there are solid capital ratios in all day.

On interbank strong recovery in earnings thanks to lower.

Lower provision and higher yourself.

Key banking indicators a recovery.

Retail loans, we feel real strong deposit franchise.

My question market share in retail deposits.

We have seen cost of funds down almost by half from last year at two point at one four per cent.

And NIM is still under pressure due to assets and no mix and FX excess cash.

Cost of risk came at one 8% in the first quarter below pre COVID-19 level and as we continue our focus on efficiency and branch rationalization.

I think that's the Rudolph profit share in the first quarter due to higher results from investments at <unk>.

C D E F accelerated.

Bos pre COVID-19.

With regular annuities, leading the recovery.

It was a solid quarter in gross premiums plus collections up 14, 3% on a quarterly basis and 25% on a yearly basis.

Strong net gain on sale of a financial investment return on the investment portfolio at 10, 4% and industry continues to be the market leader in annuities with a 28, 7% share.

And then you had a sound first quarter and Michelle with return on adjusted equity up 37% profit normalized from data net is researching the first quarter last year and an all time high levels from the first part of 2021.

It wasn't a significant growth in fee income from funds management and commercialization infrastructure problems.

There were cost savings from reduced use of office spaces, and lower administrative expenses and assets under management had a strong growth up $6 five percentage per quarter, and 24, 1% year over year.

No.

This has been mainly driven by investments we chose at interbank and cash they would do.

We are very happy to see a recovery in most of our current and recurring results which include.

For the recovery in the quarterly growth of retail loans with an acceleration of mortgages and personal loans.

Second on inflection point in credit cards in April when we have seen our first months of growth since the beginning of the pandemic.

Third there was an important growth in insurance premiums and for a recovery in fees coming from increased activity with clients on interbank and intangible.

Now I will focus on the key messages, we would like to take home from you to take home from disposal on slide seven.

There are six messages, which we will cover in detail in the following day.

First we continued to see a macro recovery.

Second we have a strong balance sheet with liquidity and capital levels substantially better when compared to pre COVID-19 levels and Moreover, we have manageable for lunch.

Based on levels in the balance sheet.

Activity has continued to recover as mentioned before in all three operating companies.

The digital trends continue to be better each month and support I used a strategy, which translates into growth of clients and business.

The first message for Great lakes for cost of risk, which is a low because with leather and less debt. We continue on with our focus on efficiency and branch rationalization.

Let's move to slide number eight the first day message about the recovery in the macro theme.

In March we have seen a strong recovery in most of the GDP indicators favor the reopening of the economy and the base effect from last year when activity was depressed by the first round of strict measures to contain depending on our side.

So the performance of leading indicators for linked to domestic demand such as sending sales electricity consumption in public investment suggest that the economy per phone.

Broadly in that.

Particularly public investment as you can see on the bottom left Gardner.

On the strategy to reactivate the economy through the execution of public investment, resulting resulted in a new historical record of almost 7 billion solid executed in the first quarter. This year and almost 4 billion. So on this only in March 2021.

This was mainly explained by progress in work related to the reconstruction with changes program the length of the Lehman major India rank up there.

Expectations for when economic activity continued to recover up to match that show a deterioration in April mainly due to the uncertainty related to the outcome of the election in the same way volatility in the exchange rate. So at all on reaching $3 84 last week and today. It is back again.

To around $3 seven shortly.

On slides nine through 11, the second message relates to liquidity the legislation and capitalization on book.

Each night during the first quarter, we have continued to share an increase in our total deposit base on interbank.

For 6%.

Driving the yearly growth to 33% for truck sales are lumpy deposits ratio to stand at a low level of 89% This book and below because she can shop for it.

The loan to deposits base in both currencies is a healthy level with a loan to deposit ratio in Charlotte on 105% well below the 118% of the system.

I have to match that has been on improvement in liquidity in the financial system.

Due to their fans coming from the private pension funds as well as D. We undo storefront of defense coming from Directv.

He has been able to benefit from this situation and to have gained additional 40 basis points market share in total deposits in the quarter.

And 20 basis points market share in retail deposits in April and after the first book for the second round of the presidential election.

We have seen a tightening of liquidity in the financial system and integrate there wasn't a nutshell solar from the system, which decrease if we did in that currency.

At the end of April day, total liquidity of the system in both currencies remains good and the loan to deposit ratio for interbank is up 91% well better than pre COVID-19 levels, which were above 100 per se.

We continue to have ample liquid assets and with 28 billion solace at interbank out of which 18 billion shortly our cash and equivalents and have around 1 billion solid on your first stand alone out of which around 300 million soldiers are passionately on it which would go there.

Could cover our U S current obligations for more than three years.

On slide 10, our loan book has a manageable level of debt I would say true.

So with no exchange risks on the remaining commercial loans in dollars correspond to export company with no currency risk on.

<unk> 23 per cent of total loss is compression on a dollar and only 6% of retail loans and 1% of small.

On slide 11, we continue to have a solid capital position at all three operating companies for fire fish.

Our total capital ratio as of the end of March was 17% compared to 16, 3% of the system.

And a minimum of $10 six per cent with whereby the FDA asked for it.

This means that we have over 600 basis points buffer you know total capital ratio.

Core equity tier one ratio was stable at 11, 5% I didn't actually accrued on our solvency ratio stands at 153% well above 200% required by I didn't day legal our capitalization ratio is 30% again, well above the 8% required.

On slide 12.

Mostly operating trends at your first half continued to show positive developments in activity this quarter as well as for April this year at interbank debit and credit cards turnover has recovered to pre COVID-19 levels of 186 after reaching a peak in December on 100.

13% noodles.

New disbursements of payroll deduction on loans to the public sector employees are growing 15% versus pre COVID-19 levels, while mortgages have registered a new record month in April and outgrowing.

8% versus pre COVID-19 levels.

Total fees for interbank at 83% of a day of pre COVID-19 levels with commercial banking fees recovering faster than retail space, mainly thanks to new business coming from the aggressive for active alone.

In the day, something definitely would any day legal recovery was much faster with.

With gross premiums in April this year on 107% versus pre COVID-19 levels and assets under management at plus 19%, enabling vessels February last year.

On slide 13, we are showing the quarterly evolution of our sales total revenues.

Have seen a strong recovery in revenue coming from other income from investments, mainly I think I said went up but also at interbank anything.

Quarterly growth of.

8% is driven by a 27% increase I didn't dare say water, which more than offset decreases of three one and 33% I think their bank and valuable.

Yearly growth in revenues of 19, 4% was mainly driven by interest rate would any day legal which more than offset a 4% decrease in interbank revenue diversification.

Day diversification of our U S businesses has definitely played an important role in the yearly recovery of revenues. The banking business continues to recover in a more gradual way mainly due to the pressure on net interest income on NIM coming from low yield low.

Oh gosh.

Cash portfolio leaf and.

And a smaller country they shouldn't affect us in.

In in a low rate environment.

Moving on to slides 14, and 15 and the fourth key message on slide 14, our kpis.

In the digital transformation continued to show positive results supporting our refreshed strategy.

Our used aircraft on April <unk> 78 per cent of our customer base.

31 points in the past two years.

100% digital customers, who are items that do not use branches or contact center any longer.

Use digital channel plus eight P. M true correspondent agents only for cash in English I have reached 7% in April.

Saturday points from March 2019.

Even though sales have also continued to see a rapid increase on interbank retail digital sales reached 53 per cent in April and I think they'll say would also on digital sales reached 77% both increasing sharply in the past two years.

We have continued to see an important number of new digital accounts being opened for E. V was as of the end of April 55 per cent of new retail saving accounts were opened digitally digitally and new digital client acquisition of retail customers reached 42 per cent compared to 12% in March 'twenty.

And I think our.

Investments to build our digital capabilities during the last year has placed on advantage for our cash collection operations on the current circumstance.

On slide 15.

We have reached more than 4 million retail customers and more than 110000 businesses.

Our retail client base has increased almost 15% CAGR in the past two years, where our commercial client base has increased 39% each year for the past two years are 100% reported retail digital customers have grown at a CAGR of more than 50% in the past a year, reaching one 3 billion.

Playing the P to P payment feature among multiple banks operating which helps on gambler is already active in more than $3 5 million do share as of April in only one year, 40% of which use interbank FTE account.

To keep our 100% digital solution for payments relaunch on February last year has surpassed 1 million users as of the end of April.

The first key message refers to the low level of provisions registered during this quarter with a cost of risk of one 8% even below pre COVID-19 levels debt.

The true positive strength described during the last conference call have continued to develop further during this quarter on slide 16. The first positive strength is that outstanding rescheduled loans have continued to decrease.

As of March outstanding rescheduled loss was $9 2 billion or <unk> 22 per cent of the total loan book.

This non.

This represents a 28 per cent decrease vessels for the peak of June last year.

This is true for both commercial and retail portfolios. Moreover, the number of total clients Reschedule has also decreased as the new inflow has been marginally during this last month.

On slide 17.

On a positive trend.

We have continued to see on improving payment behavior. Among interbranch clients I should say per 2021, 99% of our total retail portfolio cash already had a payment due.

67 per cent of the retail portfolio has not been rescheduled and on.

Any registering a very good payment behavior.

98, 9% of clients are paying their installment only 0.1 fashion has requested on additional relief and only 1% national state.

New request up really from not day. This represents a one 1% after five which compares to one 5% as of January.

<unk> 33 per cent of the retail portfolio, which has been rescheduled as of April 97 per cent of clients are paying debt installment only zero point for person has requested an additional relief and only two 6% passion update on day summing up newly less relief request and non.

This represents a 3% as of April which compares to a three 8% as of January this year I've.

Our senior debt payment behavior has been up sales for credit cards central for April with percentage of payments at almost 98 per cent for the 55 per cent of the portfolio that has not been rescheduled while almost 98 per cent for reactive rescheduling <unk> 93 per cent for unilaterally reschedulings and around 95.

Per cent for start to lap structural reschedule.

For Smes confer.

Standing rescheduled portfolio is small and below $750 million out of which 96% of claims have been paid installments out of the 92% that has had statements already you as of the end of April.

On slide 18 desktop.

<unk> is a quarterly reduction of for the provision cost of risk for the quarter was extraordinarily low at one 8%, which compares to the three 1% of the fourth quarter last year and the $3 four per cent of the first quarter 'twenty training. This level of cost of risk is below pre COVID-19 level of two.

2% for the full year 2019 may lead you to the low cost of risk in retail, which today has a lower contribution coming from credit cards, which is the product with the higher cost of risk in the portfolio.

This is reflected in the low cost of risk for rebid in the quarter, which was three 4% down from six 2% in the fourth quarter and five 5% in the first quarter of last year and also below the 4% full year cost of risk 2019.

Pre COVID-19.

Commercial banking continues to have low levels of cost of risk. Thanks to a small participation in the small business segment and watch the 0.5% in the quarter.

Finally in the last few minutes actually on slide 19 refers to the disciplined and proactive management of costs, we have been pursuing a before and after COVID-19 stopped this.

This quarter cost are flat compared to the previous year as activity has to recover and we start to see increases from the variable cost, especially on the book.

We have registered a very low efficiency ratio of 30%.

Well below our guidance of 35 to <unk> 37 per cent based things to the positive impact on revenue as previously described.

At interbank efficiency ratio is up 39% when we have accelerated our branch optimization program started in 2016 and have closed additional 52 branches in slip on Venus started reaching a total reduction the number of branches of 30% from their peak in 2016.

As mentioned during the last conference call on expenses will start to increase during the next quarters as the level of activity continues to recover driving variable cost and some additional expenses start to materialize related to a commercial alliance with upbeat and EM debt.

A I D investment guidance remains at 35 37 cost income ratio for full year for Isaac.

Now, let's have a closer look at some additional indicators by segment on slide 25 to 27.

On slide 21, we are showing a recovery in most of our key banking indicators with the exception of NIM, which is still under pressure.

<unk> decreased 70 basis points from the quarter down to three 7%, but NIM after risk improved 10 basis points in the same period.

Low level of NIM in the quarter.

You do on a number of factors for the portfolio mix with a low contribution of credit cards second raptiva loans at low yields share excess cash invested at low return and for the low rates environment.

NIM should start to recover in the next quarters as well.

Cash should resume growth as we have already seen in April.

Have a reduction in the excess cash, which we also have seen some extent in April and the fever alone start to mature in a greater extent.

NIM would have reached four 8% in the quarter, when excluding fever and excess cash effects.

Total fee and other income had a strong growth of 25 per cent in the quarter, mainly driven by strong investment results.

Other expenses decreased two five per cent in the quarter and two 8% when compared to one year ago with the efficiency ratio for the bank at 39 per se.

On slide 22, our year over year low growth was 12, 3%, mainly thanks to the rack diva loan disbursement.

<unk> growth was small this quarter, but there are some positive trends in mortgages, which continued to accelerate growing three 6% this quarter and payroll deductible loans to the public sector employees growing two 9% this quarter strength.

Cash and other personal loans decreased five 8% in the quarter, but have seen an inflection point in April where credit cash cash Register a positive number for the first time since the beginning on the F&B and other personal loans continue to accelerate growth. He is supposed to be strength of April should translate into a positive figures for it.

For the following quarters.

Actual banking grew 36% in the year, but was flat in the book on flow.

23.

Total deposits grew.

Two 5% in the quarter and 35 per cent year over year with retail deposits growing 151, 5% in the quarter and 25% in the year, gaining 40 basis points 40 basis points market share year over year to a record for 14, 1% as of March.

Due to bank.

Which include our Central Bank funding for direct you up the new program has decreased seven 6% on a cash.

Orderly basis, but has increased 70% of our yearly basis in line with defense, we have lend to our clients.

Cost of funds has continued to decrease reaching one 4% in the quarter a reduction of 20 basis points from the quarter and 170 basis points on a yearly basis.

Positive development came from several factors like decreases in market rates, a better funding mix and the higher funding coming from the Central zone.

Well, we don't think they'll say Rudolph on slide 24, and 'twenty five quarterly premiums continues to show a strong growth of 14% driving the yearly growth to 25 per cent all business lines grew with mandatory annuities, leading the growth in premiums in there. So we don't remains a market leader in annuities with a 20.

Eight 7% market share in the quarter when.

When looking at the April figures for recovery more evident as premiums have grown two times when compared to April 2020.

On slide 25.

Definitely Rudolph investment portfolio decreased four 6% on a quarterly basis, mainly due to sales in the fixed income portfolio, but you 13% on a yearly basis.

Results from the from investments had a particularly strong performance dishwater coming growth both from a reversal of provision for me from a loft and other investment income.

Thanks to the strength.

On the debt.

The investment portfolio was extraordinarily high at $10 four per cent well above the previous quarter 11th.

Moving on to our wealth management segment on slide 20 feet in telling a posted strong revenue in the quarter, but below the extraordinary high level registered in the last quarter of 2020 for.

The income had a particularly positive strength this quarter growing 22% driving the yearly growth to 14, 7%.

On slide 27 in telling us assets under management reached $22 3 billion. Shortly from March a strong $6 five per cent quarterly increase and 24% increase on a yearly basis.

Wholesale fee net positive strength growing three 8% in the quarter and 7% year over year.

It means of 87 million solace from each quarter are below the extraordinarily high level of 155 million and finish off the fourth quarter, but represent a solid quarter for the day level with a 30% return on adjusted it.

Moving on to Slide 28, we have provided a comparison of our results with the operating trend for expected for 2021, which we have shared during our last conference call. We mentioned that <unk> 2021 will be a year of rebuilding the portfolio at interbank to foster.

Growth in the coming years in definitely won't even tell you all should continue to grow despite an extraordinary good year for both companies in 2020.

Sure.

Talking about capital, we expect interbank capital to remain at SUNS level, well above regulatory requirements as of March total capital ratio of 17% and core equity tier one ratio of 11, 5% are well above the guidance and the regulatory requirements.

Second profitability.

Return on adjusted equity came at 23, 7% this quarter and should be above the 14 per cent for full year 2021 as per our guidance.

That loan growth at the bank for this quarter was relatively flat, but trends played out a recovery for the coming quarter.

For revenues grew <unk>.

8% on a quarterly basis, mainly thanks to other income net.

<unk> was three 8% in the quarter still below the yearly guidance of 4% to 43%.

They especially net interest income and NIM is mainly coming from three factors. As previously described the full year effect for 17 on finish for active along at very low rates the impact of mix on average due to the decrease in the credit portfolio and the increases from mortgages.

For the excess cash invested low beta.

And for the low rate environment.

Related to cost of risk it came below that guidance at one 8% in the quarter below pre COVID-19 levels and we are keeping are around 2% guidance for the full year.

Talking about the efficiency ratio on a your first it was 30% in the quarter better than the 35% to 37% guidance. We have continued with our cost efficiency efforts in branch rationalization program. This ratio was extraordinarily low during the quarter, mainly due to the strong other income and <unk>.

<unk> expenses seasonality, we expect an increase in expenses in the coming quarters, mainly due to the recovery of activity, which drive variable cost and further acceleration of our digital investments, including building our venture with them.

On slide 30, we wanted to share with you.

That we have published our sustainability report for interbank for 'twenty 'twenty, when we outline the actions taken throughout the year in order to achieve our vision of sustainability you can find it in our wet.

And to finalize the presentation on slide 31, I want to close this presentation with a brief summary of the six messages that have been developed.

The presentation.

Third we continued to see a macro recovery through second we have a strong balance sheet.

Capital levels substantially better when compared to pre COVID-19 levels, and Moreover, we have manageable dollarization level from the balance sheet.

Third on D. V. D has continued to recover in all three operations company for for your faith.

For the digital strength continued to support value for strategy, which translates into growth of clients and business.

<unk> cost of risk is below pre COVID-19 levels.

And six we continue our focus on efficiency and branch rationalization.

Thank you very much now we welcome any questions you might have.

Thank you and at this time, we will open the floor for question first people take questions from the conference call on the webcast question.

If you would like to ask a question. Please press Star then one on your Touchtone phone.

Questions will be taken in the order that they're received and then if at any time you would like to remove yourself from the queue. Please press Star then two again to ask a question. Please press Star then one and for the webcast viewers simply type your question in the box and click submit question.

Pause momentarily to compile a list of questions.

So my first question will come from Ernesto <unk> with Bank of America go ahead.

Hi, good morning Felipe.

On Saturday.

Everyone.

Regulations on your record high earnings for a quarter. Thanks to your diversified earnings.

My question is on how to think about the earnings for the next quarters.

Considering that this quarter was driven by.

Hi market related revenues.

I think on are likely to repeat.

That opex should be trending up.

But on the other side you were having a very strong economic recovery. So does true Bruce.

On your NII, probably long day.

The excess cash.

Also provision.

It seems to be already below pre COVID-19 levels, and you were saying that we should get a cluster of risk of two per cent for the full year. So.

Would it be right to expect core revenues improving in the next quarters, while our marketing market reality golf on others.

Income normalizing.

On where do you see the upside risks on earnings.

And then just a last question on how should we think about the evolution of the ROE we would be.

Next quarters and the full year.

Which year do you expect to reach the pre pandemic level. Thank you.

Okay. Thank you Ernesto I. Thank you.

So for your question, but I think you nailed it on your thoughts.

Around the answer no we do think that the.

Market related.

The result should not stabilize normalize obviously, we will be closely paying attention to see if we have additional growth opportunities as you know we are here.

We have a big investment portfolio and in our business. This is what we do but total so we'll be paying attention to any opportunity, but the offset to that.

Potential increase of our expenses on maybe.

Let's see how the macro factors affect at risk.

Will be debt.

Our retail portfolio will start have started growing again, so we do expect that to help us in driving more revenue no debt.

Kind of your expectation.

So immediately it will be difficult to foresee everything that know how everything is going to move around but that assumption.

What we are.

Executing on returned to growth, especially in higher margin products that we have already witness to the end of March on beginning of April which will offset the other potential negative trends on.

<unk> been very active in paying attention to what these from health investment opportunities now for more detail on the trends. Let me stop you don't seem to get them. So she's done for them.

Work around that.

The numbers on the trends that we're seeing.

Thank you Philippe.

Good morning, and less on and thank you for your question I guess and as we have mentioned this first quarter no cash I've seen are beginning to see that from other income revenue also basically.

On the guidance that we have provided for the full year is a.

Soft topline for covering us so we're talking about really a march on growth this year.

We have seen on 0.8 per cent displays and.

As I mentioned.

If it is possible not on the following quarter, we will not have such a big contribution from other income, but we are expecting net interest income and also other income to help offset a day.

Lower revenue if you went from other income and this should be coming from the recovery and growth in the retail portfolio. We have shown that this quarter is the first quarterly which is the total retail portfolio is increasing and Moreover April has seen the inflection point in credit card also summing up those two range together second quarter, we should see and.

On a better recovery in the volume of retail loss, we should drive a little bit interest income, but also in fee income then I guess for second question related.

Roy as you have seen the level of ROE a dishwasher is well above the guidance that we provided we are maintaining the above 40% guidance in narrow because of the trends that we have described and also soft top line recovery in a further.

Increasing.

Inexpensive.

So most likely we will see quarters with lower ROE is that the one day, we have registered this each quarter now and the aim is to try to be.

At more normalized levels of arrow for for 2022, depending of course on the on the macro environment.

I don't know if this is okay. So if there was something else that you want them to.

No yes, perfect. Thank you very much for its probably been the killer.

Thank you okay.

And our next question will come from Sebastian Gallego with Credit Corp Capital. Please go ahead.

Yes, hi, good morning, everyone and thanks for the presentation.

As my colleague said congratulation as well.

For the for the strong quarter I have.

Several questions maybe the first one a follow up on day on the recovery off of credit cards can you elaborate a little bit more on that topic, particularly considering a potential withdrawals or pension funds. We have seen this liquidity.

Fact on particularly Chile.

I'm just wondering how fast.

Or what's actually the pace you're expecting for.

For the credit card business to pick up in the in the coming months and how should we think about actual growth on that portfolio.

Second question.

You mentioned, it's about margins for Ya man you mention that.

So on breath, you up into loans will have a maturity, but but but I understand debt.

Debt the term of breadth do you up for two loans is at least 36 months I'm just wondering if you could provide.

More color on how you're seeing the evolution of Oh breath, you up into loans.

And maybe.

One final question would be on on on net fees.

When we look at operating trends it could probably be the the actual operating trend with the lowest or the slowest pace of recovery. It seems study that is currently.

80% that you mentioned in the presentation I'm just wondering.

How should we think about net fees going forward should we expect to see a further recovery or or could this be a new normal for net fees. Thank you.

Okay. Thank.

Thank you Shannon.

Let me go through like the concept of else to do.

Your first question and then we'll go to Michela for chicken.

And we'll go through the numbers, but basically what we're seeing on credit cards is a recovery.

It has to use a bit with the recovery of the macro activity, but it also has to do a lot with our risk appetite on azure.

No she's done.

Last year it started.

Immediately change our underwriting standards in order to be much more conservative than that.

Together with the pace, we saw increased liquidity.

On some of our customers.

Not taking more credit card loans on.

The fact that much of the delinquent credit cards have already gone through our P&L.

<unk> ended up with our portfolio and credit costs reduced by more than 30% non which.

Very important for us in order for.

If you can share that as a revenue generator and we've been.

Okay with that we'd been working in our models we've been.

We are building our value proposition to our customers.

Now we feel that we can return to growth not only because of the activity on <unk>, but because we feel that we have more elements now in order to properly assess risks and debt portfolio I return to increase which appetite towards that in.

So that will be the main driver of of our our credit card portfolio.

We've done on with homework, we have.

Got it calibrated our model we understood. The current situation of the Peruvian population. So so we feel more comfortable going back to search for that growth.

This is again, what we do what we've been doing for the last 20 years now.

In terms of the pace of growth.

Probably that will be.

From.

We will start opening gradually.

Because you know we would still want to see if what we've done.

The effect on we are thinking but to gauge equation.

The customers that we have in the portfolio the way Theyre behaving for.

I really believe that each of them are bringing because of the risk profile that we have a low.

<unk>.

The low.

Provision expenses are related to add a related that we are seeing tremendous growth behavior in terms of payments from the state of book there.

Customers that we have so the equation is paying.

<unk> very nicely, probably lower revenue coming from those customers, but it <unk>.

You can know where provisions of debt as.

Well, so our net income benefit from that so that's kind of the first part of your question on now let me pass it I'm going to get us when she can talk about margins decisions on.

On.

What we're thinking about teach them for.

Okay Hello.

Thanks again for for the question, let me just on.

Couple of things today to the answer from literally pay on on credit stats and recovery in and maybe just to point out that despite the fact that there is going to be more cash available for clients because of artificial contracts out there that we have also started to see an acceleration in the.

The new client acquisition for new credit that's not so basically that also built up a more and greater Nova. So that is also going to help the growth. Although it is a mix of existing clients.

To me more but also a new clients now and just to have in mind that the current risk profile of day credit card portfolio.

Really without without low risk noise, even lower than pre COVID-19 levels. So there is ample room to push for more growth now that we have everything set in place us actually sleep image in Samsung argued.

Fever.

I'm, having mindset that we have reached over 7 billion solid if not effective at low tide at the peak last year, but we have been seeing since last year is one side. There are some prepayments for active launch and those prepayments are coming mainly in the corporate segment and to some extent in the mid corporate.

For a minute as well no prepayments a 40 day.

In the fall.

Moreover, besides prepayments there are some installments that will start to cut you off.

I'll start.

Sure.

On May June July et cetera that will also decrease the outstanding of a fever, yes, we have to be a extension of the vaccine by Lowe's aim that was approved.

That will not impact the full portfolio actually not there are a number of things that have to be met for a company to be able to access. These extension now so it most likely impact only a portion of debt right. Now. So what we are expecting is a gradual decrease on these outstanding loans from Gretzky.

And that's no.

They disappear from from the balance sheet that would also help a little bit.

And the last point related.

Fees and I mean, we will start we have seen a recovery of feet on a few main shown on this.

It has been slow leer than other core operating trends.

And it naturally.

Thanks Ian.

It's a mixed number because there are some very positive news from fees and there are for mother's day and recovering slow yet. So one side, we have fees coming from commercial banking fees coming from commercial banking are growing more than 20 per cent year over year for basically we are growing a lot even when compared to pre COVID-19 levels.

It's coming from a number of reasons for shoulder active strategy paid off so we have more clients more cash. So we are having more fees coming from from payments, but also a recovery in export fees and M. I mean, corporate finance fees. So that is something that we have seen is a trend that is very stable and growing.

On January this year, and we hope to continue to feed into that.

Then as you have seen also I think the legal fees.

The growth very very nicely and that is also a very positive strength that we are.

The portion of fees that is still in fact it ended up.

Still below last.

Last year, our retail fees and specially fees related to create cash flow kind of a reminder of the credit card for portfolio decreased more than 30% year over year with COVID-19 and in the same way fees related to credit cash decrease in that proportion. So basically those suites are growing and as long as the credit card I think it continues to.

Recall that we should see also those fees.

Yeah.

Recovery in day in the months from now so putting all together.

I, I guess and revenue share.

On the guidance, it's going to be kind of flattish note with lower revenue is coming from from other income and a recovery in in fees and net interest income.

Very clear on Makena.

And we thank you so much.

Thank you for OCA.

And our next question will come from Jason moving with Scotiabank. Please go ahead.

Hello, Thanks for the opportunity to ask questions My question.

On operations have been answered, but I thought maybe a more general question on how the group is preparing itself with this uncertainty it seems like the market has rebounded from some recent lows with some expectations of a more market friendly.

Winning but how is the bank you talked about liquidity, maybe that's a good way to phrase it.

Are you positioning the bank in terms of liquidity and risk taking going into this period.

During this period of uncertainty.

Yeah.

Hey, Jason Thanks for your for your question.

Yes.

We've been here before.

In previous situations similar to this went on with kind of our playbook for these no. So in terms of times of uncertainty.

We always.

Or was reinforced our liquidity position, we have very strong capital position.

And the other point of concern is the underwriting standards.

Ill hop guidance doing.

Last year, we started to to to move on that front, but that's something that we.

We are being very careful.

Still on and lastly, we've always managed.

Our beautiful day its Dino.

Currency neutral neutral and also we're kind of a <unk>.

We've always had a view of being.

Hedged in terms of our operations on our dollar sold exposure on them.

We continue to do that but I think that's all those for are the main parts that we need to take care of on that.

What we're doing now again.

That's helpful. I appreciate the color and comments.

Congrats on the good quarter.

Thank you Jason.

And our next question will come from Geoffrey Elliott with Autonomous. Please go ahead.

Oh Hello, good morning, Thanks for taking the question the.

Proposals that have come out of the central bank on limits to interest rates and fees can you help quantify.

Quantify what those mean for Iff's now you've got a bit more detail.

Sure.

Thank you thanks for your question.

Surely the proposal came out.

As mentioned on into introduction.

We don't think it will significantly affect.

Fish.

Like.

Only a very small portion of part of our consumer book.

But very small debt.

We'll have.

Tough to change because of the.

The central Bank for spring.

Where we really have been.

Our heat is it does.

There's a restriction on in order for for customers too.

For for financial institution to charge.

I don't know, how you call it Nicola and her work on it and.

And display.

Yes.

Do they payment late payments on yeah.

That means there's a restriction to we tried to late payment fees on that has been changed by a higher interest rate for for late payment.

So.

All in all again.

The impact will not be big I think it's less than 40 million soldiers in all for it for fish, which is low.

On a per cent of artificial revenue, however, what worries us.

That it will not it is not a good in late.

You need to invest.

Create payment behavior for Peruvian so having debt in place.

Pete.

He is a very good incentive for customers too.

Based on time, and we see that in almost any market in the world.

So that's one of the things that we think will affect or could affect.

The payment behavior in the future so.

And that is it.

The main concern debt, we have net of revenue impact right now is what could happen in the future if peruvians zone.

Don't see it as a.

<unk> have good payment behavior overall, I've mentioned the impact of the low in our operations. So far will be extremely limited almost almost nothing.

However, as you know.

The low has been for.

Centered before the constitutional court.

In order to deter the Unconstitutionality of the law on we are.

Waiting to see what happens there, but we have expectations that it could be reverted don't both for the top of the range and also for these late payment fees.

Situations.

And is there anything else bank specific.

Bubbling up.

Yeah.

Congress or in terms of proposals from the presidential candidates.

Could impact you down the line I know, there's been a series of different for.

Over the last year or is there anything new out there that we should be aware of.

Banking strategic nothing that comes to mind really we haven't seen many of them.

Many ideas around the banking system in the index.

In the preceding show.

Plants yet.

Yet so so really nothing that comes to mind.

As has been discussed nowhere like reprogramming of loans due to the pandemic.

We've taken care of on.

A couple of interested that has already been taken not book.

So nothing really that we.

We are paying attention.

Thanks very much.

Thank you.

And our next question will come from Yuri Fernandes with JP Morgan. Please go ahead.

Good morning, everybody. So I haven't just a quick question regarding other income right.

But I guess Mattel already nation, there were sales of fixed income portfolio, but what else is driving that because okay. This quarter was record, but Turkey was very strong for us he was very strong.

This quarter I guess, we saw some evaluation of investing in assets.

I guess, what I would like to know all these like how sustainable are those revenues and I guess, you said that it will normalize, but we will get to normalize back to 2020 levels that were too high or would return to its causing any key on 1019 level I know, it's hard because you know marketing from.

It's very volatile on hard to predict.

I guess it could be true.

And would be nice to have more color.

If this is like U S equities seeks a day.

Come on what is driving this.

Trading is for you. Thank you.

Okay. Thank you Judy.

It's a little bit.

But.

The way I would look at it every day.

Related to intermodal I would like to I.

I would look at the historical levels of interest.

We're not revenue will converge to historical levels.

And then dumped on the lunch from from the bank.

Well again with all the liquidity we thought we are taking a very conservative approach drove investing basically neutral.

It's all government related silver and related instruments, So it's very plain vanilla.

On the results will depend on how that that moves and so so really we have these results like every months obviously, the first quarter, we saw an opportunity.

We worked around that.

But it's tough to predict exactly what will happen in the months to come so again I will.

Again look at the previous year's results for the bank on.

And try to think that we will converge on on that front.

And I don't know if you could have you have from contract maybe a little bit more on certain will be.

And he said he was for salt life.

Yeah year end year out.

The.

Earnings potential of the way they monitor investments muscle total so again.

Looking at the price.

A successful story of value might be it will pretty true.

I don't know if you went on something.

Not not not not not really I guess, that's that's the that's the submarine there could be opportunities knowing that in the coming quarters, maybe nobody could have for some other.

Extraordinary levels of bad debt.

And that's something that the day, we can we can.

Assure or how do you mind us for certain revenue.

Perfect. Thank you and congratulations on the list from quarter.

Thank you Jody.

And our next question will come from Andres Soto with Santander. Please go ahead.

Good morning for all thank.

Thank you for on the presentation. My question is regarding digital transformation you guys have presented unimpressive flight.

Slide the numbers regarding digital sales, our new customers are up but I would like to understand from a business perspective, how these translate into fees from being on all their other operating metrics on how do you see.

The journey for monetizing. These are these are increase in.

Impressive growth in users.

Mhm. Thank you.

That's an excellent question and.

Yeah.

We can actually address in many different ways.

First I think that is.

The division that we have torch day Ito is very positive we are executing as you know a detailed person study.

So so so that's materializing.

I guess.

<unk>.

The way I would put it is we've been able to manage it.

Almost like let's say stable operating expenses, but the number of interactions and number of customers that we have brought into the bank in the last 12 to 18 months.

Non significantly slowed the pace of the new customers on interbank is accelerating and we kind of manage.

Different lines, probably IP cost incretion, but.

Looking for savings in other places.

And to keep that stable not so so if we were operating on the under our previous model, having no more than a million customers joined the bank in the last day.

12 to 18 months would have cost us significantly more than what we are having on so we're able to kind of keep our hour.

Efficiency ratio at.

Reasonable levels on that.

And so that's I think the most important book that I would point out.

Second.

We are gaining market share in deposits, especially for for the retail franchise north.

So so our acquisition strategy is to bring in funds.

Which are very efficiently and simple.

Well, that's a that's important despite.

Jim.

Michela mentioned rationalizing more aggressively than any banking through our branch net.

That study is also paid back to us.

And then.

The third part is.

Debt I, particularly don't have an answer right now, but we're starting to see no because we've been very focused on volume on more reach in on better services for our customers will be the actual value being brought in is something that we're starting to starting to focus to make sure I'm probably in the <unk>.

<unk> months, we'll be able to elaborate a little bit more how we're capturing value from that perspective, but.

First we wanted to have the infrastructure that possibility Joseph commercial terms to bring in more customers on a detail on the approach we are seeing that getting trucks from now we have to move to the upside.

So that has been with the same cost base basically so now we're moving.

The next phase, which will be kept to a more value not only.

Luke Akshay.

I don't know if we get if you went out something more specific on that maybe maybe if I can add something I mean before COVID-19 and we have discussed this I guess in the past we were having now.

For positive operating leverage neutral basically we were being able to increase our revenue is much faster than cost and that goes back to the first point of lift that he'd been the other day that we needed to be able to bring much more clients without increasing the cost base.

Why not at least that we have like two different situations between retail and commercial actually I guess, we are already seeing the value e-commerce.

Banking because.

All the clients that we brought last year through our digital account opening okay that day, and also where a link to a fever are already bringing.

And also we have seen the boosting in piece. So I would say that that is like Nokia and other work on an inflow of clients. If a digital and now we are at being able to generate more for what is happening in the retail side is that the 90 day affected by like external factors. So that things that we do not have to do a lot with the growth on the <unk>.

Fly has no provision from last year.

On the low level of debt you can see that from Craig's got so I should know that as that normalizes in the customer base continues.

We should go back to that or should keep operating leverage debt. We used to have these recalls.

I guess, there we will see if the value on what we're doing and materializing.

Andre I hope that debt.

To answer the question.

Definitely make a lot of anything for them for now for Columbus for Lithia on cool.

Luckily for us from everything.

Thank goodness.

There are no more questions at this time I will turn the call over to the third group for any webcast questions.

Thank you we have one question from you on a go through from an Ito maybe on a.

Could you share with us the reduction of on boarding coast, what what the coast in <unk> 'twenty enough two 1 million new customers what is the close today.

Okay. Thank you Joanne for the question I don't know.

Can you help me with that or maybe we will have to go to do on a later if we don't have that detail. So far yes, I am sorry, we don't have the numbers right now we will have to come back to you and afterwards.

Yes.

Come back from new dry on on that specific question.

We come from we have for another question from your stock on non toll from pre market day.

What is your perspective on the new repo operations, we stage for guaranteed loan portfolios should do we expect a greater contribution in the banking system.

Well I don't know exactly what the other banks will do I will tell you. What we're doing we are already already doing big Red program around any of our customers.

At low rates and we are not very actively going through the whole per.

On the negative contributor because we find it a little bit.

She has too many steps not so we've done our own.

<unk> solution for our customers.

And from the.

Telemeter showed.

Every time, we are seeing less and less customers looking for relief and.

So I think the program we have internally built is being very well accepted by our customers that need help.

So we don't expect particularly to be.

Users of the program.

But then you asked about the whole system.

We'll.

I cannot answer for for the other institutions.

So at this time I'm showing no further questions I would like to turn the call over to the operator.

And I see no further questions on my end here. So that will conclude the question and answer session I'd like to turn the conference back over to Mrs. Casassa for any closing remarks.

Okay. Thank you very much again, everybody for joining a day school and we are very pleased with the results of this quarter and I hope to see you all during our second a conference call in.

Okay.

Hi, everybody.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.

Okay.

[music].

Thanks.

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