Q2 2021 Intercorp Financial Services Inc Earnings Call
Good morning, and welcome to Intercorp financial services second quarter, 'twenty 'twenty, One conference call.
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It is now my pleasure to hand, the call over to Raphael Baja of inspire group, Sir you may begin.
Thank you and good morning to everyone on today's call Intercorp financial services will discuss each second quarter 'twenty 'twenty. One earnings. We are very pleased to talk with us and he said, we fully paid casiano Chief Executive Officer said, often called the financials. How does he says he says.
Micaela Casassa, Chief financial Officer of Intercorp financial services Mr.
Let's talk a little about southern Chief Executive Officer of Dolphin Udo I'm used.
Blue know fairly true Chief Executive officer of Intel Eagle, They will be discussing the results than what would be distributed by the company yesterday. Almost 11. There is also a webcast presentation to accompany discussion during this call.
You didn't receive a copy of the presentation or the earnings report.
What if any level on the company's website or you face that combat E to download a copy or otherwise floating in recent if you need any assistance today. Please call inspire group in New York at 212710, 96 AC I wanted to remind you that today's call is for investors and analysts only therefore questions from the media.
I will now be taken.
Please be advised that forward looking Siemens may be made during this conference call.
Do not account for future economic circumstances industry conditions, the company's future performance or financial results as such statements made are based on several assumptions and factors that could change, causing towards soles to materially differ from the current expectations for a complete note on forward looking statements. Please refer to the earnings.
And patients and report issued yesterday.
Now my pleasure to turn the call over to Mr. Philippe Cassis Chief.
Chief Executive Officer of Intercorp financial services for his opening remarks, Mr. Yano. Please go ahead Sir.
Quarter 2021 school.
Everyone, we're making that guidance again, Oh cool I hope you and your families remain safe and healthy.
Let me start by giving you a brief overview of the hill and macro situation into.
On the cemetery front, Peru was able to speed up introduction Asian process and as a result currently around 27% of the population or $8.9 million individuals.
The first dose while 19% also received a second dose or a single shorts machine.
Okay, Lockdown measure absorption across the country. Our numbers indicate we are ending the second wave.
We know that we must get ready for a third wave and the new government is planning accordingly.
The improved sanitary conditions continued to have a positive impact on the economic recovery of the country.
Despite the volatility witnessed during the electoral cycle economic activity in the country has continued to show a robust rebound.
Accumulated GDP growth levels until the amount of meat going towards 20% increased as a result of NIM.
What's important basically.
Strong public investment and tailwind from higher commodity prices and improved trade pattern.
For the rest of the year growth will probably trimmed down towards low double digits on a base effect dissipate over the next couple of quarters.
Because we all know on July 28, the new government took office.
But do you think the challenges remain high in the country are government take search stitch, the business community and the population in general Ashish denominations in different positions, including the covenant. The first measures are announced.
The consumer and business confidence indicators continue at low level signal in that economy activity will likely slow down in the coming months in the meantime, we have seen volatility in the exchange rate and the weakening of the local currency with cash.
On inflation.
And in addition are you.
Ah you're fitness franchise continues to prove its strength and resilience.
We remain confident download our team has the experience and skills to manage to try and time as we have done successfully in the past.
Again, our clear strategic focus I've taken.
To reach another solid quarter with strong results in both operating segments.
Sure.
Strategic businesses.
In each of our subsidiaries, we have topped with all within the Peruvian financial system.
Our liquidity capitalization on provisioning levels to GAAP.
With our risk management skills.
Strong focus on efficiency our detailed strategy.
In the mind of our customers give us confidence that our platform is well positioned to continue Toby Peruvian with their financial needs in the future.
The opportunity continues to be there are financial <unk> research on their penetration in the country.
Hi.
We have the platform to make our work good.
I will pass it on to Micaela to update you on strong results of this quarter with a detailed review of our operations.
And please remain safe.
Thank you Philippe and good morning, everybody and welcome again to Intercorp financial services SEC looks a lot better.
Earnings call at this time, we have divided the presentation for Apache, which include financial highlights key, Michigan, and Michelle's nice shaped men and trends and take away from being.
I will start with a brief summary of financial highlights on slide 225.
Did they say it for the quarter out.
For Iff's, we've registered another strong quarter with a return on adjusted equity at 20% with this the first half earnings of 984 million soles and reached 21, 7%.
And we've reduced our 17, 2% year over year growth in revenue for the first half efficiency ratio stayed low at 31, 2% in the first half improving almost 200 basis points year over year.
We continue to have a solid capitalization strong liquidity and manageable the lubrication letters.
Indicators continue to support.
Our interbank.
Earnings continue to build that with an 18, 8% early in the first half. Good news is that we have seen accelerated growth in retail launch in the second quarter, which has allowed us to gain 20 basis points.
During this quarter.
14.5% market share in retail bullshit, Okay, again up 40 basis points, you can block hour and 70 basis points year over year.
The first quarter with an improving NIM since the pandemic started up 20 basis points Q on Q and the second consecutive quarter with cost of risk below pre covid levels.
Laurel there we've seen a recovery in expenses, which is driven by the recovery in activity that we continue with our focus on efficiency and bench rushing inflation, putting definitely Rudolph solid profit in the first half drove <unk> up to 50% due to higher results from investors. It is another quarter with a strong return on.
The investment portfolio.
Okay.
And gross premiums plus collection had increased seven 4% during the quarter with regular annuities picking up.
We've also seen a strong gain in the annuities market share to 71, 2% in the second.
What I'd tell you got 30% that really for the second consecutive quarter with a significant year over year growth.
In the first half.
'twenty, one revenue mainly driven by other income, but also by net interest income other income has been positively affected by macro basket on the investment portfolio and asset under management philosophy Bullshit SEC.
Seven 3% only in the quarter, which has driven the yearly growth to 27% one of the very positive news of this quarters again is at the top line has continued to be strong.
In the first half 'twenty, one growth in revenue to 17, 2% when compared to the first semester of last year.
This is mainly thanks to a recovery in most revenue lines.
Which includes net interest income fees and other income, indicating an improvement in the quality of top line. This.
This recovery has taken place in all three operating companies now.
Now I will focus on the key messages, we would like you to take home from this call on slide seven.
There are six key messages, which we will cover in detail in the following SEC.
The economic recovery in Peru continues.
Second we have a strong balance sheet with capital liquidity and education levels substantially better when compared to pre covid levels.
Third we have seen a strong recovery in our core indicators in all three operating companies.
For the digital trends continue to support our refreshed strategy, which translates into growth of clients and business.
Peter Costa Rica, Costa fleet continues to be below pre covid levels.
And the six one is that we continue with our focus on efficiency and branch rationalization.
Moving to slide number eight.
We can see that the economic activity in Peru has continued to recover from the low levels registered in the second quarter of last year.
Since March 21 O. What we are seeing double digit monthly GDP growth rate as well as in the main economic factors I'll have Michele.
GDP figure is now near pre Covid levels evidencing a robust rebound.
In the period comprising January may 'twenty 'twenty, one the GDP growth rate is 20% year over year and were favored by the reopening of the economy. The progression the vaccination programs nationwide Philippe and the base effect from last year. When most of the activities were suspended to contain the pandemic.
The positive performance is widespread in sectors like construction manufacturing called mesh meadows and electricity and water.
Their GDP growth should soften over the coming quarters, as basically fetch dissipate expecting a growth rate of around 10% by year end.
On slides eight and nine to 11, they tripled message relates to capital liquidity and the legislation on slide nine we continue to have a solid capital position in all three operating company Sofia fish, our total capital ratio at the end of June was 16, 5% at interbank.
Compared to 15, 4% of the system as a whole and the minimum eight 6% required by discipline.
This means we have increased to almost 800 basis points the boxer.
Capital ratios after the Superintendency decided no we're temporarily the minimum required.
Core equity tier one ratio improved 10 basis points in the quarter up 11, 5%.
Our solvency ratio stands at 160% well above the 100% required while I didn't tell eagle our capitalization ratio is 22% again, well above the 8% pretty quiet.
On page 10.
We continue to register high levels of liquidity up to March there was an improvement in liquidity in the financial system due to the funds coming from the private pension fund as well as the unused portion of defense coming from them actually rapid.
Starting April and after the first of all for a second round of the presidential elections, we started experiencing tightening of really being the financial system and at interbank. During the second quarter total deposit base at interbank decreased three 1%, reducing the yearly growth two 9%.
There was an outflow of dollars from the system, which decreased the liquidity in that currency.
As of the end of July a total liquidity of the system in both currency remains good and the loan to deposit ratio for interbank is at 94% still better than pre covid levels, which were about 100 per cent.
Laurel that allow to deposit ratio in both currency you have healthy levels with a loan to deposit ratio in Charlotte at 107% well below the 123% ownership. Good news is that during July a retail deposit base increased 6% in one month of July is typically a very liquid market.
We continue to have ample liquid financial assets with $26 million at interbank out of which more than $16 billion, our cash and equivalents and have around 900 million solid I used to standalone level out of which around 250 million less cash and equivalents which are good.
Current obligations.
On slide 11.
Loan book has a manageable level of debt.
So with little exchange rate risk I should remaining commercial launch in the last call respond to export companies with no carriage English only 23% of total loss is comprised of dollar and only 6% of retail loans.
Moving on and do they do affect the sort of my second slide 20 on slide 12 monthly operating trends that have.
We have continued to show positive developments in activity for this quarter as well as for July 2021 at interbank debit and credit cards turnover has continued to increase substantially reaching 45% above pre covid levels.
Theres myself payroll deduction launched to the public sector employees are growing 28% versus pre covid levels, while mortgages have reduced or a slowdown in growth in July.
And that growing 3% versus pre covid levels after reaching a record in June total fees for interbank are at 82% of pre covid levels with commercial banking fees recovering faster and retail fees, mainly thanks to the new business coming from bad Rush is a fever long shot in.
In the case of indefinitely and Intel Eagle the recovery was much stronger with gross premiums in July this year at 136% versus pre covid levels and asset under management plus 21% in July versus February last year.
On slide 13, we are showing the quarterly evolution of total revenues for FX, we have seen a second consecutive quarter income for total revenue, which is like a 17, 2% increase in revenue during the first half of the year. This growth is mainly coming from first analyst.
Station of Interbank revenues second a strong recovery in revenue coming from other income from investments, but also other social revenue I didn't catch that.
The.
The diversification of our businesses has definitely played an important role in the yearly recovery of revenue if I can see the banking business continues to recover in a more gradual way mainly due to the pressuring the net interest income and NIM.
I mean from low yield low excess cash portfolio mix and a slower accumulation smaller contribution sorry of the detached and low rate environment.
Now moving to the fourth key message on slide 14.
Our digital Kpis stabilized during last month as the slow growth in activity, reflecting a more stable mix in channel users digital users as of July are 78% estimate base up 18 points in the past two years, 100% digital.
Customers, who are clients that do not use branches or contact center and you don't get a who use digital channels plus Atms in correspondent agents only for cash in and cash out has reached 56% at July 25 points from June 2019.
Digital sales have also performed well at interbank retail digital sales reached 55% in July and I think they said would also digital sales reached 81% both increasing sharply in the last two years.
We have continued to see an important number of new digital accounts being opened for them they need us.
As of the end of July 61% of new retail retail saving accounts were opened digitally.
Digitally a new digital client acquisition of retail customers with 45% compared to 14% in June two years ago.
Our investments to build our digital capabilities during the last few years has.
It definitely plays to an advantage for our customers and operations under the current circumstances on slide 15, we have reached more than 4 million retail customers of the bank and 116 businesses. Our retail client base has increased 14% CAGR in the past two years, while our commercial client base.
37%.
Our 100% retail digital customer have grown at a CAGR of almost 16% in the past few years, reaching over one 5 million.
Clean that need to be payment feature among multiple banks operating with cell phone number.
Already active in more than four 2 million users have up at the end of July 41% out of which use interbank as their key accounts.
And two are 100% digital solution for payments Relaunching favorite I'd love to hear how switch 1 million users as of the end of July.
Moreover, both payment initiative have aggressively started to increase their number of Americans, reaching a combined number of 650000 stuff up at the end of July five times higher than one year ago.
The first key message refers to the low level of provisions register for the second consecutive quarter at 1.7 below pre Covid that was the three positive trends, we have been experiencing the past quarter and have continued to develop partner during this quarter on slide two.
<unk>. The first positive trend is that outstanding rescheduled loans continued to decrease as of June outstanding, which can last were $7.8 billion or 19% of the total loan book. This number represents a 39% decrease versus the peak of June last year. This.
This is true for both retail and commercial portfolios. Moreover, the number of total clients. Reschedule has also decreased the new infill has been marching up during this last month.
On slide 17.
And the second positive trend is that we have continued to see a very good payment behavior. Among interbank suppliers until July 2021, 99% of our total retail portfolio has already had a payment you.
71% of the retail portfolio has not been rescheduled and these registering a very good payment behavior 99, 1% of clients are paying their installment.
Europe is fantastic with any additional relief and only 0.9% has nothing.
Of the 29% of the retail portfolio, which has been rescheduled to die 97, 4% of players are paying in installments only 0.1%. After the question additional relief in only five 5% has not paid a game. So I mean, not new relief request an update.
This represents a low number of two 6% as of July which compares to 3%.
Okay.
A similar fate.
<unk> has been a platform play that catch up am Tonight with percentage of famous at almost 99% for the 63% of the portfolio that has been rescheduled while almost 99% for reactive rescheduling <unk> 97 per cent for unilateral rescheduling and around 96% for structured rescheduled.
As for SME if confirmed.
Sunday rescheduled portfolio is small around 750 million out of which 96% of clients.
The pay in the installed base out of the 98% that have hot payments already.
Ready.
You actually at the end of July.
On slide 18, the third positive trend in the low level of provisions cost of risk for the quarter was extraordinarily low at one 7% below the one 8% of the previous quarter and below pre covid levels from two 2% for 2019.
Mainly due to the low cost of risk in retail, which today has a lower contribution coming from credit cards, which is the problem with the higher cost of risk in the portfolio.
Is it reflected in the low cost of risk for retail in the quarter, which was three 2%.
One from two 4% in the first quarter and below the 4% for the full year 2019 pre covid levels commercial banking continues to have low levels of cost of risk. Thanks.
Thanks to a small participation in the SME segment and was 0.4% for the quarter and below the fit up one 5% for the first quarter.
NPL coverage for the bank I Hope you had almost 170% and for retail loans.
200 per se are.
Stuck up provincial professional at the end of June represents around 7% of our total loans. Excluding the fact that when people are sort of known.
Finally, the last key message on slide 19 refers to the disciplined and proactive management of cost I used those passports you before and after Covid.
During the first half of 'twenty, one we have registered a very low efficiency ratio of 31%.
Below that 3% registered last year, and well below our guidance of 35% to 37% mainly.
Many thanks to the positive impact on revenue previously described which have contributed to our operating leverage as.
As the bullshit.
As the 17% increase in semi annual revenue more than surpassing the 11, 9% inflation costs.
This quarter, though we have seen a recovery in prices driven by banking activity, we would compare with compared to the previous year. It is important to remember that during 2020 I eat fish was one of the few financial services institution in the region, which was able to execute an aggressive cost reduction program, which ended up.
Reducing the total cost base for the first five 5% for the full year at interbank efficiency ratio is at 14, 8% for the semester above the 37, 2% registered last year as expenses have increased 5% as we starting to increase.
In line with the recovery of the activity.
Well and compete with expensive technology.
During our previous conference call.
Okay.
But all of that.
We have continued with our branch optimization program started in 2016 and hospitals additional 62 branches.
They started reaching a total reduction in the number of branches of 33% or almost 100 branches from the peak in 2016.
Expenses will continue to increase during the next quarter when compared to the previous year driven by variable costs investments in technology and some additional expenses related to a commercial alliance with.
Guidance remains at 35, seven cost income ratio for the full year for I would say most.
Most likely we will be in the lower end of athletes.
Now, let's have a closer look at some additional indicator by segments in flight with it.
Yeah.
On slide 21, we are showing a recovery in most of our key banking indicators, including for the first time to the pandemic started NIM, which was up 20 basis points in the quarter. The recovery of NIM in the quarter is mainly due to a recovery in yields total fee and other income decreased 14.
5% in the quarter, mainly driven by the strong investments with social in the first quarter with fee income, though recovery and growing one 7% in the quarter and 44% when compared to the same quarter last year.
Other expenses increased three 9% in the quarter and 24% when compared to one Diablo as the SEC.
Quarter last year was the strongest in terms of lockdown.
Only impacted the level of efficiency.
Efficiency ratio for the quarter is up 42, 5%.
On slide 22, the positive news coming from the accelerated growth in the retail loans, which reached four 1% in the quarter, resulting in a gain of market share of 20 basis points in the quarter and also a recovery in the size of the portfolio back almost to pre covid levels.
We have registered a strong growth in all retail products with consumer loans growing three 7% in the quarter mortgages growing a record five 7% in payroll deductible loans to the public sector growing 2% before.
Moreover July has seen a further acceleration, especially in credit cards, whether the Easter at one 7% growth in one month. They have you seen in the year so far.
Actual banking grew seven 2% in the year, they need you sort of a fever, but was down 1% in the quarter.
On slide 23 during the second quarter, there has been a reduction in the total amount amount of deposits in the case of interbank deposits decreased three 1% in the quarter.
<unk> nine 1% year over year with retail deposits decreasing seven in the quarter, but growing 11, 3% year over year, which has allowed us to gain 40 basis points market share in the quarter and 70 basis points year over year, a record 14, 5% as of June.
Cost of funds remained stable at one 4%.
Representing a reduction of 80 basis points year over year.
This positive development came from several factors like decreases in market rates I bet, your funding mix and higher funding from the Central Bank.
On slide 42004 to 'twenty five.
Let's have a look at intercept Udo quarterly premiums continue to show a very strong growth of seven 4%.
Q O Q driving the yearly growth to more than 100% most business lines grew with mandatory annuities, leading the growth in premium.
Interestingly, we would all registered also a strong great eight daily market share.
Reaching 71, 2% compared to 28, 7% market share in the previous quarter.
On slide 25 in terms of what does the investment portfolio decreased one 3% on a quarterly basis, mainly due to sales in the portfolio, but grew three 8% on a yearly basis. We saw strong investment continues strong this quarter, but below the extraordinary high first quarter with a return to sort of your investment portfolio still high at seven.
47%.
This quarter well above the six 3% registered one year ago.
Moving onto our wealth management segment on slide 26.
Posted strong revenue in the quarter again, beating the extraordinary high level registered in the first quarter.
Net interest income grew more than 5% in the quarter. Other income grew almost 10% with fee income flat after a particularly positive trend last quarter and more than 20% versus last year.
Slide 27.
Lastly, bullshit kind of strong growth during the quarter at seven 3%.
The yearly growth, 27% and reached $27.2 billion in June.
Earnings of 90 million solid for this quarter are both strong.
The first quarter of 87 and drive the semiannual earnings to 177 million with a 39% hourly.
On slide 29, we are providing a comparison of our semi annual results with the operating trends expected for 'twenty 'twenty one.
As we mentioned in our previous conference call 'twenty 'twenty, one will be a year of rebuilding the portfolio of interbank foster growth in the coming years.
Kelly will should continue to grow despite an extraordinary good deal for both companies in 2020 despite covid.
First talking about capital, we expect interbank capital to remain at sound levels, well above regulatory requirements as of June total capital ratio of 16, 41% and core equity tier one ratio 11, 5% or above.
Above the guidance.
In terms of profitability. The first half 'twenty. One are you fish and return on adjusted it would be if at 21, 7% well above the guidance it should be above the 14% for the full year 'twenty 'twenty one.
Given the strong results of the first half we expect to beat our guidance by at least 200 basis, but the extent of this bid of course will largely depend on the speed of the recovery in activity.
Talking about loan growth year to date loan growth as of June was four 3% for retail and minus one for commercial and in line with our guidance, we expect retail loans to continue building up by year end.
NIM was three 9% in the semester.
4% in the quarter growing 20 basis points, which bring us to the low end of the guidance provided which is what we are expecting also for year end.
Terms of cost of risk it came in below the guidance at one 7% in the quarter and one 8% in different Mr slightly below pre covid levels, but we are expecting cost of risk.
I really am.
Increasing no as the credit card portfolio in fact, we continue maintaining our guidance of around 2%.
In terms of efficiency ratio the efficiency ratio for I F F 31% in different master bedroom down of 35% to 37% guidance. We have continued with our cost efficiency efforts in branch rationalization program.
An increase in expenses in the coming quarters in line with the T.
CVP, which drive variable cost and further acceleration of our digital investments, including building our bench with rocky So we shouldn't that be here in the low end of the guidance.
Moving to slide 13, we wanted to give you a brief summary of the main actions we have undertaken to watch a stroke of corporate governance and a S. ESG.
Disclosure can be ideal in the New York stock Exchange in July 2019.
We have undertaken a physician.
Actions, which include that right. After the IPO, we improved our reporting standard language best practices, the financial services industry, starting September 2019, and up to April. This year, we have implemented subsequent drugs with J P. M D, resulting in improved internal controls and procedures.
During the second quarter 2020, we appointed an independent audit committee about your faith and the internal shops auditor.
In the first quarter of this year, we appointed a new board, including a representative of minority shareholders for the private pension fund and we included new disclosures related to ESG in a report on the second quarter. This year, we have successfully concluded our specialty shops internal control our fault.
Yep.
And we are currently participating for the first time in these standard <unk> Poor's global corporate interesting ability of fashion.
Finally on slide 31, I want to close the presentation with a brief summary of the key.
There are six key messages discussion before.
The economic recovery in Peru continues second ISS has a strong balance sheet capital liquidity in the lower inflation levels.
There was one factor.
Profit levels.
We have seen a strong recovery in our core indicators in all three operating companies, which is reflected in revenue and profitability for the digital trends continue to support our U S strategy, which translates into growth of clients and business.
Five cost of risk continues to be pre covid levels for the second consecutive quarter and six we continue our focus on efficiency and branch rationalization.
Thank you very much now we welcome any questions.
You might have.
Yes, thank you at.
At this time well open the floor for your questions first of all I'll take the questions from the conference call and on the webcast questions.
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Plasma entirely to compile a list of the questioners.
And the first question on the phone today comes from what I spoke of Linda form Bank of America.
Hi, good morning, Philippe on the Gorilla.
My friend for her strong second quarter, and so are we well above 20%.
My first question is hungry economic income political outlook.
We have seen better economic growth remains one of the highest in the region.
However, when you tell them for example housing or it has an important impact in the Peruvian stock.
I believe one of the key concern related to who will be appointed by the central bank. According to some parochial local newspaper.
Course of income who you wanted to keep a lot of the hurdles of central Bank.
So that could provide continued good reviews risks related to talk on a cap rate in the sector. So can you give us an update on what are you expecting other critical Bang ER and what are the reasons that you're finding to be more optimistic on the political front.
Then my second question is on loan and net interest income broke a we have seen loan growth continues to show modest recovery.
However, as you pointed out rebel and her revenue picking up economy remained strong so how can we think about loan growth.
Uh huh.
Maybe some burden per gram for.
For the next year.
Hi, Ernesto since for your question, let me take on the first part was very simple.
We are.
We know basically the same as you regarding the central Bank.
The snow strong confirmation yet.
It was just that there.
There is a view that the government could.
Brazil.
Confirming who know a lot of it.
Where AUM.
Waiting for those news to come in and regarding the.
Political.
Scenario, we always we're cautious.
Early in the process.
Moving different so we are we are paying attention to to the announcements by.
But by the government on the steps being taken in terms of announcements.
Mr. Snow. So so again, we're very focused on executing our strategy. We believe we have the platform to be successful in Peru, and different circumstances with proven that not only in the last let's say 10 years since I've been at <unk>.
Interbank as a company.
Cool.
So that for over 100 years.
What I can tell you things midnight eastern within a large luxury going on in Peru on and we've always had a team very focused on executing on these opportunities while being cautious in terms of the risk right.
Depending on the situation.
So I hope that addresses the first part of your of your question and then on the second and more specifics regarding the trends, let me pass it onto them together.
Thank you Philippe and good morning, there and thank you for the question. Let me first comment on what we are expecting for it for year end and as I was mentioning on the comment on guidance in terms of loan growth, we have seen a roughly 4% year to date growth in retail, okay, but what do we see that.
B the trend between the first quarter in the second quarter. The good news and also looking at July the good news is that consumer loans, especially credit card shneur.
Now it's starting.
It will pick up so.
We are expecting the yearend fake figures for retail, especially to be in line more or less with the guidance.
<unk>, which was.
Single digit growth, but given that we're at 4% already in the first in the first half no. We are expected to be between eight and 9% for now.
Now in terms of the commercial portfolio, though and the guy there continue to be a slight reduction.
Raptiva loans start to be repaid and we are replacing those loans were three will have loans, but not at the same age.
<unk> also know given the dates.
Yes.
In terms of NIM.
Have seen four of your face we have registered a three 8% NIM first quarter, 4% in the second quarter and what we are seeing for the for the rest of the year is NIM close to 4%. So we are not feel guidance for our year end figure, which is the low end of the range a two 4%.
As far as 2022 is concerned.
We can share at this point I'm not going to be able to do this.
If he could get actually we are just now in the process of starting notion I think its funny.
For next year not in field, there are number of variables that we need to see how how they behave.
Okay.
Okay perfect. Thank you very much.
Let me elaborate a lovely question and operating expenses.
I believe.
The only language is growing much higher than the rest of the lines in the P&L. So I'm just wondering how do you see epic rolls in the next quarter.
Go ahead I'm gonna.
Yeah, Yes labor.
And there are a number of things not that they're.
Driving the increase in expenses for the first half.
And basically who is driving the growth and expansion is the banking the banking sector.
In the slides I'm showing you that for the first half those expenses are growing nine 5% and what is driving growth each technology and that has been the case, if you want to offer.
And he is now that more strongly the variable costs related to marketing and trade cost expenses, we have seen an increase in the turnover.
Everything's great cash.
You'll have to put in.
40% now so that is something that strongly drives the expensive. So we are expecting for the second half of the year.
Not to continue to have these increases in expenses and again, the two things that will drive expenditures technology, an invaluable gosh now and that is why despite the fact that we have on our <unk>.
71% for the squad for this semester sorry, we are still in our guidance for the low end of the range not at around 35%.
So a number of additional cost that we are incurring related to it.
Our partnership with wrapping up that have already materialized in the first half as we continue to be the case for the for the months to come so with that no way, we will see especially the efficiency ratio of the bank this year no.
Deteriorate.
Expenses are recovering faster than revenue because of the pressure in NIM, but we expect that not to change in the in the coming in the coming years, but when the operating leverage for interbank will continue to be as it was before note with revenues growing faster than that.
I don't know if it is part of LCR Nashville.
Yeah.
Yeah.
Uh huh.
Let me add something regarding that.
But we have to to pay attention to also specifically on efficiency ratio because everything that Nicola Shaw.
Sure.
But I will also call it the attention to that change in the.
Profile of our our our credit card portfolio and that.
As bringing lower revenues from that portfolio that hopefully the risk appetite that we have.
Still higher on Brexit.
Hmm.
Two brief revenue into future, but right now what we're seeing is customers that are coming in with lower rates, but significantly lower.
Risk cost as well and you can see that in both in our local group on our.
Look we're provisions are.
Very low levels. So so when looking at efficiency ratio specifically for what revenue is coming from credit cards.
Related to you have to take a look also at the after tax return I'm, sorry, after risk return for that portfolio, which.
At the end he is bringing in a very positive situation in terms of.
Of results on.
That's also a positive impact on net income.
Yeah.
Thank you Augusta good grandmother.
Thank you and the next question comes from Jason <unk> from Scotiabank.
Alright, thanks for the opportunity.
Felipe and Michela My I have two questions. The first one maybe just an update on that.
The joint venture with Rocky in and how that's going.
And if theres any.
Metrics that you think we should be tracking closely.
On that front and my second question is more of a general question that encompasses a bit of what you've been discussing about politics.
And some uncertainty.
My question would be on that front, if you can talk about.
We've been focused for some time on interest rate caps changes in the pension system and potential implications for annuities higher taxes.
When you you have a very conservative outlook for this year of 2014 for greater than 14% excuse me I think the greater that isn't important.
It is important part of that statement given.
Given the almost 22% are what you generated in the first half how should we think about the scenarios.
Knowing forward with.
With potential policies and how.
<unk> can protect itself or protect returns for shareholders. In this environment. You said, you've mentioned that the track record of doing this in the past.
But how should we think about the future and is this government and potential policies different could be different than what we've seen in the past.
Thank you.
Okay, Hi, Jason how are you let me take on both of them, maybe michela can complement a bit on.
The first one on the joint venture with rubbish.
<unk> is going well obviously.
We launched that at the beginning of the pandemic. So it has had some some delays because now.
Getting something to start in operationally and the reduction of it has not been the trimble.
It's been accelerating recently.
We have the solution operating and working very well so far we have reached around 180000 customers for the venture of which.
The recently launched credit 100% digital credit card is at around 25000 customers. So it's going well it's building up we're learning where.
Towards to where we're dropping like a very traditional institutional at interbank.
Even though we have.
DNA of innovation.
Working with a 100% Navy veto.
Digital native.
Company off Ravi.
<unk>, obviously present, some challenges and opportunity but.
We are getting traction in addition to in the future will be the same as we are.
Highlighting our reports the growth of clean which has reached over 4 million customers into growth of <unk> has reached over one 3 million customers and we could include it.
The rapid evolution that again, it's at around 180000 customers, so far and we expect that to continue generate.
Regarding the second part of your question in terms of the political environment and what we can expect what we know is what.
What has been announced and obviously there is.
In the.
In the Brushy and so speech there was a reference to.
Looking for a new role in the ongoing and a few of them which is the.
The state owned banks, probably that has to go through a process of changing.
Changing low so whatever through Congress holds.
That's something we're monitoring but that has been announced and the other thing that has been announced has been intense.
The intention.
To continue with reforms.
Revenue suspension system.
Which is a business that we have as you know we do not operate we're obviously looking at that closely as well because it has an impact in the overall health of the of the financial fees can you brew could create some opportunities for us.
We're monitoring that.
There is not much yet.
Specific in terms of measures towards the financial system.
What is already.
Inflation is good.
Great stuff.
With the Central Bank.
Already enacted.
And we operate in that environment.
I've seen some effects from that not that much on the rates.
How far our customers because we are.
It should be below that cap, but in the delinquency commissions, we could judge that.
We have lost those.
Our revenues.
For approximately $60 million to $70 million.
Per year.
But that's already reflected.
Can you just bought it fully so what goes on at a new level.
Of revenues, we have from from from those and then we remain.
Expectations of what's going to come again.
We manage that closely.
What we need to do our our our mandate is you have sufficient as possible.
Engaged.
Different reasons to continue to put pressure on our our revenues or or or or.
Rich.
So that's something that we have been doing forever and we will continue to do that.
Okay.
The way we have been operated and we operate at Intercorp financial services for many years.
And then very focused in terms of building competitive advantage is not to be everything to everyone, but in what we are good.
Good is not liking wealth management, the life insurance business in the annuity business.
First of all around.
Certain commercial banking services and specifically in consumer financial that's our strength.
We are in.
<unk>.
Four.
For our digital transformation, we have seen the results.
We have no rebound on that front, we continued to rationalize our operations, including our branches and we continued to increase the number of customers we have in Brazil.
More than 25% of our customer base in the last year, so that helps us very.
Very happy on.
Industrial wood fuel.
And then.
What could happen as I've mentioned in the introductory statement and also well within our.
Talking is that.
The growth over the overall system could decelerate.
Cause of different measures because of macro conditions.
And then we will have as management to see what we do we are generating excess capital so on alternative could be known.
For four hours in the benefit of our shareholders, maybe we boost up in dividends and Dave.
Gross does not materialize and we continue to be overcapitalized or maybe we evaluate what usually management doesn't live in different situations normally maybe share buybacks could be.
No assumptions that we've done in the past.
Still to go but we have been through these processes before we update.
Yeah.
Again, our priority is to look for opportunities to continue fostering growth.
Serving them, helping peruvians with their financial needs, but obviously, we also are looking for the best interest of our shareholders. So nothing is off the table in terms of making sure that we enhance shareholder value given the guidance. We have one regarding the OE I think michela mentioned obviously.
Above 14%, whilst the guidance under an uncertain scenario, we're doing much better than that and we do expect to have a significant beat over those numbers.
Let's see how the second half.
Materializes, but based on what we're seeing we do feel confident that it's going to be immaterial.
Overdose lifts.
Thank you very much appreciate I'm not here.
Yeah.
Thank you.
Thank you and the next question comes from Andres Soto Santander.
Good morning to all and thank you all it's been apparent California opportunity to ask questions. My question is regarding your ROE guidance, which sounds a quite conservative given the performance in the first half of the ear, So I would like to understand.
When you look in the second half are these you know the implied guidance will be narrow the range of 8% to 10%.
How do you break that down between your different business units is this.
A result of having much lower trading gains expected for the insurance and our wealth management business or something related to do your banking unit.
Let me pass it onto Makena since she has a mortgage on that okay.
Good morning, and there is a they saw the question I mean, what we have seen in the first half no you'll see the numbers in Iraq.
Extremely high for insurance and also in Asia.
So basically I'm just wondering if I can.
Neither for Tonight.
Okay. So we have now for the first half we have 21, 7% I E.
No, which is composed of an 18, 8% for the bank, 50% for insurance and 39% for a.
And also how do you find that in the past, let's say them now and always had a terrible thing.
And now we're having a very good 2021 and in the past guidance has always been not to be in a release around.
18% now, 18% to 20%, but it was more or less the same insurance was if you remember at levels of 15% ROE in wealth management, what shall we say around 20% to 25%.
So basically what has happened this first half is that.
Hey Bank now is already if you want an hour and they know that for a number of reasons that we changed in time not so during the first half the bank has had an extremely low.
Cost of risk.
Eight 1%.
Okay.
The pre covid levels and second that during the first quarter in banking.
I should also have some extraordinary gains in the portfolio and I don't know if you remember we've had a bit of big fell off.
Oh of government bonds and what has happened is water with banking is that we are having high trading income because of the effect.
So some of those things the banking segment will not repeat during the second half no but on the other side banking is recovery in terms of the core muscles.
Income and in fee and so it is difficult to say that we are going to improve that iron ore that we have to just anybody.
It does.
If 50% are really of the first half and if a short extraordinary not remember it was 15%.
Pre covid now and we've got in the first and second quarter extraordinary gains coming from the portfolio not the return on the investment portfolio and now have been above 10% in the first half would have been seven 7% ish.
Sorry above 10% for Spartan, 747% in the second quarter and the rest will now leverage.
Six 5% recovery. So again, we absolutely are games that will not repeat.
In the paper.
Yeah.
And then maybe a little bit more positive note. We have had extraordinary games during the first two quarters of the year nobody in that case, we might have some additional was depending on how our market.
So if you sum up everything together no the 21, 7% I E.
Are you faced.
Difficult to repeat in the second half of the year as we are expecting lower I really, especially I would say in the in the insurance business and to some extent it would also be in the in the banking book also diagnose what 14% when we started the year of course, we were not expecting such.
So that's.
That's why we're looking at our year end figures if you want the car one without extraordinary things no we are.
I'm pretty confident that we will beat this 14% I said at the beginning at least 200 basis points. It could be more depending also on the on the difficult to predict part related to the portfolio.
That'd be all specially up to some extent also on an intermodal. So I know, it's not like a straightforward one.
And then but that's more or less what we are seeing for the second half and why no were not expecting such a high arrow as different shops.
No. Thank you. Thank you for color and my second question is probably a follow up on the comment that Louis Philippe I just made about our increased return to shareholders given the diminished growth outlook in the past when when a defensive stock was undervalued.
Stock buyback was the preferred alternative for you guys I would like to see what what are your thoughts about that.
The possibility of an extraordinary dividend.
Given the you know the current liquidity.
Or at least an instruction, but do you currently have.
Yes, Hi, Andreas.
Again, there are different mechanisms to do that no we've used.
Both actually at some point, we we bumped up our dividends and a different moment, we we did indeed establish a buyback program.
We managed well.
A couple of years.
And again.
We have many alternatives we have not taken a decision obviously they will have to take this to our board and then go to the the necessary approvals. It's just what I wanted to highlight the elements that we have on our ships.
In terms of thinking.
How we will face the upcoming months, depending on what we see in terms of growth obviously.
This is something that still needs to be discussed so there's not specific reference or any speed.
Specific completion around it.
That's very clear thank you looks like and if I may follow up on that.
You know all the business units are well above the minimum levels required by the regulator.
How we can or what is your sensitivity or what is your target in terms of all in terms of how how much above the regulatory limits you want to be.
When you when you think about these decisions tool to return capital to shareholders.
Yeah, usually it has been like buffer of between 203 hundred basis points above the minimum regulatory levels.
And that business continues on the overall however, now we're also looking at our core equity tier one and that that probably creates.
I don't think there is no economic and if you want a complement but I think that obviously, we need to look at both number of snow.
Not only the buffer that we want about overall capital ratio back also.
We're looking at the core equity two levels and we went up the actual numbers.
Yeah.
And I guess going back to the to the guidance that we have for capital now we are at least four for year end and we have a total capital ratio more than 15 in core equity tier one ratio and more than 11% not so basically when we have a big Bachelor isn't the total capital ratio. Moreover, no given that they should.
And then can decrease their requirement nobody you watch before and more than 10% and now we have eight something like that.
We saw a very big effort that nobody baffling core equity tier one if I might.
Nevertheless, I forget, but what we have to bear in mind, though is that these numbers are built with the local guidance.
Local accounting a M.
And in the local accounting earnings we do still have them.
They are an important number there.
Provisions that we did last year because of Covid not that we that we need to and see how they're going to be treated even the low growth knowing that we have experienced this year. So there could be an opportunity there but for sure now what we have to remind you that core equity tier one can cannot decreased a lot.
No vessels there.
Absolutely.
Perfect that's very clear thank you both.
Thank you.
Thank you and the next question comes from Carlos Gomez.
S P C.
Hello, Good morning, congratulations with the results.
Presentation.
Two questions one on the react Pizza program.
How's the Vulcan how is the payback and do you expect this program to be.
Extended and at some point, perhaps for the banks to have to make a contribution for at least the possibility that you're contemplating.
And second we never do.
Great cuts have been implemented that central bank.
A great switch, which is probably higher than what you do most of your business at what level do the rate caps to be lower so I'm not going to start affecting your cup of coffee.
Okay.
Okay.
Let me take a Greg.
Carlos Thanks for your question of Directv program is evolving very well as you know we were active participants we helps a.
Big number of customers and also we took the opportunity to enhance our our commercial banking platform.
Specifically in the medium sized enterprises and also theres more like interbank, So that's behaving well the paybacks.
Turning to what we expected.
So that's that.
Good government lunch.
The possibility to to extent certain gender.
We are.
Working actively with customers to take advantage of that we do not have a clear indication of how the program will be both.
You extended I guess it all depends on the extent of the economic recovery, so far the economic recovery.
As we have mentioned looks to be on the right track. So so we will be well.
No.
Paying attention to that but so far that the program has worked very well it felt the economy very well.
Interbank, particularly very well because we have been able to strengthen our platform and our relationship with commercial banking I don't know really what do you mean by contribution maybe you could clarify.
A little bit later, and then in terms of.
Right.
And then our our portfolio.
<unk>.
The main effect of breakup.
[noise] towards smaller financial institutions, particularly to those like gosh or small fee and in theater that focused on.
Right.
Independent customers with lack of truck record. So probably those are the ones that are being shipped you can see our average yields of our portfolios are below that.
So so.
<unk> decreased that probably we will keep a small portion of the portfolio, but we don't.
It has to be.
Hmm.
Higher than what we've seen unexpected really of a material effect on our portfolio. However, as I mentioned, one of the byproducts of that wash.
Late payment fees.
West also touched upon that regulation, which that really impacted us in the whole financial system, because that's the way we.
We do it that way.
We used to do it the way that it used to be done.
Many countries and the concern there is not really the 60 to 70 million a shortlist of.
But that growth in revenue, but if one will be the effect on payment behavior going forward of the Peruvian consumer because if you know that.
You are late by some days you will be.
Fee that creates consciousness on behaving well in terms of paid so that's something that we're looking at because we.
We have reported to the superintendency and regulators the Dutch on main concern will be.
Long term.
And changing.
Customer behavior in terms of being.
On date for payments or not so that's probably the effect that we are looking at more closely rather than just.
The revenue said, we have to dose for that.
T.
Okay, so to clarify SME revenue.
Sorry, sorry, sorry, just if I can add some information related to the reactive at Lowe's. So that's what I do have a sense of the size and I mean, we reached during the third quarter last year, we reach them no corrective of loans of $6.7 billion <unk> eight.
In beef in those six 7 billion.
Roughly speaking up 2 billion for the small businesses almost 4 billion for the mid size companies and 700 million for what has happened is absolutely yes.
Is that now we have 6 billion so listen I'll show it has decreased around.
Our portfolio now and then and what had decrease is actually the portion of the corporate interactive alone that has decreased.
More than 40% because of prepayments and and also we have seen a decrease in the mid sized companies now of around 15% now that the small business portfolio effect you might say one that continues to be stable also because of the new in it.
Let's say the new place given by the government in terms of I O.
And giving more in free time to pay for our company.
So far at around 5%, even those have already been in eight as of the end of June.
Okay, that's very clear and to clarify my question on some of these programs number one they can be extended and then eventually they got to extend it for a long period of time and at some point they are extending at low rates and at some point the function of the patients have to take care of.
Got it and it becomes more of a cost benefit.
I was asking if that is something that you contemplate it doesn't seem to be in the horizon.
No we do not expect that to be happy.
Happening, we already put our contribution as you name it and in doing this program with rage.
Significant rates and spreads basically sprite zero.
What we do.
What we are used to dealing with these types of customer. So so so I think that was the contribution again the program has worked well.
We don't see something happening in the future.
It doesn't change.
But thank you so much.
Thank you.
Thank you and then I'll.
Got something tomorrow with a credit Corp capital.
Yeah.
Hi, good morning, and thank you for the presentation and congratulation for the results I have a couple of questions. The first one is regarding loan growth considering the pace of growth of credit card fees in the second quarter on and ultimately July when do you believe the interbank count reach again, the pre covid level.
The credit card portfolio.
My second question is regarding the Google can we what are your thoughts on in the coming quarters regarding gross premiums yeah, judgmental, let me kind of reserves and the claims considering that given the covid situation claims have.
Go on AUM.
So that just went up the income reserves.
A different performance doesn't normalize it equals can you provide more color regarding the strengths in the insurance business thinker as much.
Okay. Thank you for your question.
On the credit cost, let me pass it onto Michela, we do expect a gradual recovery hopefully.
Okay.
We're witnessing that.
Micaela, probably has more details and then maybe even shiloh can help us.
Yes.
Good morning, Daniel.
Related credit cards are still not there is a long way to grow is now having made that the credit card portfolio alone decrease roughly speaking one third 30% you are in your income.
What we have seen during the second quarter was like a first study initiation do we have like that one month of growth two months stable and now we have seen July not being a very positive month. So we expect that there would be.
I don't know that we're seeing from credit cards and.
David that's not this will continue.
But having in mind that the decrease was really really sharp.
And we are in and then uncertainty scenario I'm not so sure it's not going to each year.
Have to run the numbers for the growth expected this year to see whether or not that's going to take place during covid.
Hello can you help us with the second part of your question. Please.
Yeah.
We can hear you mentioned.
Yeah sure.
Well, we see for the second half of the year regarding premiums first.
<unk> strong growth continuing we haven't yet seen any deceleration in our in.
In our lines of business.
No no concerns there with regards to claim it's very uncertain I mean, the third wave is probably coming in the next few months and but we feel confident that.
We've been able to pass the first one cycle with no major Oh.
Incidents, so we feel comfortable with it.
Claims part of it will be okay. The part of the we have more uncertainty is the performance of our portfolio.
The markets are very volatile right now so.
Depending on how they behave that will affect our results for the second time.
Thank you Ursula.
Perfect. Thank you so much for the poor downswings.
Yeah.
Thank you and thank you.
The next question comes from lots of Ambarella fourth P T J.
Hi, Good morning. Thank you for the call I wanted to ask about margins you had a nice increase in yields.
Retail portfolio I think it's 40 basis points quarter over quarter can you comment on what's driving that increase are you are you going into riskier segments or just repricing and how do you think.
It's going to continue to the second half of the year and also related to margins, there's a central bank meeting today, there's not an expectation.
We started to increase say, maybe this cycle have made maybe not today.
Can you remind us what is the impact of higher rates on your margins. Thank you.
Sure all along so okay, let me pass it onto my cholesterol and she can give us a little bit of who's doing that.
And all along so how are you. Thanks for the question. The first part relating related to what is driving the increase in NIM is mainly the return on the portfolio and what we have seen that before the second quarter is mainly coming from breakup now so actually what has happened is that I mean.
We are starting to see a grocery player, but Moreover, we think the defense revenue.
No we have seen an improvement in the in the cash part of it and they'll be cash a higher yes, so basically the average sale.
<unk> has improved in the ship on corporate personally.
And we expect that not to be the case for the coming quarter. So that they're talking about specifically the risk profile and I mean, I shouldn't do we shift the risk profile that we have today.
Gotcha is below our appetite.
And that is because now with the one south of the portfolio stay disappearing not in the low growth of the of the past month actually what has happened is that the overall credit card portfolio has had a very low level of risk and that is reflected in provisions.
Thank you Don.
And so what we are trying to build up for the future is a better and let's say risk return formula where we will see cost of risk going back and now we are aiming at a higher <unk>.
Gil.
And revenue just in order to improve the overall profitability of the dish, Okay and I will kindly ask you to repeat your second question because I'm not sure if I if I got exactly the point.
Yes, I was asking about the possibility of the central bank hiking rates, which we're seeing in other countries and how will that impact your margins.
Well, that's actually Philippe mentioned.
Before we already have not that they pick.
Pickup in rates if that is what you are referring to and that has not materially but no intellectual thought of course, we will need to see how the cash not that that I mean, there is a formula that has been established and that is monitored by the central bank that we'll update it.
No one had required that we need to check whether or not and that continues to decrease substantially you know, but so far they are kind of imagining what we have seen though is that impact that.
Alright.
And that's related to the to the late payment fees now that that one already known Wahid of 60 to 70 million.
So that shouldn't repeat.
In the following month, yes.
Yes, I mean again I'm sorry.
I think I'll answer it first go to the action that the central Bank and taking racing.
The reference rate non we're also waiting for okay. Okay, sorry, yes.
Right.
Waiting for that obviously, obviously.
If the reference rate goes up it would have an impact.
In terms of the commercial business as you know we run it through spiritual probably that.
Perfect very much the impression there is usually.
Fast and simple.
Then we'll have to see what we do in the retail portfolio mortgages again, the new mortgages go out.
We manage intubation spreads easier and then we need to see the the impact on the other types of loans and consumer loans or credit cards.
However, again I think the offsetting to any potential increase is.
Increased risk appetite that we're having for the portfolio. So we do expect to if things go as planned to continue bringing in customers that will come in with higher rates.
So somehow.
Akshay will come from that front, but again, we need to wait and see what would really happen sooner in the announcement today.
Okay. Thank you and I thank them again.
Thank you.
Thank you.
And there appear to be no further questions on the phone or on the webcast at this time.
I'd like to return the Florida voters Casassa for any closing remarks.
Yes.
Before closing.
<unk>, let me, let me add something.
Something that we just learned a couple of weeks ago. We wanted to show also with you because it's the basis of everything that we do which is our of our employees and we have been interbank has been named the best place to work for in Latin America with number one Latin America like a great place to work, we're very happy with.
We wanted to show you, we do not only because we are proud of the way our employees are facing these different timeshare.
Any kind of work that's good.
To serve Peruvians, but also because as you know it's part of that core strategy.
In order to provide excellent service to two brueggen. So.
While we maintain the.
A good level of working environment, we were confident that our strategy will continue to be deployed. So that's from my part. Thank you very much to everyone for attending the call. As you know we have a strong franchise that is performing well is recovering nicely from.
From tough times, but we under winter in 2020, and we do remain confident.
We will be up to the task for any challenge.
Comps in the coming months.
We have a very strong franchise that is proving that how should the diversification and focus in order to to continue to Brian good results, while diminishing which not so with that let me personally to me Jennifer Thompson.
Yes, not much.
Thank you again, everybody for joining the call and we.
We will see everybody again during our third quarter.
The conference call. Thank you bye bye.
Thank you. This concludes today's conference call you may now disconnect.
Yes.