Q3 2024 Intercorp Financial Services Inc Earnings Call
Good morning, and welcome to the Intercorp financial services third quarter 2024 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 as the as to the procedure to follow if you would like to ask a question also you can submit online questions at any time today 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 question. It is now my pleasure to turn the call over to Mr. Ivan Peel from inspire group, Sir you may begin.
Speaker Change: Thank you and good morning, everyone.
Speaker Change: On today's call Intercorp financial services will discuss its third quarter 2020 for earnings.
Speaker Change: We are very pleased to have with US Mr. Luis Felipe Castellanos, Chief Executive Officer, Intercorp financial services Mrs.
Michela Casassa, Chief Financial Officer, Intercorp financial services.
Speaker Change: Mr. Carlos <unk>, Chief Executive Officer Interbank Mr.
Speaker Change: Mr. Gonzalo <unk>, Chief Executive Officer Interstate girl.
Speaker Change: Mr Bruno Rachel Chief Executive Officer and Telecom.
Speaker Change: They will be discussing the results that were distributed by the company yesterday.
Speaker Change: There is also a webcast video presentation to accompany the discussion during this call.
Speaker Change: If you did not receive a copy of the presentation or the earnings report.
Speaker Change: We're now available on the company's website.
Speaker Change: S Dotcom Doc P.
Speaker Change: Otherwise if you need any assistance today, please call inspire group in New York at 64694088 or three.
Speaker Change: I would like to remind you that today's call is for investors and analysts only.
Speaker Change: Therefore questions from the media will not be taken.
Speaker Change: Please be advised that forward looking statements may be made during this conference call.
Speaker Change: <unk> did not account for future economic circumstances industry.
Industry conditions, the company's future performance or financial results.
Speaker Change: As such statements made are based on several assumptions and factors that could change.
Speaker Change: Causing actual results to materially differ from the current expectations.
Speaker Change: For a complete note on forward looking statements. Please refer to the earnings presentation and report issued.
Speaker Change: Yesterday.
Speaker Change: It is now my pleasure to turn the call over to Mr. Luis Felipe Castellanos Chief.
<unk> Executive officer of Intercorp financial services for.
Whereas opening remarks.
Speaker Change: Mr. Castellanos. Please go ahead Sir.
Thank you.
Speaker Change: Good morning, all and welcome to our third quarter 2020 for urban school I want to thank you for attending our call today.
Speaker Change: I would like to start by addressing the macro situation in our country in.
Speaker Change: In the first eight months of 2015 for economic growth performed positively with three four and 5% growth in post accumulating at 249% year to date GDP growth, mainly due to the recovery in consumption.
Speaker Change: It's slightly improved market sentiment from consumers and businesses lead us to expect GDP growth of about 3% for this year.
Speaker Change: Making peru, the country with the highest growth in the region.
Speaker Change: This week, the Asia Pacific Economic cooperation.
Speaker Change: CEO conference taking place in Lima, highlighting the relevance of <unk> within this important point.
It is a great chance to focus on its investment opportunities.
Speaker Change: Looking ahead to 2025, we are cautiously optimistic about the future growth of video.
We expect private investment in industrial and mining.
Speaker Change: To reactivate.
Speaker Change: This activity will continue to generate employment with a positive impact in vehicle.
Speaker Change: This quarter's results for <unk>.
Speaker Change: <unk> that we are emerging from the most challenging phase of the credit cycle.
Speaker Change: On top of the liquidity events of the previous quarter like the fourth the mutual pension fund and the <unk>.
Speaker Change: EBIT of severance indemnities deposits, which accelerated the recovery. Although results were supported by effective risk management diversification of our income and the ability to make quick decisions with flexibility on pieces.
Speaker Change: This is why I believe that now with the group's expectations off through the positive trend should continue.
Speaker Change: Mentioned, our first half.
Speaker Change: Demonstrate the resilience during this credit cycle.
Indoor banks, we have been able to grow our market share in loans and deposits growing in commercial banking and now starting to grow again in the consumer pool.
Speaker Change: The cost of risk is converging to normalized levels as we see an improvement in our customers' ability to pay.
Speaker Change: With enhanced internal models and improved underwriting standards that should allow us to continue growing.
Speaker Change: Finally, interbank and East Bay continue to capture business opportunities together, while team continues to engage users generating more volume from.
Speaker Change: From our customers.
Speaker Change: In Tennessee.
Speaker Change: We have seen relevant growth in fees, mainly in private annuities and individual life, we continue to be the market leader.
Speaker Change: Our wealth management business had a positive quarter in its core business.
Speaker Change: Its under management reached another all time high and the investment portfolio had a good quarter.
Speaker Change: Now.
Speaker Change: I wanted to take the opportunity to address two independent events got acute concurrently on the end of last month as we communicated to our guidance through our official channels.
Speaker Change: First on the operational issues and interbank, which led to service interruptions between October 31st normal service was restored within hours of such events.
Speaker Change: All of them related to the first on event, whereby a third unauthorized party illegally accessed and expose certain data from Aruba.
Upland notification, we confirmed that no data that allows for such as water sports with <unk>.
Speaker Change: Median between core security measures, including special monitoring of operations and client information, ensuring that both deposits and financial products output there.
Speaker Change: Customers could continue to operate normally and states.
Speaker Change: As you know our key strategic priority continues to be achieving Ddos excellence for our customers. We are focused focused on becoming the leading data platform with profitable growth to create the best user experience for our customers to development of our analytical capabilities and always leverage.
Speaker Change: On the desktop.
Speaker Change: Finally, I wanted to share some good news about sustainability.
Speaker Change: He is a SCOR has seen a substantial improvement reaching a score of 69% from 61. This is a reflection of our commitment to build a sustainable business.
Speaker Change: Going forward, we continue to be optimistic about <unk> outlook as we execute our long term strategy.
Speaker Change: Now, let me pass it onto retailer for further explanation of our quarter's results.
Speaker Change: Thank you Philippe good morning, and welcome everyone to Intercorp financial services for any Penny for third quarter earnings call to begin we would like to review the macro outlook.
Continued improvement in economic indicators.
Speaker Change: On slide two GDP for the third quarter due around 4% with almost alone showing three 5% growth. These results brings the first eight months of the year to accumulated growth of two 9% close to full year market expectation of 3%.
Speaker Change: Primary sectors drove the growth accumulating three 8% for the year driven by improvements in the performance of several mining units. The non primary sector also accumulated two 7% in the same period, reflecting increased consumption of both groups into everything.
Speaker Change: We also wanted to mention that the IMF has updated its growth estimates for both 2024 and 2020.
Speaker Change: They have adjusted the estimate for Latam countries I've worked for 'twenty 'twenty four.
Speaker Change: Downward for 'twenty.
Speaker Change: <unk> is expected to lead the region with a 3% GDP growth in 2024 for 2025, the IMF predicts a two 6% growth we had a stronger first half due to the pre electoral year, which typically reduces diner.
Speaker Change: Dynamism in the second half.
Speaker Change: Furthermore, monetary policy remains one of the roof main highlights we were among the first in the region to control inflation.
Speaker Change: One of the first to cut their restaurants rate, reducing it by 275 basis points from the peak of 775%. So the current 5%.
We believe the central Bank still has room to continue reducing rates as long as the fed.
Speaker Change: It continues to get unexpected.
Speaker Change: Finally, we continue to see a stable currency depreciation of the story for the year was only 2% while the rest of the region was over 10%.
Speaker Change: On slide three consistent with the previous slide we observe optimistic leading indicators, we see business confidence improving during the year. The central bank in its latest report is expecting private investment to grow to 3%. This year and has increased its expectations for 2025.
Speaker Change: From 3% growth to four 1% in line with a more optimistic view of the Peruvian economy. This is good news as the expectation of the level of investments for the following years is increasing.
Speaker Change: First because the part of reactivation or infrastructure projects, which are expected to remain at high levels over the next three years.
Speaker Change: Second due to mining projects, both in existing mines to optimize and extend their remaining life into new projects and expansions. Some examples alethia money out of it by lack of Jorge and our culture and for infrastructure. The linear dose they may throw the aneel yelp any vertical among others.
On the other hand consumer confidence remains on the positive side.
Speaker Change: All of US we have seen a gradual recovery in formal employment in a year over year growth in real formal wage.
Speaker Change: This trend is positive.
Speaker Change: Typically impacting private from Chatham chosen as one of the factors driving internal demand. It is important to mention that part of the recovery in conjunction with also accelerated by the pension fund withdraw with India availability of severance indemnities in Boston.
Speaker Change: Sequentially, there has been a recovery in the purchasing power of people still slow, but already improving consumption levels.
Speaker Change: Finally, continuing with the positive note Moody's and Fitch have changed their outlook for Baidu from negative to stable this quarter.
Speaker Change: Moving on in this context, we continue to build on our three key strategic priorities, which are first we aim for profitable growth to become a leading digital platform will continue to grow our customer base double digit across all segments consistent with macroeconomic recovery I used to have.
Speaker Change: <unk> with its solid recovery registering in net income more than doubled in the third quarter compared to the same period last year and already achieving over 15% <unk> in the third quarter.
Second we strive to create the best digital experience with more than 81% of our retail banking customers being digital and improving NPS for retail banking to 66 point I shall begin.
Speaker Change: And so.
Speaker Change: We continue to focus on our core businesses, maintaining a significant market share in consumer banking loans, 22% ranking second in the market.
Speaker Change: Our retail deposit market share exceeds 16%.
Speaker Change: The marketing annuities with over 31% market share.
Speaker Change: Finally in wealth management assets under management continued to grow at double digits, reaching 19% year over year and surpassing previewed matching.
Speaker Change: Moving on we will reveal four sections of our earnings presentation sustainable growth digital update key businesses and finally some takeaways.
Speaker Change: Let us start with the first sexual which focuses on sustainable growth on.
Speaker Change: On slide seven we wanted to share our key messages for the quarter.
Speaker Change: Third improving banking and investment results drive quarterly earnings recovery to grow by twofold year over year, reaching 390 million net income I S. S. Yet.
Speaker Change: This results in a narrow eat that is now above 15% an improvement from the previous quarter and in our path to our medium term Roe equal.
Speaker Change: Second lower cost of risk translates into better results for Interbody with a decrease of 90 basis points for the quarter and 210 basis points from the peak in the fourth quarter of 2023.
Speaker Change: We see better results for interbank with not only about 14% higher than the previous quarter and last year.
Speaker Change: So the cost of funds continues to improve decreasing 70 basis points year over year outperforming the system average by 20 basis points.
Speaker Change: This improvement is mainly because of proactive management of efficient funding with growth around 13% year over year in deposits, both retail and commercial leveraging on our synergies easy base, hence enhancing the funding mix. We have continued to gain market share in retail deposits now at approximately.
Speaker Change: 15%.
Speaker Change: Although this quarter loan growth has been moderate we had the good news is cash loan disbursement rebounded by 8% from the previous quarter.
Speaker Change: Additionally, we have continued gaining market share in key products with a 40 basis point quarterly increase in commercial banking and 10 basis points in consumer.
This sustained growth in insurance premiums generated improvement in insurance core business, a slight insurance and private annuities grow nicely in a year over year basis, and they're looking at that.
Speaker Change: Finally in wealth management assets under management continued to grow nicely, reaching a historical maximum driving fee income.
Speaker Change: While also gaining market share in their phone those are mutual fund company.
Speaker Change: On slide eight the 390 million solid net income in the quarter is double the net income reported last year and 36% above the previous quarter. This.
Speaker Change: This improvement implies a narrowly above 15% clearly in our path to our medium term ROE Eagles, well would actually usually mention in banking the quarter over quarter year over year comparisons have very positive first the cost of risk is closer to normalized levels and second better margins were achieved through.
Speaker Change: A reduction in the cost of funds and increase yields from the investment portfolio.
Speaker Change: You have a low net income to grow 52% compared to last year, reaching a narrowing of 14, 4%, which is over 400 basis points higher than the previous year, but still below our targets.
Speaker Change: In the insurance business core business remains solid while the recovery of the investment portfolio generates better results on a year over year basis.
Speaker Change: Finally in the wealth management business. The good night dynamic with clients continues of asset under management hit a record 11 driving fee income upward.
Speaker Change: Also the investment portfolio had a better performance in line with the market as such there is a significant improvement in the quarterly figures rebounding five six times moving ROA closer.
Speaker Change: Closer to 14%.
Speaker Change: On slide nine we see a recovery in revenues in this quarter, mainly due to an improvement in margins have interbank driven by a reduction in the cost of funds and better yield in investments on top of that there was an important improvement in revenues from Italy.
Speaker Change: These continue to grow and the investment portfolio portfolio had a good quarter. Finally, we see good performance of core business and interface with a better return on our investment portfolio in the park.
Speaker Change: Yes.
Speaker Change: On slide 10, we wanted to point out that the cost of risk and Npls has nearly reached normalized levels at three 1% and two 9% respectively. Both indicators have followed that don't work downward trend as anticipated, but at a faster rate than initially estimated.
Speaker Change: Liquidity events from the previous quarter accelerated the improvement in asset quality ratios. Moreover, the improved macro environment is slowly starting to enhance people's purchasing power and increase their deposit disposable income leading to better payment behavior from customers with that said, let's walk through some <unk>.
Speaker Change: <unk> insight.
Speaker Change: First we have increased our exposure to commercial banking moving from 44% in the third quarter of 23% to 47% in the ranch portfolio as of the third quarter 'twenty for.
Speaker Change: This segment continues to perform well as approximately 11% of the commercial portfolio is backed with guarantees from the improved from the new program, which generated growth at a lower cost of risk.
Speaker Change: We mentioned earlier given the current situation the focus of growth has been concentrated on lower risk products.
Speaker Change: Shifts the mix of our consumer portfolio tactically credit cards and personal loans has decreased now representing 18% of the total loan book down from 23% a year ago.
Speaker Change: Meanwhile, low risk products payroll deductible loans to the public sector employees and mortgages have increased to 13% and 22% respectively. This Keith has allowed the cost of risk from retail to reduce around 200 basis points in the quarter and almost 300 basis points from a year ago.
Speaker Change: It has also impacted on the NPL coverage ratio for our retail having a lower coverage ratio when compared with a year ago and effect, which is purely due to the mix of the portfolio and not to lower coverage ratios in each specific retail products.
Speaker Change: Finally, we are taking advantage of our analytics capability.
Speaker Change: The past year, we have focus on enhancing our internal models.
Speaker Change: Analyzing several variables and incorporating more transactional late.
Speaker Change: This approach aims to promote growth in a healthy manner.
Speaker Change: Secondly, the right allocation of loss will result in a more stable cost of risk for the future. However, we remain cautious given that the economic activity has not yet fully recovered.
Speaker Change: On slide 11, complementing the previous slide the rescheduling outstanding loans have continued to decrease 15% from the previous quarter and 22% versus a year ago now representing around 17% of the consumer loan portfolio.
Speaker Change: During this call we mentioned how the payment behavior perfect for performing loans was quite different from customers with rescheduled.
Speaker Change: Given the improvement in the payment behavior of clients. The defense has become smaller and rescheduled lungs are now electing almost 92%.
Speaker Change: Now this improvement is in part on the back of the liquidity events of the second quarter, such as the availability of severance indemnity deposits and pension funds. We dealt with highway that it is also the result of our proactive strategy in origination risk management and collections, we are constantly improving our collections capabilities and.
Speaker Change: Patients through digital channels, making our payments solutions more available to clients.
On slide 12, we wanted to show the evolution of fee income, which has increased of ISS levels by 5% from the last quarter driven by a 9% increase in banking fee income and a 2% increase in intending all in line with higher asset under management at the bank level the increase in credit card fees.
Speaker Change: Is the main driver thanks to the gradual recovery in turnover.
Speaker Change: Finally on this section on slide 13, so we wanted to highlight that the efficiency that efficiency remains a top priority. There is a 3% increase in total expenses of iff's level versus the previous quarter and 2% from the banking segment, mainly due to variable costs.
Speaker Change: The cost to income ratios are still within expected levels.
Speaker Change: 38% for your faith and 79% for Integra.
Speaker Change: Now, let's move to the digital updates.
On slide 16, we continue the positive strength in our digital indicators, which continue to show a nice evolution when compared to the previous year.
Speaker Change: Interbank digital experience in the finance everything you need in a single App.
Speaker Change: We have made relevant progress in our journey towards becoming more digital developing the necessary capabilities to meet our customers needs and providing them with the best experience.
Speaker Change: So we have seen substantial growth in both digital estimates and digital sales increasing to 81% and 67% respectively.
We are working on new developments in the App, including New features do compete enhancement they use of Jennie O. Four claims resolution among others. We also.
Speaker Change: Hi.
Speaker Change: Hi.
Speaker Change: Yeah.
Speaker Change: Adoption campaign, driving both downloads and active user engagement.
Speaker Change: All these efforts had a positive impact on our customer experience reflected in our NPS.
Speaker Change: Finally, we are stable at around 76% and digital self service as we have maintained.
Speaker Change: Always on communication actions, which are focused on educating customers about new self service functionality through the app in on.
Speaker Change: Our virtual assistant.
Speaker Change: As part of our digital value added proposition. We believe we are creating value in primary banking relationship would be.
Speaker Change: <unk> is an accelerator of 60% of the average monthly transaction for customers that use interbank as their primary bank are explained by transaction and proceed with Lee with.
Speaker Change: We have been implementing commercial actions focus on usage and increased transactions through various campaigns, which have resulted in an acceleration accelerating growth of fleet. The number of transactions expanded by two four in the last year active user increased by 31% and the average number of transactions by user.
Speaker Change: Greece by 57%.
Speaker Change: Moreover, there has been developments in the app such as the clean sung <unk> from as a result, we generate more engagement by enhancing our customer experience our customer that uses interbank as their primary bank has one six times more product one four times more deposit, 98% less churn and finally.
Speaker Change: More clients are attachment or India.
Speaker Change: On slide 18, we have continued working to generate further finished.
We encourage the growth of our payment ecosystem, focusing on increasing transactional volumes offering merchants value added services and using ECB as a distribution network for interbank photos as well as source to increase scope.
The results are evident we follow for key figures, 71% yearly increase in ECP cash flow coming to interbank accounts and 43% increase in flows from that.
Speaker Change: Eight time fuel, increasing transactional volumes and 57% growth inflows from Micros marathon, thanks to ECB yet.
Speaker Change: Finally on this section on slide 19 insurance and wealth management digital indicators show positive developments as well as digital adoption is increasing in.
Speaker Change: In insurance, we continue to focus on enhancing the digital experience for our clients and expanding our distribution through new digital channels like Whatsapp driving digital adoption.
Speaker Change: The development of internal capabilities has allowed us to increase digital self service 65%.
Speaker Change: Similarly, so our digital sales have reached 82% and <unk> for me that slowly gaining relevance have reached 14%.
Speaker Change: In wealth management in their phone those digital transactions reached 53% and end users now account for 25% of total in there from those customers to achieve these results. We have focus and will continue to work on enhancing communication and sales through digital channels and on the development of products and <unk>.
Speaker Change: Patient characteristics, they look for digital clients.
Speaker Change: Now, let's move on to show you some more details on the performance of our three key businesses.
Speaker Change: On slide 21, we are gaining market relevance in our key businesses.
Speaker Change: Reactivation in consumption and increasing cash loan disbursement has driven our recovery in the retail segment, our market share in consumer and retail loans is at an inflection point, having increased by 10 basis points each on a quarterly basis.
Speaker Change: Furthermore, throughout the year, we have focused on growing our commercial loan book.
Speaker Change: We have leveraged and fulsome debate to increase market share of commercial loans with government guarantees.
Speaker Change: Moreover, sales finance remains one of our key products with market share growing from 14, 6% just 12 months ago to more than 17% ranking second in the market.
Speaker Change: Well, they're all commercial loans market share has increased nicely to 10, 6%, our all time high which is 100 basis points above last year.
Speaker Change: Finally, we have been working to enhance our value proposition to clients aiming to increase our primary banking relationship which is positively impacting our deposits as a result, our market share of favorable interim inflows continues to grow in retail deposit market share has recent above 15%.
Speaker Change: On slide 22, we observe that moderation in loan growth this quarter. However.
Speaker Change: However, there was positive news in the cash flow market, we experienced a slight recovery in disbursement all that all the loan book grew by approximately 1% in the quarter and three 3% compared to a year ago in a market, which if not grown on the commercial side. The work continues.
Speaker Change: To grow gaining relevance in the mix, though at a slower pace. This quarter, we continued to leverage and importantly, blue program, which allow us allowed us to grow in the SME and midsized companies with government guarantees.
Speaker Change: This program in the second quarter, and we expect it to gradually decrease over time.
Speaker Change: Consequently, this quarter, we have only these first $500 million solid compared to average the burst in the previous quarter.
Speaker Change: Additionally, we continue to focus on growing supply chain finance I've mentioned in the previous slides.
Speaker Change: Overall, the commercial banking portfolio grew 12% year over year, and two 2% from the previous quarter outperforming the system and gaining market share.
On the retail side, we see two important trends.
Speaker Change: We are experiencing growth in mortgages in July we have seen a boost in our loan gain and 27 basis points in market share over the past year.
Speaker Change: Second we are at an inflection point in up in cash flow with an 8% improvement in this person from their previous quarter steel with a conservative approach to grow the.
Speaker Change: The enhancement of our internal models, including customer Centricity vision helped us generate a more comprehensive value proposition for our clients, allowing us to grow in a healthy manner.
Speaker Change: On slide 21 risk adjusted NIM continues to increase 60 basis points in the last quarter and 130 basis points from the bottom by the end of last year in line with a reduction of cost of risk mentioned before Moreover, we also see an improvement in total NIM of 10 basis points in there.
Speaker Change: Quarter, extending the trend of the previous quarter.
Speaker Change: Meanwhile, there was still impact on yields due to the shift of the loan book mix consumer loans, which include takeout from personal loans decreased from 23% to 18% year over year.
Speaker Change: Frequently we see lower yield on loans of 10 basis points, reaching 10, 5%.
Speaker Change: However, we have been proactive in managing our investment portfolio to mitigate these effects taking advantage of market opportunities to generate additional margins.
Speaker Change: Furthermore, this quarter being positive news of the cost of funds continues a downward trend decreasing 10 basis points to three 5% with an accumulated reduction of 70 basis points from the peak of the fourth quarter two to three.
Speaker Change: Now our sensitivity to changes in rate is higher on the funding side as we have more short term deposits, both institutional and retail.
Speaker Change: This is why when rates increase our cost of funds wahid, but now that we see lower market rates we benefit.
Speaker Change: This improvement is attributable not only to lower market rates as the short duration of our interest bearing deposits allows for faster and pricing, especially in local currency deposits, but also to a better funding mix deposits grew by around 13% in the last year and 6% in the last quarter.
Speaker Change: With saving deposits showing growth of 18% and 6% in the same period.
Speaker Change: A result deposits have become more relevant for funding increasing from 76% to 81% in the last 12 months.
Hence the cost of deposits decreased by 20 basis points in the quarter and 80 basis points from last year.
Speaker Change: This is a result of our focus on the proactive management of our fishing funding kpis that increased by 300 basis points in the last quarter.
Speaker Change: Finally, our solid loan to deposit ratio of 94% is in line with the industry average.
Speaker Change: Now moving to insurance on slide 25, given the low penetration of insurance in Peru, the potential for growth of this market is important this quarter's premiums were up 7% and around 13% year over year as market share of annuity clients above 31%.
Individual life and private annuities continued to grow nicely with year over year increases of 23% and more than 100% respectively.
Private annuities have positioned themselves as an attractive investment book.
Speaker Change: We are also observing growth in retail digital products. Despite a cleanup within the film by vehicle segment due to high claims rates.
Speaker Change: Also we wanted to share some good news in October industrial <unk> secured a share of did you have anything survivorship insurance business through a public tender.
Active from January 2025 until December 2026, this stood up to earnings in the next couple of years of years.
Speaker Change: Finally on wealth management, we continue to see growth in asset under management with a yearly growth of 19% and 5% on a 470 basis, reaching again historically maximum of $7 1 billion in the Formula has had an important year for <unk> the digital developments with <unk>.
Speaker Change: We have allowed us to grow more than 50% in the year outperforming sphere and peers and gaining market share now at an all time high at 17%.
Speaker Change: On the back of that there is an important recovery of fee income on an annual basis, representing a 22% growth year over year.
Speaker Change: Now, let me move to the final part of the presentation, where we provide an update on ESG operating trends for 2024 and some takeaways.
Speaker Change: On slide 28, we want to share our sustainability update.
Speaker Change: Our commitment to sustainability has led to a significant improvement in our PSA score actually Philippe previously mentioned, we've improved by eight points and reached a person field of 93% being the highest grades in the country.
Speaker Change: On the environmental front, we've taken a significant step forward by publishing our first climate report.
Speaker Change: This report includes our first qualitative assessment of climate related risks to our banking business. We've also expanded our green loan portfolio to $330 million demonstrated our commitment to sustainable heightened.
Speaker Change: On the social front, we've continued to prioritize diversity equity and inclusion programs like all women and speed up and improve data have empowered employees and clients from diverse backgrounds.
Speaker Change: Finally on the Goldman Armstrong, we've updated our policies to align with best practices and international standards. This commitment to transparency and accountability each cornerstone to our sustainability strategy.
On Slide 29, let me give you an update on our operating results for the third quarter of 2024.
Speaker Change: We continue to present <unk> capital levels with total capital ratio almost up 16% in core equity tier one ratio higher than 12%, both well above our guidance in our capital requirements.
Speaker Change: Roy is gradually improving reaching more than 15% on the third quarter and 10, 6% for the first nine months of the year still below meet them run rate, but closer to our guidance, we expect that with improvement in cost of risk the recovering the investment portfolio and good activation of consumer loan we should be in.
Speaker Change: Line with guidance.
Speaker Change: Loan growth of three 3% is no guidance, but we expect a rebound in the last quarter of the year supported by strong growth from commercial banking mortgages and the recovery of the consumer portfolio.
Speaker Change: NIM for the quarter was five 3% during the first nine months of the year.
Speaker Change: Cost of risk for banking is already up four zero percent for the nine months of 'twenty, 'twenty four better than our expectations and below.
Speaker Change: Our guidance.
Speaker Change: The three 1% of the third quarter is also closer to our normalized cost of risk.
Speaker Change: We continue to see good efficiency levels are you first in line.
Speaker Change: With data.
Speaker Change: Let me finalize the presentation with some key takeaways.
Speaker Change: First improving banking and investment results drive earnings recovery.
Speaker Change: Second lower cost of risk translates into better results for interbank.
Speaker Change: So better funding impact positively cost of funds.
Speaker Change: For moderation in loan growth with improvement of cash loan disbursements.
Speaker Change: Sustained growth in insurance premiums and finally strong increase in asset under management wealth management, gaining market share and keep the funds. Thank.
Speaker Change: Thank you very much now we welcome any questions you might have.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on your telephone keypad.
Speaker Change: If you're using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.
Speaker Change: Okay.
Speaker Change: And the first question will come from Ernesto Gabby Lando with Bank of America. Please go ahead.
Thank you hi, good morning, Ben Good luck travels and good morning to all your team.
Speaker Change: Congrats on your results.
Speaker Change: Recovery on the wealth management business.
Speaker Change: Thanks for the opportunity to ask questions.
Speaker Change: My first question will be on your NIM expectations as you mentioned.
Speaker Change: Expecting them to be.
Speaker Change: Relatively flat this year.
However, starting to think about the next year.
Speaker Change: We see that the economy is bouncing back.
Speaker Change: How should we think about the strain.
Speaker Change: Especially if at some point.
Speaker Change: Have a more.
Speaker Change: Great.
Speaker Change: Right.
Speaker Change: And my second question will be on asset quality.
Speaker Change: So wondering how do you see.
Speaker Change: Cost of risk evolving over the next years.
Speaker Change: As you have mentioned.
Speaker Change: 4% the first night.
Speaker Change: 3%.
Speaker Change: Water.
You have mentioned in previous calls yet.
Speaker Change: First just a REIT should be normalized in 233.5% levels. So.
Speaker Change: Just wanted to hear how you're seeing this trend going forward.
Speaker Change: And my last question will be.
Speaker Change: On the fee income side.
Speaker Change: How do you see growth.
Speaker Change: His line.
Speaker Change: Especially considering that you will have revenues.
Speaker Change: Its under management.
Speaker Change: Then we started to see a better performance.
Speaker Change: Thank you.
Speaker Change: Okay. Thank you and therefore will be a very detailed question I think there. So just so that im going to go through and again, that's where she can build upon those are specific thanks.
Speaker Change: Alberto.
Alberto: Good morning.
Speaker Change: Thank you for the question, let's start with NIM and as you have seen in the <unk> in the current number NIM has improved 10 basis points.
Speaker Change: What we are expecting for 2025 is a recovery of NIM.
Speaker Change: Mainly due to a couple of things first cost of funds, which has already decreased substantially now will have a full year effect during 2025, which is very positive and the second is the book the portfolio mix as you mentioned.
Speaker Change: In the high yield portion of the portfolio, which is now consumer loans.
Speaker Change: Great cartoon and personal loans has decreased this year substantially but we are starting to see.
Speaker Change: A slight growth. So we are expecting growth for 2025 and that should help you don't loans, thus together with cost of funds impacting positively NIM for 2025.
Speaker Change: On asset quality.
Speaker Change: I guess this quarter it is already a normalized let another one 3% now having in mind that these 3% comes with a couple of things that are still not we seen our let's say risk profile target first.
Speaker Change: In the consumer loan book is more or less that we would like it to be and the second impact is that we have a portion of the commercial loan book, which is guaranteed by the state. So I guess that volume going for what we expect is that.
Speaker Change: There is room for improvement in the specific cost of risk of the consumer loan book.
Speaker Change: We'll push the cost of risk down what back then in portfolio mix and deep in majority of the guarantees from the state will push cost of recap uplift. So basically we're not yet giving guidance for next year. That's what we're expecting is cost of risk to be around.
What we have seen a I mean between what we have seen this quarter and slightly above that.
Speaker Change: And the third party fee income.
I guess this quarter has been a good risk.
Speaker Change: A reflection of what we should expect for next year and as you mentioned not the drivers of the recovery of fee income.
Speaker Change: The growth in the consumer loan book for Shaw fees.
Speaker Change: Fees coming from easy pay in Intel level. So we are expecting a much nicer growth year over year during 2025.
Speaker Change: Versus what we saw this year because this quarter not fees are growing nicely, but still when you look at the year over year cumulated numbers, there are still some negative impacts there.
Speaker Change: I'm not sure whether AIE.
Speaker Change: In fulfill the three questions.
Speaker Change: So super careful.
Speaker Change: You very much just a last question on your ROE expectations.
Speaker Change: So.
Speaker Change: You are reiterating that you can expect them or we.
Speaker Change: Around 12%.
Speaker Change: Please proceed.
But when do you expect to reach a sustainable Roe.
Speaker Change: I think you were expecting something around 18% at some point when do you think we can.
Speaker Change: Seven.
Speaker Change: We have are still closing numbers.
Speaker Change: So, but I guess the question there is the bank and specifically that recover our consumer loan book.
Speaker Change: I guess, we should be close to the 18% Roe levels.
Maybe more like by year end next year.
Speaker Change: It is difficult to see yet the full year of 2025 already as they meet them right. So maybe the last part of 10 35, we still need to check, but I guess I mean, we are getting closer to that and it's a matter of.
Speaker Change: Cost of risk continues the trend that we have seen this quarter and the recovery of the consumer loan book.
Speaker Change: Oh perfect excellent. Thank you very much.
Speaker Change: Thank you Ernesto the next question will come from Yuri Fernandes with JP Morgan. Please go ahead.
Yuri Fernandes: Thank you <unk> Hello, everybody and also congrats on the on the early recovery here in the good set of results.
Yuri Fernandes: I have a question regarding your credit card debt back in the day was Super important and I think it remains super important but could be losing losing share with you our total loan book.
What should we see and what do you need to have market diet and start growing the credit card book again, because this was another quarter of course over a course of decrease I guess it towards down maybe 5%. So just trying to understand where is the inflection point what do you see what is the Columbia today.
Yuri Fernandes: Cash change in the industry.
You can talk about this product and then I can ask a second question. Thank you.
Speaker Change: Okay, Jamie Thank you very much let me pass it onto to Carlos.
Speaker Change: We can build upon your question. Thank.
Speaker Change: Thank you Uli.
Speaker Change: Yes, Greg touched remains very important for us.
Speaker Change: We have seen over the last couple of quarters.
Speaker Change: The whole market shrink.
Speaker Change: Shrinking a little bit more due to the economic environment.
I need to hedge.
Speaker Change: So we follow that path I believe we have reached or are very close to the inflection point and we are looking to grow.
Speaker Change: Our portfolio, but we're going to be as I mentioned on last call, we want to be very cautious.
Speaker Change: We don't want to rush into rolling that we want to keep our cost.
Speaker Change: So.
Speaker Change: We are seeing some growth on some segments.
Speaker Change: Our value proposition remains very strong.
Speaker Change: Continue to look for that.
Speaker Change: No.
Speaker Change: The last quarter of the year is always higher consumption because of <unk>.
Speaker Change: All the events related to that where we're going to see some increase over that and we'll try four months theme.
Speaker Change: Okay.
Speaker Change: But a cautious growth.
Speaker Change: On that portfolio.
Yes. It continues.
Speaker Change: Yes, I guess.
Speaker Change: All anxious about growth, obviously, but as Scott mentioned, we are just emerging from a very hot part of the credit cycle for a contrast muscle so as you mentioned.
Speaker Change: The economy needs to continue recovery path.
Speaker Change: Consumer purchasing power and ability to debate should saw more strength. So we can.
Speaker Change: <unk> begun less conservative.
Speaker Change: And obviously, we've been working in our models so that the people will flow.
Speaker Change: But we're going to be cautious.
Speaker Change: Because again.
Speaker Change: The economy in Peru business with a response, but we need to remember that deposit the device is a pre electoral year position to assemble it.
Speaker Change: There.
Speaker Change: I think that we're cautiously optimistic but cautious.
Speaker Change: Welcome.
Speaker Change: So personally if I may just on the cards abroad.
Speaker Change: Ed.
Speaker Change: How should we think about the margins and the risk adjusted margin of the card products. It is accretive for your total knee and risk adjusted NIM once we start to see you.
Speaker Change: You are feeling more comfortable with this broader could this be a tailwind for your margins.
If I can you really it is a great if yes for sure.
Speaker Change: Yes.
Speaker Change: Now.
Speaker Change: Now I mean, the new level of rates in risk adjusted yield is for sure one of the highest note and this is one of the reasons why NIM is a little bit impacted.
Speaker Change: I guess in line with what Carlos literally behalf just mentioned.
Speaker Change: The importance of the recovery of that portfolio is vital let's say for the recovery in the yield of loans of the bank and authentic.
Speaker Change: No no. Thank you Nick Hiller in for 2025, how should we think about margins for for you I remember in the first call. They were somewhat positive on funding cost.
Speaker Change: We are a tailwind for <unk>.
Is that the case could you see lead keeping expanding from here as we as we are seeing this quarter.
Speaker Change: Yes, yes for sure yes.
Speaker Change: Sure Yes.
Speaker Change: Cost of funds is already not a lower level and as long as the portfolio mix starts to shift not ours.
NIM should recover.
Speaker Change: Canadian <unk> guidance.
Speaker Change: Microphone five.
Speaker Change: Yeah.
Speaker Change: Sorry, if I cannot and I was only going to say that we've seen a further improvement in October already.
Speaker Change: Good <unk>. Thank you very much guys.
Jerry: Thank you Jerry.
Speaker Change: The next question will come from Andres Soto with Santander. Please go ahead.
Andres Soto: Good morning to all of them.
Andres Soto: I have two questions the first one.
Andres Soto: In terms of loan growth.
Andres Soto: Being able to port base gained market share to be this year basically Europe facing the system.
Andres Soto: Is this trend that should continue next year or next year, we should see is growing more in tandem with the.
Andres Soto: The ratio of the program.
Or even below considering you at all.
Andres Soto: Hard comps in your commercial portfolio.
Speaker Change: And the second question for me is related to reach that we saw last month.
Speaker Change: I understand I mean they were.
Speaker Change: There wasn't any short term impact in terms of that.
Speaker Change: Deposits outflow or.
Speaker Change: Clients are shutting down accounts or something like that.
Anything about a week.
Speaker Change: We anticipate fourth quarter results.
Speaker Change: Okay. Thank you I'll address part of your question first and the second one.
Speaker Change: That's been very recent.
Speaker Change: We have not seen any material change in our operations customers continue to operate normally so we don't.
Speaker Change: We don't anticipate anything so far and then in your first question of we've always.
Speaker Change: Mentioned, our aim is to outpace the market is like on the sustainable way, we year easier I would like to stretch a little bit more.
Speaker Change: <unk>.
Speaker Change: Market share and that's our objective for 2025, obviously it will depend on many factors I think we have ample room for growth in our commercial book within our market shares have not that high on that.
Speaker Change: On that.
Speaker Change: Segment.
Speaker Change: In.
Speaker Change: It will depend on the recovery of the consumer portfolio, obviously, we're very focused on that.
Speaker Change: To also help them not so if you ask me like.
Speaker Change: Big strategic view is to continue growing faster than the market.
Speaker Change: As we've been doing in recent years, hopefully 2025, and the <unk> will continue to do so.
Speaker Change: Hey, listen I appreciate it it's all based on your previous comments regarding.
Speaker Change: Hello royalty in the fourth quarter can we expect sort of BCE.
Mid single digits.
Speaker Change: Next year, it will make sense to for you to grow high single digits already back.
That too optimistic.
Speaker Change: I think it's too early to tell right now and if we are not providing guidance already.
This time of the year, we're all sitting down in our on our budget budgeting process of working on that front. So as soon as we have more clarity on that obviously, we will communicate it to the market through the appropriate channels, but I wouldn't anticipate hopefully like overall the transport boost GDP should continue to retail.
Speaker Change: With the caveat of the FDA.
Speaker Change: Electoral year.
Speaker Change: It's been kind of its own.
Speaker Change: System suite grow faster, obviously than this year, which has been the case.
Speaker Change: We've got a little bit of market share.
Speaker Change: And for what we expect that as soon as we complete our work we will.
Speaker Change: Clearly communicated.
Speaker Change: That's helpful.
Speaker Change: Yeah.
Speaker Change: No. Thank you Anders.
Speaker Change: At this time I.
Speaker Change: I will turn the call over to Mr. Ivan Pill from Aspire Group. Please go ahead Sir.
Ivan Pill: Thank you operator.
Speaker Change: First question comes from one Nicholas Argo yellow.
Speaker Change: Any sanctions I'm, sorry from credit Corp capital asset management any sanctions are expected from the regulator coming from the data breach event.
Speaker Change: Hi, Thanks, very much for the question.
Speaker Change: We don't know yet obviously.
We are collaborating with the with the authorities in all of their requirements.
Speaker Change: We'll go through that process.
Speaker Change: We're not anticipating to yet.
Speaker Change: There appear to be no further questions at this time I would like to turn the floor back to Ms. <unk> for closing remarks.
Speaker Change: Okay. Thank you very much and thank you everybody for joining <unk> third quarter conference call, we will see everybody back again next year.
Bye bye.
Speaker Change: France has now concluded. Thank you for attending today's presentation you may now disconnect.
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