Intercorp Financial Services Inc. (IFS) Q2 2025 Earnings Call Transcript

Intercorp Financial Services (IFS) delivered a strong Q2 2025, reporting net income of PEN 580 million, doubling year-over-year, and an ROE of 20.7%, largely driven by robust performance across its core banking, insurance, and wealth management segments, augmented by significant investment returns. The company outpaced the system with 6% loan growth and gained market share in commercial banking, while maintaining a low 2.5% cost of risk. Although consumer loan portfolio recovery has been slower than anticipated, IFS expects NIM to improve in H2 2025 as this segment gradually accelerates and the impact of a recent subordinated bond repayment subsides, with continued strategic investments in technology and talent supporting long-term digital excellence and efficiency goals.

Analysis

Intercorp Financial Services (IFS) reported a robust second quarter for 2025, with net income doubling year-over-year to PEN 580 million and a return on equity (ROE) reaching 20.7%. This performance was driven by solid core operations and particularly strong investment returns within its Wealth Management (Inteligo) and Insurance (Interseguro) segments. Inteligo's assets under management grew 14% YoY to a record $7.8 billion, while its other income expanded 5.3x, significantly boosting group profitability. The banking segment (Interbank) demonstrated strong momentum in commercial lending, gaining 90 basis points of market share through a focus on mid-sized companies and synergies with its payment platform, Izipay. Overall loan growth of 6% YoY outpaced the system by a factor of three. A key highlight was the exceptionally low cost of risk, which stood at 2.5%, well below the 3% guidance, reflecting a strategic tilt towards lower-risk portfolios and improved macroeconomic conditions. While this conservative mix has kept Net Interest Margin (NIM) stable, management anticipates a slight improvement in the second half of the year as higher-yielding consumer lending shows early signs of recovery and the impact of holding excess liquidity for a bond repayment subsides. The company's strategic investments in technology and digital platforms like PLIN are yielding results, with digital retail customers reaching 83% and low-cost deposits growing 12% YoY, strengthening its funding base. Although management guides for a normalization of ROE towards 17% for the full year, the strong asset quality and growing digital ecosystem position IFS favorably within a recovering Peruvian economy.

Key Decisions for Investors

• Investors should recognize that the exceptional 20.7% Q2 ROE was heavily influenced by non-recurring investment gains in the wealth management division, and should model future performance based on the company's more sustainable full-year guidance of approximately 17% ROE.
• The primary catalyst for future margin expansion is the pace of recovery in the higher-yielding consumer loan portfolio; monitor upcoming quarterly results for an acceleration in consumer loan growth, as this will be critical for improving the loan mix and boosting NIM from its currently suppressed levels.
• While the current 2.5% cost of risk is a significant positive, anticipate a gradual normalization towards 3% as the bank resumes growth in the consumer segment; the key metric to track is risk-adjusted NIM to ensure the trade-off between higher growth and higher risk remains profitable.
• Consider the strategic 10% YoY increase in expenses as a long-term investment in digital capabilities and the payments ecosystem (Izipay, PLIN), which is successfully driving market share gains and attracting low-cost deposits, creating a durable competitive advantage.