Intercorp Financial Services Inc. Common Shares

Good morning, and welcome to Intercorp Financial Services' second quarter 2023 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 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 Natalia Nirenberg of Inspire Group. You may begin.

financial services will discuss its second quarter 2023 earnings we are very pleased to have with us mr luis felipe castellanos chief executive officer intercorp financial services miss michela casasa chief financial officer intercorp financial services Mr. Gonzalo Basadre, Chief Executive Officer Interseguro, Mr. Bruno Ferreccio, Chief Executive Officer Inteligo, and Mr. Carlos Tori, Executive Vice President and Payments at Intercorp Financial Services. They will be discussing the results that were distributed by the company yesterday. There is also a webcast video presentation to accompany the discussion during this call. If you didn't receive a copy of the presentation or the earnings report, they are now available on the company's website, ifs.com.pe, to download the copy. Otherwise, for any reason, if you need any assistance today, please call Inspire Group in New York at 646-940-8843. I would like to remind you that today's call is for investors and analysts only. Therefore, questions from the media will not be taken. Please be advised that forward-looking statements may be made during this conference call. These 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 actual results to materially differ from the current expectations. For a complete note on forward-looking statements, please refer to the earnings presentation and the report issued yesterday. It's now my pleasure to turn the call over to Mr. Luis Felipe Castellanos, Chief Executive Officer of Intercorp Financial Services, for his opening remarks. Mr. Castellanos, please go ahead.

Okay, thank you. Good morning, everyone, and welcome to our second quarter 2023 earnings call. Thank you all very much for attending our call today. I will start, as always, by assessing the macro situation in Peru. We expect a mild improvement in some of the key indicators for the second half of the year, but we continue to operate on a challenging environment. As you know, the country got off on the wrong foot with social unrest and inclement weather in early 2023. Peru had a first half of the year with negative GDP growth. This has taken a toll in the numbers for the full year, and now GDP growth expectations have trimmed down to between 1% and 2% range. In the meantime, inflation has moderated and hopefully began its journey towards the central bank target. The currency, the nuevo sol, has recovered some of its value, and that has helped alleviate pressure on prices. Interest rates in Peru have probably peaked, and at some point in the second half of the year, we would expect that the central bank to start lowering them again. The potential impact of a ninja phenomenon for later in the year or early 2024 is still uncertain. So as you know, as you've heard, it's a challenging environment. Moving to our business, IFS continues to grow in terms of number of customers and expanding market shares across key business lines. This has fostered a 15% revenue increase this quarter and 47% earnings growth compared to the same quarter last year, where market conditions impacted investment results in our wealth management business. Paired with only 5% year-over-year growth in expenses below inflation, this has led IFS to register a sound efficiency level of 35% in the quarter. At Interbank, we have sustained growth across revenue lines despite the moderation in banking activities. NIM has expanded further to 5.6%. However, provisions continue to increase in retail banking as we are digesting the impact in the Peruvian consumer of slower economic growth, high inflation, and especially the effect of the social and weather dislocations previously mentioned. We expect growth moderation of our consumer book in the second half of the year to continue. At Interseguro, we see good investment returns with a well-hedged and predominantly fixed income portfolio. The company remains market leader in the annuity business, while jeering to higher growth segments such as individual life and retail insurance, which have importantly increased the contribution to total premiums in the last year. Intelio has managed to grow AUMs in dollar terms and shows resilience as investment results start to normalize. Finally, we continue to strengthen our payments ecosystem with EasyPay, which represents a growing and profitable operation for us that has started to provide new income streams to our business through better customer engagement, larger float, increased fees, and net interest income. Going back to what I first mentioned, the macro backdrop has temporarily put pressure on risk profile and profitability at IFS, and we have adjusted our guidance for cost of risk and ROE accordingly, as Miquela will explain in detail further on. On the first topic, confidently, loan loss allowances provide strong coverage. And on the profitability outlook, we're confident that once we move towards the next credit cycle, we will be on track to achieve our mid-term target of around 18% sustainable ROE. As such, we remain optimistic about Peru and about IFS outlook going forward and continue to build on our key strategic priorities, which are growth, digital, and focus in key businesses. Now, let me pass it on to Miquela for further explanation of our figures in the quarter. Thank you.