Intercorp Financial Services Inc. 2026 Q2 Earnings Call

Sir, you may begin. Thank you, and good morning, everyone.

On today's call, Intercorp Financial Services will discuss its second quarter 2026 earnings. We are very pleased to have with us Mr. Luis Felipe Castellanos, Chief Executive Officer, Intercorp Financial Services, Ms. Michela Casassa, Chief Financial Officer, Intercorp Financial Services, Mr. Carlos Tori, Chief Executive Officer, Interbank, Mr. Gonzalo Basadre, Chief Executive Officer, Interseguro, Mr. Bruno Ferreccio, Chief Executive Officer, Inteligo. 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. Otherwise, if you need any assistance today, please call InspIR Group in New York on 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 report issued yesterday. It is now my pleasure to turn the call over to Mr. Luis Felipe Castellanos, Chief Executive Officer of Intercorp Financial Services, for his opening remarks. Mr. Castellanos, please go ahead, sir.

Good morning, and thank you all for joining our second quarter 2026 earnings call. First, let me start with the macro and political environment. In the second quarter, economic activity in Peru moderated after the strong momentum seen earlier this year. Even so, the underlying picture remains constructive, supported by resilient domestic demand. Private investment is expected to grow 17.5% in the quarter, its strongest pace since 2012, excluding the post-pandemic rebound. At the same time, employment indicators continue to improve, supporting consumption. On the political front, as you are all aware, Peru now has a new administration in place. The new government has set out a clear agenda for the coming months, focused on reinforcing the preparedness for El Niño phenomenon, strengthening security, reactivating economic growth through private investment, modernizing the public sector, and improving healthcare and social programs.

These measures are consistent with the expectations for stronger private investment and consumption, and support our view of GDP growth of about above 3.4% in 2026. While the international backdrop remains volatile, we are especially focused on El Niño-related risks in the country. We see it as a relevant risk for Peru, with potential effects on primary sectors, infrastructure, supply chains, and certain customer segments. At IFS, we are monitoring this closely and maintaining a prudent approach to risk management. Based on our analysis, we expect any potential impact on our results to materialize starting in the second half of the year. In this context, IFS delivered another solid quarter. Net income remained strong at PEN 585 million, and ROE reached 18.5%, above our midterm target.

While earnings were lower than in the previous quarter, this mainly reflects a normalization of certain investment results and a gradual normalization in cost of risk as expected, following an exceptionally strong first quarter. At Interbank, quarterly net income remained strong and the underlying business continued to show positive trends. Loan growth was positive across segments with particularly strong momentum in consumer loans, where the pace of growth accelerated, and in the small business, where we continue to grow above the market. Overall, these higher yielding segments are now expanding at a double-digit rate. We continue to strengthen our payments ecosystem through Izipay and Plin. These platforms are important levers to deepen relationships, increase engagement, and support the growth of low-cost funding. Interseguro maintains strong momentum in long-term insurance supported by annuities and life, while preserving its leadership in annuities.

The business continues to leverage synergies with Inteligo and Interbank to advance more integrated solutions to our clients. Inteligo continued to grow a double-digit rate, reaching a new record in assets under management, supported by healthy client engagement and a strong advisory model. Overall, this quarter confirms that we remain on track in terms of results and profitability, supported by a diversified platform, clear growth opportunities across businesses, and disciplined execution of our model. Our strategy remains focused on profitable growth with the customer at the center of our decisions, and continued investments in the capabilities that support long-term value creation, including investment in digital channels, data analytics, digital products, cybersecurity, and GenAI. Looking ahead, we believe IFS is well-positioned to continue growing with discipline while sustaining profitability and strengthening our leadership in Peru over the long term.

Now, let me pass on to Michela, who will walk you through this quarter's results in more detail.

Thank you. Thank you, Luis Felipe, and good morning, and welcome everyone to Intercorp Financial Services' second quarter 2026 earnings call.

Let me begin with our quarterly key messages. First, we continue to consistently deliver strong profitability. In the second quarter, IFS reported net income of PEN 585 million, an ROE of 18.5%, remaining above our midterm target and supported by solid performance across all of our businesses. Second, higher-yielding loans accelerated during the quarter, growing 12% year-over-year and almost 6% in the quarter. Third, risk-adjusted NIM remained resilient at 3.5%, up 10 basis points year-over-year, while cost of risk normalized to 2.1%, still below our risk appetite, but with a lower impact from the excess liquidity from the eighth release of the private pension funds, which took place until February this year. Fourth, we continue to deepen primary banking relationships.

As a result, our retail primary banking customer base grew 16%, and our Net Promoter Score remained strong at 61 points. Finally, insurance and wealth management continue to deliver strong growth with premiums up 9% year-over-year, mainly driven by annuities and life, and assets under management up 14% year-over-year. Let's start with our first key message. At slide 4, entering into a brief update of the macro environment, GDP growth for the second quarter is expected at around 2.8%, reflecting a more moderate pace after the strong momentum seen in late 2025 and early 2026. This lower growth in GDP is mainly due to the fishing sector, which was impacted by the global El Niño. Even so, we expect activity to improve in the second half, supported by resilient domestic demand, private spending, favorable commodity prices, and greater political stability.

For the full year, GDP is expected to grow 3.4% in 2026 and 3.2% in 2027, already incorporated the expected impact from El Niño, which most analysts estimate at between 0.7 and one percentage point of GDP. Growth should continue to be supported by non-primary sectors, particularly construction, commerce, and services. Inflation rose to 4.1% year-over-year in July, and monetary policy remains supportive with the reference rate at 4.25%. We expect inflation to remain around these levels throughout the year before returning to the central bank's target range in 2027. At this point, we do not expect additional rate cuts. Peru continues to offer strong fundamentals and attractive long-term opportunities, with growth expected to remain above 3% over the next two years and with an upside potential given the new government leading the region. On domestic demand, the outlook has improved.

The central bank revised its 2026 projection upward to 5.9% from 4.9%, mainly reflecting stronger expectations for private consumption and investment. This is consistent with confidence indicators. Business confidence climbed to 69% at the end of the second quarter with the result of the election, and is the highest level in the past year, while consumer confidence recovered to 51 in July. Together with solid fundamentals and better terms of trade, this gives us a constructive view on growth for the coming years. Having said that, we are also preparing for the potential impact of El Niño. Water temperatures have continued to increase, and the probability of a strong to extraordinary event has risen from almost zero to a combined probability of 80% for the fourth quarter 2026.