IFS Q1 2026 Earnings Call Transcript

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DATE

Tuesday, May 12, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Luis Felipe Castellanos Lopez-Torres
• Chief Financial Officer — Michela Casassa Ramat
• Chief Executive Officer, Interbank — Carlos Tori Grande
• Chief Executive Officer, Interseguro — Gonzalo Basadre
• Chief Executive Officer, Inteligo — Bruno Ferreccio

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TAKEAWAYS

• Net Income -- PEN 602 million, a 35% increase year over year, marking a new quarterly record.
• Return on Equity (ROE) -- 19.4%, exceeding prior guidance and driven by improved profitability.
• Higher Yielding Loan Growth -- 9% year over year, with small business loans up nearly 30%.
• Total Loan Portfolio Growth -- 6% year over year, or 7% after excluding FX effects.
• Risk Adjusted Net Interest Margin (NIM) -- 4.2%, up 90 basis points from last year.
• Cost of Risk -- 1.4%, the lowest in 4 years, with retail portfolio cost of risk below 3% and consumer lending cost of risk below 5%.
• Cost of Funds -- Below 3%, with a decrease of 40 basis points year over year, and 10 basis points quarter over quarter.
• Revenue Growth -- 10% year over year at the group level; banking segment up 8%, Interseguro up 18%, Inteligo up 34% (driven by fees and assets under management).
• Expense Growth -- 13% year over year at group level, attributed to ongoing investment in technology, digital capabilities, and talent; cost-to-income ratio at 36.6%.
• Retail Banking Primary Customer Growth -- 14% increase, with Net Promoter Score (NPS) at 68.
• Written Insurance Premiums -- 35% rise, mainly from private annuities and life products.
• Assets Under Management -- 13% growth, reaching a new record of PEN 9.5 billion.
• Market Share in Mortgages -- Gained 20 basis points to 16.2%, over 100 basis points above the fourth-largest bank.
• Retail Deposits -- Grew over 13% year over year; savings and transactional balances up over 20%.
• Commercial Deposits -- Efficient commercial deposits increased 27% year over year due to payment ecosystem expansion.
• Digital Adoption -- Retail digital usage at 84%; commercial digital clients at 75%.
• PLIN Users and Transactions -- 2.7 million monthly active clients and over 70 million monthly transactions, with 60% merchant-directed.
• Strategic Acquisition -- Jointly acquired Infinance XP (formerly Financiera O) with InRetail for $130 million at a 1.19x price/book multiple; adds close to 3 million customers, PEN 1.8 billion in loans, and PEN 1.5 billion in deposits.
• Integration Initiatives -- Launched SIP app consolidating financial products, payments, and loyalty into one application under Infinance XP.
• Core Operating Performance -- Profitability supported by improvements in risk, funding costs, and diversified revenue streams across all segments.

SUMMARY

Intercorp Financial Services (NYSE:IFS) highlighted record profitability and robust loan growth, with strong contributions from retail, insurance, and wealth management activities. The group executed a strategic transaction with InRetail to acquire Infinance XP, signaling expansion in digital consumer finance and payments, while newly launched digital initiatives, such as the SIP application, are exceeding initial adoption expectations. Management communicated that efficient funding, technology investment, and scalable digital channels are priorities to drive further operational leverage, with a focus on segment-specific digital platforms rather than a unified app structure.

• Guidance for full-year ROE has been raised to above 17%, with upside risk acknowledged, due to sustained trends in low cost of risk and favorable economic tailwinds.
• Cost-to-income discipline is reaffirmed, with management matching ongoing digital investment needs to an efficiency ratio targeted near 37%, and ambition for sub-35% in the long term.
• Management emphasized resilience of the diversified platform in navigating external volatility, political uncertainty, and potential weather-related disruptions, supported by proactive risk management.
• Digital penetration continues to generate operational efficiencies, with demonstrable reductions in physical card issuance and in-person banking needs.
• Regulatory developments in the instant payment ecosystem, particularly the introduction of the Central Bank's UPI "highway," are anticipated to complement, rather than replace, existing PLIN rails, fostering a multi-channel transaction environment.

INDUSTRY GLOSSARY

• PLIN: A Peruvian interbank digital transfer service, operating as a "highway" for fast, interoperable payments between participating banks and wallets.
• NIM (Net Interest Margin): Banking metric measuring the difference between interest income generated and interest paid to lenders, relative to interest-earning assets.
• SIP (app): Integrated digital application launched by Infinance XP, aggregating financial products, payment solutions, and loyalty rewards on one platform.
• GenAI: Generative artificial intelligence, utilized by IFS to innovate and automate digital banking solutions and operational productivity.
• Retail Primary Customers: Retail banking clients with the bank designated as their main financial relationship.

Full Conference Call Transcript

Ivan Peill: Thank you, and good morning, everyone. On today's call, Intercorp Financial Services will discuss its first quarter 26 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 Inter Seguro, Mr. Bruno Ferreccio, chief executive officer Intelligo. 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 did not 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 Inspire Group in New York. On (646) 940-8.84 thousand. 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.

Lord Luis Felipe Castellanos Lopez-Torres: Thank you. Good morning, and thank you all for joining our first quarter 26 earnings call. Let me start on the macro front. 2026 started better than expected. With first quarter GDP growth of around 3.6%, supported by private spending and favorable commodity prices. However, going forward, the outlook remains subject to certain risks, The international environment has become more volatile with higher energy prices and external uncertainty potentially pressuring inflation and growth outlook. In addition, the potential impact of El Nino could affect activity in the coming quarters if weather related disruptions materialize.

While Peru's monetary framework and macro fundamentals continue to provide support, we believe it is appropriate to remain prudent and closely monitor how both domestic and external risks evolve. Turning to IFA's first quarter results. We delivered record quarterly net income of 602 million and an ROE above 19%. These results reflect disciplined execution across our platform and the benefits of our model. At Interbank, we also delivered record quarterly net income, supported by low cost of risk and improving risk adjusted NIM. Loan growth has been more measured due to pension fund withdrawals, although higher yielding segments continue to grow at a high-single-digit pace.

In parallel, we are making progress with EasyPay, strengthening our merchant franchise and capturing joint business opportunities with the bank. We are also enhancing our small business value proposition through our recently launched business app, while Plin continues to deepen engagement through new features such as Plin credit card. Interseguro continues to grow in its core business, supported by private annuities and life insurance. It is also leveraging synergies with Intelligo to expand private annuities and with Interbank to advance integrated bank assurance solutions. Intelligo, our wealth management segment, continues to grow at double-digit rate, reaching a new record in assets under management, thanks to our customer's trust and consistent engagement.

IFS remains committed to focused profitable growth with customers at the center of our decisions. We are reinforcing this through digital excellence, deeper primary relationships, and continued investments in technology, GenAI, and innovation to improve productivity and customer experience. Highlight of this quarter was our strategic partnership within retail, As announced in April, IFS and InRetail agreed to acquire Infinance XP. Formerly Financiera O, through the purchase of EXP Holding for a $130 million. Believe this transaction will strengthen our consumer finance and payments ecosystem by combining IFS's capabilities within retail's reach. A powerful combination to create a superior value proposition to enhance customer experience in everyday uses through a scalable digital platform.

We are committed to make the investments required to make this possible. Looking ahead, we remain focused on executing our strategy in an environment that may continue to be volatile. Our platform and diversified sources of revenue have proven resiliency across cycles. We believe we are well positioned to keep executing our growth strategy with discipline, sustaining profitability, and continuing to strengthen our leadership in Peru. We maintain a strong focus on risk management, efficiency, and disciplined investments. Now let me pass it on to Michela for further explanation of this quarter's results. Thank you.

Michela Casassa Ramat: Thank you, Luis Felipe. Good morning, and welcome everyone to Intercorp Financial Services first quarter earnings call. We would like to begin with our quarterly key messages. In 2026, we see a robust start to the year, delivering a solid performance across all segments as mentioned by Luis Felipe. Net income reached a quarterly record of 602 million soles, marking a 35% increase compared to the prior year and a return on equity of 19.4%. Second key message is that higher yielding loans continue with a positive momentum, showing a 9% growth on a year over year basis.

Third, risk adjusted NIM increased 90 basis points over the year reaching 4.2% in the last quarter, while we maintain a low cost of risk at 1.4% and cost of funds below 3%. Fourth, we continue to deepen primary banking relationships, and as a result, our retail banking primary customers grew by 14% and our NPS reached 68 points. Fifth, our insurance and wealth management business continues to deliver double-digit growth with written premiums growing by 35% year over year, mainly due to the growth in private annuities and with assets under management growing 13% year over year. On this slide, I will start with a quick update on our latest acquisition. In Retail Peru Corp.

And Intercor Financial Services, announced the acquisition of Infinance XP, formerly Financiera O. We executed the transaction through the purchase of EXP Holding Corp, from IFS Retail Corp for a $130 million implying a 1.19 price over book value multiple, following the closing InRetail and IFS each own 50% of EXP holding. Additionally, we wanted to mention that as part of Infinance's digital strategy, they have recently launched SIP, an app that brings together financial products, payments, and the loyalty program in 1 application. On slide 4, we wanted to highlight 3 key points. First, this is a strategic partnership to strengthen our consumer finance and payments ecosystem.

We are building on Infinance XP scale with close to 3 million customers, 1.8 billion in loans and PEN 1.5 billion in deposits. Second, we are combining IFS' solid financial position and integrated capabilities with InRetail's leading retail platform which has more than 4 thousand stores nationwide to accelerate adoption and distribution. Third, we are enhancing the customer value proposition through a scalable digital platform, expanding access and convenience and making everyday payment and consumer credit simpler and more seamless. Now let's start with our first key message. On slide 6, let me start with a brief update on the macro environment. We entered 2026 with stronger momentum than expected.

GDP growth for the first quarter is tracking around 3.6%, following a solid finish to 2025 supported by private spending and still favorable commodity prices. That said, the near term outlook has become more challenging. Inflation has sped up above the Central Bank's target due to temporary supply shocks and global conditions have turned more volatile, particularly with higher energy prices. Looking ahead, growth should remain close to 3%, supported by sectors such as construction, commerce and services, even though political uncertainty related to the presidential elections could slightly slow the pace. Nonetheless, monetary policy remains supportive with a reference rate at 4.25%, which is 50 basis points below the Fed.

At this point, we do not expect rate cuts from the Central Bank. Moreover, while the SOL has shown an appreciation trend over the last 12 months, more volatile global conditions and domestic political dynamics have led to a depreciation of 2.2% year to date as of May. In sum, Peru continues to offer strong fundamentals and attractive long term opportunities even as we navigate a more volatile environment in the near term. In terms of domestic demand, growth continues to be led by private investment, which is expected to expand by around 7% this year.

This reflects a mining project pipeline of over €60 billion across more than 60 projects, together with the infrastructure works already underway, particularly in transportation and energy. This momentum is clearly visible in strong construction activity. Private consumption remains solid supported by real wage growth and a still tight labor market with a formal wage bill expanding by over 5% in real terms. While consumer and business confidence softened in April as the electoral cycle intensified, this has not yet translated into fundamentals. Business confidence has remained in the positive part of the range on the back of record copper and gold prices. There are still some risks to monitor.

Weather conditions, including a higher probability of a moderate coastal El Nino could affect sectors such as fishing and trade, while higher global energy prices may continue to pressure costs. That said, current momentum and underlying fundamentals point to resilient domestic demand even as the electoral process adds uncertainty. In this context, credit growth remains slightly positive led by retail lending, which continues to outpace commercial credit. On Slide 8, we delivered a very strong start to the year with record quarterly net income at IFS. Earnings were up 35% year over year and ROE above 19. Earnings also improved substantially versus last quarter.

At the bank, results were supported by lower cost of risk and strong financial transaction results, including gains on our sovereign bond portfolio and dividends received from IFS which we net of IFS consolidation, as well as strong FX gains. Net income increased 44% versus last year and the bank's ROE improved to 19.5%. Interseguro and Intelligo also posted another quarter of double-digit growth supported by healthy core trends. At Interseguro, results were mainly supported by a stronger insurance result, excluding the impact of inflation mainly in annuities and life.

At Inteligo, results benefited from a stronger return on the investment portfolio with ROE reaching 22%, Overall, it was a solid quarter across all IFS business lines with core operating performance as the main driver of profitability. On Slide 9, you can see that IFS revenues grew 10% year over year. At the bank, top line growth was up 8% year over year, supported by ongoing improvements in our cost of funds stronger fee generation and better investments and FX results. Interseguro also showed strong revenue growth of 18% driven by a better insurance result in Life and Annuities. And at Intelligo, revenues increased 34%, reflecting steady fee growth in line with higher assets under management.

Investments performance also improved in the quarter as we reflect a softer fourth quarter comparison as the portfolio delivered a 12-month return of above 12%. On Slide 10, IFS expenses increased 13% year over year, reflecting the investments we are making to support our long term growth. This includes accelerated spending in technology to strengthen resilience enhance the user experience, improve cybersecurity, expand capacity, and advance our GenAI capabilities. We are also investing in leadership and talent across key teams because people remain central to executing our strategy. As a result, the cost to income ratio at IFS level stands at 36.6%. Now let's move on to our second key message.

On Slide 12, we are seeing consistent growth across products and segments with a 9% growth in our higher yielding loans. Our total loan portfolio grew around 6% year over year or 7% excluding FX. Growth was driven by mortgages, midsized companies and small businesses, with this last 1 up nearly 30% over the past year. In retail banking, we continue to see healthy momentum across segments. Mass market remains our core retail franchise representing roughly 66% of the retail portfolio while affluent continues to expand as well. Consumer balances were broadly stable quarter on quarter reflecting the expected excess liquidity, yet still grew 5% year on year, with disbursements growing 15% year over year during the month of March.

Good news came in April, where growth came in very strong, showing an acceleration. Mortgage lending also continued to outperform growing more than 8% year over year. We gained 20 basis points of market share reaching 16.2%, which is more than 100 basis points above the Fourth Bank, hence firmly positioning us as the third largest player in the system. In commercial banking, performance was strong across corporate, midsized companies and small business. Small business stood out again, growing almost 30% year over year, and disbursements more than doubling year over year during the month of March. This means we not only replace all Impulso MyPeru maturities, but expanded our book to more than 3x that level.

Over the past year, disbursements have doubled, reflecting the strength of our enhanced value proposition. And we have recently launched our new business banking app for small business, which now brings together both Interbank and EasyPay functionalities in 1 place. This is a key step to make our clients more digital, improve day to day interactions with the bank, and ultimately, deepen primary banking relationships. Following with the third message we continue to see improvement in risk adjusted NIM. On Slide 14, let me share a quick update on asset quality. Our quarterly cost of risk continued to improve reaching 1.4% this quarter. The lowest level in the past 4 years.

This reflects a healthier loan mix and a more supportive credit environment together with the positive impact from the excess liquidity in the retail portfolio. In retail, cost of risk is now below 3% down 100 basis points versus last quarter and well below our risk appetite. Consumer lending continues to perform better with cost of risk improving from around 7% to below 5% year over year supported by healthier customer and the positive impact of recent liquidity events. Importantly, new vintages are also tracking well. On the commercial side, asset quality remains strong with cost of risk stable. Overall, nonperforming loan ratios remain healthy and our coverage ratio is solid at around 140%.

Looking ahead, as our consumer and small business portfolios continue to grow and now represent around 22% of total loans, we would expect cost of risk to gradually normalize from these very low levels. Even in a volatile environment, these trends point to a healthier operating backdrop and reinforce that our disciplined risk management is supporting sustainable growth. On slide 15, there are some good news to highlight in terms of risk adjusted NIM. We continue to make meaningful progress on a risk adjusted basis. The risk adjusted NIM is up 90 basis points year over year reaching 4.2%. The last quarter alone added another 20 basis points mainly driven by the lower cost of risk.

On the asset side, average loan yields were slightly lower, This mainly reflects the risk mix of the portfolio. On the funding side, our cost of funds declined by another 20 basis points quarter over quarter, reflecting continued improvement in our deposit mix and pricing and offsetting the impact from yield on loans. As a result, reported NIM declined by 10 basis points versus last quarter, but it remained stable year over year. it is worth noting that the bond issuance completed in January added a negative impact of around 20 basis points to NIM, which will disappear later this year. On Slide 16, I want to spend a moment on funding the trends are moving in the right direction.

Deposits continue to be our main source of funding, representing about 82% of the total. Total deposits grew 8% year over year, or 9% excluding FX effect. Retail deposits continued to grow, up more than 13% with savings and transactional balances up over 20%, supported by the pension fund release. On the commercial side, the continued expansion of our payment ecosystem led to a 27% increase in efficient commercial deposits. All of this is translating into lower funding costs, as our cost of funds is down 40 basis points year over year, and a further 10 basis points over the last quarter. Cost of deposits improved by 20 basis points just in the quarter.

With efficiency efficient funding now at about 40% of the mix, we still see additional room for improvement. Moving on to our digital strategy, our payment ecosystem with PLIN and EasyPay is driving our growth in low-cost funding. We have continued working to generate further synergies as we drive the growth of our payment ecosystem, focusing on increasing transactional volumes, offering value added services, and leveraging EasyPay as both a distribution network for Interbank products and a source to increase float. As mentioned, 1 key development has been the new banking app for small business, which allows us to deliver an integrated solution maximize the value we bring to our clients.

As such, the flows from EasyPay were up 60% over the past year for the segment, contributing to a 40% increase in deposits, which now account for 12% of wholesale deposits or 33% of wholesale low cost deposits. Additionally, the flows from EasyPay to Interbank expanded by 16% in the same period as Interbank's share of EasyPay flows is around 40%. PLIN continues to gain scale and deepen engagement. PLIN WhatsApp, the first bank led payments experience on WhatsApp in Peru, reached almost 7 thousand affiliates by March. Usage keeps accelerating, with transactions per user up 44% quarter over quarter.

In March, we launched PLIN Credit Card, our buy now pay later solution where we already have more than 30 thousand active clients. Our digital initiatives continue to create tangible value and deepen primary banking relationships with PLIN playing a central role. Over the past year, our retail primary banking base grew 14% and now represents more than 35% total retail clients. PLIN closed the quarter with 2.7 million monthly active clients and more than 70 million monthly transactions with 60% going to merchants. We also continue to see encouraging trends in our digital indicators. Retail digital adoption increased to 84%, and commercial digital clients now stand at 75%.

The good news is that NPS improved quarter over quarter reaching 68 in retail, a record high, and 73% in commercial supported by agility and simplicity of our app and consistently strong service quality. Finally, we are upgrading the app experience with a clear focus on security, speed, and self-service. We added anti fraud alerts on the home screen and pilot piloted temporary credit card blocking, increasing alert contactability by over 40%. In addition, we enable digital tracking of customer requests helping reduce customer assistance by 20% and we reduced physical debit card issuance by 30%. All of these reinforces our commitment to delivering the best possible experience for our customers.

In insurance, we continue to focus on enhancing the digital experience for our clients and expanding our sales from digital channels. The development of internal capabilities has allowed us to increase digital self-service to 70% and the digital premiums to grow 25% in the last year. In Wealth Management, we are committed to improve our digital adoption to 38%. Additionally, digital transactions now represent 58% of all activity on the platform. Moving on, solid results with double digit growth in insurance and wealth management. On slide 22, we continue to build contractual service margin, which increased 15% year over year. Growth was mainly driven by annuities, up 19%, followed by Individual Life, up 17%.

Individual Life remains a key priority for us given its low penetration and high profitability. While our traditional channels continue to perform well, we are also broadening distribution and refining the product to reach new segments and sustain growth. On investments, results were affected by higher inflation which impacted a portion of the portfolio linked to inflation. This same effect flows through insurance results largely netting out at the bottom line. Excluding this impact, the investment portfolio return would have been 6.3% in line with our historical levels. On Slide 23, Intelligo continues to show solid momentum Assets under management have grown at a double digit pace reaching again new highs and now totaling 9.5 billion including deposits.

Fee income continues to improve, up 9% year over year adding to the positive trend in results. Now let me move to the final part of the presentation where we provide some key takeaways. Before we move on to our operating trends, we would like to summarize where we are focusing our growth efforts. The consumer portfolio was flat quarter on quarter, yet it posted 5% year over year growth. April has seen a clear acceleration in growth which we expect to continue in the coming months. At the same time, the mortgage segment continued its positive trajectory with 8% growth continuing to gain market share now above 16%.

In commercial banking, we have seen important growth in small business which increased by 29% year over year. We continue to see a strong potential in this business given our current small market share. The commercial portfolio as a whole grew 8% year over year, when adjusted by FX. This strong performance is supported by our strategy to deepen relationships with key mid sized company clients and leveraging synergies with EasyPay, enhance our value proposition. In insurance, we are maintaining our focus on long term products as individual life has shown encouraging growth this year.

Finally, in wealth management, assets under management continues to grow at a healthy pace, up 13% year over year reaching a new record level, a reflection of both market performance and continued client engagement. On Slide 26, let's go through our first quarter operating trends. Our ROE for the first quarter was 19.4% above our guidance for 2026. Given this report this result, we see our year end ROE above 17% rather than around 17% as stated in the previous call. In terms of loan growth, we were up 5.6% or close to 7%, adjusting for FX appreciation. We continue to expect high single digit growth for the full year.

Finally, we remain focused on efficiency at IFS Our cost to income ratio was below 37% within our guidance range. Let me finalize the presentation with some key takeaways. First, we saw a robust start to the year. Second, our higher yielding loans continue with a positive momentum, especially in the small business segment. Third, we continue to see sustained improvement in the risk adjusted NIM helping profitability. Fourth, we are strengthening primary banking relationships with our retail clients. And finally, our insurance and wealth management business continued delivering double digit growth. Thank you very much. Now we welcome any questions you may have.

Operator: Thank you. At this time, we will open the floor for your questions. First, we will take the questions from the conference call and then the webcast questions. Followed by the 1 key on your touch tone phone now. Questions will be taken in the order in which they are received. If at any time you would like to remove yourself from the questioning queue, just press star 2. Again, to ask a question, please press star 1 now. For the webcast viewers, simply type your question in the box and click submit questions. We will pause momentarily compile a list of questioners. The first question will come from Ernesto Gabilondo with Bank of America. Please go ahead.

Analyst (Ernesto Gabilondo): Thank you. Hi. Good morning, Luis Felipe, Carlos, and Michela, and good morning to all your team. And congrats on your results. My first question will be about the political outlook Can you provide us more color on the latest update on the presidential elections? When is the court expecting to decide who will be the second candidate and what is the next date we should be following. My second question is on the weather phenomenon of El Nino.

So, also, you can provide us, like, the latest news on the probability of having a moderate or a strong El Nino this year And what should be the date or what should we be monitoring to think about this phenomenon of El Nino? And my third question is on your customer risk outlook. As you pointed out, it behaved much better than expected. You also mentioned that you have this risk appetite over high year loans, credit cards, and SMEs. And we should be thinking a gradual higher cost to risk. But I remember last time you were guiding around 2.5% for the year.

So after a very, very good first quarter, just wondering how do you see the cost of risk in 2026? And then how should we be in the next years? Thank you.

Lord Luis Felipe Castellanos Lopez-Torres: Okay, Ernesto. Thanks very much for your questions. Let me go, some of them, and then I will pass it on to the team. On the political outlook, actually, it is it is it is not exactly clear when. there is an expectation that probably by the fifth of this month, the 100% of the count will be completed. Right now, it is very close. it is at 99.755%. So it is very close. The difference is only, like, around 15 thousand votes. So I guess, it will be prudent to wait until everything is discounted. So I guess the next day to really get important news is when this 100% is completed.

Again, as mentioned, I have heard that 1, it could be as early as this Friday, the fifteenth, but the entities are doing their work. No? And so I guess that is what we need to pay attention. And then that second round is scheduled for June 7, so that is probably another important date where we need to focus on because obviously, that will define who comes in office afterwards. So that is what we have on the political outlook so far. In terms of El Nino, I was looking at some numbers and the chances of a moderate El Nino have increased as we reported in the presentation.

There were around 21 percent probability in the in January and has increased to 43 percent. However, that situation can change with within this changing over the years, but we are preparing, you know, We have lots of experience in terms of managing this in terms of what we need to do with our customers or clients. And the effect would probably not be very it felt very strong during the course of this year, but probably we will see some additional hot weather it is maybe some drops on the on the on the South Of Peru.

Hot weather on the North Of Peru, but really the impact should come more towards the latter part of the year or early next year. No. that is when the actual weather phenomenon should hit. But something that we are paying attention and, obviously, getting ready to be prepared. And then in terms of cost of risk, yeah, I guess, also, it was mentioned during the presentation. Like, the system as a whole is behaving very well in terms of cost of risk, and in particular, Interbank is having a very good result given all the measures that we have been taking. For the outcome of the year, let me pass it on to Carlos.

Maybe he can elaborate a little bit more around our strategy for continue growing in higher yielding growth, which is the 1 that is going to at the end impact how fast the cost of risk should go back to more normal levels. You know? So, Carlos, if you can help me there, it will be great.

Carlos Tori Grande: Yeah. Thank you, Felipe. Hello, Ernesto. So the way we look at it is not that we have obviously, we do not have a target to increase the cost of risk. The way we look at it is the yield on loans. You Usually, when you go higher yielding loans, the cost of risk goes up together and you manage that spread. You So we have been obviously getting better with our models and being able to assess risk better. But, also, as Luis Felipe mentioned, the whole system has had low cost of risk over the last I would say, 5 or 6 months. Because of end of year gratifications, the AFP withdrawal.

So it is been a very liquid system for consumers, and that has 2 effects. Okay? So 1 is, obviously, oral risk goes down. Also on credit cards, on revolving credit cards, not only risk goes down, but our customers repay a larger amount of their credit card bills. So the balance goes down as well. So terms of that, it kind of hurts the yield a little bit, but also improves the risk. As long as the equation is the yield is still there and we are it is a profitable loan We are fine with that, and that is what has been happening.

What we foresee over the next couple of months is that risk will go up a little bit as liquidity kind of there is a way and we will continue to see growth. that is what we have seen in April. April, we have seen more growth than we saw on the previous months, but risk is still controlled. So those are the 2 levers that we look at, and we would expect a little bit more growth And that is it will not be a fast increase to cost of risk, but our appetite to risk is in the 2.5 or 2.8 range, no long term, not in the short term.

I do not know if that answers the question.

Analyst (Ernesto Gabilondo): Oh, excellent. Perfect. Thank you. Thank you so much. So just the last question in your ROE expectations. As you mentioned, this year, the ROE could be above your previous guidance and now could be above 17% for the year. I know that the quarter was also favored by financial transactions. So especially market with revenues and other income. So just wanted to know or to understand if that could be recurring and also what will be the drivers behind your new guidance?

Lord Luis Felipe Castellanos Lopez-Torres: Okay. Thank you, Ernesto. Well, that the is basically the strong start to the year. As mentioned during the call, no, we are cautiously optimistic. The risks for the ROEs to the upside. As Michela mentioned, no, we were guiding at around 17%. No, we feel more comfortable saying that it is going to be higher than 17%. However, it is early in the year. There are lots of moving parts still. We have the international environment that creates some volatility. We have the political situation. And obviously, we need see what happens with El Nino. So we would not we would not wanna move strongly around that.

But obviously, the beginning of the year, and the trends that we are seeing put us in a very optimistic situation in terms of what can 2026 deliver for us. No? The drivers are that are the low cost of risk that we are seeing. The economy of Peru is growing. it is expected to grow at around 3%. Commodity prices continue to be very strong. That creates a positive momentum for Peru as a whole. Business confident and in and the investment environment started very positive in the year. Let's see how that evolves as the political landscape starts to clarify. And so those indicators are the 1 that are driving the increase in expectation of our ROE. Perfect.

Thank you very much.

Operator: Thank you. The next question will come from Yuri Fernandes with JPMorgan. Please go ahead.

Analyst (Yuri Fernandes): Congrats Micheal, Luis Felipe. I will try to explore some of the topics that Ernesto did not touch in his few questions here. Maybe on margins, if you can provide a little bit of more color I think the mix towards more consumer loans may help, you know, the means to move up. And I think that is part of the explanation. Right? Risk adjustment means going up. So if cost of risk moves up, NIM should also go up. Can you help us quantify the magnitude of that? Are you talking about kind of 10 bps risk adjusted going up over the years, 20 bps, 30 bps?

Just trying to understand, you know, how powerful the combination of margins minus cost of risk maybe here, for the company. Then I can ask a second question. Thank you.

Lord Luis Felipe Castellanos Lopez-Torres: Hey, Judy. Yeah. You are right. In terms of, trends, that is correct. No. As cost of risk, goes up, yields should go up, and the overall impact should be positive To go over specific numbers, let me pass it on to Michela to see if she has like, the model or more detail on the numbers. If we can provide them. Michela?

Michela Casassa Ramat: Good morning, Yuri. Listen. We did have a budget, you know, with NIM, cost of risk, and risk adjusted NIM. But as you can see from the numbers now that we are showing this first quarter, the numbers have been substantially better, especially in terms of cost of risk. No? So at the end of the day, the risk adjusted NIM is better than what we expected. What we, expect let's say, the rest of the year is a gradual, let's say, recovering NIM, no, which has not happened this quarter, because still the portfolio mix has not changed that much, no, before because of the excess liquidity and the private pension funds withdrawal.

So 1 thing, not that we should see in the coming month at a certain moment is that yield on loans should start to pick up because of the mix. No? And at the same time, also cost of risk. So risk adjusted NIM will be, like, stable or roughly, you going above the level that you see there, but the components should start to go up. So both hidden loans and cost of risk. No.

Analyst (Yuri Fernandes): Super clear, Miguel and Felipe. And if I may ask second 1. Just on insurance, I think that was a highlight this quarter. There was I guess, some help on inflation. But thinking ahead, you know, what should I expect about this business unit? When I look to your premiums, they are growing. But the number of insurance clients, I think there is a slide on your presentation about this, it caught my attention that the number of clients is mostly stable, growing, I think, 1% year over year. That is a little bit less than what we see on wealth and banking. So, again, it was a good quarter. Premiums are fine. You know? You had, like, financial income.

But looking ahead, you know, like, how should we think about insurance? I guess part of my concern is, maybe this subsidiary is not doing as good as the other ones given the number clients, but maybe I am just wrong because, the patient withdraws, maybe they explain part of the annuities weakness here. So if you can help me understand what should the we expect for insurance, I would appreciate. Thank you.

Lord Luis Felipe Castellanos Lopez-Torres: Okay. Yeah. Yuri, so yeah. I see you are referring to the fact that we closed March 2025 with 3.2 million customers in insurance and 3.3 in March 26. No. So those are probably that is what you are referring. We have Gonzalo Basadre here, which will help us. The drivers of insurance overall are very strong. As you have seen, premiums are growing double digit. The result from investment coming very, very well as well, and it is a very efficient operation. But in order to address specifically your question, Gonzalo can help us with that.

Gonzalo Basadre: Yes. Hi. Hi, Yuri. I think that the confusion lies in that total number of clients, as you as you have seen, is not growing very fast. But that is because a big proportion of our clients are bank assurance clients, which are very big in number, but very small in individual revenues. what is growing very fast is private annuities, life insurance, which have a smaller number of clients, with a much bigger premiums. In total, as you have seen, premiums are growing very fast. So what we should expect for the following months is premiums growing very fast, but number of clients not so much. Just because most of them come from bank insurance.

But that does not mean that the business is not growing at a very healthy pace. I do not know if I explained.

Analyst (Yuri Fernandes): No. No. It helps. Like, that was exactly it. Like, Premo's growing. 35, clients not growing, but it is clear. So, basically, the growth of bank client in the end also help you to grow your premiums on the insurance division, right? So you do not need to have, like, let's say, proper insurance clients for you to keep delivering the premium growth. that is basically it. Right? I do not I mean, bank clients are not growing as fast as are private annuities and life insurance clients. And that is why total number does of clients is not growing very fast.

But premiums do grow very fast just because average premiums of private annuities on life is much bigger than the back insurance clients. No. that is clear. No. Thank you very much, guys. Thank you. Thank you, Yuri.

Operator: The next question will come from Carlos Gomez-Lopez with HSBC. Please go ahead.

Analyst (Carlos Gomez-Lopez): Hello. Good morning, and congratulations on the results, and thank you for your detailed presentation as always. So I have 2 questions more for the long term. The first 1 is regardless of the outcome of elections, what do you think that we should expect in terms of growth in your planning for the medium term for the next, let's say, 3, 5 years? What is it that you are expecting in terms of such as asset growth, perhaps returns, but mostly asset growth? For the for the medium term? And second, are there any regulatory changes that affect clean or the between clean and YAPI that you expect in the next year or 2 years? Thank you so much.

Operator: And, Carlos, thanks very much for your question.

Lord Luis Felipe Castellanos Lopez-Torres: Regarding me medium long term growth, the way we see it is specifically for loans, let's say, or assets our take is that the system should be growing between 2x and 3x GDP. Okay? So as long as GDP continues to grow 3 plus or recovers, we should see low single digit or started to get into low double digit sorry. High single digit or starting to get into that low double digit growth. And particularly Interbank, for instance, has always focused on gaining a little market share given that we have opportunities in certain specific segments. No? So probably our growth will be above what we have as an expectation for the system as a whole.

Premiums, on the contrary, probably growing faster because the level of penetration of premium improved opportunities that bring insurance businesses in Peru, particularly in life and annuities, which is our area of focus, has strong under penetration. So we expect that for some years, we will continue to see double digit growth. And then in terms of our private bank as well, all these years of continued growth are creating an emerging wealthy class which was the segment that we are catering specifically for our wealth management segment, and that also should bring low double digit growth at least for the year to come. No?

So that is kind of our take on the way we see growth for the upcoming years, medium to long term. And then in terms of, PLIN and Yape, I did not get very well your question. I think that dynamic is as we have seen. Both getting traction Peruvians using more and more digital solutions and the payment ecosystems are being reinforced PLIN continues to get traction We are starting to build some use cases into our solutions like what Michela mentioned, no, like a that had that great or credit card related to clean. So we see this as a very important opportunity for us as well.

I do not know, Carlos, you wanna compliment anything specific around this dynamic.

Analyst (Carlos Gomez-Lopez): No. Just to follow your pulse up. Sorry. That can be. Sorry. Go ahead. Too many Carlos in the call.

Lord Luis Felipe Castellanos Lopez-Torres: Yeah. Carlos, please. Go ahead. Go ahead. No. No. Okay. Carlos Felipe was talking about clean.

Carlos Tori Grande: So, yeah, the other avenue of growth for clean is the instant payments on WhatsApp. No? So Clean WhatsApp is obviously something that only Interbank has, and we have been growing with that as well.

Operator: But I understand, Carlos, your question was more related to regulation that affects YAP and clean.

Analyst (Carlos Gomez-Lopez): I do not know if that was your question. Yeah. Yeah. that is my question. I mean, as both companies, start to monetize the strong network that both of you have created, I would expect that perhaps at some point, the regulator might want to have a look at how, you know, that monetization takes place and with an there might be new rules or force you to share things in a way that you have not in the past. If you if you are I do to encounter any constraints as you as you deepen your monetization of PLIN.

Carlos Tori Grande: So the regulation regarding PLIN and Yape was given, I believe, it is, like, 2 years ago or 2 years and a half where it asked us to interoperate. No? So PLIN can send to Yapi, Yape to PLIN. And that is the regulation. that is a framework. No? And there is updates to that in terms of SLAs and stability and stuff like that, and they continue to monitor and revise and the regulator is a central bank and that is working. In terms of new regulation, do not foresee anything in the in the short term.

What will possibly and this is something that we will we will see what happens, but what possibly may affect the way we interact is that the central bank will start offering a new let's call it highway. You know? So they are starting with tap is a service provided by UPI from the Indian central bank So the central bank will offer a highway where we can interconnect. So if PLIN wants to send to Yape or Yape to PLIN or other players, in the market, we can go through these I am I am calling it highway of the central bank. But it will not be, as far as we know, subject to regulation.

There will be informants in terms that we all have to be connected, but we do not necessarily have to use it. The idea of the central bank is to offer this highway in better terms or better or more use cases to incentivize the different issuers to use the highway. But it should not be or as far as we know, there will be no regulation saying we have to go through it. No? So it is not I would not consider additional competition, but it will be an additional rail or highway through which we can interact. And the and just to complement that, it would probably be the first the first use of open banking.

So the idea is that the rail will be able to source funds from different accounts to send your transaction. Well, that is the idea that should come online I think the target date is December. Probably, most banks will not go into production in December because it is just a very high transactional month. Probably January 2027 is a more realistic time frame.

Analyst (Carlos Gomez-Lopez): that is very clear and very complete. Thank you so much. Sure. Thank you, Carlos. Both cards.

Operator: The next question will come from Alonso Aramburú with BTG. Please go ahead.

Analyst (Alonso Aramburu): Yes. Hi. Good morning. Thank you for the call. Just following up on your comments on loan growth in April that you are seeing acceleration. Just curious, I mean, where are you seeing that? Is it broad based? Are you referring more to your consumer and credit card book? And what is driving that? Is it really more appetite from the bank, or is it normalization of liquidity, or maybe a combination of the 2? And then a second question regarding your acquisition of Infinance XP.

Just curious, I know it is it is only a month since the acquisition, but if you can provide some comments on the initial reaction to the app from the public, how is that how did that launch? is it going? Thank you.

Lord Luis Felipe Castellanos Lopez-Torres: Yeah. Okay. So thank you, Alonso. On your first question, I think it is a combination of both. No? I think the money from the pension funds, it is starting to, like, to be used already. So demand is starting to get back into the system. No? We are we are seeing that growth in the consumer financing, particularly, you know, our small business segment. For us, it is more driven by the fact that we are building value proposition and going out to look for clients given the low market share that we have over there. And then in terms of commercial banking, the activity is mixed. No?

So we have not seen strong growth there, but it is it is very seasonal. No? So let me it on to Carlos so he can complement this part of the question, and then I will return to go over your SIP question. Tori.

Carlos Tori Grande: Thank you, Luis Felipe. I think you mentioned most of it Hola, Alonso. How are you? So, yes, I it is a mix. there is a little bit less liquidity, so we are having as I have been mentioning over the calls, our value proposition has been having traction, and we have been seeing more transactions increase. What has happened over the last few weeks is maybe prepayment of our credit cards is not as high. No? So that gives you a little bit of growth. But, also, we have put in line 1 or 2 good models that target the high risk or a lower segment.

Which has allowed us to have a little bit more penetration there without increasing risk too much, and we have started to see some of that. So it is a little bit appetite, I would say 50% appetite and 50% market. And we will we expect to continue to see that over the next couple of weeks and months. So yeah. And what we really mentioned in commercial banking, that is it. We it is as he mentioned, but we continue to see good growth in the lower segment of banking also, Banca Negocios. Is doing well as well. Good growth.

Lord Luis Felipe Castellanos Lopez-Torres: You. Felipe, do you want to take the SIP? Yeah. Yeah. On the SIP, you are you are right, Alonso. Not only the transaction has been recently executed, but also the launch of SIP has been very recent as well. it is it is having good traction. It is it is a couple of both. it is acquiring new customers and new customers are coming in better than we expected. And then it is a matter of migration of people that used to have the old solution Financiera OS solution, and then you had some people that use Agora. So now this new app consolidates like, basically 3 things. Now loyalty, consumer financing, and also a payment. Solution. No?

And we had certain expectations in terms of what we were willing to achieve at launching of the new brand and new solution. What I can tell you it is surpassing the expectations that we had. No? So I think we are in a good start. And as we have discussed, this is an early stage, it is probably a very interesting data solution that we are bringing to market where within retail, it will require still time and investments in order to pursue the growth that we are thinking it could have.

So it is more like a medium to long term where we will start seeing the actual results of what we are imagining on this on this front. No? But to go over your specific question, the launching has been successful in our view and the traction that is getting is exceeding expectations that we had. Great. Thank you, Felipe and Carlos. Thank you, Alonso.

Operator: Next question will come from Andres Soto with Santander. Please go ahead.

Analyst (Andres Soto): My question is regarding your digital strategy and the question has to components. 1, a philosophical 1. I understand there is an app under in finance which is the 1 that they those users use to go to the stores And then you mentioned in the call, there is another app under EasyPay, which is the 1 that I guess you are giving to your SME customers, and then you have, PLIN, which is the 1 that we use to interconnect with other banks. My question is, is this by design?

Are you planning to continue keeping those apps separate or is it the plan to for at some point to migrate to an ecosystem where your customers can go to cover all the financial needs. And the other part that is not philosophical from the question is regarding investments. I would like to understand what point in the cycle are we in terms of digital investment. You reiterate your, guidance for cost of income of 37%. Are you expecting some additional pressure in 2027, or you believe that your expenses in digital can be covered under these very stringent efficiency ratio? Thank you very much.

Lord Luis Felipe Castellanos Lopez-Torres: Andres, thanks very much for your, you know, something about question, Andre, and your other question. On the philosophical side, it is part of this strategy. Actually, well, Lean is not an app, as you know. Lean is like a highway that connects payment possibilities within customers. So that is not basically a highway. You have to see it that way. No? And we have talked about it. it is like sell in The US. Okay? And then you have the in finance app or ZIP is a different play. it is a consumer financing it is a joint venture between us and in retail.

It will have its own customers. it is probably going to be integrated at some point through the ability of doing certain things that move you between different apps. But right now, the way it is it works and the way it is structured, it is a different solution serving specific customers that have very specific needs that we see that is boosted by the, opportunities and potential that having your regional as a partner brings. No? And then you have the small businesses app, which is a separate app, which caters to its own segment.

With other specific solutions, more related to merchants, and there, the EasyPay and the and the interbank app for those types of customers is being integrated as a single 1. No? So, yeah, philosophically, we have different place for different segments and different strategies. No? that is that is the way we are designing this. If they are at some point all going to be converted into a single app, I do not see it right now based on the information that I am seeing. But probably we will build communication ways in order to provide different services through APIs or something like that. No. But that is the way we are designing the future so far.

And then in terms of investments, that is a very interesting question. I do see that the pressure for investments in digital, in technology, in cybersecurity, in GenAI will continue. This is not something that we do data transformation and it ends at some point. I think the cost what we are doing is basically following customer's expectations. And customers' expectations are basically increasingly demanding. So the level of investments that we need to continue deploying in all of our segments, including banking, including insurance, including wealth management and payments, is very demanding as well. So I think that the ability to manage the efficiency ratio at around 37% will be what guides us for the next couple years.

And then at some point, we will get another level of scale that will probably allow us to think about levels below 35%, but that is not in the in the in the medium term. that is probably more a long term view. that is very clear, Luis Felipe. And if I may ask a follow-up on PLIN.

Analyst (Andres Soto): Once the central bank UPI system is up and running, is there still a place for PLIN? What will be the use case for this, which is, as you mentioned, just connecting with other banks? Okay.

Lord Luis Felipe Castellanos Lopez-Torres: there is a space for PLIN. Probably, our strategy might change. But I guess it is having 2 highways probably We will we will need to see which 1 is more efficient and which 1 is the 1 that serve our purposes better. But I do not see that 1 will completely replace the other. Probably, that will be complementary. Carlos has been very involved in our payment strategy Maybe he can complement this view as well. No? Carlos?

Carlos Tori Grande: No. I agree. So first, we start with the fact that PLIN is not an app. it is a brand and a highway, as Felipe mentioned. Within that highway, technologically, you can send funds and use PLIN and send funds through Visa Direct or you can send it through the local chamber exchange chamber. Those are the 2 highways we can use today technologically. UPI will add a third 1. So we can go through UPI. And we can brand it clean or we can brand it tap. The transaction will still be from the interbank app to customer that receives it at interbank or at a different bank.

So that will not change, but the fact that there will be additional use cases and the central bank is very ambitious on how they will grow this in the next couple of years. We will continue to assess our strategy and see what we do. But as Luis Felipe mentioned, this at least the first round, will be absolutely complementary. To what we have to what we have now. An additional highway. Understood. You, Carlos, and thank you, Luis Felipe.

Analyst (Andres Soto): Congratulations on the results. Thank you, Andre. Nice to see you, Andre. Nice to talk to you.

Ivan Peill: At this time, we will take the webcast questions. I will now turn the call over to Mr. Ivan Peill from Inspire Group. Thank you, operator.

Analyst: The first question comes from Shane Matthews of White Oak. Investors. What should we expect cost of risk for the banking business for the year? And were there any large recoveries in Q1 which led to lower provisions for the bank? Or is this the normal run rate going forward?

Lord Luis Felipe Castellanos Lopez-Torres: Okay. I think we have we kind of answered this question throughout the course of the after the day. But just to summarize, I do not think we have had any specific 1 timer I think that is as was mentioned throughout the call, is a system as a whole is behaving better in terms of risk. The low cost of risk is particular for Interbank, also we are seeing in the in the business as a whole. And then the level of cost of risk for the year will depend on the speed, basically, that our higher yielding book is built. No? So that is the expectation that we have.

As mentioned, our budget has been outbid by what we are seeing in the first quarter, and we do expect that probably as the book in higher yielding lows continues to build up, cost us of risk should marginally start to go up. And the next question?

Operator: The next there are no further questions at this time. I would now like to turn the call over to the operator. Thank you. There appear to be no further questions on the audio side. Would like to turn the floor back to Ms. Kasassa for any closing remarks.

Michela Casassa Ramat: Okay. Thank you very much. Thank you again, everybody, for joining our call, and we will see each other again for the second quarter results. Stay safe. Bye.

Operator: This concludes today's conference call. You may now disconnect.

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