Intercorp Financial Servs (NYSE:IFS) reported first-quarter financial results on Tuesday. The transcript from the company's first-quarter earnings call has been provided below.
This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.
Access the full call at https://event.choruscall.com/mediaframe/webcast.html?webcastid=pRCbTQIx
Summary
Intercorp Financial Servs reported a record quarterly net income of 602 million soles with an ROE of 19% for Q1 2026, driven by low cost of risk and improvements in financial transactions.
The company is focusing on strategic growth through digital excellence and innovation, including initiatives like EasyPay and Plin Credit Card, while also enhancing its small business offerings.
Intercorp Financial Servs has announced a strategic partnership with Invetel to acquire Infinance XP for $130 million, aiming to strengthen its consumer finance and payments ecosystem.
Future outlook remains cautiously optimistic with expectations of continued growth supported by a favorable economic environment, though potential risks such as El Nino and political uncertainties could impact results.
Operational highlights include a 9% year-over-year growth in higher yielding loans, a 35% increase in written premiums in the insurance segment, and a 13% growth in assets under management in wealth management.
Full Transcript
OPERATOR
Good morning and welcome to Intercorp Financial Servs first quarter 2026 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 and 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.
Ivan Peel (Moderator)
Thank you and good morning everyone. On today's call, Intercorp Financial Servs will discuss its first quarter 2026 earnings. We are very pleased to have with us Mr. Luis Felipe Castellanos, Chief Executive Officer, InterCorp Financial Services. Ms. Michaela Casasa, Chief Financial Officer, InterCorp Financial Services. Mr. Carlos Torre, Chief Executive Officer, InterBank. Mr. Gonzalo Passadre, Chief Executive Officer, Interseguro. Mr. Bruno Ferrecho, 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 didn't receive a copy of the presentation or the earnings report, they are now available on the company's website, ifs.compe otherwise. If you need any assistance today, please call Inspire 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 Servs, for his opening remarks. Mr. Castellanos, please go ahead, sir.
Luis Felipe Castellanos (Chief Executive Officer)
Thank you. Good morning and thank you all for joining our first quarter 2026 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 IFS 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. Inteligo, Our wealth management segment continues to grow at double digit rate, reaching a new record in assets under management. Thanks to our customers 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, Gen AI and innovation to improve productivity and customer experience. Highlight of this quarter was our strategic partnership with invito. As announced in April, IFS and Invetel agreed to acquire Infinance XP, formerly FinanceRao through the purchase of IXP Holding for $130 million. We 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 do 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 revenues 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 Michele for further explanation of this quarter's results. Thank you.
Michaela Casasa (Chief Financial Officer)
Thank you Luis Felipe Good morning and welcome everyone to Intercor Financial Services first quarter earnings call. We'd like to begin with our quarterly key messages. In the first quarter of 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, making 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 maintained 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 asset under management growing 13% year over year. On this slide, I'll start with a quick update on our latest acquisition in retail. Peru Corp. And Intercorp Financial Servs announced the acquisition of Inc Finance xp, formerly Financierao. We executed the transaction through the purchase of EXP Holding Corp. From IFH Retail Corp. For $130 million, implying a 1.19 price over book value multiple following the closing in retail and IFS each own 50% of EXP holding. Additionally, we wanted to mention that as part of Infinance Digital Strategy, they've recently launched sip, an app that brings together financial products, payments and the loyalty program in one application. On slide four, we wanted to highlight three 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 soles in loans and 1.5 billion soles in deposits. Second, we're combining ifs solid financial position and integrated capabilities within retail's leading retail platform, which has more than 4,000 stores nationwide, to accelerate adoption and distribution. Third, we're 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 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 picked 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 non primary 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 the 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 the 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 Inteligo 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% this year supported by ongoing improvements in our cost of funds, stronger fee generator generation and better Investments and FX results. Interseguro also showed strong revenue growth of 18% driven by better insurance result in life and annuities and an italigo revenues increased 34% reflecting steady fee growth in line with higher assets under management investments performance also improved in the quarter, partly reflecting 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 gen AI capabilities. We are also investing in leadership and talent across key teams because people remains 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, mid sized companies and small businesses with this last one 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 over 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 come 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, mid sized 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 replaced all impulso niperu maturities, but expanded our book to more than three times that level. Over the past year, disbursements have doubled, reflecting the strength of our enhanced value proposition. We've recently launched our new Business Banking app for Small Business which now brings together both interbank and easy pay functionalities in one 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 four 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 customers 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, non performing 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 remains stable year over year. It's 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 as 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 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 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 Plink 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 Easy Pay as both a distribution network for interbank products and a source to increase flow. As mentioned, one key development has been the new banking app for small business which allows us to deliver an integrated solution and maximize the value we bring to our clients. As such, the flows from Easy pay 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 ECPay to Interbank expanded by 16% in the same period. As Interbank's share of EasyPay flows is around 40%. Plyn continues to gain scale and deepen engagement bling WhatsApp, the First bank led payments experience on WhatsApp in Peru reached almost 7,000 affiliates by the end of March. Usage keeps accelerating, with Plinios 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 30,000 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% of 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 88%, 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 the 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 piloted temporary credit card blocking, increasing alert contactability by over 40%. In addition, we enabled digital tracking of customer requests, helping reduce customer assistance by 20% and we reduced physical debit card issuance by 30%. All of this 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 Interfundos app, aiming to transform it from a simple transactional tool into a comprehensive digital advisor for our mutual fund clients. This has led to a steady rise in app engagement with the number of digital users increasing 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 offering to reach new segments and sustain growth. 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, Inteligo continues to show solid momentum. Asset under management have grown at a double digit pace, reaching 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'd 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 to enhance our value proposition. In insurance, we're maintaining our focus on long term products as individual life has shown encouraging growth this year. Finally, in wealth management, asset 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 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 cast 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 continue 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. If you would like to ask a question, please press the star key followed by the one key on your touchtone 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 two again. To ask a question, please press Star one now. For the webcast viewers, simply type your question in the box and click Submit Questions. We will pause momentarily to compile a list of questioners. The first question will come from Ernesto Gabilando with Bank of America. Please go ahead.
Ernesto Gabilando (Equity Analyst)
Thank you. Hi, good morning, Luis, Felipe, Carlos and Michaela, 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 on 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 Nino. So also you can provide us like the latest news on the probability of having a moderate or a strong El Niño this year and what should be the date or what should we be monitoring to think about this phenomenon of El Niño? And my third question is on your cost of risk outlook. As you pointed out, it behaved much better than expected. You also mentioned that you have this risk appetite over high yield loans, credit cards and SMEs. And we should be thinking a gradual higher cost of 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 it be in the next years? Thank you.
Luis Felipe Castellanos (Chief Executive Officer)
Okay, Ernesto, thanks very much for your questions. Let me go over some of them and then I'll pass it on to the team on the political outlook. Actually, it's not exactly clear when there's an expectation that probably by the 15th of this month the 100% of the count will be completed. Right now it's very close. It's at 99.755%, so it's very close. The difference is only like around 15,000 votes. So I guess it will be prudent to wait until everything is counted. So I guess the next day to really get important news is when this 100% is completed again. As mentioned, I've heard that it could be as early as this Friday, the 15th, but the entities are doing their work, so I guess that's what we need to pay attention. And then that second round is scheduled for June 7, so that's probably another important date. Well, we need to focus on because obviously that will define who comes in office afterwards. So that's 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% probability in January and has increased to 43%. However, that situation can change. We've seen this changing over the years, but we're preparing, 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 will probably not be very felt, very strong during the course of this year, but probably we'll see some additional hot weather, maybe some droughts 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's when the actual weather phenomenon should hit. But something that we're 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 outlook 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 one that is going to at the end impact how fast the cost of risk should go back to more normal levels. So Carlos, you can help me there. It would be great.
Carlos Torre (Chief Executive Officer)
Yeah, thank you, Felipe. Hello, Ernesto. The way we look at it is not that we have, obviously we don't have a target to increase the cost of risk. The way we look at it is the yield on loans. Usually when you go higher yielding loans, the cost of risk goes up together and you manage that spread. So we've been obviously getting better with our models and being able to assess risk better. But also as Louis Felipe mentioned, the whole system has had low cost of risk over the last, I would say five or six months because of end of year gratifications, the AFP withdrawal. So it's been a very liquid system for consumers. And that has two effects. Okay, so one is obviously overall risk goes down, but 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. In terms of that it hurts the yield a little bit, but also improves the risk. As long as the equation is that the yield is still there and it's a profitable loan. We're Fine with that. And that's 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 withers away and we will continue to see growth. That's what we have seen in April. April we have seen more growth than what we saw in the previous months. But risk is still controlled. So those are the two levers that we look at. And we would expect a little bit more growth and that it won't 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 don't know if that answers the question.
Ernesto Gabilando (Equity Analyst)
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 related 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?
Luis Felipe Castellanos (Chief Executive Officer)
Okay, thank you, Ernesto. Well, the driver is basically the strong start to the year. As mentioned during the call, we are cautiously optimistic. The risks for the ROE to the upside, as Michaela mentioned, we were guiding at around 17%. We feel more comfortable saying that it's going to be higher than 17%. However, it's 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 to see what happens with El Nino. So we wouldn't want to move strongly around that. But obviously the beginning of the year and the trends that we're seeing put us in a very optimistic situation in terms of what can 2026 deliver for us. The drivers are that are the low cost of risk that we're seeing. The economy of Peru is growing, is expected to grow at around 3%. The commodity prices continue to be very strong. That creates a positive momentum for Peru as a whole. Business confidence and investment environment started very positive in the year. Let's see how that evolve as the political landscape starts to clarify. So those indicators are the one that are driving the increase in expectation of our roe.
Ernesto Gabilando (Equity Analyst)
Perfect. Thank you very much.
Luis Felipe Castellanos (Chief Executive Officer)
Thank you.
OPERATOR
The next question will come from Yuri Fernandez with JP Morgan. Please go ahead.
Yuri Fernandez (Equity Analyst)
Thank you guys. Congrats, Michele Luiz, Felipe. I'll try to explore some of the topics that Ernesto didn't touch in his few questions here. Maybe, maybe on margins if you can provide a little bit of more color, I think the mix towards more consumer loans may help the needs to move up. And I think that's part of the explanation, right? Risk adjusted nims going up. So if cost of risk moves up, a NIM should also go up. Can you help us quantify the magnitude of that? Are we talking about kind of 10bps risk adjusted going up over the years, 20bps, 30 deeps. Just trying to understand how powerful the combination of margins minus cost of risk maybe here for the company and then I can ask a second question.
Luis Felipe Castellanos (Chief Executive Officer)
Thank you, Judy. Yeah, you're right. In terms of trends, that's correct. 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 Michaela to see if she has like the model or more detail on the numbers if we can provide them.
Michaela Casasa (Chief Financial Officer)
Michaela, Good morning Yuri. Listen, we did have a budget with NIM cost of risk and risk adjusted nim. But as you can see from the numbers that we are showing this first quarter, the numbers have been substantially better, especially in terms of cost of risk. So at the end of the day the risk adjusted NIM is better than what we expected. What we expect let's say for the rest of the year is a gradual, let's say recovery which has not happened this quarter because still the portfolio mix has not changed that much, not before because of the excess liquidity and the private pension funds withdrawal. So one thing not that we should see in the coming months 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 nimble will be like stable or roughly not going above the level that you see there. But the components should start to go up. So both EBD on loans and a cost of risk,
Yuri Fernandez (Equity Analyst)
no? Super, super clear. Michaela, Luis Felipe and if I may, a second one just on insurance, I think that was a highlight this quarter. There was I guess some help on inflation. But thinking ahead, what should 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 had financial income. But looking ahead, 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 of clients. But maybe I'm just wrong because the pinch withdrawals, maybe they explain part of the annuities weakness here. So if you can help me understand what should we expect for insurance, I would appreciate. Thank you.
Luis Felipe Castellanos (Chief Executive Officer)
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 26th. That's what you're referring. We have Gonzalo Asadre here, which will help us. The drivers of insurance overall are very strong. As you've seen, premiums are growing double digit. The result from investment coming very, very well as well. And it's a very efficient operation. But in order to address it specifically your question, Gonzalo can help us with that.
Gonzalo Passadre (Chief Executive Officer)
Hi. Hi, Jury. I think that the confusion lies in that total number of clients, as you have seen, is not growing very fast. But that's because a big proportion of our clients are bank assurance clients, which are very big in number but very small in individual revenues. What's 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 doesn't mean that the business is not growing at a very healthy pace. I don't know if I explained.
Yuri Fernandez (Equity Analyst)
No, no, it helps. Like that was exactly it. Like premiums growing, 35 clients not growing, but it's 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 don't need to have like, let's say proper insurance clients for you to to keep delivering the premium premium growth. That's basically it, right?
Gonzalo Passadre (Chief Executive Officer)
I mean, bank clients are not growing as fast as our private annuities and life insurance clients. And that's why total number of clients is not growing very fast. But premiums do grow very fast. Just because average premiums of private annuities and life is much bigger than the back insurance clients.
Yuri Fernandez (Equity Analyst)
No, that's clear. No. Thank you very much, guys. Thank you.
OPERATOR
Thank you, Julie.
Carlos Gomez (Equity Analyst)
The next question will come from Carlos Gomez with ACE sbc. Please go ahead.
Luis Felipe Castellanos (Chief Executive Officer)
Hello, good morning and congratulations on the results and thank you for your detailed presentation as always. So I Have two questions more for the long term. The first one is regardless of the outcome of the 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 three, five years? What is it that you expect in terms of asset growth? Perhaps returns, but mostly asset growth for the medium term. And second, are there any regulatory changes that affect Plin or the relationship between Plin and Yape that you expect in the next year or two years? Thank you so much Carlo.
Carlos Torre (Chief Executive Officer)
Thanks very much for your question Regarding 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 2 and 3 times GDP. Okay. So as long as GDP continues to grow 3% plus or recovers, we should see low single digit or starting 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 bit market share given that we have opportunities in certain specific segments. 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 in Peru, opportunities that bring insurance businesses in Peru, particularly in life and annuities, which is our area of focus, has strong underpenetration. So we expect that for some years 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 is 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 years to come. So that's kind of our take on the way we see growth for the upcoming years medium to long term. And then in terms of plinium Japi, I didn't get very very well your question. I think that the dynamic is as we've seen both getting traction, Peruvians using more and more digital solutions and the payment ecosystems are being reinforced clean continues to get traction. We are starting to build some use cases into our Plin solutions like what Michaela mentioned like or credit card related to Plin. So we see this as a very important opportunity for us as well. I don't know Carlos, if you want to compliment anything specific around this dynamic. No, just to follow your Sorry, that's too many Carlos in the call Carlos, Tory, please go ahead. No, Felipe was talking about Plin. So yeah, the other avenue of growth for Plin is the instant payments on WhatsApp. So plin, WhatsApp is obviously something that only Interbank has and we've been growing with that as well. But I understand, Carlos, your question was more related to regulation that affects Yape. And I don't know if that was your question. Yeah, that's 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 that monetization takes place. And there might be new rules or force you to share things in a way that you have not in the past, if you are, if you expect to encounter any constraints as you deepen your monetization of plin. So the regulation regarding Plin and Yape was given, I believe it's like two years ago or two years and a half where it asked us to interoperate. So Plin consent to yape, yape to Plin. And that's the regulation. That's a framework and there's 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. We don't foresee anything in the short term. What will possibly, and this is something that we'll 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. They're starting with tap, which is a service provided by UPI from the Indian central government. 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 this. I'm calling it highway in 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 will have to be connected, but we don't 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 that the different issuers 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. I wouldn't consider additional competition, but it will be an additional rail or highway through which we can interact. Just to complement that, it will probably be the first, first use of open banking. So the idea is that rail will be able to Source funds from different accounts to send your transaction. That's 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's just a very high transactional month. Probably January of 2027 is a more realistic time frame.
Carlos Gomez (Equity Analyst)
That's very clear and very complete. Thank you so much.
OPERATOR
Thank you, Carlos. Both cards.
Alonso Aramburu (Equity Analyst)
The next question will come from Alonso. Aramburu with btg. Please go ahead.
Luis Felipe Castellanos (Chief Executive Officer)
Yes, hi, good morning. Thank you for the call. Just following up on your comments on loan growth in April that you're seeing acceleration. Just curious, where are you seeing that? Is it broad based? Are you referring more to your consumer and credit card book and what's driving that? Is it really more appetite from the bank or is a normalization of liquidity? Or maybe maybe a combination of the two. And then a second question regarding your acquisition of Infinance xp. Just curious, I know it's only a month since the acquisition, but if you can provide some comments on the initial reaction to the SIP app from the public. How is that. How did that launch is going to.
OPERATOR
Thank you.
Luis Felipe Castellanos (Chief Executive Officer)
Yeah, okay, so thank you Alonso, on your first question. Yeah, I think it's a combination of both. No, I think the money from the pension funds started to like to be used already. So demand is starting to get back into the system. So we're seeing that growth in the consumer financing, particularly in our small business business segment. For us it's 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. So we have not seen strong growth there, but it's very seasonal. So let me pass it on to Carlos so he can complement this part of the question and then I'll return to go over your SIP question. Thank you.
Carlos Torre (Chief Executive Officer)
I think you mentioned most of it. Hola, Alonso, how are you? So yes, it's a mix. There's a little bit less liquidity. So we're having, as I've been mentioning over the calls, our value proposition has been having traction and we've been seeing more transactions and increase. What has happened over the last few weeks is maybe prepayment of our credit cards isn't as high, so that gives you a little bit of growth. But also we have put in line one or two good models that target the high risk or the lower segment which has allowed us to have a little bit more penetration there without increasing risk too much. And we've started to see some of that. So it's a little bit appetite, I would say 50% appetite and 50% market and we expect to continue to see that over the next couple of weeks and months. So. So yeah, and, and what we mentioned in, in commercial banking, that's it. We, it's as he mentioned but we continue to see good growth in, in, in the lower segment of of banking. So Banker Negocios is doing well as well.
OPERATOR
Good growth. Thank you. You want to take. Yeah, yeah.
Luis Felipe Castellanos (Chief Executive Officer)
On the sip. You're right, Alonso. Not only the transaction has been recently executed, but also the launch of SIP has been very recent as well. It's having good traction. It's a couple both it's acquiring new customers and new customers are coming in better than we expected. And then it's a matter of migration of people that used to have the old solution, financiera solution and then you had some people that use Agora. So now this new app consolidates basically three things. Loyalty, consumer financing and also a payment solution. We had certain expectations in terms of what we were willing to achieve at launching of the new brand. A new solution for what I can tell you it is surpassing the expectations that we had. So I think we are in a good start and as we've discussed this is an early stage is probably a very interesting detail solution that we are bringing to market to air within retail. It will require still time and investments in order to pursue the growth that we are thinking it could have. So it's 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 it's getting is exceeding the expectations that we had.
Alonso Aramburu (Equity Analyst)
Great, thank you Felipe and Carlos.
OPERATOR
Thank you Alonso.
Andre Soto (Equity Analyst)
Again, if you have a question on the audio side, please press Star and then one to join the question queue. The next question will come from Andre Soto with Santander. Please go ahead.
Luis Felipe Castellanos (Chief Executive Officer)
Good morning to all and thank you very much for this presentation. My question is regarding your digital strategy and the question has two components. One a philosophical one. I understand there is an app and they're Infinance, which is the one that those users use to go to the stores. And then you mentioned in the call there is another app under EasyPay which is the one that I guess you are giving to your SME customers and then you have Clean, which is the one that you use to interconnect with other banks. My question is this by design, are you planning to continue keeping those apps separate or is it the plan 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 at 37%. Are you expecting some additional pressure into 2027 or you believe that your expenses in digital can be covered under these very stringent efficiency ratio? Thank you very much,
Andre Soto (Equity Analyst)
Andrea. Thanks very much for your philosophical question, Andrea. And your other question on the philosophical side. It's part of the strategy actually. Well, Plin is not an app, as you know. Plin is like a highway that connects payments possibilities within customers. So, so, so, so, so that's not basically a highway. You have to see it that way. No, and we've talked about it. It's like sell in the U.S. okay. And then you have the, the in finance app or. Or SIP is a different play. It's consumer financing. It's a joint venture between us and in retail it will have its own customers. It's probably going to be integrated at some point through the ability of doing certain things that move you through different apps. But right now the way it works and the way it's structured, it's a different solution serving specific customers that have very specific needs that we see that is boosted by the opportunities and potential that having in regional as a partner brings. 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 ECPay and Interbank app for those types of customers is being integrated as a single one. So yeah, philosophically we have different place for different segments and different strategies. That's the way we are designing this. If they are going at some point all be converted into a single app. I don't see it right now based on information that I'm seeing, but probably will build communication ways in order to provide different services through APIs or something like that. No, but that's the way we are designing the future so far. And then in terms of investments, that's a very interesting question. I do see that the pressure for investments in data, in technology, in CyberSecurity, in Gen AI will continue. This is not something that we do digital transformation and it ends at some point. I think what we're doing is basically following customers 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 the 37% will be what guides us for the next couple years. And then at some point we'll get another level of scale that will probably allow us to think about levels below 35%. But that's not in the medium term. That's probably more a long term view.
Luis Felipe Castellanos (Chief Executive Officer)
That's very clear, Felipe.
Andre Soto (Equity Analyst)
And if I may ask, a follow up on clean. Once the central bank UPI system is up and running, is there still a place for spliing? What will be the use case for this which is, as you mentioned, just connecting with other banks?
Luis Felipe Castellanos (Chief Executive Officer)
There's a space for Plin. Probably our strategy might change, but I guess it's having two highways. Probably we will need to see which one is more efficient and which one is the one that serves our purposes better. But I don't see that one 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 Torre (Chief Executive Officer)
No, I agree. So first we start with the fact that Plin is not an app. It's 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 two highways we can use today. Technologically UPI will add a third one. So we can go through UPI and we can brand it Plin or we can brand it Tap. The transaction will still be from the Interbank app to customer or another Interbank 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 Felipe mentioned, this at least the first round will be absolutely complementary to what we have to what we have now. So an additional highway.
Andre Soto (Equity Analyst)
Understood. Thank you Carlos. And thank you, Liz. Felipe, congratulations on the results.
OPERATOR
Thank you. Thank you. Nice to see you. Andres. Nice to talk to you. At this time we will take the webcast questions. I will now turn the call over to Mr. Ivan Peel for from Inspire Group.
Shane Matthews (Equity Analyst)
Thank you operator. 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?
Luis Felipe Castellanos (Chief Executive Officer)
Okay, I think we kind of answered this question throughout the course of the presentation. But just to summarize, I don't think we've had any specific one timer recovery. I think that that's, as was mentioned throughout the call, is that the system as a whole is behaving better in terms of risk. The low cost of risk is particular for Interbank, but also we're seeing in the business as a whole. And then the level of cost of risk for the year will depend on the speed basically our higher yielding book is built. So that is the expectation that we have. As mentioned, our budget has been outbeat by what we're seeing in the first quarter. And we do expect that probably as the book in higher yielding lows continues to build up, cost of. Of risk should marginally start to go up. And the next question,
OPERATOR
The next. There are no further questions at this time. I'd now like to turn the call over to the operator.
Michaela Casasa (Chief Financial Officer)
Thank you. There appear to be no further questions on the audio side. I would like to turn the floor back to Ms. Casasa for any closing remarks. Okay, thank you very much. Thank you again everybody for joining our call. And we'll see each other again for the second quarter results. Stay safe.
OPERATOR
This concludes today's conference call. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
Login to comment