Business context and reporting period
Intercorp Financial Services Inc. (IFS) filed this audited Form 20-F for the fiscal year ended December 31, 2023; it is an annual report, not a standalone fourth-quarter filing. IFS is a Panama-incorporated holding company whose principal businesses operate mainly in Peru: banking (Interbank), insurance (Interseguro), wealth management (Inteligo) and payments (Izipay). Consolidated financial statements are prepared in soles under IFRS as issued by the IASB.
IFS adopted IFRS 17 retrospectively and restated 2022 comparative information. The adoption reduced retained earnings by S/820.5 million as of January 1, 2022; 2021 was not restated and remains under IFRS 4.
Financial performance and position
Unless otherwise noted, amounts are in S/ millions. IFS does not present a conventional consolidated revenue measure; the following income lines provide relevant operating context.
| Metric | 2023 | 2022, restated | Change |
|---|---|---|---|
| Interest and similar income | 7,120.4 | 5,871.3 | +21.3% |
| Interest and similar expenses | (2,592.4) | (1,661.7) | Expense up 56.0% |
| Net interest and similar income | 4,528.0 | 4,209.6 | +7.6% |
| Impairment loss on loans, net of recoveries | (1,981.8) | (830.6) | Expense up 138.6% |
| Net fee income from financial services | 1,178.5 | 1,137.4 | +3.6% |
| Other income | 557.8 | 542.4 | +2.8% |
| Result from insurance activities | (178.4) | (252.9) | Loss narrowed |
| Other expenses | (2,750.2) | (2,627.1) | Expense up 4.7% |
| Net profit | 1,079.3 | 1,678.1 | (35.7%) |
| Net profit attributable to IFS shareholders | 1,072.7 | 1,668.0 | (35.7%) |
Net interest margin improved to 5.3% from 5.0%, while risk-adjusted NIM fell to 3.0% from 4.0%. The efficiency ratio increased to 36.2% from 34.6%; ROE declined to 11.3% from 19.1% and ROA to 1.2% from 1.9%. These ratios are management-defined measures, and adjusted profit measures are non-IFRS.
Segment net profit was S/856.1 million for banking, S/292.1 million for insurance, S/36.2 million for wealth management and S/33.1 million for payments; holding costs and consolidation eliminations were S/138.2 million. Interbank’s 2023 ROE was 11.2%; Interseguro’s IFRS net profit was S/292.1 million, while its SBS-GAAP profit was S/315.1 million. Inteligo returned to profit from a S/141.4 million loss in 2022, mainly on improved investment valuations. Izipay’s revenue was S/815.9 million and net profit S/33.1 million; its net profit was below the S/41.1 million reported for the post-acquisition portion of 2022.
At December 31, 2023, total assets were S/89.6 billion, gross loans S/48.2 billion, deposits and obligations S/49.2 billion, and total equity S/10.0 billion. Cash, due from banks and inter-bank funds were S/10.3 billion on the balance sheet. Total liabilities were S/79.6 billion, including S/9.0 billion due to banks and correspondents and S/5.6 billion in bonds, notes and other obligations. The filing does not provide a single consolidated leverage ratio or a clear consolidated liquidity coverage ratio.
Cash and cash equivalents fell to S/9.1 billion from S/12.7 billion. Net cash provided by operating activities was S/2.9 billion, compared with S/1.0 billion used in 2022; investing activities used S/3.5 billion, versus S/1.4 billion in 2022; financing activities used S/3.0 billion, versus S/1.3 billion in 2022. The company attributes the decline in cash principally to lower deposits at the Central Reserve Bank of Peru.
Interbank’s total regulatory capital ratio was 15.5%, versus 15.1% in 2022; its Tier 1 ratio was 11.8%, versus 12.0%. Its past-due-loan ratio was 3.5% and coverage ratio 148.7%. IFS’s consolidated past-due-loan metric was 3.4%. The cost of risk increased to 4.1% from 1.8%.
Material changes and unusual items
- Loan impairment expense rose sharply as Peru’s weaker economy, social unrest and climate events increased credit risk and reduced recoveries. Interbank tightened lending standards and slowed new loan origination.
- Higher loan yields supported interest income, but higher deposit and wholesale funding costs drove a 56.0% increase in interest expense.
- IFS’s 2022 profit included a S/222.5 million fair-value gain from the step acquisition of Izipay. Management excluded it in its 2022 adjusted, non-IFRS measures; 2023 profit was not adjusted.
- Financial investments increased 17.3% to S/26.7 billion. Peruvian sovereign and global bonds and BCRP certificates represented 59.3% of the investment portfolio before accrued interest.
- IFS repurchased 938,371 shares in 2023 under a shareholder-approved program of up to US$100 million. IFS declared US$115.4 million of dividends for 2023, payable in April 2024.
Outlook, management commentary and key risks
IFS did not provide a quantified company earnings or return forecast. Management said it expects credit-risk pressures to continue and potentially intensify depending on Peru’s macroeconomic conditions. The company cited the Central Reserve Bank of Peru’s December 2023 forecasts of 3.0% real GDP growth and 2.3% inflation for 2024. Peru’s GDP contracted 0.6% in 2023 and inflation was 3.2%, down from 8.5% in 2022.
Principal risks include deterioration in loan quality and adequacy of credit-loss provisions; political and social instability in Peru; sol-dollar currency mismatches; interest-rate and investment-valuation volatility; exposure to sovereign debt and illiquid real estate investments; regulatory changes, including consumer interest-rate caps and Basel III capital requirements; competition and technology disruption; cybersecurity, fraud and operational risk; natural disasters and El Niño; and the holding-company dependence on subsidiary distributions. IFS also warns that its ability to pay dividends depends on subsidiaries’ distributable profits, regulatory capital and liquidity, and restrictions in their financing arrangements.
IFS reported no material legal proceedings at the parent-company level, but subsidiaries are involved in ordinary-course disputes. Inteligo Bank faces two Fairfield/BLMIS-related lawsuits seeking approximately US$8.4 million in aggregate; one appeal remained pending and the other was in discovery, scheduled to continue through December 2025. The filing also describes material Interbank tax disputes, with stated amounts and status varying by tax year; investors should consult the detailed disclosures and Note 17.
The financial statements received an unqualified audit opinion, and management and the independent auditor concluded that internal control over financial reporting was effective as of December 31, 2023. The auditor identified expected credit losses on loans and the discount rate for pension insurance contract liabilities as critical audit matters.
Important facts for investors to verify
- Review the audited IFRS statements and reconcile consolidated loan balances, impairment allowances, past-due ratios and cost of risk with the separate SBS-GAAP disclosures.
- Assess whether the higher credit-loss expense and the S/180.6 million post-model adjustment for El Niño adequately reflect portfolio risk, especially consumer loans.
- Check funding costs, deposit mix and maturity concentrations, including that 77% of deposits and obligations are classified as payable within one month in the filing’s maturity table.
- Monitor Interbank’s capital buffers against the phased Basel III requirements and the solvency and liquidity positions of each regulated subsidiary.
- Verify the cash-flow and investment disclosures, sovereign-bond concentration, 2024 capital expenditure budget of approximately S/278 million for Interbank, and the status of announced dividends and share repurchases.
- Review IFRS 17 restatement effects, Interbank tax litigation developments, and the progress and potential exposure from the Inteligo Bank lawsuits.