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Intercorp Financial Services Inc. (NYSE:IFS) Q4 2023 Earnings Call Transcript February 13, 2024 with AI legalese decoder

Operator: Good morning, and welcome to the Intercorp Financial Services Fourth Quarter 2023 Conference Call. All lines have been placed on mute to prevent any background noise. Please be advised that today’s conference is being recorded. After the presentation, we will open the floor for questions. [Operator Instructions] It is now my pleasure to turn the call over to Ms. Valentina Porto of InspIR Group. Ma’am, you may begin.

Valentina Porto: Thank you, and good morning, everyone. On today’s call, Intercorp Financial Services will discuss its fourth quarter 2023 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. Gonzalo Basadre, Chief Executive Officer, Deseguro; Mr. Bruno Ferreccio, Chief Executive Officer, Inteligo; Mr. Carlos Tori, Executive Vice President of Payments at Intercorp Financial Services. They’ll be discussing the results that were distributed by the company yesterday. There is also a webcast video presentation to accompany the discussion during this call. If you didn’t receive a copy of the presentation or the earnings report, they are now available on the company’s website, ifs.com.pe to download a copy.Otherwise for any reason, if you need any assistance today, please call InspIR Group in New York at 646-940-8843. I would like to remind you that today’s call is for investors and analysts only. Therefore, questions from the media will not be taken. Please be advised that forward-looking statements may be made during this conference call. These do not account for future economic circumstances, industry conditions, the company’s future performance, or financial results. As such, statements are made 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.Story continuesIt 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.

Luis Felipe Castellanos: Thank you. Good morning all and welcome to our fourth quarter and full year 2023 earnings call. I want to thank you very much for attending. I want to start by making a brief summary of our strategy at IFS. You know that our aspiration includes: to become the leading digital financial services solution for clients, providing profitable products and services in our key businesses with the best digital experience for our customers, based on operational excellence and levered on advanced analytics and the best talents are our competitive advantage. This is the strategy we are employing and we continue to execute it with a long-term vision. Regarding economic environment, 2023 was a challenging year in Peru with virtually no GDP growth, and a contraction in domestic demand which translated into a deterioration of the payment capabilities of our retail customers.On the positive side, inflation decreased consistently during the second half of 2023 and the central bank has reduced the soles reference rate by 100 basis points during the year to 6.25%. Also, expectations of a strong El Nino phenomenon have decreased and for 2024, GDP growth of around 3% is now expected, which is a good recovery versus last year. Despite this challenging environment, IFS continues to show resilience in its core operations. In 2023, we grew our customer base and revenues and we continue to consolidate our results of our digitalization efforts. At Interbank, market shares across key business lines remain strong despite moderation in consumer loans as we are still digesting increased levels of cost of risk, mainly in the consumer finance segments.Despite of the challenging conditions, Interbank remains well-provisioned and well-capitalized. At Interseguro in 2023, we continued growing in premiums of individual life and retail insurance, while consolidating market leadership in annuities. Investment results continued to be solid in the company. Although global market conditions impacted negatively our investment results in our wealth management business, in 2023, Inteligo’s results recovered from the negative profit posted in 2022. Finally, on payments, despite growth in merchants, volumes have moderated in 2023 and this has taken a toll in anticipated (ph) results. However, Interbank and Izipay continued working on creating synergies, while PLIN continues to accelerate within a fully interoperable B2B system.We remain confident that IFS will continue generating sustainable returns in the coming years as we are being cautious with our operations. Given the scenario we’re facing today, we continue working on our long-term strategy, which is to ultimately empower all Peruvians to achieve their financial well-being. Now let me pass it on to Michela so she can give you a detailed review of our results. Thank you.Michela Casassa Ramat: Thanks, Luis Felipe. Good morning and welcome everyone to Intercorp Financial Services year end 2023 earnings call. Today, we will review five sections of our earnings presentation, starting with the macro outlook for Peru. On Slide 3, complementing what Luis Felipe mentioned, the decrease in GDP and in inflation for four quarters in a row has triggered the first cuts in the soles rate, driving it down from the peak of 7.75% to 6.25% as of today. Inflation has decreased from a yearly 8.8% at the peak of June ’23 to 3% as of January, already within the central bank’s target. And exchange rate has remained relatively stable. 2024 is expected to be a year of recovery for the Peruvian economy with an expectation of 3% GDP growth, mainly due to the following reasons.First, the base effect versus the first quarter 2023, as no major…

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