Lima, 17 de noviembre de 2023

Señores

SUPERINTENDENCIA DEL MERCADO DE VALORES

Av. Santa Cruz No. 315

Miraflores. -

Referencia:

Hecho de Importancia

De nuestra consideración:

Conforme con lo establecido en el Reglamento de Hechos de Importancia e Información Reservada, aprobado mediante Resolución SMV No. 005-2014-SMV-01 y normas modificatorias, por medio de la presente cumplimos con informarles, en calidad de Hecho de Importancia, que hoy 17 de noviembre de 2023 S&P Global Ratings ("S&P") reafirmó las calificaciones de largo y corto plazo de IFS, en BBB- y A-3, respectivamente. Asimismo, la perspectiva de calificación de IFS se mantiene negativa, lo cual fue debidamente informado el pasado 16 de julio de 2020.

Cumplimos con adjuntar copia del referido informe de S&P.

Sin otro particular, quedamos de ustedes.

Atentamente,

JUAN ANTONIO CASTRO MOLINA

DNI No. 09337988

Representante Bursátil

Firmado Digitalmente por:

JUAN ANTONIO CASTRO MOLINA

Fecha: 17/11/2023 11:18:33 a.m.

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NOVEMBER 17, 2023 1

Table Of Contents (cont.)

Related Criteria

Related Research

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Intercorp Financial Services Inc.

Ratings Score Snapshot

Issuer Credit Rating

BBB-/Negative/A-3

Credit Highlights

Overview

Key strengths

Key risks

Good liquidity at the holding company, which mitigates its dependence on dividend

Uncertain political environment poses risk to economic

payments from subsidiaries

growth

Good revenue diversification considering its banking, insurance, wealth management

Stiff competition from larger banks

and payment businesses

Strong market position in credit cards and consumer loans through its banking subsidiary Banco Internacional del Peru S.A.A - Interbank and in annuities in the insurance segment through Interseguro

Higher exposure to the retail segment (relative to its peers), which is more sensitive to conditions in the labor market

Our analysis of Intercorp Financial Services Inc. (IFS) reflects its status as a nonoperating holding company. IFS is a holding company of Intercorp Peru Ltd.'s (Intercorp) financial services businesses in Peru. The financial arm of the group comprises Banco Internacional del Peru S.A.A. - Interbank, Interseguro, Inteligo, and Izipay, all of which we incorporate into our group credit profile (GCP) analysis. We use our bank criteria to assess the GCP because Interbank represents the vast majority of the group's total assets (77%) and equity (81%) as of September 2023.

IFS's 'bbb' GCP incorporates business diversification thanks to operations in banking, insurance, wealth management,

and payment businesses, together with sufficient capitalization for its growth plan. The ratings on IFS don't include external support, either from its ultimate owner Intercorp or from the government. We expect that potential extraordinary government support would only flow to the banking unit (Interbank) but wouldn't be extended to IFS. In

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Intercorp Financial Services Inc.

addition, the 'BBB-'long-term issuer credit rating on IFS incorporates its reliance on upstream dividends and other distributions from operating companies to meet financial obligations. Therefore, we rate it one notch below its GCP.

IFS has enough liquidity to service its debt for the next two years, even in a scenario where it doesn't receive dividends.

In addition, the $300 million outstanding bullet senior unsecured bond is due in October 2027 (at an interest rate

4.125%). As a result, IFS doesn't have principal payments for the next few years, resulting in low refinancing risk.

Outlook

The negative outlook on IFS reflects those of the sovereign of Peru, where most of investments are located, along with our view of the financial system.

Downside scenario

Over the next two years, we could lower the ratings if the deterioration in business conditions in Peru results in a downgrade of the sovereign. We could also downgrade IFS if higher risks materialize that damage the operating conditions for banks in Peru--indicated by a downward revision of the BICRA's economic risk score--hurting the bank's intrinsic credit fundamentals.

Upside scenario

We could revise the outlook on IFS to stable if we take a similar action on the sovereign or our view of the financial system changes.

Key Metrics

Intercorp Financial Services Inc.--Key Ratios And Forecasts

--Fiscal year ended Dec. 31 --

%

2020a

2021a

2022a

2023f

2024f

Growth in customer loans

12.9

3.6

5.5

4.5-5.5

7.0-8.0

Growth in total assets

23.3

1.9

(2.7)

3.0-4.0

5.0-6.0

Net interest income/average earning assets

5.5

4.9

5.6

5.6-6.0

5.2-5.8

Return on average common equity

4.3

19.4

17.0

9.0-10.0

11.0-13.0

Return on assets

0.5

2.0

1.9

0.9-1.3

1.1-1.6

Gross nonperforming assets/customer loans

3.2

3.4

2.9

3.0-3.5

2.5-3.0

Net charge-offs/average customer loans

2.0

3.0

1.9

2.7-3.0

2.2-2.5

Risk-adjusted capital ratio

6.7

7.8

8.7

8.3-8.7

8.3-8.7

All figures are S&P Global Ratings-adjusted.a--

Actual. e--Estimate. f Forecast. N/A----

Not applicable.

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Intercorp Financial Services Inc.

Anchor: Driven By Risks Of Operating In Peru

To determine IFS' GCP, we apply our bank methodology, given that the banking unit makes up a substantial portion of the group's operations. Our bank criteria use our BICRA economic risk and industry risk scores to determine a bank's anchor, the starting point in assigning an issuer credit rating. The anchor for banks operating only in Peru is 'bbb-'.

Business Position: Good Business And Revenue Diversification, But Developments In Peru Affect Results

IFS's solid business position underscores Interbank's significant presence in the Peruvian lending and deposits market with a strong share of consumer loans, mainly credit cards. In addition, the company has presence in the insurance and wealth management businesses through its subsidiaries Interseguro (not rated) and Inteligo (not rated), respectively, and payments business through Izipay. Interseguro has a 27.5% share of the retirement annuities market. Inteligo is a wealth management unit that contributes to the fee-income base of the group. Izipay is a leading provider of products and services related to payment acquiring, correspondent banking, and credit card processing. All of these factors provide stability to dividend flows to IFS.

As of September 2023, Interbank was the fourth-largest bank among the 17 operating in Peru, with a market share of 13% in terms of loans after Banco de Credito del Peru (33%), BBVA Peru (21%), and Scotiabank Peru (16%). In addition, the bank has a significant presence in the retail lending business (about 19% of market share), mainly in credit cards.

In the first nine months of 2023, IFS reported an important contraction in profitability with a return on average assets (ROAA) of 1.2% and return on equity of 10.7%, compared with about 1.9% and 17.0% in fiscal 2022, respectively. Results in 2023 were influenced by an increase in cost of risk at Interbank and lower investment results (at the insurance and wealth management units), only in part mitigated by higher loan margins and cost containment actions. On the other hand, results in 2022 included one-time revaluation gains of Peruvian sol (PEN) 223 million from the acquisition of Izipay.

For the rest of 2023 and first part of 2024, we expect profitability to remain compressed due to higher cost of risk and then to gradually improve as reference interest rates further decline (with a positive impact on investment results and funding costs). We expect profits will also improve due to the impact of tightening in origination standards in the retail segment. Also, the pace of improvement in profitability would depend on the evolution of El Niño. In addition, we expect IFS to continue focusing on improving operating efficiencies and strengthening its digital and analytical capabilities.

From dividends declared and paid in 2023 (on results generated in 2022), Interbank contributed about 85% of total dividends and Interseguro the remaining 15%, with no distribution at Inteligo given the hit on results from valuation on investments. In 2022, Interbank contributed about 59% of total dividends, Interseguro 20%, and Inteligo 21%, in line with historical levels.

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Intercorp Financial Services Inc.

For the next two years, we expect the bulk of dividends to come from Interbank and Interseguro, and a gradual recovery at Inteligo as interest rates recede and investments value recover. We expect the payment systems unit to continue capitalizing results to fund growth.

Chart 1

Capital And Earnings: Capitalization Sufficient To Fund Growth Plan And Absorb Credit Losses

Our opinion of IFS' capital and earnings stems primarily from our forecasted consolidated risk-adjusted capital (RAC) ratio of about 8.5% for the next 18-24 months. Our base-case scenario assumes the following:

  • GDP growth in Peru of 0.9% in 2023 (based on political and climate events balanced in part by the impact of newer mining projects) and 2.4% in 2024
  • Average inflation of 6.6% in 2023 and 3.2% in 2024
  • Policy rate gradually declining in 2023-2024 (from 7% in November 2023)
  • Much higher cost of risk for the banking system, in part compensated by higher rates on loans and cost efficiencies
  • Insurance and wealth management units still affected by results from valuation of investments; higher losses in technical results in part compensated by lower operational costs
  • Payment business still with low impact on overall results of the group
  • Dividends in line with historical levels

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Intercorp Financial Services Inc.

Risk Position: Credit Losses Affected By The Exposure To Retail Segment

IFS' risk position reflects our assessment of Interbank and incorporates our view on risk management of the other business units of the group.

The banking unit has a diversified lending portfolio by economic sector, single exposure, and business segment. The bank also has a low-complexity portfolio.

During 2023, asset quality metrics of the bank and the banking industry in Peru deteriorated due to the combination of persistent (although declining) inflation, deceleration in investments and economic growth, climate events, and the impact of social disturbs in late 2022 and beginning of 2023 (with the maturity in the third quarter of loans refinanced to clients in the southern part of Peru). In addition, the deterioration of the bank related to its growth strategy with a focus in the retail segment in previous quarters. We expect metrics to remain affected in the rest of 2023 and first part of 2024, and then improve given the recovery in economic activity and the tightening in origination standards. However, metrics would also depend on the evolution of the El Niño climate event. The bank has reinforced levels of provisions and good capitalization to cope with higher credit losses.

Funding And Liquidity: Wide Access To Retail Deposits And Adequate Liquidity

In our opinion, IFS has adequate funding and liquidity, in line with our assessment of Interbank. IFS's funding base relies on customer deposits, which represented about 74% as of September 2023, similar to domestic peers. A large share of the deposit base consists of retail deposits, which we deem as more stable during times of market distress. In addition, the group has wide access to local and international capital markets. Our base-case expectation is that the stable funding ratio will remain above 100% for the next two years due to the bank's steady deposit base. Moreover, liquidity remains healthy, with broad liquid assets over short-term wholesale funding of 5.8x as of September 2023.

At IFS's holding level, double leverage remained stable and manageable at 107% as of September 2023. As of September 2023, IFS's only debt was its $300 million bullet senior unsecured bond that is due in October 2027. Therefore, IFS doesn't have to face principal payments for the next few years, resulting in low refinancing risk.

IFS has enough liquidity to service its debt for the next two years, even in a scenario where it doesn't receive dividends. By the end of September 2023, the holding company had PEN187 million in cash (equivalent to about US$49 million) and about PEN157 million in investments (equivalent to about US$50 million). The holding has annual interest payments of about US$12.5 million and corporate expenses of about US$8.5 million.

Environmental, Social, And Governance

We view exposure to environmental, social, and governance (ESG) risks and opportunities for IFS as broadly in line with those of the industry and domestic peers.

Peru is somewhat exposed to natural disasters such as earthquakes, volcanic activity, landslides, and the El Niño

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Intercorp Financial Services Inc.

climate pattern. However, IFS, through Interbank and like the rest of the domestic banks, has been able to contain credit and operating losses at moderate levels during such conditions. The bank also has solid loan diversification, in our view. However, the Peruvian economy depends to some extent on the commodity metals sector, which the domestic banks generally don't finance. Still, the banks are indirectly exposed to those sectors through the whole supply chain (suppliers, subcontractors, and employees of the sector who are also retail clients).

The country's transition to a cleaner energy mix is an indirect and medium-term challenge for banks to manage, given that they have benefited from the wealth generated by the commodity metals sector and the large international investments in it. The political landscape has been marked by corruption investigations and political confrontation between the executive and legislative branches. The risk of social protests, particularly against some mining projects, over profit or environmental concerns will remain elevated, with potential impact on governability and investment decisions, and, consequently, on economic growth prospects. The ability to reconcile concerns among the central government, local authorities, and industries remains a challenge for Peru.

Key Statistics

Table 1

Intercorp Financial Services Inc. Key Figures

--Year ended Dec. 31--

Mil. PEN

2023*

2022

2021

2020

2019

Adjusted assets

87,672.9

85,814.8

88,856.2

87,134.2

70,505.6

Customer loans (gross)

49,379.8

47,530.9

45,070.5

43,504.3

38,531.6

Adjusted common equity

8,201.1

8,019.1

7,705.5

6,068.9

6,523.5

Operating revenues

4,436.1

5,630.6

4,993.4

4,828.2

4,619.6

Noninterest expenses

2,058.9

2,683.9

2,262.8

1,910.7

1,943.1

Core earnings

771.4

1,667.3

1,877.8

563.6

1,436.9

*Data as of Sept. 30. PEN--Peruvian nuevo sol.

Table 2

Intercorp Financial Services Inc. Business Position

--Year-ended Dec. 31--

%

2023*

2022

2021

2020

2019

Return on average common equity

10.7

17.0

19.4

4.3

18.1

*Data as of Sept. 30.

Table 3

Intercorp Financial Services Inc. Capital And Earnings

--Year ended Dec. 31--

%

2023*

2022

2021

2020

2019

S&P Global Ratings' RAC ratio before diversification

N/A

8.7

7.8

N/A

7.6

S&P Global Ratings' RAC ratio after diversification

N/A

7.0

6.3

N/A

6.2

Adjusted common equity/total adjusted capital

100.0

100.0

100.0

100.0

100.0

Net interest income/operating revenues

76.7

74.0

70.8

74.7

74.5

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Intercorp Financial Services Inc.

Table 3

Intercorp Financial Services Inc. Capital And Earnings (cont.)

--Year ended Dec. 31--

%

2023*

2022

2021

2020

2019

Fee income/operating revenues

20.1

20.2

16.5

15.0

20.0

Market-sensitive income/operating revenues

4.9

2.5

16.3

14.8

11.3

Cost to income ratio

46.4

47.7

45.3

39.6

42.1

Preprovision operating income/average assets

3.6

3.3

3.1

3.7

4.0

Core earnings/average managed assets

1.2

1.9

2.1

0.7

2.1

*Data as of Sept. 30. N/A--Not applicable.

Table 4

Intercorp Financial Services Inc. Risk Position

--Year ended Dec. 31--

%

2023*

2022

2021

2020

2019

Growth in customer loans

5.2

5.5

3.6

12.9

12.3

Total diversification adjustment/S&P Global Ratings' RWA before diversification

N/A

23.5

24.9

N/A

22.5

Total managed assets/adjusted common equity (x)

10.9

10.9

11.7

14.5

11.0

New loan loss provisions/average customer loans

3.8

1.8

0.8

5.9

2.1

Net charge-offs/average customer loans

3.1

1.9

3.0

2.0

2.0

Gross nonperforming assets/customer loans + other real estate owned

3.2

2.9

3.4

3.2

2.4

Loan loss reserves/gross nonperforming assets

146.5

148.5

132.8

212.4

147.9

*Data as of Sept. 30. N/A--Not applicable.

Table 5

Intercorp Financial Services Inc. Funding And Liquidity

--Year ended Dec. 31--

%

2023*

2022

2021

2020

2019

Core deposits/funding base

75.6

76.3

74.1

72.9

77.6

Customer loans (net)/customer deposits

95.9

93.8

87.9

85.9

97.1

Long-term funding ratio

93.1

96.5

98.4

97.5

93.0

Stable funding ratio

116.0

123.0

134.0

135.3

111.9

Short-term wholesale funding/funding base

7.7

3.9

1.9

2.8

8.2

Broad liquid assets/short-term wholesale funding (x)

5.8

11.5

27.4

19.3

5.7

Broad liquid assets/total assets

32.4

32.9

37.1

39.0

31.8

Broad liquid assets/customer deposits

58.9

59.3

68.3

73.0

59.5

Net broad liquid assets/short-term customer deposits

60.9

67.7

82.3

86.5

61.2

Short-term wholesale funding/total wholesale funding

31.5

16.6

7.2

10.2

36.4

*Data as of Sept. 30.

Intercorp Financial Services Inc.--Rating Component Scores

Issuer Credit Rating

BBB-/Negative/A-3

SACP

bbb

Anchor

bbb-

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Intercorp Financial Services Inc. published this content on 17 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 November 2023 16:22:59 UTC.