What Intercorp Financial Services (IFS) Said on Its Q3 Earnings Call

Key Points

• El Niño provisions reduced reported earnings: IFS posted Q3 net income of PEN 457 million and 14% ROE; excluding the provisions, net income was PEN 544 million, up 19% year over year, and ROE was 16.6%. Management maintained its full-year ROE outlook of around 17% and said it currently expects no additional El Niño provisions in Q4.
• Lending growth supported margin recovery: Performing loans grew 10% year over year, led by 21% growth in higher-yielding consumer and small-business loans. Net interest margin rose 20 basis points sequentially to 5.1%, and management expects continued lending growth and further margin improvement.
• About 11% of the loan portfolio may be exposed to El Niño’s effects, mainly through commercial agriculture and fishing loans and retail borrowers in affected areas. IFS has allocated provisions for the event and raised its medium-term ROE target to above 20%.

Intercorp Financial Services NYSE: IFS reported third-quarter 2026 net income of PEN 457 million and a return on equity of 14%, as provisions for a potentially extraordinary El Niño event weighed on results.

Chief Financial Officer Michela Casassa said net income excluding the El Niño-related provisions was PEN 544 million, up 19% from a year earlier, with a return on equity of 16.6%. The company maintained its expectation for full-year return on equity of around 17%, even after the provisions.

Chief Executive Officer Luis Felipe Castellanos said the company views El Niño as a temporary challenge and has raised its medium-term return-on-equity target to above 20%. Growth in consumer and small-business lending, alongside lower funding costs, helped improve the bank’s margins during the quarter.

El Niño Provisions and Portfolio Exposure

Casassa said Peru’s ENFEN agency raised its estimated probability of an extraordinary El Niño in the first quarter of 2027 to 55% in October, from 9% in June. The company expects the effects to extend into the first half of 2027, particularly in agriculture, fishing and some northern regions.

About 11% of the company’s loan portfolio is potentially exposed, Casassa said. Approximately 8% consists of commercial lending with direct exposure to agriculture and fishing, while 3% comprises consumer and small-business loans in affected areas.

Casassa described the commercial exposure as low risk, saying those clients have clauses allowing them to refinance or defer payments. The retail exposure is considered medium risk, and the company plans to support eligible borrowers through rescheduling programs.

Interbank allocated PEN 185 million in provisions to El Niño, including PEN 81 million already held under expert criteria and PEN 104 million in additional provisions. IXP recorded PEN 37 million, half of which was recognized by Intercorp Financial Services. The after-tax effect on the parent company’s net income was PEN 86 million, Casassa said.

Castellanos said the provisions reflect the company’s current extraordinary-event scenario and that management would reassess as conditions evolve. He confirmed that, based on current information, the company did not expect additional fourth-quarter provisions for the event.

Higher-Yielding Loans Support Margin Recovery

Performing loans grew 10% year over year and 4% from the previous quarter. Consumer and small-business loans, which carry higher yields, rose 21% year over year and 10% sequentially. Together, they represented 23% of the performing loan book.

Consumer loans increased 18% from a year earlier, while small-business loans rose 34%. Casassa said the company was focusing growth on lower-risk customers and areas not expected to be affected by El Niño, while tightening underwriting in exposed regions.

Net interest margin increased 20 basis points from the previous quarter to 5.1%. Excluding El Niño provisions, risk-adjusted net interest margin rose 40 basis points to 3.9%; including the provisions, it was 3.4%.

Interbank CEO Carlos Tori said the bank wants higher-yielding loans to account for more than 25% of the portfolio and expects lending growth and margin expansion to continue. Casassa said the company should see further margin improvement in 2027 as the loan mix shifts, although she did not provide a specific forecast.

Quarterly cost of risk was 1.9% excluding El Niño provisions, compared with 2.1% in both the preceding quarter and the year-earlier period. Including the provisions, it was 2.7%. Casassa said underlying cost of risk could gradually move closer to 2.5% as higher-yielding loans grow.

Insurance, Wealth Management and Funding

Interseguro reported net income of PEN 97 million and a return on equity above 30%. Its contractual service margin, which Casassa described as a measure of future profits from long-term insurance, rose 8% year over year to PEN 1.2 billion.

At wealth-management business Inteligo, net income was PEN 38 million as investment returns normalized after a strong first half. Assets under management, including deposits, reached $10.1 billion, up 13% year over year, while fee income rose 5% to PEN 53 million.

Casassa said the bank’s cost of funds fell 10 basis points during the quarter, helped primarily by faster growth in low-cost retail, transactional and business deposits. She cautioned that interest-rate trends could put pressure on funding costs going forward.

Asked about capital, Casassa said Interbank remained above its internal buffers and was reviewing its 2027 strategy as lending grows faster than expected. Castellanos said a new share buyback program was under review but had not been defined, as management weighs it against capital needs for growth.

About Intercorp Financial Services (NYSE:IFS)

Intercorp Financial Services Inc. is a Peru-based financial services holding company and part of the Intercorp group. Through its subsidiaries, it provides banking, insurance, wealth management and payment services, primarily in Peru. Its banking operations, conducted through Interbank, serve individual and business customers with products such as deposits, loans, credit cards and digital banking services. The company also offers insurance products through Interseguro, including life and savings-related coverage.

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