Executive Summary / Key Takeaways

• Digital-Led Growth & Diversification: Intercorp Financial Services (IFS) is executing a robust digital transformation strategy, leveraging platforms like PLIN and Izipay to deepen primary banking relationships and expand its payment ecosystem, driving market share gains across banking, insurance, and wealth management. This strategy is diversifying earnings beyond traditional banking.
• Strong Financial Recovery & Profitability: The company delivered a significant financial recovery, with Q2 2025 net income reaching PEN 580 million and an ROE of approximately 21%, building on a strong 2024. This rebound is attributed to effective de-risking, improved asset quality, and robust investment returns, positioning IFS for sustained profitability.
• Cautious Optimism for 2025 Outlook: Management projects a 2025 ROE of around 16%, aiming for 18% by year-end, supported by high single-digit loan growth, a slight NIM recovery (above 5.4%), and a sound cost of risk around 3%. This outlook balances Peru's economic recovery with potential pre-electoral volatility and a measured approach to consumer loan expansion.
• Competitive Edge through Integrated Ecosystem: IFS differentiates itself through a comprehensive, integrated financial services ecosystem and deep local market expertise, particularly in retail and commercial segments. Its digital initiatives are crucial in competing against larger, more technologically advanced rivals, driving efficiency and customer engagement.
• Technology as a Core Moat: Strategic investments in AI, cybersecurity, and enhanced user experience across its digital platforms (Interbank app, PLIN, Izipay, Interfondos) are central to IFS's competitive advantage. These technologies are improving operational efficiency, expanding customer reach, and fostering stronger, more profitable client relationships.

Setting the Scene: A Peruvian Financial Leader's Digital Evolution

Intercorp Financial Services Inc. (IFS), a venerable institution incorporated in 1897 and headquartered in Lima, Peru, stands as a diversified financial powerhouse. The company offers a comprehensive suite of banking, insurance, wealth management, and payment services to both retail and commercial clients across the nation. Its strategic journey has been consistently shaped by an unwavering commitment to digital excellence, aiming to establish itself as Peru's leading digital platform. This ambition is underpinned by a focus on profitable growth and cultivating primary banking relationships through a world-class digital experience and advanced analytics.

Peru's economy provides a dynamic backdrop for IFS's operations. The nation has demonstrated positive momentum, with an accumulated GDP growth of 3.1% as of May 2025, driven by increased dynamism in consumption-linked sectors and sustained private investment, which is projected to grow by 5% in 2025. The Central Bank has revised its internal demand forecast upward from 3.5% to 4.5% for 2025, projecting a GDP growth of 3.1%. This environment of low inflation and a stable exchange rate, coupled with positive momentum for investments, positions Peru as one of the fastest-growing economies in the region. However, the international context and Peru's upcoming presidential elections in 2026 introduce potential volatility, necessitating a cautious yet optimistic approach from financial institutions like IFS.

Within this landscape, IFS operates in a highly competitive arena. Key direct competitors include established players like Credicorp (via Banco de Crédito del Perú, BCP), Scotiabank Peru , and BBVA Peru . While these rivals often boast greater scale and advanced technological capabilities, IFS leverages its deep local expertise, extensive network of financial stores, and an integrated ecosystem spanning banking, insurance, and wealth management. The company's strategic response to this competitive pressure is to double down on digital innovation, aiming to enhance efficiency, expand customer reach, and solidify its market position.

Technological Edge: The Digital Core of IFS's Strategy

At the heart of IFS's competitive strategy lies its profound commitment to technological differentiation and innovation. The company is not merely adopting digital tools; it is fundamentally transforming its operations and customer interactions through a full-scale digital platform. Strategic investments are heavily concentrated on enhancing resilience, user experience, cybersecurity, increasing capacity, and integrating artificial intelligence (AI) across its subsidiaries.

The tangible benefits of this technological drive are evident in several key performance indicators. For instance, IFS has seen its retail digital customer base expand from 80% to 83% in Q2 2025, while commercial digital clients now stand at 74%. The self-service indicator, reflecting customer autonomy through digital channels, reached 78%, and digital sales climbed to 71%. These figures underscore the successful shift in customer behavior towards digital engagement.

A prime example of IFS's core technology in action is its payment ecosystem, anchored by PLIN and Izipay. PLIN, a mobile payment solution, has seen its active users grow 13% over the last year, reaching 2.4 million monthly customers, each making an average of 25 transactions—a 25% increase year-over-year. P2M (person-to-merchant) payments now constitute 70% of total PLIN transactions, with QR POS payments alone growing 51% to 2.2 million monthly transactions. The launch of PLIN Metropolitano further expands its use cases and accelerates adoption. Izipay, a payment processing solution, continues to gain traction, with volumes increasing 1.7 times, channeling more flow to Interbank. This synergy has led to a 20% growth in small business deposits, which now represent approximately 10% of wholesale deposits, and Interbank's share of Izipay flows stands at around 39%.

In wealth management, Inteligo is enhancing its Interfondos app, aiming to transition it from a transactional platform to a true digital advisor for mutual fund clients. This initiative has resulted in a 7-point year-over-year increase in app adoption and a 6-point increase in digital transactions, which now account for more than half of all client transactions. Similarly, Interseguro is expanding its digital self-service capabilities, which increased to 68% (from 66% last year), and direct sales grew 11% in the past year.

For investors, this technological roadmap represents a significant competitive moat. These digital platforms not only drive operational efficiency and reduce costs but also expand market reach, enhance customer loyalty, and generate new revenue streams through increased transactional volumes and cross-selling opportunities. The focus on AI for areas like claims resolution and advanced analytics for risk management and customer-centricity further strengthens IFS's ability to grow profitably and adapt to evolving market demands.

Financial Performance and Operational Resilience

IFS has demonstrated a compelling financial recovery, emerging from a challenging credit cycle with renewed vigor. In the second quarter of 2025, the company reported a net income of PEN 580 million, achieving a robust Return on Equity (ROE) of approximately 21%. This performance contributed to a first-half 2025 ROE of 18.4%, with earnings 2.4 times higher than the same period last year. This strong showing was driven by solid performance across its core businesses and particularly strong investment returns.

Revenue growth has been notable, with IFS reporting a 19% year-over-year increase in Q2 2025. Interbank's Net Interest Margin (NIM) remained stable, influenced by slower-than-expected consumer portfolio growth, but was offset by an improving cost of funds and a low cost of risk. The bank's fee income grew 14%, fueled by commercial banking activities and increased credit card purchases. Inteligo also saw a 17% increase in fees, reflecting strong Assets Under Management (AUM) growth.

Operational efficiency remains a priority, though strategic investments have led to a 10% year-over-year increase in IFS expenses in Q2 2025. These investments are directed towards technology, including AI, cybersecurity, and talent acquisition. Despite this, IFS maintained a healthy cost-to-income ratio of 36%, while Interbank's ratio stood at 42%. Management aims for a medium-term efficiency ratio of 40% for the bank and below 37% for IFS.

Asset quality has significantly improved. The consolidated cost of risk stood at 2.5% in Q2 2025, a substantial 150 basis points below the previous year and aligned with Q1 2025 (excluding a one-off Telefonica (TEF) impact). The retail cost of risk improved dramatically to 4.2% from 11.7% in the consumer portfolio a year ago, reflecting a healthier client risk profile. Loan yields, while declining 70 basis points year-over-year to 9.9% in Q2 2025 due to market rates and portfolio mix, stabilized quarter-over-quarter. Crucially, the risk-adjusted NIM improved 80 basis points year-over-year, underscoring the positive impact of better asset quality.

The funding mix has also seen positive trends. The cost of funds declined 40 basis points year-over-year in Q2 2025, driven by lower market rates and a healthier funding structure. Deposits now constitute approximately 80% of the funding base, growing 7.4% year-over-year, outperforming the system. Low-cost funding increased 12% year-over-year, enhancing Interbank's funding efficiency. Capital ratios remain sound, with a total capital ratio of around 17% and a core equity Tier 1 ratio close to 12%. The successful issuance of subordinated bonds in late 2024 at the lowest-ever spread and the planned call of 2030 Tier 2 bonds in July 2025 further demonstrate strong market confidence and prudent capital management.

Competitive Positioning and Strategic Responses

IFS maintains a strong competitive position in the Peruvian financial services market, strategically leveraging its integrated ecosystem and digital initiatives to gain market share. In commercial banking, Interbank has gained 90 basis points in market share over the last year, driven by a 20% year-over-year growth in sales finance, where it is the second-largest player. The synergy with Izipay has been particularly effective, contributing to a 30 basis point market share gain in small companies and a 240 basis point gain in midsized companies. Overall, IFS's total loans grew 6% year-over-year in Q2 2025, outperforming the system by approximately 3x and resulting in a 30 basis point gain in total market share.

Against major competitors like Credicorp (BCP), Scotiabank Peru , and BBVA Peru , IFS differentiates itself through its deep local market understanding and a comprehensive, integrated service offering that spans banking, insurance, and wealth management. While competitors like Credicorp (BAP) often exhibit greater scale and faster innovation cycles in certain digital banking areas, IFS's focus on fostering primary banking relationships through its digital platforms and extensive network of financial stores creates strong customer loyalty. For instance, primary banking clients, representing over 33% of its retail base, have 1.6 times more products, 1.4 times more deposits, 97% less churn, and 3 times higher NPS.

Scotiabank Peru (BNS), with its international network, may offer advantages in cross-border transactions, but IFS's localized expertise and integrated solutions, particularly in insurance product bundling, resonate strongly with Peruvian clients. Against BBVA Peru's (BBVA) digital-first approach, IFS is rapidly closing the technology gap through significant investments in AI and user experience, aiming to match or exceed efficiency in service delivery. While direct quantitative comparisons of all competitor financial metrics are challenging to ascertain, IFS's consistent market share gains and robust profitability metrics suggest effective operational execution in a competitive environment.

IFS's competitive advantages are further bolstered by high barriers to entry in the Peruvian financial sector, including stringent regulatory requirements and substantial capital needs. These factors protect IFS's market share and support its strategy of offering integrated services. The company's strategic response to competitive forces involves continuous innovation in its digital offerings, expanding its payment ecosystem, and leveraging analytics to tailor products and services, ensuring it remains a formidable player in the evolving financial landscape.

Outlook and Guidance: A Path to Sustained Growth

Management's outlook for IFS is characterized by cautious optimism, with clear guidance for 2025 that reflects both Peru's economic recovery and potential headwinds. The company projects a full-year 2025 ROE of approximately 16%, with an ambition to reach closer to its medium-term target of 18% by year-end. This guidance acknowledges the strong performance in Q4 2024 and Q2 2025, which benefited from seasonal factors and extraordinary investment returns, but anticipates a normalization of these effects. The path to 18% ROE is largely contingent on the accelerated recovery of the consumer loan book at Interbank.

For loan growth, IFS expects a high single-digit increase in 2025, surpassing 2024's growth and continuing to outpace the system average. This growth will be primarily driven by commercial banking and a gradual recovery in the consumer portfolio. However, management remains prudent regarding the pace of consumer loan expansion, citing lingering client caution due to past liquidity events and potential volatility from the upcoming pre-electoral year in Peru.

Interbank's Net Interest Margin (NIM) is projected to see a slight recovery, aiming to be above 5.4% in 2025. This improvement is expected from a continued reduction in the cost of funds, driven by a healthier funding mix, and a recovery in loan yields as the higher-yielding consumer portfolio expands. The cost of risk for banking is guided to remain sound at around 3% for 2025, below the 3.6% of full-year 2024 and in line with its mid-term target. While a slight increase in cost of risk is anticipated as consumer lending resumes, the overall risk-adjusted NIM is expected to improve.

Operating expenses are projected to result in an IFS cost-to-income ratio of around 37% for 2025. This reflects ongoing strategic investments in technology and talent, which are expected to be offset by top-line income growth. Fee income is anticipated to grow in the high single-digits to low double-digits, driven by increased activity in the consumer loan book, synergies with Izipay, and continued growth in Inteligo's AUM.

Conclusion

Intercorp Financial Services (IFS) stands at a pivotal juncture, having successfully navigated a challenging credit cycle and now poised for sustained growth. The company's core investment thesis is firmly rooted in its strategic commitment to digital excellence, which is not merely a technological upgrade but a fundamental re-engineering of its business model to foster primary customer relationships and expand its integrated financial ecosystem. This digital transformation, evidenced by the impressive growth of platforms like PLIN and Izipay, is a critical differentiator in Peru's competitive financial landscape.

The robust financial recovery in Q2 2025, marked by strong profitability and improving asset quality, underscores the effectiveness of IFS's de-risking strategies and operational agility. While management's 2025 guidance for ROE, loan growth, and NIM reflects a cautious optimism, it sets a clear path towards achieving its medium-term targets, contingent on the continued recovery of the Peruvian economy and a measured expansion of its consumer loan portfolio. IFS's ability to consistently gain market share against formidable competitors, coupled with its deep local expertise and ongoing technological investments in AI and cybersecurity, positions it favorably for long-term value creation. Investors should monitor the pace of consumer loan recovery and the company's continued execution of its digital strategy, as these factors will be instrumental in realizing IFS's full growth potential and solidifying its leadership in the dynamic Peruvian financial services sector.