UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE13a-16 OR15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of August 2019
Commission File Number001-38965
INTERCORP FINANCIAL SERVICES INC.
(Registrant’s name)
Intercorp Financial Services Inc.
Torre Interbank, Av. Carlos Villarán 140
La Victoria
Lima 13, Peru
(51) (1)615-9011
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form20-F or Form40-F: Form20-F ☒ Form40-F ☐
Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form6-K in paper as permitted by RegulationS-T Rule 101(b)(7): ☐
On August 12, 2019, Intercorp Financial Services Inc. (“IFS”) announced its unaudited results for the second quarter of 2019, which were approved by the Board on August 12, 2019. IFS’ interim condensed consolidated unaudited results as of June 30, 2019, December 31, 2018 and for the six-month periods ended June 30, 2019 and 2018 and the corresponding Management Discussion and Analysis are attached hereto.
Intercorp Financial Services Inc.
Second Quarter 2019 Earnings
Lima, Peru, August 12, 2019.Intercorp Financial Services Inc. (Lima Stock Exchange/NYSE: IFS) announced today its unaudited results for the second quarter of 2019. These results are reported on a consolidated basis under IFRS in nominal Peruvian soles.
Intercorp Financial Services: Stable earnings in 2Q19 with 18.5% ROAE, despite negative mark-to-market after a strong 1Q19 at Inteligo
• | Strong results in 1H19, with profits increasing 9.9% YoY and 18.9% ROAE |
• | IFS’ reported earnings increased 70.8% YoY in 2Q19 and 42.0% in 1H19 |
• | Total revenues increased 8.4% in 1H19 with efficiency ratio relatively stable at 34.3% |
• | Positive evolution of digital transformation indicators |
Interbank: Strong quarter with 21.7% ROAE
• | Net profit, adjusted from gain on sale of Interfondos, increased 12.3% QoQ and 5.1% YoY |
• | 12.7% YoY loan growth, with a 17.3% increase in retail loans and a slower growth in commercial loans |
• | Retail deposits grew 14.5% YoY, gaining 80 bps in market share in the year |
• | NIM up 30 bps QoQ and 20 bps YoY |
Interseguro: Solid quarter in earnings with ROAE at 13.6%
• | Net profit, adjusted from the effect of adoption of new mortality tables, increased 13.4% QoQ and 5.5% YoY |
• | Gross premiums plus collections grew 9.6% YoY |
• | Market leader in annuities with 32.2% share YTD |
• | Results from investments increased 5.5% QoQ and 22.3% YoY, with ROIP reaching 6.1% |
Inteligo: Quarterly results of S/ 33 million impacted by S/ -14.9 million mark-to-market in investments
• | Net profit increasing 19.9% YoY and 27.9% ROAE in 1H19 |
• | Sustained AUM growth of 4.0% QoQ and 8.9% YoY |
Second Quarter 2019 Earnings Report | 1 |
Intercorp Financial Services
SUMMARY
Intercorp Financial Services’ Statement of financial position | ||||||||||||||||||||
S/ million | 06.30.18 | 03.31.19 | 06.30.19 | %chg 06.30.19/ 03.31.19 | %chg 06.30.19/ 06.30.18 | |||||||||||||||
Assets | ||||||||||||||||||||
Cash and due from banks and inter-bank funds | 7,941.3 | 9,730.6 | 10,823.0 | 11.2 | % | 36.3 | % | |||||||||||||
Financial investments | 17,803.5 | 17,852.8 | 17,835.5 | -0.1 | % | 0.2 | % | |||||||||||||
Loans, net of unearned interest | 31,596.6 | 35,019.0 | 35,647.0 | 1.8 | % | 12.8 | % | |||||||||||||
Impairment allowance for loans | -1,273.6 | -1,396.2 | -1,411.9 | 1.1 | % | 10.9 | % | |||||||||||||
Property, furniture and equipment, net | 598.0 | 948.5 | 900.2 | -5.1 | % | 50.5 | % | |||||||||||||
Other assets | 3,399.3 | 3,601.6 | 3,378.4 | -6.2 | % | -0.6 | % | |||||||||||||
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Total assets | 60,065.1 | 65,756.2 | 67,172.2 | 2.2 | % | 11.8 | % | |||||||||||||
Liabilities and equity | ||||||||||||||||||||
Deposits and obligations | 30,910.2 | 34,790.0 | 35,373.8 | 1.7 | % | 14.4 | % | |||||||||||||
Due to banks and correspondents and inter-bankfunds | 4,592.9 | 3,832.6 | 4,647.0 | 21.2 | % | 1.2 | % | |||||||||||||
Bonds, notes and other obligations | 6,306.7 | 6,663.2 | 6,606.2 | -0.9 | % | 4.7 | % | |||||||||||||
Insurance contract liabilities | 9,914.9 | 10,407.2 | 10,935.1 | 5.1 | % | 10.3 | % | |||||||||||||
Other liabilities | 1,820.5 | 2,336.4 | 2,167.0 | -7.3 | % | 19.0 | % | |||||||||||||
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Total liabilities | 53,545.2 | 58,029.4 | 59,729.0 | 2.9 | % | 11.5 | % | |||||||||||||
Equity, net | ||||||||||||||||||||
Equity attributable to IFS’ shareholders | 6,483.1 | 7,686.8 | 7,401.2 | -3.7 | % | 14.2 | % | |||||||||||||
Non-controlling interest | 36.8 | 40.0 | 42.0 | 5.1 | % | 14.2 | % | |||||||||||||
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Total equity, net | 6,519.9 | 7,726.8 | 7,443.2 | -3.7 | % | 14.2 | % | |||||||||||||
Total liabilities and equity net | 60,065.1 | 65,756.2 | 67,172.2 | 2.2 | % | 11.8 | % | |||||||||||||
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Intercorp Financial Services’ net profit was S/ 350.1 million in 2Q19, relatively stable QoQ, but a 70.8% increase YoY. IFS annualized ROAE was 18.5% in 2Q19, lower than the 19.0% registered in 1Q19, but higher than the 12.7% reported in 2Q18.
When excluding the aggregate negative effect of the adoption of new mortality tables in our insurance segment for S/ 144.8 million in 2Q18, IFS’ profits remained stable YoY. Accordingly, ROAE excluding this effect was 21.4% in 2Q18.
Second Quarter 2019 Earnings Report | 2 |
Intercorp Financial Services’ P&L statement | ||||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | %chg QoQ | %chg YoY | |||||||||||||||
Interest and similar income | 1,070.2 | 1,166.7 | 1,201.7 | 3.0 | % | 12.3 | % | |||||||||||||
Interest and similar expenses | -286.0 | -335.8 | -342.3 | 2.0 | % | 19.7 | % | |||||||||||||
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Net interest and similar income | 784.2 | 831.0 | 859.4 | 3.4 | % | 9.6 | % | |||||||||||||
Impairment loss on loans, net of recoveries | -112.6 | -186.4 | -192.9 | 3.5 | % | 71.4 | % | |||||||||||||
Recovery (loss) due to impairment of financial investments | 1.3 | 1.9 | 0.8 | -58.2 | % | -39.3 | % | |||||||||||||
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Net interest and similar income after impairment loss | 672.9 | 646.4 | 667.2 | 3.2 | % | -0.8 | % | |||||||||||||
Fee income from financial services, net | 220.4 | 223.0 | 222.7 | -0.1 | % | 1.1 | % | |||||||||||||
Other income | 75.0 | 138.9 | 129.4 | -6.9 | % | 72.4 | % | |||||||||||||
Total premiums earned minus claims and benefits | -186.2 | -74.1 | -79.4 | 7.2 | % | -57.3 | % | |||||||||||||
Net Premiums | 160.5 | 171.2 | 164.4 | -4.0 | % | 2.4 | % | |||||||||||||
Adjustment of technical reserves | -163.7 | -73.3 | -63.6 | -13.2 | % | -61.2 | % | |||||||||||||
Net claims and benefits incurred | -183.1 | -172.0 | -180.2 | 4.8 | % | -1.6 | % | |||||||||||||
Other expenses | -450.7 | -481.7 | -484.7 | 0.6 | % | 7.6 | % | |||||||||||||
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Income before translation result and income tax | 331.4 | 452.5 | 455.2 | 0.6 | % | 37.3 | % | |||||||||||||
Translation result | -13.9 | 10.1 | 11.9 | 18.1 | % | n.m. | ||||||||||||||
Income tax | -112.6 | -109.9 | -117.0 | 6.4 | % | 3.9 | % | |||||||||||||
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Profit for the period | 204.9 | 352.7 | 350.1 | -0.7 | % | 70.8 | % | |||||||||||||
Attributable to IFS’ shareholders | 203.1 | 350.6 | 347.9 | -0.7 | % | 71.3 | % | |||||||||||||
EPS | 1.83 | 3.17 | 3.18 | |||||||||||||||||
ROAE | 12.7 | % | 19.0 | % | 18.5 | % | ||||||||||||||
ROAA | 1.4 | % | 2.2 | % | 2.1 | % | ||||||||||||||
Efficiency ratio(1) | 38.7 | % | 33.7 | % | 34.8 | % |
(1) | Efficiency ratio is defined as (Salaries and employee benefits + Administrative expenses + Depreciation and amortization) / (Net interest and similar income + Fee income + Other income + Net premiums earned). |
Quarter-on-quarter performance
Profits remained relatively stable QoQ as increases in net interest and similar income at Interbank and in other income at Interseguro were offset by reductions in other income at Inteligo and in total premiums earned minus claims and benefits at Interseguro, together with an increase in impairment loss on loans at Interbank and a higher effective tax rate.
Net interest and similar income grew 3.4% QoQ, mainly due to increases in interest on loans and interest on financial investments at Interbank, partially offset by lower interest on investments at both Inteligo and Interseguro.
Impairment loss on loans increased 3.5% due to higher requirements in credit cards and medium-sized companies, partially offset by a release of provisions in payroll deduction loans, all at Interbank.
Net fee income from financial services remained relatively stable QoQ, as holding eliminations and reductions in brokerage and custody service fees and product structuring activity at Inteligo were almost completely offset by growth in commissions from credit card services and fees from maintenance and mailing of accounts, transfer fees and commissions on debit card services at Interbank.
Second Quarter 2019 Earnings Report | 3 |
Other income decreased 6.9% QoQ mainly due to negative mark-to-market valuations on Inteligo’s proprietary portfolio in 2Q19, partially offset by increases in net gain on sale of financial investments and net gain on investment property at Interseguro.
Total premiums earned minus claims and benefits at Interseguro showed a quarterly reduction of S/ 5.3 million, explained by an S/ 8.2 million increase in net claims and benefits incurred, as well as by a S/ 6.8 million reduction in net premiums, partially offset by a S/ 9.7 million decrease in adjustment of technical reserves.
Other expenses slightly increased 0.6% QoQ mainly due to higher administrative expenses related to IT services at Interbank, growth in administrative expenses and depreciation and amortization at Interseguro, and to one-off expenses at Inteligo. These effects were partially offset by a reversal of expenses related to fees for insurance activities upon consolidation.
IFS effective tax rate increased, from 23.8% in 1Q19 to 25.0% in 2Q19, attributed to a higher contribution from Interbank and Interseguro to IFS’ profits, in addition to lower tax-exempt profits from Inteligo.
Year-on-year performance
Profits increased 70.8% YoY mainly due to a reduction in adjustment of technical reserves at the insurance segment, explained by the effect of a one-time adjustment of S/ -144.8 million for the full adoption of new mortality tables in 2Q18, in addition to increases in net interest and similar income at Interbank, and in other income at both Interbank and Interseguro. Moreover, translation result changed from a negative figure in 2Q18 to positive in 2Q19, which also contributed to IFS’ net profit increase with respect to 2Q18. These effects were partially offset by higher impairment loss on loans at Interbank and other expenses across all subsidiaries.
Net interest and similar income increased 9.6% YoY, mainly driven by higher interest on loans and interest on due from banks and inter-bank funds at Interbank, partially offset by lower interest on investments at Interseguro and Inteligo.
Impairment loss on loans grew 71.4% YoY mainly explained by the effect associated with the release of provisions for construction sector exposures in 2Q18, in addition to a higher volume of credit card loans, all at Interbank. These effects were partially compensated by a release of provisions in payroll deduction loans.
Net fee income from financial services increased 1.1% YoY mainly due to an increase in commissions from credit card services and lower expenses related to the sale of insurance products at Interbank. These effects were partially offset by lower brokerage and custody service fees and product structuring activity at Inteligo.
Other income increased 72.4% YoY mainly explained by better results on sale of financial investments at Interseguro and Interbank. This was partially offset by negative mark-to-market valuations on Inteligo’s proprietary portfolio.
Total premiums earned minus claims and benefits at Interseguro increased S/ 106.8 million due to reductions of S/ 100.1 million in adjustment of technical reserves and S/ 2.9 million in net claims and benefits incurred, in addition to a S/ 3.9 million increase in net premiums.
Second Quarter 2019 Earnings Report | 4 |
Other expenses increased across all subsidiaries, mainly at Interbank due to higher variable costs related to credit cards and IT services.
IFS effective tax rate decreased, from 35.5% in 2Q18 to 25.0% in 2Q19, due to a positive contribution from Interseguro to IFS’ profits.
CONTRIBUTION BY SEGMENTS
The following table shows the contribution of Interbank, Interseguro and Inteligo to Intercorp Financial Services’ net profit. The performance of each of the three segments is discussed in detail in the following sections.
Intercorp Financial Services’ Profit by segment | ||||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | %chg QoQ | %chg YoY | |||||||||||||||
Interbank | 285.6 | 299.7 | 300.2 | 0.2 | % | 5.1 | % | |||||||||||||
Interseguro | -113.7 | 28.9 | 32.8 | 13.4 | % | n.m. | ||||||||||||||
Inteligo | 49.2 | 78.3 | 33.4 | -57.4 | % | -32.2 | % | |||||||||||||
Corporate and eliminations | -16.2 | -54.2 | -16.3 | -70.0 | % | 0.5 | % | |||||||||||||
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IFS profit for the period | 204.9 | 352.7 | 350.1 | -0.7 | % | 70.8 | % | |||||||||||||
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Second Quarter 2019 Earnings Report | 5 |
Interbank
SUMMARY
Interbank’s profits reached S/ 300.2 million in 2Q19, relatively stable QoQ and an increase of S/ 14.6 million YoY. The quarterly result was mainly due to increases of S/ 46.7 million in net interest and similar income, and S/ 7.2 million in net fee income from financial services, offset by a S/ 37.8 million decrease in other income, as well as by growth of S/ 6.7 million in impairment loss on loans and S/ 5.0 million in other expenses. It is worth mentioning that the reduction in other income was mainly explained by the sale of Interfondos, our mutual funds subsidiary, to Inteligo Group in January 2019, which resulted in gains for S/ 52.6 million in 1Q19.
The annual increase in net profit was mainly a result of growth of S/ 85.4 million in net interest and similar income, S/ 27.5 million in other income and S/ 13.5 million in net fee income from financial services. Conversely, impairment loss on loans grew S/ 80.0 million and other expenses increased S/ 30.9 million. Furthermore, the effective tax rate was 26.4% in 2Q19, compared to 27.2% in 2Q18.
Interbank’s ROAE was 21.7% in 2Q19, lower than the 22.1% registered in 1Q19 and the 23.9% reported in 2Q18. However, it was higher than the 19.8% adjusted ROAE from the gain on sale of Interfondos in 1Q19.
Banking Segment’s P&L Statement | ||||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | %chg QoQ | %chg YoY | |||||||||||||||
Interest and similar income | 879.9 | 965.0 | 1,019.1 | 5.6 | % | 15.8 | % | |||||||||||||
Interest and similar expenses | -261.0 | -307.4 | -314.9 | 2.4 | % | 20.6 | % | |||||||||||||
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Net interest and similar income | 618.9 | 657.6 | 704.3 | 7.1 | % | 13.8 | % | |||||||||||||
Impairment loss on loans, net of recoveries | -113.0 | -186.3 | -193.0 | 3.5 | % | 70.8 | % | |||||||||||||
Recovery (loss) due to impairment of financial investments | 0.1 | -0.0 | 0.1 | n.m. | n.m. | |||||||||||||||
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Net interest and similar income after impairment loss | 506.0 | 471.2 | 511.4 | 8.5 | % | 1.1 | % | |||||||||||||
Fee income from financial services, net | 187.1 | 193.4 | 200.6 | 3.7 | % | 7.2 | % | |||||||||||||
Other income | 67.8 | 133.1 | 95.3 | -28.3 | % | 40.6 | % | |||||||||||||
Other expenses | -364.9 | -390.8 | -395.8 | 1.3 | % | 8.5 | % | |||||||||||||
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Income before translation result and income tax | 396.1 | 406.9 | 411.5 | 1.1 | % | 3.9 | % | |||||||||||||
Translation result | -3.5 | 0.2 | -3.7 | n.m. | 3.8 | % | ||||||||||||||
Income tax | -106.9 | -107.4 | -107.6 | 0.2 | % | 0.7 | % | |||||||||||||
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Profit for the period | 285.6 | 299.7 | 300.2 | 0.2 | % | 5.1 | % | |||||||||||||
ROAE | 23.9 | % | 22.1 | % | 21.7 | % | ||||||||||||||
Efficiency ratio(1) | 40.7 | % | 38.2 | % | 39.1 | % | ||||||||||||||
NIM | 5.6 | % | 5.5 | % | 5.8 | % | ||||||||||||||
NIM on loans | 9.1 | % | 8.6 | % | 8.9 | % |
(1) | Efficiency ratio is defined as (Salaries and employee benefits + Administrative expenses + Depreciation and amortization) / (Net interest and similar income + Fee income + Other income). |
INTEREST-EARNING ASSETS
Interbank’s interest-earning assets reached S/ 48,102.7 million as of June 30, 2019, an increase of 2.6% QoQ and 12.1% YoY.
Second Quarter 2019 Earnings Report | 6 |
The quarterly growth in interest-earning assets was due to increases of 9.9% in cash and due from banks and inter-bank funds, and 1.7% in loans, partially offset by a decrease of 4.7% in financial investments. The growth in cash and due from banks and inter-bank funds was mainly explained by higher deposits at the Central Bank, while the reduction in financial investments was mainly a result of lower volumes of global bonds and corporate bonds.
The YoY increase in interest-earning assets was attributed to growth of 32.8% in cash and due from banks and inter-bank funds, and 12.6% in loans, partially offset by a reduction of 15.7% in financial investments. The increase in cash and due from banks and inter-bank funds was mainly due to higher deposits and reserves at the Central Bank, while the decrease in financial investments was mainly explained by lower volumes of global bonds, sovereign bonds and corporate bonds.
Interest-earning assets | ||||||||||||||||||||
S/ million | 06.30.18 | 03.31.19 | 06.30.19 | %chg 06.30.19/ 03.31.19 | %chg 06.30.19/ 06.30.18 | |||||||||||||||
Cash and due from banks and inter-bank funds | 7,627.6 | 9,217.9 | 10,131.0 | 9.9 | % | 32.8 | % | |||||||||||||
Financial investments | 6,232.7 | 5,511.4 | 5,254.5 | -4.7 | % | -15.7 | % | |||||||||||||
Loans | 29,058.3 | 32,159.2 | 32,717.3 | 1.7 | % | 12.6 | % | |||||||||||||
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Total Interest-earning assets | 42,918.6 | 46,888.5 | 48,102.7 | 2.6 | % | 12.1 | % | |||||||||||||
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Loan portfolio | ||||||||||||||||||||
S/ million | 06.30.18 | 03.31.19 | 06.30.19 | %chg 06.30.19/ 03.31.19 | %chg 06.30.19/ 06.30.18 | |||||||||||||||
Performing loans | ||||||||||||||||||||
Retail | 15,304.1 | 17,205.6 | 17,958.8 | 4.4 | % | 17.3 | % | |||||||||||||
Commercial | 13,761.7 | 14,994.8 | 14,790.5 | -1.4 | % | 7.5 | % | |||||||||||||
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Total Performing loans | 29,065.8 | 32,200.5 | 32,749.3 | 1.7 | % | 12.7 | % | |||||||||||||
Restructured and refinanced loans | 238.2 | 213.7 | 211.1 | -1.2 | % | -11.4 | % | |||||||||||||
Past due loans | 819.5 | 867.2 | 906.1 | 4.5 | % | 10.6 | % | |||||||||||||
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Total gross loans | 30,123.5 | 33,281.4 | 33,866.5 | 1.8 | % | 12.4 | % | |||||||||||||
Add (less) | ||||||||||||||||||||
Accrued and deferred interest | 208.3 | 273.8 | 262.5 | -4.1 | % | 26.0 | % | |||||||||||||
Impairment allowance for loans | -1,273.5 | -1,396.1 | -1,411.7 | 1.1 | % | 10.9 | % | |||||||||||||
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Total direct loans, net | 29,058.3 | 32,159.2 | 32,717.3 | 1.7 | % | 12.6 | % | |||||||||||||
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Performing loans grew 1.7% QoQ due to a 4.4% increase in retail loans, partially offset by a slight 1.4% reduction in commercial loans.
Growth in retail loans was explained by increases of 5.3% in credit cards, 4.3% in other consumer loans and 3.7% in mortgages. Growth in other consumer loans was mainly explained by higher payroll deduction loans, cash loans and car loans, while the increase in mortgages was due to a higher demand in both traditional and MiVivienda products.
The quarterly decrease in commercial loans was due to lower short and medium-term loans, mostly in the corporate segment.
Performing loans grew 12.7% YoY due to increases of 17.3% in retail loans and 7.5% in commercial loans.
Second Quarter 2019 Earnings Report | 7 |
The annual growth in retail loans was mainly due to increases of 24.6% in credit cards, 15.5% in other consumer loans and 13.6% in mortgages. Other consumer loans grew as a result of higher payroll deduction loans, cash loans and car loans; while mortgages increased due to a higher demand in traditional products.
The YoY increase in commercial loans was mainly explained by higher short and medium-term lending in the corporate and medium-enterprise segments, as well as higher leasing operations in the corporate segment.
Breakdown of retail loans | ||||||||||||||||||||
S/ million | 06.30.18 | 03.31.19 | 06.30.19 | %chg 06.30.19/ 03.31.19 | %chg 06.30.19/ 06.30.18 | |||||||||||||||
Consumer loans: | ||||||||||||||||||||
Credit cards | 4,330.9 | 5,125.0 | 5,396.9 | 5.3 | % | 24.6 | % | |||||||||||||
Other consumer | 5,209.9 | 5,769.5 | 6,016.6 | 4.3 | % | 15.5 | % | |||||||||||||
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Total consumer loans | 9,540.7 | 10,894.6 | 11,413.6 | 4.8 | % | 19.6 | % | |||||||||||||
Mortgages | 5,763.3 | 6,311.1 | 6,545.3 | 3.7 | % | 13.6 | % | |||||||||||||
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Total retail loans | 15,304.1 | 17,205.6 | 17,958.8 | 4.4 | % | 17.3 | % | |||||||||||||
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FUNDING STRUCTURE
Funding structure | ||||||||||||||||||||
S/ million | 06.30.18 | 03.31.19 | 06.30.19 | %chg 06.30.19/ 03.31.19 | %chg 06.30.19/ 06.30.18 | |||||||||||||||
Deposits and obligations | 28,995.0 | 32,561.7 | 33,112.4 | 1.7 | % | 14.2 | % | |||||||||||||
Due to banks and correspondents and inter-bankfunds | 4,272.7 | 3,512.6 | 4,312.9 | 22.8 | % | 0.9 | % | |||||||||||||
Bonds, notes and other obligations | 5,227.6 | 5,610.9 | 5,569.9 | -0.7 | % | 6.5 | % | |||||||||||||
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Total | 38,495.3 | 41,685.3 | 42,995.3 | 3.1 | % | 11.7 | % | |||||||||||||
% of funding | ||||||||||||||||||||
Deposits and obligations | 75.3 | % | 78.1 | % | 77.0 | % | ||||||||||||||
Due to banks and correspondents and inter-bank funds | 11.1 | % | 8.4 | % | 10.0 | % | ||||||||||||||
Bonds, notes and other obligations | 13.6 | % | 13.5 | % | 13.0 | % |
Interbank’s total funding base increased 3.1% QoQ, above the performance of interest-earning assets. This was explained by increases in due to banks and correspondents and inter-bank funds, in addition to higher deposits and obligations, while bonds, notes and other obligations remained relatively stable. Growth in due to banks and correspondents and inter-bank funds was manly explained by higher long-term funding from the Central Bank. The increase in deposits and obligations was mainly due to growth of 13.8% in institutional deposits and 1.7% in retail deposits, partially offset by a 2.7% decrease in commercial deposits.
The bank’s total funding base increased 11.7% YoY, below the annual growth in interest-earning assets, and was mainly explained by growth of 14.2% in deposits and obligations, and 6.5% in bonds, notes and other obligations, while due to banks and correspondents and inter-bank funds remained relatively stable. The YoY growth in deposits and obligations was explained by increases of 15.8% in commercial deposits, 14.5% in retail deposits and 11.1% in institutional deposits.
Second Quarter 2019 Earnings Report | 8 |
The annual increase in bonds, notes and other obligations was attributable to the following issuances in the local market in March 2019: (i) Certificates of Deposit for S/ 150 million due March 2020 and (ii) Corporate Bonds for S/ 150 million due March 2029.
As of June 30, 2019, the proportion of deposits and obligations to total funding was 77.0%, higher than the 75.3% reported as of June 30, 2018. Likewise, the proportion of institutional deposits to total deposits decreased from 17.9% as of June 30, 2018 to 17.4% as of June 30, 2019.
Breakdown of deposits | ||||||||||||||||||||
S/ million | 06.30.18 | 03.31.19 | 06.30.19 | %chg 06.30.19/ 03.31.19 | %chg 06.30.19/ 06.30.18 | |||||||||||||||
By customer service: | ||||||||||||||||||||
Retail | 12,992.6 | 14,626.0 | 14,878.8 | 1.7 | % | 14.5 | % | |||||||||||||
Commercial | 10,452.8 | 12,440.9 | 12,099.2 | -2.7 | % | 15.8 | % | |||||||||||||
Institutional | 5,190.6 | 5,069.2 | 5,768.9 | 13.8 | % | 11.1 | % | |||||||||||||
Other | 359.0 | 425.6 | 365.5 | -14.1 | % | 1.8 | % | |||||||||||||
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Total | 28,995.0 | 32,561.7 | 33,112.4 | 1.7 | % | 14.2 | % | |||||||||||||
By type: | ||||||||||||||||||||
Demand | 9,030.9 | 10,779.4 | 10,342.2 | -4.1 | % | 14.5 | % | |||||||||||||
Savings | 9,494.2 | 10,680.3 | 10,750.8 | 0.7 | % | 13.2 | % | |||||||||||||
Time | 10,464.3 | 11,087.6 | 12,013.5 | 8.4 | % | 14.8 | % | |||||||||||||
Other | 5.6 | 14.4 | 6.0 | -58.1 | % | 7.9 | % | |||||||||||||
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Total | 28,995.0 | 32,561.7 | 33,112.4 | 1.7 | % | 14.2 | % | |||||||||||||
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NET INTEREST AND SIMILAR INCOME
Net interest and similar income | ||||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | %chg QoQ | %chg YoY | |||||||||||||||
Interest and similar income | 879.9 | 965.0 | 1,019.1 | 5.6 | % | 15.8 | % | |||||||||||||
Interest and similar expenses | -261.0 | -307.4 | -314.9 | 2.4 | % | 20.6 | % | |||||||||||||
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Net interest and similar income | 618.9 | 657.6 | 704.3 | 7.1 | % | 13.8 | % | |||||||||||||
NIM(1) | 5.6 | % | 5.5 | % | 5.8 | % | 30 bps | 20 bps | ||||||||||||
(1) Annualized. Net interest and similar income / Average interest-earning assets. |
| |||||||||||||||||||
Interest and similar income | ||||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | %chg QoQ | %chg YoY | |||||||||||||||
Interest and similar income | ||||||||||||||||||||
Due from banks and inter-bank funds | 8.7 | 25.2 | 29.3 | 16.2 | % | n.m. | ||||||||||||||
Financial investments | 62.4 | 51.8 | 58.9 | 13.8 | % | -5.6 | % | |||||||||||||
Loans | 808.7 | 888.0 | 930.9 | 4.8 | % | 15.1 | % | |||||||||||||
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Total Interest and similar income | 879.9 | 965.0 | 1,019.1 | 5.6 | % | 15.8 | % | |||||||||||||
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Average interest-earning assets | 44,225.3 | 47,530.3 | 48,899.5 | 2.9 | % | 10.6 | % | |||||||||||||
Average yield on assets (annualized) | 8.0 | % | 8.1 | % | 8.3 | % | 20 bps | 30 bps |
Second Quarter 2019 Earnings Report | 9 |
Interest and similar expense | ||||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | %chg QoQ | %chg YoY | |||||||||||||||
Interest and similar expense | ||||||||||||||||||||
Deposits and obligations | -131.9 | -179.1 | -173.9 | -2.9 | % | 31.8 | % | |||||||||||||
Due to banks and correspondents and inter-bank funds | -43.3 | -39.0 | -43.0 | 10.3 | % | -0.7 | % | |||||||||||||
Bonds, notes and other obligations | -85.8 | -89.3 | -98.0 | 9.7 | % | 14.2 | % | |||||||||||||
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Total Interest and similar expense | -261.0 | -307.4 | -314.9 | 2.4 | % | 20.6 | % | |||||||||||||
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Average interest-bearing liabilities | 38,461.7 | 41,166.4 | 42,340.3 | 2.9 | % | 10.1 | % | |||||||||||||
Average cost of funding (annualized) | 2.7 | % | 3.0 | % | 3.0 | % | | 0 bps | | | 30 bps | |
QoQ Performance
Net interest and similar income grew 7.1% QoQ due to a 5.6% increase in interest and similar income, partially offset by a 2.4% growth in interest and similar expense.
The higher interest and similar income was due to growth of 16.2% in interest on due from banks and inter-bank funds, 13.8% in interest on financial investments and 4.8% in interest on loans.
Interest on due from banks and inter-bank funds grew S/ 4.1 million, or 16.2% QoQ, explained by an 11.0% increase in the average volume, while the nominal average rate remained stable. The average volume grew due to higher balances of deposits and reserve requirements at the Central Bank, while the average rate sustained as higher returns on inter-bank funds were offset by lower returns on deposits at the Central Bank.
The increase in interest on financial investments was explained by a 70 basis point growth in the nominal average rate, partially offset by a 4.9% decrease in the average volume. The increase in the nominal average rate, from 3.7% in 1Q19 to 4.4% in 2Q19, was mainly a result of higher income from dividends received for shares owned on IFS, which are eliminated upon consolidation; while the reduction in the average volume was the result of lower investments in global and corporate bonds.
The higher in interest on loans was due to growth of 30 basis points in the average yield and 2.1% in the average loan portfolio.
The increase in the average rate, from 10.7% in 1Q19 to 11.0% in 2Q19, was mainly explained by yield growth of 30 basis points in retail loans and 10 basis points in commercial loans. The increase in retail loans was due to higher average rates on consumer loans, while mortgage rates declined. In the commercial portfolio, rates increased mainly as the result of higher yields on trade finance loans.
The higher average volume of loans was attributed to a growth of 4.2% in retail loans, as commercial loans remained relatively stable. In the retail portfolio, average volumes increased 5.1% in credit cards and 3.3% in both payroll loans and mortgages. The average volume of commercial loans remained relatively stable as decreases of 3.1% in leasing operations and 1.5% in short and medium-term loans were offset by a 4.8% growth in trade finance loans.
Second Quarter 2019 Earnings Report | 10 |
The nominal average yield on interest-earning assets increased 20 basis points, from 8.1% in 1Q19 to 8.3% in 2Q19, as a result of higher returns on financial investments and loans.
Growth in interest and similar expenses was due to increases of 10.3% in interest on due to banks and correspondents, and 9.7% in interest on bonds, notes and other obligations, partially offset by a 2.9% reduction in interest on deposits and obligations.
The S/ 4.0 million, or 10.3% QoQ, increase in interest on due to banks and correspondents was the result of growth of 20 basis points in the nominal average cost and 4.6% in the average volume. The increase in the average cost was attributed to higher rates paid on funding provided by the Central Bank and COFIDE, while the higher average volume was explained by growth in funding provided by the Central Bank and inter-bank funds.
Interest on bonds, notes and other obligations grew S/ 8.7 million, or 9.7% QoQ, as a result of the issuances of senior bonds by the end of March 2019, whose quarterly interest was not recorded completely in 1Q19 as it was in 2Q19.
Interest on deposits and obligations decreased S/ 5.2 million, or 2.9% QoQ, due to a reduction of 10 basis points in the average cost, partially offset by a 2.9% growth in the average volume. The lower average cost was mainly a result of decreases in rates paid to institutional and commercial deposits, partially offset by a higher average cost of retail deposits. The higher average volume was explained by growth in commercial, institutional and retail deposits. By currency, average balances of dollar-denominated deposits grew 4.4% while average soles-denominated deposits increased 1.9%.
The average cost of funding remained stable QoQ, at 3.0%, as the lower cost on deposits offset the higher rates paid on due to banks and correspondents, and bonds, notes and other obligations.
As a result of the above, the net interest margin was 5.8% in 2Q19, 30 basis points above the 5.5% reported in 1Q19.
YoY Performance
Net interest and similar income grew 13.8% YoY due to a 15.8% increase in interest and similar income, partially offset by a 20.6% growth in interest and similar expense.
Growth in interest and similar income was mainly due to increases of more than three-fold in interest on due from banks and inter-bank funds, and 15.1% in interest on loans, partially offset by a 5.6% decrease in interest on financial investments.
Interest on due from banks and inter-bank funds grew S/ 20.6 million, explained by increases of 80 basis points in the nominal average rate and 14.9% in the average volume. The increase in the nominal average rate was due to higher returns on reserve funds at the Central Bank, as well as on inter-bank funds. The higher average volume was due to growth in deposits and reserve requirements at the Central Bank.
The increase in interest on loans was due to a 14.6% growth in the average volume of loans, while the average yield remained stable YoY, at 11.0%.
Second Quarter 2019 Earnings Report | 11 |
The higher average volume of loans was attributed to growth of 17.2% in retail loans and 11.7% in commercial loans. In the retail portfolio, volumes increased 24.0% in credit cards, 14.3% in payroll loans and 13.3% in mortgages. In the commercial portfolio, the higher average volume was mainly due to increases of 14.4% in short and medium-term loans and 12.4% in trade finance loans, while leasing operations reduced 4.2%.
The average rate on loans remained stable as a 10 basis point increase in commercial loans was offset by a 20 basis point decrease in retail loans. The growth in commercial loans was mainly due to higher yields on trade finance loans, while the reduction in retail loans was due to lower average rates on consumer loans and mortgages.
The lower interest on financial investments was explained by a 14.3% reduction in the average volume, partially offset by a 40 basis point increase in the average rate, from 4.0% in 2Q18 to 4.4% in 2Q19. The decrease in the average volume was the result of lower balances of global bonds, sovereign bonds and CDBCR, while the increase in the average rate was due to higher returns on global bonds, corporate bonds from financial institutions and sovereign bonds.
The nominal average yield on interest-earning assets increased 30 basis points YoY, from 8.0% in 2Q18 to 8.3% in 2Q19, mainly explained by higher nominal average rates on due from banks and investments, as well as by a higher proportion of loans within interest-earning assets, since they contribute with a higher average yield than the rest of components, even if their nominal average rate remained stable when compared to 2Q18.
Growth in interest and similar expense was due to increases of 31.8% in interest on deposits and obligations, and 14.2% in interest on bonds, notes and other obligations; while interest on due to banks and correspondents remained relatively stable YoY.
Interest on deposits and obligations increased S/ 42.0 million, or 31.8% YoY, explained by growth of 30 basis points in the nominal average cost and 12.9% in the average volume. The increase in the average cost, from 1.8% in 2Q18 to 2.1% in 2Q19, was due to higher rates paid to institutional, commercial and retail deposits. The higher average volume was explained by growth in commercial, retail and institutional deposits. By currency, average balances of dollar-denominated deposits grew 14.0% while average soles-denominated deposits increased 12.2%.
Interest on bonds, notes and other obligations grew S/ 12.2 million, or 14.2% YoY, as a result of the issuances of senior bonds in March 2019, in addition to a 1.6% depreciation of the exchange rate with respect to 2Q18, which increased the value of bonds issued in dollars.
Interest on due to banks and correspondents remained relatively stable as a 6.4% reduction in the average volume was almost completely offset by a 30 basis point increase in the average cost.
The average cost of funds increased 30 basis points YoY, from 2.7% in 2Q18 to 3.0% in 2Q19, mainly due to the higher average costs of deposits and due to banks and correspondents.
As a result of the above, net interest margin was 5.8% in 2Q19, 20 basis points higher than the 5.6% reported in 2Q18.
Second Quarter 2019 Earnings Report | 12 |
IMPAIRMENT LOSS ON LOANS, NET OF RECOVERIES
Impairment loss on loans, net of recoveries increased 3.5% QoQ and 70.8% YoY. The quarterly increase was mainly due to higher requirements in credit cards and medium-sized companies, partially offset by a release of provisions in payroll deduction loans for S/ 38.8 million.
The YoY growth was mainly explained by a base effect associated with the release of provisions for construction sector exposures for S/ 62.9 million in 2Q18, in addition to a higher volume of credit card loans, which require the highest level of provisions among all products even at performing stages. These effects were partially compensated by the release of provisions in payroll deduction loans mentioned above.
As a result of the above, the annualized ratio of impairment loss on loans to average loans was 2.3% in 2Q19, in line with that reported in 1Q19 and higher than the 1.5% registered in 2Q18. However, excluding the release of provisions for payroll deduction loans in 2Q19 and for construction sector exposures in 2Q18, the annualized ratio of impairment loss on loans to average loans was 2.8% in 2Q19, compared to 2.4% in 2Q18.
Impairment loss on loans, net of recoveries | ||||||||||||||||||||
%chg | %chg | |||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | QoQ | YoY | |||||||||||||||
impairment loss on loans, net of recoveries | -113.0 | -186.3 | -193.0 | 3.5 | % | 70.8 | % | |||||||||||||
Impairment loss on loans/average gross loans | 1.5 | %(1) | 2.3 | % | 2.3 | %(2) | 0 bps | 80 bps | ||||||||||||
NPL ratio (at end of period)(3) | 3.1 | % | 2.9 | % | 2.9 | % | 0 bps | -20 bps | ||||||||||||
NPL coverage ratio (at end of period) | 126.0 | % | 131.4 | % | 127.9 | % | -350 bps | 190 bps | ||||||||||||
Impairment allowance for loans | 1,273.5 | 1,396.1 | 1,411.7 | 1.1 | % | 10.9 | % | |||||||||||||
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(1) | Excluding the reversion of impairment loss on loans for construction sector exposures, cost of risk was 2.4% in 2Q18. |
(2) | Excluding the reversion of impairment loss on loans for payroll deduction loans, cost of risk was 2.8% in 2Q19. |
(3) | NPL ratio: Exposure under Stage 3 and refinanced loans / Total exposure (IFRS 9). |
The NPL ratio remained stable QoQ, at 2.9%, yet it decreased 20 basis points YoY, as the result of improvements in NPLs in both retail and commercial loans. Additionally, the NPL coverage ratio was 127.9% as of June 30, 2019, lower than the 131.4% reported as of March 31, 2019, but higher than the 126.0% registered as of June 30, 2018. The quarterly reduction in impairment allowance for loans was mainly explained by the release of payroll deduction loan provisions, while the annual increase was mainly a result of higher provision requirements in credit cards.
FEE INCOME FROM FINANCIAL SERVICES, NET
Net fee income from financial services increased S/ 7.2 million QoQ, or 3.7%, mainly explained by growth of S/ 3.8 million in commissions from credit card services and S/ 3.0 million in fees from maintenance and mailing of accounts, transfer fees and commissions on debit card services.
Net fee income from financial services grew S/ 13.5 million YoY, or 7.2%, mainly due to an S/ 8.0 million increase in commissions from credit card services, in addition to lower expenses related to the sale of insurance products.
Second Quarter 2019 Earnings Report | 13 |
Fee income from financial services, net | ||||||||||||||||||||
%chg | %chg | |||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | QoQ | YoY | |||||||||||||||
Income | ||||||||||||||||||||
Commissions from credit card services | 93.3 | 97.5 | 101.3 | 3.9 | % | 8.5 | % | |||||||||||||
Commissions from banking services | 76.6 | 76.5 | 77.1 | 0.8 | % | 0.7 | % | |||||||||||||
Maintenance and mailing of accounts, transfer fees | 58.4 | 57.1 | 60.1 | 5.4 | % | 2.9 | % | |||||||||||||
and commissions on debit card services | ||||||||||||||||||||
Fees from indirect loans | 16.3 | 13.8 | 14.3 | 3.5 | % | -12.2 | % | |||||||||||||
Collection services | 9.8 | 9.9 | 10.1 | 2.2 | % | 2.7 | % | |||||||||||||
Other | 8.0 | 8.3 | 9.9 | 19.4 | % | 24.1 | % | |||||||||||||
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Total income | 262.5 | 263.0 | 272.8 | 3.7 | % | 3.9 | % | |||||||||||||
Expenses | ||||||||||||||||||||
Insurance | -35.1 | -27.1 | -23.9 | -11.7 | % | -31.8 | % | |||||||||||||
Fees paid to foreign banks | -4.1 | -3.7 | -4.4 | 20.3 | % | 7.6 | % | |||||||||||||
Other | -36.1 | -38.9 | -43.9 | 12.8 | % | 21.5 | % | |||||||||||||
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Total expenses | -75.3 | -69.7 | -72.2 | 3.7 | % | -4.1 | % | |||||||||||||
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Fee income from financial services, net | 187.1 | 193.4 | 200.6 | 3.7 | % | 7.2 | % | |||||||||||||
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OTHER INCOME
Other income decreased S/ 37.8 million QoQ mainly due to a base effect, explained by the S/ 52.6 million gain from the sale of Interfondos to Inteligo in 1Q19.
Other income grew S/ 27.5 million YoY mainly explained by an S/ 18.4 million net gain on sale of financial investments.
Other income | ||||||||||||||||||||
%chg | %chg | |||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | QoQ | YoY | |||||||||||||||
Net gain on foreign exchange transactions | 67.1 | 41.3 | 35.8 | -13.3 | % | -46.6 | % | |||||||||||||
Net gain on sale of financial investments | 0.0 | 11.5 | 18.4 | 59.3 | % | n.m. | ||||||||||||||
Net gain (loss) on financial assets at fair value | -9.7 | 8.0 | 27.8 | n.m. | n.m. | |||||||||||||||
Other | 10.4 | 72.2 | 13.3 | -81.5 | % | 28.8 | % | |||||||||||||
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Total other income | 67.8 | 133.1 | 95.3 | -28.3 | % | 40.6 | % | |||||||||||||
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OTHER EXPENSES
Other expenses increased S/ 5.0 million QoQ, or 1.3%, and S/ 30.9 million YoY, or 8.5%. The quarterly increase was mainly due to higher administrative expenses related to IT services.
The annual growth in other expenses was explained by increases in variable costs related to credit cards and IT services. Furthermore, Interbank adopted IFRS 16 which modified the presentation of our operating leases, principally branches. In 2Q19, instead of recognizing an expense for rental of these leases, the bank recognized the associated depreciation. The impact of this change resulted in lower administrative expenses and higher depreciation and amortization totaling approximately S/ 18.8 million.
The efficiency ratio was 39.1% in 2Q19, compared to the 38.2% reported in 1Q19 and the 40.7% registered in 2Q18. However, excluding the gain from the sale of Interfondos for S/ 52.6 million in 1Q19, the efficiency ratio was 40.3% in 1Q19.
Second Quarter 2019 Earnings Report | 14 |
Other expenses | ||||||||||||||||||||
%chg | %chg | |||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | QoQ | YoY | |||||||||||||||
Salaries and employee benefits | -156.1 | -162.3 | -163.6 | 0.8 | % | 4.8 | % | |||||||||||||
Administrative expenses | -167.3 | -157.9 | -172.4 | 9.2 | % | 3.1 | % | |||||||||||||
Depreciation and amortization | -32.2 | -55.4 | -54.8 | -1.2 | % | 69.9 | % | |||||||||||||
Other | -9.3 | -15.3 | -5.0 | -67.2 | % | -45.9 | % | |||||||||||||
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Total other expenses | -364.9 | -390.8 | -395.8 | 1.3 | % | 8.5 | % | |||||||||||||
Efficiency ratio | 40.7 | % | 38.2 | %(1) | 39.1 | % | 90 bps | -160 bps |
(1) | Adjusting from the gain on sale of Interfondos, efficiency ratio was 40.3% in 1Q19. |
REGULATORY CAPITAL
The ratio of regulatory capital to risk-weighted assets (RWA) was 16.1% as of June 30, 2019, lower than the 16.4% registered as of March 31, 2019 and the 16.7% reported as of June 30, 2018.
In 2Q19, regulatory capital decreased 0.6% QoQ, while RWA grew 1.6% mainly due to higher capital requirements for credit and market risks.
The annual reduction in the capital ratio was due to a 11.5% growth in RWA, partially offset by a 7.5% increase in regulatory capital. The YoY increase in RWA was mostly attributed to loan growth. The annual increase in regulatory capital was mainly a result of the addition of S/ 573.3 million in capital, reserves and earnings with capitalization agreement during the last twelve months.
It is worth mentioning that the SBS has initiated the implementation of an additional set of Basel III standards, in effect between 2017 and 2026. Among these, it stands out that there will be an annual 10% phase out of existing Tier I instruments, yet allowing its eligibility as Tier II capital. This is why, despite the annual increase in capital and reserves, S/ 63.3 million of the US$ 200.0 million junior subordinated bond issued in April 2010 no longer count as primary capital. As of June 30, 2019, 70.0% of this issuance was considered as primary capital, in line with the percentage registered as of March 31, 2019.
As of June 30, 2019, Interbank’s capital ratio of 16.1% was significantly higher than its risk-adjusted minimum capital ratio requirement, established at 11.6%. The minimum regulatory capital ratio requirement was 10.0%, while the additional capital requirement for Interbank was 1.6% as of June 30, 2019. Furthermore, Core Equity Tier 1 (CET1 as required by the Peruvian regulatory entity) as of June 30, 2019 increased 30 basis points YoY, to 10.6%, despite loan growth of 12.4% and RWA growth of 11.5% YoY.
Second Quarter 2019 Earnings Report | 15 |
Regulatory capital | ||||||||||||||||||||
%chg | %chg | |||||||||||||||||||
06.30.19/ | 06.30.19/ | |||||||||||||||||||
S/ million | 06.30.18 | 03.31.19 | 06.30.19 | 03.31.19 | 06.30.18 | |||||||||||||||
Tier I capital | 4,912.4 | 5,452.8 | 5,447.8 | -0.1 | % | 10.9 | % | |||||||||||||
Tier II capital | 1,996.8 | 2,014.1 | 1,976.9 | -1.8 | % | -1.0 | % | |||||||||||||
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Total regulatory capital | 6,909.2 | 7,466.9 | 7,424.8 | -0.6 | % | 7.5 | % | |||||||||||||
Risk-weighted assets | 41,430.4 | 45,446.8 | 46,186.2 | 1.6 | % | 11.5 | % | |||||||||||||
BIS ratio | 16.7 | % | 16.4 | % | 16.1 | % | -30 bps | -60 bps | ||||||||||||
Tier I capital / risk-weighted assets | 11.9 | % | 12.0 | % | 11.8 | % | -20 bps | -10 bps | ||||||||||||
CET1 | 10.3 | % | 10.2 | % | 10.6 | % | 40 bps | 30 bps |
Second Quarter 2019 Earnings Report | 16 |
Interseguro
SUMMARY
Interseguro’s profits reached S/ 32.8 million in 2Q19, an increase of S/ 3.9 million QoQ and S/ 146.5 million YoY.
The quarterly growth was mainly explained by a S/ 13.9 million increase in other income, partially offset by reductions of S/ 5.3 million in total premiums earned minus claims and benefits and S/ 3.4 million in net interest and similar income, as well as by a S/ 3.7 million growth in other expenses.
The annual increase in net profit was mainly a result of growth of S/ 106.8 million in total premiums earned minus claims and benefits, and S/ 38.1 million in other income, partially offset by a S/ 4.8 million decrease in net interest and similar income, in addition to a S/ 4.7 million increase in other expenses.
It is worth mentioning that the annual increase in total premiums earned minus claims and benefits was mainly explained by the effect related to a one-time adjustment of S/ -144.8 million in technical reserves in 2Q18, as a result of the full adoption of new mortality tables published in March 2018 by the Peruvian regulatory entity (Superintendencia de Banca y Seguros). Excluding such adjustment, net profit increased S/ 1.7 million YoY.
Interseguro’s ROAE was 13.6% in 2Q19, above the 12.8% reported in 1Q19, but below the 14.9% adjusted ROAE registered in 2Q18.
Insurance Segment’s P&L Statement | ||||||||||||||||||||
%chg | %chg | |||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | QoQ | YoY | |||||||||||||||
Interest and similar income | 157.5 | 156.8 | 152.2 | -3.0 | % | -3.4 | % | |||||||||||||
Interest and similar expenses | -12.9 | -13.6 | -12.3 | -9.6 | % | -4.6 | % | |||||||||||||
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Net Interest and similar income | 144.6 | 143.2 | 139.8 | -2.3 | % | -3.3 | % | |||||||||||||
Recovery (loss) due to impairment of financial investments | 1.7 | 2.4 | 0.4 | -82.4 | % | -75.5 | % | |||||||||||||
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Net Interest and similar income after impairment loss | 146.3 | 145.5 | 140.2 | -3.6 | % | -4.1 | % | |||||||||||||
Fee income from financial services, net | -0.8 | -1.0 | -1.0 | -4.7 | % | 25.3 | % | |||||||||||||
Other income | 0.6 | 24.8 | 38.7 | 55.9 | % | n.m. | ||||||||||||||
Total premiums earned minus claims and benefits | -186.2 | -74.1 | -79.4 | 7.2 | % | -57.3 | % | |||||||||||||
Net premiums | 160.5 | 171.2 | 164.4 | -4.0 | % | 2.4 | % | |||||||||||||
Adjustment of technical reserves | -163.7 | -73.3 | -63.6 | -13.2 | % | -61.2 | % | |||||||||||||
Net claims and benefits incurred | -183.1 | -172.0 | -180.2 | 4.8 | % | -1.6 | % | |||||||||||||
Other expenses | -69.7 | -70.7 | -74.4 | 5.2 | % | 6.8 | % | |||||||||||||
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Income before translation result and income tax | -109.8 | 24.6 | 24.2 | -1.7 | % | n.m. | ||||||||||||||
Translation result | -3.9 | 4.4 | 8.6 | 98.6 | % | n.m. | ||||||||||||||
Income tax | — | — | — | n.m. | n.m. | |||||||||||||||
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Profit for the period | -113.7 | 28.9 | 32.8 | 13.4 | % | n.m. | ||||||||||||||
ROAE | n.m. | 12.8 | % | 13.6 | % | |||||||||||||||
Efficiency ratio(1) | 24.7 | % | 12.9 | % | 13.8 | % |
(1) | Efficiency ratio is defined as (Salaries and employee benefits + Administrative expenses + Depreciation and amortization) / (Net interest and similar income + Fee income + Other income + Net premiums earned). |
Second Quarter 2019 Earnings Report | 17 |
RESULTS FROM INVESTMENTS
Results from Investments(1) | ||||||||||||||||||||
%chg | %chg | |||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | QoQ | YoY | |||||||||||||||
Interest and similar income | 157.5 | 156.8 | 152.2 | -3.0 | % | -3.4 | % | |||||||||||||
Interest and similar expenses | -2.7 | -2.8 | -2.0 | -26.7 | % | -25.8 | % | |||||||||||||
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Net interest and similar income | 154.8 | 154.0 | 150.1 | -2.5 | % | -3.0 | % | |||||||||||||
Recovery (loss) due to impairment of financial investments | 1.7 | 2.4 | 0.4 | -82.4 | % | -75.5 | % | |||||||||||||
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Net Interest and similar income after impairment loss | 156.5 | 156.4 | 150.5 | -3.7 | % | -3.8 | % | |||||||||||||
Net gain (loss) on sale of financial investments | -3.7 | -6.2 | 14.3 | n.m. | n.m. | |||||||||||||||
Net gain (loss) on financial assets at fair value through profit or loss | -18.5 | 15.5 | -9.7 | n.m. | -47.5 | % | ||||||||||||||
Rental income | 6.4 | 9.0 | 11.7 | 30.4 | % | 84.2 | % | |||||||||||||
Gain on sale of investment property | — | — | -1.6 | n.m. | n.m. | |||||||||||||||
Valuation gain (loss) from investment property | 11.5 | 1.3 | 20.7 | n.m. | 79.0 | % | ||||||||||||||
Other(1) | -3.0 | -3.2 | -3.6 | 11.3 | % | 19.1 | % | |||||||||||||
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Other income | -7.3 | 16.5 | 31.8 | 93.4 | % | n.m. | ||||||||||||||
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Results from investments | 149.2 | 172.8 | 182.4 | 5.5 | % | 22.3 | % | |||||||||||||
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(1) | Only includes transactions related to investments. |
NET INTEREST AND SIMILAR INCOME
Net interest and similar income related to investments was S/ 150.1 million in 2Q19, a decrease of S/ 3.9 million, or 2.5%, QoQ and S/ 4.7 million, or 3.0%, YoY.
The quarterly and annual decreases were explained by reductions in interest and similar income of S/ 4.6 million and S/ 5.3 million, respectively, attributed to a lower inflation rate that had a negative impact on returns of the fixed income portfolio. Additionally, certain accounting adjustments in certain fixed income securities explained the lower net interest and similar income related to investments.
RECOVERY (LOSS) DUE TO IMPAIRMENT OF FINANCIAL INVESTMENTS
Recovery due to impairment of financial investments reached S/ 0.4 million in 2Q19, a decrease of S/ 2.0 million QoQ and S/ 1.3 million YoY. The quarterly decrease was mainly due to reductions in the amortized cost of non-investment grade instruments, while the annual reduction was mainly explained by lower reversal of provisions as certain impaired investments were sold in the interim period.
OTHER INCOME
Other income related to investments was S/ 31.8 million in 2Q19, an increase of S/ 15.3 million QoQ and S/ 39.1 million YoY.
The quarterly growth was mainly due to increases of S/ 20.5 million in net gain on sale of financial investments and S/ 19.4 million in valuation gain from investment property, partially offset by a negative reversion in net result on financial assets at fair value.
The annual increase was mainly explained by a positive reversion in net result on sale of financial investments, as well as growth of S/ 9.2 million in valuation gain from investment property and S/ 5.3 million in rental income, in addition to a lower net loss on financial assets at fair value.
Second Quarter 2019 Earnings Report | 18 |
TOTAL PREMIUMS EARNED MINUS CLAIMS AND BENEFITS
Total Premiums Earned Minus Claims And Benefits | ||||||||||||||||||||
%chg | %chg | |||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | QoQ | YoY | |||||||||||||||
Net premiums | 160.5 | 171.2 | 164.4 | -4.0 | % | 2.4 | % | |||||||||||||
Adjustment of technical reserves | -163.7 | -73.3 | -63.6 | -13.2 | % | -61.2 | % | |||||||||||||
Net claims and benefits incurred | -183.1 | -172.0 | -180.2 | 4.8 | % | -1.6 | % | |||||||||||||
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Total premiums earned minus claims and benefits | -186.2 | -74.1 | -79.4 | 7.2 | % | -57.3 | % | |||||||||||||
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Total premiums earned minus claims and benefits were S/ -79.4 million in 2Q19, a decrease of S/ 5.3 million QoQ, but an increase of S/ 106.8 million YoY.
The quarterly decrease was due to an S/ 8.2 million growth in net claims and benefits incurred, as well as a S/ 6.8 million reduction in net premiums, partially offset by a S/ 9.7 million decrease in adjustment of technical reserves.
The annual growth was explained by reductions of S/ 100.1 million in adjustment of technical reserves and S/ 2.9 million in net claims and benefits incurred, as well as a S/ 3.9 million increase in net premiums. The reduction in adjustment of technical reserves was a result of the effect of the adoption of new mortality tables.
NET PREMIUMS
Net Premiums by Business Line | ||||||||||||||||||||
%chg | %chg | |||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | QoQ | YoY | |||||||||||||||
Annuities | 66.1 | 80.9 | 75.7 | -6.5 | % | 14.6 | % | |||||||||||||
D&S | 13.1 | 0.7 | 0.4 | -34.2 | % | -96.7 | % | |||||||||||||
Individual Life | 30.5 | 32.1 | 32.1 | -0.3 | % | 5.2 | % | |||||||||||||
Retail Insurance | 50.9 | 57.5 | 56.2 | -2.3 | % | 10.3 | % | |||||||||||||
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Net Premiums | 160.5 | 171.2 | 164.4 | -4.0 | % | 2.4 | % | |||||||||||||
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Net premiums was S/ 164.4 million in 2Q19, a 4.0% decrease QoQ and a 2.4% increase YoY.
The quarterly reduction was mainly explained by decreases of S/ 5.2 million in annuities and S/ 1.3 million in retail insurance, while individual life premiums remained stable.
The annual increase in net premiums was mainly due to growth of S/ 9.6 million in annuities, S/ 5.3 million in retail insurance and S/ 1.6 million in individual life, partially offset by a S/ 12.7 million decrease in disability and survivorship premiums due to the expiration of Seguros Sura’s disability and survivorship contract in December 2018.
Second Quarter 2019 Earnings Report | 19 |
ADJUSTMENT OF TECHNICAL RESERVES
Adjustment of Technical Reserves by Business Line | ||||||||||||||||||||
%chg | %chg | |||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | QoQ | YoY | |||||||||||||||
Annuities | -151.2 | -49.6 | -39.9 | -19.6 | % | -73.6 | % | |||||||||||||
Individual Life | -9.5 | -21.9 | -21.3 | -3.0 | % | 123.1 | % | |||||||||||||
Retail Insurance | -3.0 | -1.7 | -2.4 | 41.0 | % | -18.9 | % | |||||||||||||
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Adjustment of technical reserves | -163.7 | -73.3 | -63.6 | -13.2 | % | -61.2 | % | |||||||||||||
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Adjustment of technical reserves was S/ 63.6 million in 2Q19, a decrease of S/ 9.7 million QoQ and S/ 100.1 million YoY.
The quarterly reduction was mainly due to a S/ 9.7 million decrease in annuities, while the annual decrease was explained by a reduction of S/ 111.3 million in annuities, partially offset by an S/ 11.8 million increase in individual life.
The annual reduction in adjustment of technical reserves for annuities was mainly explained by the effect related to a one-time adjustment of S/ -144.8 million in 2Q18, as a result of the full adoption of new mortality tables published in March 2018 by the Peruvian regulatory entity (Superintendencia de Banca y Seguros).
NET CLAIMS AND BENEFITS INCURRED
Net Claims and Benefits Incurred by Business Line | ||||||||||||||||||||
%chg | %chg | |||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | QoQ | YoY | |||||||||||||||
Annuities | -156.3 | -156.8 | -162.2 | 3.5 | % | 3.8 | % | |||||||||||||
D&S | -10.6 | 0.6 | 0.9 | 53.8 | % | n.m. | ||||||||||||||
Individual Life | -1.2 | 0.8 | -2.6 | n.m. | 107.3 | % | ||||||||||||||
Retail Insurance | -14.9 | -16.6 | -16.4 | -1.8 | % | 9.5 | % | |||||||||||||
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Net claims and benefits incurred | -183.1 | -172.0 | -180.2 | 4.8 | % | -1.6 | % | |||||||||||||
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Net claims and benefits incurred reached S/ 180.2 million in 2Q19, an increase of S/ 8.2 million QoQ and a decrease of S/ 2.9 million YoY.
The quarterly growth was the result of increases of S/ 5.4 million in annuity benefits and S/ 3.4 million in individual life claims.
The annual reduction in net claims and benefits incurred was explained by an S/ 11.5 million decrease in disability and survivorship claims, associated with the expiration of Seguros Sura’s disability and survivorship contract in December 2018, partially offset by growth of S/ 5.9 million in annuity benefits, S/ 1.5 million in retail insurance claims and S/ 1.4 million in individual life claims.
Second Quarter 2019 Earnings Report | 20 |
OTHER EXPENSES
Other Expenses | ||||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | %chg QoQ | %chg YoY | |||||||||||||||
Salaries and employee benefits | -19.0 | -18.0 | -18.1 | 0.8 | % | -4.5 | % | |||||||||||||
Administrative expenses | -11.2 | -11.1 | -13.4 | 21.0 | % | 19.1 | % | |||||||||||||
Depreciation and amortization | -4.7 | -5.0 | -6.9 | 36.2 | % | 46.4 | % | |||||||||||||
Expenses related to rental income | -1.0 | -1.5 | 0.3 | n.m. | n.m. | |||||||||||||||
Other | -33.8 | -35.1 | -36.3 | 3.6 | % | 7.6 | % | |||||||||||||
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Other expenses | -69.7 | -70.7 | -74.4 | 5.2 | % | 6.8 | % | |||||||||||||
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Other expenses increased S/ 3.7 million QoQ, or 5.2%, and S/ 4.7 million YoY, or 6.8%.
The quarterly growth in other expenses was mainly attributed to increases of S/ 2.3 million in administrative expenses and S/ 1.9 million in depreciation and amortization, partially offset by a decrease of S/ 1.8 million in expenses related to rental income.
The annual increase in other expenses was mainly due to growth of S/ 2.2 million in administrative expenses and S/ 2.2 million in depreciation and amortization, partially offset by a decrease of S/ 1.3 million in expenses related to rental income.
Second Quarter 2019 Earnings Report | 21 |
Inteligo
SUMMARY
Inteligo’s net profit in 2Q19 was S/ 33.4 million, a decrease of S/ 44.9 million, or 57.4%, QoQ and S/ 15.9 million, or 32.2%, YoY.
The main driver of these results was a reduction of 98.6% QoQ and 88.0% YoY in other income, as a consequence of the deterioration of investment portfolio valuations in the quarter.
On the commercial front, Inteligo’s prospecting process continued to show positive results in terms of new account openings and assets under management. Accordingly, Inteligo’s AUM grew 4.0% QoQ and 8.9% YoY as of June 30, 2019.
Inteligo’s ROAE was 16.8% in 2Q19, lower than the 38.1% reported in 1Q19 and the 26.3% registered in 2Q18.
Wealth Management Segment’s P&L Statement | ||||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | %chg QoQ | %chg YoY | |||||||||||||||
Interest and similar income | 40.0 | 45.6 | 38.9 | -14.6 | % | -2.7 | % | |||||||||||||
Interest and similar expenses | -10.8 | -14.9 | -14.4 | -2.9 | % | 33.4 | % | |||||||||||||
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Net interest and similar income | 29.2 | 30.7 | 24.5 | -20.2 | % | -16.1 | % | |||||||||||||
Impairment loss on loans, net of recoveries | 0.4 | -0.1 | 0.0 | n.m. | n.m. | |||||||||||||||
Recovery (loss) due to impairment of financial investments | -0.5 | -0.5 | 0.3 | n.m. | n.m. | |||||||||||||||
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Net interest and similar income after impairment loss | 29.1 | 30.2 | 24.8 | -17.7 | % | -14.6 | % | |||||||||||||
Fee income from financial services, net | 42.6 | 38.9 | 37.1 | -4.6 | % | -12.9 | % | |||||||||||||
Other income | 4.2 | 36.8 | 0.5 | -98.6 | % | -88.0 | % | |||||||||||||
Other expenses | -24.6 | -26.9 | -28.7 | 6.6 | % | 16.5 | % | |||||||||||||
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Income before translation result and income tax | 51.3 | 79.0 | 33.8 | -57.2 | % | -34.1 | % | |||||||||||||
Translation result | -0.9 | 0.7 | 1.6 | n.m. | n.m. | |||||||||||||||
Income tax | -1.2 | -1.4 | -2.1 | 45.8 | % | 72.8 | % | |||||||||||||
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Profit for the period | 49.2 | 78.3 | 33.4 | -57.4 | % | -32.2 | % | |||||||||||||
ROAE | 26.3 | % | 38.1 | % | 16.8 | % | ||||||||||||||
Efficiency ratio(1) | 34.9 | % | 25.2 | % | 45.9 | % |
(1) | Efficiency ratio is defined as (Salaries and employee benefits + Administrative expenses + Depreciation and amortization) / (Net interest and similar income + Fee income + Other income). |
ASSETS UNDER MANAGEMENT & DEPOSITS
AUM reached S/ 18,479.4 million as of June 30, 2019, an increase of S/ 710.4 million, or 4.0%, QoQ and S/ 1,510.6 million, or 8.9%, YoY, mostly due to new account openings, generating an influx of funds as a result of a strengthened prospecting and client conversion strategies at Inteligo.
Client deposits reached S/ 2,474.9 million as of June 30, 2019, a S/ 58.2 million, or 2.3%, decrease QoQ, but a S/ 374.4 million, or 17.8%, increase YoY. The annual growth was mainly generated by funding obtained from new account openings.
Second Quarter 2019 Earnings Report | 22 |
NET INTEREST AND SIMILAR INCOME
Net interest and similar income | ||||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | %chg QoQ | %chg YoY | |||||||||||||||
Interest and similar income | ||||||||||||||||||||
Due from banks and inter-bank funds | 1.3 | 2.1 | 2.1 | -0.4 | % | 60.6 | % | |||||||||||||
Financial Investments | 22.6 | 25.3 | 18.8 | -25.7 | % | -16.6 | % | |||||||||||||
Loans | 16.2 | 18.2 | 18.1 | -0.6 | % | 11.5 | % | |||||||||||||
Total interest and similar income | 40.0 | 45.6 | 38.9 | -14.6 | % | -2.7 | % | |||||||||||||
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Interest and similar expenses | ||||||||||||||||||||
Deposits and obligations | -9.3 | -11.5 | -11.3 | -2.0 | % | 21.1 | % | |||||||||||||
Due to banks and correspondents | -1.5 | -3.4 | -3.2 | -6.1 | % | n.m. | ||||||||||||||
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Total interest and similar expenses | -10.8 | -14.9 | -14.4 | -2.9 | % | 33.4 | % | |||||||||||||
Net interest and similar income | 29.2 | 30.7 | 24.5 | -20.2 | % | -16.1 | % | |||||||||||||
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Inteligo’s net interest and similar income in 2Q19 was S/ 24.5 million, a S/ 6.2 million, or 20.2%, decrease when compared with 1Q19, explained by lower dividend distributions from portfolio investments in 2Q19.
Net interest and similar income decreased S/ 4.7 million, or 16.1%, YoY. This reduction was a consequence of portfolio rebalancing strategies implemented during 2Q19.
FEE INCOME FROM FINANCIAL SERVICES
Fee income from financial services, net | ||||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | %chg QoQ | %chg YoY | |||||||||||||||
Income | ||||||||||||||||||||
Brokerage and custody services | 4.1 | 3.9 | 3.4 | -13.3 | % | -18.1 | % | |||||||||||||
Funds management | 39.0 | 35.4 | 34.3 | -3.0 | % | -12.0 | % | |||||||||||||
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Total income | 43.1 | 39.3 | 37.7 | -4.0 | % | -12.6 | % | |||||||||||||
Expenses | ||||||||||||||||||||
Brokerage and custody services | -0.4 | -0.2 | -0.4 | 85.6 | % | 0.6 | % | |||||||||||||
Others | -0.1 | -0.1 | -0.2 | 13.1 | % | 50.2 | % | |||||||||||||
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Total expenses | -0.5 | -0.4 | -0.6 | 59.2 | % | 10.0 | % | |||||||||||||
Fee income from financial services, net | 42.6 | 38.9 | 37.1 | -4.6 | % | -12.9 | % | |||||||||||||
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Net fee income from financial services was S/ 37.1 million in 2Q19, a decrease of S/ 1.8 million, or 4.6%, compared to the previous quarter. On a yearly basis, net fee income from financial services decreased S/ 5.5 million, or 12.9%. The quarterly and annual decreases were explained by lower brokerage and custody service fees amid higher price volatility in global markets, as well as lower product structuring activity during the quarter.
Second Quarter 2019 Earnings Report | 23 |
OTHER INCOME
Other income | ||||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | %chg QoQ | %chg YoY | |||||||||||||||
Net gain on sale of financial investments | 0.2 | 24.5 | 13.5 | -44.8 | % | n.m. | ||||||||||||||
Net trading gain (loss) | 7.2 | 14.8 | -13.1 | n.m. | n.m. | |||||||||||||||
Other | -3.2 | -2.5 | 0.1 | n.m. | n.m. | |||||||||||||||
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Total other income | 4.2 | 36.8 | 0.5 | -98.6 | % | -88.0 | % | |||||||||||||
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Other income reached S/ 0.5 million in 2Q19, a decrease of S/ 36.3 million QoQ and S/ 3.7 million YoY, attributable to negative mark-to-market valuations on Inteligo’s proprietary portfolio during 2Q19.
OTHER EXPENSES
Other expenses | ||||||||||||||||||||
S/ million | 2Q18 | 1Q19 | 2Q19 | %chg QoQ | %chg YoY | |||||||||||||||
Salaries and employee benefits | -13.9 | -15.1 | -15.2 | 0.4 | % | 8.8 | % | |||||||||||||
Administrative expenses | -10.4 | -9.2 | -9.5 | 2.4 | % | -8.6 | % | |||||||||||||
Depreciation and amortization | -2.2 | -2.5 | -3.9 | 56.3 | % | 73.1 | % | |||||||||||||
Other | 1.9 | -0.1 | -0.2 | n.m. | n.m. | |||||||||||||||
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Total other expenses | -24.6 | -26.9 | -28.7 | 6.6 | % | 16.5 | % | |||||||||||||
Efficiency ratio | 34.9 | % | 25.2 | % | 45.9 | % |
Other expenses reached S/ 28.7 million in 2Q19, an increase of S/ 1.8 million, or 6.6%, QoQ and S/ 4.1 million, or 16.5%, YoY. The increase in non-core expenses for the period was related to one-off legal expenses.
Second Quarter 2019 Earnings Report | 24 |
Intercorp Financial Services Inc. and Subsidiaries
Interim condensed consolidated financial statements as of June 30, 2019, December 31, 2018 and for thesix-month periods ended June 30, 2019 and 2018
Intercorp Financial Services Inc. and Subsidiaries
Interim condensed consolidated financial statements as of June 30, 2019, December 31, 2018 and for thesix-month periods ended June 30, 2019 and 2018
Content
Interim condensed consolidated financial statements
Intercorp Financial Services Inc. and Subsidiaries
Interim condensed consolidated statements of financial position
As of June 30, 2019 (unaudited) and December 31, 2018 (audited)
Note | As of June 30, 2019 | As of December 31, 2018 | ||||||||||
S/(000) | S/(000) | |||||||||||
Assets | ||||||||||||
Cash and due from banks | 3 | |||||||||||
Non-interest bearing | 2,655,929 | 3,102,250 | ||||||||||
Interest bearing | 6,525,301 | 3,991,629 | ||||||||||
Restricted funds | 1,411,593 | 1,286,532 | ||||||||||
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10,592,823 | 8,380,411 | |||||||||||
Inter-bank funds | 230,137 | 495,037 | ||||||||||
Financial investments | 4 | 17,835,546 | 17,629,445 | |||||||||
Loans, net | 5 | |||||||||||
Loans, net of unearned interest | 35,646,972 | 34,325,721 | ||||||||||
Impairment allowance for loans | (1,411,861 | ) | (1,364,804 | ) | ||||||||
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34,235,111 | 32,960,917 | |||||||||||
Investment property | 6 | 999,773 | 986,538 | |||||||||
Property, furniture and equipment, net | 2(c) | 900,238 | 622,525 | |||||||||
Due from customers on acceptances | 57,685 | 132,961 | ||||||||||
Intangibles and goodwill, net | 955,864 | 954,546 | ||||||||||
Accounts receivable and other assets, net | 7 | 1,298,747 | 1,502,554 | |||||||||
Deferred Income Tax asset, net | 66,313 | 79,475 | ||||||||||
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Total assets | 67,172,237 | 63,744,409 | ||||||||||
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Note | As of June 30, 2019 | As of December 31, 2018 | ||||||||
S/(000) | S/(000) | |||||||||
Liabilities and equity | ||||||||||
Deposits and obligations | 8 | |||||||||
Non-interest bearing | 5,402,453 | 5,321,025 | ||||||||
Interest bearing | 29,971,323 | 28,360,925 | ||||||||
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35,373,776 | 33,681,950 | |||||||||
Inter-bank funds | 50,013 | — | ||||||||
Due to banks and correspondents | 9 | 4,596,947 | 4,293,361 | |||||||
Bonds, notes and other obligations | 10 | 6,606,219 | 6,496,778 | |||||||
Due from customers on acceptances | 57,685 | 132,961 | ||||||||
Insurance contract liabilities | 11 | 10,935,092 | 10,300,468 | |||||||
Accounts payable, provisions and other liabilities | 7 | 2,109,272 | 1,750,363 | |||||||
Deferred Income Tax liability, net | — | 52 | ||||||||
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Total liabilities | 59,729,004 | 56,655,933 | ||||||||
Equity, net | 12 | |||||||||
Equity attributable to IFS’s shareholders: | ||||||||||
Capital stock | 963,446 | 963,446 | ||||||||
Treasury stock | (208,178 | ) | (208,178 | ) | ||||||
Capital surplus | 268,077 | 268,077 | ||||||||
Reserves | 4,700,000 | 4,700,000 | ||||||||
Unrealized results, net | 414,304 | 121,686 | ||||||||
Retained earnings | 1,263,576 | 1,203,043 | ||||||||
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7,401,225 | 7,048,074 | |||||||||
Non-controlling interest | 42,008 | 40,402 | ||||||||
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Total equity, net | 7,443,233 | 7,088,476 | ||||||||
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Total liabilities and equity, net | 67,172,237 | 63,744,409 | ||||||||
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The accompanying notes are an integral part of these interim condensed consolidated financial statements.
3
Intercorp Financial Services Inc. and Subsidiaries
Interim condensed consolidated statements of income
For thesix-month periods ended June 30, 2019 and 2018
Note | 2019 | 2018 | ||||||||
S/(000) | S/(000) | |||||||||
Interest and similar income | 14 | 2,368,471 | 2,106,457 | |||||||
Interest and similar expenses | 14 | (678,134 | ) | (552,922 | ) | |||||
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Net interest and similar income | 1,690,337 | 1,553,535 | ||||||||
Impairment loss on loans, net of recoveries | 5(c) | (379,355 | ) | (285,458 | ) | |||||
Impairment recovery on financial investments | 4(c) | 2,674 | 3,558 | |||||||
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Net interest and similar income after impairment loss | 1,313,656 | 1,271,635 | ||||||||
Fee income from financial services, net | 15 | 445,713 | 436,973 | |||||||
Net gain on foreign exchange transactions | 77,125 | 107,972 | ||||||||
Net gain on sale of financial investments | 76,121 | 21,754 | ||||||||
Net gains on financial assets at fair value through profit or loss | 39,611 | (4,191 | ) | |||||||
Net gain on investment property | 6(b) | 43,278 | 22,101 | |||||||
Other income | 16 | 32,113 | 24,290 | |||||||
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713,961 | 608,899 | |||||||||
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Insurance premiums and claims | ||||||||||
Net premiums earned | 17 | 198,740 | 93,137 | |||||||
Net claims and benefits incurred for life insurance contracts and others | (352,250 | ) | (358,215 | ) | ||||||
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(153,510 | ) | (265,078 | ) | |||||||
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Other expenses | ||||||||||
Salaries and employee benefits | (392,272 | ) | (370,873 | ) | ||||||
Administrative expenses | (371,387 | ) | (368,576 | ) | ||||||
Depreciation and amortization | (128,181 | ) | (77,724 | ) | ||||||
Other expenses | 16 | (74,576 | ) | (77,379 | ) | |||||
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(966,416 | ) | (894,552 | ) | |||||||
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Income before translation result and Income Tax | 907,691 | 720,904 | ||||||||
Translation result | 22,005 | (7,915 | ) | |||||||
Income Tax | 13(c) | (226,858 | ) | (218,073 | ) | |||||
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Net profit for the period | 702,838 | 494,916 | ||||||||
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Attributable to: | ||||||||||
IFS’s shareholders | 698,516 | 491,313 | ||||||||
Non-controlling interest | 4,322 | 3,603 | ||||||||
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702,838 | 494,916 | |||||||||
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Earnings per share attributable to IFS’s shareholders (stated in Soles) | 18 | 6.310 | 4.459 | |||||||
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Weighted average number of outstanding shares (in thousands) | 18 | 110,692 | 110,190 | |||||||
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The accompanying notes are an integral part of these interim condensed consolidated financial statements.
4
Intercorp Financial Services Inc. and Subsidiaries
Interim condensed consolidated statements of other comprehensive income
For thesix-month periods ended June 30, 2019 and 2018
2019 | 2018 | |||||||
S/(000) | S/(000) | |||||||
Net profit for the period | 702,838 | 494,916 | ||||||
Other comprehensive income that will not be reclassified to the consolidated income statements in subsequent periods: | ||||||||
Net movement of equity instruments at fair value through other comprehensive income | 80,853 | 671 | ||||||
Income Tax | (212 | ) | 6,275 | |||||
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Total gains that will not be reclassified to the consolidated income statements in subsequent periods | 80,641 | 6,946 | ||||||
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Other comprehensive income to be reclassified to the consolidated income statements in subsequent periods: | ||||||||
Net movement of debt instruments at fair value through other comprehensive income | 920,120 | (478,150 | ) | |||||
Income Tax | (7,242 | ) | (262 | ) | ||||
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912,878 | (478,412 | ) | ||||||
Insurance premiums reserve | (676,231 | ) | 869,403 | |||||
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Net movement of cash flow hedges | (7,705 | ) | 4,429 | |||||
Income Tax | 3,012 | (1,262 | ) | |||||
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(4,693 | ) | 3,167 | ||||||
Translation of foreign operations | (19,219 | ) | 5,697 | |||||
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Total unrealized gain to be reclassified to the consolidated income statements in subsequent periods | 212,735 | 399,855 | ||||||
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Total other comprehensive income for the period, net of Income Tax | 996,214 | 901,717 | ||||||
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Attributable to: | ||||||||
IFS’s shareholders | 991,134 | 898,305 | ||||||
Non-controlling interest | 5,080 | 3,412 | ||||||
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996,214 | 901,717 | |||||||
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The accompanying notes are an integral part of these interim condensed consolidated financial statements.
5
Intercorp Financial Services Inc. and Subsidiaries
Interim condensed consolidated statements of changes in equity
For thesix-month periods ended June 30, 2019 and 2018
Attributable to IFS’s shareholders | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized results, net | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of shares | Instruments that will not be reclassified to the consolidated income statements | Instruments that will be reclassified to the consolidated income statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issued | In treasury | Capital stock | Treasury stock | Capital surplus | Reserves | Equity instruments at fair value | Debt instruments at fair value | Insurance premiums reserves | Cash flow hedges reserve | Foreign currency translation reserve | Retained earnings | Total | Non- controlling | Total equity, net | ||||||||||||||||||||||||||||||||||||||||||||||
(in thousands) | (in thousands) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | ||||||||||||||||||||||||||||||||||||||||||||||
Balances as of January 1, 2018 | 113,110 | (5,428 | ) | 963,446 | (467,200 | ) | 268,077 | 3,700,000 | 105,619 | 238,348 | (675,095 | ) | (36 | ) | 76,394 | 1,507,674 | 5,717,227 | 35,780 | 5,753,007 | |||||||||||||||||||||||||||||||||||||||||
Net profit for the period | — | — | — | — | — | — | — | — | — | — | — | 491,313 | 491,313 | 3,603 | 494,916 | |||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 7,500 | (477,327 | ) | 867,976 | 3,146 | 5,697 | — | 406,992 | (191 | ) | 406,801 | |||||||||||||||||||||||||||||||||||||||||||
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Total other comprehensive income | — | — | — | — | — | — | 7,500 | (477,327 | ) | 867,976 | 3,146 | 5,697 | 491,313 | 898,305 | 3,412 | 901,717 | ||||||||||||||||||||||||||||||||||||||||||||
Declared and paid dividends, Note 12(a) | — | — | — | — | — | — | — | — | — | — | — | (510,688 | ) | (510,688 | ) | — | (510,688 | ) | ||||||||||||||||||||||||||||||||||||||||||
Dividends paid tonon-controlling interest of Subsidiaries | — | — | — | — | — | — | — | — | — | — | — | — | — | (3,196 | ) | (3,196 | ) | |||||||||||||||||||||||||||||||||||||||||||
Transfer from Retained earnings to Reserves | — | — | — | — | — | 1,000,000 | — | — | — | — | — | (1,000,000 | ) | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Sale of treasury stock, Note | — | 3,010 | — | 259,022 | — | — | — | — | — | — | — | 123,705 | 382,727 | 862 | 383,589 | |||||||||||||||||||||||||||||||||||||||||||||
Dividends received by Subsidiaries on treasury stock | — | — | — | — | — | — | — | — | — | — | — | 8,972 | 8,972 | 63 | 9,035 | |||||||||||||||||||||||||||||||||||||||||||||
Others | — | — | — | — | — | — | — | — | — | — | — | (13,401 | ) | (13,401 | ) | (151 | ) | (13,552 | ) | |||||||||||||||||||||||||||||||||||||||||
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Balance as of June 30, 2018 | 113,110 | (2,418 | ) | 963,446 | (208,178 | ) | 268,077 | 4,700,000 | 113,119 | (238,979 | ) | 192,881 | 3,110 | 82,091 | 607,575 | 6,483,142 | 36,770 | 6,519,912 | ||||||||||||||||||||||||||||||||||||||||||
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Balance as of January 1, 2019 | 113,110 | (2,418 | ) | 963,446 | (208,178 | ) | 268,077 | 4,700,000 | 147,554 | (232,337 | ) | 75,575 | 27,911 | 102,983 | 1,203,043 | 7,048,074 | 40,402 | 7,088,476 | ||||||||||||||||||||||||||||||||||||||||||
Net profit for the period | — | — | — | — | — | — | — | — | — | — | — | 698,516 | 698,516 | 4,322 | 702,838 | |||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 80,559 | 911,042 | (675,121 | ) | (4,643 | ) | (19,219 | ) | — | 292,618 | 758 | 293,376 | ||||||||||||||||||||||||||||||||||||||||||
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Total other comprehensive income | — | — | — | — | — | — | 80,559 | 911,042 | (675,121 | ) | (4,643 | ) | (19,219 | ) | 698,516 | 991,134 | 5,080 | 996,214 | ||||||||||||||||||||||||||||||||||||||||||
Declared and paid dividends, Note 12(a) | — | — | — | — | — | — | — | — | — | — | — | (654,464 | ) | (654,464 | ) | — | (654,464 | ) | ||||||||||||||||||||||||||||||||||||||||||
Dividends paid tonon-controlling interest of Subsidiaries | — | — | — | — | — | — | — | — | — | — | — | — | — | (3,455 | ) | (3,455 | ) | |||||||||||||||||||||||||||||||||||||||||||
Dividends received by Subsidiaries on treasury stock | — | — | — | — | — | — | — | — | — | — | — | 11,422 | 11,422 | 80 | 11,502 | |||||||||||||||||||||||||||||||||||||||||||||
Others | — | — | — | — | — | — | — | — | — | — | — | 5,059 | 5,059 | (99 | ) | 4,960 | ||||||||||||||||||||||||||||||||||||||||||||
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Balance as of June 30, 2019 | 113,110 | (2,418 | ) | 963,446 | (208,178 | ) | 268,077 | 4,700,000 | 228,113 | 678,705 | (599,546 | ) | 23,268 | 83,764 | 1,263,576 | 7,401,225 | 42,008 | 7,443,233 | ||||||||||||||||||||||||||||||||||||||||||
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The accompanying notes are an integral part of these interim condensed consolidated financial statements.
6
Intercorp Financial Services Inc. and Subsidiaries
Interim condensed consolidated statements of cash flows
For thesix-month periods ended June 30, 2019 and 2018
2019 | 2018 | |||||||
S/(000) | S/(000) | |||||||
Cash flows from operating activities | ||||||||
Net profit for the period | 702,838 | 494,916 | ||||||
Plus (minus) | ||||||||
Impairment loss on loans, net of recoveries | 379,355 | 285,458 | ||||||
Impairment recovery on financial investments | (2,674 | ) | (3,558 | ) | ||||
Depreciation and amortization | 128,181 | 77,724 | ||||||
Provision for sundry risks | 1,703 | 2,452 | ||||||
Deferred Income Tax | 6,942 | 37,533 | ||||||
Net gain on sale of financial investments | (76,121 | ) | (21,754 | ) | ||||
Net (gain) loss of financial assets at fair value through profit or loss | (39,611 | ) | 4,191 | |||||
Net gain for the valuation of investment property | (21,981 | ) | (6,432 | ) | ||||
Translation result | (22,005 | ) | 7,915 | |||||
Net loss (gain) on sale of investment property | 1,556 | (1,559 | ) | |||||
Decrease (increase) in accrued interest receivable | 979 | (38,729 | ) | |||||
Increase in accrued interest payable | 40,984 | 24,099 | ||||||
Net changes in assets and liabilities | ||||||||
Net increase in loans | (1,646,799 | ) | (2,466,800 | ) | ||||
Increase in accounts receivable and other assets, net | (19,631 | ) | (185,703 | ) | ||||
Net (increase) decrease in restricted funds | (119,836 | ) | 480,241 | |||||
Increase (decrease) in deposits and obligations | 1,646,516 | (1,699,478 | ) | |||||
Increase (decrease) in due to banks and correspondents | 295,859 | (130,965 | ) | |||||
Increase (decrease) in accounts payable, provisions and other liabilities | 114,569 | (495,824 | ) | |||||
Decrease (increase) of investments at fair value through profit or loss | 251,624 | (269,209 | ) | |||||
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Net cash provided by (used in) operating activities | 1,622,448 | (3,905,482 | ) | |||||
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7
Interim condensed consolidated statements of cash flows (continued)
2019 | 2018 | |||||||
S/(000) | S/(000) | |||||||
Cash flows from investing activities | ||||||||
Net sale (purchase) of financial investments | 674,993 | (139,314 | ) | |||||
Purchase of property, furniture and equipment | (26,633 | ) | (14,737 | ) | ||||
Purchase of intangible assets | (57,720 | ) | (46,573 | ) | ||||
Net purchase of investment property | 8,746 | 159,422 | ||||||
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Net cash provided by (used in) investing activities | 599,386 | (41,202 | ) | |||||
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Cash flows from financing activities | ||||||||
Dividends payed | (654,464 | ) | (510,688 | ) | ||||
Increase of bonds, notes and other obligations | 245,572 | 637,290 | ||||||
Net decrease in receivable inter-bank funds | 264,900 | 171,678 | ||||||
Net increase in payable inter-bank funds | 50,013 | 281,157 | ||||||
Sale of treasury stock, net | — | 383,589 | ||||||
Dividend payments tonon-controlling interest | (3,455 | ) | (3,196 | ) | ||||
Lease payments | (63,457 | ) | (16,434 | ) | ||||
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Net cash (used in) provided by financing activities | (160,891 | ) | 943,396 | |||||
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Net increase (decrease) in cash and cash equivalents | 2,060,943 | (3,003,288 | ) | |||||
Gain (loss) from translation result on cash and cash equivalents | 25,683 | (9,881 | ) | |||||
Cash and cash equivalents at the beginning of the period | 7,087,062 | 9,225,617 | ||||||
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Cash and cash equivalents at the end of the period, Note 3 | 9,173,688 | 6,212,448 | ||||||
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Supplementary cash flow information: | ||||||||
Cash paid during the period for | ||||||||
Interest | 682,809 | 534,681 | ||||||
Cash received during the period from | ||||||||
Interest | 2,326,534 | 2,050,510 |
The accompanying notes are an integral part of these interim condensed consolidated financial statements.
8
Intercorp Financial Services Inc. and Subsidiaries
Notes to the interim condensed consolidated financial statements
As of June 30, 2019 (unaudited) and December 31, 2018 (audited)
1. | Business activity and business combination |
(a) | Business activity |
Intercorp Financial Services Inc. and Subsidiaries (henceforth “IFS”, “the Company” or “the Group”) is a limited liability holding company incorporated in the Republic of Panama on September 19, 2006, and is a Subsidiary of Intercorp Perú Ltd. (henceforth “Intercorp Perú”), a holding company incorporated in 1997 in the Commonwealth of the Bahamas. As of June 30, 2019, and December 31, 2018, Intercorp Perú holds directly and indirectly 76.46 percent, of IFS’s capital stock, equivalent 75.94 percent of IFS’s outstanding capital stock.
As indicated on further detail in Note 25, as a result of the Initial Public Offering made by IFS in July 2019, the ownership of Intercorp Peru Ltd. decreased to 70.62 percent of IFS’s issued and outstanding capital stock.
IFS’s legal domicile is located at Av. Carlos Villarán 140 Urb. Santa Catalina, La Victoria, Lima, Peru.
As of June 30, 2019, IFS holds 99.30 percent of the capital stock of Banco Internacional del Perú S.A.A. – Interbank (henceforth “Interbank”), 99.84 percent of the capital stock of Interseguro Compañía de Seguros S.A. (henceforth “Interseguro”) and 100 percent of the capital stock of Inteligo Group Corp. (henceforth “Inteligo”). As of December 31, 2018, IFS holds 99.30 percent of the capital stock of Interbank, 99.84 percent of the capital stock of Interseguro, 100 percent of the capital stock of Inteligo and 99.42 percent of the capital stock of Hipotecaria Sura Empresa Administradora Hipotecaria S.A. (henceforth “Hipotecaria Sura”). Interbank and Interseguro operate in Peru, while Inteligo and its Subsidiaries (Inteligo Sociedad Agente de Bolsa S.A. and Inteligo Bank Ltd.) operate in Peru and Panama. Hipotecaria Sura was liquidated on February 20, 2019.
The interim condensed consolidated financial statements of IFS and Subsidiaries as of June 30, 2019, and for thesix-month periods then ended were approved by the Board of Directors held on August 12, 2019.
(b) | Business combinations |
In May 2017, IFS entered into an agreement with Sura Asset Management S.A. (Colombia), Sura Asset Management Perú S.A. (Peru) and Grupo Wiese (Peru) for the purchase of shares, which resulted in the direct and indirect acquisition of up to 100 percent of Seguros Sura S.A. (henceforth “Seguros Sura”) and up to 100 percent of Hipotecaria Sura. The acquisition was approved by Peru’s Superintendence of Banking, Insurance and Private Pension Funds Administrators (henceforth “SBS”, by its Spanish acronym) on September 28, 2017.
As a consequence, in November 2017, IFS acquired directly and indirectly 99.39 percent of Seguros Sura’s capital stock and 99.42 percent of Hipotecaria Sura’s capital stock.
The price of the overall transaction was US$275,865,000 (equivalent to approximately S/891,911,000).
9
Notes to the interim condensed consolidated financial statements (continued)
In accordance with the legal regulations in force in Peru, the SBS granted asix-month deadline to complete the merger between Interseguro and Seguros Sura as from the date of its approval of the acquisition. In this sense, Interseguro merged with Seguro Sura on March 31, 2018, date on which Seguros Sura transferred all its assets and liabilities to the absorbing company, extinguishing after completing this merger process without having to liquidate.
The acquisitions were recorded in accordance with the “Acquisition method” established by IFRS 3 “Business Combinations”. The costs related to the acquisition, amounting to S/7,863,000, were registered as an expense at the date of adquisition.
The following are the fair values of the entities acquired:
Fair value of the acquired entities | ||||
S/(000) | ||||
Seguros Sura S.A. | ||||
Assets | 5,543,147 | |||
Liabilities | (5,287,650 | ) | ||
Hipotecaria Sura S.A. | ||||
Assets | 12,560 | |||
Liabilities | (2,452 | ) | ||
|
| |||
Total net assets identified | 265,605 | |||
Non-controlling interest – proportionate share of the acquired entities’ net assets | (1,912 | ) | ||
Goodwill | 628,218 | |||
|
| |||
Consideration transferred | 891,911 | |||
|
|
The net cash flow used in the acquisition is presented below:
S/(000) | ||||
Consideration transferred | 891,911 | |||
Cash and due from banks of the acquired entities | (239,247 | ) | ||
Transaction cost of the acquisition | 7,863 | |||
|
| |||
660,527 | ||||
|
|
The goodwill represents the future synergies that are expected to arise from the combination of operations, distribution channels, workforce and other efficiencies not included in the intangible assets of the present value of acquiredin-force business.
The net assets recognized in the consolidated financial statements of IFS at the acquisition date were based on a preliminary fair value assessment. During 2018, Management completed the review of the fair value estimate of insurance contracts liabilities as of the acquisition date and, as consequence, the net identifiable assets were modified. Amendments were therefore made to the net identifiable assets, as detailed below:
Preliminary balance | Amendment | Amended balance | ||||||||||
S/(000) | S/(000) | S/(000) | ||||||||||
Insurance contracts liabilities | (5,210,487 | ) | 195,339 | (5,015,148 | ) | |||||||
Goodwill | 628,218 | (195,339 | ) | 432,879 |
10
Notes to the interim condensed consolidated financial statements (continued)
2. | Significant accounting policies |
(a) | Basis of presentation and use of estimates |
The interim condensed consolidated financial statements as of June 30, 2019, and for thesix-month periods ended June 30, 2019 and 2018 have been prepared in accordance with IAS 34 “Interim Financial Reporting”.
The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements, and should be read in conjunction with the Group’s consolidated audited financial statements as of December 31, 2018 and 2017, and as of January 1, 2017 (henceforth “Annual Consolidated Financial Statements”).
The accompanying interim condensed consolidated financial statements have been prepared on a historical cost basis, except for investment property, derivative financial instruments, financial investments at fair value through profit or loss and through other comprehensive income, which have been measured at fair value. The interim condensed consolidated financial statements are presented in Soles, which is the functional currency of the Group, and all values are rounded to the nearest thousand (S/(000)), except when otherwise indicated.
The preparation of the interim condensed consolidated financial statements, in conformity with the International Financial Reporting Standards (henceforth “IFRS”) as issued by the International Accounting Standards Board (IASB), requires Management to make estimations and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of significant events in the notes to the interim condensed consolidated financial statements.
Estimates and criteria are continually assessed and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances. Existing circumstances and assumptions about future developments, however, may change due to markets’ behavior or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Actual results could differ from those estimates. The most significant estimates comprised in the accompanying interim condensed consolidated financial statements are related to the calculation of the impairment of the portfolio of loan and financial investments, the measurement of the fair value of the financial investments and investment property, the assessment of the impairment of goodwill, the liabilities for insurance contracts and measurement of the fair value of derivative financial instruments; also, there are other estimates such as the estimated useful life of intangible assets, property, furniture and equipment, and the estimation of deferred Income Tax.
Regarding the liabilities for insurance contracts, in the second quarter of 2018, the Group made the following changes in its accounting estimates related to the determination of these liabilities:
(i) | Adoption of new mortality tables (SPP 2017) |
Through SBS ResolutionNo.886-2018 dated March 7, 2018, the SBS published the new Peruvian mortality and morbidity tables“SPP-S-2017” and“SPP-I-2017” (for men and women) to be used in mathematical reserve calculations of pensions from the Private Pension System (“SPP”, by its Spanish acronym) and the Complementary Insurance of Hazardous Work. These tables gather updated information from Peru’s SPP and show the recent changes in life expectancy. From June 1, 2018, the Group decided to use these new tables for its pension reserve calculation.
11
Notes to the interim condensed consolidated financial statements (continued)
(ii) | Changes in the assumptions used in calculating interest rates to discount pension reserves |
Until May 31, 2018, in order to discount claim reserves, Interseguro used the average market rate of its financial assets portfolio for the matching currency pension flows and a reinvestment rate of 3 percent fornon-matching currency pension flows. From the second quarter 2018, Interseguro modified the estimation of these assumptions, using the risk-free rate due to the currency of Peruvian government’s sovereign yield curves plus an illiquidity premium as a portion of the corporate bonds spread that is not related to loss given default or the cost of credit rating downgrade. These corporate bonds spread is calculated based on the performance of the asset portfolio designated by Interseguro to cover its pension obligations.
In accordance with IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors” and since the changes above result from new information or events and are not error corrections nor related to previous periods, they are considered changes in accounting estimations and the effects were recognized prospectively and included in the interim condensed consolidated income statements for:
(i) | The period in which a change occurs, if it affects only such period; or |
(ii) | The period in which a change occurs and future periods, if it affects all of them. |
As a consequence, Management considers that the changes in the mortality and morbidity tables and in the method for determining the discount interest rate reflect a better accounting estimation of insurance contracts liabilities; see Note 4.6 (a) and (b) of the Annual Consolidated Financial Statements. These changes in accounting estimates were recorded during the second quarter of 2018.
(b) | Change in accounting policy |
As of December 31, 2017, the Subsidiary Interseguro recognized in its income statements the effect of the change in the value of liabilities coming from retirement, disability and survivor’s pensions, caused by the variations in the market interest rates used to discount these liabilities. In the first quarter of 2018, Management decided to modify its accounting policy in order to show the effect of the change in market interest rates on the interim condensed consolidated statements of other comprehensive income. This change was made to reduce volatility in the profits or losses associated to the effect of changes in market interest rates, as the financial assets supporting such insurance liabilities are measured at fair value through other comprehensive income. According to IAS 8, as the aforementioned change constitutes a voluntary change in the accounting policy of the Company and, in compliance with said the standard, was applied retrospectively, see Note 4.2.1 of the Annual Consolidated Financial Statements.
(c) | New standards, interpretations and amendments adopted by the Group |
The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended December 31, 2018, except for the adoption of new standards effective as of January 1, 2019.
The Group has adopted, for the first time, IFRS 16 “Leases” and, as required by IAS 34, the nature and effect of these changes are disclosed below:
12
Notes to the interim condensed consolidated financial statements (continued)
• | IFRS 16 “Leases” |
IFRS 16 supersedes IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement Contains a Lease”, SIC 15 “Operating Leases-Incentives” and SIC 27 “Evaluating the Substance of Transactions Involving the Legal Form of a Lease”. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a singleon-balance sheet model.
Lessor accounting under IFRS 16 is substantially unchanged from the one under IAS 17. Lessors will continue to classify leases as either operating or finance leases using similar principles as in IAS 17. Therefore, IFRS 16 did not have an impact for leases where the Group is the lessor.
As permitted by the transitional provisions of IFRS 16, the Group elected to apply the modified retrospective approach and has not restated figures from previous periods. Under this method, the Group recognizes lease liabilities for an amount equivalent to the current values of future payments agreed as of January 1, 2019. The Group also chose to use the recognition exemptions for lease contracts that, at the commencement date, corresponded tolow-value assets.
The effect of adoption IFRS 16 as of January 1, 2019, is as follows:
S/(000) | ||||
Assets | ||||
Property, furniture and equipment(Right-of-use-assets) | 341,746 | |||
Liabilities | ||||
Accounts payable, provisions and other liabilities (Lease liabilities) | 341,746 |
The first adoption of IFRS 16 has not had impact neither on the interim condensed consolidated statements of income nor on the interim condensed consolidated statements of changes in the Group’s equity as of January 1, 2019.
(c.1) | Nature of the effect of adoption of IFRS 16 |
Before the adoption of IFRS 16, the Group classified each of its leases (as lessee) at the inception date as either a finance lease or an operating lease. A lease was classified as a finance lease if it transferred substantially all of the risks and rewards incidental to ownership of the leased asset to the Group; otherwise it was classified as an operating lease. Finance leases were capitalized at the commencement of the lease at the fair value of the inception date of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments were apportioned between interest (recognized as finance costs) and reduction of the lease liability. In an operating lease, the leased property was not capitalized and the lease payments were recognized as rent expense in the consolidated income statements on a straight-line basis over the lease term. Any prepaid rent and accrued rent were recognized under the captions “Deferred charges” and Other accounts payable, respectively. Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach for all leases, except for leases oflow-value assets. The standard provides specific transition requirements and practical expedients, which have been applied by the Group.
13
Notes to the interim condensed consolidated financial statements (continued)
• | Leases previously classified as finance leases |
The Group did not change the initial amounts of recognized assets and liabilities at the date of initial adoption for leases previously classified as finance leases (i.e., theright-of-use-assets and lease liabilities equal the lease assets and liabilities recognized under IAS 17). The requirements of IFRS 16 were applied to these leases from January 1, 2019.
• | Leases previously classified as operating leases |
The Group recognizedright-of-use-assets and lease liabilities for leases previously classified as operating leases, except for leases oflow-value assets. Theright-of-use-assets for most leases were recognized based on the amount equal to the lease liabilities, adjusted for any related prepaid and accrued lease payments previously recognized: Lease liabilities were recognized based on the present value of the remaining lease payments, discounted by using the incremental borrowing rate at the date of initial application.
The Group also applied the available practical expedients wherein it:
• | Used a single discount rate to a portfolio of leases with reasonably similar characteristics. |
• | Relied on its assessment of whether leases are onerous immediately before the date of initial application. |
• | Applied the exemption to leases oflow-value assets at the date of initial application. |
• | Excluded the initial direct costs from the measurement of theright-of-use asset at the date of initial application. |
The leases liabilities as of January 1, 2019 can be reconciled to the operating lease commitments as of December 31, 2018 as follows:
S/(000) | ||||
Operating lease commitments as of December 31, 2018 | 508,085 | |||
Weighted average incremental borrowing rate as of January 1, 2019 | 5.58 | % | ||
Discounted operating lease commitments as of January 1, 2019 | 341,749 | |||
Minus: | ||||
Commitments relating to leases oflow-value assets | (3 | ) | ||
|
| |||
Lease liabilities as of January 1, 2019 | 341,746 | |||
|
|
14
Notes to the interim condensed consolidated financial statements (continued)
(c.2) | Summary of new accounting policies |
Set out below are the new accounting policies of the Group upon adoption of IFRS 16, which have been applied from the date of initial application:
• | Right-of-use-assets |
The Group recognizesright-of-use-assets at the commencement date of the lease (i.e., the date the underlying asset is available for use).Right-of-use-assets are measured at cost, minus any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost ofright-of-use-assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognizedright-of-use-assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term.Right-of-use-assets are subject to impairment.
• | Lease liabilities |
At the commencement date of the lease, the Group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate it. The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.
• | Leases and leases oflow-value assets |
The Group applies the lease of low-value assets recognition exemption to leases of small items of office furniture. Lease payments and leases oflow-value assets are recognized as expense on a straight-line basis over the lease term.
• | Significant judgement in determining the lease term of contracts with renewal options |
The Group determines the lease term as thenon-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.
15
Notes to the interim condensed consolidated financial statements (continued)
The Group has the option, under some of its leases, to lease the assets for additional terms. The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal the lease. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy).
The Group includes the renewal period as part of the lease term for leases, if it is appropriate, based on the paragraphs described above.
(c.3) | Amounts recognized in the statements of financial position and interim condensed consolidated statements of income |
Set out below, are the carrying amounts of the Group’sright-of-use-assets and lease liabilities and the movements during the period:
Right-of-use-assets | ||||||||||||||||||||
Land | Buildings and facilities | Furniture and equipment | Total | Lease liabilities | ||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | ||||||||||||||||
As of January 1, 2019 | 56,657 | 285,089 | — | 341,746 | 341,746 | |||||||||||||||
Additions | — | 11,309 | 2,292 | 13,601 | 14,317 | |||||||||||||||
Disposals and/or sales | — | (28,547 | ) | — | (28,547 | ) | (28,583 | ) | ||||||||||||
Depreciation expense | (1,850 | ) | (36,601 | ) | (191 | ) | (38,642 | ) | — | |||||||||||
Interest expense | — | — | — | — | 5,843 | |||||||||||||||
Payments | — | — | — | — | (43,706 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
As of June 30, 2019 | 54,807 | 231,250 | 2,101 | 288,158 | 289,617 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
• | Interpretation of IFRIC 23 “Uncertainty over Income Tax Treatments” |
The Interpretation addresses the accounting for income tax when tax treatments involve uncertainty that affects the application of IAS 12 “Income Taxes”. The interpretation does not apply to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments.
The Interpretation specifically addresses the following:
• | Whether an entity considers uncertain tax treatments separately. |
• | The assumptions an entity makes about the examination of tax treatments by taxation authorities. |
• | How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates. |
• | How an entity considers changes in facts and circumstances. |
16
Notes to the interim condensed consolidated financial statements (continued)
An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the resolution of the uncertainty should be followed.
Although IFS and its Subsidiaries domiciled in the Republic of Panama and the Bahamas are not subject to any income tax or capital gains tax, and Peruvian companies of life insurance are exempted from Income Tax regarding the income derived from assets linked to technical reserves for pension insurance (retirement, disability and survival pensions) and annuities from the Private Pension Funds Administration System – see Note 13(a), the Group applied the interpretation from the entry into force; however, as a result of the evaluation made, Management concluded that this interpretation has not affected the interim condensed consolidated financial statements.
• | Amendments to IFRS 9 “Financial Instruments”: Prepayment features with negative compensation |
Under IFRS 9, a debt instrument can be measured at amortized cost or at fair value through other comprehensive income, provided that the contractual cash flows are ‘solely payments of principal and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within the appropriate business model for that classification. The amendments to IFRS 9 clarify that a financial asset passes the SPPI criterion regardless of the event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable compensation for the early termination of the contract. These amendments had no significant impact on the interim condensed consolidated financial statements of the Group.
• | Amendments to IAS 19 “Employee Benefits”: Plan amendment, curtailment or settlement |
The amendments to IAS 19 address the accounting when a plan amendment, curtailment or settlement occurs during a reporting period. The amendments specify that when a plan amendment, curtailment or settlement occurs during the annual reporting period, an entity is required to determine the cost of current services for the remainder of the period after the plan amendment, curtailment or settlement.
The amendments had no impact on the interim condensed consolidated financial statements of the Group as it does not maintain defined benefit plans.
• | Amendments to IAS 28 “Investments in Associates and Joint Ventures”: Long-term interests in associates and joint ventures |
The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint venture to which the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture (long-term interests). This clarification is relevant because it implies that the expected credit loss model in IFRS 9 applies to such long-term interests.
The amendments also clarified that, in applying IFRS 9, an entity does not take account of any losses of the associate or joint venture, or any impairment losses on the net investment, recognized as adjustments to the net investment in the associate or joint venture that arise from applying IAS 28.
These amendments had no impact on the interim condensed consolidated financial statements as the Group does not have long-term interests in associates and joint ventures.
17
Notes to the interim condensed consolidated financial statements (continued)
• | Annual improvements 2015 – 2017 cycle |
• | IFRS 3 “Business Combinations”, the amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the requirements for a business combination achieved in stages, including remeasuring previously held interests in the assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held interest in the joint operation. |
An entity applies those amendments to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after January 1, 2019, with early adoption permitted.
These amendments had no impact on the interim condensed consolidated financial statements of the Group as there is no transaction where a joint control is obtained.
• | IFRS 11 “Joint Arrangements”, a party that participates in, but does not have joint control of, a joint operation might obtain joint control of the joint operation in which the activity of the joint operation constitutes a business as defined by IFRS 3. The amendments clarify that the previously held interests in that joint operation are not remeasured. |
An entity applies those amendments to transactions in which it obtains joint control on or after the beginning of the first annual reporting period beginning on or after January 1, 2019, with early adoption permitted.
These amendments had no impact on the interim condensed consolidated financial statements of the Group as there is no transaction where a joint control is obtained.
• | IAS 12 “Income Taxes”, the amendments clarify that the income tax effects of dividends are linked more directly to past transactions or events that generated distributable profits than to distributions to shareholders. Therefore, an entity recognizes the income tax effects of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events. |
An entity applies those amendments for annual reporting periods beginning on or after January 1, 2019, with early adoption permitted. When an entity first adopts those amendments, it applies them to the income tax effects of dividends recognized on or after the beginning of the earliest comparative period.
Although IFS and its Subsidiaries domiciled in the Republic of Panama and the Bahamas are not subject to any income tax or capital gains tax – see Note 13(a), legal entities or natural persons not domiciled in Peru are subject to an additional tax on dividends received from entities domiciled in Peru. In this regard, since the Company controls the Subsidiaries that distribute the dividends, it recognizes the amount of the Income Tax as an expense of the year to which these dividends correspond. Since the Group´s currect practice is in line with these amendments, they had no impact on the interim condensed consolidated financial statements of the Group.
18
Notes to the interim condensed consolidated financial statements (continued)
• | IAS 23 “Borrowing Costs”, the amendments clarify that an entity treats as part of general borrowings any borrowing originally made to develop a qualifying asset when substantially all of the activities necessary to prepare that asset for its intended use or sale are complete. |
An entity applies those amendments to borrowing costs incurred on or after the beginning of the annual reporting period in which the entity first adopts those amendments. An entity applies those amendments for annual reporting periods beginning on or after January 1, 2019, with early adoption permitted.
These modifications had no impact on the Group’s interim condensed consolidated financial statements because they do not develop qualified assets or obtain financing for these purposes.
(d) | Basis of consolidation |
There were no changes in the composition of IFS in the period. The interim condensed consolidated financial statements of IFS comprise the financial statements of Intercorp Financial Services Inc. and Subsidiaries. The method adopted by IFS to consolidate its Subsidiaries is described in Note 4.3 to the Annual Consolidated Financial Statements.
As described in Note 34 to the Annual Consolidated Financial Statements, in January 2019, Interbank sold Interfondos S.A., Sociedad Administradora de Fondos (henceforth “Interfondos”) to Inteligo Perú Holding S.A.C.. Such transaction was eliminated for accounting consolidation purposes, so it had no impact on the accompanying interim condensed consolidated financial statements.
19
Notes to the interim condensed consolidated financial statements (continued)
3. | Cash and due from banks |
(a) | This caption is made up as follows: |
As of June 30, 2019 | As of December 31, 2018 | |||||||
S/(000) | S/(000) | |||||||
Cash and clearing | 1,681,356 | 1,860,442 | ||||||
Deposits in the Central Reserve Bank of Peru – BCRP | 6,080,478 | 3,639,927 | ||||||
Deposits in banks | 1,411,854 | 1,586,693 | ||||||
Accrued interest | 7,542 | 6,817 | ||||||
|
|
|
| |||||
9,181,230 | 7,093,879 | |||||||
Restricted funds (b) | 1,411,593 | 1,286,532 | ||||||
|
|
|
| |||||
Total | 10,592,823 | 8,380,411 | ||||||
|
|
|
|
(b) | The Group maintains restricted funds related to: |
As of June 30, 2019 | As of December 31, 2018 | |||||||
S/(000) | S/(000) | |||||||
Repurchase agreements with BCRP (*) | 1,329,695 | 1,189,454 | ||||||
Derivative financial instruments | 77,494 | 92,456 | ||||||
Others | 4,404 | 4,622 | ||||||
|
|
|
| |||||
Total | 1,411,593 | 1,286,532 | ||||||
|
|
|
|
(*) | As of June 30, 2019, correspond to deposits maintained in the BCRP which guarantee repurchase agreements amounting to S/1,340,200,000 (guaranteed repurchase agreements amounting to S/1,154,500,000 as of December 31, 2018), see Note 9(a). |
Cash and cash equivalents presented in the interim condensed consolidated statements of cash flows exclude the restricted funds and accrued interest.
20
Notes to the interim condensed consolidated financial statements (continued)
4. | Financial investments |
(a) | This caption is made up as follows: |
As of June 30, 2019 | As of December 31, 2018 | |||||||
S/(000) | S/(000) | |||||||
Debt instruments measured at fair value through other comprehensive income (b) | 13,506,243 | 13,143,526 | ||||||
Investments at amortized cost (e) | 1,831,238 | 1,843,944 | ||||||
Investments at fair value through profit or loss (d) | 1,334,336 | 1,571,468 | ||||||
Equity instruments measured at fair value through other comprehensive income (f) | 950,549 | 845,317 | ||||||
|
|
|
| |||||
Total financial investments | 17,622,366 | 17,404,255 | ||||||
|
|
|
| |||||
Accrued income | ||||||||
Debt instruments measured at fair value through other comprehensive income (b) | 176,992 | 185,067 | ||||||
Investments at amortized cost (e) | 36,188 | 40,123 | ||||||
|
|
|
| |||||
Total | 17,835,546 | 17,629,445 | ||||||
|
|
|
|
21
Notes to the interim condensed consolidated financial statements (continued)
(b) | Following is the detail of debt instruments measured at fair value through other comprehensive income: |
Unrealized gross amount | Annual effective interest rates | |||||||||||||||||||||||||||||||||||
Amortized | Estimated | Maturity | S/ | US$ | ||||||||||||||||||||||||||||||||
cost | Gains | Losses (c) | fair value | Min | Max | Min | Max | |||||||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | % | % | % | % | |||||||||||||||||||||||||||||
As of June 30, 2019 | ||||||||||||||||||||||||||||||||||||
Corporate, leasing and subordinated bonds (*) | 7,695,006 | 436,253 | (35,190 | ) | 8,096,069 | Jul-19 / Jan-114 | 1.96 | 9.33 | 2.76 | 10.73 | ||||||||||||||||||||||||||
Peruvian Sovereign Bonds | 2,637,515 | 232,175 | — | 2,869,690 | Aug-20 / Feb-55 | 1.92 | 8.19 | — | — | |||||||||||||||||||||||||||
Negotiable Certificates of Deposit issued by BCRP (**) | 1,618,515 | 1,174 | (85 | ) | 1,619,604 | Jul-19 /Aug-20 | 2.57 | 2.62 | — | — | ||||||||||||||||||||||||||
Bonds guaranteed by the Peruvian Government | 703,498 | 28,176 | (1,849 | ) | 729,825 | Oct-24 / Jul-34 | 4.10 | 6.01 | 4.41 | 6.60 | ||||||||||||||||||||||||||
United States of America Treasury Bonds | 32,868 | 2 | — | 32,870 | Jul-19 /Jul-19 | — | — | 1.82 | 1.82 | |||||||||||||||||||||||||||
Global Bonds of the Republic of Colombia | 127,994 | 1,032 | — | 129,026 | Jul-21 /Feb-24 | — | — | 2.61 | 2.95 | |||||||||||||||||||||||||||
Global Bonds of the United Mexican States | 29,020 | 139 | — | 29,159 | Oct-23 | — | — | 2.92 | 2.92 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total | 12,844,416 | 698,951 | (37,124 | ) | 13,506,243 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Accrued interest | 176,992 | |||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Total | 13,683,235 | |||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
As of December 31, 2018 | ||||||||||||||||||||||||||||||||||||
Corporate, leasing and subordinated bonds (*) | 7,687,065 | 80,122 | (286,043 | ) | 7,481,144 | Jan-19 /Jan-114 | 2.01 | 9.58 | 2.80 | 8.90 | ||||||||||||||||||||||||||
Peruvian Sovereign Bonds | 2,702,571 | 46,714 | (65,955 | ) | 2,683,330 | Aug-20 /Feb-55 | 2.37 | 8.19 | — | — | ||||||||||||||||||||||||||
Negotiable Certificates of Deposit issued by BCRP (**) | 1,381,011 | 179 | (711 | ) | 1,380,479 | Jan-19 /Apr-20 | 2.73 | 3.05 | — | — | ||||||||||||||||||||||||||
Bonds guaranteed by the Peruvian Government | 804,309 | 5,166 | (14,477 | ) | 794,998 | May-24 / Jul -34 | 4.10 | 6.01 | 4.97 | 8.81 | ||||||||||||||||||||||||||
Global Bonds of the Republic of Peru | 332,311 | 1,439 | (14,692 | ) | 319,058 | Jul-25 /Feb-55 | 6.39 | 7.40 | 3.66 | 3.71 | ||||||||||||||||||||||||||
United States of America Treasury Bonds | 83,888 | — | (1,039 | ) | 82,849 | Dec-20 /Oct-23 | �� | — | — | 2.47 | 2.53 | |||||||||||||||||||||||||
Global Bonds of the Republic of Colombia | 271,482 | — | (4,046 | ) | 267,436 | Mar-19 /Sep-37 | — | — | 2.29 | 7.48 | ||||||||||||||||||||||||||
Global Bonds of the United Mexican States | 105,749 | — | (7,133 | ) | 98,616 | Oct-23 /Sep-34 | — | — | 4.16 | 6.28 | ||||||||||||||||||||||||||
Global Bonds of the Republic of Chile | 36,983 | — | (1,367 | ) | 35,616 | Feb-28 | — | — | 3.74 | 3.74 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Total | 13,405,369 | 133,620 | (395,463 | ) | 13,143,526 | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||
Accrued interest | 185,067 | |||||||||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||||||
Total | 13,328,593 | |||||||||||||||||||||||||||||||||||
|
|
(*) | As of June 30, 2019 and December 31, 2018, Inteligo holds corporate bonds from different entities for approximately S/473,867,000 and S/411,047,000, respectively, which guarantee loans with Credit Suisse First Boston and J. Safra Sarasin; see Note 9(a). |
(**) | As of June 30, 2019 and December 31, 2018, Interbank holds certificates of deposit issued by the BCRP for approximately S/106,578,000 and S/256,777,000, respectively, which guarantee loans with said entity for approximately S/98,166,000 and S/247,456,000; see Note 9(a). |
(c) | The Group has determined that the unrealized losses (other than credit risk) on debt instruments as of June 30, 2019 and December 31, 2018, are of temporary nature. |
The Group, according to the business model applied to these debt instruments, has the capacity to hold these investments for a sufficient period that allows the early recovery of the fair value, up to the maximum period for the early recovery or the due date.
22
Notes to the interim condensed consolidated financial statements (continued)
As of June 30, 2019 and December 31, 2018, the detail of the unrealized losses of the debt instruments classified as at fair value through other comprehensive income is as follows:
As of June 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||
Issuer | Amortized Cost | Unrealized gross gain | Unrealized gross loss | Amortized Cost | Unrealized gross gain | Unrealized gross loss | Maturity as of June 30, 2019 | Risk rating as of December 31, 2018 (***) | ||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||
Peruvian Sovereign Bonds | 2,637,515 | 232,175 | — | 2,702,571 | 46,714 | (65,955 | ) | 2020-2055 | A- (*) | |||||||||||||||||||
Global Bonds of the Republic of Peru | — | — | — | 332,311 | 1,439 | (14,692 | ) | — | BBB+ (*) | |||||||||||||||||||
Global Bonds of the Republic of Colombia | 127,994 | 1,032 | — | 271,482 | — | (4,046 | ) | 2021-2024 | BBB (*) | |||||||||||||||||||
Global Bonds of the United Mexican States | 29,020 | 139 | — | 105,749 | — | (7,133 | ) | 2023 | BBB+ (*) | |||||||||||||||||||
PA Pacifico Trust | 161,146 | — | (5,941 | ) | 166,049 | — | (12,280 | ) | 2035 | BBB- (*) | ||||||||||||||||||
Banco de Crédito del Perú | 233,323 | 117 | (4,843 | ) | 222,072 | — | (14,536 | ) | 2019-2023 | AA+ (**) | ||||||||||||||||||
BBVA Continental | 262,052 | 10,763 | (4,485 | ) | 199,326 | 2,039 | (4,737 | ) | 2020-2033 | BBB+ (*) | ||||||||||||||||||
Fermaca Enterprises S.R.L. | 220,743 | — | (3,529 | ) | 229,906 | — | (11,778 | ) | 2038 | BBB- (*) | ||||||||||||||||||
Corporación Financiera de Desarrollo S.A. | 388,107 | 21,617 | (2,632 | ) | 386,240 | — | (19,238 | ) | 2019-2046 | AA (**) | ||||||||||||||||||
Cencosud S.A. | 110,861 | — | (1,965 | ) | 191,388 | — | (20,819 | ) | 2045 | BBB- (*) | ||||||||||||||||||
Taboada Finance Ltda. | 92,453 | 1,849 | (1,849 | ) | 93,010 | 612 | (4,694 | ) | 2029-2033 | BBB+ (*) | ||||||||||||||||||
Mexico City Airport Trust | 92,678 | — | (1,011 | ) | 94,948 | — | (11,129 | ) | 2047 | BBB (*) | ||||||||||||||||||
Enel Distribución Perú S.A.A. | 85,613 | 6,232 | (524 | ) | 85,665 | 426 | (5,864 | ) | 2025-2038 | AAA (**) | ||||||||||||||||||
Southern Perú Copper Corporation | 150,718 | 11,548 | (260 | ) | 220,634 | — | (7,653 | ) | 2028-2040 | BBB+ (*) | ||||||||||||||||||
Bienes Raíces Uno Trust | 178,760 | 4,083 | — | 183,572 | — | (23,301 | ) | 2044 | BBB (*) | |||||||||||||||||||
Electricite de France S.A. | 70,583 | 1,212 | — | 72,431 | — | (8,673 | ) | 2114 | A- (*) | |||||||||||||||||||
Línea Amarilla S.A.C. | 174,009 | 9,060 | — | 173,130 | 1,042 | (4,998 | ) | 2037 | AA (**) | |||||||||||||||||||
Celeo Redes Operación CL | 91,542 | 3,320 | — | 94,252 | — | (6,014 | ) | 2047 | BBB (*) | |||||||||||||||||||
Falabella Perú S.A.A. | 101,273 | 7,699 | — | 101,341 | — | (6,474 | ) | 2028-2035 | AA+ (**) | |||||||||||||||||||
Mexichem SAB de CV | 173,770 | 4,488 | — | 178,387 | — | (18,048 | ) | 2042-2044 | BBB- (*) | |||||||||||||||||||
Lima Metro Line 2 Finance Limited | 145,373 | 1,994 | — | 149,512 | — | (7,935 | ) | 2034 | BBB (*) | |||||||||||||||||||
Celulosa Arauco y Constitución S.A. | 159,690 | 5,599 | — | 163,796 | — | (12,295 | ) | 2047 | BBB- (*) | |||||||||||||||||||
Goldman Sachs | 63,821 | 4,599 | — | 63,129 | — | (6,572 | ) | 2030-2042 | BBB+ (*) | |||||||||||||||||||
H2Olmos S.A. | 228,452 | 5,044 | — | 230,838 | — | (4,793 | ) | 2025-2032 | AA (**) | |||||||||||||||||||
México Generadora de Energía | 68,531 | 2,947 | — | 72,009 | — | (5,324 | ) | 2032 | BBB (*) | |||||||||||||||||||
PA Costera Trust | 73,093 | 536 | — | 75,046 | — | (4,716 | ) | 2034 | BBB- (*) | |||||||||||||||||||
Red de Energía del Perú | 106,680 | 4,891 | — | 109,665 | — | (4,111 | ) | 2026-2031 | AAA (**) | |||||||||||||||||||
Comisión Federal de Electricidad CFE | — | — | — | 35,007 | — | (4,180 | ) | — | BBB+ (*) | |||||||||||||||||||
Instruments with individual losses less than S/4 million | 812,046 | 1 | (10,085 | ) | 3,559,022 | 296 | (73,475 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 7,039,846 | 340,945 | (37,124 | ) | 10,562,488 | 52,568 | (395,463 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(*) | Instrument rated abroad. |
(**) | Instrument rated in Peru. |
(***) | Corresponds to the instrument’s rating with the largest unrealized loss. |
23
Notes to the interim condensed consolidated financial statements (continued)
On the other hand, the movement of the allowance for expected credit losses for debt instruments measured at fair value through other comprehensive income is presented below:
As of June 30, 2019 | As of December 31, 2018 | As of June 30, 2018 | ||||||||||
S/(000) | S/(000) | S/(000) | ||||||||||
Expected credit loss under IFRS 9 at the beginning of the period | 28,050 | 40,840 | 40,840 | |||||||||
New assets originated or purchased | 641 | 1,215 | 606 | |||||||||
Assets derecognized or matured (excluding write-offs) | (685 | ) | (13,463 | ) | (2,145 | ) | ||||||
Effect on the expected credit loss different to changes of the stage during the period (*) | (2,630 | ) | (829 | ) | (2,019 | ) | ||||||
Foreign exchange effect | (73 | ) | 287 | 44 | ||||||||
|
|
|
|
|
| |||||||
Expected credit loss under IFRS 9 at the end of the period | 25,303 | 28,050 | 37,326 | |||||||||
|
|
|
|
|
|
(*) | Corresponds mainly to the variation in the inputs used for calculating the expected credit losses other than changes of the stage during the year. |
As a result of the assessment of the impairment of its debt instruments at fair value through other comprehensive income, the Group recorded a recovery of the impairment of S/2,674,000 and S/3,558,000 for thesix-month periods ended June 30, 2019 and 2018, respectively; and a recovery of the impairment of S/13,077,000 during the year 2018, which were presented in the caption “Impairment recovery on financial investments” in the interim condensed consolidated statements of income.
24
Notes to the interim condensed consolidated financial statements (continued)
(d) | The composition of financial instruments at fair value through profit or loss is as follows: |
As of June 30, 2019 | As of December 31, 2018 | |||||||
S/(000) | S/(000) | |||||||
Equity instruments | ||||||||
Local and foreign mutual funds and investment funds participations | 900,530 | 1,144,771 | ||||||
BioPharma Credit PLC. | 136,256 | 144,157 | ||||||
Royalty Pharma, Note 19 (a) | 100,692 | 78,808 | ||||||
ViaSat Inc. | 29,222 | 21,705 | ||||||
LendUp | 23,170 | 23,720 | ||||||
Ishare Core MSCI World UCIT | 20,567 | 18,195 | ||||||
Others | 68,461 | 72,046 | ||||||
Debt instruments | ||||||||
Corporate, leasing and subordinated bonds | 36,761 | 42,625 | ||||||
Peruvian Sovereign Bonds | 18,677 | 21,927 | ||||||
United States of America Treasury Bonds | — | 3,514 | ||||||
|
|
|
| |||||
Total | 1,334,336 | 1,571,468 | ||||||
|
|
|
|
(e) | As of June 30, 2019 and December 31, 2018, the investments at amortized cost are totally comprised of Peruvian Sovereign Bonds for an amount of S/1,867,426,000 and S/1,884,067,000, respectively, including accrued interest. These investments present a low credit risk and the expected credit loss isnon-significant. |
As of June 30, 2019, the estimated fair value of these investments amounts to approximately S/1,929,286,000 (S/1,856,325,000, as of December 31, 2018).
As of June 30, 2019 and December 31, 2018, Interbank holds loans with the BCRP for approximately S/1,106,106,000 and S/671,963,000, respectively, see Note 9(a), that are guaranteed through the Peruvian Sovereign Bonds; which are classified as restricted for approximately S/1,216,909,000 and S/738,635,000, respectively.
25
Notes to the interim condensed consolidated financial statements (continued)
(f) | As of June 30, 2019 and December 31, 2018, the composition of equity instruments measured at fair value through other comprehensive income is as follows: |
As of June 30, 2019 | As of December 31, 2018 | |||||||
S/(000) | S/(000) | |||||||
InRetail Perú Corp., Note 19 (a) | 307,239 | 228,122 | ||||||
BioPharma Credit PLC | 253,621 | 261,484 | ||||||
Ishares diverse countries (ETF) | 137,490 | 130,155 | ||||||
Ferreycorp S.A.A. | 71,025 | 78,528 | ||||||
Engie Energía Perú S.A. | 63,024 | 51,384 | ||||||
Luz del Sur S.A.A. | 46,127 | 23,727 | ||||||
Vanguard FTSE Emerging Markets | 27,821 | 25,702 | ||||||
Gilead Sciences INC | 19,726 | 18,988 | ||||||
Bolsa de Valores de Lima S.A. | 13,548 | 15,737 | ||||||
Others below S/5 million | 10,928 | 11,490 | ||||||
|
|
|
| |||||
Total | 950,549 | 845,317 | ||||||
|
|
|
|
26
Notes to the interim condensed consolidated financial statements (continued)
(g) | Below are the debt instruments measured at fair value through other comprehensive income and at amortized cost according to the stages indicated by IFRS 9 as of June 30, 2019 and December 31, 2018: |
As of June 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||
Debt instruments measured at fair value through other comprehensive income and at amortized cost | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | ||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||
Corporate, leasing and subordinated bonds | 7,760,145 | 335,924 | — | 8,096,069 | �� | 7,167,899 | 313,245 | — | 7,481,144 | |||||||||||||||||||||||
Peruvian Sovereign Bonds | 4,700,928 | — | — | 4,700,928 | 4,527,274 | — | — | 4,527,274 | ||||||||||||||||||||||||
Negotiable Certificates of Deposit issued by BCRP | 1,619,604 | — | — | 1,619,604 | 1,380,479 | — | — | 1,380,479 | ||||||||||||||||||||||||
Bonds guaranteed by the Peruvian Government | 729,825 | — | — | 729,825 | 794,998 | — | — | 794,998 | ||||||||||||||||||||||||
Global Bonds of the Republic of Peru | — | — | — | — | 319,058 | — | — | 319,058 | ||||||||||||||||||||||||
United States of America Treasury Bonds | 32,870 | — | — | 32,870 | 82,849 | — | — | 82,849 | ||||||||||||||||||||||||
Global Bonds of the Republic of Colombia | 129,026 | — | — | 129,026 | 267,436 | — | — | 267,436 | ||||||||||||||||||||||||
Global Bonds of the United Mexican States | 29,159 | — | — | 29,159 | 98,616 | — | — | 98,616 | ||||||||||||||||||||||||
Global Bonds of the Republic of Chile | — | — | — | — | 35,616 | — | — | 35,616 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total | 15,001,557 | 335,924 | — | 15,337,481 | 14,674,225 | 313,245 | — | 14,987,470 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group rates its financial assets into Stage 1, Stage 2 and Stage 3, as described below:
Stage 1: When the financial assets are first recognized, the Group recognizes an allowance based on 12 months ECLs. Stage 1 also includes financial assets whose credit risk has improved and the loan has been reclassified from Stage 2.
Stage 2: When a financial asset has shown a significant increase in credit risk since origination, the Group records an allowance for the lifetime ECLs. Stage 2 also includes financial assets whose credit risk has improved and the financial asset has been reclassified from Stage 3.
Stage 3: Financial assets considered credit -impaired. The Group records an allowance for the lifetime financial asset.
For more detail, see Note 31.1 of the Annual Consolidated Financial Statements.
27
Notes to the interim condensed consolidated financial statements (continued)
5. | Loans, net |
(a) | This caption is made up as follows: |
As of June 30, 2019 | As of December 31, 2018 | |||||||
S/(000) | S/(000) | |||||||
Direct loans | ||||||||
Loans | 26,310,989 | 25,569,152 | ||||||
Credit cards | 5,403,540 | 4,881,404 | ||||||
Leasing | 1,582,838 | 1,682,629 | ||||||
Discounted notes | 558,619 | 494,953 | ||||||
Factoring | 315,638 | 309,558 | ||||||
Advances and overdrafts | 70,792 | 50,219 | ||||||
Refinanced loans | 211,094 | 210,384 | ||||||
Past due and under legal collection loans | 906,111 | 856,909 | ||||||
|
|
|
| |||||
35,359,621 | 34,055,208 | |||||||
Plus (minus) | ||||||||
Accrued interest from performing loans | 328,554 | 318,250 | ||||||
Unearned interest and interest collected in advance | (41,203 | ) | (47,737 | ) | ||||
Impairment allowance for loans (c) | (1,411,861 | ) | (1,364,804 | ) | ||||
|
|
|
| |||||
Total direct loans, net | 34,235,111 | 32,960,917 | ||||||
|
|
|
| |||||
Indirect loans | 4,028,380 | 4,071,460 | ||||||
|
|
|
|
(b) | The classification of the direct loan portfolio is as follows: |
As of June 30, 2019 | As of December 31, 2018 | |||||||
S/(000) | S/(000) | |||||||
Commercial loans | 15,857,613 | 16,032,068 | ||||||
Consumer loans | 11,922,123 | 10,891,278 | ||||||
Mortgage loans | 6,825,661 | 6,407,479 | ||||||
Small and micro-business loans | 754,224 | 724,383 | ||||||
|
|
|
| |||||
Total | 35,359,621 | 34,055,208 | ||||||
|
|
|
|
For purposes of estimating the impairment loss in accordance with IFRS 9, the Group’s loan portfolio is segmented by homogeneous groups that share similar risk characteristics; the Group determined these 3 types of portfolios: Retail Banking (groups consumer and mortgage loans), Commercial Banking (groups commercial loans) and Small Business Banking (groups loans to small and micro-business).
28
Notes to the interim condensed consolidated financial statements (continued)
(c) | The movement of the allowance for expected credit loss, calculated according to IFRS 9, is as follows: |
(c.1) | Total direct loans |
As of June 30, 2019 | As of June 30, 2018 | As of December 31, 2018 | ||||||||||||||||||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Total | ||||||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | ||||||||||||||||||||||||||||
Expected credit loss under IFRS 9 at the beginning of period balances | 394,801 | 462,749 | 507,254 | 1,364,804 | 329,161 | 477,616 | 453,570 | 1,260,347 | 1,260,347 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Impact of the expected credit loss in the consolidated income statements - | ||||||||||||||||||||||||||||||||||||
New assets originated or purchased | 189,680 | — | — | 189,680 | 183,625 | — | — | 183,625 | 366,155 | |||||||||||||||||||||||||||
Assets derecognized or repaid (excluding write offs) | (57,647 | ) | (41,984 | ) | (19,408 | ) | (119,039 | ) | (54,534 | ) | (40,475 | ) | (16,352 | ) | (111,361 | ) | (198,889 | ) | ||||||||||||||||||
Transfers to Stage 1 | 122,067 | (120,389 | ) | (1,678 | ) | — | 85,262 | (84,501 | ) | (761 | ) | — | — | |||||||||||||||||||||||
Transfers to Stage 2 | (103,282 | ) | 119,800 | (16,518 | ) | — | (108,407 | ) | 121,843 | (13,436 | ) | — | — | |||||||||||||||||||||||
Transfers to Stage 3 | (19,119 | ) | (107,156 | ) | 126,275 | — | (12,364 | ) | (116,331 | ) | 128,695 | — | — | |||||||||||||||||||||||
Impact on the expected credit loss for credits that change stage in the period | (88,163 | ) | 112,592 | 288,245 | 312,674 | (65,532 | ) | 133,662 | 226,456 | 294,586 | 586,327 | |||||||||||||||||||||||||
Others (*) | 46,028 | (27,538 | ) | (5,888 | ) | 12,602 | (4,520 | ) | (25,636 | ) | 3,748 | (26,408 | ) | (14,370 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
89,564 | (64,675 | ) | 371,028 | 395,917 | 23,530 | (11,438 | ) | 328,350 | 340,442 | 739,223 | ||||||||||||||||||||||||||
Write offs (**) | — | — | (405,399 | ) | (405,399 | ) | — | — | (402,539 | ) | (402,539 | ) | (791,107 | ) | ||||||||||||||||||||||
Recovery of written–off loans | — | — | 63,723 | 63,723 | — | — | 72,426 | 72,426 | 145,586 | |||||||||||||||||||||||||||
Foreign exchange effect (***) | (899 | ) | (1,804 | ) | (4,481 | ) | (7,184 | ) | 225 | 921 | 1,731 | 2,877 | 10,755 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Expected credit loss under IFRS 9 at the end of period balances | 483,466 | 396,270 | 532,125 | 1,411,861 | 352,916 | 467,099 | 453,538 | 1,273,553 | 1,364,804 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
Notes to the interim condensed consolidated financial statements (continued)
(c.1.1) | The following tables present the changes in the allowance for expected credit losses for direct loans for each classification of the direct loan portfolio: |
Changes in the allowance for expected credit losses for direct loans – Commercial
As of June 30, 2019 | As of June 30, 2018 | As of December 31, 2018 | ||||||||||||||||||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Total | ||||||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | ||||||||||||||||||||||||||||
Expected credit loss under IFRS 9 at the beginning of period balances | 68,705 | 27,397 | 98,111 | 194,213 | 48,699 | 28,437 | 75,335 | 152,471 | 152,471 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Impact of the expected credit loss in the consolidated income statements - | ||||||||||||||||||||||||||||||||||||
New assets originated or purchased | 43,573 | — | — | 43,573 | 39,794 | — | — | 39,794 | 72,297 | |||||||||||||||||||||||||||
Assets derecognized or repaid (excluding write offs) | (23,948 | ) | (6,261 | ) | (1,184 | ) | (31,393 | ) | (24,149 | ) | (6,998 | ) | (2,785 | ) | (33,932 | ) | (50,354 | ) | ||||||||||||||||||
Transfers to Stage 1 | 7,555 | (7,555 | ) | — | — | 6,223 | (6,223 | ) | — | — | — | |||||||||||||||||||||||||
Transfers to Stage 2 | (17,573 | ) | 19,638 | (2,065 | ) | — | (12,552 | ) | 13,466 | (914 | ) | — | — | |||||||||||||||||||||||
Transfers to Stage 3 | (4,140 | ) | (3,550 | ) | 7,690 | — | (785 | ) | (3,029 | ) | 3,814 | — | — | |||||||||||||||||||||||
Impact on the expected credit loss for credits that change stage in the period | (5,289 | ) | 3,967 | 16,496 | 15,174 | (3,944 | ) | 6,019 | 17,906 | 19,981 | 40,119 | |||||||||||||||||||||||||
Others (*) | (2,584 | ) | (2,199 | ) | (352 | ) | (5,135 | ) | (2,924 | ) | (1,352 | ) | 6,695 | 2,419 | 10,835 | |||||||||||||||||||||
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(2,406 | ) | 4,040 | 20,585 | 22,219 | 1,663 | 1,883 | 24,716 | 28,262 | 72,897 | |||||||||||||||||||||||||||
Write offs (**) | — | — | (7,725 | ) | (7,725 | ) | — | — | (11,883 | ) | (11,883 | ) | (34,355 | ) | ||||||||||||||||||||||
Recovery of written–off loans | — | — | 567 | 567 | — | — | 592 | 592 | 1,163 | |||||||||||||||||||||||||||
Foreign exchange effect (***) | (757 | ) | (232 | ) | (807 | ) | (1,796 | ) | 182 | 120 | 286 | 588 | 2,037 | |||||||||||||||||||||||
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Expected credit loss under IFRS 9 at the end of period balances | 65,542 | 31,205 | 110,731 | 207,478 | 50,544 | 30,440 | 89,046 | 170,030 | 194,213 | |||||||||||||||||||||||||||
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Changes in the allowance for expected credit losses for direct loans – Consumer |
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As of June 30, 2019 | As of June 30, 2018 | As of December 31, 2018 | ||||||||||||||||||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Total | ||||||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | ||||||||||||||||||||||||||||
Expected credit loss under IFRS 9 at the beginning of period balances | 303,953 | 398,353 | 284,645 | 986,951 | 262,829 | 408,167 | 275,650 | 946,646 | 946,646 | |||||||||||||||||||||||||||
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Impact of the expected credit loss in the consolidated income statements - | ||||||||||||||||||||||||||||||||||||
New assets originated or purchased | 135,215 | — | — | 135,215 | 132,282 | — | — | 132,282 | 276,193 | |||||||||||||||||||||||||||
Assets derecognized or repaid (excluding write offs) | (30,789 | ) | (34,274 | ) | (10,627 | ) | (75,690 | ) | (27,578 | ) | (31,540 | ) | (8,262 | ) | (67,380 | ) | (129,000 | ) | ||||||||||||||||||
Transfers to Stage 1 | 107,497 | (105,819 | ) | (1,678 | ) | — | 71,963 | (71,202 | ) | (761 | ) | — | — | |||||||||||||||||||||||
Transfers to Stage 2 | (82,094 | ) | 87,087 | (4,993 | ) | — | (88,896 | ) | 94,214 | (5,318 | ) | — | — | |||||||||||||||||||||||
Transfers to Stage 3 | (14,319 | ) | (95,050 | ) | 109,369 | — | (11,126 | ) | (103,797 | ) | 114,923 | — | — | |||||||||||||||||||||||
Impact on the expected credit loss for credits that change stage in the period | (76,613 | ) | 102,949 | 235,954 | 262,290 | (55,364 | ) | 120,375 | 176,788 | 241,799 | 483,030 | |||||||||||||||||||||||||
Others (*) | 52,318 | (25,594 | ) | (4,325 | ) | 22,399 | (545 | ) | (22,634 | ) | (1,995 | ) | (25,174 | ) | (25,882 | ) | ||||||||||||||||||||
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91,215 | (70,701 | ) | 323,700 | 344,214 | 20,736 | (14,584 | ) | 275,375 | 281,527 | 604,341 | ||||||||||||||||||||||||||
Write offs (**) | — | — | (371,253 | ) | (371,253 | ) | — | — | (372,400 | ) | (372,400 | ) | (710,980 | ) | ||||||||||||||||||||||
Recovery of written–off loans | — | — | 61,378 | 61,378 | — | — | 69,620 | 69,620 | 140,049 | |||||||||||||||||||||||||||
Foreign exchange effect (***) | (92 | ) | (1,452 | ) | (2,661 | ) | (4,205 | ) | 27 | 750 | 1,070 | 1,847 | 6,895 | |||||||||||||||||||||||
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Expected credit loss under IFRS 9 at the end of period balances | 395,076 | 326,200 | 295,809 | 1,017,085 | 283,592 | 394,333 | 249,315 | 927,240 | 986,951 | |||||||||||||||||||||||||||
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30
Notes to the interim condensed consolidated financial statements (continued)
Changes in the allowance for expected credit losses for direct loans – Mortgage
As of June 30, 2019 | As of June 30, 2018 | As of December 31, 2018 | ||||||||||||||||||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Total | ||||||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | ||||||||||||||||||||||||||||
Expected credit loss under IFRS 9 at the beginning of period balances | 8,428 | 20,142 | 86,040 | 114,610 | 8,368 | 24,742 | 71,977 | 105,087 | 105,087 | |||||||||||||||||||||||||||
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Impact of the expected credit loss in the consolidated income statements - | ||||||||||||||||||||||||||||||||||||
New assets originated or purchased | 904 | — | — | 904 | 1,159 | — | — | 1,159 | 2,035 | |||||||||||||||||||||||||||
Assets derecognized or repaid (excluding write offs) | (334 | ) | (625 | ) | (6,661 | ) | (7,620 | ) | (800 | ) | (881 | ) | (4,234 | ) | (5,915 | ) | (11,857 | ) | ||||||||||||||||||
Transfers to Stage 1 | 5,069 | (5,069 | ) | — | — | 5,598 | (5,598 | ) | — | — | — | |||||||||||||||||||||||||
Transfers to Stage 2 | (804 | ) | 10,194 | (9,390 | ) | — | (939 | ) | 8,119 | (7,180 | ) | — | — | |||||||||||||||||||||||
Transfers to Stage 3 | (79 | ) | (3,006 | ) | 3,085 | — | (95 | ) | (3,582 | ) | 3,677 | — | — | |||||||||||||||||||||||
Impact on the expected credit loss for credits that change stage in the period | (4,584 | ) | 384 | 18,941 | 14,741 | (5,075 | )�� | (172 | ) | 15,565 | 10,318 | 23,422 | ||||||||||||||||||||||||
Others (*) | 443 | (418 | ) | (1,871 | ) | (1,846 | ) | 38 | (3,382 | ) | (819 | ) | (4,163 | ) | (3,032 | ) | ||||||||||||||||||||
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615 | 1,460 | 4,104 | 6,179 | (114 | ) | (5,496 | ) | 7,009 | 1,399 | 10,568 | ||||||||||||||||||||||||||
Write offs (**) | — | — | (1,108 | ) | (1,108 | ) | — | — | (562 | ) | (562 | ) | (2,689 | ) | ||||||||||||||||||||||
Recovery of written–off loans | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Foreign exchange effect (***) | (34 | ) | (114 | ) | (944 | ) | (1,092 | ) | 13 | 48 | 331 | 392 | 1,644 | |||||||||||||||||||||||
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Expected credit loss under IFRS 9 at the end of period balances | 9,009 | 21,488 | 88,092 | 118,589 | 8,267 | 19,294 | 78,755 | 106,316 | 114,610 | |||||||||||||||||||||||||||
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Changes in the allowance for expected credit losses for direct loans – Small and micro-business |
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As of June 30, 2019 | As of June 30, 2018 | As of December 31, 2018 | ||||||||||||||||||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Total | ||||||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | ||||||||||||||||||||||||||||
Expected credit loss under IFRS 9 at the beginning of period balances | 13,715 | 16,857 | 38,458 | 69,030 | 9,265 | 16,270 | 30,608 | 56,143 | 56,143 | |||||||||||||||||||||||||||
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Impact of the expected credit loss in the consolidated income statements - | ||||||||||||||||||||||||||||||||||||
New assets originated or purchased | 9,988 | — | — | 9,988 | 10,390 | — | — | 10,390 | 15,630 | |||||||||||||||||||||||||||
Assets derecognized or repaid (excluding write offs) | (2,576 | ) | (824 | ) | (936 | ) | (4,336 | ) | (2,007 | ) | (1,056 | ) | (1,071 | ) | (4,134 | ) | (7,678 | ) | ||||||||||||||||||
Transfers to Stage 1 | 1,946 | (1,946 | ) | — | — | 1,478 | (1,478 | ) | — | — | — | |||||||||||||||||||||||||
Transfers to Stage 2 | (2,811 | ) | 2,881 | (70 | ) | — | (6,020 | ) | 6,044 | (24 | ) | — | — | |||||||||||||||||||||||
Transfers to Stage 3 | (581 | ) | (5,550 | ) | 6,131 | — | (358 | ) | (5,923 | ) | 6,281 | — | — | |||||||||||||||||||||||
Impact on the expected credit loss for credits that change stage in the period | (1,677 | ) | 5,292 | 16,854 | 20,469 | (1,149 | ) | 7,440 | 16,197 | 22,488 | 39,756 | |||||||||||||||||||||||||
Others (*) | (4,149 | ) | 673 | 660 | (2,816 | ) | (1,089 | ) | 1,732 | (133 | ) | 510 | 3,709 | |||||||||||||||||||||||
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140 | 526 | 22,639 | 23,305 | 1,245 | 6,759 | 21,250 | 29,254 | 51,417 | ||||||||||||||||||||||||||||
Write offs (**) | — | — | (25,313 | ) | (25,313 | ) | — | — | (17,694 | ) | (17,694 | ) | (43,083 | ) | ||||||||||||||||||||||
Recovery of written–off loans | — | — | 1,778 | 1,778 | — | — | 2,214 | 2,214 | 4,374 | |||||||||||||||||||||||||||
Foreign exchange effect (***) | (16 | ) | (6 | ) | (69 | ) | (91 | ) | 3 | 3 | 44 | 50 | 179 | |||||||||||||||||||||||
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Expected credit loss under IFRS 9 at the end of period balances | 13,839 | 17,377 | 37,493 | 68,709 | 10,513 | 23,032 | 36,422 | 69,967 | 69,030 | |||||||||||||||||||||||||||
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31
Notes to the interim condensed consolidated financial statements (continued)
(c.2) | Indirect loans (substantially all indirect loans correspond to commercial loans) |
As of June 30, 2019 | As of June 30, 2018 | As of December 31, 2018 | ||||||||||||||||||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | Total | ||||||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | ||||||||||||||||||||||||||||
Expected credit loss under IFRS 9 at the beginning of period balances | 19,829 | 19,753 | 22,469 | 62,051 | 46,890 | 77,299 | 14,989 | 139,178 | 139,178 | |||||||||||||||||||||||||||
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Impact of the expected credit loss in the consolidated income statements - | ||||||||||||||||||||||||||||||||||||
New assets originated or purchased | 4,303 | — | — | 4,303 | 6,181 | — | — | 6,181 | 12,138 | |||||||||||||||||||||||||||
Assets derecognized or repaid (excluding write offs) | (6,801 | ) | (5,338 | ) | (3,215 | ) | (15,354 | ) | (4,647 | ) | (10,668 | ) | (9,907 | ) | (25,222 | ) | (53,790 | ) | ||||||||||||||||||
Transfers to Stage 1 | 9,347 | (9,347 | ) | — | — | 17,393 | (17,393 | ) | — | — | — | |||||||||||||||||||||||||
Transfers to Stage 2 | (3,704 | ) | 3,730 | (26 | ) | — | (1,209 | ) | 1,209 | — | — | — | ||||||||||||||||||||||||
Transfers to Stage 3 | (73 | ) | (1 | ) | 74 | — | — | (40,388 | ) | 40,388 | — | — | ||||||||||||||||||||||||
Impact on the expected credit loss for credits that change stage in the period | (2,951 | ) | (1,399 | ) | 219 | (4,131 | ) | (4,539 | ) | 2,089 | (19,233 | ) | (21,683 | ) | (3,009 | ) | ||||||||||||||||||||
Others (*) | (371 | ) | 27 | (1,036 | ) | (1,380 | ) | (13,379 | ) | (2,800 | ) | 1,919 | (14,260 | ) | (34,490 | ) | ||||||||||||||||||||
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(250 | ) | (12,328 | ) | (3,984 | ) | (16,562 | ) | (200 | ) | (67,951 | ) | 13,167 | (54,984 | ) | (79,151 | ) | ||||||||||||||||||||
Write offs (**) | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Recovery of written–off loans | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Foreign exchange effect (***) | (246 | ) | (356 | ) | (14 | ) | (616 | ) | 237 | 233 | 22 | 492 | 2,024 | |||||||||||||||||||||||
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Expected credit loss under IFRS 9 at the end of period balances | 19,333 | 7,069 | 18,471 | 44,873 | 46,927 | 9,581 | 28,178 | 84,686 | 62,051 | |||||||||||||||||||||||||||
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(*) | Corresponds mainly to: (i) the variation between the amortized cost of the loan at the beginning of period and its amortized cost at the end of period (variation in the provision recorded for partial amortizations that did not represent a reduction or cancellation of the loan), (ii) variations in credit risk that did not generate transfers to other stages; and (iii) the execution of contingent loans (conversion of indirect debt into direct debt). |
(**) | The Group writes off financial assets that are still subject to collection activities. In this regard, the Group seeks to recover the amounts legally owed in full, but have been written off because there is no reasonable expectation of recovery. |
(***) | Corresponds mainly to the effect of the exchange rate and the variation of the value of money over time. |
(d) | In Management’s opinion, the impairment allowance for loan recorded as of June 30, 2019 and 2018 and December 31, 2018 has been established in accordance with NIIF 9 and is sufficient to cover incurred losses on the loan portfolio. |
32
Notes to the interim condensed consolidated financial statements (continued)
6. | Investment property |
(a) | This caption is made up as follows: |
As of June 30, 2019 | As of December 31, 2018 | Acquisition or construction year | Valuation methodology As of June 30, 2019 and December 31, 2018 | |||||||||||||
S/(000) | S/(000) | |||||||||||||||
Land | ||||||||||||||||
San Isidro – Lima | 246,514 | 249,377 | 2009 | Appraisal | ||||||||||||
Miraflores – Lima | 57,464 | 70,800 | 2017 | Appraisal | ||||||||||||
San Martín de Porres – Lima | 63,771 | 64,501 | 2015 | Appraisal | ||||||||||||
Piura | 49,986 | 50,708 | 2008 | Appraisal | ||||||||||||
Sullana | 16,405 | 16,491 | 2012 | Appraisal | ||||||||||||
Santa Clara – Lima | 12,855 | 10,342 | 2017 | Appraisal | ||||||||||||
Chimbote | 7,232 | 7,421 | 2015 | Appraisal | ||||||||||||
Lurin | 4,031 | 4,032 | 2008 | Appraisal | ||||||||||||
Others | 11,267 | 11,672 | — | Appraisal | ||||||||||||
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469,525 | 485,344 | |||||||||||||||
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Completed investment property - “Real Plaza” Shopping Malls | ||||||||||||||||
Talara | 38,818 | 41,337 | 2015 | DCF | ||||||||||||
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38,818 | 41,337 | |||||||||||||||
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Buildings | ||||||||||||||||
Orquídeas - San Isidro - Lima | 157,261 | 144,645 | 2017 | DCF | ||||||||||||
Ate Vitarte – Lima | 69,365 | 67,894 | 2006 | DCF | ||||||||||||
Chorrillos – Lima (d) | 67,633 | 51,552 | 2017 | DCF | ||||||||||||
Maestro – Huancayo | 32,530 | 32,901 | 2017 | DCF | ||||||||||||
Cusco | 28,938 | 28,472 | 2017 | DCF | ||||||||||||
Panorama – Lima | 20,703 | 20,437 | 2016 | DCF | ||||||||||||
Pardo y Aliaga – Lima | 18,690 | 19,164 | 2008 | DCF | ||||||||||||
Trujillo | 16,557 | 16,270 | 2016 | DCF | ||||||||||||
Cercado de Lima – Lima | 12,727 | 12,929 | 2017 | DCF | ||||||||||||
Others | 25,006 | 24,100 | 2017 | DCF | ||||||||||||
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449,410 | 418,364 | |||||||||||||||
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Built on leased land | ||||||||||||||||
San Juan de Lurigancho – Lima | 42,020 | 41,493 | 2017 | DCF | ||||||||||||
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Total | 999,773 | 986,538 | ||||||||||||||
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DCF: Discounted cash flow
(i) | As of June 30, 2019 and December 31, 2018, there are no liens on any investment property. |
33
Notes to the interim condensed consolidated financial statements (continued)
(b) | The net gain on investment property as of June 30, 2019 and 2018, consists of the following: |
As of June 30, 2019 | As of June 30, 2018 | |||||||
S/(000) | S/(000) | |||||||
Gain on valuation of investment property | 21,981 | 6,432 | ||||||
Income from rental of investment property | 22,853 | 14,110 | ||||||
(Loss) gain on sale of investment property | (1,556 | ) | 1,559 | |||||
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Total | 43,278 | 22,101 | ||||||
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(c) | The movement of investment property is as follows: |
As of June 30, 2019 | As of June 30, 2018 | |||||||
S/(000) | S/(000) | |||||||
Beginning of period balances | 986,538 | 1,118,608 | ||||||
Additions (d) | 11,726 | 34,658 | ||||||
Sales (e) | (20,472 | ) | (192,521 | ) | ||||
Transfers | — | (17,634 | ) | |||||
Valuation gain (loss) | 21,981 | �� | 6,432 | |||||
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Balance as of June 30 | 999,773 | 949,543 | ||||||
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Balance as of December 31, 2018 | 986,538 | |||||||
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(d) | During 2019, the main additions are outlays related to the construction of the “Chorrillos-Lima” building. |
During 2018, the main additions are outlays related to the construction of the“Orquídeas-San Isidro–Lima” building.
(e) | In June 2019, Interseguro sold to a related entity in cash and at market value, a percent of the land located in Miraflores, Lima (called “Cuartel San Martin”); recognizing a net loss of approximately S/1,556,000. The result of the sale of investment property is presented as “Net gain on investment property” in the interim condensed consolidated statement of income. |
In January 2018, Interseguro sold, in cash and at market value, the Real Plaza Pucallpa shopping center, a parcel located in Lurín (Lima) and a building through a surface rights agreement to related entities.
34
Notes to the interim condensed consolidated financial statements (continued)
(f) | Fair value measurement – Investment property - Valuation techniques |
The valuation techniques to estimate the fair value and the main assumptions used are described in Note 8 “Investment property” of the Annual Consolidated Financial Statements.
The main assumptions used in the valuation and estimation of the fair value of investment property are detailed below:
As of June 30, 2019 | As of December 31, 2018 | |||||||
Average ERV | US$ | 67.3 | US$ | 59.1 | ||||
Long-term inflation | 2.6 | % | 2.6 | % | ||||
Long-term occupancy rate | 98.9 | % | 98.9 | % | ||||
Average growth rate of rental income | 2.6 | % | 2.6 | % | ||||
Average NOI margin | 92.7 | % | 95.3 | % | ||||
Discount rate | 9.0 | % | 9.0 | % |
35
Notes to the interim condensed consolidated financial statements (continued)
7. | Accounts receivable and other assets, net; accounts payable, provisions and other liabilities |
(a) | These captions are comprised of the following: |
As of June 30, 2019 | As of December 31, 2018 | |||||||
S/(000) | S/(000) | |||||||
Accounts receivable and other assets | ||||||||
Financial instruments | ||||||||
Accounts receivable from sale of investments | 371,867 | 367,902 | ||||||
Other accounts receivable, net | 361,775 | 440,531 | ||||||
Accounts receivable related to derivative financial instruments (b) | 187,124 | 185,376 | ||||||
Assets for technical reserves for claims and premiums by reinsurers | 98,228 | 147,891 | ||||||
Operations in process | 36,355 | 54,428 | ||||||
Accounts receivable from reinsurers and coinsurers | 31,110 | 39,875 | ||||||
Credit card commissions receivable | 13,865 | 13,237 | ||||||
Insurance operations receivables, net | 10,392 | 42,795 | ||||||
|
|
|
| |||||
Total | 1,110,716 | 1,292,035 | ||||||
|
|
|
| |||||
Non-financial instruments | ||||||||
Deferred charges | 83,556 | 80,113 | ||||||
Investments in associates | 60,935 | 63,233 | ||||||
Prepaid Income Tax | 22,482 | 19,860 | ||||||
Public works tax deduction | 7,556 | 22,608 | ||||||
Prepaid rights to related entity | 6,574 | 8,856 | ||||||
Value Added Tax credit | 1,189 | 5,517 | ||||||
Others | 5,739 | 10,332 | ||||||
|
|
|
| |||||
188,031 | 210,519 | |||||||
|
|
|
| |||||
Total | 1,298,747 | 1,502,554 | ||||||
|
|
|
| |||||
Accounts payable, provisions and other liabilities | ||||||||
Financial instruments | ||||||||
Other accounts payable | 422,169 | 471,412 | ||||||
Contract liability with investment component | 394,359 | 298,382 | ||||||
Accounts payable for acquisitions of investments | 292,490 | 228,687 | ||||||
Lease liabilities, Note 2(c) | 289,617 | — | ||||||
Accounts payable related to derivative financial instruments (b) | 191,364 | 154,116 | ||||||
Operations in process | 154,847 | 116,717 | ||||||
Workers’ profit sharing and salaries payable | 118,107 | 127,516 | ||||||
Allowance for indirect loan losses | 44,873 | 62,051 | ||||||
Accounts payable to reinsurers and coinsurers | 16,721 | 62,879 | ||||||
|
|
|
| |||||
1,924,547 | 1,521,760 | |||||||
|
|
|
| |||||
Non-financial instruments | ||||||||
Taxes payable | 68,745 | 101,085 | ||||||
Deferred income | 61,028 | 59,482 | ||||||
Provision for other contingencies | 47,837 | 46,506 | ||||||
Others | 7,115 | 21,530 | ||||||
|
|
|
| |||||
184,725 | 228,603 | |||||||
|
|
|
| |||||
Total | 2,109,272 | 1,750,363 | ||||||
|
|
|
|
36
Notes to the interim condensed consolidated financial statements (continued)
(b) | The following table presents, as of June 30, 2019 and December 31, 2018, the fair value of derivative financial instruments recorded as assets or liabilities, including their notional amounts. |
As of June 30, 2019 | Assets | Liabilities | Notional amount | Effective part recognized in other comprehensive income during the six-month periods ended June 30, 2019 | Maturity | Hedged instruments | Caption of the interim condensed | |||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||
Derivatives held for trading | ||||||||||||||||||||||
Forward exchange contracts | 51,856 | 22,719 | 6,044,964 | — | Between July 2019 and January 2021 | — | — | |||||||||||||||
Interest rate swaps | 59,268 | 71,996 | 3,205,416 | — | Between November 2020 and December 2029 | — | — | |||||||||||||||
Currency swaps | 29,270 | 33,158 | 1,031,552 | — | Between July 2019 and January 2025 | — | — | |||||||||||||||
Cross currency swaps | — | 53,725 | 193,467 | — | January 2023 | — | — | |||||||||||||||
Options | 113 | 342 | 76,644 | — | Between July 2019 and June 2020 | — | — | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
140,507 | 181,940 | 10,552,043 | — | |||||||||||||||||||
Derivatives held as hedges Cash flow hedges: | ||||||||||||||||||||||
Cross currency swaps (CCS) | 33,558 | 3,288 | 1,380,541 | (5,556 | ) | January 2023 | Senior bonds | Bonds, notes and other obligations | ||||||||||||||
Cross currency swaps (CCS) | 13,059 | — | 493,050 | 2,506 | October 2027 | Senior bonds | Bonds, notes and other obligations | |||||||||||||||
Interest rate swaps (IRS) | — | 2,031 | 131,480 | (659 | ) | November 2020 | Due to banks | Due to banks and correspondents | ||||||||||||||
Interest rate swaps (IRS) | — | 1,360 | 82,175 | (533 | ) | December 2020 | Due to banks | Due to banks and correspondents | ||||||||||||||
Interest rate swaps (IRS) | — | 1,364 | 82,175 | (535 | ) | December 2020 | Due to banks | Due to banks and correspondents | ||||||||||||||
Cross currency swaps (CCS) | — | 1,381 | 65,740 | 84 | October 2020 | Senior bonds | Bonds, notes and other obligations | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
46,617 | 9,424 | 2,235,161 | (4,693 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
187,124 | 191,364 | 12,787,204 | (4,693 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
37
Notes to the interim condensed consolidated financial statements (continued)
As of December 31, 2018 | Assets | Liabilities | Notional amount | Effective part recognized in other comprehensive income during the year | Maturity | Hedged instruments | Caption of the interim | |||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||
Derivatives held for trading | ||||||||||||||||||||||
Forward exchange contracts | 20,009 | 21,529 | 5,177,208 | — | Between January 2019 and February 2020 | — | — | |||||||||||||||
Interest rate swaps | 19,249 | 19,854 | 2,018,220 | — | Between November 2020 and December 2029 | — | — | |||||||||||||||
Currency swaps | 48,452 | 48,915 | 909,114 | — | Between January 2019 and January 2025 | — | — | |||||||||||||||
Cross currency swaps | — | 59,683 | 198,529 | — | January 2023 | — | — | |||||||||||||||
Options | 628 | 1,956 | 234,780 | — | Between January 2019 and June 2020 | — | — | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
88,338 | 151,937 | 8,537,851 | — | |||||||||||||||||||
Derivatives held as hedges Cash flow hedges: | ||||||||||||||||||||||
Cross currency swaps (CCS) | 74,144 | — | 1,349,200 | 25,775 | January 2023 | Senior bonds | Bonds, notes and other obligations | |||||||||||||||
Cross currency swaps (CCS) | 22,675 | — | 505,950 | 3,420 | October 2027 | Senior bonds | Bonds, notes and other obligations | |||||||||||||||
Interest rate swaps (IRS) | — | 1,002 | 134,920 | (684 | ) | November 2020 | Due to banks | Due to banks and correspondents | ||||||||||||||
Interest rate swaps (IRS) | — | 589 | 84,325 | (394 | ) | December 2020 | Due to banks | Due to banks and correspondents | ||||||||||||||
Interest rate swaps (IRS) | — | 588 | 84,325 | (393 | ) | December 2020 | Due to banks | Due to banks and correspondents | ||||||||||||||
Cross currency swaps (CCS) | 219 | — | 67,460 | 2,562 | October 2020 | Senior bonds | Bonds, notes and other obligations | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
97,038 | 2,179 | 2,226,180 | 30,286 | |||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||
185,376 | 154,116 | 10,764,031 | 30,286 | |||||||||||||||||||
|
|
|
|
|
|
|
|
(i) | As of June 30, 2019 and December 31, 2018, certain derivative financial instruments required the establishment of collateral deposits, see Note 3(b). |
(ii) | For the designated hedging derivatives mentioned in the chart above, changes in fair values of hedging instruments completely offset the changes in fair values of hedged items; therefore, there has been no hedge ineffectiveness during thesix-month periods ended June 30, 2019 and during the fiscal year 2018. Likewise, during thesix-month periods ended June 30, 2019 and during the fiscal year 2018 no hedge was discontinued. |
(iii) | Derivatives held for trading are traded mainly to satisfy clients’ needs. The Group may also take positions with the expectation of profiting from favorable movements in prices or rates. Also, this caption includes any derivatives which do not comply with IFRS 9 hedge accounting requirements. |
38
Notes to the interim condensed consolidated financial statements (continued)
8. | Deposits and obligations |
(a) | This caption is made up as follows: |
As of June 30, 2019 | As of December 31, 2018 | |||||||
S/(000) | S/(000) | |||||||
Time deposits | 11,528,439 | 11,074,316 | ||||||
Demand deposits | 11,264,902 | 10,109,492 | ||||||
Savings deposits | 10,750,666 | 10,728,257 | ||||||
Severance indemnity deposits | 1,823,745 | 1,763,826 | ||||||
Other obligations | 6,024 | 6,059 | ||||||
|
|
|
| |||||
Total | 35,373,776 | 33,681,950 | ||||||
|
|
|
|
(b) | Interest rates applied to deposits and obligations are determined based on the market interest rates. |
(c) | As of June 30, 2019 and December 31, 2018, approximately S/9,927,289,000 and S/9,734,215,000, respectively, of deposits and obligations are covered by the Peruvian Deposit Insurance Fund. |
9. | Due to banks and correspondents |
(a) | This caption is made up as follows: |
As of June 30, 2019 | As of December 31, 2018 | |||||||
S/(000) | S/(000) | |||||||
By type | ||||||||
BCRP, Notes 3(b), 4(b) (**) and (e) | 2,544,472 | 2,073,919 | ||||||
Promotional credit lines | 1,376,848 | 1,386,603 | ||||||
Loans received from foreign entities, (b) and Note 4(b) (*) | 624,530 | 796,028 | ||||||
Loans received from Peruvian entities | 5,007 | 763 | ||||||
|
|
|
| |||||
4,550,857 | 4,257,313 | |||||||
Interest and commissions payable | 46,090 | 36,048 | ||||||
|
|
|
| |||||
4,596,947 | 4,293,361 | |||||||
|
|
|
| |||||
By term | ||||||||
Short term | 2,914,843 | 2,507,623 | ||||||
Long term | 1,682,104 | 1,785,738 | ||||||
|
|
|
| |||||
Total | 4,596,947 | 4,293,361 | ||||||
|
|
|
|
39
Notes to the interim condensed consolidated financial statements (continued)
(b) | As of June 30, 2019 and December 31, 2018, some of the Group loan agreements include standard clauses regarding the compliance of financial ratios, assets disposals and intercompany transactions under certain conditions, the use of funds and other management issues, such as: |
(i) | Submit audited financial statements on an annual basis and unaudited financial statements on a quarterly basis (both in Spanish and English). |
(ii) | Maintain a determined global capital ratio. |
(iii) | Maintain a determined coverage margin ofnon-performing loan portfolio. |
(iv) | Maintain a determined past due loans rate. |
In the opinion of Management, the Group complies with all covenants arising from its due to banks and correspondents as of June 30, 2019 and December 31, 2018.
40
Notes to the interim condensed consolidated financial statements (continued)
10. | Bonds, notes and other obligations |
(a) | This caption is made up as follows: |
Issuance | Issuer | Annual interest rate | Interest payment | Maturity | Amount issued | As of June 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||
(000) | S/(000) | S/(000) | ||||||||||||||||||||||||||
Local issuances | ||||||||||||||||||||||||||||
Subordinated bonds – first program | ||||||||||||||||||||||||||||
Second (B series) | Interbank | 9.50% | Semi-annually | 2023 | US$30,000 | 98,610 | 94,086 | |||||||||||||||||||||
Third (A series) | Interbank | 3.5% + VAC (*) | Semi-annually | 2023 | S/ 110,000 | 70,000 | 70,000 | |||||||||||||||||||||
Fifth (A series) | Interbank | 8.50% | Semi-annually | July 2019 | S/ 3,300 | 3,300 | 3,300 | |||||||||||||||||||||
Sixth (A series) | Interbank | 8.16% | Semi-annually | July 2019 | US$15,110 | 49,667 | 50,966 | |||||||||||||||||||||
Eighth (A series) | Interbank | 6.91% | Semi-annually | 2022 | S/ 137,900 | 137,112 | 137,130 | |||||||||||||||||||||
Second, first tranch (**) | Interseguro | 6.97% | Semi-annually | 2024 | US$35,000 | — | 118,055 | |||||||||||||||||||||
Second, second tranch | Interseguro | 6.00% | Semi-annually | 2024 | US$15,000 | 49,305 | 50,594 | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
407,994 | 524,131 | |||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Subordinated bonds – second program | ||||||||||||||||||||||||||||
Second (A series) | Interbank | 5.81% | Semi-annually | 2023 | S/ 150,000 | 149,801 | 149,776 | |||||||||||||||||||||
Third (A series) | Interbank | 7.50% | Semi-annually | 2023 | US$50,000 | 164,048 | 168,312 | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
313,849 | 318,088 | |||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Subordinated bonds – third program | ||||||||||||||||||||||||||||
First (Single series) | Interseguro | 9.50% | Semi-annually | 2029 | US$20,000 | 65,740 | — | |||||||||||||||||||||
Corporate bonds – second program | ||||||||||||||||||||||||||||
Fifth (A series) | Interbank | 3.41% + VAC (*) | Semi-annually | 2029 | S/ 150,000 | 150,000 | — | |||||||||||||||||||||
Negotiable certificates of deposits – first program | ||||||||||||||||||||||||||||
First (A series) | Interbank | 4.28% | Annually | 2020 | S/ 150,000 | 145,369 | — | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Total local issuances | 1,082,952 | 842,219 | ||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
International issuances | ||||||||||||||||||||||||||||
Subordinated bonds | Interbank | 6.625% | Semi-annually | 2029 | US$300,000 | 981,561 | 1,006,875 | |||||||||||||||||||||
Junior subordinated notes | Interbank | 8.50% | Semi-annually | 2070 | US$200,000 | 653,932 | 671,546 | |||||||||||||||||||||
Senior bonds – First and second issuance | Interbank | 5.75% | Semi-annually | 2020 | US$650,000 | 1,274,470 | 1,309,248 | |||||||||||||||||||||
Senior bonds | IFS | 4.125% | Semi-annually | 2027 | US$300,000 | 969,670 | 993,241 | |||||||||||||||||||||
Senior bonds | Interbank | 3.375% | Semi-annually | 2023 | US$484,895 | 1,528,109 | 1,558,979 | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Total international issuances | 5,407,742 | 5,539,889 | ||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Total local and international issuances | 6,490,694 | 6,382,108 | ||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Interest payable | 115,525 | 114,670 | ||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Total | 6,606,219 | 6,496,778 | ||||||||||||||||||||||||||
|
|
|
|
(*) | The Spanish term “Valor de actualización constante” is referred to an amount subject to adjustments. |
(**) | In February 2019, Interseguro executed the early redemption of said instruments and paid interest for approximately US$1,200,000. |
41
Notes to the interim condensed consolidated financial statements (continued)
(b) | The international issuances are listed at the Luxembourg Stock Exchange. On the other hand, the local and international issuances include standard clauses of compliance with financial ratios, the use of funds and other administrative matters. |
As of June 30, 2019 and December 31, 2018, the international issuances maintain mainly this clause: Submit audited financial statements on an annual basis and unaudited financial statements on a quarterly basis (both in Spanish and English).
In the opinion of Management, this clause has been met by the Group as of June 30, 2019 and December 31, 2018.
11. | Insurance contract liabilities |
(a) | This caption is made up as follows: |
As of June 30, 2019 | As of December 31, 2018 | |||||||
S/(000) | S/(000) | |||||||
Technical reserves for insurance premiums (b) | 10,705,628 | 10,006,960 | ||||||
Technical reserves for claims | 229,464 | 293,508 | ||||||
|
|
|
| |||||
10,935,092 | 10,300,468 | |||||||
|
|
|
| |||||
By term | ||||||||
Short term | 933,568 | 935,182 | ||||||
Long term | 10,001,524 | 9,365,286 | ||||||
|
|
|
| |||||
Total | 10,935,092 | 10,300,468 | ||||||
|
|
|
|
42
Notes to the interim condensed consolidated financial statements (continued)
(b) | The movement of technical reserves disclosed by type of insurance for the periods ended June 30, 2019 and 2018, is as follows: |
2019 | 2018 | |||||||||||||||||||||||||||||||||||||||
Annuities | Retirement, disability and survival annuities | Life insurance | General insurance | Total | Annuities | Retirement, disability and survival annuities | Life insurance | General insurance | Total | |||||||||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||||||||
Beginning of period balances | 8,665,894 | 715,217 | 586,166 | 39,683 | 10,006,960 | 9,034,796 | 676,949 | 525,662 | 36,482 | 10,273,889 | ||||||||||||||||||||||||||||||
Insurance subscriptions | 157,702 | — | 2,463 | 34,825 | 194,990 | 116,569 | 1 | 5,973 | 23,403 | 145,946 | ||||||||||||||||||||||||||||||
Interest rate effect | 642,214 | 34,017 | — | — | 676,231 | (869,253 | ) | (149 | ) | — | — | (869,402 | ) | |||||||||||||||||||||||||||
Time passage adjustments | (82,519 | ) | 18,726 | 64,137 | (34,188 | ) | (33,844 | ) | 49,482 | 19,616 | 16,109 | (19,676 | ) | 65,531 | ||||||||||||||||||||||||||
Maturities and recoveries | — | — | (20,465 | ) | — | (20,465 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||
Exchange differences | (104,151 | ) | — | (14,072 | ) | (21 | ) | (118,244 | ) | 31,140 | 121 | 5,143 | (699 | ) | 35,705 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Balances as of June 30 | 9,279,140 | 767,960 | 618,229 | 40,299 | 10,705,628 | 8,362,734 | 696,538 | 552,887 | 39,510 | 9,651,669 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Balances as of December 31 | 8,665,894 | 715,217 | 586,166 | 39,683 | 10,006,960 | |||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
(c) | In Management’s opinion, these balances reflect the exposure of life and general insurance contracts as of June 30, 2019 and December 31, 2018 in accordance with IFRS 4. |
(d) | As of June 30, 2019 and December 31, 2018, the main assumptions used in the estimation of retirement, disability and survival annuities and individual life reserves are the following: |
As of June 30, 2019 | As of December 31, 2018 | |||||||
Type | Mortality table | Technical rates | Mortality table | Technical rates | ||||
Annuities | SPP-S-2017, SPP-I-2017 | 5.00% in US$ | SPP-S-2017, SPP-I-2017 | 5.63% in US$ | ||||
with improvement factor for mortality | 2.11% in S/ VAC 5.28% in adjusted S/ | with improvement factor for mortality | 2.74% in S/ VAC 5.84% in adjusted S/ | |||||
Retirement, disability and survival | SPP-S-2017,SPP-I-2017 with improvement factor for mortality | 2.11% in S/ VAC | SPP-S-2017,SPP-I-2017 with improvement factor for mortality | 2.74% in S/ VAC | ||||
Individual life insurance contracts (included linked insurance contracts) | CSO 80 adjusted | 4.00 - 5.00% | CSO 80 adjusted | 4.00 - 6.00% |
43
Notes to the interim condensed consolidated financial statements (continued)
The sensitivity of the estimates used by the Group to measure its insurance risks is represented primarily by life insurance risks; the main variables as of June 30, 2019 and December 31, 2018, are the interest rates and the mortality tables. The Group has assessed the changes of the reserves related to its most significant life insurance contracts included in the reserves of annuities, retirement, disability and survival of +/- 100 basis points (bps) in the interest rates and of +/- 500 bps of the mortality factors, being the results as follows:
As of June 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||
Variation of the reserve | Variation of the reserve | |||||||||||||||||||||||
Reserve | Amount | Percentage | Reserve | Amount | Percentage | |||||||||||||||||||
Variables | S/(000) | S/(000) | % | S/(000) | S/(000) | % | ||||||||||||||||||
Annuities | ||||||||||||||||||||||||
Portfolio in S/ and US Dollars - Basis amount | ||||||||||||||||||||||||
Changes in interest rate: + 100 bps | 8,326,208 | (952,934 | ) | (10.27 | ) | 7,816,973 | (848,921 | ) | (9.80 | ) | ||||||||||||||
Changes in interest rate: - 100 bps | 10,446,520 | 1,167,378 | 12.58 | 9,696,893 | 1,030,999 | 11.90 | ||||||||||||||||||
Changes in mortality table at 105% | 9,188,145 | (90,997 | ) | (0.98 | ) | 8,587,633 | (78,261 | ) | (0.90 | ) | ||||||||||||||
Changes in mortality table at 95% | 9,374,568 | 95,427 | 1.03 | 8,747,817 | 81,923 | 0.95 | ||||||||||||||||||
Retirements, disability and survival | ||||||||||||||||||||||||
Portfolio in S/ – Basis amount | ||||||||||||||||||||||||
Changes in interest rate: + 100 bps | 678,721 | (89,238 | ) | (11.62 | ) | 635,838 | (79,379 | ) | (11.10 | ) | ||||||||||||||
Changes in interest rate: - 100 bps | 879,403 | 111,444 | 14.51 | 813,614 | 98,397 | 13.76 | ||||||||||||||||||
Changes in mortality table at 105% | 757,930 | (10,030 | ) | (1.31 | ) | 706,495 | (8,722 | ) | (1.22 | ) | ||||||||||||||
Changes in mortality table at 95% | 778,501 | 10,541 | 1.37 | 724,366 | 9,149 | 1.28 |
44
Notes to the interim condensed consolidated financial statements (continued)
12. | Equity |
(a) | Capital stock - |
As of June 30, 2019 and December 31, 2018, IFS’s capital stock is represented by 113,110,864 common shares subscribed and paid in. IFS’s shares are quoted at the Lima Stock Exchange; have no nominal value and their issuance value was US$9.72 per share, see also Note 25.
The General Shareholders’ Meeting of IFS held on April 1, 2019, agreed to distribute dividends for the year 2018 for approximately US$197,187,000 (equivalent to approximately S/654,464,000), US$1.75 per share, paid on May 3, 2019.
The General Shareholders’ Meeting of IFS held on April 2, 2018, agreed to distribute dividends for the year 2017 for approximately US$157,750,000 (equivalent to approximately S/510,688,000), US$1.40 per share.
(b) | Shareholders’ equity for legal purposes (regulatory capital) - |
IFS is not required to establish a regulatory capital for statutory purposes. As of June 30, 2019 and December 31, 2018, the regulatory capital required for Interbank, Interseguro and Inteligo Bank is calculated based on the separate financial statements of each Subsidiary prepared following the accounting principles and practices of their respective regulators, the SBS or the Central Bank of the Bahamas. The regulatory capital required for Interbank, Interseguro and Inteligo Bank is detailed in Note 17(f) to the Annual Consolidated Financial Statements.
(c) | Treasury stock - |
As of June 30, 2019 and December 31, 2018, the Group holds shares issued by IFS, as detailed below:
Number of shares | Cost | |||||||
Company | (000) | S/(000) | ||||||
Interbank | 1,986 | 164,295 | ||||||
IFS | 432 | 43,883 | ||||||
|
|
|
| |||||
Total | 2,418 | 208,178 | ||||||
|
|
|
|
45
Notes to the interim condensed consolidated financial statements (continued)
In the Shareholders’ Meeting of IFS, held on May 25, 2016, the program of acquisition of own issuance shares was approved. Such acquisition, as agreed, may be carried out on one or more occasions, as appropriate to IFS’s interests, according to market conditions and other legal limits and factors in force at the time of the acquisition. These acquisitions shall be subject to the current legal limit(10-percent limit of the capital stock) established in Article 84 of the Securities Market Act. Likewise, the Shareholders’ Meeting set a limit for the acquisitions made under this program, which may not exceed 3,500,000 shares (equivalent to 3.09 percent of the Company’s capital stock), without taking into account the shares acquired prior to this program. On August 9, 2017, Management, pursuant to said delegation, informed the Board of Directors of IFS its decision to terminate the program of acquisition of own issuance shares.
In 2018, Interbank sold 3,009,490 shares of IFS at their market price for approximately US$121,133,000 (equivalent to approximately S/382,727,000) through the Lima Stock Exchange. Said sale was recorded as a decrease in “Treasury stock” by S/259,022,000 and the difference amounting to S/123,705,000 was recorded in “Retained earnings”, see also Note 25.
13. | Tax situation |
(a) | IFS and its Subsidiaries incorporated and domiciled in the Republic of Panama and the Commonwealth of the Bahamas are not subject to any Income Tax, or any other taxes on capital gains, equity or property; nevertheless, IFS is subject to an additional tax on dividends received from its Subsidiaries incorporated and domiciled in Peru. The Subsidiaries incorporated and domiciled in Peru are subject to the Peruvian Tax legislation. |
IFS’s Subsidiaries incorporated in Peru are subject to the payment of Peruvian taxes; thus, they must calculate their tax liabilities on the basis of their separate financial statements. The Income Tax rate as of June 30, 2019 and 2018, was 29.5 percent, over the taxable income.
(b) | The Tax Authority (henceforth “SUNAT”, by its Spanish acronym) is legally entitled to perform tax audits procedures for up to four years subsequent to the date at which the tax return regarding a taxable period must be filed. The Income Tax and theValue-Added-Tax returns subject to inspection by the Tax Authority in each of the Subsidiaries, are the following: |
• | Interbank, Hipotecaria Sura and Seguros Sura: Income Tax returns of the years from 2014 to 2018, andValue-Added-Tax returns of the years 2014 to 2018, are pending reviewing by SUNAT. |
• | Interseguro: Income Tax returns of the years 2014, 2015, 2017 and 2018, andValue-Added-Tax returns of the years 2014 to 2018, are pending reviewing by SUNAT. |
Given the possible interpretations that SUNAT may give to the legislation in effect, up to date it is not possible to determine whether or not any review to be conducted would result in liabilities for the Subsidiaries; any increased tax or surcharge that could arise from possible tax reviews would be applied to the results of the period in which such tax increase or surcharge may be determined.
46
Notes to the interim condensed consolidated financial statements (continued)
In the case of Interbank, in April 2004, June 2006, February 2007, June 2007, November 2007, October 2008 and December 2010, it received a number of Tax Determination and Tax Penalty notices corresponding mainly to the Income Tax determination for the fiscal years 2000 to 2006. As a result, claims and appeals were filed and subsequent contentious administrative proceedings were started, with the exception of Income Tax 2006, which is still pending in the Tax Court.
Regarding the tax litigations followed by Interbank related to the annual Income Tax returns for the years 2000 to 2006, the most relevant matter subject to discrepancy with SUNAT corresponds to whether the “interests in suspense” are subject to Income Tax or not. In this sense, Interbank considers that the interests in suspense do not constitute accrued income, in accordance with the SBS and the IFRS, which is also supported by a ruling of the Permanent Constitutional and Social Law Chamber of the Supreme Court issued in August 2009.
Notwithstanding the foregoing, in February 2018, Interbank was informed that the Third Transitory Chamber of Constitutional and Social Law of the Supreme Court, issued a ruling regarding a third bank that impacts Interbank’s original estimation regarding the degree of contingency indicated in the previous paragraph; which, based on this new circumstance and in compliance with the IFRS, Interbank estimates as possible as of the date of this report.
The tax liability requested for this concept and other minor matters by SUNAT as of June 30, 2019, amounts to approximately S/393,000,000. This amount has been calculated according to the resolutions issued by SUNAT in June, 2019.
From the tax and legal analysis carried out, Interbank’s Management and its external legal advisors consider that there is sufficient technical support for the prevalence of Interbank’s position; as a result, it has not recorded any provision for this contingency as of June 30, 2019 and December 31, 2018.
On the other hand, during the years 2013 and 2014, SUNAT closed the audit processes corresponding to the assessment of the Income Tax of the fiscal years 2007, 2008 and 2009, respectively, thus issuing a series of Assessment Resolutions without any additional levying of said tax.
On January 11, 2016, SUNAT closed the partial audit corresponding to the fiscal year 2013 for withholding of Income Tax fromnon-domiciled beneficiaries, issuing a series of Final Assessment Resolutions without any additional levying of the tax in question.
On February 3, 2017, SUNAT closed the inspection corresponding to the fiscal year 2010 related to Income Tax. The Bank paid the amount of the deficiency under protest and filed a complaint.
On February 14, 2018, SUNAT notified Interbank of the beginning of the partial inspection process for the Income Tax for the year 2014.
On September 7, 2018, SUNAT closed the partial inspection process for the income tax for the year 2014; without additional tax request.
47
Notes to the interim condensed consolidated financial statements (continued)
On January 14, 2019, Interbank was notified of the Determination and Penalty Resolutions corresponding to the audit of the Income Tax for the fiscal year 2013. The tax debt sought by SUNAT amounts to approximately S/53,000,000. To date, Interbank Management has submitted the respective complaint to the resolutions indicated above. In Management opinion and its legal advisors, consider that there are technical arguments for the prevalence of Interbank’s position.
On April 26, 2019, SUNAT notified of the beginning of the definitive inspection process for withholding of Income Tax fromnon-domiciled beneficiaries for the year 2018.
On January 4, 2019, Interseguro was notified through a Tax Determination notice about the partial auditing of the Income Tax fornon-domiciled entities for Sura corresponding to January 2015. The tax debt claimed by SUNAT amounts to approximately S/19,000,000 Considering that this debt corresponds to a period prior to the acquisition of Seguros Sura by the Group, and according to the conditions of the purchase and sale agreement of this entity, this tax assessment, if confirmed after the legal actions that Management is to file, would be assumed by the sellers. On January 30, 2019, the Company filed an appeal against the determination decision with the Tax Authority.
Finally, as of the date of this report, SUNAT is reviewing the 2012 tax return of Interbank. In the opinion of Management, any eventual additional tax assessment would not be significant for the interim condensed consolidated financial statements as of June 30, 2019 and December 31, 2018.
(c) | IFS calculates the period’s Income Tax expense using the best estimate of the weighted average tax rate. The table below presents the amounts reported in the interim condensed consolidated statements of income: |
For thesix-month periods ended June 30, | ||||||||
2019 | 2018 | |||||||
S/(000) | S/(000) | |||||||
Current – Expense | 219,915 | 255,605 | ||||||
Deferred – Expense (Income) | 6,943 | (37,532 | ) | |||||
|
|
|
| |||||
226,858 | 218,073 | |||||||
|
|
|
|
48
Notes to the interim condensed consolidated financial statements (continued)
14. | Interest and similar income and expenses |
This caption is comprised of the following:
For thesix-month periods ended June 30, | ||||||||
2019 | 2018 | |||||||
S/(000) | S/(000) | |||||||
Interest and similar income | ||||||||
Interest on loan portfolio | 1,854,164 | 1,622,171 | ||||||
Interest on investments at fair value through other comprehensive income | 368,360 | 389,893 | ||||||
Interest on due from banks and inter-bank funds | 58,738 | 21,266 | ||||||
Interest on investments at amortized cost | 44,291 | 41,272 | ||||||
Dividends on financial instruments through other comprehensive income | 41,955 | 30,030 | ||||||
Other interest and similar income | 963 | 1,825 | ||||||
|
|
|
| |||||
Total | 2,368,471 | 2,106,457 | ||||||
|
|
|
| |||||
Interest and similar expenses | ||||||||
Interest and fees on deposits and obligations | (350,679 | ) | (259,245 | ) | ||||
Interest on bonds, notes and other obligations | (202,318 | ) | (176,514 | ) | ||||
Interest and fees on obligations with financial institutions | (88,828 | ) | (89,361 | ) | ||||
Deposit insurance fund fees | (21,985 | ) | (19,766 | ) | ||||
Result from hedging transactions | (4,583 | ) | (4,583 | ) | ||||
Other interest and similar expenses | (9,741 | ) | (3,453 | ) | ||||
|
|
|
| |||||
Total | (678,134 | ) | (552,922 | ) | ||||
|
|
|
|
49
Notes to the interim condensed consolidated financial statements (continued)
15. | Fee income from financial services, net |
This caption is comprised of the following:
For thesix-month periods ended June 30, | ||||||||
2019 | 2018 | |||||||
S/(000) | S/(000) | |||||||
Income | ||||||||
Maintenance and mailing of accounts, transfer fees and commissions on credit and debit card | 317,448 | 303,726 | ||||||
Commissions for banking services | 100,665 | 97,931 | ||||||
Funds management fees | 69,224 | 77,218 | ||||||
Fees from indirect loans | 28,097 | 31,536 | ||||||
Collection services fees | 19,797 | 18,205 | ||||||
Brokerage and custody services fees | 3,598 | 5,333 | ||||||
Others | 19,366 | 18,075 | ||||||
|
|
|
| |||||
Total | 558,195 | 552,024 | ||||||
|
|
|
| |||||
Expenses | ||||||||
Credit cards | (56,715 | ) | (49,529 | ) | ||||
Debtor’s life insurance premiums | (19,704 | ) | (30,050 | ) | ||||
Fees paid to foreign banks | (8,085 | ) | (7,364 | ) | ||||
Brokerage and custody services | (300 | ) | (1,409 | ) | ||||
Others | (27,678 | ) | (26,699 | ) | ||||
|
|
|
| |||||
Total | (112,482 | ) | (115,051 | ) | ||||
|
|
|
| |||||
Net | 445,713 | 436,973 | ||||||
|
|
|
|
50
Notes to the interim condensed consolidated financial statements (continued)
16. | Other income and expenses |
This caption is comprised of the following:
For the six-month periods ended June 30, | ||||||||
2019 | 2018 | |||||||
S/(000) | S/(000) | |||||||
Other income | ||||||||
Income from investments in associates | 9,523 | 8,442 | ||||||
Other technical income from insurance operations | 5,402 | 4,919 | ||||||
Income from ATM rentals | 2,044 | 1,510 | ||||||
Gain from sale ofwritten-off-loans | 1,572 | 56 | ||||||
Services rendered to third parties | 1,470 | 1,859 | ||||||
Other income | 12,102 | 7,504 | ||||||
|
|
|
| |||||
Total other income | 32,113 | 24,290 | ||||||
|
|
|
| |||||
Other expenses | ||||||||
Commissions from insurance activities | (22,547 | ) | (29,805 | ) | ||||
Sundry technical insurance expenses | (21,529 | ) | (19,576 | ) | ||||
Donations | (2,828 | ) | (2,789 | ) | ||||
Provision for sundry risk | (1,703 | ) | (2,452 | ) | ||||
Expenses related to rental income | (1,247 | ) | (1,054 | ) | ||||
Other expenses | (24,722 | ) | (21,703 | ) | ||||
|
|
|
| |||||
Total other expenses | (74,576 | ) | (77,379 | ) | ||||
|
|
|
|
51
Notes to the interim condensed consolidated financial statements (continued)
17. | Net premiums earned |
(a) | For thesix-month periods ended June 30, 2019 and 2018, this caption is comprised of the following: |
Premiums assumed (1) | Adjustment of technical reserves (2) | Gross premiums earned (*) (3) = (1) - (2) | Premiums ceded to reinsurers (4) | Net premiums earned (incurred) (5) = (3) – (4) | ||||||||||||||||||||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||||||||
Life insurance | ||||||||||||||||||||||||||||||||||||||||
Annuities (**) | 151,793 | 111,206 | (36,166 | ) | (161,341 | ) | 115,627 | (50,135 | ) | — | — | 115,627 | (50,135 | ) | ||||||||||||||||||||||||||
Group life | 66,104 | 53,102 | (309 | ) | 880 | 65,795 | 53,982 | (2,579 | ) | (2,413 | ) | 63,216 | 51,569 | |||||||||||||||||||||||||||
Individual life | 66,447 | 64,424 | (43,217 | ) | (21,733 | ) | 23,230 | 42,691 | (2,243 | ) | (2,870 | ) | 20,987 | 39,821 | ||||||||||||||||||||||||||
Retirement, disability and survival | 8,469 | 79,070 | (53,358 | ) | (19,617 | ) | (44,889 | ) | 59,453 | (2,513 | ) | (50,211 | ) | (47,402 | ) | 9,242 | ||||||||||||||||||||||||
Others | — | 2 | (2,717 | ) | (1,005 | ) | (2,717 | ) | (1,003 | ) | — | — | (2,717 | ) | (1,003 | ) | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total life insurance | 292,813 | 307,804 | (135,767 | ) | (202,816 | ) | 157,046 | 104,988 | (7,335 | ) | (55,494 | ) | 149,711 | 49,494 | ||||||||||||||||||||||||||
Total general insurance | 50,220 | 48,074 | (1,072 | ) | (3,452 | ) | 49,148 | 44,622 | (119 | ) | (979 | ) | 49,029 | 43,643 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | 343,033 | 355,878 | (136,839 | ) | (206,268 | ) | 206,194 | 149,610 | (7,454 | ) | (56,473 | ) | 198,740 | 93,137 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*) | Includes the annual variation of technical reserves and unearned premiums. |
(**) | The variation of the adjustment of technical reserves is due to the variation in the rates with which technical reserves are determined; see rates in Note 11(d). |
52
Notes to the interim condensed consolidated financial statements (continued)
18. | Earnings per share |
The following table presents earnings per share computations:
Outstanding shares | Shares considered in computation | Effective days in the period | Weighted average number of shares | |||||||||||||
(in thousands) | (in thousands) | (in thousands) | ||||||||||||||
2018 | ||||||||||||||||
Balance as of January 1, 2018 | 107,682 | 107,682 | 180 | 107,682 | ||||||||||||
Sale of treasury stock | 3,010 | 3,010 | 150 | 2,508 | ||||||||||||
|
|
|
|
|
| |||||||||||
Balance as of June 30, 2018 | 110,692 | 110,692 | 110,190 | |||||||||||||
|
|
|
|
|
| |||||||||||
Net earnings attributable to IFS S/(000) | 491,313 | |||||||||||||||
|
| |||||||||||||||
Earnings per share attributable to IFS (Soles) | 4.459 | |||||||||||||||
|
| |||||||||||||||
2019 | ||||||||||||||||
Balance as of January 1, 2019 | 110,692 | 110,692 | 180 | 110,692 | ||||||||||||
|
|
|
|
|
| |||||||||||
Balance as of June 30, 2019 | 110,692 | 110,692 | 110,692 | |||||||||||||
|
|
|
|
|
| |||||||||||
Net earnings attributable to IFS S/(000) | 698,516 | |||||||||||||||
|
| |||||||||||||||
Earnings per share attributable to IFS (Soles) | 6.310 | |||||||||||||||
|
|
53
Notes to the interim condensed consolidated financial statements (continued)
19. | Transactions with shareholders, related parties and affiliated entities |
(a) | The table below presents the main transactions with shareholders, related parties and affiliated companies as of June 30, 2019 and December 31, 2018 and for thesix-month periods ended June 30, 2019 and 2018: |
As of June 30, 2019 | As of December 31, 2018 | |||||||
S/(000) | S/(000) | |||||||
Assets | ||||||||
Instruments at fair value through profit or loss | ||||||||
Participations - Royalty Pharma | 100,692 | 78,808 | ||||||
Negotiable certificates of deposit – Financiera Oh! S.A. | 20,320 | 20,809 | ||||||
Investment funds participations – NGCP | — | 2,890 | ||||||
Shares - InRetail Perú Corp. | — | 7,322 | ||||||
Others | 1,660 | 205 | ||||||
|
|
|
| |||||
122,672 | 110,034 | |||||||
|
|
|
| |||||
Investments at fair value through other comprehensive income | ||||||||
Shares - InRetail Perú Corp. | 307,239 | 228,122 | ||||||
Corporate bonds - InRetail Shopping Malls S.A. | 69,196 | 59,131 | ||||||
Corporate bonds - Colegios Peruanos S.A. | 59,191 | 58,913 | ||||||
Corporate bonds - Intercorp Perú Ltd. | 4,363 | 15,766 | ||||||
Corporate bonds - Intercorp Retail Inc. | 18,059 | — | ||||||
Corporate bonds - Cineplex S.A. | — | 7,317 | ||||||
|
|
|
| |||||
458,048 | 369,249 | |||||||
|
|
|
| |||||
Loans, net (b) | 1,070,070 | 1,157,158 | ||||||
Accounts receivable from UTP (h) | 72,550 | 58,968 | ||||||
Accounts receivable from Homecenters Peruanos S.A. (g) | 39,141 | 39,141 | ||||||
Accounts receivable related to derivative financial instruments | 1,985 | 3,908 | ||||||
Other assets (f) | 16,696 | 10,183 | ||||||
Liabilities | ||||||||
Deposits and obligations | 333,123 | 571,032 | ||||||
Other liabilities | 157 | 214 | ||||||
Off-balance sheet accounts | ||||||||
Indirect loans (b) | 116,280 | 139,702 |
For the six-month periods ended June 30, | ||||||||
2019 | 2018 | |||||||
S/(000) | S/(000) | |||||||
Income (expenses) | ||||||||
Interest and similar income | 41,869 | 44,887 | ||||||
Interest and similar expenses | (6,856 | ) | (5,147 | ) | ||||
Valuation of financial derivative instruments | 52 | (3,549 | ) | |||||
Rental income | 5,936 | 5,198 | ||||||
(Loss) gain on sale of investment property | (1,556 | ) | 1,559 | |||||
Administrative expenses | (20,824 | ) | (13,725 | ) | ||||
Others, net | 13,206 | 15,405 |
54
Notes to the interim condensed consolidated financial statements (continued)
(b) | As of June 30, 2019 and December 31, 2018, the detail of loans to shareholders and related entities is the following: |
As of June 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||
Direct loans | Indirect loans | Total | Direct loans | Indirect loans | Total | |||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||
Supermercados Peruanos S.A. | 212,577 | 681 | 213,258 | 236,826 | 701 | 237,527 | ||||||||||||||||||
InRetail Pharma S.A. | 150,347 | 4,931 | 155,278 | 163,596 | 5,060 | 168,656 | ||||||||||||||||||
GTP Inversionistas S.A.C. | 99,426 | — | 99,426 | 102,027 | — | 102,027 | ||||||||||||||||||
Nessus Hoteles Perú S.A. | 97,013 | — | 97,013 | 102,851 | 169 | 103,020 | ||||||||||||||||||
Colegios Peruanos S.A.C. | 78,781 | 1,822 | 80,603 | 80,379 | 1,843 | 82,222 | ||||||||||||||||||
Universidad Tecnológica del Perú | 80,000 | — | 80,000 | 80,000 | — | 80,000 | ||||||||||||||||||
Homecenters Peruanos S.A. | 63,064 | — | 63,064 | 55,995 | 6,327 | 62,322 | ||||||||||||||||||
Financiera Oh! S.A. | 60,012 | 387 | 60,399 | 65,009 | 291 | 65,300 | ||||||||||||||||||
San Miguel Industrias PET S.A. | 26,308 | 27,208 | 53,516 | 9,873 | 36,366 | 46,239 | ||||||||||||||||||
Cineplex S.A. | 30,480 | 7,197 | 37,677 | 33,844 | 8,996 | 42,840 | ||||||||||||||||||
Centros de Salud Peruanos | 37,602 | — | 37,602 | 20,701 | — | 20,701 | ||||||||||||||||||
San Miguel Industrias Ecuador | 32,910 | — | 32,910 | 32,910 | — | 32,910 | ||||||||||||||||||
Bembos S.A.C. | 26,506 | 6,180 | 32,686 | 26,747 | 6,130 | 32,877 | ||||||||||||||||||
Procesos de Medios de Pago S.A. | 5,967 | 20,051 | 26,018 | 7,704 | 20,575 | 28,279 | ||||||||||||||||||
PF Interproperties Perú | — | 21,470 | 21,470 | — | 21,126 | 21,126 | ||||||||||||||||||
Others | 69,077 | 26,353 | 95,430 | 138,696 | 32,118 | 170,814 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
1,070,070 | 116,280 | 1,186,350 | 1,157,158 | 139,702 | 1,296,860 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(c) | As of June 30, 2019 and December 31, 2018, the directors, executives and employees of the Group have been involved, directly and indirectly, in credit transactions with certain subsidiaries of the Group, as permitted by Peruvian law, which regulates and limits certain transactions with employees, directors and officers of financial entities. As of June 30, 2019 and December 31, 2018, direct loans to employees, directors and officers amounted to S/220,795,000 and S/223,381,000, respectively; said loans are repaid monthly and bear interest at market rates. |
There are no loans to IFS’s directors and key personnel guaranteed with shares of any Subsidiary.
55
Notes to the interim condensed consolidated financial statements (continued)
(d) | IFS’s key personnel compensation, including the Income Tax assumed for thesix-month periods ended June 30, 2019 and 2018, comprised the following: |
For the six-month periods ended June 30, | ||||||||
2019 | 2018 | |||||||
S/(000) | S/(000) | |||||||
Salaries | 12,196 | 13,244 | ||||||
Board of Directors’ compensations | 1,025 | 732 | ||||||
|
|
|
| |||||
Total | 13,221 | 13,976 | ||||||
|
|
|
|
(e) | As of December 31, 2018, the Group holds participations in different mutual funds managed by Interfondos, which are classified as investments at fair value through profit or loss and amounted S/9,934,000. |
(f) | It corresponds mainly to prepaid expenses for spaces ceded to Interbank in the stores of Supermercados Peruanos S.A. for the operation of financial agencies until the year 2030, and for an amount of approximately S/6,574,000 and S/8,856,000 as of June 30, 2019 and December 31, 2018, respectively, see Note 7(a). Interbank may renew the term of the agreements for an additional term of 15 years. |
(g) | It corresponds to a loan with maturity in 2046 and bears interests at market value. |
(h) | As of June 30, 2019 and December 31, 2018, correspond to a finance lease for the construction of educational facilities in San Juan de Lurigancho and Ate Vitarte districts. |
(i) | In Management’s opinion, transactions with related parties have been performed under standard market conditions and within the limits permitted by the SBS. Taxes generated by these transactions and the taxable base used for computing them are those customarily used in the industry and they are determined according to the tax rules in force. |
56
Notes to the interim condensed consolidated financial statements (continued)
20. | Business segments |
The Chief Operating Decision Maker (“CODM”) of IFS is the Chief Executive Officer (“CEO”) and presents three operating segments based on products and services as follows:
Banking
Mainly loans, credit facilities, deposits and current accounts.
Insurance
It provides annuities and conventional life insurance products, as well as other retail insurance products.
Wealth management
It provides brokerage and investment management services. Inteligo serves mainly Peruvian citizens.
The operating segments monitor the operating results of their business units separately for the purpose of making decisions on the distribution of resources and performance assessment. Segment performance is evaluated based on operating profit or loss and it is measured consistently with operating profit or loss in the interim condensed consolidated financial statements.
Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.
No revenue from transactions with a single external customer or counterparty exceeded 10 percent of the Group’s total revenues in thesix-month periods ended June 30, 2019 and 2018.
57
Notes to the interim condensed consolidated financial statements (continued)
The following table presents the Group’s financial information by business segments for thesix-month periods ended June 30, 2019 and 2018:
For thesix-month periods ended June 30, 2019 | For thesix-month periods ended June 30, 2018 | |||||||||||||||||||||||||||||||||||||||
Banking | Insurance | Wealth management | Holding and consolidation adjustments | Total consolidated | Banking | Insurance | Wealth management | Holding and consolidation adjustments | Total consolidated | |||||||||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||||||||
Total income (*) | ||||||||||||||||||||||||||||||||||||||||
Third party | 2,606,473 | 569,280 | 197,886 | (92,467 | ) | 3,281,172 | 2,247,891 | 418,216 | 164,756 | (22,370 | ) | 2,808,493 | ||||||||||||||||||||||||||||
Inter-segment | (37,080 | ) | — | (736 | ) | 37,816 | — | (22,351 | ) | — | (5,508 | ) | 27,859 | — | ||||||||||||||||||||||||||
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|
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|
|
|
|
|
|
| |||||||||||||||||||||
Total income | 2,569,393 | 569,280 | 197,150 | (54,651 | ) | 3,281,172 | 2,225,540 | 418,216 | 159,248 | 5,489 | 2,808,493 | |||||||||||||||||||||||||||||
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Extracts of results | ||||||||||||||||||||||||||||||||||||||||
Interest and similar income | 1,984,136 | 308,960 | 84,531 | (9,156 | ) | 2,368,471 | 1,723,003 | 315,148 | 73,794 | (5,488 | ) | 2,106,457 | ||||||||||||||||||||||||||||
Interest and similar expenses | (622,280 | ) | (25,966 | ) | (29,284 | ) | (604 | ) | (678,134 | ) | (503,456 | ) | (26,649 | ) | (19,950 | ) | (2,867 | ) | (552,922 | ) | ||||||||||||||||||||
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Net interest and similar income | 1,361,856 | 282,994 | 55,247 | (9,760 | ) | 1,690,337 | 1,219,547 | 288,499 | 53,844 | (8,355 | ) | 1,553,535 | ||||||||||||||||||||||||||||
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Impairment loss on loans, net of recoveries | (379,296 | ) | — | (59 | ) | — | (379,355 | ) | (286,233 | ) | — | 775 | — | (285,458 | ) | |||||||||||||||||||||||||
Impairment recovery on financial investments | 56 | 2,777 | (159 | ) | — | 2,674 | (11 | ) | 1,795 | 1,774 | — | 3,558 | ||||||||||||||||||||||||||||
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Net interest and similar income after impairment loss | 982,616 | 285,771 | 55,029 | (9,760 | ) | 1,313,656 | 933,303 | 290,294 | 56,393 | (8,355 | ) | 1,271,635 | ||||||||||||||||||||||||||||
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Fee income from financial services, net | 393,936 | (1,951 | ) | 76,023 | (22,295 | ) | 445,713 | 366,868 | (2,442 | ) | 85,666 | (13,119 | ) | 436,973 | ||||||||||||||||||||||||||
Net gain on sale of financial investments | 29,931 | 8,100 | 38,090 | — | 76,121 | 11,597 | (1,633 | ) | 11,790 | — | 21,754 | |||||||||||||||||||||||||||||
Other income (**) | 198,470 | 55,431 | (758 | ) | (61,016 | ) | 192,127 | 146,423 | 14,006 | (6,494 | ) | (3,763 | ) | 150,172 | ||||||||||||||||||||||||||
Total net premiums earned minus claims and benefits | — | (153,501 | ) | — | (9 | ) | (153,510 | ) | — | (265,078 | ) | — | — | (265,078 | ) | |||||||||||||||||||||||||
Depreciation and amortization | (110,159 | ) | (11,886 | ) | (6,341 | ) | 205 | (128,181 | ) | (66,375 | ) | (6,927 | ) | (4,402 | ) | (20 | ) | (77,724 | ) | |||||||||||||||||||||
Other expenses | (676,416 | ) | (133,198 | ) | (49,225 | ) | 20,604 | (838,235 | ) | (660,608 | ) | (124,522 | ) | (46,647 | ) | 14,949 | (816,828 | ) | ||||||||||||||||||||||
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Income before translation result and Income Tax | 818,378 | 48,766 | 112,818 | (72,271 | ) | 907,691 | 731,208 | (96,302 | ) | 96,306 | (10,308 | ) | 720,904 | |||||||||||||||||||||||||||
Translation result | (3,446 | ) | 13,000 | 2,321 | 10,130 | 22,005 | (1,641 | ) | (2,877 | ) | (389 | ) | (3,008 | ) | (7,915 | ) | ||||||||||||||||||||||||
Income Tax | (215,035 | ) | — | (3,460 | ) | (8,363 | ) | (226,858 | ) | (201,402 | ) | — | (2,753 | ) | (13,918 | ) | (218,073 | ) | ||||||||||||||||||||||
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Net profit for the year | 599,897 | 61,766 | 111,679 | (70,504 | ) | 702,838 | 528,165 | (99,179 | ) | 93,164 | (27,234 | ) | 494,916 | |||||||||||||||||||||||||||
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Attributable to: | ||||||||||||||||||||||||||||||||||||||||
IFS’s shareholders | 599,897 | 61,766 | 111,679 | (74,826 | ) | 698,516 | 528,165 | (99,179 | ) | 93,164 | (30,837 | ) | 491,313 | |||||||||||||||||||||||||||
Non-controlling interest | — | — | — | 4,322 | 4,322 | — | — | — | 3,603 | 3,603 | ||||||||||||||||||||||||||||||
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599,897 | 61,766 | 111,679 | (70,504 | ) | 702,838 | 528,165 | (99,179 | ) | 93,164 | (27,234 | ) | 494,916 | ||||||||||||||||||||||||||||
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(*) | Corresponds to interest and similar income, other income and net premiums earned. |
(**) | For Banking Segment “Other income” for the six months ended June 30, 2019, includes approximately S/52,580,000, before taxes, as gain on the sale of Interfondos to Inteligo Perú Holding S.A.C., which is eliminated upon consolidation, see Note 2(d). The net profit (after taxes) amounted to approximately S/32,422,000. |
58
Notes to the interim condensed consolidated financial statements (continued)
As of June 30, 2019 | ||||||||||||||||||||
Banking | Insurance | Wealth management | Holding and eliminations | Total consolidated | ||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | ||||||||||||||||
Capital expenditures (*) | 75,635 | 16,606 | 3,838 | — | 96,079 | |||||||||||||||
Total assets | 50,221,171 | 13,406,666 | 3,625,892 | (81,492 | ) | 67,172,237 | ||||||||||||||
Total liabilities | 44,518,393 | 12,498,174 | 2,863,950 | (151,513 | ) | 59,729,004 | ||||||||||||||
As of December 31, 2018 | ||||||||||||||||||||
Banking | Insurance | Wealth management | Holding and eliminations | Total consolidated | ||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | ||||||||||||||||
Capital expenditures (*) | 176,082 | 70,333 | 9,718 | 41 | 256,174 | |||||||||||||||
Total assets | 47,440,393 | 12,572,396 | 3,808,939 | (77,319 | ) | 63,744,409 | ||||||||||||||
Total liabilities | 41,986,416 | 11,795,308 | 2,996,179 | (121,970 | ) | 56,655,933 |
(*) | It includes the purchase of property, furniture and equipment, intangible assets and investment property. |
The distribution of the Group’s total income based on the location of the customer and its assets, for thesix-month periods ended June 30, 2019 amounts to S/3,112,643,000 in Peru and S/168,529,000 in Panama (for thesix-month periods ended June 30, 2018 amounts to S/2,677,078,000 in Peru and S/131,415,000 in Panama). The distribution of the Group’s total assets based on the location of the customer and its assets, as of June 30, 2019 is S/63,701,371,000 in Peru and S/3,470,866,000 in Panama (S/60,033,938,000 in Peru and S/3,710,471,000 in Panama as of December 31, 2018). It should be noted that both income and assets located in Panama correspond mainly to Peruvian citizens.
59
Notes to the interim condensed consolidated financial statements (continued)
21. | Financial instruments classification |
The financial assets and liabilities of the interim condensed consolidated statements of financial position as of June 30, 2019 and December 31, 2018, are presented below:
As of June 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||||||||||
At fair value through profit or loss | Debt instruments measured at fair value through other comprehensive income | Equity instruments measured at fair value through other comprehensive income | Amortized cost | Total | At fair value through profit or loss | Debt instruments measured at fair value through other comprehensive income | Equity instruments measured at fair value through other comprehensive income | Amortized cost | Total | |||||||||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||||||||||||||
Cash and due from banks | — | — | — | 10,592,823 | 10,592,823 | — | — | — | 8,380,411 | 8,380,411 | ||||||||||||||||||||||||||||||
Inter-bank funds | — | — | — | 230,137 | 230,137 | — | — | — | 495,037 | 495,037 | ||||||||||||||||||||||||||||||
Financial investments | 1,334,336 | 13,683,235 | 950,549 | 1,867,426 | 17,835,546 | 1,571,468 | 13,328,593 | 845,317 | 1,884,067 | 17,629,445 | ||||||||||||||||||||||||||||||
Loans, net | — | — | — | 34,235,111 | 34,235,111 | — | — | — | 32,960,917 | 32,960,917 | ||||||||||||||||||||||||||||||
Due from customers on acceptances | — | — | — | 57,685 | 57,685 | — | — | — | 132,961 | 132,961 | ||||||||||||||||||||||||||||||
Accounts receivable and other assets, net | 187,124 | — | — | 923,592 | 1,110,716 | 185,376 | — | — | 1,106,659 | 1,292,035 | ||||||||||||||||||||||||||||||
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1,521,460 | 13,683,235 | 950,549 | 47,906,774 | 64,062,018 | 1,756,844 | 13,328,593 | 845,317 | 44,960,052 | 60,890,806 | |||||||||||||||||||||||||||||||
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Financial liabilities | ||||||||||||||||||||||||||||||||||||||||
Deposits and obligations | — | — | — | 35,373,776 | 35,373,776 | — | — | — | 33,681,950 | 33,681,950 | ||||||||||||||||||||||||||||||
Inter-bank funds | — | — | — | 50,013 | 50,013 | — | — | — | — | — | ||||||||||||||||||||||||||||||
Due to banks and correspondents | — | — | — | 4,596,947 | 4,596,947 | — | — | — | 4,293,361 | 4,293,361 | ||||||||||||||||||||||||||||||
Bonds, notes and other obligations | — | — | — | 6,606,219 | 6,606,219 | — | — | — | 6,496,778 | 6,496,778 | ||||||||||||||||||||||||||||||
Due from customers on acceptances | — | — | — | 57,685 | 57,685 | — | — | — | 132,961 | 132,961 | ||||||||||||||||||||||||||||||
Insurance contract liabilities | — | — | — | 10,935,092 | 10,935,092 | — | — | — | 10,300,468 | 10,300,468 | ||||||||||||||||||||||||||||||
Accounts payable, provisions and other liabilities | 191,364 | — | — | 1,733,183 | 1,924,547 | 154,116 | — | — | 1,367,644 | 1,521,760 | ||||||||||||||||||||||||||||||
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191,364 | — | — | 59,352,915 | 59,544,279 | 154,116 | — | — | 56,273,162 | 56,427,278 | |||||||||||||||||||||||||||||||
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60
Notes to the interim condensed consolidated financial statements (continued)
22. | Financial risk management |
It comprises the management of the main risks, that due to the nature of their operations, IFS and its Subsidiaries are exposed to; and correspond to: credit risk, market risk, liquidity risk, insurance risk and real estate risk.
In order to manage this risk, every Subsidiary of the Group has a specialized structure and organization in their management, measurement systems, mitigation and coverage processes that considers the specific needs and regulatory requirements to develop its business. The Group and its Subsidiaries, mainly Interbank, Interseguro and Inteligo Bank, operate independently but in coordination with the general provisions issued by the Board of Directors and the Management of IFS.
A full description of the Group’s financial risk management is presented in Note 31 “Financial risk management” of the Annual Consolidated Financial Statements; following is presented the financial information related to credit risk management for the loan portfolio, offsetting of financial assets and liabilities, and foreign exchange risk.
(a) | Credit risk management for loans |
Interbank’s loan portfolio is segmented into homogeneous groups that shared similar credit risk characteristics. These groups are: (i) Retail Banking (credit card, mortgage, payroll loan, consumer loan and vehicular loan), (ii) Small Business Banking (segments S1, S2 and S3), and (iii) Commercial Banking (corporate, institutional, companies and real estate). In addition, at Inteligo Bank, the internal model developed (scorecard) assigns 5 levels of credit risk classified as follows: low risk, medium low risk, medium risk, medium high risk, and high risk. These categories are described in Note 31.1(d) of the Annual Consolidated Financial Statements.
61
Notes to the interim condensed consolidated financial statements (continued)
The following table shows the credit quality and maximum exposure to credit risk of direct loans based on the Group’s internal credit rating as of June 30, 2019 and December 31, 2018. The amounts presented do not consider impairment.
Total direct loans | As of June 30, 2019 | As of December 31, 2018 | ||||||||||||||||||||||||||||||
Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | |||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||
Not impaired | ||||||||||||||||||||||||||||||||
High grade | 26,434,858 | 121,187 | — | 26,556,045 | 25,062,456 | 372,197 | — | 25,434,653 | ||||||||||||||||||||||||
Standard grade | 3,600,459 | 614,529 | — | 4,214,988 | 3,853,640 | 849,073 | — | 4,702,713 | ||||||||||||||||||||||||
Sub-standard grade | 350,508 | 1,025,111 | — | 1,375,619 | 417,701 | 845,995 | — | 1,263,696 | ||||||||||||||||||||||||
Past due but not impaired | 1,507,365 | 844,781 | — | 2,352,146 | 1,048,378 | 791,096 | — | 1,839,474 | ||||||||||||||||||||||||
Impaired | ||||||||||||||||||||||||||||||||
Individually impaired | — | — | 9,344 | 9,344 | — | — | 7,349 | 7,349 | ||||||||||||||||||||||||
Collectively impaired | — | — | 851,479 | 851,479 | — | — | 807,323 | 807,323 | ||||||||||||||||||||||||
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Total direct loans | 31,893,190 | 2,605,608 | 860,823 | 35,359,621 | 30,382,175 | 2,858,361 | 814,672 | 34,055,208 | ||||||||||||||||||||||||
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As of June 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||
Commercial loans | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | ||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||
Not impaired | ||||||||||||||||||||||||||||||||
High grade | 11,405,729 | 27,044 | — | 11,432,773 | 12,088,746 | 106,480 | — | 12,195,226 | ||||||||||||||||||||||||
Standard grade | 2,223,766 | 127,033 | — | 2,350,799 | 2,305,607 | 125,090 | — | 2,430,697 | ||||||||||||||||||||||||
Sub-standard grade | 134,243 | 341,359 | — | 475,602 | 226,849 | 124,051 | — | 350,900 | ||||||||||||||||||||||||
Past due but not impaired | 1,225,072 | 143,871 | — | 1,368,943 | 714,034 | 134,730 | — | 848,764 | ||||||||||||||||||||||||
Impaired | ||||||||||||||||||||||||||||||||
Individually impaired | — | — | 9,344 | 9,344 | — | — | 7,349 | 7,349 | ||||||||||||||||||||||||
Collectively impaired | — | — | 220,152 | 220,152 | — | — | 199,132 | 199,132 | ||||||||||||||||||||||||
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Total commercial loans | 14,988,810 | 639,307 | 229,496 | 15,857,613 | 15,335,236 | 490,351 | 206,481 | 16,032,068 | ||||||||||||||||||||||||
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As of June 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||
Consumer loans | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | ||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||
Not impaired | ||||||||||||||||||||||||||||||||
High grade | 9,074,099 | 49,401 | — | 9,123,500 | 7,481,529 | 223,261 | — | 7,704,790 | ||||||||||||||||||||||||
Standard grade | 764,572 | 399,588 | — | 1,164,160 | 980,918 | 643,553 | — | 1,624,471 | ||||||||||||||||||||||||
Sub-standard grade | 189,730 | 475,240 | — | 664,970 | 163,050 | 534,181 | — | 697,231 | ||||||||||||||||||||||||
Past due but not impaired | 134,010 | 491,908 | — | 625,918 | 97,943 | 442,380 | — | 540,323 | ||||||||||||||||||||||||
Impaired | ||||||||||||||||||||||||||||||||
Individually impaired | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Collectively impaired | — | — | 343,575 | 343,575 | — | — | 324,463 | 324,463 | ||||||||||||||||||||||||
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Total consumer loans | 10,162,411 | 1,416,137 | 343,575 | 11,922,123 | 8,723,440 | 1,843,375 | 324,463 | 10,891,278 | ||||||||||||||||||||||||
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62
Notes to the interim condensed consolidated financial statements (continued)
As of June 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||
Mortgage loans | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | ||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||
Not impaired | ||||||||||||||||||||||||||||||||
High grade | 5,409,028 | 23,274 | — | 5,432,302 | 5,003,914 | 22,297 | — | 5,026,211 | ||||||||||||||||||||||||
Standard grade | 547,806 | 68,480 | — | 616,286 | 478,576 | 56,958 | — | 535,534 | ||||||||||||||||||||||||
Sub-standard grade | 23,772 | 195,426 | — | 219,198 | 22,575 | 170,556 | — | 193,131 | ||||||||||||||||||||||||
Past due but not impaired | 133,040 | 180,407 | — | 313,447 | 224,588 | 188,839 | — | 413,427 | ||||||||||||||||||||||||
Impaired | ||||||||||||||||||||||||||||||||
Individually impaired | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Collectively impaired | — | — | 244,428 | 244,428 | — | — | 239,176 | 239,176 | ||||||||||||||||||||||||
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Total mortgage loans | 6,113,646 | 467,587 | 244,428 | 6,825,661 | 5,729,653 | 438,650 | 239,176 | 6,407,479 | ||||||||||||||||||||||||
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As of June 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||
Small and micro-business loans | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | ||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||
Not impaired | ||||||||||||||||||||||||||||||||
High grade | 546,002 | 21,468 | — | 567,470 | 488,267 | 20,159 | — | 508,426 | ||||||||||||||||||||||||
Standard grade | 64,315 | 19,428 | — | 83,743 | 88,539 | 23,472 | — | 112,011 | ||||||||||||||||||||||||
Sub-standard grade | 2,763 | 13,086 | — | 15,849 | 5,227 | 17,207 | — | 22,434 | ||||||||||||||||||||||||
Past due but not impaired | 15,243 | 28,595 | — | 43,838 | 11,813 | 25,147 | — | 36,960 | ||||||||||||||||||||||||
Impaired | ||||||||||||||||||||||||||||||||
Individually impaired | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Collectively impaired | — | — | 43,324 | 43,324 | — | — | 44,552 | 44,552 | ||||||||||||||||||||||||
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| |||||||||||||||||
Total small and micro-business loans | 628,323 | 82,577 | 43,324 | 754,224 | 593,846 | 85,985 | 44,552 | 724,383 | ||||||||||||||||||||||||
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The following table shows the credit quality and maximum exposure to credit risk of indirect loans based on the Group’s internal credit rating as of June 30, 2019 and December 31, 2018. The amounts presented do not consider impairment.
As of June 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||
Contingent Credits: Guarantees and stand by letters, import and export letters of credit | Stage 1 | Stage 2 | Stage 3 | Total | Stage 1 | Stage 2 | Stage 3 | Total | ||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||
Not impaired | ||||||||||||||||||||||||||||||||
High grade | 3,427,201 | 107,809 | — | 3,535,010 | 3,256,280 | 223,735 | — | 3,480,015 | ||||||||||||||||||||||||
Standard grade | 311,648 | 16,397 | — | 328,045 | 211,784 | 110,420 | — | 322,204 | ||||||||||||||||||||||||
Sub-standard grade | 21,746 | 111,832 | — | 133,578 | 33,472 | 192,699 | — | 226,171 | ||||||||||||||||||||||||
Past due but not impaired | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Impaired | ||||||||||||||||||||||||||||||||
Individually impaired | — | — | 23,632 | 23,632 | — | — | 35,738 | 35,738 | ||||||||||||||||||||||||
Collectively impaired | — | — | 8,115 | 8,115 | — | — | 7,332 | 7,332 | ||||||||||||||||||||||||
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| |||||||||||||||||
Total indirect loans | 3,760,595 | 236,038 | 31,747 | 4,028,380 | 3,501,536 | 526,854 | 43,070 | 4,071,460 | ||||||||||||||||||||||||
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63
Notes to the interim condensed consolidated financial statements (continued)
(b) | Offsetting of financial assets and liabilities |
The information contained in the tables below includes financial assets and liabilities that: (i) are offset in the interim condensed consolidated statements of financial position of the Group or; (ii) are subject to an enforceable master netting arrangement or similar agreement that covers similar financial instruments, regardless of whether they are offset in the interim condensed consolidated statements of financial position or not.
Similar arrangements of the Group include derivatives clearing agreements. Financial instruments such as loans and deposits are not disclosed in the following tables since they are offset in the interim condensed consolidated statements of financial position.
The offsetting framework agreement issued by the International Swaps and Derivatives Association Inc. (“ISDA”) and similar master netting arrangements do not meet the criteria for offsetting in the interim condensed consolidated statements of financial position because of such agreements were created in order for both parties to have an enforceable offsetting right in cases of default, insolvency or bankruptcy of the Group or the counterparties or following other predetermined events. In addition, the Group and its counterparties do not intend to settle such instruments on a net basis or to realize the assets and settle the liabilities simultaneously.
The Group receives and delivers guarantees collaterals in the form of cash with respect to transactions with derivatives; see Note 3.
Financial assets and liabilities subject to offsetting, enforceable master netting arrangement and similar agreement as of June 30, 2019 and December 31, 2018 are as follows:
Related amounts not offset in the interim condensed consolidated statements of financial position | ||||||||||||||||||||||||
Assets | Gross amounts of recognized financial instruments | Gross amounts of recognized financial instruments and offset in the interim condensed consolidated statements of financial position | Net amounts of financial instruments presented in the interim condensed consolidated statements of financial position | Financial instruments (including non-cash collateral) | Cash collateral received (pledged), Note 3(b) | Net amount | ||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||
As of June 30, 2019 | ||||||||||||||||||||||||
Derivatives, Note 7(b) | 187,124 | — | 187,124 | (104,375 | ) | — | 82,749 | |||||||||||||||||
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|
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|
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| |||||||||||||
Total assets | 187,124 | — | 187,124 | (104,375 | ) | — | 82,749 | |||||||||||||||||
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| |||||||||||||
As of December 31, 2018 | ||||||||||||||||||||||||
Derivatives, Note 7(b) | 185,376 | — | 185,376 | (41 | ) | — | 185,335 | |||||||||||||||||
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|
|
|
| |||||||||||||
Total assets | 185,376 | — | 185,376 | (41 | ) | — | 185,335 | |||||||||||||||||
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| |||||||||||||
Liabilities | ||||||||||||||||||||||||
As of June 30, 2019 | ||||||||||||||||||||||||
Derivatives, Note 7(b) | 191,364 | — | 191,364 | (104,375 | ) | (77,494 | ) | 9,495 | ||||||||||||||||
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|
|
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|
|
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| |||||||||||||
Total liabilities | 191,364 | — | 191,364 | (104,375 | ) | (77,494 | ) | 9,495 | ||||||||||||||||
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|
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| |||||||||||||
As of December 31, 2018 | ||||||||||||||||||||||||
Derivatives, Note 7(b) | 154,116 | — | 154,116 | (41 | ) | (92,456 | ) | 61,619 | ||||||||||||||||
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|
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| |||||||||||||
Total liabilities | 154,116 | — | 154,116 | (41 | ) | (92,456 | ) | 61,619 | ||||||||||||||||
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64
Notes to the interim condensed consolidated financial statements (continued)
(c) | Foreign exchange risk |
The Group is exposed to fluctuations in the exchange rates of the foreign currency prevailing on its financial position and cash flows. Management sets limits on the levels of exposure by currency and total daily and overnight positions, which are monitored daily. Most of the assets and liabilities in foreign currency are stated in US Dollars. Transactions in foreign currency are made at the exchange rates of the free market.
As of June 30, 2019, the weighted average exchange rate of the free market published by the SBS for transactions in US Dollars was S/3.285 per US$1 ask and S/3.290 per US$1 bid (S/3.369 and S/3.379 as of December 31, 2018, respectively). As of June 30, 2019, the exchange rate for the accounting of asset and liability accounts in foreign currency set by the SBS was S/3.287 per US$1 (S/3.373 as of December 31, 2018).
The table below presents a detail of the Group’s position:
As of June 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||
US Dollars | Soles | Other currencies | Total | US Dollars | Soles | Other currencies | Total | |||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Cash and due from banks | 9,086,304 | 1,183,609 | 322,910 | 10,592,823 | 6,802,749 | 1,224,791 | 352,871 | 8,380,411 | ||||||||||||||||||||||||
Inter-bank funds | 230,137 | — | — | 230,137 | — | 495,037 | — | 495,037 | ||||||||||||||||||||||||
Financial investments | 6,888,876 | 10,933,970 | 12,700 | 17,835,546 | 7,670,084 | 9,941,459 | 17,902 | 17,629,445 | ||||||||||||||||||||||||
Loans, net | 10,063,650 | 24,171,461 | — | 34,235,111 | 10,048,173 | 22,912,744 | — | 32,960,917 | ||||||||||||||||||||||||
Due from customers on acceptances | 43,389 | — | 14,296 | 57,685 | 112,653 | — | 20,308 | 132,961 | ||||||||||||||||||||||||
Accounts receivable and other assets, net | 149,859 | 910,967 | 49,890 | 1,110,716 | 154,643 | 1,102,800 | 34,592 | 1,292,035 | ||||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
26,462,215 | 37,200,007 | 399,796 | 64,062,018 | 24,788,302 | 35,676,831 | 425,673 | 60,890,806 | |||||||||||||||||||||||||
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|
|
|
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Deposits and obligations | 14,538,083 | 20,552,973 | 282,720 | 35,373,776 | 13,584,983 | 19,807,644 | 289,323 | 33,681,950 | ||||||||||||||||||||||||
Inter-bank funds | — | 50,013 | — | 50,013 | — | — | — | — | ||||||||||||||||||||||||
Due to banks and correspondents | 850,844 | 3,746,103 | — | 4,596,947 | 1,046,545 | 3,246,816 | — | 4,293,361 | ||||||||||||||||||||||||
Bonds, notes and other obligations | 5,919,642 | 686,577 | — | 6,606,219 | 6,110,077 | 386,701 | — | 6,496,778 | ||||||||||||||||||||||||
Due from customers on acceptances | 43,389 | — | 14,296 | 57,685 | 112,653 | — | 20,308 | 132,961 | ||||||||||||||||||||||||
Insurance contract liabilities | 4,052,996 | 6,882,096 | — | 10,935,092 | 4,072,811 | 6,227,657 | — | 10,300,468 | ||||||||||||||||||||||||
Accounts payable, provisions and other liabilities, net | 399,121 | 1,504,245 | 21,181 | 1,924,547 | 215,093 | 1,297,074 | 9,593 | 1,521,760 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
25,804,075 | 33,422,007 | 318,197 | 59,544,279 | 25,142,162 | 30,965,892 | 319,224 | 56,427,278 | |||||||||||||||||||||||||
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| |||||||||||||||||
Forwards position, net | (1,604,614 | ) | 1,662,794 | (58,180 | ) | — | (629,147 | ) | 685,813 | (56,666 | ) | — | ||||||||||||||||||||
Currency swaps position, net | (20,971 | ) | 20,971 | — | — | (59,991 | ) | 59,991 | — | — | ||||||||||||||||||||||
Cross currency swaps position, net | 1,745,863 | (1,745,863 | ) | — | — | 1,724,081 | (1,724,081 | ) | — | — | ||||||||||||||||||||||
Options position, net | (147 | ) | 147 | — | — | 81 | (81 | ) | — | — | ||||||||||||||||||||||
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| |||||||||||||||||
Monetary position, net | 778,271 | 3,716,049 | 23,419 | 4,517,739 | 681,164 | 3,732,581 | 49,783 | 4,463,528 | ||||||||||||||||||||||||
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|
|
|
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|
|
As of June 30, 2019, the Group granted indirect loans (contingent operations) in foreign currency for approximately US$653,416,000, equivalent to S/2,147,778,000 (US$696,510,000, equivalent to S/2,349,328,000 as of December 31, 2018).
65
Notes to the interim condensed consolidated financial statements (continued)
23. | Fair value |
(a) | Financial instruments measured at fair value and fair value hierarchy |
The following table presents an analysis of the financial instruments that are measured at their fair value including the level of hierarchy of fair value. The amounts are based on the balances presented in the interim condensed consolidated statements of financial position:
As of June 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||
Financial assets | ||||||||||||||||||||||||||||||||
Financial investments | ||||||||||||||||||||||||||||||||
At fair value through profit or loss (*) | 684,283 | 301,523 | 348,530 | 1,334,336 | 811,238 | 352,273 | 407,957 | 1,571,468 | ||||||||||||||||||||||||
Debt instruments measured at fair value through other comprehensive income | 10,394,305 | 3,111,938 | — | 13,506,243 | 9,822,970 | 3,320,556 | — | 13,143,526 | ||||||||||||||||||||||||
Equity instruments measured at fair value through other comprehensive income | 948,920 | 1,629 | — | 950,549 | 843,646 | 1,671 | — | 845,317 | ||||||||||||||||||||||||
Derivatives receivable | — | 187,124 | — | 187,124 | — | 185,376 | — | 185,376 | ||||||||||||||||||||||||
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|
| |||||||||||||||||
12,027,508 | 3,602,214 | 348,530 | 15,978,252 | 11,477,854 | 3,859,876 | 407,957 | 15,745,687 | |||||||||||||||||||||||||
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|
| |||||||||||||||||
Accrued interest | 176,992 | 185,067 | ||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Total financial assets | 16,155,244 | 15,930,754 | ||||||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||||||
Financial liabilities | ||||||||||||||||||||||||||||||||
Accounts payable by derivatives | — | 191,364 | — | 191,364 | — | 154,116 | — | 154,116 | ||||||||||||||||||||||||
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|
(*) As of June 30, 2019 and December 31, 2018, correspond mainly to mutual funds and investments funds participations.
Financial assets included in Level 1 are those measured on the basis of information that is available in the market, to the extent that their quoted prices reflect an active and liquid market and that are available in some centralized trading mechanism, trading agent, price supplier or regulatory entity.
Financial instruments included in Level 2 are valued based on the market prices of other instruments with similar characteristics or with financial valuation models based on information of variables observable in the market (interest rate curves, price vectors, etc.).
Financial assets included in Level 3 are valued by using assumptions and data that do not correspond to prices of operations traded on the market. Fair value is estimated using a discounted cash flow (DCF) model. The valuation requires Management to make certain assumptions about the model variables and data, including the forecast of cash flow, discount rate, credit risk and volatility.
66
Notes to the interim condensed consolidated financial statements (continued)
The table below presents a description of significant unobservable data used in valuation:
Valuation technique | Significant inputs | Valuation | Sensitivity of inputs to fair value | |||||
Royalty Pharma | DCF Method | Sales forecast | Average sector analysis, estimates | 10 percent increase (decrease) in the sales forecast would result in increase (decrease) in fair value by S/14,538,000. | ||||
500 basis points increase in the WACC would result in decrease in fair value by | ||||||||
S/26,779,000. | ||||||||
WACC | 8.00% | 500 basis points decrease in the WACC would result in increase in fair value by | ||||||
S/38,343,000. | ||||||||
Mutual funds and investment funds participations | DCF Method | Discount rate | Depends on the credit risk | 500 basis points increase in the discount rate would result in decrease in fair value by | ||||
S/4,723,000. | ||||||||
500 basis points decrease in the discount rate would result in increase in fair value by | ||||||||
S/6,163,000. | ||||||||
WACC | 9.00% | 500 basis points increase in the discount rate would result in decrease in fair value by | ||||||
S/1,331,000. | ||||||||
500 basis points decrease in the discount rate would result in increase in fair value by | ||||||||
S/1,617,000. | ||||||||
Comparable multiples | Price-to-sales ratio | Depends on industry’s entity | 10 percent increase (decrease) in the price-to-sales ratio would result in increase | |||||
(decrease) in fair value by S/2,436,000. | ||||||||
Equity value | Depends on the credit risk | 500 basis points increase (decrease) in the discount rate would result in increase | ||||||
(decrease) in fair value by S/239,000. |
The table below includes a reconciliation of fair value measurement of financial instruments classified by the Group into Level 3 of the valuation hierarchy:
As of June 30, 2019 | As of December 31, 2018 | |||||||
S/(000) | S/(000) | |||||||
Balance as of January 1 | 407,957 | 261,737 | ||||||
Purchases | 79,611 | 151,231 | ||||||
Sales | (108,999 | ) | (61,328 | ) | ||||
Total gain recognized in the interim condensed consolidated statements of income | (30,039 | ) | 56,317 | |||||
|
|
|
| |||||
Ending balance | 348,530 | 407,957 | ||||||
|
|
|
|
During thesix-month periods ended June 30, 2019, and during the year 2018, there were no transfers of financial instruments from Level 3 to Level 1 or to Level 2. Also, during thesix-month periods ended June 30, 2019 and during the year 2018, there were no transfers of financial instruments between Level 1 and Level 2.
67
Notes to the interim condensed consolidated financial statements (continued)
(b) | Financial instruments not measured at fair value |
The table below presents the disclosure of the comparison between the carrying amounts and fair values of the Group’s financial instruments that are not measured at their fair value, presented by level of fair value hierarchy:
As of June 30, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Fair value | Book value | Level 1 | Level 2 | Level 3 | Fair value | Book value | |||||||||||||||||||||||||||||||
S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | S/(000) | |||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||
Cash and due from banks | — | 10,592,823 | — | 10,592,823 | 10,592,823 | — | 8,380,411 | — | 8,380,411 | 8,380,411 | ||||||||||||||||||||||||||||||
Inter-bank funds | — | 230,137 | — | 230,137 | 230,137 | — | 495,037 | — | 495,037 | 495,037 | ||||||||||||||||||||||||||||||
Investments at amortized cost | 890,572 | 1,038,714 | — | 1,929,286 | 1,867,426 | 700,177 | 1,156,148 | — | 1,856,325 | 1,884,067 | ||||||||||||||||||||||||||||||
Loans, net | — | 34,673,151 | — | 34,673,151 | 34,235,111 | — | 33,276,930 | — | 33,276,930 | 32,960,917 | ||||||||||||||||||||||||||||||
Due from customers on acceptances | — | 57,685 | — | 57,685 | 57,685 | — | 132,961 | — | 132,961 | 132,961 | ||||||||||||||||||||||||||||||
Accounts receivables and other assets, net | — | 923,592 | — | 923,592 | 923,592 | — | 1,106,659 | — | 1,106,659 | 1,106,659 | ||||||||||||||||||||||||||||||
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|
|
|
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|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | 890,572 | 47,516,102 | — | 48,406,674 | 47,906,774 | 700,177 | 44,548,146 | — | 45,248,323 | 44,960,052 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||||
Deposits and obligations | — | 35,352,674 | — | 35,352,674 | 35,373,776 | — | 33,699,626 | — | 33,699,626 | 33,681,950 | ||||||||||||||||||||||||||||||
Inter-bank funds | — | 50,013 | — | 50,013 | 50,013 | — | — | — | — | — | ||||||||||||||||||||||||||||||
Due to banks and correspondents | — | 4,600,651 | — | 4,600,651 | 4,596,947 | — | 4,291,346 | — | 4,291,346 | 4,293,361 | ||||||||||||||||||||||||||||||
Bonds, notes and other obligations | 5,702,738 | 1,170,305 | — | 6,873,043 | 6,606,219 | 5,569,970 | 895,427 | — | 6,465,397 | 6,496,778 | ||||||||||||||||||||||||||||||
Due from customers on acceptances | — | 57,685 | — | 57,685 | 57,685 | — | 132,961 | — | 132,961 | 132,961 | ||||||||||||||||||||||||||||||
Insurance contract liabilities | — | 10,935,092 | — | 10,935,092 | 10,935,092 | — | 10,300,468 | — | 10,300,468 | 10,300,468 | ||||||||||||||||||||||||||||||
Accounts payable and other liabilities | — | 1,733,183 | — | 1,733,183 | 1,733,183 | — | 1,367,644 | — | 1,367,644 | 1,367,644 | ||||||||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total | 5,702,738 | 53,899,603 | — | 59,602,341 | 59,352,915 | 5,569,970 | 50,687,472 | — | 56,257,442 | 56,273,162 | ||||||||||||||||||||||||||||||
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|
|
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|
|
The methodologies and assumptions used to determine fair values depend on the terms and risk characteristics of each financial instruments and they include the following:
(i) | Long-term fixed-rate and variable-rate loans are assessed by the Group based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for the estimated losses of these loans. As of June 30, 2019 and December 31, 2018, the book value of loans, net of allowance, was not significantly different from the calculated fair values. |
(ii) | Instruments whose fair values approximates their book value - For financial assets and financial liabilities that are liquid or have short-term maturity (less than three months) it is assumed that the carrying amounts approximate to their fair values. This assumption is also applied to demand deposits, savings accounts without a specific maturity and variable-rate financial instruments. |
(iii) | Fixed rate financial instruments - The fair value of fixed-rate financial assets and financial liabilities at amortized cost is determined by comparing market interest rates when they were first recognized with current market rates related to similar financial instruments for their remaining term to maturity. The fair value of fixed interest rate deposits is based on discounted cash flows using market interest rates for financial instruments with similar credit risk and maturity. For quoted debt issued, the fair value is determined based on quoted market prices. When quotations are not available, a discounted cash flow model is used based on the yield curve of the appropriate interest rate for the remaining term to maturity. |
68
Notes to the interim condensed consolidated financial statements (continued)
24. | Fiduciary activities and management of funds |
The Group provides custody, trustee, investment management and advisory services to third parties; therefore, the Group makes purchase and sale decisions in relation to a wide range of financial instruments. Assets that are held in trust are not included in the interim condensed consolidated financial statements. These services give rise to the risk that the Group could eventually be held responsible of poor yielding of the assets under its administration.
As of June 30, 2019 and December 31, 2018, the value of the managedoff-balance sheet financial assets is as follows:
As of June 30, 2019 | As of December 31, 2018 | |||||||
S/(000) | S/(000) | |||||||
Investment funds | 13,799,188 | 12,924,575 | ||||||
Mutual funds | 4,680,235 | 4,668,076 | ||||||
|
|
|
| |||||
Total | 18,479,423 | 17,592,651 | ||||||
|
|
|
|
69
Notes to the interim condensed consolidated financial statements (continued)
25. | Subsequent event: Initial Public Offering |
On July 3, 2019, following the approval by the Board, IFS filed with the Securities and Exchange Commission of the United States of America (“SEC”), a Registration Statement under FormF-1 of the Securities Exchange Act of 1933 of the United States of America, in relation with a proposal of an Initial Public Offering of IFS’s common shares.
On July 18, 2019, IFS announced the Initial Public Offering of approximately 9,000,000 common shares at a price of US$46.00 per common share. The sale was performed by (i) IFS, (ii) Banco Internacional del Perú, S.A.A. – Interbank, a Subsidiary of IFS (“Interbank”), (iii) Intercorp Perú Ltd., controlling shareholder of IFS, and (iv) anon-related shareholder.
As part of the Public Offering, IFS sold approximately 2,418,754 common shares held as treasury stock (including shares sold by Interbank), as well as approximately 1,150,000 new common shares to be issued. Also, IFS granted the underwriters an option for a period of 30 days to purchase up to an aggregate of 1,350,000 additional new common shares. As of the date of this report, said option has been exercised over 1,186,841 shares.
Intercorp Perú, IFS’s majority shareholder, sold 2,531,246 shares, and as consequence its ownership in IFS’s issued capital stock decreased from 74.32 percent to 70.62 percent. Besides that, thenon-related shareholder sold 3,000,000 shares.
In this sense, the combined securities traded were 10,286,841 shares at a price of US$46.00, with a total sale amount of approximately US$473,200,000, out of which, IFS and Interbank sold 4,755,595 shares for US$218,757,000 (before expenses).
The shares sold in connection with the Initial Public Offering began trading on the New York Stock Exchange on July 19, 2019, under the ticker symbol “IFS”.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INTERCORP FINANCIAL SERVICES INC. | ||||||
Date: August 12, 2019 | By: | /s/ Michela Casassa Ramat | ||||
Name: | Michela Casassa Ramat | |||||
Title: | Chief Financial Officer |
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