IFS (IFS) Q4 2025: High-Yield Loans Grow 8%, Pushing NIM and ROE Recovery
IFS’s Q4 2025 results highlight a decisive pivot to higher-yielding loans and digital-led funding, driving a 50 basis point NIM uplift and double-digit growth in insurance and wealth management. The bank’s disciplined risk appetite and payments ecosystem expansion underpin a conservative but credible ROE recovery path. Investors should watch for further margin gains and deposit mix shifts as Peru’s macro tailwinds persist into an election year.
Summary
- Deposit Mix Optimization: Low-cost funding and digital payments ecosystems are central to margin expansion.
- Yield-Driven Growth: High-yield consumer and SME loans are accelerating, supporting NIM and profitability recovery.
- Election-Year Focus: Political stability and commodity tailwinds are critical for sustaining above-system growth.
Business Overview
Intercorp Financial Services (IFS) is a diversified Peruvian financial group operating across banking, insurance, and wealth management. Its primary segments include Interbank (retail and commercial banking), Interseguro (insurance, especially annuities and life), and Inteligo (wealth management and asset management). IFS generates revenue from net interest income, insurance premiums, fee-based services, and investment returns, with a growing focus on digital banking, payments, and holistic customer relationships.
Performance Analysis
IFS delivered record net income, propelled by a sharp rebound in higher-yielding loans and robust double-digit growth in insurance and wealth management. The group’s risk-adjusted net interest margin (NIM) climbed 50 basis points YoY to 4% in Q4, reflecting a strategic shift toward consumer and SME lending, which grew 8% and 25% respectively. Asset quality remained strong, with cost of risk at 2.1% for the year, even as loan mix tilted toward higher-yield segments.
Retail primary banking relationships expanded 11%, and digital adoption exceeded 84% of retail clients, underscoring the payoff from investments in payments (Plin, EasyPay) and digital channels. Insurance premiums surged 61% YoY, driven by private annuities, while Inteligo’s assets under management hit new highs, up double digits. The group’s cost-to-income ratio held at 36.8%, balancing technology investments with operating leverage.
- Consumer and SME Lending Acceleration: Both segments outpaced system growth, supporting margin and market share gains.
- Deposit-Led Funding: 81% of funding now comes from deposits, with retail and payments-driven flows lowering cost of funds.
- Expense Discipline Amid Tech Spend: Opex rose 11%, but efficiency ratios remained stable as digital initiatives scaled.
Excluding Ruta de Lima impairment, core profitability and ROE would have been even higher, affirming the underlying strength of the business model. The group’s diversified earnings base and digital-led funding strategy are key differentiators as competition intensifies.
Executive Commentary
"These results confirm our ability to adapt quickly and keep generating value despite some headwinds in a disciplined and sustained way, aligned with our long-term strategy and reaffirming our commitment to long-term profitability and sustainability."
Luis Felipe Castellanos, Chief Executive Officer
"Higher yielding loans continue the positive trend, showing an 8% growth on a year-over-year basis. Risk-adjusted NIM increased 50 basis points over the year, reaching 4% in the last quarter, while we maintain a low cost of risk at 2.1% and cost of funds near 3%."
Miquela Casasa, Chief Financial Officer
Strategic Positioning
1. Payments Ecosystem as a Funding Engine
IFS’s digital payments platforms—Plin and EasyPay—are driving growth in low-cost deposits, which now represent 40% of efficient funding. Transaction volumes on Plin rose 48% YoY, and EasyPay flows climbed 60%, reinforcing both funding stability and customer engagement.
2. High-Yield Loan Focus
The accelerated push into credit cards, personal loans, and SME lending is raising portfolio yields and NIM. Management expects this trend to continue, with cost of risk expected to normalize toward 2.5% as the higher-yielding book expands, but with profitability gains outpacing risk cost increases.
3. Insurance and Wealth Management Synergies
Interseguro and Inteligo delivered double-digit growth, with cross-segment collaboration (e.g., bank assurance, private annuities) deepening client relationships and expanding fee and premium income. Both segments maintain structural ROEs above 20%, anchoring group profitability.
4. Disciplined Risk and Capital Management
Loan growth is balanced with a conservative risk appetite, especially as consumer and SME portfolios ramp up. Non-performing loan coverage remains robust at 140%, and capital ratios (16% total, 12.5% CET1) provide ample buffer for growth and volatility.
5. Digital Transformation and Efficiency
Ongoing investments in technology, GenAI, and customer experience are central to IFS’s strategy. Digital adoption metrics and NPS scores (51 retail, 68 commercial) validate progress, while efficiency gains from digital channels offset higher tech spend.
Key Considerations
This quarter’s results reflect a business model in transition, with digital and high-yield lending at the core of future growth. The key will be sustaining margin and asset quality as the loan mix shifts, and leveraging payments-led funding to manage cost of capital.
Key Considerations:
- Deposit Mix Shift: Continued migration toward low-cost, transactional deposits is critical for funding loan growth and protecting NIM.
- Risk Appetite Calibration: Balancing higher-yield lending with prudent underwriting will determine the sustainability of recent margin gains.
- Political and Macro Volatility: Peru’s election cycle and commodity exposure could alter private investment and loan demand trajectories.
- Expense Growth vs. Efficiency: Tech and talent investments are necessary, but maintaining sub-37% cost-to-income is key for ROE targets.
Risks
IFS faces elevated risk from Peru’s political cycle, with potential for delayed investment and shifts in consumer sentiment if market-unfriendly candidates gain traction. Loan growth and asset quality could also be disrupted by further pension fund withdrawals or external shocks. While commodity price strength supports the macro backdrop, any reversal would pressure both funding and credit demand. The group’s conservative guidance reflects these uncertainties.
Forward Outlook
For Q1 2026, IFS expects:
- Continued high single-digit loan growth, led by consumer and SME segments
- NIM to improve modestly, supported by funding mix and loan yield expansion
For full-year 2026, management guided:
- ROE around 17%, with potential upside if high-yield lending accelerates and political risk remains contained
- Cost-to-income ratio to remain near 37%, balancing tech investment and operating leverage
Management highlighted several factors that will shape 2026:
- Deposit growth and funding mix will be managed to support loan expansion without sacrificing margin
- Political stability and commodity prices are key external variables, with upside from continued macro resilience
Takeaways
IFS’s Q4 confirms the business is executing a disciplined shift to higher-margin, digital-led growth, but is not immune to macro and political cross-currents.
- Loan Mix Drives Margin: The pivot to high-yield lending is lifting NIM and profitability, but will require tight risk management as growth accelerates.
- Funding and Digital Scale: Payments-led deposit growth is lowering funding costs and deepening customer engagement, supporting defensible margin gains.
- Election-Year Watch: Investors should closely monitor the political cycle and any shifts in credit demand or asset quality as macro conditions evolve.
Conclusion
IFS’s results validate its strategic focus on digital, high-yield lending, and funding mix optimization to drive sustainable profitability. The outlook is constructive, but vigilance is warranted as the group navigates Peru’s political and macro landscape in 2026.
Industry Read-Through
IFS’s earnings underscore several key themes for the Latin American financial sector. First, digital payments ecosystems are now proven engines for low-cost funding and customer retention, with ecosystem players poised to outgrow traditional banks on both margin and engagement. Second, the shift toward higher-yielding consumer and SME lending will be a margin lever, but also raises the bar for risk management and pricing discipline. Third, macro and political volatility—especially in commodity-linked economies—remains a wild card for both credit demand and funding stability. Investors in regional banks should prioritize exposure to digital, payments, and diversified financial platforms with proven risk controls and capital flexibility.