Intercorp Financial Services (IFS) Q4 2025 earnings review
Record Year Marred by Q4 Investment Write-down
IFS delivered a record FY25 with Net Profit surging 49% to S/ 1.94 billion, driven by a massive reduction in loan provisions (-34% YoY) as credit quality normalized. However, Q4 momentum stalled (Profit -6% YoY) due to a specific S/ 128 million impairment on the 'Rutas de Lima' investment and a sharp drop in Wealth Management trading gains. While the core Banking engine is accelerating (+16% Profit YoY in Q4), non-core investment volatility weighed on the quarter.
🐂 Bull Case
The cleanup is working. Cost of Risk fell to 1.8% in Q4 (lowest since 2023), and total loan provisions dropped 28.5% YoY in the quarter. This is the primary engine for the FY25 profit surge.
Interbank (Banking segment) net income grew 16% YoY in Q4. Net Interest Income grew 2.8% and Fee Income +9.2%, showing healthy core banking operations independent of the investment portfolio volatility.
🐻 Bear Case
A S/ 128 million impairment related to 'Rutas de Lima' in the Insurance segment and a 66% profit drop in Wealth Management (due to lower mark-to-market valuations) highlight significant non-operating risks.
Operating expenses rose 10.5% YoY in Q4, outpacing revenue growth in several lines. Management cited higher technology and personnel costs, which could pressure efficiency ratios if revenue growth slows.
⚖️ Verdict: ⚪
Neutral/Positive. The core banking turnaround is real and powerful, driving record annual results. However, the Q4 investment impairment and expense growth muddied the waters. The thesis relies on the continued normalization of credit costs.
Key Themes
Rutas de Lima Impairment Shock
Q4 results were hit by a S/ 127.9 million provision in the Insurance business related to the 'Rutas de Lima' exposure. This single item caused the 'Impairment of financial investments' line to balloon from S/ 4.6 million in 24Q4 to S/ 127 million in 25Q4, masking the operational improvements elsewhere.
Cost of Risk Normalization
Accelerating improvement. The Cost of Risk dropped to 1.8% in Q4, down 80bps YoY and 30bps QoQ. Retail Cost of Risk specifically is at its lowest level since 2023 (3.7%). This confirms the 'disciplined approach' to loan origination is paying off.
Retail Deposit Capture
Interbank successfully captured flows from pension fund withdrawals, driving an 8.7% QoQ increase in retail deposits. This improved the funding mix and helped lower the cost of funds by 10bps QoQ to 3.0%.
Wealth Management Volatility
Reversing. After a strong run, the Wealth Management segment profit collapsed 66% YoY (from S/ 71.6M to S/ 24.4M) in Q4. The decline was attributed to 'lower mark-to-market valuations' compared to the prior year, despite Assets Under Management (AUM) growing 16% YoY.
Banking Segment Dominance
Stable/Strengthening. The Banking segment (Interbank) is increasingly carrying the group, contributing S/ 402.9M in profit (87% of total) in Q4 while Insurance and Wealth Management faded. Banking ROE held steady at 16.1%.
Other KPIs
Accelerating. Up significantly from 12.6% in FY24. Excluding the Rutas de Lima impairment, FY25 ROE would have been 18.5%. This demonstrates the underlying earning power of the franchise has been restored.
Stable. NIM held flat YoY at 5.3%. While yields on loans dropped 40bps due to mix shift, the company successfully offset this by lowering funding costs by 20bps via better deposit mix.
Accelerating. Expenses grew 10.5% YoY, faster than the 2.3% growth in Net Interest Income. Management attributes this to 'higher technology expenses and employee salaries.' Efficiency ratio deteriorated slightly to 37.2% in Q4 from 35.8% a year ago.
Guidance
The earnings release did not contain specific numerical guidance tables for FY26. Management commentary focused on the 'resilience of our diversified business model' and 'strong commitment to sustainable value creation,' but lacked specific forward-looking targets in the provided text.
Key Questions
Rutas de Lima Exposure
Is the S/ 128M impairment in Q4 the full extent of the Rutas de Lima impact, or should we expect further provisions in FY26?
Wealth Management Stability
With AUM up 16% but profits down 66%, how quickly can fee generation offset the volatility in mark-to-market valuations seen in Q4?
Expense Discipline
Operating expenses grew 10.5% in Q4 while Net Interest Income grew only 2.8%. What specific levers are being pulled to realign expense growth with revenue growth in FY26?