Intercorp Financial Services Q1 2025 Earnings: Navigating Growth Amid Challenges

Rhys NorthwoodFriday, May 9, 2025 7:01 pm ET
15min read

Intercorp Financial Services Inc. (NYSE: IFS) delivered a mixed but fundamentally robust performance in its Q1 2025 earnings, showcasing strong year-on-year growth while navigating near-term headwinds. The Lima-based financial conglomerate reported a net profit of S/446 million (approximately $109 million USD), marking a 211% year-on-year increase from Q1 2024. However, quarterly profits dipped compared to the prior quarter due to impairments linked to its exposure to Telefónica, a Spanish telecom giant facing financial struggles. Despite this, Intercorp’s leadership in Peru’s annuities market, coupled with strategic investments in digital innovation and geographic diversification, positions it as a resilient player in Latin America’s financial sector.

Financial Performance: Strength Amid Volatility

The Q1 results highlight a clear divergence between annual and quarterly trends:
- Year-on-Year Growth: Net profit surged from S/140 million in Q1 2024, driven by gains in banking, insurance, and wealth management segments.
- Quarter-on-Quarter Dip: A S/23 million decline from Q4 2024’s S/469 million profit was attributed to provisions for loan impairments in Interbank (its banking subsidiary) and Interseguro (insurance arm), tied to Telefónica’s financial distress.

Key metrics include:
- Return on Equity (ROE): Maintained at robust levels, though exact figures were not disclosed.
- Earnings Per Share (EPS): Rose to S/3.922, up from S/1.224 in Q1 2024, reflecting improved profitability.
- Market Capitalization: Stood at $3.97 billion, with an average daily trading volume of 196,576 shares, indicating moderate liquidity.

Strategic Highlights: Digital Growth and Geographic Diversification

Intercorp’s resilience stems from its multi-sector model and focus on innovation:
1. Digital Expansion: Customer base and digital transaction volumes grew across all segments, with banking and wealth management leading the charge.
2. Geographic Strength:
- Asia: Contributed 18% sales growth, particularly in Korea and China.
- Americas: Expanded 16% as retailers rebounded from past supply chain issues.
3. Innovation Pipeline: Over 450 clients visited its R&D facilities during Cosmoprof 2025, signaling strong demand for new products in skincare and prestige beauty.

CEO Luis Felipe Castellanos emphasized the company’s agility: “We aim to grow twice as fast as the market, leveraging our global footprint and innovation capabilities.”

Risks and Challenges

While Intercorp’s fundamentals remain strong, risks persist:
- Telefónica Impairments: The S/23 million QoQ profit decline underscores reliance on single clients. Management noted this as an isolated issue, but investor scrutiny may follow.
- Geopolitical Volatility: Tariffs and trade disputes could disrupt supply chains, though Intercorp’s global production network (in Europe, Asia, and the Americas) provides flexibility.
- Skincare Market Softness: Declines in the U.S. and China, Intercorp’s two largest skincare markets, remain unresolved.

Investment Outlook: A "Buy" with Cautious Optimism

  • Stock Performance: Trading at $14.82, IFS carries a “Buy” sentiment from technical analysts, citing strong liquidity and manageable debt levels.
  • Forward Guidance: The company reaffirmed its 5-7% revenue growth target for 2025, supported by new product launches and operational efficiencies.
  • Valuation: Near its fair value, the stock offers potential upside if geopolitical risks subside and skincare recovery materializes.

Conclusion: A Resilient Player in Latin America’s Financial Landscape

Intercorp Financial Services’ Q1 2025 results underscore its ability to capitalize on long-term opportunities while managing short-term volatility. With a market cap of $3.97 billion, a proven track record of innovation, and a dominant position in Peru’s annuities market, the company is well-positioned to outpace regional competitors. While risks like Telefónica’s financial woes and geopolitical uncertainties linger, Intercorp’s diversified revenue streams and global operations mitigate these challenges.

Investors should monitor skincare market recovery in the U.S. and China and the resolution of Telefónica-related impairments. For now, the “Buy” rating holds, supported by strong EPS growth and a leadership position in a growing market. As CEO Castellanos noted, “We are ready to adapt—and grow—even in turbulent environments.”

Key Data Points:
- Net Profit Q1 2025: S/446 million (+211% YoY).
- Market Cap: $3.97 billion.
- Stock Price: $14.82 (rated “Buy” by TipRanks).
- Skincare Segment: Declined in key markets but expected to recover in H2 2025.
- Global Footprint: Operations in 80 countries, with Peru as the core market.