Good morning, and welcome to Intercorp Financial Services First Quarter 2022 Conference Call. All lines have been placed on mute to prevent any background noise. Please be advised that today's conference is being recorded. After the presentation, we will open the floor for questions. Also, you can submit online questions at any time today using the window on your webcast and they will be answered after the presentation during the Q&A session. Simply type your question in the box and click submit question. It is now my pleasure to turn the call over to Rafael Borja of InspIR Group. Sir, you may begin.

Thank you, and good morning, everyone. On today's call, Intercorp Financial Services, we will discuss its first quarter 2022 earnings. We are very pleased to have with us Mr. Luis Felipe Castellanos, Chief Executive Officer of Intercorp Financial Services; Mrs. Michela Casassa, Chief Financial Officer of Intercorp Financial Services; Mr. Gonzalo Basadre, Chief Executive Officer of Interseguro; Mr. Bruno Ferreccio, Chief Executive Officer of Inteligo; and Mr. Carlos Tori, Vice President of Retail Banking and Channels of Intercorp. They will be discussing the results that were distributed by the company yesterday, May 12. There is also a webcast, video presentation to accompany the discussion during this call. If you didn't receive a copy of a presentation or the earnings report, they are now available on the company's website ifs.com.pe to download a copy. Otherwise for any reason if you need any assistance today, please call InspIR Group in New York at 212-710-9686. I would like to remind you that today's call is for investors and analysts only, therefore, questions from the media will not be taken. Please be advised that forward-looking statements may be made during this conference call. These do not account for future economic circumstances, industry conditions, the company's future performance or financial results. As such, the statements made are based on several assumptions and factors that could change causing actual results to materially differ from the current expectations. For a complete note on forward-looking statements, please refer to the earnings presentation and report issued yesterday. It is now my pleasure to turn the call over to Mr. Luis Felipe Castellanos, Chief Executive Officer of Intercorp Financial Services, for his opening remarks. Mr. Castellanos, please go ahead, sir.

Thank you, Rafael and thanks everyone. Good morning. Welcome to our first quarter 2022 earnings call. We really appreciate you taking your time to attend our call, and I hope that you and your families remain safe and healthy. Let me start by giving you a brief overview of the macro and political situation in Peru. Despite accumulated GDP growth figures reached 3.9% in February, we expect this year's GDP growth to be somewhere in between 2.5% and 3%, mainly explained by three factors. One, a less favorable international environment due to global financial conditions, health restrictions in China and the Russia/Ukraine conflict. Second, a historical increase in production cost and in inflation, which is negatively impacting businesses' margins and families' purchasing power. The Central Bank is tightening its monetary policy with the recent announcement of a new 50 basis points rate hike as of yesterday. And third, the level of political uncertainty in our country. We believe that the political front will continue to be uncertain in the coming months, and it will take some time for public and private investment to reassume its growth pattern. Despite positive headwinds, in light of commodity prices and exports positively impacting the macro economies. Under this scenario, IFS continues to show resilience. Our core banking franchise continues to recover with a strong growth in consumer financing and commercial banking, with sound risk indicators. We still face volatility in our investment operations, but all-in-all, we have continued our recovery path. As we have mentioned in the past, we strongly believe that our people, our culture and our ability to adapt to changes through our two-tier digital strategy are our core strengths and the pillars that will allow us to grow profitably in the future. Our deployment of digital products and services continues to evolve, and our franchise continues to grow in number of customers and in revenues, with sound levels of efficiency. As we will see during the presentation, we recently announced the acquisition of 50% stake that we did not own in Izipay, a transaction that reinforces our commitment to Peru and completes our 100% ownership of the company. We believe this deal will strengthen our strategic and competitive positioning in the payments landscape in Peru and will allow us to explore new sources of growth and monetization opportunities, both with our retail customers and with merchants. At IFS, we continue to make progress and to grow in a sustainable way. We are committed to fulfill our purpose, which is to empower all Peruvians to achieve their financial wellbeing. Now let me pass it on to Michela to update you on the results of this quarter and to give you a detailed review of our operations. Thank you very much and stay healthy.

Good morning, and welcome everyone to Intercorp Financial Services first quarter 2022 earnings call. This time, we will focus on four items on the agenda, which include financial highlights, the announced acquisition of Izipay, our key messages and takeaways. I will start with a brief summary of financial highlights on slides three to eight. The main highlights are: on slide three, IFS had a good quarter, reaching an ROE of 17.4%, thanks to the strong recovery in core business at Interbank and despite the negative impacts on the investment portfolio, especially at Inteligo, but also at Interseguro. Earnings grew more than 50% on a quarterly basis, thanks to the strong growth in the quarterly results of the core banking business, as well as to the partial recovery of insurance and wealth management investment portfolios. On a yearly basis, earnings show a decrease of 24%, mainly due to the extraordinary results registered in the first quarter of 2021 on the investment portfolios of the three subsidiaries, which did not take place this year. On slide four, at Interbank, strong recovery of core business in the first Q resulted in 19.1% ROE. There is a solid performance in consumer finance and SME, with credit cards and personal loans up 41% year-on-year. Double-digit growth in net interest income and fee income, there's a shift in the loan mix and higher rates that are driving NIM up, reaching 4.5% in the first quarter, and we continue to have consistent credit quality metrics with cost of risk at 1.4%. At Interseguro, earnings grew almost threefold quarter-on-quarter, with ROE at 15.7%. Gross premiums plus collections increased 26% year-over-year. Return on the investment portfolio was 5.1%, impacted by negative mark-to-market. Interseguro continues to be the market leader in annuities with a 31.6% share in the first Q…

We will now begin the question-and-answer session. The first question is from Ernesto Gabilondo with Bank of America. Please go ahead.

and good morning, everybody.

Ernesto, are you there? We can't hear you. No, no, we can't.

Mr. Gabilondo, can you hear us? Sounds like Mr. Gabilondo is having audio issues. We'll move on to the next question is from Jason Mollin with Scotiabank. Please go ahead.

Luis Felipe and Michela, thanks for the presentation. My first question is on the sensitivity of IFS's net interest income to interest rates. Clearly, it looks to be having a positive effect. How is debt positioning itself? What is the sensitivity today to 100 basis point change on the net NII? But also on your balance sheet, on your investments, if you can give us some color there, that would be very helpful. And how you think management can prepare for what you expect going forward? And my second question is on the RappiBank joint venture. You showed some figures on credit cards and NPS. And I saw on the 20-F that at the end of December 2021, RappiBank had 209,000 customers. So, maybe you can give us some perspective on how that's evolving and what you expect there relative to what you showed for March, and what the number of clients at the end of 2021? Thank you.

Okay. Jason, thank you very much for your question. Let's maybe, Michela, you can start with the sensitivity on the NIM question. And I can then wrap that.

Okay. Good morning, Jason. As I mentioned during the last call, I mean, we are actually monthly updating our sensitivity calculations because given the speed and number of increases in rates, now this is actually changing, okay? But basically, what we have seen is that for 100 basis points increase in the soles rate, okay, we are seeing a neutral to positive effect, okay? What we are seeing now as the, let's say, the further improvement in NIM versus what we expected is -- I mean, it's more coming from the portfolio mix, okay? But also not to these increases in rates. What is lagging a little bit behind, but we believe will start impacting in the next month is the financial expenses, okay? For example, there have been a number of positive impacts in the cost of funds coming from exchange rate, for example, okay? That will not necessarily be repeated in the future. So, NIM will continue to improve as we see the full effects of the rates -- as the increasing rate that we have already in the portfolio. But we are expecting a faster increase in the cost of funds than we saw before. This is why the update that we have today for soles rates is neutral to positive impact. Now when we shift to the dollar impact of 100 basis points increase, this is a little bit different and is actually a negative impact of around, I don't know, between $4 million and $5 million, because we have less earning assets in dollars and more bonds and liabilities, okay? So, hopefully, with the mix of the two and with the shift of the portfolio, what we are expecting is that this -- I mean, on top of the increase of rates that we have seen and even with the dollar ones, NIM will continue to improve in the coming -- in all the coming quarters to be in the high range of our guidance.

Yeah. Let me address, particularly on the interest rate sensitivity of the portfolio. At the bank, it's very straightforward. We do have a large portfolio of sovereign bonds, all of them related to the Peruvian government. They are like short-term bonds. The average duration is of that three years, so the impact there is important. So far, over a portfolio of around PEN 8 billion, the rate moves -- that have been very sharp half like a negative impact of around PEN 700-plus million, which are in DPV. They -- so they don't hit the P&L. They go to equity. And given that we have plenty of capital, that's not a concern. And with the evolution of time, given the short duration, that should be sweeping away. But we are obviously monitoring that. And then I think the other important part where we do have investments that could be sensitive to interest rate movements is obviously in our insurance portfolio, and let me pass it on to Gonzalo, who can address the specific effects that we can have there and how we are managing that.

Great. Thanks Luis Felipe. Our portfolio has a high percentage of fixed income security is around 80%, so definitely, our portfolio led to rate increases. They don't flow to results. They will reduce the possibilities of realized gains because of by sale of securities. On the other hand, what we're seeing is that as rates are -- as investment rates are going up, are the rates we're offering our clients are not moving up at the same speed, so our spreads are increasing. So, even though we'll have a reduced possibility of realizing in the short-term, in the long-term, what we're seeing is an increase in spreads in the sale of our annuities.

Okay. Thanks Gonzalo. And then on the RappiBank effort, as we have mentioned, it's an early stage venture for us. That was launched. It had like a couple of setbacks because of the pandemic. So, we kind of realign and relaunched. It's still early. We are refocusing. As we mentioned, we are piloting a way of just opening accounts. We reached, as you well said, 200,000 accounts or wallets. We quickly saw in agreement with Rappi that, that was easy to place, but not very clear paths for monetization there. So, we have actually stopped growing through accounts. And we moved to credit cards, where we have achieved close to 60,000 credit cards. And we are closely monitoring the evolution of those cards. The bottom line is there's traction on the product. However, we are not being very successful in those customers actually taking loans on their credit card. Now they're using the credit card, they use all the benefits that are coming through the usage of the card in Rappi, but we're having trouble in actually making that stick as a credit card loan. We have too many people that are repaying their full amounts, so it's actually a bit costly. So, as you've seen in the last quarter, we almost didn't grow in number of credit cards placed, because we are reworking value proposition, segment of customers, analyzing all the data we're getting and all that. Again, that's an early stage, probably we're going to go through lots of pivoting before we'll come with a very specific product that allows us to really become aggressive in terms of growth. So, basically, that's the status there. We are monitoring it closely. And hopefully, we'll be able to find, sooner than later, good profitable source of growth. And if not, we will have to continue monitoring to see what other decisions we can be taken.

That's very helpful. Luis, maybe a follow-up on one of the comments you made more in the general outlook for Peru's economy. I mean, you said that it could take some time to show recovery in investment. What do you think needs to happen for that to take place? Like what are the catalysts that could get -- like what is the positive scenario for catalyst to drive investments? And perhaps what could be some of the concerns that makes it even worse? I mean, could things -- what would be the downside scenarios or catalysts as well?

Sure. Okay. Let me try to address that question, which is not -- it sounds like a simple question, but you have many, many points to it. But I guess, what needs to happen in order for investor confidence and consumer confidence to come back is to see in terms of stability in the political environment. We all know that the macro fundamentals of Peru continue to be solid despite inflation, because this is an international phenomenon. We know that the Central Bank is very structured, and it's having lots to do in the Peruvian economy to make sure that the macro accounts remain healthy. And the Minister of Finance and their team are doing all the efforts to make that possible. However, we see a lot of -- we're very concerned about the way the executive continues to name people that we believe don't have the qualifications to run important parts of the government. So, there's lots of turnover and lots of questioning there. That trend it creates instability. And on the other side, Congress continues to approve some measures that are very populist that at the end, that do not allow investors to feel comfortable that we are going on the right track from that point. And in the middle of that, there's a big push between the executive and the Congress. Even though we've seen, in the latest days, some agreement in certain points with different parties have voted together. One can agree or not in what they have been voted together. So, there is lots of noise going around the executive, Congress, whatever. So, maybe the catalyst will be, from my perspective -- and this is completely my perspective -- making some changes and the change could be setting up our executive branch with a new prime minister that brings confidence and a new set of ministers that provide that confidence to the market and create a positive working relationship with Congress. I think that could be a good catalyst. Now it's not happening. One of the big concerns was the proposal of a new . That has been put down by Congress. However, if that continues to rise on and on will also be a source of concern for everybody involved. Hopefully, now that, that has been put to bed, that's out of question. However, it's not clear what will the next days come to us. So, again, there's political noise and both the executive branch and the legislative branch need to work together in order to return to a more normal stable situation. That could move along with the good economic prospects that we have because of all the potential that the country has and because of the positive cycle of commodities that should benefit our country.

Thank you for the comments. We really appreciate. No, it's a tough question. It's difficult to tell, but thank you for that. Fantastic.

You are welcome.

The next question is from Ernesto Gabilondo with Bank of America. Please go ahead.

Thank you. Hi. Good morning, Luis Felipe and Michela, and good morning everybody. Thanks for your presentation and for the opportunity to ask questions. My first question is on loan growth and asset quality. What do you think would be the level in which inflation and interest rates to start to have an impact in loan growth and in asset quality? Then my second question is on your digital transformation. It was very interesting for me to see your new digital strategies. Especially I would like to hear on your new growth strategy related to payments, the Neobank and open banking. So, just wondering if you would like to create Neobank bank or a specific area to allocate the Neobank. And I think if that is the case, it will be very helpful if you can start disclosing a P&L and key performance indicators in the future as they differ from those of a traditional bank. And then my last question is on your ROE. We saw your reported first quarter ROE was higher than 17% and above the 16% guided. So, do you think you can maintain this level of ROE in the next quarters? And where do you see your sustainable ROE? Thank you.

Okay. Let me start -- Ernesto, and thanks very much for your question. By number three, then I'll move to number two and I'll leave Michela number one, so we're going to be backwards here. Yes, we had a strong start of the year. We are very confident that we could continue with those levels of ROE. I know that our guidance is a little bit below that. We don't feel -- at this stage, we don't feel, not feel moving guidance. It's early still in the year. It's just a quarter. And there's some uncertainty in front of us, especially in the front of investments. We've seen what has been happening in the last couple of weeks, three weeks, which has been terrible for the market. So, I guess, we feel comfortable that the fundamentals of IFS in other businesses are strong. We're going to face some volatility. And we hope that we could continue at these levels of ROE. And on sustainable, I think, Michela can correct me, but we see IFS at 18%-plus sustainable ROE for the next years. So that's basically it. But again, a good start of the year in a very volatile environment, which could have some surprises quarter-in, quarter-out because of the volatility in the market. So, I think, we're okay with what we have right now, but the fundamentals are building up pretty nicely. On the second part, I think we discussed about this. We won't have a Neobank outside of IFS. Maybe in another country at someday, but actually, regulation in Peru does not allow us to have two licenses for different banks. So, everything we do, we will have to do under the Interbank license umbrella. And obviously, as we discussed also last time, we will separate as much as…

Okay. Thank you, Luis Felipe. Hi, Ernesto. Let me talk about a little bit of loan growth and asset quality. First, you have seen that we have closed this first quarter with -- I mean, with high levels of growth, actually taking out the Reactiva impact, which at the end of the day, has little impact of revenues because the loans of Reactiva were at very, very low yields. The total loan book has grown 10%, okay? But the biggest part of this growth is coming from retail and especially from credit cards and other personal loans, that as I showed, have grown 41% year-over-year. So, basically, what we are seeing today is that the risk profile of our portfolio, okay, is still better than pre-COVID levels, okay? So, even if now, credit cards and other personal loans as a total balance are already a little above than pre-COVID levels, the overall portfolio with still Reactiva loans with higher mortgage loans than pre-COVID, make a total portfolio mix with lower risk than pre-COVID. So, this is then reflecting, as you are seeing in the cost of risk. But also, when we look at the retail portfolio itself and at credit card specifically, which is the -- let's say, the highest risk portfolio, the risk profile of the credit card portfolio itself is also still much better than pre-COVID, okay? So, of course, we have in mind and we are running many different analysis of how inflation in this high interest rates will, at some point, limit the growth that we are seeing, okay? And we believe it will come in the following month. Still, there are important buckets -- pockets of clients where we could still grow. So, what we are trying to identify is, okay, which pockets of clients are more, let's say, sensible, not to this impact from inflation and interest rates so that we can maybe limit growth there? But we believe there is still room for significant growth at least in the coming quarters. And then, we will need to see, of course, what else happens with the economy, because some of the impacts that we are also expecting and that will have a positive impact in asset quality is, for example, the new funds that will be released to the market. So, the new release of private pension funds and the new release of the CTS, as we saw during last year, were partially used to -- I mean, to help clients to honor their debts. So that also -- it's an extra positive impact that we might expect in the future. Having said that, it is true that with the recomposition of the portfolio mix, the cost of risk should gradually increase in the coming months, but we still believe that will be below pre-COVID levels for the full year this year. So, I don't know, Ernesto, if that covers that part of the question.

Yes. Very, very helpful. Thank you very much, Michela and Luis Felipe.

You are welcome.

Thank you, Ernesto.

The next question is from Carlos Gomez with HSBC. Please go ahead.

Michela, good morning and Congratulations on the results. And as always, congratulations on the transparency and the clear explanation. I particularly like how you show the Reactiva loans and the acquisition of Izipay. And I wanted to ask you about that. First, to confirm, you're paying $80 million for Izipay, so in our numbers, that's about six times EBITDA as per your numbers. Please let me know if that is correct. And second, can you give us an idea about the market share of Izipay in the payment system? Thank you.

Yeah. Hi. It’s -- you are right. It's PEN 80 million for 50% of the company, given that we already owned the other 50%. So now Izipay is 100% owned by IFS, 50% directly, 50% by Interbank. But at the end, we consolidate the whole entity in our books. In terms of the multiple, actually, my numbers show a little bit lower than that. I think it was around five times. But let me pass it on to Carlos Tori, who is our Head of Retail Banking and Payments, so he can confirm these numbers.

Yeah. The multiple depends a lot on the FX you take on the numbers and if you use first quarter or you're expecting numbers for the year. But yeah, it's somewhere around there, $80 million for 50%. So yeah. In terms of market share, which was your question, there's no regulator or are not regulated. So, we don't know how much the competition processes. We have some idea because we can see within our numbers on our credit cards and debit cards which transactions go where, which depends on the merchants. So, we have some idea. We know market share is growing. But we don't have or we cannot disclose an exact number because it would be an extrapolation from what we see. So, I don't know.

Can you give us an idea? Are we talking 5%, 20%, 50% market share? What range should we be looking at?

It should be around 50%. 50%.

50? 5 0?

Yeah.

Yes, 5-0. Yeah. And I guess a couple of words on Izipay. I think it's independently of the price, because obviously, I think the transaction was facilitated by a motivated seller, and we took on the opportunity for an asset that we have been chasing for many years, but different circumstances did not allow us to really pull the trigger on it because there were like different interests. But now as you know, Scotiabank is rationalizing their position in Peru, but in Latin America, so we took this as an opportunity. I think that strategically, this creates a tremendous platform for our payment strategy. I think it can accelerate many of the visions that we have. Lots of competitors in the region and in the country are starting to build some efforts in order to be able to have this kind of asset in their scope. This -- with the traction it has, the platform it has, the size it has and the connection with existing customers it has because it has a very good set of customers and relationships, really makes us feel that we do have something that will definitely accelerate, but boost our vision on becoming the most important manager of a payment ecosystem in the country. So that's -- those are the main merits of this transaction for us.

Okay. Thank you. And the selling partner is -- you mentioned Scotiabank, anybody else?

No. This was an asset owned 50% by Interbank and 50% by Scotiabank.

Very clear. Thank you so much.

You are welcome.

The next question is from Daniel Mora with Credicorp Capital. Please go ahead.

Hi. Good morning, everyone and thank you for the presentation. I have two questions. The first one is regarding NIM. I would like to know what percentage of the loan portfolio or if you want to explain it by segment, is with free float -- is with floating rates. I would like to understand with the increase of the Central Bank rate, which segment of the portfolios will reprice with the increase of these rates? And also, I would like to understand what is your base case scenario for the NIM to return to pre-pandemic levels, considering also the higher increase in credit cards and increasing the loan mix of retail loans? I know that this is something very uncertain and you are analyzing this on a regular basis, but I would like to understand what is the best case scenario? And the second question is regarding cost of risk. I would also like to know, when do you expect that we can see a cost of risk also more aligned to the historical levels of IFS. This question is mainly to understand if 2023, the next year, could be considered still a transitory year, or it will be more aligned to pre-pandemic levels. Thank you so much.

Okay. Well, thank you very much Daniel for your question. On this part, let me pass it on to Michela, who will probably have more of the details that you are looking for.

Good morning, Daniel and thank you for the questions. Let me start with NIM and the portions of the portfolio that have float rate. But maybe let me put the answer in a different way, because what actually is going on is that we are -- let's say, we are passing some of the increases in rates to different products in the portfolio, okay? So, basically, retail -- so let's talk about consumer financing, so credit cards, personal loans, payroll deductible loans for the public sector employees, we have been increasing the rates in the new disbursements. So, a portion of the increase in the interest in the loan yield that you see is coming from that, together, of course, with the change in mix. But when you look at the new rates and the new disbursement, they are clearly above previous level. It is a little bit more difficult in mortgages, okay, which also have a fixed rate. But even there we have started to raise rates in the new disbursement. A little bit more difficult there and say because of competition, because that's the product that has -- if you want, in the past month, increased the rate the less. Now, when moving to the commercial loan book, it's a little bit the same. So, basically there, you price based on spreads. So, basically, if the cost of funds increases, you start to price your loans to your clients also in that way. And in the SMEs, where it is not based on spread, but it is more like retail, even there we have started to grow nicely in this first quarter, but this growth is coming with higher disbursement rates. So, I mean, I would say that when talking about new disbursement like almost all products are…

Perfect. Thank you so much. It's very clear, very clear with all the details.

Thanks.

Thank you.

Excuse me, the next question is from Alonso Aramburu with BTG Pactual. Please go ahead.

Yes. Hi. Good morning and thank you for the call. I wanted to follow-up, Michela, on the NIM. And in the press release, you mentioned that you had slightly lower rates compared to the previous quarter. So I'm just wondering, you're mentioning that you're increasing new disbursement, rates on new disbursement. So what happened between fourth quarter and this quarter? Are you seeing more competition? Just maybe some color, or maybe you're going to less risky clients and that's affecting a little bit the yield on the consumer lending. So that's on the NIM. And my second question is on commercial lending, which was relatively weak this quarter. I'm just wondering if you can give us some color. Is it just overall private investment in the economy that is affecting the Commercial segment? Or is there something else? Is the liquidity of the company? What are you seeing there? Thank you.

Go ahead, Michela.

Good morning, Alonso. Thank you for the question. Sorry, help me understand the first question. You are talking about the evolution from fourth quarter to first quarter of NIM of IFS, is that right?

Of Interbank specifically. Because in the press release, you mentioned that the average rate on loans was stable quarter-on-quarter and the mix helped. But there was slightly lower rates across the board, right? So, I'm just wondering what happened.

Yeah. Okay. Let me explain what is happening there. I mean, when you look at the average rate of each single product, it is increasing, okay? Under IFRS, we have these additional effects that are coming -- I don't know if you remember that we had some impairments from the reschedulings that we did last year, okay? That continues to have an impact, which sometimes positive, sometimes it's negative. So, this particular quarter, what you are seeing there has like an extraordinary impact that makes the rate flat, but that should not be the case going forward. I mean, each single product is increasing its average yield, okay? And going -- I mean, moving to the commercial lending decrease, there are a couple of things to comment there. I mean, first, Reactiva. When -- I mean, we actually look at the growth, both with and without Reactiva because at the end of the day, the balances that are going down from Reactiva, as I mentioned before, have very low yields. So, we are very much focused that the loans from commercial banking without Reactiva are growing, and actually, they are growing very nicely. In the first quarter, there was, I mean, a lot of competition, to be sincere, in the large corporate. Why? Because of the number of increases in rates, okay, that we were trying to pass to clients, but the market dynamics were not allowing to do that. So you know that from time-to-time, and you have always seen this in the past years, we always focus on profitability. So, if we see big transactions with low or negative yields, we will not enter. So, we saw a decrease in market share in the first quarter in the large corporate segment. That has changed and has improved a lot in -- actually in April, where because rates continue to increase, we have seen the overall market dynamics to be more on the front of raising rates also for the large corporate segment. That is not the case, for example. As I was mentioning for the SMEs. SMEs, a completely different picture there. We are growing and actually, we will start to see some more improvements in market share, and we are also being able to translate the increasing rates with no problem. So, going forward, I mean, yes, it is true that investments are not happening. So, medium term, financing is not something that is booming, but there are certain sectors in which we are very strong, as for example, the agri export segment, which is going very nicely in Peru. So, we are focusing on trying to grow profitably in large corporate, in midsized companies and in SMEs in those specific segments, which are kind of not following the GDP evolution in the country.

Yeah. Sorry, Michela. Let me add something. I think we've mentioned it before, but especially in corporate and mortgages and all those businesses are very sensitive to rates. We will continue to be very disciplined in terms of pricing. And again mentioned -- as we've always mentioned, we are not obsessed by size or just market shares. We're very focused on profitability. And we've seen, this quarter, crazy things happened in the Corporate segment, where some of our customers were receiving loans with rates that did not make sense. And we just let them pass and we will continue to do so, because we do know that the end sense will come into action and the right pricing will be able to be achieved in this market. So, we're not playing the size or the market share game. We are playing the profitability game to strengthen our relationship with our customers. So, sometimes, we will sacrifice market share against profitability, and this quarter was a clear example of that.

Thank you Luis Felipe and Michela. Great color. Thank you.

Thank you.

Thank you, Alonso.

At this time, I'd like to turn the call over to Rafael Borja for webcast questions. Please go ahead.

Thank you, operator. We have one question from . Can you please give us more details on the decline quarter-over-quarter in total deposits?

Sure. Michela, can you help out with that, please?

Yes. Hello. Let me tell you a little bit of what's been going on because we haven't discussed a lot about deposits and liquidity. I mean, first, I think it's important to have in mind that as of March, our loan to deposit ratio stands at 99%, which is still below the 106% of the system, okay? And it's actually still below the pre-COVID levels, okay? I mean, our loan to deposit ratio, but also the system loan to deposit ratio pre-COVID was usually a little above 100%. So, we -- you would see numbers for Interbank at around 103%, 104%. What happened with COVID is that there was an extra liquidity in the overall system coming from a number of measures. So, we had the PEN 60 million of Reactiva. We had all the private pension funds flows coming to the system, but also the CTS. So, we've been leaving, let's say, at the system level with extra liquidity, a big portion of what was in soles, okay? So, last year -- and actually, there is a number of slides in the presentation, number 41, where you can see that the loan to deposit ratio of Interbank one year ago as of March 2021, was actually 89%. So, we were very happy, because we were very liquid, but of course, that had a cost. So, what has happened in this first quarter, okay? The most important change in why you see the volumes going down is that, that liquidity at system level has started to disappear because again, all those flows have been started to be used and Reactiva loans have been repaid, so Central Bank has taken out that liquidity. And what we've been trying to do is given the increase in rates is to optimize cost of funds, okay? So, basically, we have been letting some high cost institutional funds to go away, so that we can limit the impact of the increasing rates in our short-term deposits. So, basically, going forward, it's possible that this trend that we have seen in the system will continue to take place. But there is this uncertainty that with the new measures that could be approved or are in the process of being approved of extra private pension funds and extra CTS coming to the market, maybe that will normalize a little bit. But we do expect loan to deposit ratio, I mean, to continue to tighten and to go to more normalized pre-COVID levels in the following quarters.

This concludes our question-and-answer session. I would like to turn the conference back over to Mrs. Casassa for any closing remarks. .

Okay. Thank you very much. Thank you everybody again for attending these first quarter results, and we hope to see you all on June 22nd on our first virtual Investor Day. Please don't miss it. Bye.

Bye everyone.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.