Thank you for holding and good morning, and welcome to the Intercorp Financial Services Third Quarter 2023 Conference Call. [Operator Instructions] Please be advised that today's call is being recorded. [Operator Instructions] It is now my pleasure to turn the call over to Ms. Valentina Porto of InspIR Group. Ma'am, you may begin.

Thank you, and good morning, everyone. On today's call, Intercorp Financial Services will discuss its third quarter 2023 earnings. We are very pleased to have with us Mr. Luis Felipe Castellanos, Chief Executive Officer of Intercorp Financial Services; Ms. Michela Casassa, Chief Financial Officer, Intercorp Financial Services; Ms. Claudia Delgado, Chief Financial Officer in Deseguro; and Mr. Bruno Ferreccio, Chief Executive Officer of Inteligo. They will be discussing the results that were distributed by the company yesterday. There is also a webcast video presentation to accompany the discussion during this call. If you didn't receive a copy of the 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 (646) 940-8843. 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, 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. Good morning, and thank you for attending our third quarter 2023 earnings call. Let's start by -- with assessing the macro situation in Peru. As we move on through the year, unfortunately, macro conditions have continued to deteriorate. The market expectation for a quick economic recovery has faded out. Businesses and consumers are adapting to the new growth outlook, but conditions have certainly taken a toll in credit conditions in the country. According to the latest survey of economic expectations from the Central Bank, GDP growth is expected to be close to zero this year and soft in 2024. El Nino poses a risk for a pickup in growth next year, but this will only depend on the magnitude of such climate phenomenon. We have taken certain actions in order to mitigate the possible negative impacts as we will comment during the presentation. It is worth to note that we remain optimistic on the country's midterm prospects as many of the factors affecting growth during the last months, we believe are temporary, including the political turmoil, the social unrest we faced earlier this year, the Yaku rains, the restrictive monetary policies after COVID and even the potential El Nino. On the positive side, inflation has decreased consistently in the last months to such extent that the Central Bank has been comfortable to cut interest rates twice already and possibly for a third time later today. Inflation expectations for the next 12 months now lie very close to the upper limit of the policy target. The government appears to be reacting to the negative business environment and it has started to make announcements of measures to boost the economy. But it is still early to call for a clear recoup of confidence and private investment and a better macro…

Thank you, Felipe. Good morning, everybody, and welcome to Intercorp Financial Services Third Quarter 2023 Earnings Call. Today, we will review-sections of our earnings presentation, starting with the macro outlook for Peru. On Slide 3, complementing what Luis Felipe just mentioned, decrease in GDP and in inflation three quarters in a row has triggered the first cuts in soles rates in September and October, driving it down from 7.75% to 7.25%. Inflation has decreased from a yearly 8.8% as of June '22 to 4.3% as of October this year and exchange rate has been relatively stable with a slight peak during October, which has reverted in the past days. GDP remains the main concern, as shown on Slide 4. This third quarter has changed the view from a recovery in the second half of the year to a more negative one, driving full year '23 GDP estimates down to less than 1% and internal demand and private investments to negative territory. On Slide 5, during the last weeks, the probability of a strong Nino has surpassed for the first time the moderate view. We are already taking some actions to mitigate future impacts, which include reviewing our infrastructure for the safety of our employees and clients, further tighten our credit underwriting standards in the north and south of the country, reviewing potential impacts on our agro, fishing and transportation sector commercial clients and further focus on cost efficiencies. Additionally, we have already included some impacts of a moderate Nino in our forward-looking considerations for 2024, which has already impacted cost of risk this quarter roughly 100 basis points. On Slide 6, in line with the previously mentioned macro scenario, we have further moderated banking activity by tightening credit standards, which had an impact in credit and debit card purchases as…

[Operator Instructions] And the first question will come from Ernesto Gabilondo with Bank of America. Please go ahead.

Thank you. Hi, good morning, Luis Felipe and Michele. Thanks for the opportunity. My first question will be related to El Nino. As you mentioned, you're increasing your customer risk and expected losses to moderate in El Nino of around 100 basis points. But I don't know if you have explored how much of the loan portfolio of IFS could be on the zones impacted from the last El Nino experience in 2017. Just to have an idea if the provisions that you're building in this quarter will be enough and also will be interesting if, for example, this is a peak or it will continue to have a high level of provisions during the first quarter of next year? And then my second question is on your Wealth Management business. We have seen a lot of volatility in the valuation in the results. So I want to know if you have like a strategy to present more consistent results? That will be my two questions. Thank you.

Thank you, Ernesto. First, on El Nino and the share, let me pass it on to Michela first, and then she will pass it on to Bruno for the question about Wealth Management.

Related to El Nino phenomenon, we have some ransom numbers to estimate the percentage of the portfolio that might be impacted. Related to the retail portfolio, we are talking about something between 10% and 12%. And in Commercial Banking, the potential impacted portfolio is less than 5%, okay? Also in the small business portfolio, we are expecting an impact which is closer to the percentages of retail that I just mentioned. But as that portfolio is small, it's like PEN 700 million, PEN 800 million, we do not expect a strong impact in that portfolio. So those would be the numbers there. As we have incorporated a moderated impact from El Nino in these forward-looking considerations, not depending on how that evolves in the following months, no, we might need to incorporate in the fourth quarter a strong impact from El Nino that still needs to see because we have seen probabilities of El Nino phenomenon moving in different directions in the past weeks.

Yes. On your second question regarding results for Wealth Management. There's 2 parts to our results. First is the Wealth Management business, that's been very stable. The second part is due to the performance of the portfolio, as we've been discussing for the last 6 or 7 quarters and that is somewhat market dependent. But specifically, to your question regarding our strategy to eliminate some of this volatility, the answer is yes. We've been implementing since basically fourth quarter last year, we had 90% -- almost 90% of results going through the profit and loss statement. We've been making a conscious effort to move all our fixed income investments to OCI, because our strategy is to collect income from the fixed income portfolio. Unfortunately, that was being booked again through P&L, causing much of this volatility that you're seeing. And we have made a conscious effort to move that. We've already increased that percentage to almost 40% from 10% only at the beginning of the year. And so, we are continuing to move in that direction. And hopefully, by the end of the year, that percentage is going to be even higher. And so long term, our strategy is, again, more fixed income and that fixed income portfolio reflecting the variation through the OCI part of the book and not through P&L.

Thank you very much. That's super helpful. Just a last question in terms of the ROE trends. So again, this quarter and the full year will be impacted because higher provisions, the impact in the Wealth Management business. But thinking about next year, how should we think about a trend for the ROE? Should it be feasible to be at the double digits?

The short question is yes, but all will depend on the -- obviously, in the recovery of the economy. As you've seen, we do expect the economic growth to return to a more positive environment next year. However, that will be dependent on the extent of the impact of El Nino. And also, we also expect moderation in terms of volatility in the global market conditions. And as rates go down, probably, that will have an impact, a positive impact. So probably the first half of the year will be more complicated than the second half of the year, but we do expect to slowly and surely return to an uptick in profitability. Probably next year won't be the year where we will reach our medium target -- medium-term target. But depending on -- again, on the impact of El Nino, we will start increasing our ROE to more normal levels.

[Operator Instructions] And I would like to hand the call over to the InspIR Group for any webcast questions.

[interpreted] Thank you, operator. The first question comes from Catalina from BCI Asset Management . The question is, what would be the impact on the cost of risk if you adjust in your models the probability of El Nino from moderate to strong?

Okay. Thanks for your question, Catalina. Let me pass it on to Michela.

Good morning, Catalina. We have run some estimates already. But I mean, of course, it will depend also on the update of the other macroeconomic variables. But what we do expect is a smaller impact of what we have already registered for a moderate impact from El Nino. So it should be a little bit less than what we have already in this quarter.

At this time, there are no further questions. I would like to turn the call over to the operator.

[Operator Instructions] There appear to be no further questions at this time. I would like to turn the floor back over to Ms. Casassa for any closing remarks. Please go ahead.

Thank you, everybody, for attending our call. If you have further questions, you can always contact our Investor Relations and we will see each other again in the next conference call. Bye, everybody.

This concludes today's conference call. You may now disconnect.