6-K - IFS - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF THE

SECURITIES EXCHANGE ACT OF 1934

February 11, 2021

Commission File Number 001-38965

INTERCORP FINANCIAL SERVICES INC.

(Registrant’s name)

Intercorp Financial Services Inc.

Torre Interbank, Av. Carlos Villarán 140

La Victoria

Lima 13, Peru

(51) (1) 615-9011

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F: Form 20-F ☒ Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

On February 11, 2021, Intercorp Financial Services Inc. (“IFS”) announced its unaudited results for the fourth quarter of 2020, which were approved by the Board on February 11, 2021. IFS’ condensed consolidated unaudited results as of December 31, 2020 and December 31, 2019, and the corresponding Management Discussion and Analysis are attached hereto.

EXHIBIT INDEX

Exhibit	Description
99.1	Intercorp Financial Services Inc. Fourth Quarter 2020 Earnings

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	INTERCORP FINANCIAL SERVICES INC.
Date: February 11, 2021	By:	/s/ Michela Casassa Ramat
	Name:	Michela Casassa Ramat
	Title:	Chief Financial Officer

ifs-ex991_6.htm

Exhibit 99.1

Intercorp Financial Services Inc.

Fourth Quarter 2020 Earnings

Lima, Peru, February 11, 2021. Intercorp Financial Services Inc. (Lima Stock Exchange/NYSE: IFS) announced today its unaudited results for the fourth quarter 2020. These results are reported on a consolidated basis under IFRS in nominal Peruvian soles.

Intercorp Financial Services: FY20 results impacted by higher provisions, but improving in 4Q20 with ROAE at 18.1%

•	15.6% earnings growth in 4Q20 due to lower provision charges and solid results from investments
•	Cost containment measures in 2020 offset negative impacts from COVID-19 on revenues
---	---
•	Strong capitalization at all business segments
---	---
•	Digital trends continue to support IFS’ strategy
---	---

Interbank: FY20 profits undermined by high provisions and soft top line due to COVID-19, yet recovering in 4Q20

•	12.8% (+20 bps YoY) market share in loans and 13.9% (+40 bps YoY) in retail deposits by year-end
•	150 bps YoY reduction in cost of funds, down to 1.6% in 4Q20
---	---
•	FY20 cost of risk at 6.1%, improving to 3.1% in 4Q20
---	---
•	60 basis point quarterly improvement in NIM after provisions
---	---
•	7.0% yearly decrease in expenses
---	---

Interseguro: FY20 profits grew 8.2% with ROAE at 18.9%

•	Private and regular annuities leading a 19.1% yearly growth in premiums
•	Results from investments increased 13.1% QoQ and 28.0% YoY, with ROIP reaching 6.8% in 4Q20
---	---
•	Cost containment measures resulted in 4.3% yearly reduction in expenses
---	---
•	Market leader in annuities with a 27.3% share in 2020
---	---

Inteligo: FY20 profits grew 21.4% with ROAE at 28.0%

•	Record quarter in earnings, 39.9% QoQ growth and more than two-fold YoY
•	Strong revenues in 4Q20 driven by net interest income and positive mark-to-market
---	---
•	Continued growth in AUM: 5.6% QoQ and 14.7% YoY
---	---
•	4Q20 ROAE at all-time high
---	---

Intercorp Financial Services

SUMMARY

2020 Performance

Intercorp Financial Services’ profits were S/ 383.5 million in 2020, a 73.6% decrease compared to 2019. The lower net profit was mainly driven by a more than three-fold increase in impairment loss on loans and a 21.9% reduction in net fee income from financial services. These effects were partially offset by growth of 31.2% in other income and 1.4% in net interest and similar income, in addition to a 3.4% reduction in other expenses and a reversal of the income tax payment.

It is worth mentioning that IFS’ results in the comparing periods were affected by (i) the reversion of payroll deduction loan provisions for S/ 27.4 million after taxes in 2Q19; (ii) the reversion of loan loss provisions for S/ 73.4 million after taxes in 4Q19 due to fine-tuning of IFRS9 models reflecting improved risk profile on customers; (iii) the one-off impact of a liability management transaction on financial expense for S/ 29.0 million after taxes in 4Q19; and (iv) the impact on interest income of the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic for S/ 130.4 million after taxes during 2020.

IFS’ ROAE excluding the effect of the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic in 2020 was 6.0%.

Intercorp Financial Services’ P&L statement

S/ million							%chg<br><br><br>20/19			%chg<br><br><br>19/18
Interest and similar income	4,321.3		4,847.2		4,665.0			-3.8	%		12.2	%
Interest and similar expenses	(1,177.3	)	(1,424.0	)	(1,192.3	)		-16.3	%		21.0	%
Net interest and similar income	3,144.0		3,423.3		3,472.7			1.4	%		8.9	%
Impairment loss on loans, net of recoveries	(660.1	)	(750.8	)	(2,393.9	)	n.m.				13.7	%
Recovery (loss) due to impairment of financial investments	13.1		(6.8	)	(32.9	)	n.m.			n.m.
Net interest and similar income after impairment loss	2,497.0		2,665.7		1,045.8			-60.8	%		6.8	%
Fee income from financial services, net	874.4		925.9		723.5			-21.9	%		5.9	%
Other income	408.7		592.1		776.7			31.2	%		44.9	%
Total premiums earned minus claims and benefits	(400.8	)	(279.6	)	(279.1	)		-0.2	%		-30.2	%
Net Premiums	681.8		689.3		615.8			-10.7	%		1.1	%
Adjustment of technical reserves	(362.2	)	(268.7	)	(100.8	)		-62.5	%		-25.8	%
Net claims and benefits incurred	(720.3	)	(700.3	)	(794.1	)		13.4	%		-2.8	%
Other expenses	(1,837.5	)	(1,978.3	)	(1,910.7	)		-3.4	%		7.7	%
Income before translation result and income tax	1,541.9		1,925.7		356.3			-81.5	%		24.9	%
Translation result	(35.0	)	17.8		(45.7	)	n.m.			n.m.
Income tax	(415.5	)	(493.3	)	72.9		n.m.				18.7	%
Profit for the period	1,091.4		1,450.1		383.5			-73.6	%		32.9	%
Attributable to IFS' shareholders	1,084.3		1,441.3		383.3			-73.4	%		32.9	%
EPS	9.85		12.80		3.32
ROAE	16.6	%	18.3	%	4.5	%
ROAA	1.8	%	2.1	%	0.5	%
Efficiency ratio	35.7	%	34.4	%	32.2	%

Net interest and similar income grew due to increases in interest on investments at Interseguro and incremental dividends received from investments at Inteligo. At Interbank, net interest and similar income remained relatively stable when compared to 2019.

Impairment loss on loans, net of recoveries increased more than three-fold in 2020 compared to the previous year. The increase in provision expenses was mainly explained by the adjustments of the bank’s expected loss models to address the impact of the COVID-19 pandemic, as well as by a base effect related to (i) the reversion of payroll deduction loan provisions for S/ 38.8 million in 2Q19,

and (ii) the reversion of loan loss provisions for S/ 104.1 million in 4Q19 due to fine-tuning of IFRS9 models reflecting improved risk profile on customers.

The reduction in net fee income from financial services was mainly due to lower commissions from credit card services, maintenance and mailing of accounts, transfer fees and commissions on debit card services at Interbank.

Other income grew as a result of positive performance across all three subsidiaries, particularly from net gain on sale of securities at Interseguro and positive mark-to-market valuations on investments at Inteligo.

Total premiums earned less claims and benefits were S/ -279.1 million in 2020, slightly better than the S/ -279.6 million reported in 2019. The annual performance was due to a S/ 167.9 million decrease in adjustment of technical reserves, partially offset by S/ 93.8 million growth in net claims and benefits incurred and a S/ 73.6 million reduction in net premiums.

The reduction in other expenses was mostly attributed to lower salaries and employee benefits, as well as marketing and credit card expenses, both at Interbank, in addition to lower administrative expenses at Interseguro. These reductions were driven by cost containment measures implemented to offset the impacts of the COVID-19 pandemic on revenues.

The efficiency ratio was 32.2% in 2020, an improvement compared to the 34.4% registered in 2019. However, excluding (i) the one-off impact of a liability management transaction on financial expense for S/ 42.3 million in 2019; and (ii) the impact on interest income of the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic for S/ 185.0 million in 2020, the efficiency ratio would have improved from 34.2% in 2019 to 31.1% in 2020.

Intercorp Financial Services’ Statement of financial position

S/ million									%chg<br><br><br>12.31.20/<br><br><br>12.31.19
Assets
Cash and due from banks and inter-bank funds	11,213.9		17,573.1		18,783.6		6.9	%		67.5	%
Financial investments	19,072.7		22,787.9		24,277.1		6.5	%		27.3	%
Loans, net of unearned interest	38,531.6		43,962.9		43,504.3		(1.0	)%		12.9	%
Impairment allowance for loans	(1,394.8	)	(3,116.5	)	(2,984.9	)	(4.2	)%	n.m.
Property, furniture and equipment, net	950.9		875.0		844.4		(3.5	)%		(11.2	)%
Other assets	3,187.9		3,930.0		3,811.5		(3.0	)%		19.6	%
Total assets	71,562.3		86,012.4		88,236.0		2.6	%		23.3	%
Liabilities and equity
Deposits and obligations	38,093.2		45,208.9		47,149.3		4.3	%		23.8	%
Due to banks and correspondents and inter-bank funds	4,148.8		10,555.0		9,689.8		(8.2	)%	n.m.
Bonds, notes and other obligations	6,890.3		7,696.1		7,778.8		1.1	%		12.9	%
Insurance contract liabilities	11,426.6		11,896.6		12,501.7		5.1	%		9.4	%
Other liabilities	2,099.9		2,320.6		2,162.5		(6.8	)%		3.0	%
Total liabilities	62,658.8		77,677.2		79,282.1		2.1	%		26.5	%
Equity, net
Equity attributable to IFS' shareholders	8,856.9		8,291.7		8,908.1		7.4	%		0.6	%
Non-controlling interest	46.6		43.5		45.8		5.4	%		(1.6	)%
Total equity, net	8,903.4		8,335.2		8,953.9		7.4	%		0.6	%
Total liabilities and equity net	71,562.3		86,012.4		88,236.0		2.6	%		23.3	%

4Q20 Performance

Intercorp Financial Services’ net profit was S/ 377.4 million in 4Q20, a S/ 58.9 million increase QoQ, or 18.5%, but a S/ 35.4 million decrease YoY, or 8.6%.

It is worth noting that IFS’ profits in the comparing periods were affected by (i) the reversion of loan loss provisions for S/ 73.4 million after taxes in 4Q19 due to fine-tuning of IFRS9 models reflecting improved risk profile on customers; (ii) the one-off impact of a liability management transaction on financial expense for S/ 29.0 million after taxes in 4Q19; and (iii) the impact on interest

income of the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic for S/ 20.1 million after taxes in 3Q20 and S/ 14.0 million after taxes in 4Q20.

IFS annualized ROAE was 17.5% in 4Q20, higher than the 15.8% registered in 3Q20, but still below the 19.0% annualized ROAE reported in 4Q19. However, excluding the previously mentioned one-off impact of a liability management transaction in 4Q19 and the effects of the modification of contractual cash flows due to the loan rescheduling schemes offered to customers in 3Q20 and 4Q20, ROAE was 20.3% in 4Q19, 16.7% in 3Q20 and 18.1% in 4Q20.

Intercorp Financial Services’ P&L statement

S/ million							%chg<br><br><br>QoQ			%chg<br><br><br>YoY
Interest and similar income	1,249.9		1,186.1		1,187.2			0.1	%		(5.0	)%
Interest and similar expenses	(390.0	)	(279.4	)	(266.5	)		(4.6	)%		(31.7	)%
Net interest and similar income	859.9		906.6		920.7			1.6	%		7.1	%
Impairment loss on loans, net of recoveries	(147.9	)	(463.3	)	(327.5	)		(29.3	)%	n.m.
Recovery (loss) due to impairment of financial investments	(8.3	)	(2.8	)	22.3		n.m.			n.m.
Net interest and similar income after impairment loss	703.7		440.6		615.5			39.7	%		(12.5	)%
Fee income from financial services, net	250.3		174.7		185.9			6.5	%		(25.7	)%
Other income	181.9		267.8		282.3			5.4	%		55.2	%
Total premiums earned minus claims and benefits	(74.4	)	(63.3	)	(89.7	)		41.7	%		20.4	%
Net Premiums	164.6		139.6		178.4			27.7	%		8.3	%
Adjustment of technical reserves	(57.9	)	9.5		(53.5	)	n.m.				(7.6	)%
Net claims and benefits incurred	(181.1	)	(212.4	)	(214.5	)		1.0	%		18.4	%
Other expenses	(513.9	)	(446.7	)	(536.8	)		20.2	%		4.5	%
Income before translation result and income tax	547.6		373.1		457.2			22.5	%		(16.5	)%
Translation result	12.5		(12.5	)	(3.7	)		(70.7	)%	n.m.
Income tax	(147.3	)	(42.1	)	(76.1	)		80.9	%		(48.4	)%
Profit for the period	412.8		318.5		377.4			18.5	%		(8.6	)%
Attributable to IFS' shareholders	410.3		317.4		376.0			18.5	%		(8.4	)%
EPS	3.55		2.75		3.26
ROAE	19.0	%	15.8	%	17.5	%
ROAA	2.3	%	1.5	%	1.7	%
Efficiency ratio	34.3	%	28.1	%	31.8	%

Quarter-on-quarter performance

Profits increased 18.5% QoQ due to lower impairment loss on loans and a recovery in fees at Interbank, in addition to increases in net interest and similar income at Inteligo and Interseguro, and higher other income at Inteligo. These effects were partially offset by higher other expenses across all subsidiaries, as well as by negative adjustment of technical reserves at Interseguro and a higher income tax payment at Interbank.

Net interest and similar income increased S/ 14.1 million, or 1.6% QoQ, mainly due to incremental dividends received from investments at Inteligo and Interseguro, as well as higher fixed-income investment returns at Interseguro. These effects were partially offset by a reduction in net interest and similar income at Interbank, driven by lower interest on loans.

Impairment loss on loans decreased 29.3% QoQ, mainly due to lower provision requirements in both retail and commercial loan books at Interbank.

Net fee income from financial services increased S/ 11.2 million, or 6.5% QoQ, mainly explained by higher commissions from banking services, maintenance and mailing of accounts, transfer fees and commissions on debit and credit card services, all at Interbank.

Other income increased S/ 14.5 million, or 5.4% QoQ, mainly attributable to positive mark-to-market valuations on Inteligo’s proprietary investment portfolio. This was partially compensated by reductions in net gain on sale of financial investments at Interbank and Interseguro, and in valuation gain from investment property at Interseguro.

Total premiums earned minus claims and benefits at Interseguro showed a quarterly reduction of S/ 26.4 million, mainly explained by the constitution of S/ 53.5 million of technical reserves in 4Q20, compared to a S/ 9.5 million release in 3Q20. This effect was partially offset by S/ 38.8 million growth in net premiums.

Other expenses increased S/ 90.1 million, or 20.2% QoQ, mainly attributed to (i) a S/ 35.2 million effect of higher profit sharing due to the accounting of non-tax deductible voluntary provisions under local GAAP accounting standards at Interbank, (ii) the regularization in the rescue of life insurance policies at Interseguro; and (iii) the provisioning of variable compensation for the year at Inteligo.

IFS effective tax rate grew, from 11.7% in 3Q20 to 16.8% in 4Q20, mainly attributed to a higher effective tax rate at Interbank.

Year-on-year performance

Profits decreased 8.6% YoY mainly due to higher impairment loss on loans at Interbank, in addition to reductions in net fee income from financial services at all subsidiaries. Moreover, higher other expenses at all three business segments and net claims and benefits incurred at Interseguro also contributed to the YoY reduction in bottom-line. These factors were partially compensated by increases in other income and in net interest and similar income, both across all subsidiaries. Additionally, a lower effective tax rate at IFS also contributed to offset the annual reduction in earnings.

Net interest and similar income increased S/ 60.8 million, or 7.1% YoY, mainly due to lower interest expense on deposits and obligations, and on bonds, notes and other obligations, both at Interbank. Additionally, a higher return on Interseguro’s fixed income portfolio and strong results on Inteligo’s proprietary investment portfolio, also contributed to the annual growth in net interest and similar income.

Impairment loss on loans grew more than two-fold YoY, explained by higher provision requirements in credit cards, payroll deduction loans and cash loans, as well as in the medium-sized segment of the commercial loan book. All this was mainly attributed to the adjustments of the bank’s expected loss models to address the impact of the COVID-19 pandemic. It is worth noting that the YoY growth was also explained by a base effect related to the reversion of loan loss provisions in the banking segment for S/ 104.1 million in 4Q19 due to fine-tuning of IFRS9 models reflecting improved risk profile on customers.

Net fee income from financial services decreased S/ 64.4 million, or 25.7% YoY, mainly due to lower commissions from credit card services, banking services, and fees from maintenance and mailing of accounts, transfer fees and commissions on debit card services, all at Interbank. Additionally, lower fund management fees at Inteligo also contributed to the annual reduction in net fee income from financial services.

Other income increased S/ 100.4 million, or 55.2% YoY, mainly due to positive mark-to-market valuations on proprietary portfolio investments at Inteligo, and net gain on financial assets at fair value at both Interseguro and Interbank.

On a yearly basis, total premiums earned minus claims and benefits at Interseguro decreased S/ 15.3 million explained by S/ 33.4 million higher net claims and benefits incurred, partially offset by a S/ 13.8 million increase in net premiums and a S/ 4.4 million reduction in adjustment of technical reserves.

Other expenses increased S/ 22.9 million, or 4.5% YoY, mainly due to (i) a S/ 35.2 million effect of higher profit sharing due to the accounting of non-tax deductible voluntary provisions under local GAAP accounting standards at Interbank, (ii) the regularization in the rescue of life insurance policies at Interseguro; and (iii) the provisioning of variable compensation for the year at Inteligo.

IFS effective tax rate decreased, from 26.3% in 4Q19 to 16.8% in 4Q20, mainly attributed to higher tax-exempt profits from Inteligo and Interseguro.

CONTRIBUTION BY SEGMENTS

The following table shows the contribution of Interbank, Interseguro and Inteligo to Intercorp Financial Services’ net profit. The performance of each of the three segments is discussed in detail in the following sections.

Intercorp Financial Services’ Profit by segment

S/ million									%chg<br><br><br>YoY
Interbank	337.5		146.7		193.8		32.1	%		(42.6	)%
Interseguro	34.7		66.5		37.7		(43.4	)%		8.7	%
Inteligo	69.6		110.5		154.7		39.9	%	n.m.
Corporate and eliminations	(29.0	)	(5.3	)	(8.7	)	65.6	%		(69.8	)%
IFS profit for the period	412.8		318.5		377.4		18.5	%		(8.6	)%

Interbank

SUMMARY

2020 Performance

Interbank posted almost break-even results in 2020, compared to profits of S/ 1,228.5 million in the previous year. The yearly performance was mainly attributed to a more than three-fold increase in impairment loss on loans and a S/ 207.3 million decrease in net fee income from financial services. These effects were partially offset by a reversal of the income tax payment and a S/ 78.0 million reduction in other expenses.

It is worth mentioning that Interbank’s results in the comparing periods were affected by (i) the gain on sale of Interfondos, Interbank’s former mutual funds subsidiary, to Inteligo for S/ 32.4 million after taxes in 1Q19; (ii) the reversion of payroll deduction loan provisions for S/ 27.4 million after taxes in 2Q19; (iii) the reversion of loan loss provisions for S/ 73.4 million after taxes in 4Q19 due to fine-tuning of IFRS9 models reflecting improved risk profile on customers; (iv) the one-off impact of a liability management transaction on financial expense for S/ 29.0 million after taxes in 4Q19; and (v) the impact on interest income of the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic for S/ 130.4 million after taxes during 2020.

Interbank’s ROAE excluding the effect of the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic in 2020 was 2.0%.

Banking Segment’s P&L Statement

S/ million					2020			%chg<br><br><br>20/19			%chg<br><br><br>19/18
Interest and similar income	3,559.1		4,074.0			3,836.4			(5.8	)%		14.5	%
Interest and similar expense	(1,067.7	)	(1,290.1	)		(1,053.4	)		(18.3	)%		20.8	%
Net interest and similar income	2,491.4		2,783.9			2,783.1			(0.0	)%		11.7	%
Impairment loss on loans, net of recoveries	(660.9	)	(750.8	)		(2,393.9	)	n.m.				13.6	%
Recovery (loss) due to impairment of financial investments	(0.1	)	0.0			0.2		n.m.			n.m.
Net interest and similar income after impairment loss	1,830.5		2,033.2			389.3			(80.9	)%		11.1	%
Fee income from financial services, net	759.5		827.1			619.8			(25.1	)%		8.9	%
Other income	309.7		434.3			444.1			2.3	%		40.2	%
Other expenses	(1,502.7	)	(1,611.5	)		(1,533.5	)		(4.8	)%		7.2	%
Income before translation result and income tax	1,397.0		1,683.1			(80.2	)	n.m.				20.5	%
Translation result	(10.2	)	(5.6	)		(6.0	)		6.7	%		(45.2	)%
Income tax	(375.9	)	(449.0	)		80.5		n.m.				19.4	%
Profit for the period	1,010.9		1,228.5			(5.7	)	n.m.				21.5	%
ROAE	20.2	%	21.2	%	n.m.
Efficiency ratio	40.9	%	38.9	%		38.6	%
NIM	5.5	%	5.6	%		4.6	%
NIM on loans	9.0	%	8.7	%		7.8	%

Net interest and similar remained relatively stable as a 5.8% decrease in interest and similar income was compensated by a 18.3% reduction in interest and similar expense.

The lower interest and similar income was due to reductions of 74.5% in interest on due from banks and inter-bank funds, and 5.0% in interest on loans, partially offset by 14.8% growth in interest on financial investments.

Interest on due from banks and inter-bank funds decreased S/ 80.1 million, or 74.5%, explained by a 90 basis point reduction in the average yield, partially compensated by 43.4% growth in the average volume. On one hand, the decrease in the nominal average rate was mainly related to lower returns on deposits and reserve funds at the Central Bank. On the other hand, the increase in the average volume was explained by higher deposits and reserve funds at the Central Bank, partially offset by a lower average balance of inter-bank funds.

Interest on loans decreased S/ 188.4 million, or 5.0%, due to a 190 basis point reduction in the average rate, partially offset by a 14.9% higher average volume. However, excluding the previously mentioned impact from the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic in 2020, interest on loans would have remained relatively stable YoY.

The lower average rate on loans, from 10.9% in 2019 to 9.0% in 2020, was due to yield reductions in all client segments. In retail loans rates decreased on credit cards, other consumer loans and mortgages. In the commercial portfolio, rates decreased on all types of loans. It is worth mentioning that, as a result of the loan rescheduling carried out as part of the measures implemented to deal with the COVID-19 pandemic, a portion of the interest on loans to be recorded between April and December 2020 was rescheduled, affecting the average yield on loans in 2020. Additionally, the incidence of the low-return loans offered to several commercial clients as part of the Reactiva Peru Program also had an impact on the average rate on loans.

The higher average volume of loans was attributed to growth of 26.4% in commercial loans and 5.3% in retail loans. In the commercial portfolio, the higher average volume was mainly due to a 41.7% increase in short and medium-term loans, attributed to the disbursement of loans under the Reactiva Peru Program, despite lower balances of leasing operations and trade finance loans. In the retail portfolio, average volumes grew due to increases of 9.0% in mortgages and 4.3% in payroll deduction loans, while the average balance of credit cards slightly decreased.

Interest on financial investments increased S/ 30.9 million, or 14.8%, due to 34.8% growth in the average volume, partially offset by a 50 basis point reduction in the average yield. The increase in the average volume was mainly the result of higher average balances of sovereign bonds and global bonds. The decrease in the nominal average rate, from 3.8% in 2019 to 3.3% in 2020, was mainly explained by lower returns on global bonds, sovereign bonds, Central Bank Certificates of Deposits (CDBCR) and corporate bonds from non-financial institutions.

As a result of the above, the nominal average yield on interest-earning assets decreased 190 basis points, from 8.2% in 2019 to 6.3% in 2020. However, excluding the impact from the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic, the nominal average yield on interest-earning assets would have decreased 160 basis points YoY, from 8.2% in 2019 to 6.6% in 2020.

The 18.3% lower interest and similar expense was due to reductions of 24.4% in interest on deposits and obligations, and 17.2% in interest on bonds, notes and other obligations, partially offset by a 4.9% increase in interest on due to banks and correspondents.

Interest on deposits and obligations decreased S/ 173.2 million, or 24.4%, explained by an 80 basis point reduction in the average cost, from 2.1% in 2019 to 1.3% in 2020, partially offset by 19.8% growth in the average volume. The lower average cost was due to reductions in rates paid to institutional, commercial and retail deposits. Growth in volumes came across all client segments. By currency, average balances of soles-denominated deposits increased 27.8% while average dollar-denominated deposits grew 5.8%.

The reduction in interest on bonds, notes and other obligations was explained by: (i) a base effect from the execution of an optional redemption of the prevailing “5.75% Senior Notes due 2020” corporate bonds in 4Q19, which implied a non-recurring financial expense of S/ 42.3 million in such quarter, as these bonds were being negotiated above its face value (above par); (ii) higher efficiencies in this component of interest-bearing liabilities, associated with liability management transactions executed throughout 2020, such as the redemption of international hybrid bonds in April 2020 followed by the issuance of a new international subordinated bond in July 2020; and (iii) the maturity of Certificates of Deposit for S/ 150 million in March 2020. Excluding the expense of the optional redemption of the prevailing “5.75% Senior Notes due 2020” corporate bonds, interest on bonds, notes and other obligations would have decreased 7.9% YoY.

Interest on due to banks and correspondents grew as a result of 83.5% growth in the average volume, partially compensated by a 180 basis point reduction in the average cost, from 4.2% in 2019 to 2.4% in 2020. On one hand, the increase in the average volume was due to higher funding provided by the Central Bank, related to the bank’s participation in the Reactiva Peru Program. On the other hand, the reduction in the average cost was explained by lower rates paid to all types of funding, especially inter-bank funds and that provided by the Central Bank.

The average cost of funding decreased 100 basis points, from 3.0% in 2019 to 2.0% in 2020, in line with the lower implicit cost of all interest-bearing liabilities. Excluding the expense of the optional redemption of the prevailing “5.75% Senior Notes due 2020” corporate bonds, the average cost of funding would have decreased 90 basis points, from 2.9% in 2019 to 2.0% in 2020.

As a result of the above, net interest margin was 4.6% in 2020, 100 basis points lower than the 5.6% reported in 2019. However, excluding (i) the expense of the optional redemption of the prevailing “5.75% Senior Notes due 2020” corporate bonds in 2019, and (ii) the impact from the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic in 2020, net interest margin would have decreased 80 basis points YoY, from 5.7% in 2019 to 4.9% in 2020.

Impairment loss on loans, net of recoveries increased more than three-fold in 2020 compared to the previous year. The increase in provision expenses was mainly related to the adjustments of the bank’s expected loss models to address the impact of the COVID-19

pandemic, as well as to a base effect related to (i) the reversion of payroll deduction loan provisions for S/ 38.8 million in 2Q19, and (ii) the reversion of loan loss provisions for S/ 104.1 million in 4Q19 due to fine-tuning of IFRS9 models reflecting improved risk profile on customers.

The S/ 207.3 million, or 25.1%, decrease in net fee income from financial services was mainly attributable to lower commissions from credit card services, maintenance and mailing of accounts, transfer fees and commissions on debit card services.

Other income grew S/ 9.8 million, or 2.3%, mainly due to increases in net gain on sale of financial investments, and in net gain of foreign exchange transactions and on financial assets at fair value through profit or loss.

Other expenses decreased S/ 78.0 million, or 4.8%, mainly as a result of lower salaries and employee benefits, as well as marketing and credit card expenses, all driven by cost containment measures implemented to offset the impacts of the COVID-19 pandemic on revenues.

The efficiency ratio was 38.6% in 2020, an improvement compared to the 38.9% registered in 2019. However, excluding (i) the gain on sale of Interfondos, Interbank’s former mutual funds subsidiary, to Inteligo for S/ 52.6 million in 2019, (ii) the one-off impact of a liability management transaction on financial expense for S/ 42.3 million in 2019, and (iii) the impact from the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic for S/ 185.0 million in 2020, the efficiency ratio would have improved from 39.0% in 2019 to 36.8% in 2020.

Results before translation result and income tax were S/ -80.2 million in 2020, a loss which was then almost completely offset by a reversal of the income tax payment. As a result of the above, net results for the period were S/ -5.7 million in 2020 compared to profits of S/ 1,228.5 million in 2019. Excluding the previously mentioned impact from the modification of contractual cash flows, Interbank’s profits would have reached S/ 124.8 million in 2020.

4Q20 Performance

Interbank’s profits were S/ 193.8 million in 4Q20, an increase of S/ 47.1 million QoQ, or 32.1%, but a decrease of S/ 143.7 million YoY, or 42.6%. The quarterly result was mainly attributed to a S/ 135.6 million reduction in impairment loss on loans and a S/ 10.2 million growth in net fee income from financial services. These effects were partially offset by increases of S/ 46.8 million in other expenses and S/ 32.2 million in tax payments, as well as by a S/ 14.8 million decrease in net interest and similar income.

The annual performance in net profit was mainly due to a S/ 179.7 million growth in impairment loss on loans and a S/ 56.4 million reduction in net fee income from financial services. These effects were partially compensated by a lower effective tax rate and a S/ 28.8 million increase in net interest and similar income.

It is worth mentioning that Interbank’s results in the comparing periods were affected by (i) the reversion of loan loss provisions for S/ 73.4 million after taxes in 4Q19 due to fine-tuning of IFRS9 models reflecting improved risk profile on customers; (ii) the one-off impact of a liability management transaction on financial expense for S/ 29.0 million after taxes in 4Q19; and (iii) the impacts on interest income of the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic for S/ 20.1 million after taxes in 3Q20 and S/ 14.0 million after taxes in 4Q20.

Interbank’s ROAE was 12.8% in 4Q20, an improvement compared to the 10.1% registered in 3Q20, but still lower than the 21.8% reported in 4Q19. Excluding the one-off impact of the liability management transaction in 4Q19 and the impacts from the modification of contractual cash flows in 3Q20 and 4Q20, ROAE for such periods would have resulted in 23.6%, 11.5% and 13.7%, respectively.

Banking Segment’s P&L Statement

S/ million							%chg<br><br><br>QoQ			%chg<br><br><br>YoY
Interest and similar income	1,051.7		987.0		959.2			(2.8	)%		(8.8	)%
Interest and similar expense	(353.2	)	(244.8	)	(231.9	)		(5.3	)%		(34.3	)%
Net interest and similar income	698.5		742.1		727.3			(2.0	)%		4.1	%
Impairment loss on loans, net of recoveries	(147.9	)	(463.2	)	(327.6	)		(29.3	)%	n.m.
Recovery (loss) due to impairment of financial investments	0.0		(0.1	)	0.3		n.m.			n.m.
Net interest and similar income after impairment loss	550.6		278.8		400.1			43.5	%		(27.3	)%
Fee income from financial services, net	219.7		153.1		163.3			6.7	%		(25.7	)%
Other income	107.3		119.7		112.5			(6.0	)%		4.8	%
Other expenses	(413.1	)	(367.3	)	(414.1	)		12.7	%		0.2	%
Income before translation result and income tax	464.5		184.3		261.8			42.0	%		(43.6	)%
Translation result	(3.3	)	(3.0	)	(1.2	)		(60.8	)%		(64.8	)%
Income tax	(123.7	)	(34.6	)	(66.8	)		93.0	%		(46.0	)%
Profit for the period	337.5		146.7		193.8			32.1	%		(42.6	)%
ROAE	21.8	%	10.1	%	12.8	%
Efficiency ratio	39.2	%	35.2	%	39.7	%
NIM	5.4	%	4.6	%	4.3	%
NIM on loans	8.5	%	8.0	%	7.7	%

INTEREST-EARNING ASSETS

Interbank’s interest-earning assets reached S/ 65,545.9 million as of December 31, 2020, an increase of 2.4% QoQ and 28.6% YoY.

The quarterly growth in interest-earning assets was attributed to increases of 8.5% in cash and due from banks and inter-bank funds, and 5.9% in financial investments, partially offset by a 0.9% decrease in loans. Growth in cash and due from banks and inter-bank funds was mainly due to higher deposits at the Central Bank. The increase in financial investments was mainly a result of higher balances of sovereign bonds, CDBCR and global bonds, partially compensated by reductions in corporate bonds from financial and non-financial institutions.

The YoY increase in interest-earning assets was attributed to growth of 79.5% in cash and due from banks and inter-bank funds, 60.8% in financial investments, and 9.4% in loans. Growth in cash and due from banks and inter-bank funds resulted mainly from higher deposits at the Central Bank, while the increase in financial investments, from higher volumes of sovereign bonds and global bonds.

Interest-earning assets

S/ million
Cash and due from banks and inter-bank funds	9,870.9	16,338.4	17,720.5	8.5	%	79.5	%
Financial investments	5,574.5	8,470.4	8,966.3	5.9	%	60.8	%
Loans	35,512.5	39,222.8	38,859.0	(0.9	)%	9.4	%
Total interest-earning assets	50,957.9	64,031.6	65,545.9	2.4	%	28.6	%

Loan portfolio

S/ million									%chg<br><br><br>12.31.20/<br><br><br>12.31.19
Performing loans
Retail	19,161.2		18,272.0		17,837.1		(2.4	)%		(6.9	)%
Commercial	16,304.5		22,269.3		21,914.2		(1.6	)%		34.4	%
Total performing loans	35,465.7		40,541.2		39,751.3		(1.9	)%		12.1	%
Restructured and refinanced loans	251.2		272.8		287.1		5.3	%		14.3	%
Past due loans	943.2		1,147.0		1,405.2		22.5	%		49.0	%
Total gross loans	36,660.1		41,961.0		41,443.6		(1.2	)%		13.0	%
Add (less)
Accrued and deferred interest	247.1		378.0		400.1		5.8	%		61.9	%
Impairment allowance for loans	(1,394.7	)	(3,116.2	)	(2,984.7	)	(4.2	)%	n.m.
Total direct loans, net	35,512.5		39,222.8		38,859.0		(0.9	)%		9.4	%

The QoQ and YoY evolution in the loan portfolio was mostly explained by disbursements and prepayments of commercial loans under the Reactiva Peru Program. As of December 31, 2020, these loans amounted S/ 6,616.5 million, compared to a balance of S/ 6,709.4 million as of September 30, 2020.

Performing loans decreased 1.9% QoQ due to reductions of 2.4% in retail loans and 1.6% in commercial loans. Excluding the effect of the Reactiva Peru Program in the comparing periods, performing loans and commercial loans would have decreased 2.1% and 1.7% QoQ, respectively.

The quarterly decrease in retail loans was due to reductions of 11.4% in credit cards and 6.9% in other consumer loans, partially offset by growth of 3.2% in mortgages and 0.6% in payroll deduction loans. The reduction in other consumer loans was explained by lower cash loans and vehicle loans, while the increase in mortgages, by higher demand in both traditional and MiVivienda products.

The QoQ decrease in commercial loans was mainly explained by lower short and medium-term lending, mostly to small-sized and corporate segments, as well as by a reduction of trade finance loans in the corporate segment. These effects were partially offset by higher short and medium-term lending to the medium-sized segment.

Performing loans grew 12.1% YoY explained by a 34.4% increase in commercial loans, partially compensated by a 6.9% reduction in retail loans. Excluding the effect of the Reactiva Peru Program, performing loans and commercial loans would have decreased 6.6% and 6.2% YoY, respectively.

The annual growth in commercial loans was mainly explained by higher short and medium-term lending in the corporate segment.

The YoY decrease in retail loans was due to reductions of 26.1% in credit cards and 12.9% in other consumer loans, partially compensated by increases of 6.6% in mortgages and 0.4% in payroll deduction loans. The reduction in other consumer loans was a result of lower cash loans and vehicle loans, while growth in mortgages was due to higher demand in both traditional and MiVivienda products.

It is worth mentioning that, as of December 31, 2020, and in line with the measures implemented to help our customers to overcome the impacts from the COVID-19 pandemic, 400 thousand clients had their loans rescheduled, out of which approximately 385 thousand were retail clients and around 14 thousand, commercial clients. Loans that were subject to some kind of rescheduling represented S/ 10.5 billion or 25.2% of our total portfolio. Of these, S/ 7.5 billion were retail loans (39.1% of total retail loans), and the remaining S/ 3.0 billion were commercial loans (13.2% of total commercial loans).

Breakdown of retail loans

S/ million	12.31.19
Consumer loans:
Credit cards		5,870.0	4,895.4	4,339.5	(11.4	)%	(26.1	)%
Payroll deduction loans		4,302.4	4,292.5	4,318.9	0.6	%	0.4	%
<br><br><br>^(1)^<br><br><br><br> Other consumer		2,062.7	1,928.7	1,796.1	(6.9	)%	(12.9	)%
Total consumer loans		12,235.1	11,116.6	10,454.6	(6.0	)%	(14.6	)%
Mortgages		6,926.0	7,155.4	7,382.5	3.2	%	6.6	%
Total retail loans		19,161.2	18,272.0	17,837.1	(2.4	)%	(6.9	)%
(1)	Payroll deduction loans to public sector employees.
---	---

FUNDING STRUCTURE

Funding structure

S/ million									%chg<br><br><br>12.31.20/<br><br><br>12.31.19
Deposits and obligations	35,577.8		42,538.2		44,576.8		4.8	%		25.3	%
Due to banks and correspondents and inter-bank funds	3,831.4		10,254.6		9,388.1		(8.4	)%	n.m.
Bonds, notes and other obligations	5,805.5		6,412.2		6,491.9		1.2	%		11.8	%
Total	45,214.6		59,205.0		60,456.9		2.1	%		33.7	%
% of funding
Deposits and obligations	78.7	%	71.9	%	73.7	%
Due to banks and correspondents and inter-bank funds	8.5	%	17.3	%	15.6	%
Bonds, notes and other obligations	12.8	%	10.8	%	10.7	%

Interbank's funding base continued to expand on strong deposits growth and inflows of long-term debt provided by the Central Bank, associated with the bank’s active involvement in the auctions of funds for the Reactiva Peru Program. As of December 31, 2020, the balance of such special funding was S/ 5,887.9 million, compared to S/ 5,713.6 million as of September 30, 2020.

The bank’s total funding base increased 2.1% QoQ, slightly below the performance of interest-earning assets. This was explained by growth of 4.8% in deposits and obligations, and 1.2% in bonds, notes and other obligations, partially offset by an 8.4% reduction in due to banks and correspondents and inter-bank funds. Excluding the effect of the Reactiva Peru Program’s funds, the bank’s total funding base would have increased 2.0% QoQ, while due to banks and correspondents and inter-bank funds would have decreased 22.9%.

The quarterly increase in deposits and obligations was mainly due to growth of 24.8% in institutional deposits and 6.4% in retail deposits, partially compensated by a 4.7% decrease in commercial deposits.

The QoQ growth in bonds, notes and other obligations was mainly attributable to a 0.7% depreciation of the foreign exchange rate with respect to 3Q20.

The quarterly decrease in due to banks and correspondents and inter-bank funds was due to lower funding from correspondent banks abroad, partially offset by higher funding from COFIDE.

The bank’s total funding base grew 33.7% YoY, above the annual growth in interest-earning assets, and was explained by increases of more than two-fold in due to banks and correspondents and inter-bank funds, 25.3% in deposits and obligations, and 11.8% in bonds, notes and other obligations. Excluding the effect of the Reactiva Peru Program’s funds, the bank’s total funding base would have increased 20.7% YoY, but due to banks and correspondents and inter-bank funds would have decreased 8.6%.

The YoY increase in due to banks and correspondents and inter-bank funds was the result of higher long-term funding from the Central Bank, associated with the bank’s participation in the auctions of funds for the Reactiva Peru Program. Higher funding from COFIDE also contributed to growth in due to banks and correspondents and inter-bank funds when compared to 4Q19. These effects were partially offset by a lower funding from correspondent banks abroad.

The annual growth in deposits and obligations was mainly explained by increases of 30.2% in retail deposits, 25.4% in commercial deposits, and 15.8% in institutional deposits.

The YoY increase in bonds, notes and other obligations was mainly attributable to the placement in the international market of a US$ 300 million subordinated bond in June 2020, in addition to a 9.3% depreciation of the foreign exchange rate with respect to 4Q19. It is worth mentioning that these effects were partially compensated by the execution of an optional redemption of the prevailing hybrid bonds “8.50% Junior Subordinated Notes due 2070” for US$ 200 million in April 2020.

As of December 31, 2020, the proportion of deposits and obligations to total funding was 73.7%, lower than the 78.7% reported as of December 31, 2019. Likewise, the proportion of institutional deposits to total deposits decreased from 19.1% as of December 31, 2019 to 17.7% as of December 31, 2020.

Breakdown of deposits

S/ million
By customer service:
Retail	15,981.9	19,561.2	20,810.5	6.4	%	30.2	%
Commercial	12,366.7	16,272.8	15,502.8	(4.7	)%	25.4	%
Institutional	6,806.4	6,313.7	7,880.5	24.8	%	15.8	%
Other	422.7	390.5	383.0	(1.9	)%	(9.4	)%
Total	35,577.8	42,538.2	44,576.8	4.8	%	25.3	%
By type:
Demand	10,979.6	13,801.8	12,726.3	(7.8	)%	15.9	%
Savings	11,384.9	16,067.0	17,852.3	11.1	%	56.8	%
Time	13,207.0	12,655.4	13,992.2	10.6	%	5.9	%
Other	6.2	14.0	6.0	(56.9	)%	(3.0	)%
Total	35,577.8	42,538.2	44,576.8	4.8	%	25.3	%

NET INTEREST AND SIMILAR INCOME

Net interest and similar income

S/ million
Interest and similar income	1,051.7		987.0		959.2		(2.8	)%	(8.8	)%
Interest and similar expense	(353.2	)	(244.8	)	(231.9	)	(5.3	)%	(34.3	)%
Net interest and similar income	698.5		742.1		727.3		(2.0	)%	4.1	%
NIM	5.4	%	4.6	%	4.3	%	-30	bps	-110	bps

Interest and similar income

S/ million
Interest and similar income
Due from banks and inter-bank funds	24.0		3.9		5.5		39.5	%	(77.1	)%
Financial investments	49.7		64.8		64.7		(0.2	)%	30.2	%
Loans	978.1		918.2		889.0		(3.2	)%	(9.1	)%
Total Interest and similar income	1,051.7		987.0		959.2		(2.8	)%	(8.8	)%
Average interest-earning assets	51,372.6		64,491.4		67,839.2		5.2	%	32.1	%
Average yield on assets (annualized)	8.2	%	6.1	%	5.7	%	-40	bps	-250	bps

Interest and similar expense

S/ million
Interest and similar expense
Deposits and obligations	(178.3	)	(113.6	)	(101.9	)	(10.3	)%	(42.8	)%
Due to banks and correspondents and inter-bank funds	(39.5	)	(45.5	)	(41.4	)	(8.9	)%	4.9	%
Bonds, notes and other obligations	(135.4	)	(85.7	)	(88.5	)	3.3	%	(34.6	)%
Total Interest and similar expense	(353.2	)	(244.8	)	(231.9	)	(5.3	)%	(34.3	)%
Average interest-bearing liabilities	45,154.5		57,336.5		59,830.9		4.4	%	32.5	%
Average cost of funding (annualized)	3.1	%	1.7	%	1.6	%	-10	bps	-150	bps

QoQ Performance

Net interest and similar income decreased 2.0% QoQ due to a 2.8% reduction in interest and similar income, partially offset by a 5.3% decrease in interest and similar expense. However, excluding the impacts from the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic for S/ 28.5 million in 3Q20 and S/ 19.9 million in 4Q20, interest and similar income, and net interest and similar income would have decreased 3.6% and 3.0% QoQ, respectively.

The lower interest and similar income was due to a 3.2% reduction in interest on loans, partially offset by 39.5% growth in interest on due from banks and inter-bank funds. Interest on financial investments remained relatively stable QoQ.

Interest on loans decreased S/ 29.2 million, or 3.2% QoQ, as the result of a 50 basis point reduction in the average yield, partially compensated by 1.7% growth in the average loan portfolio. However, excluding the previously mentioned impacts from the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic in 3Q20 and 4Q20, interest on loans would have decreased 4.0% QoQ.

The lower average rate on loans, from 8.9% in 3Q20 to 8.4% in 4Q20, was explained by a yield reduction of 70 basis points in commercial loans, partially offset by a 20 basis point growth in retail loans. The yield decrease in commercial loans was explained by lower rates in short and medium-term loans, trade finance loans and leasing operations. In the retail portfolio, rates grew in credit cards and payroll deduction loans, partially compensated by lower average yields on other consumer loans and mortgages. It is worth mentioning that, as a result of the loan rescheduling carried out as part of the measures implemented to deal with the COVID-19 pandemic, a portion of the interest on loans to be recorded between April and December 2020 was rescheduled, affecting the average yield on loans in 3Q20 and 4Q20. Additionally, the incidence of the low-return loans offered to several commercial clients as part of the Reactiva Peru Program also had an impact on the average rate on loans.

The higher average volume of loans was attributed to a 4.2% increase in commercial loans, partially offset by a 0.9% decrease in retail loans. In the commercial portfolio, the higher average volume was mostly due to 5.9% growth in short and medium-term loans, partially offset by reductions of 9.3% in trade finance loans and 4.8% in leasing operations. In the retail portfolio, average volumes decreased mainly due to reductions of 5.4% in both credit cards and other consumer loans, partially compensated by increases of 2.6% in mortgages and 0.9% in payroll deduction loans.

Interest on due from banks and inter-bank funds grew S/ 1.6 million, or 39.5% QoQ, explained by 12.9% growth in the average volume, while the nominal average rate remained stable. The increase in the average volume was due to higher deposits and reserve funds at the Central Bank.

Interest on financial investments remained relatively stable as a 20 basis point reduction in the average yield was partially offset by 8.5% growth in the average volume. The decrease in the average yield was due to lower returns on CDBCR, sovereign bonds and corporate bonds from financial institutions, partially compensated by higher returns on corporate bonds from non-financial institutions and global bonds. The increase in the average volume was a consequence of higher investments in sovereign bonds, CDBCR and global bonds, partially offset by lower balances of corporate bonds from financial and non-financial institutions.

The nominal average yield on interest-earning assets decreased 40 basis points QoQ, from 6.1% in 3Q20 to 5.7% in 4Q20, as a consequence of the lower returns on loans and investments. However, excluding the impacts from the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic, the nominal average yield on interest-earning assets would have decreased 50 basis points, from 6.3% in 3Q20 to 5.8% in 4Q20.

The lower interest and similar expense was due to reductions of 10.3% in interest on deposits and obligations, and 8.9% in interest on due to banks and correspondents, partially compensated by a 3.3% increase in interest on bonds, notes and other obligations.

The quarterly decrease in interest on deposits and obligations was due to a 20 basis point reduction in the average cost, partially compensated by 3.7% growth in the average volume. The decrease in the average cost was due to lower rates paid to institutional and retail deposits, associated with the low interest rate environment. The higher average volume was explained by growth in all segments of deposits. By currency, average balances of dollar-denominated deposits grew 4.0% while average soles-denominated deposits increased 3.6%.

Interest on due to banks and correspondents decreased S/ 4.1 million, or 8.9% QoQ, due to a 30 basis point reduction in the average cost, partially offset by 9.5% growth in the average volume. On one hand, the lower average cost was mainly due to reductions in rates paid to funding provided by the Central Bank in the context of the Reactiva Peru Program. On the other hand, the increase in the average volume was mostly attributed to higher funding from the Central Bank, related to the bank’s participation in the Reactiva Peru Program.

The increase in interest on bonds, notes and other obligations was mainly due to 1.2% growth in the average volume of these obligations, in part explained by a 1.2% depreciation of the average foreign exchange rate with respect to 3Q20.

The average cost of funding decreased 10 basis points QoQ, from 1.7% in 3Q20 to 1.6% in 4Q20, in line with the lower implicit cost of deposits and due to banks and correspondents.

As a result of the above, net interest margin was 4.3% in 4Q20, 30 basis points lower than the 4.6% reported in 3Q20. However, excluding the impacts from the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic, net interest margin would have decreased 40 basis points, from 4.8% in 3Q20 to 4.4% in 4Q20.

YoY Performance

Net interest and similar income increased 4.1% YoY due to a 34.3% reduction in interest and similar expense, partially offset by an 8.8% decrease in interest and similar income. However, excluding the impact from the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic for S/ 19.9 million in 4Q20, interest and similar income would have decreased 6.9% YoY, and net interest and similar income would have grown 7.0% YoY.

The lower interest and similar expense was due to reductions of 42.8% in interest on deposits and obligations, and 34.6% in interest on bonds, notes and other obligations, partially offset by a 4.9% increase in interest on due to banks and correspondents.

Interest on deposits and obligations decreased S/ 76.4 million, or 42.8% YoY, explained by a 120 basis point reduction in the average cost, from 2.1% in 4Q19 to 0.9% in 4Q20, partially offset by 25.7% growth in the average volume. The lower average cost was due to reductions in rates paid to institutional, commercial and retail deposits. Growth in volumes came across all client segments. By currency, average balances of soles-denominated deposits increased 30.1% while average dollar-denominated deposits grew 17.1%.

The S/ 1.9 million, or 4.9% YoY, increase in interest on due to banks and correspondents was the result of a more than two-fold growth in the average volume, partially compensated by a 230 basis point reduction in the average cost, from 4.0% in 4Q19 to 1.7% in 4Q20. On one hand, the increase in the average volume was due to higher funding provided by the Central Bank, related to the bank’s participation in the Reactiva Peru Program. On the other hand, the reduction in the average cost was explained by lower rates paid to funding provided by the Central Bank and COFIDE.

The average cost of funding decreased 150 basis points YoY, from 3.1% in 4Q19 to 1.6% in 4Q20, in line with the lower implicit cost of all interest-bearing liabilities. However, excluding the expense of the optional redemption of the prevailing “5.75% Senior Notes due 2020” corporate bonds, the average cost of funding would have decreased 120 basis points, from 2.8% in 4Q19 to 1.6% in 4Q20.

The lower interest and similar income was due to reductions of 77.1% in interest on due from banks and inter-bank funds, and 9.1% in interest on loans, partially offset by 30.2% growth in interest on financial investments.

Interest on due from banks and inter-bank funds decreased S/ 18.5 million, or 77.1% YoY, explained by a 90 basis point reduction in the average yield, partially compensated by 71.2% growth in the average volume. On one hand, the decrease in the nominal average rate was mainly related to a lower rate on inter-bank funds, as well as to lower returns on deposits and reserve funds at the Central Bank. On the other hand, the increase in the average volume was explained by higher deposits and reserve funds at the Central Bank, partially offset by a lower average balance of inter-bank funds.

Interest on loans decreased S/ 89.1 million, or 9.1% YoY, due to a 240 basis point reduction in the average yield, partially offset by 16.6% growth in the average volume. However, excluding the previously mentioned impact from the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic in 4Q20, interest on loans would have decreased 7.1% YoY.

The annual decrease in the average rate on loans, from 10.8% in 4Q19 to 8.4% in 4Q20, was due to reductions of 200 basis points in commercial loans and 120 basis points in retail loans. The decrease in commercial loans was explained by lower rates on all types of loans, while the reduction in the retail portfolio, to lower average yields on other consumer loans and mortgages, partially offset by higher rates on credit cards and payroll deduction loans. It is worth mentioning that, as a result of the loan rescheduling carried out as part of the measures implemented to deal with the COVID-19 pandemic, a portion of the interest on loans to be recorded between April and December 2020 was rescheduled, affecting the average yield on loans in 4Q20. Additionally, the incidence of the low-return loans offered to several commercial clients as part of the Reactiva Peru Program also had an impact on the average rate on loans.

The higher average volume of loans was attributed to 39.4% growth in commercial loans, partially offset by a 2.1% reduction in retail loans. In the commercial portfolio, the higher average volume was mainly due to a 72.0% increase in short and medium-term loans, attributed to the disbursement of loans under the Reactiva Peru Program, despite lower balances of trade finance loans and leasing operations. In the retail portfolio, average volumes decreased mainly due to reductions of 14.8% in credit cards and 1.4% in other consumer loans, partially compensated by increases of 7.0% in mortgages and 1.1% in payroll deduction loans.

Interest on financial investments increased S/ 15.0 million, or 30.2% YoY, due to 64.0% growth in the average volume, partially offset by a 70 basis point reduction in the average yield. The increase in the average volume was the result of higher average balances of sovereign bonds, global bonds and corporate bonds from financial institutions. The decrease in the nominal average rate, from 3.7% in 4Q19 to 3.0% in 4Q20, was explained by lower returns on global bonds, sovereign bonds, CDBCR and corporate bonds from financial institutions.

The nominal average yield on interest-earning assets decreased 250 basis points YoY, from 8.2% in 4Q19 to 5.7% in 4Q20, in line with the lower returns on all components of interest-earning assets. However, excluding the impact from the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic, the nominal average yield on interest-earning assets would have decreased 240 basis points YoY, from 8.2% in 4Q19 to 5.8% in 4Q20.

As a result of the above, net interest margin was 4.3% in 4Q20, 110 basis points lower than the 5.4% reported in 4Q19. However, excluding (i) the expense of the optional redemption of the prevailing “5.75% Senior Notes due 2020” corporate bonds in 4Q19 and (ii) the impact from the modification of contractual cash flows due to the loan rescheduling schemes offered to customers affected by the COVID-19 pandemic in 4Q20, net interest margin would have decreased 140 basis points YoY, from 5.8% in 4Q19 to 4.4% in 4Q20.

IMPAIRMENT LOSS ON LOANS, NET OF RECOVERIES

Impairment loss on loans, net of recoveries decreased 29.3% QoQ and grew more than two-fold YoY.

The quarterly reduction was due to lower provision requirements in both retail and commercial loan books. In the retail portfolio, the reduction in provisions was mainly driven by credit cards, while in the commercial portfolio, by corporate and SME loans.

The annual increase in provisions was mainly explained by higher requirements in credit cards, payroll deduction loans and cash loans, as well as in the medium-sized segment of the commercial loan book. All this was mainly attributed to the adjustments of the

bank’s expected loss models to address the impact of the COVID-19 pandemic. It is worth noting that the YoY growth was also explained by a base effect related to the reversion of loan loss provisions for S/ 104.1 million in 4Q19 due to fine-tuning of IFRS9 models reflecting improved risk profile on customers. Excluding this effect, impairment loss on loans, net of recoveries would have increased 30.0% YoY.

As a result of the above, the annualized ratio of impairment loss on loans to average loans was 3.1% in 4Q20, lower than the 4.5% reported in 3Q20, but higher than the 1.7% registered in 4Q19. However, excluding the previously mentioned reversion of provisions, the annualized ratio of impairment loss on loans to average loans would have increased 30 basis points YoY, from 2.8% in 4Q19 to 3.1% in 4Q20.

Impairment loss on loans, net of recoveries

S/ million	4Q19							%chg<br><br><br>QoQ			%chg<br><br><br>YoY
Impairment loss on loans, net of recoveries		(147.9	)	(463.2	)	(327.6	)		(29.3	)%	n.m.
Impairment loss on loans/average gross loans		2.8	%	<br><br><br>^(1)^<br><br><br><br>4.5	%	3.1	%		-140	bps		30	bps
NPL ratio (at end of period)		2.9	%	3.4	%	3.6	%		20	bps		70	bps
NPL coverage ratio (at end of period)		117.7	%	196.5	%	181.5	%	n.m.			n.m.
Impairment allowance for loans		1,394.7		3,116.2		2,984.7			(4.2	)%	n.m.
(1)	Excluding the reversion of loan loss provisions for S/ 104.1 million in 4Q19 due to fine-tuning of IFRS9 models reflecting improved risk profile on customers. Including this effect, cost of risk was 1.7% in such period.
---	---

The NPL ratio grew 20 basis points QoQ and 70 basis points YoY, to 3.6%. On one hand, the quarterly growth was due to a 40 basis point increase in retail loans’ NPL, mainly driven by credit cards. On the other hand, the annual growth was explained by a 230 basis point growth in the retail portfolio, partially offset by a 30 basis point reduction in the commercial portfolio.

Furthermore, the NPL coverage ratio was 181.5% as of December 31, 2020, lower than the 196.5% reported as of September 30, 2020, but higher than the 117.7% registered as of December 31, 2019. NPL coverage ratio in credit cards was 270.0% as of December 31, 2020.

FEE INCOME FROM FINANCIAL SERVICES, NET

Net fee income from financial services grew S/ 10.2 million QoQ, or 6.7%, mainly explained by increases of S/ 9.9 million in commissions from banking services, S/ 3.6 million in fees from maintenance and mailing of accounts, transfer fees and commissions on debit card services, and S/ 2.5 million in commissions from credit card services.

Net fee income from financial services decreased S/ 56.4 million YoY, or 25.7%, mainly due to reductions of S/ 33.7 million in commissions from credit card services, S/ 11.8 million in commissions from banking services, and S/ 10.3 million in fees from maintenance and mailing of accounts, transfer fees and commissions on debit card services.

Fee income from financial services, net

S/ million
Income
Commissions from credit card services	104.4		68.2		70.7		3.7	%	(32.3	)%
Commissions from banking services	91.4		69.7		79.6		14.2	%	(13.0	)%
Maintenance and mailing of accounts, transfer fees and commissions on debit card services	64.6		50.7		54.3		7.2	%	(15.9	)%
Fees from indirect loans	13.4		13.3		14.8		11.1	%	10.6	%
Collection services	10.6		11.4		11.5		0.8	%	8.6	%
Other	11.5		7.9		10.7		35.3	%	(6.9	)%
Total income	295.9		221.1		241.6		9.3	%	(18.4	)%
Expenses
Insurance	(24.6	)	(24.3	)	(27.2	)	11.9	%	10.5	%
Fees paid to foreign banks	(4.4	)	(4.0	)	(4.9	)	20.9	%	10.4	%
Other	(47.1	)	(39.7	)	(46.2	)	16.5	%	(2.1	)%
Total expenses	(76.2	)	(68.0	)	(78.3	)	15.1	%	2.7	%
Fee income from financial services, net	219.7		153.1		163.3		6.7	%	(25.7	)%

OTHER INCOME

Other income decreased S/ 7.2 million QoQ, mainly explained by a lower net gain on sale of financial investments, partially offset by an increase in net gain on foreign exchange transactions and on financial assets at fair value through profit or loss.

Other income grew S/ 5.2 million YoY due to increases in net gain on sale of financial investments and net gain on foreign exchange transactions and on financial assets at fair value through profit or loss.

Other income

S/ million	4Q19							%chg<br><br><br>YoY
Net gain on foreign exchange transactions and on financial assets at fair value through profit or loss		77.9	71.0	79.4	^(1)^	11.8	%		2.0	%
Net gain on sale of financial investments		2.1	28.3	7.7	^^	(72.9	)%	n.m.
Other		27.4	20.4	25.4		24.7	%		(7.1	)%
Total other income		107.3	119.7	112.5		(6.0	)%		4.8	%
(1)	Includes S/ 69.7 million of net gain on foreign exchange transactions and S/ 9.7 million of net gain (loss) on financial assets at fair value though profit or loss (derivatives).
---	---

OTHER EXPENSES

Other expenses increased S/ 46.8 million QoQ, or 12.7%, and remained relatively stable YoY.

The quarterly growth in expenses was mainly attributed to a S/ 35.2 million effect of higher profit sharing due to the accounting of non-tax deductible voluntary provisions under local GAAP accounting standards.

The efficiency ratio was 39.7% in 4Q20, compared to the 35.2% reported in 3Q20 and the 39.2% registered in 4Q19. However, excluding the one-off impact of the liability management transaction in 4Q19 and the impacts from the modification of contractual cash flows in 3Q20 and 4Q20, the efficiency ratio would have been 37.7% in 4Q19, 34.2% in 3Q20 and 38.9% in 4Q20.

Other expenses

S/ million
Salaries and employee benefits	(164.2	)	(128.3	)	(170.0	)	32.5	%	3.6	%
Administrative expenses	(180.0	)	(173.0	)	(163.3	)	(5.6	)%	(9.3	)%
Depreciation and amortization	(58.3	)	(55.9	)	(64.4	)	15.2	%	10.3	%
Other	(10.6	)	(10.1	)	(16.3	)	61.3	%	54.1	%
Total other expenses	(413.1	)	(367.3	)	(414.1	)	12.7	%	0.2	%
Efficiency ratio	39.2	%	35.2	%	39.7	%	450	bps	50	bps

REGULATORY CAPITAL

The ratio of regulatory capital to risk-weighted assets (RWA) was 17.0% as of December 31, 2020, in line with that reported as of September 30, 2020, but higher than the 15.2% registered as of December 31, 2019.

In 4Q20, regulatory capital slightly decreased 0.3% QoQ. Meanwhile, RWA also decreased 0.4% QoQ due to lower capital requirements for credit risk, given the reductions in retail and commercial loans.

The annual increase in the total capital ratio was due to 13.8% growth in regulatory capital, partially offset by a 1.5% increase in RWA. Regulatory capital increased as a result of the addition of S/ 671.1 million in capital, reserves and earnings with capitalization agreement during the last twelve months, as well as the “4.00% Subordinated Notes due 2030” for US$300 million issued in July 2020. These effects were partially compensated by the execution of an optional redemption of US$ 200 million hybrid bonds in April 2020. The YoY increase in RWA was mostly attributed to loan growth and the higher risk weights applied to intangible assets by disposition of the SBS, with impact on the bank’s increasing digital investments.

As of December 31, 2020, Interbank’s capital ratio of 17.0% was significantly higher than its risk-adjusted minimum capital ratio requirement, established at 10.7%. The minimum regulatory capital ratio requirement was 10.0%, while the additional capital requirement for Interbank was 0.7% as of December 31, 2020. Furthermore, Core Equity Tier 1 (CET1) was 11.5% as of December 31, 2020, slightly below the 11.6% reported as of December 31, 2019.

Regulatory capital

S/ million
Tier I capital	5,721.7		5,932.3		5,930.7		(0.0	)%	3.7	%
Tier II capital	1,957.6		2,840.2		2,811.5		(1.0	)%	43.6	%
Total regulatory capital	7,679.3		8,772.6		8,742.1		(0.3	)%	13.8	%
Risk-weighted assets (RWA)	50,673.8		51,680.2		51,451.8		(0.4	)%	1.5	%
Total capital ratio	15.2	%	17.0	%	17.0	%	0	bps	180	bps
Tier I capital / RWA	11.3	%	11.5	%	11.5	%	0	bps	20	bps
CET1	11.6	%	11.4	%	11.5	%	10	bps	-10	bps

Interseguro

SUMMARY

2020 Performance

Interseguro’s profits reached S/ 141.1 million in 2020, a S/ 10.7 million, or 8.2%, increase compared to the previous year.

The yearly performance was mainly due to increases of S/ 32.7 million in other income, mostly explained by net gain on sale of securities, and S/ 30.9 million in net interest and similar income, as well as to a S/ 12.7 million reduction in other expenses, mainly related to efficiencies implemented during the year. These effects were partially offset by a S/ 36.4 million negative performance in translation result and a S/ 27.6 million higher loss due to impairment of financial investments.

Insurance Segment’s P&L Statement

S/ million	2018							%chg<br><br><br>20/19			%chg<br><br><br>19/18
Interest and similar income		611.0		612.5		655.0			6.9	%		0.3	%
Interest and similar expenses		(61.1	)	(72.5	)	(84.0	)		15.9	%		18.7	%
Net Interest and similar income		549.9		540.1		571.0			5.7	%		-1.8	%
Recovery (loss) due to impairment of financial investments		11.3		(6.2	)	(33.8	)	n.m.			n.m.
Net Interest and similar income after impairment loss		561.3		533.9		537.2			0.6	%		-4.9	%
Fee income from financial services, net		(4.6	)	(4.0	)	(6.1	)		52.2	%		-13.3	%
Other income		67.6		169.0		201.7			19.3	%	n.m.
Total premiums earned minus claims and benefits		(400.8	)	(279.6	)	(279.1	)		-0.2	%		-30.2	%
Net premiums		681.8		689.4		615.8			-10.7	%		1.1	%
Adjustment of technical reserves		(362.2	)	(268.7	)	(100.8	)		-62.5	%		-25.8	%
Net claims and benefits incurred		(720.3	)	(700.3	)	(794.1	)		13.4	%		-2.8	%
Other expenses		(273.7	)	(298.7	)	(286.0	)		-4.3	%		9.2	%
Income before translation result and income tax		(50.1	)	120.6		167.7			39.1	%	n.m.
Translation result		(11.4	)	9.8		(26.6	)	n.m.			n.m.
Income tax		—		—		—		n.m.			n.m.
Profit for the period		(61.5	)	130.4		141.1			8.2	%	n.m.
New mortality tables impact on technical reserves		(144.8	)	—		—
Profit excluding change in mortality tables		83.3		130.4		141.1
ROAE	n.m.			14.2	%	18.9	%
ROAE excl. change in mortality tables		9.4	%	14.2	%	18.9	%
Efficiency ratio		14.6	%	13.3	%	11.0	%

Net interest and similar income was S/ 571.0 million in 2020, an increase of S/ 30.9 million compared to 2019, mainly explained by S/ 42.5 million growth in interest and similar income, partially offset by a S/ 11.5 million increase in interest and similar expenses.

Loss due to impairment of financial investments was S/ -33.8 million, compared to a loss of S/ -6.2 million in the previous year, a deterioration of S/ 27.6 million attributable to an additional provision for impairment on a fixed income investment that was downgraded in relation to the COVID-19 outbreak.

Other income was S/ 201.7 million, a S/ 32.7 million growth compared to 2019, mainly due to increases of S/ 65.8 million in net gain on sale of securities, S/ 20.6 million in net trading result and S/ 7.2 million in net gain on sale of real estate investments. These factors were partially offset by decreases of S/ 49.1 million in net gain on valuation of real estate investments and S/ 9.3 million in rental income.

The yearly performance in net premiums was mainly due to decreases of S/ 67.8 million in annuities and S/ 8.9 million in retail insurance, mostly associated to card protection products, partially offset by a S/ 3.1 million increase in individual life premiums.

It is worth mentioning that the overall activity in net premiums was affected by the national lockdown implemented to face the COVID-19 pandemic, which later recovered during 3Q20 and 4Q20 in all segments.

The lower adjustment of technical reserves in 2020 was driven mainly by decreases of S/ 137.4 million in annuities, S/ 20.3 million in individual life and S/ 10.2 million in retail insurance. The reduction in technical reserves for annuities was attributable to a release of technical reserves for annuities, mostly related to (i) a higher mortality rate resulting from the COVID-19 pandemic, and (ii) the effect of lower sales.

Other expenses were S/ 286.0 million in 2020, a S/ 12.7 million decrease when compared to 2019, mainly explained by lower administrative expenses due to the efficiencies implemented throughout the year to deal with the impact of the COVID-19 pandemic.

4Q20 Performance

Interseguro’s profits reached S/ 37.7 million in 4Q20, a decrease of S/ 28.8 million QoQ, but an increase of S/ 3.0 million YoY.

The quarterly result was mainly explained by growth of S/ 30.1 million in other expenses, mostly related to a regularization in the rescue of life insurance policies, and a reduction of S/ 26.4 million in total premiums earned minus claims and benefits, in addition to a S/ 4.2 million contraction in other income. These factors were partially offset by a S/ 13.4 million increase in net interest and similar income, a S/ 16.4 million reversion of provision for impairment loss, and a S/ 2.8 million improvement in translation result.

The annual increase in net profit was mainly due to growth of S/ 18.4 million in net interest and similar income and S/ 7.7 million in other income, in addition to a S/ 22.2 million positive effect in loss due to impairment of financial investments. These effects were partially offset by a reduction of S/ 15.3 million in total premiums earned minus claims and benefits, and an increase of S/ 15.1 million in other expenses. Additionally, a S/ 13.6 million negative effect in translation result also contributed to partially offset the yearly increase in profits.

Interseguro’s ROAE was 17.1% in 4Q20, below the 35.7% reported in 3Q20, but above the 14.7% registered in 4Q19.

Insurance Segment’s P&L Statement

S/ million							%chg<br><br><br>QoQ			%chg<br><br><br>YoY
Interest and similar income	155.6		160.5		176.0			9.6	%		13.1	%
Interest and similar expenses	(20.8	)	(20.7	)	(22.7	)		9.7	%		9.2	%
Net Interest and similar income	134.8		139.8		153.2			9.6	%		13.7	%
Recovery (loss) due to impairment of financial investments	(8.3	)	(2.5	)	13.9		n.m.			n.m.
Net Interest and similar income after impairment loss	126.5		137.3		167.1			21.7	%		32.1	%
Fee income from financial services, net	(0.8	)	(1.5	)	(2.2	)		46.5	%	n.m.
Other income	50.6		62.5		58.3			-6.8	%		15.1	%
Total premiums earned minus claims and benefits	(74.4	)	(63.3	)	(89.7	)		41.7	%		20.4	%
Net premiums	164.6		139.6		178.4			27.7	%		8.3	%
Adjustment of technical reserves	(57.9	)	9.5		(53.5	)	n.m.				-7.6	%
Net claims and benefits incurred	(181.1	)	(212.4	)	(214.5	)		1.0	%		18.4	%
Other expenses	(78.9	)	(63.9	)	(94.0	)		47.2	%		19.1	%
Income before translation result and income tax	22.9		71.2		39.5			-44.5	%		72.3	%
Translation result	11.7		(4.7	)	(1.9	)		-60.2	%	n.m.
Income tax	—		—		—		n.m.			n.m.
Profit for the period	34.7		66.5		37.7			-43.4	%		8.7	%
ROAE	14.7	%	35.7	%	17.1	%
Efficiency ratio	14.1	%	9.5	%	12.1	%

RESULTS FROM INVESTMENTS

Results from Investments ^(1)^

S/ million	4Q19							%chg<br><br><br>QoQ			%chg<br><br><br>YoY
Interest and similar income		155.6		160.5		176.0			9.6	%		13.1	%
Interest and similar expenses		(10.4	)	(9.2	)	(10.9	)		18.1	%		4.0	%
Net interest and similar income		145.2		151.3		165.1			9.1	%		13.7	%
Recovery (loss) due to impairment of financial investments		(8.3	)	(2.5	)	13.9		n.m.			n.m.
Net Interest and similar income after impairment loss		136.9		148.9		179.0			20.3	%		30.8	%
Net gain (loss) on sale of financial investments		13.5		25.7		21.2			-17.8	%		57.1	%
Net gain (loss) on financial assets at fair value through profit or loss		12.3		18.0		30.4			69.3	%	n.m.
Rental income		11.3		9.6		9.1			(4.4	)%		(18.8	)%
Gain on sale of investment property		(1.2	)	—		—		n.m.			n.m.
Valuation gain (loss) from investment property		9.8		5.4		(6.5	)	n.m.			n.m.
Other^(1)^		(3.2	)	(4.6	)	(3.9	)		(15.7	)%		20.8	%
Other income		42.4		54.1		50.3			(6.9	)%		18.6	%
Results from investments		179.3		202.9		229.3			13.0	%		27.9	%
(1)	Only includes transactions related to investments.
---	---

NET INTEREST AND SIMILAR INCOME

Net interest and similar income related to investments was S/ 165.1 million in 4Q20, an increase of S/ 13.8 million, or 9.1%, QoQ and S/ 19.9 million, or 13.7%, YoY.

The quarterly and annual performances were mainly explained by increases of S/ 15.5 million and S/ 20.4 million in interest and similar income, respectively, mostly attributed to a higher return of the fixed income portfolio and to incremental dividends.

RECOVERY (LOSS) DUE TO IMPAIRMENT OF FINANCIAL INVESTMENTS

Recovery due to impairment of financial investments was S/ 13.9 million in 4Q20, compared to losses of S/ 2.5 million in 3Q20 and S/ 8.3 million in 4Q19.

The quarterly and annual performances were mainly due to a reversion of provision for impairment loss related to a fixed income investment that was downgraded in relation to the COVID-19 outbreak in 1Q20.

OTHER INCOME

Other income related to investments was S/ 50.3 million in 4Q20, a decrease of S/ 3.8 million QoQ, but an increase of S/ 7.9 million YoY.

The quarterly reduction was mainly due to decreases of S/ 11.9 million in valuation gain from investment property and S/ 4.5 million in net gain on sale of financial investments, partially offset by S/ 12.4 million growth in net gain on financial assets at fair value.

The annual increase was mainly explained by growth of S/ 18.1 million in net gain on financial assets at fair value and S/ 7.7 million in net gain on sale of financial investments, partially offset by decreases of S/ 16.3 million in valuation gain from investment property and S/ 2.2 million in rental income.

TOTAL PREMIUMS EARNED MINUS CLAIMS AND BENEFITS

Total Premiums Earned Minus Claims And Benefits

S/ million							%chg<br><br><br>QoQ
Net premiums	164.6		139.6		178.4			27.7	%	8.3	%
Adjustment of technical reserves	(57.9	)	9.5		(53.5	)	n.m.			(7.6	)%
Net claims and benefits incurred	(181.1	)	(212.4	)	(214.5	)		1.0	%	18.4	%
Total premiums earned minus claims and benefits	(74.4	)	(63.3	)	(89.7	)		41.7	%	20.4	%

Total premiums earned minus claims and benefits were S/ -89.7 million in 4Q20, a decrease of S/ 26.4 million QoQ and S/ 15.3 million YoY.

The quarterly reduction was mainly due to the constitution of S/ 53.5 million of technical reserves in 4Q20, compared to a S/ 9.5 million release in 3Q20. This effect was partially offset by S/ 38.8 million growth in net premiums.

The annual performance was explained by S/ 33.4 million higher net claims and benefits incurred, partially offset by a S/ 13.8 million increase in net premiums and a S/ 4.4 million reduction in adjustment of technical reserves.

NET PREMIUMS

Net Premiums by Business Line

S/ million				%chg<br><br><br>QoQ			%chg<br><br><br>YoY
Annuities	71.1	50.2	85.9		71.2	%		20.7	%
D&S	0.0	0.1	0.1	n.m.			n.m.
Individual Life	34.3	34.9	37.5		7.5	%		9.6	%
Retail Insurance	59.2	54.5	54.8		0.6	%		(7.4	)%
Net Premiums	164.6	139.6	178.4		27.7	%		8.3	%

Net premiums were S/ 178.4 million in 4Q20, an increase of S/ 38.8 million, or 27.7%, QoQ and S/ 13.8 million, or 8.3%, YoY.

The quarterly result was due to growth of S/ 35.7 million in annuities and S/ 2.6 million in individual life. The higher annuities were a result of better market conditions, which drove premiums even above pre COVID-19 levels, while individual life premiums grew due to an improvement in the collection of premiums.

The annual performance in net premiums was mainly due to increases of S/ 14.8 million in annuities and S/ 3.2 million in individual life. These factors were partially offset by a S/ 4.4 million reduction in retail insurance premiums, explained by decreases in premiums related to credit life insurance and card protection insurance products.

ADJUSTMENT OF TECHNICAL RESERVES

Adjustment of Technical Reserves by Business Line

S/ million							%chg<br><br><br>QoQ			%chg<br><br><br>YoY
Annuities	(34.8	)	22.4		(34.1	)	n.m.				(2.1	)%
Individual Life	(23.5	)	(19.4	)	(23.4	)		20.3	%		(0.4	)%
Retail Insurance	0.4		6.6		4.0			(39.5	)%	n.m.
Adjustment of technical reserves	(57.9	)	9.5		(53.5	)	n.m.				(7.6	)%

Adjustment of technical reserves was S/ 53.5 million in 4Q20, compared to a S/ 9.5 million release in 3Q20 and a S/ 57.9 million requirement in 4Q19.

The quarterly performance was mainly explained by a base effect related to a S/ 22.4 million release in technical reserves for annuities in 3Q20 that became a S/ 34.1 million requirement in 4Q20 due to higher sales and a lower mortality rate.

The annual reduction in adjustment of technical reserves was mainly explained by a S/ 3.6 million higher release in retail insurance and a S/ 0.7 million decrease in technical reserves for annuities.

NET CLAIMS AND BENEFITS INCURRED

Net Claims and Benefits Incurred by Business Line

S/ million							%chg<br><br><br>QoQ			%chg<br><br><br>YoY
Annuities	(164.5	)	(166.3	)	(174.3	)		4.8	%		6.0	%
D&S	(1.2	)	(0.1	)	0.1		n.m.			n.m.
Individual Life	(1.4	)	(6.3	)	(3.9	)		(38.4	)%	n.m.
Retail Insurance	(14.0	)	(39.7	)	(36.4	)		(8.4	)%	n.m.
Net claims and benefits incurred	(181.1	)	(212.4	)	(214.5	)		1.0	%		18.4	%

Net claims and benefits incurred reached S/ 214.5 million in 4Q20, an increase of S/ 2.1 million QoQ and S/ 33.4 million YoY.

The quarterly growth was mainly the result of an S/ 8.0 million increase in annuity benefits, partially offset by reductions of S/ 3.3 million in retail insurance, attributable to lower claims in credit life insurance, and S/ 2.4 million in individual life claims.

The annual performance in net claims and benefits incurred was explained by a S/ 22.4 million increase in retail insurance, mostly explained by higher claims in credit life insurance related to the COVID-19 mortality in Peru. Additionally, increases of S/ 9.8 million in annuity benefits and S/ 2.5 million in individual life claims also contributed to the YoY growth in net claims and benefits incurred.

OTHER EXPENSES

Other Expenses

S/ million							%chg<br><br><br>QoQ
Salaries and employee benefits	(19.7	)	(17.7	)	(21.8	)		23.5	%	10.9	%
Administrative expenses	(15.7	)	(9.3	)	(12.2	)		31.0	%	(22.1	)%
Depreciation and amortization	(5.7	)	(6.4	)	(6.4	)		0.6	%	12.1	%
Expenses related to rental income	(1.1	)	(0.3	)	(1.1	)	n.m.			(3.7	)%
Other	(36.7	)	(30.1	)	(52.5	)		74.1	%	43.0	%
Other expenses	(78.9	)	(63.9	)	(94.0	)		47.2	%	19.1	%

Other expenses increased S/ 30.1 million QoQ, or 47.2%, and S/ 15.1 million YoY, or 19.1%.

The quarterly and annual expense growth were mainly explained by the regularization in the rescue of life insurance policies. Additionally, the quarterly performance was also explained by increases of S/ 4.1 million in salaries and employee benefits and S/ 2.9 million in administrative expenses.

Inteligo

SUMMARY

2020 Performance

Inteligo’s profits reached S/ 243.1 million in 2020, a S/ 42.8 million, or 21.4%, increase compared to the previous year. This result was mainly attributable to 82.4% growth in other income, mainly due to strong investment results for the year, partially offset by slightly higher other expenses.

On the commercial front, Inteligo’s prospection process showed good results in terms of new account openings and AUM growth both in Private Wealth Management and Mutual Funds. Accordingly, Inteligo’s AUM increased 14.7% in 2020.

Consequently, Inteligo’s ROAE was 28.0% in 2020, notably higher than the 24.7% reported in 2019.

Wealth Management Segment’s P&L Statement

S/ million							%chg<br><br><br>20/19			%chg<br><br><br>19/18
Interest and similar income	154.1		168.0		163.4			(2.7	)%		9.0	%
Interest and similar expenses	(44.1	)	(61.5	)	(51.7	)		(16.0	)%		39.4	%
Net interest and similar income	110.0		106.5		111.8			4.9	%		(3.2	)%
Impairment loss of loans, net of recoveries	0.8		(0.0	)	(0.0	)		-11.2	%	n.m.
Recovery (loss) due to impairment of financial investments	1.8		(0.7	)	0.7		n.m.			n.m.
Net interest and similar income after impairment loss	112.6		105.8		112.5			6.3	%		(6.0	)%
Fee income from financial services, net	164.2		164.3		164.0			(0.2	)%		0.1	%
Other income	33.2		58.4		106.6			82.4	%		75.8	%
Other expenses	(106.5	)	(123.3	)	(128.0	)		3.8	%		15.8	%
Income before translation result and income tax	203.5		205.3		255.0			24.2	%		0.9	%
Translation result	(0.2	)	1.4		(3.8	)	n.m.			n.m.
Income tax	(5.7	)	(6.4	)	(8.0	)		24.6	%		12.1	%
Profit for the period	197.5		200.3		243.1			21.4	%		1.4	%
ROAE	25.7	%	24.7	%	28.0	%
Efficiency ratio	35.2	%	37.3	%	33.3	%

Inteligo’s net interest and similar income was S/ 111.8 million in 2020, a S/ 5.3 million, or 4.9%, increase compared to 2019. This was mainly explained by incremental dividends received from investments during the year, partially offset by a compression of the net interest margin in the lending business.

Net fee income from financial services was S/ 164.0 million, stable on a YoY basis.

Other income from financial services was S/ 106.6 million, a S/ 48.2 million or 82.4% increase when compared to 2019, mainly attributable to positive mark-to-market valuations on investments.

Other expenses increased S/ 4.7 million, or 3.8% in 2020, mainly explained by incremental salaries and employee benefits, partially contained by expense reduction initiatives implemented following the COVID-19 pandemic breakout in March 2020.

4Q20 Performance

Inteligo’s net profit in 4Q20 was S/ 154.7 million, an increase of S/ 44.2 million QoQ and S/ 85.1 million YoY.

The main driver of the notably positive performance in 4Q20 was the contribution of other income, which accounted for extraordinarily strong gains for the period, mainly associated with positive mark-to-market conditions in Inteligo’s proprietary portfolio. Also in line with the positive portfolio performance, solid growth in net interest and similar income helped further the quarterly result.

From a business development perspective, Inteligo’s prospection process continued to show positive results in terms of new account openings and assets under management growth. Inteligo’s AUM grew 5.6% QoQ and 14.7% YoY as of December 31, 2020.

Consequently, Inteligo’s ROAE was 62.8% in 4Q20, higher than the 53.5% reported in 3Q20 and the 33.6% registered in 4Q19. Furthermore, the efficiency ratio remained at competitive levels.

Wealth Management Segment’s P&L Statement

S/ million							%chg<br><br><br>QoQ			%chg<br><br><br>YoY
Interest and similar income	41.0		37.9		51.1			34.9	%		24.8	%
Interest and similar expenses	(16.3	)	(12.8	)	(10.8	)		(16.3	)%		(33.9	)%
Net interest and similar income	24.7		25.1		40.4			61.1	%		63.4	%
Impairment loss on loans, net of recoveries	0.0		(0.0	)	0.0		n.m.				89.6	%
Recovery (loss) due to impairment of financial investments	(0.0	)	(0.2	)	8.1		n.m.			n.m.
Net interest and similar income after impairment loss	24.7		24.8		48.5			95.2	%		96.2	%
Fee income from financial services, net	47.0		40.1		40.5			1.0	%		(13.9	)%
Other income	30.0		75.2		106.9			42.2	%	n.m.
Other expenses	(33.2	)	(27.3	)	(39.2	)		43.4	%		18.3	%
Income before translation result and income tax	68.6		112.7		156.6			38.9	%	n.m.
Translation result	2.3		(0.2	)	1.9		n.m.				(16.5	)%
Income tax	(1.3	)	(2.1	)	(3.9	)		88.7	%	n.m.
Profit for the period	69.6		110.5		154.7			39.9	%	n.m.
ROAE	33.6	%	53.5	%	62.8	%
Efficiency ratio	32.4	%	19.5	%	20.6	%

ASSETS UNDER MANAGEMENT & DEPOSITS

AUM reached S/ 20,988.8 million in 4Q20, a S/ 1,108.9 million or 5.6% increase QoQ and a S/ 2,695.9 million or 14.7% growth YoY; mostly due to strengthened mark-to-market valuations from the appreciation of client assets and the foreign exchange rate, as well as due to the execution of successful client prospection and conversion strategies throughout the year.

Client deposits were S/ 2,855.5 million in 4Q20, a decrease of S/ 309.4 million or 9.8% QoQ, and S/ 23.0 million or 0.8% YoY. This was mainly related to clients’ higher liquidity needs after the onset of the COVID-19 pandemic.

NET INTEREST AND SIMILAR INCOME

Net interest and similar income

S/ million
Interest and similar income
Due from banks and inter-bank funds	4.0		1.4		1.1		(19.6	)%	(72.6	)%
Financial Investments	18.8		20.8		34.2		64.6	%	81.6	%
Loans	18.2		15.8		15.9		0.5	%	(12.6	)%
Total interest and similar income	41.0		37.9		51.1		34.9	%	24.8	%
Interest and similar expenses
Deposits and obligations	(13.6	)	(11.2	)	(9.8	)	(12.4	)%	(27.7	)%
Due to banks and correspondents	(2.6	)	(1.6	)	(0.9	)	(43.4	)%	(65.7	)%
Total interest and similar expenses	(16.3	)	(12.8	)	(10.8	)	(16.3	)%	(33.9	)%
Net interest and similar income	24.7		25.1		40.4		61.1	%	63.4	%

Inteligo’s net interest and similar income was S/ 40.4 million in 4Q20, a S/ 15.3 million, or 61.1% increase when compared with 3Q20. This was mainly explained by incremental dividends received from investments during the quarter.

Net interest and similar income increased S/ 15.7 million or 63.4% YoY, mainly explained by strong results in Inteligo’s investment portfolio and an increase in interest income generated by a higher average balance of fixed income investments for the period. Nonetheless, there was also an effect related to a net interest margin compression, associated with the lending business.

FEE INCOME FROM FINANCIAL SERVICES

Fee income from financial services, net

S/ million
Income
Brokerage and custody services	3.4		2.2		2.2		1.2	%	(33.0	)%
Funds management	44.0		38.2		38.6		1.1	%	(12.3	)%
Total income	47.4		40.4		40.9		1.1	%	(13.7	)%
Expenses
Brokerage and custody services	(0.3	)	(0.1	)	(0.2	)	10.4	%	(38.0	)%
Others	(0.1	)	(0.2	)	(0.3	)	31.1	%	94.0	%
Total expenses	(0.4	)	(0.3	)	(0.4	)	22.3	%	6.8	%
Fee income from financial services, net	47.0		40.1		40.5		1.0	%	(13.9	)%

Net fee income from financial services was S/ 40.5 million in 4Q20, an increase of S/ 0.4 million, or 1.0% when compared to the previous quarter. Results were relatively stable following unchanged trading volumes and recurring fees from clients.

On a YoY basis, net fee income from financial services decreased S/ 6.5 million, or 13.9%, mainly explained by lower fund management fees due to the partial recomposition of client portfolios from mutual and private equity funds to other asset classes.

OTHER INCOME

Other income

S/ million							%chg<br><br><br>QoQ			%chg<br><br><br>YoY
Net gain on sale of financial investments	(0.2	)	(6.3	)	23.3		n.m.			n.m.
Net trading gain (loss)	32.5		82.8		84.6			2.1	%	n.m.
Other	(2.4	)	(1.4	)	(1.0	)		(24.2	)%		(55.8	)%
Total other income	30.0		75.2		106.9			42.2	%	n.m.

Inteligo’s other income reached S/ 106.9 million in 4Q20, an increase of S/ 31.7 million QoQ and S/ 76.9 million YoY, mainly attributable to the effect of positive mark-to-market valuations on proprietary portfolio investments.

OTHER EXPENSES

Other expenses

S/ million							%chg<br><br><br>QoQ			%chg<br><br><br>YoY
Salaries and employee benefits	(17.8	)	(15.4	)	(24.0	)		56.0	%		34.6	%
Administrative expenses	(10.6	)	(8.6	)	(11.2	)		29.6	%		5.8	%
Depreciation and amortization	(4.6	)	(3.4	)	(3.6	)		5.8	%		(22.2	)%
Other	(0.2	)	0.0		(0.5	)	n.m.			n.m.
Total other expenses	(33.2	)	(27.3	)	(39.2	)		43.4	%		18.3	%
Efficiency ratio	32.4	%	19.5	%	20.6	%

Other expenses reached S/ 39.2 million in 4Q20, an increase of S/ 11.9 million, or 43.4% QoQ, mainly due to the provisioning of variable compensation for the year, as well as to incremental administrative expenses for the quarter after increased operational activity.

On a yearly basis, other expenses increased S/ 6.0 million, or 18.3% YoY, as a result of higher salaries and employee benefits, and administrative expenses. The lower depreciation and amortization for the period partially offset the annual increase in expenses.

Intercorp Financial Services Inc. and Subsidiaries

Interim consolidated financial statements as of December 31, 2020 (unaudited) and 2019 (audited) and for the years then ended

Content

Interim consolidated financial statements

Interim consolidated statement of financial position	3
Interim consolidated statement of income	4
Interim consolidated statement of other comprehensive income	5
Interim consolidated statement of changes in equity	6
Interim consolidated statement of cash flows	7
Notes to the interim consolidated financial statements	9

Interim consolidated statement of financial position

As of December 31, 2020 (unaudited) and 2019 (audited)

	Note		31.12.2020			31.12.2019
			S/(000)			S/(000)
Assets
Cash and due from banks	3(a)
Non-interest bearing				3,397,663			2,704,758
Interest bearing				14,750,135			7,153,180
Restricted funds				617,684			1,270,937
				18,765,482			11,128,875
Inter-bank funds	3(e)			18,105			85,006
Financial investments		4		24,277,115			19,072,718
Loans, net:		5
Loans, net of unearned interest				43,504,274			38,531,632
Impairment allowance for loans				(2,984,851	)		(1,394,779	)
				40,519,423			37,136,853
Investment property		6		1,043,978			972,096
Property, furniture and equipment, net				844,427			950,943
Due from customers on acceptances				16,320			139,685
Intangibles and goodwill, net				1,042,585			979,262
Other accounts receivable and other assets, net		7		1,355,029			1,051,872
Deferred Income Tax asset, net				353,565			44,983
Total assets				88,236,029			71,562,293
Liabilities and equity
Deposits and obligations		8
Non-interest bearing				9,354,487			5,644,238
Interest bearing				37,794,788			32,448,986
				47,149,275			38,093,224
Inter-bank funds	3(e)			28,971			169,138
Due to banks and correspondents		9		9,660,877			3,979,637
Bonds, notes and other obligations		10		7,778,751			6,890,290
Due from customers on acceptances				16,320			139,685
Insurance contract liabilities		11		12,501,723			11,426,631
Other accounts payable, provisions and other liabilities		7		2,146,152			1,960,227
Deferred Income Tax liability, net				11			13
Total liabilities				79,282,080			62,658,845
Equity, net		12
Equity attributable to IFS’s shareholders:
Capital stock				1,038,017			1,038,017
Treasury stock				(2,769	)		(196	)
Capital surplus				532,771			530,456
Reserves				5,200,000			4,700,000
Unrealized results, net				836,773			442,905
Retained earnings				1,303,317			2,145,688
				8,908,109			8,856,870
Non-controlling interest				45,840			46,578
Total equity, net				8,953,949			8,903,448
Total liabilities and equity, net				88,236,029			71,562,293

The accompanying notes are an integral part of these interim consolidated financial statements.

Interim consolidated statement of income

For the years ended December 31, 2020 (unaudited) and 2019 (audited)

	Note		31.12.2020			31.12.2019
			S/(000)			S/(000)
Interest and similar income		14		4,799,343			4,847,216
One-off impact from the modification of contractual cash flows due to the loan rescheduling schemes		14		(134,376	)		—
Interest and similar expenses		14		(1,192,284	)		(1,423,963	)
Net interest and similar income				3,472,683			3,423,253
Impairment loss on loans, net of recoveries	5(d)			(2,393,944	)		(750,811	)
Impairment loss on financial investments	4(b.1)			(32,904	)		(6,790	)
Net interest and similar income after impairment loss				1,045,835			2,665,652
Fee income from financial services, net		15		723,500			925,885
Net gain on foreign exchange transactions				318,422			201,352
Net gain on sale of financial investments				185,383			112,215
Net gain from reduction of financial assets at amortized cost	4(c)			—			8,474
Net gain on financial assets at fair value through profit or loss				165,883			103,210
Net gain on investment property	6(b)			44,929			96,168
Other income		16		62,117			70,660
				1,500,234			1,517,964
Insurance premiums and claims	17
Net premiums earned				514,981			420,633
Net claims and benefits incurred for life insurance contracts and others				(794,051	)		(700,264	)
				(279,070	)		(279,631	)
Other expenses
Salaries and employee benefits				(749,246	)		(798,774	)
Administrative expenses				(748,617	)		(786,362	)
Depreciation and amortization				(268,750	)		(262,015	)
Other expenses		16		(144,047	)		(131,163	)
				(1,910,660	)		(1,978,314	)
Income before translation result and Income Tax				356,339			1,925,671
Translation result				(45,723	)		17,770
Income Tax	13(e)			72,933			(493,326	)
Net profit for the year				383,549			1,450,115
Attributable to:
IFS’s shareholders				383,259			1,441,258
Non-controlling interests				290			8,857
				383,549			1,450,115
Earnings per share attributable to IFS’s shareholders basic and diluted (stated in Soles)		18		3.320			12.778
Weighted average number of outstanding shares (in thousands)		18		115,447			112,789

The accompanying notes are an integral part of these interim consolidated financial statements.

Interim consolidated statement of other comprehensive income

For the years ended December 31, 2020 (unaudited) and 2019 (audited)

	31.12.2020			31.12.2019
	S/(000)			S/(000)
Net profit for the year		383,549			1,450,115
Other comprehensive income that will not be reclassified to the consolidated statement of income in subsequent periods:
Gains on equity instruments at fair value through other comprehensive income		32,294			116,672
Income Tax		—			219
Total unrealized gain that will not be reclassified to the consolidated statement of income		32,294			116,891
Other comprehensive income to be reclassified to the consolidated statement of income in subsequent periods:
Net variation of debt instruments at fair value through other comprehensive income		635,705			1,263,135
Income Tax		(2,679	)		7,878
		633,026			1,271,013
Insurance premiums reserve		(332,536	)		(1,001,073	)
Net variation of cash flow hedges		(17,968	)		(63,938	)
Income Tax		3,559			13,052
		(14,409	)		(50,886	)
Translation of foreign operations		76,935			(14,507	)
Total unrealized gain to be reclassified to the consolidated statement of income in subsequent periods		363,016			204,547
Total other comprehensive (loss) income for the period, net of Income Tax		778,859			1,771,553
Attributable to:
IFS’s shareholders		777,127			1,762,477
Non-controlling interests		1,732			9,076
		778,859			1,771,553

The accompanying notes are an integral part of these interim consolidated financial statements.

Interim consolidated statement of changes in equity

For the years ended December 31, 2020 (unaudited) and 2019 (audited)

													Attributable to IFS’s shareholders
																	Unrealized results
	Number of shares<br><br><br>(in thousands)														Instruments that will not be reclassified to the consolidated statement of income		Instruments that will be reclassified to the consolidated statement of income
	Issued		In treasury			Capital<br><br><br>stock		Treasury<br><br><br>stock			Capital<br><br><br>surplus		Reserves		Equity instruments at fair value		Debt instruments at fair value			Insurance premiums reserves			Cash flow hedges reserve			Foreign currency translation reserve			Retained earnings			Total			Non-controlling interests			Total equity, net
						S/(000)		S/(000)			S/(000)		S/(000)		S/(000)		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Balances as of January 1, 2019		113,110		(2,418	)		963,446		(208,178	)		268,077		4,700,000		147,554		(232,337	)		75,575			27,911			102,983			1,203,043			7,048,074			40,402			7,088,476
Net profit for the period		—		—			—		—			—		—		—		—			—			—			—			1,441,258			1,441,258			8,857			1,450,115
Other comprehensive income		—		—			—		—			—		—		117,329		1,268,496			(999,430	)		(50,669	)		(14,507	)		—			321,219			219			321,438
Total other comprehensive income		—		—			—		—			—		—		117,329		1,268,496			(999,430	)		(50,669	)		(14,507	)		1,441,258			1,762,477			9,076			1,771,553
Initial Public Offering, Note 1(c)		2,337		2,418			74,571		208,178			262,379		—		—		—			—			—			—			138,997			684,125			814			684,939
Declared and paid dividends, Note 12(a)		—		—			—		—			—		—		—		—			—			—			—			(654,464	)		(654,464	)		—			(654,464	)
Purchase of treasury stock, Note 12(b)		—		(1	)		—		(196	)		—		—		—		—			—			—			—			—			(196	)		—			(196	)
Dividends paid to non-controlling interests of Subsidiaries		—		—			—		—			—		—		—		—			—			—			—			—			—			(3,654	)		(3,654	)
Dividends received by Subsidiaries on treasury stock		—		—			—		—			—		—		—		—			—			—			—			11,422			11,422			80			11,502
Sale of equity instruments at fair value through other comprehensive income		—		—			—		—			—		—		—		—			—			—			—			1,077			1,077			2			1,079
Others		—		—			—		—			—		—		—		—			—			—			—			4,355			4,355			(142	)		4,213
Balance as of December 31, 2019		115,447		(1	)		1,038,017		(196	)		530,456		4,700,000		264,883		1,036,159			(923,855	)		(22,758	)		88,476			2,145,688			8,856,870			46,578			8,903,448
Net profit for the period		—		—			—		—			—		—		—		—			—			—			—			383,259			383,259			290			383,549
Other comprehensive income		—		—			—		—			—		—		32,329		630,944			(331,990	)		(14,350	)		76,935			—			393,868			1,442			395,310
Total other comprehensive income		—		—			—		—			—		—		32,329		630,944			(331,990	)		(14,350	)		76,935			383,259			777,127			1,732			778,859
Declared and paid dividends, Note 12(a)		—		—			—		—			—		—		—		—			—			—			—			(698,228	)		(698,228	)		—			(698,228	)
Sale of treasury stock, Note 12(b)		—		(23	)		—		(2,573	)		—		—		—		—			—			—			—			—			(2,573	)		—			(2,573	)
Transfer from retained earnings to reserves, Note 12(d)		—		—			—		—			—		500,000		—		—			—			—			—			(500,000	)		—			—			—
Dividends paid to non-controlling interest of Subsidiaries		—		—			—		—			—		—		—		—			—			—			—			—			—			(2,432	)		(2,432	)
Sale of equity instruments at fair value through other comprehensive income		—		—			—		—			—		—		—		—			—			—			—			(24,154	)		(24,154	)		40			(24,114	)
Others		—		—			—		—			2,315		—		—		—			—			—			—			(3,248	)		(933	)		(78	)		(1,011	)
Balance as of December 31, 2020		115,447		(24	)		1,038,017		(2,769	)		532,771		5,200,000		297,212		1,667,103			(1,255,845	)		(37,108	)		165,411			1,303,317			8,908,109			45,840			8,953,949

The accompanying notes are an integral part of these interim consolidated financial statements.

Interim consolidated statement of cash flows

For the years ended December 31, 2020 (unaudited) and 2019 (audited)

	31.12.2020			31.12.2019
	S/(000)			S/(000)
Cash flows from operating activities
Net profit for the year		383,549			1,450,115
Plus (minus) adjustments to net profit
Impairment loss on loans, net of recoveries		2,393,944			750,811
Impairment loss of financial investments		32,904			6,790
Depreciation and amortization		268,750			262,015
Sundry provisions		4,918			3,872
Provision for asset seized		—			355
Deferred Income Tax		(114,945	)		38,554
Net gain on sale of financial investments		(185,383	)		(112,215	)
Net gain from reduction of financial assets at amortized cost		—			(8,474	)
Gain loss of financial assets at fair value through profit or loss		(165,883	)		(103,210	)
Net gain for valuation of investment property		(5,438	)		(54,493	)
Translation result		45,723			(17,770	)
Net loss on sale of investment property		—			7,164
(Increase) decrease in accrued interest receivable		(207,474	)		3,222
(Decrease) increase in accrued interest payable		(13,692	)		48,307
Net changes in assets and liabilities
Net increase in loans		(5,706,700	)		(4,938,144	)
Increase in other accounts receivable and other assets		(319,718	)		(262,882	)
Net decrease in restricted funds		620,292			15,240
Increase in deposits and obligations		9,138,664			4,373,366
Increase (decrease) in due to banks and correspondents		5,672,189			(320,775	)
Increase in other accounts payable, provisions and other liabilities		526,011			841,334
Increase of investments at fair value through profit or loss		(153,124	)		(314,418	)
Net cash provided by operating activities		12,214,587			1,668,764

The accompanying notes are an integral part of these interim consolidated financial statements.

Interim consolidated statements of cash flows (continued)

	31.12.2020			31.12.2019
	S/(000)			S/(000)
Cash flows from investing activities
Net sale (purchase) of financial investments		(3,737,749	)		145,888
Purchase of property, furniture and equipment		(52,371	)		(68,185	)
Purchase of intangible assets		(198,918	)		(142,539	)
Purchase of investment property		(61,243	)		(60,865	)
Sale of investment property		—			129,800
Net cash (used in) provided by investing activities		(4,050,281	)		4,099
Cash flows from financing activities
Dividends paid		(698,228	)		(654,464	)
Net increase of bonds, notes and other obligations		1,069,243			576,947
Net decrease in receivable inter-bank funds		66,901			410,031
Net (decrease) increase in payable inter-bank funds		(140,167	)		169,138
Initial Public Offering, net of related expenses, Note 1(c)		—			684,125
Purchase of treasury stock		(2,573	)		(196	)
Dividend payments to non-controlling interests		(2,432	)		(3,245	)
Lease payments		(89,162	)		(117,463	)
Net cash provided by financing activities		203,582			1,064,873
Net increase in cash and cash equivalents		8,367,888			2,737,736
Translation (loss) gain on cash and cash equivalents		(73,698	)		26,931
Cash and cash equivalents at the beginning of the year		9,851,729			7,087,062
Cash and cash equivalents at the end of the year		18,145,919			9,851,729

The accompanying notes are an integral part of these interim consolidated financial statements.

Notes to the interim consolidated financial statements

As of December 31, 2020 (unaudited) and December 31, 2019 (audited)

1.	Business activity and other relevant events
(a)	Business activity -
---	---

Intercorp Financial Services Inc. and Subsidiaries (henceforth "IFS", “the Company” or “the Group”), is a limited liability holding company incorporated in the Republic of Panama on September 19, 2006, and is a Subsidiary of Intercorp Perú Ltd. (henceforth “Intercorp Perú”), a holding Company incorporated in 1997 in the Commonwealth of the Bahamas. As of December 31, 2020 and December 31, 2019, Intercorp Perú holds directly and indirectly 70.64 and 70.62 percent of the issuead and outstanding capital stock of IFS, respectively.

IFS’s legal domicile is located at Av. Carlos Villarán 140 Urb. Santa Catalina, La Victoria, Lima, Peru.

As of December 31, 2020 and 2019, IFS holds 99.30 percent of the capital stock of Banco Internacional del Perú S.A.A. – Interbank (henceforth “Interbank”), 99.84 percent of the capital stock of Interseguro Compañía de Seguros S.A. (henceforth “Interseguro”) and 100 percent of the capital stock of Inteligo Group Corp. (henceforth “Inteligo”).

The operations of Interbank and Interseguro are concentrated in Peru, while the operations of Inteligo and its Subsidiaries (Interfondos S.A. Sociedad Administradora de Fondos, Inteligo Sociedad Agente de Bolsa S.A. and Inteligo Bank Ltd.) are mainly concentrated in Peru and Panama.

The interim consolidated financial statements as of December 31, 2020 have been authorized by Management and the Audit Committee on February 10, 2021 and approved by the Board of Directors held on February 11, 2021. The audited consolidated financial statement of IFS and Subsidiaries as of December 31, 2019, were approved by the General Shareholders’ Meeting held on April 7, 2020.

(b)Global pandemic Covid-19 –

b.1)National State of Emergency

In December 2019, a new coronavirus strain (Covid-19) was identified in Wuhan, China; it was later declared a global pandemic by the World Health Organization, which has resulted in trade and circulation restrictions. In Peru, in March 2020, the Government declared a National State of Emergency ordering the closing of the borders, compulsory social confinement, the lockdown of businesses deemed non-essential (exceptions were production, distribution and commercialization of food and pharmaceuticals, financial services and healthcare), among others.

Subsequently, in May 2020, through Supreme Decree No. 080-2020, the government approved the gradual reopening of economic activities in order to mitigate the economic effects of the pandemic. The proposed reactivation would be in four phases based on the impact of each sector on the economy, being mining, construction, services and tourism and commerce the first ones to reopen, followed by manufacturing and agriculture. The fourth phase had considered the reopening of the entertainment sector with reduced capacity.

Notwithstanding the aforementioned, due to the increase in the number of infections nationwide, through Supreme Decree No. 008-2021, dated January 27, 2021, the Peruvian Government extended the extension of the National State of Emergency until February 28, 2021 with measures targeted by region in the areas of health care and traffic restrictions.

b.2)Economic measures adopted by the Peruvian Government

Within this context, the Ministry of Economy and Finance (henceforth “MEF”), the Central Reserve Bank of Peru (henceforth “BCRP”) and the Superintendence of Banking and Insurance (henceforth “SBS”), activated extraordinary measures aimed to alleviate the financial and economic impact of Covid-19, in

The main measures implemented in the financial system are related to facilities for loan rescheduling (payment deferrals), suspension of counting of past due days, partial withdrawal of severance indemnities and launching of credit programs guaranteed by the Peruvian Government, such as “Reactiva Perú”, created through Legislative Decree No. 1455-2020 to secure the continuity of the payment chain in the face of Covid-19’s impact.

Said program grants guarantees to companies in order for them to obtain working capital loans and thus comply with their short-term obligations with their workers and suppliers of goods and services. This program manages guarantees amounting to S/30,000 million.

As of December 31, 2020, Interbank holds loans of the “Reactiva Perú” program for approximately S/6,616,518,000, out of which S/5,855,826,000 are covered by the Peruvian Government; see Notes 5 and 9.

b.3)Measures adopted by the Company and Subsidiaries

IFS’s Management monitors closely the situation and focuses in securing the operation and enhance the liquidity and solvency positions of the Subsidiaries. Regarding liquidity, Interbank has maintained an active participation in the BCRP’s daily operations and has used available credit lines from correspondent banks abroad. Likewise, with the purpose of strengthening its capital and regulatory capital requirements to face the volatile environment, the Subsidiaries implemented the following measures:

-	In Shareholders’ Meeting held on April 3, 2020, Interbank approved the reduction in the percentage of distributable dividends, from 45 to 25 percent. In addition, the net profit generated in the first quarter of 2020 also has a capitalization agreement.
-	On June 30, 2020, Interbank placed subordinated bonds for US$300,000,000, as explained in Note 10.
---	---
-	In Board’s Session held on June 30, 2020, Interseguro committed to the capitalization of S/50,000,000 with charge to the period’s net profit.
---	---
-	On September 30, 2020, Interseguro placed subordinated bonds for US$25,000,000, as explained in Note 10.
---	---
-	In Shareholders’ Meeting held on December 24, 2020, Interseguro committed to the capitalization of S/48,148,148 with charge to the retained earnings.
---	---
(c)	Initial Public Offering –
---	---

On July 3, 2019, the Board of IFS approved the filing with the Securities and Exchange Commission of the United States of America (henceforth “SEC”), of a Registration Statement under Form F-1 of the Securities Exchange Act of 1933 of the United States of America, in relation with a proposal of an Initial Public Offering (henceforth “Offering”) of IFS’s common shares.

On July 18, 2019, IFS announced the placement of the Offering for approximately 9,000,000 common shares at a price of US$46.00 per common share. The sale was performed by (i) IFS, (ii) Interbank, (iii) Intercorp Peru; and (iv) a non-related shareholder. Additionally, IFS granted the Offering placers a 30-day call option to buy up to 1,350,000 new common shares, as an additional initial issuance.

As result of said Offering, IFS sold 2,418,754 common shares held as treasury stock (including shares sold by Interbank), as well as approximately 1,150,000 new common shares to be issued. Intercorp Peru sold 2,531,246 shares, and the non-related shareholder sold 3,000,000 shares. Additionally, the placers exercised the call option regarding 1,186,841 new common shares.

In this sense, IFS and Subsidiaries combined, sold, 4,755,595 shares at US$46.00 per share. The sale value amounted to approximately US$218,757,000 (before issuance expenses).

The total impact of the Offering on the Company’s net equity, after discounting the issuance expenses, amounted to S/684,125,000 (approximately US$208,384,000), mainly explained by:

(i)	Issuance of 2,336,841 shares, for an amount of S/336,950,000, out of which S/74,571,000 correspond to capital stock and S/262,379,000 to capital surplus (net of issuance expenses for S/15,957,000).
(ii)	Sale of 2,418,754 share held as treasury stock, including shares sold by Interbank, for a total amount of S/347,175,000, which were recorded in captions “Treasury stock” and “Retained earnings”, see Note 12(b).
---	---
(d)	Subsidiaries Activities –
---	---

IFS’s Subsidiaries are the following:

(a)Banco Internacional del Perú S.A.A. - Interbank and Subsidiaries -

Interbank is incorporated in Peru and is authorized by the Superintendence of Banking, Insurance and Private Pension Funds (henceforth “SBS”, by its Spanish acronym) to operate as a universal bank in accordance with Peruvian legislation. The Bank's operations are governed by the General Act of the Banking and Insurance System and Organic Act of the SBS – Act No. 26702 (henceforth “the Banking and Insurance Act”), that establishes the requirements, rights, obligations, restrictions and other operating conditions that financial and insurance entities must comply with in Peru.

As of December 31, 2020, and 2019, Interbank had 215 and 255 offices, respectively, and a branch established in the Republic of Panama. Regarding said branch, on April 23, 2019, Interbank’s Board approved its voluntary closing. On October 1, 2020, the Superintendency of Banks of Panama issued Resolution SBP-0115-2020 through which it cancelled the international banking license it had granted Interbank to operate in the Republic of Panama.

Additionally, it holds approximately 100 percent of the shares of the following Subsidiaries:

Entity	Activity
Internacional de Títulos Sociedad Titulizadora S.A. - Intertítulos S.T.	Manages securitization funds.
Compañía de Servicios Conexos Expressnet S.A.C.	Services related to credit card transactions or products related to the brand “American Express”.
Inversiones Huancavelica S.A.	Real estate activities. This entity was absorbed by Banco Internacional del Perú S.A.A.through a process of merging by absorption, which was authorized by the SBS in September 2019.
Contacto Servicios Integrales de Créditos y Cobranzas S.A.	Collection services. This entity was absorbed by Banco Internacional del Perú S.A.A.through a process of merging by absorption, which was authorized by the SBS in September 2019.

(b)Interseguro Compañía de Seguros S.A. and Subsidiary -

Interseguro is incorporated in Peru and its operations are governed by the Banking and Insurance Act. It is authorized by the SBS to issue life and general risk insurance contracts. As of December 31, 2020 and 2019, Interseguro participates in:

Patrimonio Fideicometido D.S.093-2002-EF, Interproperties Perú -

Interseguro holds participations in Patrimonio Fideicometido D.S.093-2002-EF, Interproperties Perú (henceforth “Patrimonio Fideicometido – Interproperties Perú”), structured entity, incorporated in April 2008, in which several investors (related parties to the Group) contributed investment properties. Each investor or investors have ownership of and specific control over the contributed investment property. The fair values of the properties contributed by Interseguro, which were included in this structured entity as of December 31, 2020 and 2019, amounted to S/118,892,000 and S/114,058,000, respectively. For accounting purposes and under IFRS 10 “Consolidated Financial Statements” the assets included in said structure are considered “silos”, because they are ring-fenced parts of the wider structured entity (the Patrimonio Fideicometido - Interproperties Perú). IFS has ownership and decision-making power over these properties and IFS has the exposure or rights to their returns; therefore, IFS consolidates the silos containing the investment properties that it controls.

(c)Inteligo Group Corp. and Subsidiaries -

Inteligo is an entity incorporated in the Republic of Panama. As of December 31, 2020 and 2019, it holds 100 percent of the shares of the following Subsidiaries:

Entity	Activity
Inteligo Bank Ltd.	It is incorporated in The Commonwealth of the Bahamas and has a branch established in the Republic of Panama that operates under an international license issued by the Superintendence of Banks of the Republic of Panama. Its main activity is to provide private and institutional banking services, mainly to Peruvian citizens.
Inteligo Sociedad Agente de Bolsa S.A.	Brokerage firm incorporated in Peru.
Inteligo Perú Holding S.A.C.	Financial holding company incorporated in Peru in December 2018. As of December 31, 2020 and 2019, it holds 99.99 percent interest in Interfondos S.A. Sociedad Administradora de Fondos, company that manages mutual funds and investment funds.
Inteligo USA, Inc.	Incorporated in the United States of America in January 2019. It provides investment consultancy and related services.

(d)Negocios e Inmuebles S.A. and Holding Retail Perú S.A. -

These entities were acquired by IFS as part of the purchase of Seguros Sura and Hipotecaria Sura, in 2017. As of December 31 2020 and 2019, as a result of the merger between Interseguro and Seguros Sura, both companies hold 8.50 percent of Interseguro’s capital stock.

(e)San Borja Global Opportunities S.A.C. -

Its corporate purpose is the marketing of products and services through Internet, telephony or related and it operates under its trading name, Shopstar, (marketplace online) dedicated to the sale of products from different stores.

(f)IFS Digital S.A.C. -

Incorporated in August 2020,its main purpose is to carry out all kinds of investments and related services.

(g)Hipotecaria Sura Empresa Administradora Hipotecaria S.A. -

Company dedicated to granting mortgage loans and acquired as part of the acquisition of the Sura Group in 2017. Since 2015 it has not granted loans and was extinguised as of December 31, 2019.

2.	Main accounting principles and practices

2.1Basis of presentation and use of estimates –

The interim consolidated financial statements as of December 31, 2020 and 2019 and for the nine-months period ended December 31, 2020 and 2019, have been prepared in accordance with IAS 34 “Interim Financial Reporting”.

The interim consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the Group’s consolidated audited financial statements as of December 31, 2020 and 2019 (henceforth “Annual Consolidated Financial Statements”).

The accompanying interim consolidated financial statements have been prepared on a historical cost basis, except for investment property, derivative financial instruments, financial investments at fair value through profit or loss and through other comprehensive income, which have been measured at fair value. The interim consolidated financial statements are presented in Soles, which is the functional currency of the Group, and all values are rounded to the nearest thousand (S/(000)), except when otherwise indicated.

The preparation of the interim consolidated financial statements, in accordance with the International Financial Reporting Standards (henceforth “IFRS”) as issued by the International Accounting Standards Board (IASB), requires Management to make estimations and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of significant events in the notes to the interim consolidated financial statements.

In that sense, the estimates and criteria are continually assessed and are based on historical experience, as well as other factors, including expectations of future events that are believed to be reasonable under the current circumstances. Existing circumstances and assumptions about future developments, however, may change due to markets’ behavior or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Actual results could differ from those estimates. The most significant estimates comprised in the accompanying interim consolidated financial statements are related to the calculation of the impairment of the portfolio of loan and financial investments, the measurement of the fair value of the financial investments and investment property, the assessment of the impairment of goodwill, the liabilities for insurance contracts and measurement of the fair value of derivative financial instruments; also, there are other estimates such as the estimated useful life of intangible assets, property, furniture and equipment, and the estimation of deferred Income Tax.

2.2Basis of consolidation –

The interim consolidated financial statements of IFS comprise the financial statements of Intercorp Financial Services Inc. and Subsidiaries. The method adopted by IFS to consolidate information with its Subsidiaries is described in Note 3.3 to the Annual Consolidated Financial Statements.

2.3Regulations issued by the SBS –

As indicated in Note 1(b), with the purpose of facilitating the payment of debt of the clients of the financial entities affected by the outbreak of Covid-19, the SBS issued the following Multiple Official Letters:

2.3.1 Regulations related to loan portfolio

(a)	Multiple Official Letters No.10997-2020-SBS, No.11150-2020-SBS, No.11170-2020-SBS and No.13195-2020-SBS issued on March 13, 2020, March 16, 2020, March 20, 2020, and May 19, 2020, respectively. Through these Multiple Official Letters, the SBS established the following exceptional measures applicable to loan portfolio, with the purpose of facilitating the debt payment of clients of the financial entities affected by the outbreak of covid-19.
- The financial system entities are enabled to modify the contractual conditions of loans without presenting them as refinanced provided that the entire term is not extended for more than six months from the original term. Also, debtors must have a maximum past due of 15 days as of February 29, 2020.
---
-In the case of loans to retail clients with modified contractual conditions, the associated interest can continue to be recognized on an accrual basis. However, if the debtor changes its situation to past due after the establishment of new loan terms, the financial entity must reverse the cumulative interest of said loan, proportionally, in a six-month period.
---
-For loans to non-retail clients with modified contractual conditions, the associated interest must be recognized by the cash flow method. Cumulative and not collected interest related to these loans must be reversed starting on the modification date, of the contractual conditions.
---
-For debtors with past due loans of more than 15 days as of February 29, 2020, the calculation of past due days will be suspended during the National lockdown.
---
-If a debtor presents past due payments after the contractual modifications, said loan will be deemed as refinanced loan, following the general criteria of the current regulation.
---
-According to Multiple Official Letter No.11150-2020-SBS, the scope of the aforementioned facilities shall be determined by each entity of the financial system, after analyzing the level of impact in their respective loan portfolio.
---
-Financial entities are able to record, as preventive and responsible manner, necessary voluntary provisions that allow them to deal with risk increasing in the loan portfolio, at the moment they materialize.
---
(b)	Multiple Official Letter No.13805-2020-SBS, issued on May 29, 2020
---	---

The main amendments to the existing regulations were the following:

(i)	Financial entities can unilaterally reprogram loans until June 30, 2020, provided the compliance of certain criteria included in said Multiple Official Letter.
(ii)	The loan rescheduling term ranges from 6 to 12 months with respect to the original term.
---	---
(iii)	For contractual modifications made since the date of the regulation, and only for purposes of the National lockdown, the debt shall be deemed as current if it is past due for a maximum of 30 calendar days.
---	---
(iv)	The suspension of counting of past due days, applicable to past due loans of more than 15 days as of February 29, 2020, shall be effective for the duration of the National lockdown, as well as the accounting situation of said loans. Also, in the case of loans that as of February 29, 2020, have been past due between 15 and 60 days, said suspension shall be effective until the end of the month following that of the lifting of the National lockdown.
---	---
(c)	Multiple Official Letter No. 15994-2020-SBS, issued on July 2, 2020
---	---
The main clarifications to the existing regulations were the following:
---
(i)	The suspension of counting of past-due days, applicable to loans with more than 15 calendar days past due, as of February 29, 2020, as well as the accounting situation of said loans, shall be maintained only until July 31, 2020.
---	---
(ii)	Regarding the report of the past-due days of loans that were subject to suspension of past-due days counting, at the closing of each month it must be reported the lowest number of past-due days resulting from the comparison between: (i) the actual past-due days of the loan at the closing of each reporting month; and (ii) the past-due days frozen as of February 29, 2020, plus the calendar days that have passed since August 1, 2020, until the closing of the reporting month.
---	---
(iii)	If as result of the enforcement of the provision in the previous paragraph the debtor improves its classification and, therefore, cuts down its provision requirements, the released provisions must be reassigned to the constitution of other mandatory provisions or, otherwise, as voluntary provisions.
---	---

In application of the regulations issued by the SBS and summarized in previous paragraphs, Interbank has reprogramed loans for approximately S/10,489 million and has modified their respective payment schedules. Thus, the present value of the loans has decreased by S/134 million, which are presented by reducing the interest income of the loan portfolio; see Note 14.

2.3.2 Resolution No.1264-2020-SBS, issued on March 26, 2020

This Resolution establishes that in the modifications of the contractual conditions indicated in the Multiple Official Letters mentioned in Note 2.3.1, it shall not increase the regulatory capital requirement for the non-revolving consumer loans and mortgage loans. Likewise, said Resolution authorizes the financial entities to use the additional regulatory capital for the component of the economic cycle.

2.3.3 Repurchase agreements of loan portfolio represented by securities

On April 3, 2020, the BCRP issued the Circular Letter No.0014-2020-BCRP, which establishes the characteristics and procedures of the repurchase agreements of loan portfolio guaranteed by the Peruvian Government. At the selling date, the bank receives the domestic currency (sale amount) and, at the same operation, is obliged to repurchase said portfolio (repurchase amount). The BCRP shall disburse 80 percent of the funds in the bank’s current account it holds at the BCRP and the remaining part in a restricted account also held by the bank at the BCRP.

2.4Reclassifications on financial statements as of December 31, 2019 –

In 2020, following an analysis on the nature of the products “Renta Particular Plus” and “Renta Particular Plus - Vitalicio”, the Company’s Management decided to perform some accounting reclassifications with the purpose of better reflecting the characteristics of said products. In the case of the product “Renta Particular Plus”, whose majority of contracts (policies) have an important financial component, it decided to record them as financial products, with the exception of the product “Renta Particular Plus - Vitalicio”, which has a significant insurance component and, therefore, is presented as insurance product according to IFRS 4.

In this sense, the balances were reclassified from “Other accounts payable, provisions and other liabilities” into the caption “Insurance contracts liabilities” of the consolidated statement of financial position, and from the captions “Net premiums earned” and “Net claims incurred for life insurance and others” into the caption “Interest and similar expenses” of the consolidated statement of income. Likewise, with the purpose of making comparable the consolidated financial statements, the balances of previous periods were modified, as presented below:

	Before reclassification			Reclassification			After reclassification
Year 2019	S/(000)			S/(000)			S/(000)
Consolidated statement of financial position
Insurance contract liabilities		11,338,810			87,821			11,426,631
Other accounts payable, provisions and other liabilities		2,048,048			(87,821	)		1,960,227
Total		13,386,858			—			13,386,858
Consolidated statement of income
Interest and similar expenses		(1,407,897	)		(16,066	)		(1,423,963	)
Net premiums earned		426,608			(5,975	)		420,633
Net claims and benefits incurred for life insurance contracts and others		(722,305	)		22,041			(700,264	)
Total		(1,703,594	)		—			(1,703,594	)
3.	Cash and due from banks and inter-bank funds
---	---
(a)	The detail of cash and due from banks is as follows:
---	---
	31.12.2020		31.12.2019
---	---	---	---	---
	S/(000)		S/(000)
Cash and clearing (b)		2,152,432		1,877,843
Deposits in the Central Reserve Bank of Peru – BCRP (b)		14,102,067		5,861,570
Deposits in banks (c)		1,891,420		2,112,316
Accrued interest		1,879		6,209
		18,147,798		9,857,938
Restricted funds (d)		617,684		1,270,937
Total		18,765,482		11,128,875
(b)	In accordance with rules in force, Interbank is required to maintain a legal reserve in order to honor its obligations with the public. This reserve is comprised of funds kept in Interbank and in the BCRP.
---	---

The legal reserve funds maintained in the BCRP are non-interest bearing, except for the part that exceeds the minimum reserve required that accrued interest at an annual rate established by the BCRP. As of December 31, 2020, the excess in foreign currency accrued interest in US Dollars at 0.01 percent (1.25 percent as of December 31, 2019).

In Management’s opinion, Interbank has complied with the requirements established by the rules in force related to the computation of the legal reserve.

(c)	Deposits in domestic banks and abroad are mainly in Soles and US Dollars, they are freely available and accrue interest at market rates.
(d)	The Group maintains restricted funds related to:
---	---
	31.12.2020		31.12.2019
---	---	---	---	---
	S/(000)		S/(000)
Repurchase agreements with BCRP (*)		542,922		1,208,506
Derivative financial instruments		70,559		57,816
Others		4,203		4,615
Total		617,684		1,270,937
(*)	As of December 31, 2020, corresponds to deposits maintained in the BCRP which guarantee agreements amounting to S/520,000,000 (guaranteed agreements amounting to S/1,205,200,000 as of December 31, 2019); see Note 9(b).
---	---

Cash and cash equivalents presented in the interim consolidated statement of cash flows do not include the restricted funds and accrued interest.

(e)	Inter-bank funds
Corresponds to loans made among financial institutions with maturity, in general, being less than 30 days. As of December 31, 2020, Inter-bank funds assets accrue interest at an annual rate of 0.25 percent in foreign currency (annual rate of 2.26 percent in national currency, as of December 31, 2019) and Inter-bank funds liabilities accrue interest at an
---
annual rate of 0.25 percent in foreign currency (annual rate of 2.25 percent in national currency and 1.75 percent in foreign currency, as of December 31, 2019) and do not have specific guarantees.
---
4.	Financial investments
---	---
(a)	This caption is made up as follows:
---	---
	31.12.2020		31.12.2019
---	---	---	---	---
	S/(000)		S/(000)
Financial investments
Debt instruments measured at fair value through other comprehensive income (b)		17,902,352		14,010,029
Investments at amortized cost (c)		2,650,930		2,160,775
Investments at fair value through profit or loss (d)		2,042,777		1,551,537
Equity instruments measured at fair value through other comprehensive income (e)		1,373,548		1,125,722
Total financial investments		23,969,607		18,848,063
Accrued income
On debt instruments measured at fair value through other comprehensive income (b)		251,140		178,444
On investments at amortized cost (c)		56,368		46,211
Total		24,277,115		19,072,718
(b)	Following is the detail of debt instruments measured at fair value through other comprehensive income:
---	---
			Unrealized gross amount								Annual effective interest rate
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Amortized							Estimated			S/					US
	cost		Gain		Loss (c)			fair value		Maturity	Min			Max		Min	Max
	S/(000)		S/(000)		S/(000)			S/(000)			%			%		%	%
As of December 31, 2020
Corporate, leasing and subordinated bonds (*)		8,031,775		1,046,789		(121,797	)		8,956,767	Mar-21 / Feb-97		(0.73	)		13.33			10.73
Peruvian Sovereign Bonds		5,765,074		589,423		(154	)		6,354,343	Aug-24 / Feb-55		0.15			6.13			—
Negotiable Certificates of Deposit issued by BCRP		1,279,644		4,087		(5	)		1,283,726	Jan-21 / Mar-23		0.25			2.28			—
Bonds guaranteed by the Peruvian Government		566,915		79,762		—			646,677	Oct-24 / Jul-34		0.58			2.61			4.24
Global Bonds of the Republic of Peru		491,791		9,189		—			500,980	Jul-25 / Dec-32		—			—			1.79
Global Bonds of the Republic of Colombia		157,405		2,454		—			159,859	Jul-21 / Feb-24		—			—			1.38
Total		16,292,604		1,731,704		(121,956	)		17,902,352
Accrued interest									251,140
Total									18,153,492
			Unrealized gross amount								Annual effective interest rate
	Amortized							Estimated			S/					US
	cost		Gain		Loss (c)			fair value		Maturity	Min			Max		Min	Max
	S/(000)		S/(000)		S/(000)			S/(000)			%			%		%	%
As of December 31, 2019
Corporate, leasing and subordinated bonds (*)		7,562,985		648,601		(12,300	)		8,199,286	Jan-20 / Jan-114		0.71			21.76			10.73
Peruvian Sovereign Bonds		3,213,581		330,856		(242	)		3,544,195	Aug-24 / Feb-55		1.59			5.31			—
Negotiable Certificates of Deposit issued by BCRP		1,481,962		1,533		(2	)		1,483,493	Jan-20 / Jun-21		2.15			3.04			—
Bonds guaranteed by the Peruvian Government		626,087		42,153		(167	)		668,073	Oct-24 / Jul -34		2.24			4.14			5.14
Global Bonds of the Republic of Colombia		114,431		551		—			114,982	Jul-21 / Mar-23		—			—			2.46
Total		12,999,046		1,023,694		(12,711	)		14,010,029
Accrued interest									178,444
Total									14,188,473

All values are in US Dollars.

(*)	As of December 31, 2020 and 2019, Inteligo holds corporate bonds issued by different entities for approximately S/381,814,000 and S/440,409,000, respectively, which guarantee loans with Credit Suisse First Boston for S/217,260,000 and S/238,608,000, respectively and with Bank J. Safra Sarasin for S/83,283,000 and S/76,222,000, respectively; see Note 9(a).
(b.1)	The Group has determined that the unrealized losses on debt instruments as of December 31, 2020 and 2019, not related to credit risk, are of temporary nature. As of December 31, 2020 and 2019, the detail of the unrealized losses corresponding to debt instruments classified as at fair value through other comprehensive income is as follows:
---	---
	31.12.2020							31.12.2019
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Issuer	Amortized<br><br><br>Cost		Unrealized gross<br><br><br>gain		Unrealized gross<br><br><br>loss			Amortized<br><br><br>Cost		Unrealized<br><br><br>gross gain		Unrealized<br><br><br>gross loss			Maturity as of December 31, 2020		Risk rating as of December 31, 2020 (***)
	S/(000)		S/(000)		S/(000)			S/(000)		S/(000)		S/(000)
Rutas de Lima		295,720		—		(115,519	)		285,047		46,465		—		2036-2039		Less than B- (*)
Peruvian Sovereign Bonds		5,765,074		589,423		(154	)		3,213,581		330,856		(242	)	2024-2055		A- (*)
Instruments with individual losses minor than S/4 million		1,345,816		32,978		(6,283	)		2,066,654		93,043		(12,469	)		—		—
Total		7,406,610		622,401		(121,956	)		5,565,282		470,364		(12,711	)
(*)	Instrument rated abroad.
---	---
(**)	Instrument rated in Peru.
---	---
(***)	For those issuers with different instruments, the classification presented corresponds to the instrument with the largest unrealized loss.
---	---

On the other hand, the movement of the allowance for expected credit losses for debt instruments measured at fair value through other comprehensive income is presented below:

	31.12.2020			31.12.2019
	S/(000)			S/(000)
Expected credit loss at the beginning of the year		34,743			28,050
Impairment of financial investments
New assets originated or purchased		120			1,588
Assets derecognized or matured (excluding write-offs)		(8,879	)		(1,290	)
Others (*)		41,663			6,492
Loss of the year to impairment on financial investments		32,904			6,790
Foreign exchange effect		3,913			(97	)
Expected credit loss at the end of the year		71,560			34,743
(*)	As of of December 31, 2020, mainly includes impairment allocated to Rutas de Lima for approximately S/33,188,000.
---	---
(c)	As of December 31, 2020, investments at amortized cost are comprised of Sovereign Bonds of the Republic of Peru issued in Soles, for an amount of S/2,707,298,000, including accrued interest (as of December 31, 2019 are entirely comprised of Sovereign Bonds of the Republic of Peru issued in Soles, for an amount of S/2,206,986,000, including accrued interest).
---	---

As of December 31, 2020, the Sovereign Bonds of the Republic of Peru have maturity dates that range from September 2023 to August 2037, have accrued interest at effective annual rates ranging from 4.29 percent and 5.15 percent (as of December 31, 2019, these investments have maturity dates that range from September 2023 to August 2037, have accrued interest at effective annual rates ranging from 4.29 percent and 6.26 percent), and estimated fair value amounting to approximately S/2,988,539,000 and S/2,328,303,000, as of December 31, 2020 and December 31, 2019, respectively.

During the year 2019, the Government of the Republic of Peru performed a public offering to buyback certain sovereign bonds, with the purpose of renewing its debt and funding its fiscal deficit. Considering the purpose of this offering, following such offering, there would be no outstanding sovereign bonds of the repurchased issuances. In the event that some bonds remained outstanding, they would become illiquid on the market. In that sense, Interbank took part of these public offerings and sold to the Government of the Republic of Peru sovereign bonds classified as investments at amortized cost for approximately S/340,518,000, generating a gain amounting to S/8,474,000, which was recorded within the caption “Gain from derecognition of financial investments at amortized cost” of the interim consolidated statement of income. Notwithstanding the aforementioned, with the purpose of maintaining its asset management strategy, the Bank purchased simultaneously other sovereign bonds of the Republic of Peru for approximately S/340,432,000, and classified them as investments at amortized cost. In Management’s opinion and pursuant to IFRS 9, said transaction is congruent with the Group’s business model because although said sales were significant, they were infrequent and were performed with the sole purpose of facilitating the debt renewal and the funding of the fiscal deficit of the Republic of Peru.

As of December 31, 2020, and 2019, Interbank hold loans with the BCRP that are guaranteed with these sovereign bonds of the Republic of Peru, classified as restricted, for approximately S/1,071,740,000 and S/762,347,000, respectively; see Note 9(a).

(d)	The composition of financial instruments at fair value through profit or loss is as follows:
	31.12.2020		31.12.2019
---	---	---	---	---
	S/(000)		S/(000)
Equity instruments
Local and foreign mutual funds and investment funds participations		1,260,929		1,083,079
BioPharma Credit PLC		131,623		132,054
Royalty Pharma		107,530		117,682
Others minor		462,353		153,468
Debt instruments
Corporate, leasing and subordinated bonds		80,342		65,254
Total		2,042,777		1,551,537

(e)The composition of equity instruments measured at fair value through other comprehensive income is presented below:

	31.12.2020		31.12.2019
	S/(000)		S/(000)
BioPharma Credit PLC		358,848		336,338
InRetail Perú Corp		339,945		285,962
Ishares		131,795		140,198
ViaSat Inc.		117,033		—
Luz del Sur S.A.A.		87,129		87,983
Engie-Energía Perú S.A.		80,852		90,670
Ferreycorp S.A.A.		73,785		83,013
Credicorp		70,130		18,030
Others (minor than S/36 million)		114,031		83,528
Total		1,373,548		1,125,722
(f)	The Group rates its financial assets into Stage 1, Stage 2 and Stage 3, as described below:
---	---

Stage 1: When the financial assets are first recognized, the Group recognizes an allowance based on 12 months ECLs. Stage 1 also includes financial assets whose credit risk has improved and the loan has been reclassified from Stage 2.

Stage 2: When a financial asset has shown a significant increase in credit risk since origination, the Group records an allowance for the lifetime ECLs. Stage 2 also includes financial assets whose credit risk has improved and the financial asset has been reclassified from Stage 3.

Stage 3: Financial assets considered credit -impaired. The Group records an allowance for the lifetime financial asset.

For more information, see Note 30.1 of the Annual Consolidated Financial Statements.

Below are the debt instruments measured at fair value through other comprehensive income and at amortized cost, classified by stages, in accordance with IFRS 9 as of December 31, 2020 and 2019:

	31.12.2020								31.12.2019
Debt instruments measured at fair value through other comprehensive income and at amortized cost	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Corporate, leasing and subordinated bonds		8,744,625		212,140		—		8,956,765		7,866,111		333,175		—		8,199,286
Peruvian Sovereign Bonds		9,005,274		—		—		9,005,274		5,704,970		—		—		5,704,970
Negotiable Certificates of Deposit issued by BCRP		1,283,727		—		—		1,283,727		1,483,493		—		—		1,483,493
Bonds guaranteed by the Peruvian Government		646,677		—		—		646,677		668,073		—		—		668,073
Global Bonds of the Republic of Peru		500,980		—		—		500,980		—		—		—		—
Global Bonds of the Republic of Colombia		159,859		—		—		159,859		114,982		—		—		114,982
Total		20,341,142		212,140		—		20,553,282		15,837,629		333,175		—		16,170,804
5.	Loans, net
---	---
(a)	This caption is made up as follows:
---	---
	31.12.2020			31.12.2019
---	---	---	---	---	---	---
	S/(000)			S/(000)
Direct loans
Loans		34,718,320			28,504,689
Credit cards		4,379,884			5,876,983
Leasing		1,211,324			1,533,395
Discounted notes		468,664			686,164
Factoring		571,994			374,192
Advances and overdrafts		39,414			87,373
Refinanced loans		287,119			251,180
Past due and under legal collection loans		1,405,185			943,168
		43,081,904			38,257,144
Plus (minus)
Accrued interest from performing loans		445,122			316,171
Unearned interest and interest collected in advance		(22,752	)		(41,683	)
Impairment allowance for loans (d)		(2,984,851	)		(1,394,779	)
Total direct loans, net		40,519,423			37,136,853
Indirect loans		4,611,931			4,101,977
(b)	The classification of the direct loan portfolio is as follows:
---	---
	31.12.2020		31.12.2019
---	---	---	---	---
	(*)
	S/(000)		S/(000)
Commercial loans (c.1)		22,001,567		17,479,006
Consumer loans (c.1)		11,416,175		12,821,567
Mortgage loans (c.1)		7,721,267		7,206,445
Small and micro-business loans (c.1)		1,942,895		750,126
Total		43,081,904		38,257,144
(*)	As of December 31, 2020, the balance of the direct loan portfolio includes disbursements made by Interbank within the “Reactiva Perú” program for approximately S/6,617 million, out of which S/4,488 million were granted to clients of its commercial portfolio and S/2,129 million to clients of its small and micro- business portfolio.
---	---
(c)	The following table shows the credit quality and maximum exposure to credit risk of direct loans based on the Group's internal credit rating as of December 31, 2020 and 2019. The amounts presented do not consider impairment.
---	---
	31.12.2020								31.12.2019
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Direct loans, (c.1)	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		31,694,702		923,185		—		32,617,887		28,314,167		271,610		—		28,585,777
Standard grade		4,668,258		1,108,249		—		5,776,507		4,675,010		528,372		—		5,203,382
Sub-standard grade		756,793		641,174		—		1,397,967		358,527		969,387		—		1,327,914
Past due but not impaired		859,509		1,101,182		—		1,960,691		1,474,310		770,876		—		2,245,186
Impaired
Individually impaired		—		—		7,678		7,678		—		—		8,444		8,444
Collectively impaired		—		—		1,321,174		1,321,174		—		—		886,441		886,441
Total direct loans		37,979,262		3,773,790		1,328,852		43,081,904		34,822,014		2,540,245		894,885		38,257,144
	31.12.2020								31.12.2019
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Indirect loans	Stage 1<br><br><br>S/(000)		Stage 2<br><br><br>S/(000)		Stage 3<br><br><br>S/(000)		Total<br><br><br>S/(000)		Stage 1<br><br><br>S/(000)		Stage 2<br><br><br>S/(000)		Stage 3<br><br><br>S/(000)		Total<br><br><br>S/(000)
Not impaired
High grade		4,021,852		391,952		—		4,413,804		3,733,040		62,860		—		3,795,900
Standard grade		106,294		53,661		—		159,955		108,515		118,463		—		226,978
Sub-standard grade		67		8,087		—		8,154		7,597		41,095		—		48,692
Past due but not impaired		—		—		—		—		—		—		—		—
Impaired
Individually impaired		—		—		22,607		22,607		—		—		22,607		22,607
Collectively impaired		—		—		7,411		7,411		—		—		7,800		7,800
Total indirect loans		4,128,213		453,700		30,018		4,611,931		3,849,152		222,418		30,407		4,101,977

(c.1)The following tables show the credit quality and maximum exposure to credit risk for each classification of the direct loan portfolio:

	31.12.2020								31.12.2019
	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
Commercial loans	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		16,239,927		620,064		—		16,859,991		12,786,786		53,449		—		12,840,235
Standard grade		2,940,008		789,777		—		3,729,785		2,605,473		127,347		—		2,732,820
Sub-standard grade		306,131		101,578		—		407,709		132,707		401,991		—		534,698
Past due but not impaired		428,695		339,035		—		767,730		1,069,813		102,267		—		1,172,080
Impaired
Individually impaired		—		—		7,678		7,678		—		—		8,444		8,444
Collectively impaired		—		—		228,674		228,674		—		—		190,729		190,729
Total commercial loans		19,914,761		1,850,454		236,352		22,001,567		16,594,779		685,054		199,173		17,479,006
	31.12.2020								31.12.2019
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
Consumer loans	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		7,971,986		147,158		—		8,119,144		9,319,421		176,764		—		9,496,185
Standard grade		977,049		271,901		—		1,248,950		1,443,966		311,673		—		1,755,639
Sub-standard grade		162,849		379,388		—		542,237		196,126		362,228		—		558,354
Past due but not impaired		160,498		620,753		—		781,251		167,295		443,693		—		610,988
Impaired
Individually impaired		—		—		—		—		—		—		—		—
Collectively impaired		—		—		724,593		724,593		—		—		400,401		400,401
Total consumer loans		9,272,382		1,419,200		724,593		11,416,175		11,126,808		1,294,358		400,401		12,821,567
	31.12.2020								31.12.2019
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
Mortgage loans	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		6,182,121		6,025		—		6,188,146		5,676,737		21,775		—		5,698,512
Standard grade		481,808		33,994		—		515,802		550,656		65,662		—		616,318
Sub-standard grade		246,609		93,321		—		339,930		25,855		190,605		—		216,460
Past due but not impaired		265,115		104,477		—		369,592		225,687		201,506		—		427,193
Impaired
Individually impaired		—		—		—		—		—		—		—		—
Collectively impaired		—		—		307,797		307,797		—		—		247,962		247,962
Total mortgage loans		7,175,653		237,817		307,797		7,721,267		6,478,935		479,548		247,962		7,206,445
	31.12.2020								31.12.2019
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Stage 1		Stage 2		Stage 3		Total		Stage 1		Stage 2		Stage 3		Total
Small and micro-business loans	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Not impaired
High grade		1,300,668		149,938		—		1,450,606		531,223		19,622		—		550,845
Standard grade		269,393		12,577		—		281,970		74,915		23,690		—		98,605
Sub-standard grade		41,204		66,887		—		108,091		3,839		14,563		—		18,402
Past due but not impaired		5,201		36,917		—		42,118		11,515		23,410		—		34,925
Impaired
Individually impaired		—		—		—		—		—		—		—		—
Collectively impaired		—		—		60,110		60,110		—		—		47,349		47,349
Total small and micro-business loans		1,616,466		266,319		60,110		1,942,895		621,492		81,285		47,349		750,126
Total direct loans		37,979,262		3,773,790		1,328,852		43,081,904		34,822,014		2,540,245		894,885		38,257,144
(d)	During the year 2020, the impairment loss for direct and indirect loans amounted to S/2,376,991,000 and S/16,953,000, respectively. Following is the movement of the allowance for expected credit loss for direct and indirect loans:
---	---
(d.1)	Direct loans
---	---
	31.12.2020												31.12.2019
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Direct loans	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss at the beginning of year balances		461,892			394,773			538,114			1,394,779			394,801			462,749			507,254			1,364,804
Impact of the expected credit loss in the consolidated statement of income -
New originated or purchased assets		451,031			—			—			451,031			317,473			—			—			317,473
Assets derecognized or repaid (excluding write offs)		(83,688	)		(59,007	)		(33,298	)		(175,993	)		(98,575	)		(82,624	)		(42,311	)		(223,510	)
Transfers to Stage 1		75,293			(74,069	)		(1,224	)		—			126,904			(125,255	)		(1,649	)		—
Transfers to Stage 2		(193,848	)		209,331			(15,483	)		—			(139,232	)		156,706			(17,474	)		—
Transfers to Stage 3		(78,182	)		(155,912	)		234,094			—			(63,227	)		(135,678	)		198,905			—
Impact on the expected credit loss for credits that change stage in the period		(41,530	)		250,635			902,137			1,111,242			(91,914	)		148,328			650,594			707,008
Others		655,617			314,104			20,990			990,711			16,327			(28,174	)		(16,381	)		(28,228	)
Total (*)		784,693			485,082			1,107,216			2,376,991			67,756			(66,697	)		771,684			772,743
Write-offs (**)		—			—			(925,960	)		(925,960	)		—			—			(874,068	)		(874,068	)
Recovery of written–off loans		—			—			106,395			106,395			—			—			136,468			136,468
Foreign exchange effect (***)		7,319			6,579			18,748			32,646			(665	)		(1,279	)		(3,224	)		(5,168	)
Expected credit loss at the end of year balances		1,253,904			886,434			844,513			2,984,851			461,892			394,773			538,114			1,394,779

(d.1.1) The following tables show the movement of the allowance for expected credit losses for each classification of the direct loan portfolio:

	31.12.2020												31.12.2019
Direct loans – Commercial	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss at the beginning of year balances		54,693			24,399			67,158			146,250			68,705			27,397			98,111			194,213
Impact of the expected credit loss in the consolidated statement of income -
New originated or purchased assets		118,602			—			—			118,602			42,558			—			—			42,558
Assets derecognized or repaid (excluding write offs)		(21,764	)		(5,610	)		(3,272	)		(30,646	)		(35,809	)		(9,153	)		(9,384	)		(54,346	)
Transfers to Stage 1		2,759			(2,759	)		—			—			6,996			(6,996	)		—			—
Transfers to Stage 2		(38,674	)		38,674			—			—			(13,571	)		14,721			(1,150	)		—
Transfers to Stage 3		(1,112	)		(1,772	)		2,884			—			(4,506	)		(3,583	)		8,089			—
Impact on the expected credit loss for credits that change stage in the period		4,211			16,255			24,738			45,204			(2,900	)		5,779			26,199			29,078
Others		(12,081	)		(20,308	)		671			(31,718	)		(6,239	)		(3,599	)		(25,290	)		(35,128	)
Total (*)		51,941			24,480			25,021			101,442			(13,471	)		(2,831	)		(1,536	)		(17,838	)
Write-offs (**)		—			—			(27,817	)		(27,817	)		—			—			(29,800	)		(29,800	)
Recovery of written–off loans		—			—			1,756			1,756			—			—			968			968
Foreign exchange effect (***)		6,927			3,140			6,061			16,128			(541	)		(167	)		(585	)		(1,293	)
Expected credit loss at the end of year balances		113,561			52,019			72,179			237,759			54,693			24,399			67,158			146,250
	31.12.2020												31.12.2019
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Direct loans – Consumer	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss at the beginning of year balances		384,989			332,697			340,914			1,058,600			303,953			398,353			284,645			986,951
Impact of the expected credit loss in the consolidated statement of income -
New originated or purchased assets		185,014			—			—			185,014			257,150			—			—			257,150
Assets derecognized or repaid (excluding write offs)		(57,327	)		(49,644	)		(18,275	)		(125,246	)		(57,268	)		(69,819	)		(17,238	)		(144,325	)
Transfers to Stage 1		57,658			(56,434	)		(1,224	)		—			111,506			(109,857	)		(1,649	)		—
Transfers to Stage 2		(109,269	)		113,159			(3,890	)		—			(120,042	)		124,906			(4,864	)		—
Transfers to Stage 3		(73,702	)		(145,625	)		219,327			—			(54,960	)		(121,246	)		176,206			—
Impact on the expected credit loss for credits that change stage in the period		(52,263	)		217,858			793,684			959,279			(81,409	)		135,659			553,748			607,998
Others		669,908			363,842			60,058			1,093,808			26,129			(24,275	)		7,613			9,467
Total (*)		620,019			443,156			1,049,680			2,112,855			81,106			(64,632	)		713,816			730,290
Write-offs (**)		—			—			(868,121	)		(868,121	)		—			—			(785,863	)		(785,863	)
Recovery of written–off loans		—			—			100,760			100,760			—			—			130,184			130,184
Foreign exchange effect (***)		142			2,682			6,477			9,301			(70	)		(1,024	)		(1,868	)		(2,962	)
Expected credit loss at the end of year balances		1,005,150			778,535			629,710			2,413,395			384,989			332,697			340,914			1,058,600
	31.12.2020												31.12.2019
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Direct loans – Mortgage	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss at the beginning of year balances		9,418			22,788			89,476			121,682			8,428			20,142			86,040			114,610
Impact of the expected credit loss in the consolidated statement of income -
New originated or purchased assets		2,125			—			—			2,125			2,153			—			—			2,153
Assets derecognized or repaid (excluding write offs)		(932	)		(1,972	)		(10,652	)		(13,556	)		(1,017	)		(1,354	)		(12,834	)		(15,205	)
Transfers to Stage 1		13,011			(13,011	)		—			—			6,760			(6,760	)		—			—
Transfers to Stage 2		(647	)		12,160			(11,513	)		—			(1,174	)		12,634			(11,460	)		—
Transfers to Stage 3		(430	)		(3,597	)		4,027			—			(312	)		(3,472	)		3,784			—
Impact on the expected credit loss for credits that change stage in the period		7,838			3,058			62,977			73,873			(6,185	)		2,094			32,211			28,120
Others		43,337			1,650			(43,681	)		1,306			787			(420	)		(2,212	)		(1,845	)
Total (*)		64,302			(1,712	)		1,158			63,748			1,012			2,722			9,489			13,223
Write-offs (**)		—			—			(4,350	)		(4,350	)		—			—			(5,427	)		(5,427	)
Recovery of written–off loans		—			—			—			—			—			—			—			—
Foreign exchange effect (***)		219			751			5,934			6,904			(22	)		(76	)		(626	)		(724	)
Expected credit loss at the end of year balances		73,939			21,827			92,218			187,984			9,418			22,788			89,476			121,682
	31.12.2020												31.12.2019
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Direct loans – Small and micro-business	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss at the beginning of year balances		12,792			14,889			40,566			68,247			13,715			16,857			38,458			69,030
Impact of the expected credit loss in the consolidated statement of income -
New originated or purchased assets		145,290			—			—			145,290			15,612			—			—			15,612
Assets derecognized or repaid (excluding write offs)		(3,665	)		(1,781	)		(1,099	)		(6,545	)		(4,481	)		(2,298	)		(2,855	)		(9,634	)
Transfers to Stage 1		1,865			(1,865	)		—			—			1,642			(1,642	)		—			—
Transfers to Stage 2		(45,258	)		45,338			(80	)		—			(4,445	)		4,445			—			—
Transfers to Stage 3		(2,938	)		(4,918	)		7,856			—			(3,449	)		(7,377	)		10,826			—
Impact on the expected credit loss for credits that change stage in the period		(1,316	)		13,464			20,738			32,886			(1,420	)		4,796			38,436			41,812
Others		(45,547	)		(31,080	)		3,942			(72,685	)		(4,350	)		120			3,508			(722	)
Total (*)		48,431			19,158			31,357			98,946			(891	)		(1,956	)		49,915			47,068
Write-offs (**)		—			—			(25,672	)		(25,672	)		—			—			(52,978	)		(52,978	)
Recovery of written–off loans		—			—			3,879			3,879			—			—			5,316			5,316
Foreign exchange effect (***)		31			6			276			313			(32	)		(12	)		(145	)		(189	)
Expected credit loss at the end of year balances		61,254			34,053			50,406			145,713			12,792			14,889			40,566			68,247
(d.2)	Indirect loans (substantially, all indirect loans correspond to commercial loans)
---	---
	31.12.2020												31.12.2019
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
Contingent credits, guarantees and stand-by letters, import and export letters of credit	Stage 1			Stage 2			Stage 3			Total			Stage 1			Stage 2			Stage 3			Total
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Expected credit loss at the beginning of year balances		16,367			4,720			18,607			39,694			19,829			19,753			22,469			62,051
Impact of the expected credit loss in the consolidated statement of income -
New originated or purchased assets		5,816			—			—			5,816			6,937			—			—			6,937
Assets derecognized or repaid (excluding write offs)		(2,859	)		(640	)		(254	)		(3,753	)		(9,803	)		(6,597	)		(3,400	)		(19,800	)
Transfers to Stage 1		1,681			(1,681	)		—			—			7,101			(7,101	)		—			—
Transfers to Stage 2		(7,493	)		7,493			—			—			(2,410	)		2,410			—			—
Transfers to Stage 3		(89	)		(32	)		121			—			(125	)		(1	)		126			—
Impact on the expected credit loss for credits that change stage in the period		(1,272	)		7,375			596			6,699			(2,997	)		(1,407	)		75			(4,329	)
Others		4,306			(37	)		3,922			8,191			(1,996	)		(2,091	)		(653	)		(4,740	)
Total (*)		90			12,478			4,385			16,953			(3,293	)		(14,787	)		(3,852	)		(21,932	)
Write-offs (**)		—			—			—			—			—			—			—			—
Recovery of written–off loans		—			—			—			—			—			—			—			—
Foreign exchange effect and others (***)		709			322			45			1,076			(169	)		(246	)		(10	)		(425	)
Expected credit loss at the end of year balances		17,166			17,520			23,037			57,723			16,367			4,720			18,607			39,694
(*)	As of December 31, 2020, the increase in loan impairment loss, net of recoveries, corresponds to greater provision requirements, mainly in the consumer loan portfolio related to adjustments performed in the calculation model of expected credit loss of Interbank’s clients aimed to face the impact of Covid-19.
---	---
(**)	The Group writes-off financial assets that are still subject to collection activities. In this regard, the Group seeks to recover the amounts legally owed in full but have been written off because there is no reasonable expectation of recovery.
---	---

(***)Corresponds mainly to the effect of the exchange rate and the variation of the time value of money.

6.	Investment property
(a)	This caption is made up as follows:
---	---
	31.12.2020		31.12.2019		Acquisition or<br><br><br>construction<br><br><br>year		Valuation methodology<br><br><br>as of December 31, 2020 and 2019
---	---	---	---	---	---	---	---
	S/(000)		S/(000)
Land
San Isidro – Lima		241,112		239,152		2009	Appraisal
San Martín de Porres – Lima		79,080		72,013		2015	Appraisal
Piura		32,908		50,396		2008	Appraisal
Sullana		17,703		16,540		2012	Appraisal
Santa Clara – Lima		14,162		12,961		2017	Appraisal
Others		9,163		8,727	-		DCF/Appraisal
		394,128		399,789
Completed investment property -<br><br><br>“Real Plaza” Shopping Malls
Talara		35,192		37,772		2015	DCF
		35,192		37,772
Buildings
Orquídeas - San Isidro - Lima		157,991		168,787		2017	DCF
Ate Vitarte – Lima		109,980		82,925		2006	DCF
Piura		75,531		—		2020	DCF
Chorrillos – Lima		67,426		71,680		2017	DCF
Chimbote		43,077		49,898		2015	DCF
Maestro-Huancayo		32,378		34,569		2017	DCF
Cusco		31,585		30,774		2017	DCF
Pardo y Aliaga – Lima		21,437		19,963		2008	DCF
Panorama – Lima		20,449		21,819		2016	DCF
Trujillo		18,111		17,600		2016	DCF
Cercado de Lima – Lima		14,697		13,545		2017	DCF
Others		21,996		22,975	-		DCF
		614,658		534,535
Total		1,043,978		972,096

DCF: Discounted cash flow

i)	As of December 31, 2020 and 2019, there are no liens on investment property.
(b)	The net gain on investment properties as of December 31, 2020 and 2019, consists of the following:
---	---
	31.12.2020		31.12.2019
---	---	---	---	---	---
	S/(000)		S/(000)
Income from rental of investment property		39,491		48,839
Gain on valuation of investment property		5,438		54,493
Loss on sale of investment property (d)		—		(7,164	)
Total		44,929		96,168
(c)	The movement of investment property is as follows:
---	---
	31.12.2020		31.12.2019
---	---	---	---	---	---
	S/(000)		S/(000)
Beginning of year balances		972,096		986,538
Additions		61,243		60,865
Sales (d)		—		(129,800	)
Valuation gain		5,438		54,493
Net transfers		5,201		—
Balances as of December 31		1,043,978		972,096
(d)	During 2019, Interseguro sold to related entities in cash and at market value, two lands located in Miraflores and Huaral. Likewise, Interseguro sold to third parties, in cash and at market value, an educational center and offices located in San Juan de Lurigancho and San Isidro. For these sales, Interseguro recognized a net loss of approximately S/7,164,000. The result of the sale of investment property is presented as "Net gain on investment property" in the interim consolidated statement of income.
---	---
(e)	The valuation techniques to estimate the fair value and the main assumptions used are described in Note 7 “Investment property” of the Annual Consolidated Financial Statements.
---	---
7.	Other accounts receivable and other assets, net, and other accounts payable, provisions and other liabilities
---	---
(a)	These captions are comprised of the following:
---	---
	31.12.2020		31.12.2019
---	---	---	---	---
	S/(000)		S/(000)
Accounts receivable and other assets, net
Financial instruments
Accounts receivable related to derivative financial instruments (b)		395,249		220,776
Other accounts receivable, net		357,783		393,254
Accounts receivable from sale of investments		111,237		74,373
Operations in process		93,933		45,613
Assets for technical reserves for claims and premiums by reinsurers		59,235		77,430
Others		35,952		39,760
		1,053,389		851,206
Non-financial instruments
Prepaid Income Tax		149,356		25,270
Investments in associates		70,344		72,301
Deferred charges		52,939		63,377
Realizable assets, received as payment and seized through legal actions		23,224		22,446
Prepaid rights to related entity		3,400		6,628
Others		2,377		10,644
		301,640		200,666
Total		1,355,029		1,051,872
Accounts payable, provisions and other liabilities
Financial instruments
Accounts payable related to contracts with financial component		561,752		377,721
Other accounts payable		364,789		436,331
Accounts payable related to derivative financial instruments (b)		271,326		222,305
Lease liabilities		269,755		341,836
Accounts payable for acquisitions of investments		185,432		75,820
Operations in process		175,194		132,982
Others		175,539		181,732
		2,003,787		1,768,727
Non-financial instruments
Provision for other contingencies		48,711		50,931
Taxes payable		38,853		76,423
Others		54,801		64,146
		142,365		191,500
Total		2,146,152		1,960,227
(b)	The fair value of derivative financial instruments recorded as assets or liabilities, including their notional amounts as of December 31, 2020 and 2019 is presented below:
---	---
As of December 31, 2020	Asset		Liability		Notional<br><br><br>amount		Effective part recognized in other comprehensive income during the year			Maturity	Hedged<br><br><br>instruments		Caption of the interim consolidated statement of financial position where the hedged item has been recognized
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	S/(000)		S/(000)		S/(000)		S/(000)
Derivatives held for trading
Forward exchange contracts		23,512		13,935		3,661,038		—		Between January 2021 and September 2021		—		—
Interest rate swaps		140,906		139,531		4,382,535		—		Between October 2021 and August 2030		—		—
Currency swaps		69,007		50,192		2,520,758		—		Between April 2021 and February 2027		—		—
Cross currency swaps		—		67,523		213,125		—		January 2023		—		—
Options		—		145		22,700		—		Between January 2021 and June 2021		—		—
		233,425		271,326		10,800,156		—
Derivatives held as hedges<br><br><br>Cash flow hedges:
Cross currency swaps (CCS)		126,839		—		1,596,861		(8,446	)	January 2023	Corporate bonds		Bonds, notes and other obligations
Cross currency swaps (CCS)		34,985		—		543,150		(5,904	)	October 2027	Senior bonds		Bonds, notes and other obligations
		161,824		—		2,140,011		(14,350	)
		395,249		271,326		12,940,167		(14,350	)
As of December 31, 2019	Asset		Liability		Notional<br><br><br>amount		Effective part recognized in other comprehensive income during the year			Maturity	Hedged<br><br><br>instruments		Caption of the interim consolidated statement of financial position where the hedged item has been recognized
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	S/(000)		S/(000)		S/(000)		S/(000)
Derivatives held for trading
Forward exchange contracts		95,961		45,276		9,289,914		—		Between January 2020 and January 2021		—		—
Interest rate swaps		81,517		75,071		4,238,143		—		Between November 2020 and December 2029		—		—
Currency swaps		30,438		36,428		1,727,922		—		Between January 2020 and September 2026		—		—
Cross currency swaps		—		50,523		195,056		—		January 2023		—		—
Options		33		126		22,154		—		Between January 2020 and December 2020		—		—
		207,949		207,424		15,473,189		—
Derivatives held as hedges<br><br><br>Cash flow hedges:
Cross currency swaps (CCS)		12,827		8,225		1,461,474		(31,211	)	January 2023	Corporate bonds		Bonds, notes and other obligations
Cross currency swaps (CCS)		—		2,821		497,100		(19,694	)	October 2027	Senior bonds		Bonds, notes and other obligations
Interest rate swaps (IRS)		—		1,670		132,560		(285	)	November 2020	Due to banks		Due to banks and correspondents
Interest rate swaps (IRS)		—		1,080		82,850		(289	)	December 2020	Due to banks		Due to banks and correspondents
Interest rate swaps (IRS)		—		1,085		82,850		(287	)	December 2020	Due to banks		Due to banks and correspondents
Cross currency swaps (CCS) (ii)		—		—		—		1,097		-	-		-
		12,827		14,881		2,256,834		(50,669	)
		220,776		222,305		17,730,023		(50,669	)
(i)	As of December 31,2020 and 2019, certain derivative financial instruments required the establishment of collateral deposits; see Note 3(d).).
---	---
(ii)	For the designated hedging derivatives mentioned in the table above, changes in fair values of hedging instruments completely offset the changes in fair values of hedged items; therefore, there has been no hedge ineffectiveness in 2020 and 2019.
---	---
(iii)	Derivatives held for trading are traded mainly to satisfy clients’ needs. The Group may also take positions with the expectation of profiting from favorable movements in prices or rates. Also, this caption includes any derivatives which do not comply with IFRS 9 hedging accounting requirements.
---	---
8.	Deposits and obligations
---	---
(a)	This caption is made up as follows:
---	---
	31.12.2020		31.12.2019
---	---	---	---	---
	S/(000)		S/(000)
Saving deposits		17,852,282		11,384,876
Demand deposits		13,832,262		11,716,035
Time deposits		13,534,993		13,053,033
Compensation for service time		1,923,698		1,933,052
Other obligations		6,040		6,228
Total		47,149,275		38,093,224
(b)	Interest rates applied to deposits and obligations are determined based on the market interest rates.
---	---
(c)	As of December 31, 2020 and 2019, approximately S/14,020,602,000 and S/10,725,904,000, respectively, of deposits and obligations are covered by the Peruvian Deposit Insurance Fund.
---	---
9.	Due to banks and correspondents
---	---
(a)	This caption is comprised of the following:
---	---
	31.12.2020		31.12.2019
---	---	---	---	---
	S/(000)		S/(000)
By type
Banco Central de Reserva del Perú - BCRP (b)		7,736,322		1,897,568
Promotional credit lines		1,453,397		1,422,067
Loans received from foreign entities		427,278		613,090
Loans received from Peruvian entities		1,117		2,049
		9,618,114		3,934,774
Interest and commissions payable		42,763		44,863
		9,660,877		3,979,637
By term
Short term		1,769,403		2,666,530
Long term		7,891,474		1,313,107
Total		9,660,877		3,979,637
(b)	During 2020, Interbank took part in the auction of funds for the “Reactiva Perú” program, Note 1(b). As of December 31, 2020, the amount recorded as debt to the BCRP amounts to approximately S/6,616,518,000.
---	---
(c)	As of December 31, 2020, and 2019, some of the Bank loans agreements include standard covenants regarding capital ratios, financial ratios, disposal of assets and transactions among companies under certain conditions, the use of funds and other issues.
---	---

In the opinion of Management and its legal advisors, all covenants have been met by the Group related to its due to banks and correspondents as of December 31, 2020 and 2019.

10.	Bonds, notes and other obligations

(a)This caption is comprised of the following:

Issuance	Issuer	Annual<br><br><br>interest rate	Interest payment	Maturity		Amount<br>issued		31.12.2019
						(000)		S/(000)
Local issuances
Subordinated bonds – first program
Third (A serie)	Interbank	3.5% + VAC (*)	Semi-annually		2023	S/ 110,000	91,000		91,000
Eighth (A serie)	Interbank	6.91%	Semi-annually	2022		S/ 137,900	137,900		136,908
							228,900		227,908
Subordinated bonds – second program
Second (A serie)	Interbank	5.81%	Semi-annually	2023		S/ 150,000	149,881		149,827
Third (A serie)	Interbank	7.50%	Semi-annually	2023		US50,000	180,819		165,426
							330,700		315,253
Subordinated bonds – third program
First - single serie	Interseguro	6.00%	Semi-annually		2029	US20,000	72,420		66,280
Second - single serie	Interseguro	4.34%	Semi-annually		2029	US20,000	72,420		66,280
Third - single serie (c)	Interseguro	4.84%	Semi-annually		2030	US25,000	90,525		—
							235,365		132,560
Corporate bonds – second program
Fifth (A serie)	Interbank	3.41% + VAC (*)	Semi-annually		2029	S/ 150,000	150,000		150,000
Negotiable certificates of deposits – first program
First (A serie)	Interbank	4.28%	Annually		2020	S/ 150,000	—		148,603
Total local issuances							944,965		974,324
International issuances
Subordinated bonds	Interbank	6.625%	Semi-annually	2029		US300,000	1,082,915		990,216
Junior subordinated notes	Interbank	8.500%	Semi-annually	2070		US200,000	—		660,992
Senior bonds	IFS	4.125%	Semi-annually	2027		US300,000	1,065,482		969,794
Corporate bonds	Interbank	3.375%	Semi-annually	2023		US484,895	1,714,707		1,549,877
Corporate bonds	Interbank	5.000%	Semi-annually	2026		S/ 312,000	311,282		311,185
Corporate bonds	Interbank	3.250%	Semi-annually	2026		US400,000	1,436,818		1,313,259
Subordinated bonds (d)	Interbank	4.000%	Semi-annually	2030		US300,000	1,078,493		—
Total international issuances							6,689,697		5,795,323
Total local and international issuances							7,634,662		6,769,647
Interest payable							144,089		120,643
Total							7,778,751		6,890,290

All values are in US Dollars.

(*)	The Spanish term “Valor de actualización constante” is referred to amounts in Soles indexed by inflation.
(b)	The international issuances are listed at the Luxembourg Stock Exchange. On the other hand, the local and international issuances include standard clauses of compliance with financial ratios, the use of funds and other administrative matters.
---	---

As of December 31, 2020, and 2019, the international issuances maintain mainly standard clauses for periodic reporting of financial information. In the opinion of Management and its legal advisors, these clauses have been met by the Group as of December 31, 2020 and December 31, 2019. See detailed information in Note 13 of the Annual Consolidated Financial Statements.

(c)	On September 30, 2020, Interseguro issued subordinated bonds denominated “Third Issuance of the Third Program of Subordinated Bonds Interseguro (Single Serie)” for the amount of US$25,000,000, recorded in Section “Transferable Securities and Issuance Programs” of the Public Registry of the Stock Market, under the Third Program of Subordinated Bonds of Interseguro.
(d)	During the month of June 2020, Interbank issued subordinated bonds called “4.00% Subordinated Notes due 2030” for an amount of US$300,000,000, under Rule 144A and Regulation S of the U.S. Securities Act of 1933 of the United States of America.
---	---
11.	Insurance contract liabilities
---	---
(a)	This caption is comprised of the following:
---	---
	31.12.2020		31.12.2019
---	---	---	---	---
	S/(000)		S/(000)
Technical reserves for insurance premiums (b)		12,298,075		11,223,456
Technical reserves for claims (c)		203,648		203,175
		12,501,723		11,426,631
By term
Short term		1,035,915		948,316
Long term		11,465,808		10,478,315
Total		12,501,723		11,426,631
(b)	The movement of technical reserves for insurance premiums (disclosed by type of insurance) as of December 31, 2020 and 2019, is as follows:
---	---
	2020																	2019
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Annuities			Retirement,<br><br><br>disability<br><br><br>and<br><br><br>survival<br><br><br>annuities			Life<br><br><br>insurance		General<br><br><br>insurance			SCTR			Total			Annuities			Retirement,<br><br><br>disability<br><br><br>and<br><br><br>survival<br><br><br>annuities			Life<br><br><br>insurance			General<br><br><br>insurance			Total
	S/(000)			S/(000)			S/(000)		S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Beginning of period balances		9,741,241			779,455			630,801		41,073			30,886			11,223,456			8,716,080			715,217			586,166			39,683			10,057,146
Insurance subscriptions		249,380			—			2,259		31,808			—			283,447			293,860			—			3,804			36,388			334,052
Acquisition of Mapfre (*)		—			—			—		—			292,499			292,499			—			—			—			—			—
Interest rate effect		356,012			(22,251	)		—		—			(1,225	)		332,536			921,312			79,761			—			—			1,001,073
Time passage adjustments		(193,358	)		(11,912	)		110,102		(35,167	)		(2,101	)		(132,436	)		(97,668	)		(15,523	)		123,371			(34,950	)		(24,770	)
Maturities and recoveries		—			—			—		—			(50,654	)		(50,654	)		—			—			(41,353	)		—			(41,353	)
Exchange differences		295,180			—			53,663		301			83			349,227			(92,343	)		—			(10,301	)		(48	)		(102,692	)
Balances as of December 31		10,448,455			745,292			796,825		38,015			269,488			12,298,075			9,741,241			779,455			661,687			41,073			11,223,456
(*)	In December 2019, the SBS authorized the transfer of a net equity block from Mapfre Peru Vida, which was made effective on January 2, 2020. The final value of the loan portfolio transfer resulted in a price adjustment in favor of Mapfre for a total amount of S/9,534,000.
---	---
(c)	In Management’s opinion, these balances reflect the exposure of life and general insurance contracts as of December 31, 2020 and 2019, in accordance with IFRS 4.
---	---
(d)	The main assumptions used in the estimation of retirement, disability and survival annuities and individual life reserves as of December 31, 2020 and 2019, are the following:
---	---
			Interest rates
---	---	---	---	---
Type	Mortality table 2020/2019		31.12.2020	31.12.2019
Annuities	SPP-S-2017, SPP-I-2017		3.53% in US$	4.54% in US$
	with improvement factor<br><br><br>for mortality		2.05% in S/ VAC<br><br><br>5.07% in adjusted S/	1.89% in S/ VAC<br><br><br>5.10% in adjusted S/
Retirement, disability and survival	SPP-S-2017, SPP-I-2017<br><br><br>with improvement factor<br><br><br>for mortality		2.05% in S/ VAC	1.89% in S/ VAC
SCTR insurance	SPP-S-2017, SPP-I-2017<br><br><br>with improvement factor<br><br><br>for mortality		2.05% in S/ VAC
Individual life insurance contracts (included linked insurance contracts)	CSO 80 adjusted		4.00 - 5.00%	4.00 - 5.00%
Lifetime RPP	SPP-S-2017, SPP-I-2017<br><br><br>with improvement factor<br><br><br>for mortality	RV2004M, MI85, B85A, B2006<br><br><br>as appropriate<br><br><br>(with adjustment factors)	2.05% in S/ VAC	5.59% in US$<br><br><br>3.36% in S/ VAC<br><br><br>6.83% in adjusted S/

The sensitivity of the estimates used by the Group to measure its insurance risks is represented primarily by life insurance risks; the main variables as of Decemeber 31, 2020 and 2019 are the interest rates and the mortality tables. The Group has assessed the changes of the reserves related to its most significant life insurance contracts included in the

reserves of annuities, retirement, disability and survival of +/- 100 basis points (bps) in the interest rates and of +/- 500 basis points (bps) of the mortality factors, being the results as follows:

	31.12.2020								31.12.2019
			Variation of the reserve								Variation of the reserve
	Reserve		Amount			Percentage			Reserve		Amount			Percentage
Variables	S/(000)		S/(000)			%			S/(000)		S/(000)			%
Annuities
Portfolio in S/ and US Dollars - Basis amount
Changes in interest rate: + 100 bps		9,235,280		(1,071,558	)		(10.40	)		8,646,725		(1,006,695	)		(10.43	)
Changes in interest rate: - 100 bps		11,621,443		1,314,606			12.75			10,890,170		1,236,750			12.81
Changes in mortality table at 105%		10,193,469		(113,369	)		(1.10	)		9,554,268		(99,152	)		(1.03	)
Changes in mortality table at 95%		10,425,963		119,125			1.16			9,757,493		104,073			1.08
Retirements, disability and survival
Portfolio in S/ – Basis amount
Changes in interest rate: + 100 bps		660,001		(85,291	)		(11.44	)		687,451		(92,004	)		(11.80	)
Changes in interest rate: - 100 bps		851,384		106,092			14.23			894,614		115,159			14.77
Changes in mortality table at 105%		735,321		(9,971	)		(1.34	)		769,044		(10,411	)		(1.34	)
Changes in mortality table at 95%		755,775		10,484			1.41			790,403		10,948			1.40
SCTR insurance
Portfolio in S/ – Basis amount
Changes in interest rate: + 100 bps		274,323		(45,819	)		(14.31	)		34,653		(5,464	)		(13.62	)
Changes in interest rate: - 100 bps		380,684		60,542			18.91			47,190		7,074			17.63
Changes in mortality table at 105%		317,191		(2,951	)		(0.92	)		39,683		(433	)		(1.08	)
Changes in mortality table at 95%		323,233		3,091			0.97			40,608		491			1.22
Lifetime RPP
Portfolio in S/ – Basis amount
Changes in interest rate: + 100 bps		128,327		(13,200	)		(9.33	)		80,971		(6,851	)		(7.80	)
Changes in interest rate: - 100 bps		157,297		15,770			11.14			95,808		7,987			9.09
Changes in mortality table at 105%		140,428		(1,099	)		(0.78	)		87,270		(551	)		(0.63	)
Changes in mortality table at 95%		142,678		1,151			0.81			88,398		577			0.66
12.	Net equity
---	---
(a)	Capital stock and distribution of dividends -
---	---

IFS’s shares are listed on the Lima Stock Exchange and, since July 2019, they are listed on the New York Stock Exchange. IFS’s shares have no nominal value and their issuance value was US$9.72 per share. As of December 31, 2020, and 2019, IFS’s capital stock is represented by 115,447,705 subscribed and paid-in common shares.

The General Shareholders’ Meeting of IFS held on April 7, 2020, agreed to distribute dividends for the year 2019 for approximately US$202,033,000 (equivalent to approximately S/698,228,000), equivalent to US$1.75 per share, which were paid on May 6, 2020.

The General Shareholders’ Meeting of IFS held on April 1, 2019, agreed to distribute dividends for the year 2018 for approximately US$197,187,000 (equivalent to approximately S/654,464,000), equivalent to US$1.75 per share, which were paid on May 3, 2019.

(b) Treasury stock -

As of December 31, 2020, and 2019, the Company and subsidiaries hold 24,824 and 1,400 shares of own issue, with an acquisition cost equivalent to S/2,769,000 and S/196,000, respectively.

Sale of treasury stock (2019)

As indicated in Note 1(c), in July 2019, Interbank and IFS sold a combined 2,418,754 shares. Said sale was recorded by decreasing the caption “Treasury stock” for an amount of S/208,178,000, and the highest value collected due to said sale amounted to S/138,997,000 and was recorded in the caption “Retained earnings”.

Corresponds to the difference between the nominal value of the shares issued and their public offerings price, which were performed in 2007 and 2019; see Note 1(c). Capital surplus is presented net of the expenses incurred and related to the issuance of such shares.

(d) Reserves -

The Board of Directors of IFS held on April 22, 2020, agreed to constitute reserves for S/500,000,000 charged to retained earnings.

(e)	Shareholders’ equity for legal purposes (regulatory capital) -

IFS is not required to establish a regulatory capital for statutory purposes. As of December 31, 2020 and 2019, the regulatory capital required for Interbank, Interseguro and Inteligo Bank (a Subsidiary of Inteligo Group Corp.), is calculated based on the separate financial statements of each Subsidiary prepared following the accounting principles and practices stated by their regulators (the SBS or Central Bank of the Bahamas, in the case of Inteligo Bank).

In Management’s opinion, Interbank, Interseguro and Inteligo Bank have been fulfilling the current requirements established by their regulators.

13.	Tax situation
(a)	IFS and its Subsidiaries incorporated and domiciled in the Republic of Panama and the Commonwealth of the Bahamas, are not subject to Income Tax, or any other taxes on capital gains, equity or property; nevertheless, IFS is subject to an additional tax on dividends received from its Subsidiaries incorporated and domiciled in Peru; see paragraph (b). The Subsidiaries incorporated and domiciled in Peru are subject to the Peruvian Tax legislation; see paragraph (c).
---	---
(b)	Legal entities or individuals not domiciled in Peru are subject to an additional tax (equivalent to 5 percent) on dividends received from entities domiciled in Peru. The corresponding tax is withheld by the entity that distributes the dividends.
---	---
In this regard, since IFS controls the entities that distribute the dividends, it recognizes the amount of the additional Income Tax on dividends received as expense of the financial year of the dividends.
---
(c)	IFS’s Subsidiaries incorporated in Peru are subject to the payment of Peruvian taxes; hence, they must calculate their tax expenses on the basis of their separate financial statements. The Income Tax rate as of December 31, 2020 and 2019, was 29.5 percent, over the taxable income.
---	---
(d)	The Tax Authority (henceforth “SUNAT”, by its Spanish acronym) is legally entitled to perform tax audit procedures for up to four years subsequent to the date at which the tax return regarding a taxable period must be filed. The Income Tax and the Value-Added-Tax returns subject to inspection by the Tax Authority in each of the Subsidiaries, are the following:
---	---

Interbank: Income Tax returns for the years 2014 to 2019, and Value-Added-Tax returns for the years 2016 to 2019.

-	Interseguro: Income Tax returns for the years 2014, 2015, 2017, 2018, 2019 and 2020, and Value-Added-Tax returns for the years 2014 to 2019.
-	Hipotecaria Sura and Seguros Sura: Income Tax returns for the years 2014 to 2018, and Value-Added-Tax returns for the years 2014 to 2018.
---	---

Given the possible interpretations that SUNAT may give to the legislation in effect, up to date it is not possible to determine whether or not any review to be conducted would result in liabilities for the Subsidiaries; any increased tax or surcharge that could arise from possible tax audits would be applied to the results of the period in which such tax increase or surcharge may be determined.

Following is the detail of the ongoing tax procedures for the Subsidiaries:

Interbank:

In April 2004, June 2006, February 2007, June 2007, November 2007, October 2008 and December 2010, Interbank received a number of Tax Determination and Tax Penalty notices corresponding mainly to the Income Tax determination for the fiscal years 2000 to 2006. As a result, claims and appeals were filed and subsequent contentious administrative proceedings were started, with the exception of Income Tax 2006, which is still pending in the Tax Court.

Regarding the tax litigations followed by Interbank related to the annual Income Tax returns for the years 2000 to 2006, the most relevant matter subject to discrepancy with SUNAT corresponds to whether the “interest in suspense” are subject to Income Tax or not. In this sense, the Bank considers that the interest in suspense do not constitute accrued income, in accordance with the SBS’s regulations, which is also supported by rulings by the Permanent Constitutional and Social Law Chamber of the Supreme Court issued in August 2009 and a recent pronouncement in June 2019.

Notwithstanding the foregoing, in February 2018, the Third Transitory Chamber of Constitutional and Social Law of the Supreme Court issued a ruling regarding a third bank that impacted the original estimation regarding the degree of contingency for this discrepancy. Subsequently, in June 2019, the Permanent Chamber of Constitutional and Social Law of the Supreme Court, in a case followed with another financial entity, ruled in favor of the tax treatment over the interest in suspense followed by said entity; which is consistent with the tax treatment followed by Interbank. On July 6, 2020 and December 28, 2020, the Permanent Chamber of Constitutional and Social Law of the Supreme Court notified Interbank its ruling regarding Income Tax for the year 2003 and prepaid Income Tax 2003, declaring groundless the cassation appeals filed by SUNAT and the Ministry of Economy and Finance (“MEF”, by its Spanish acronym), thus reaffirming the position held by Interbank regarding that interest in suspense does not constitute taxable income.

From the tax and legal analysis performed, reinforced by the aforementioned recent ruling by the Permanent Chamber of Constitutional and Social Law of the Supreme Court, Interbank’s Management and its external legal advisors consider that it exists sufficient technical support for the prevalence of Interbank’s position, in relation with the tax periods under resolution process; thus, it has not been recorded any provision for this contingency as of December 31, 2020 and 2019.

The tax liability requested for this concept and other minor contingencies as of December 31, 2020, without considering the effects of the ruling by the Permanent Chamber of Constitutional and Social Law of the Supreme Court published on

March 12, 2020, amounted to approximately S/382,000,000, and includes tax, fines and interest arrears (as of December 31, 2019 amounted to approximately S/303,000,000). However, it is estimated that once SUNAT performs the resettlements of the Income Tax, including the effects of said ruling, the requested amount will diminish significantly.

On the other hand, on February 3, 2017, SUNAT closed the audit process corresponding to the Income Tax for the year 2010. Interbank paid the debt under protest and filed a claim procedure. Subsequently, on November 6, 2018, SUNAT closed again the audit process corresponding to the Income Tax 2010, which had been reopened due to invalidity; Interbank filed a claim procedure and afterwards a tax appeal. Currently, the appeal is pending resolution by the Tax Court.

On February 14, 2018, SUNAT notified Interbank of the beginning of the partial audit process for the third category Income Tax corresponding to the year 2014. Subsequently, on September 7, 2018, SUNAT closed said partial audit process and did not determine any additional settlement of said tax.

On January 14, 2019, Interbank was notified of the Determination and Penalty Resolutions corresponding to the audit of the Income Tax for the fiscal year 2013. The tax debt requested by SUNAT amounts to approximately S/50,000,000 (including taxes, penalties and moratorium interest). The main concept observed was the deduction of loan write-offs without proof by the SBS. As of December 31, 2020, the tax liability requested for this concept and other minor contingencies amounted to approximately S/40,000,000 (as of December 31, 2019, amounted to S/39,000,000).

To date, Interbank’s Management has submitted the respective complaints to the resolutions indicated above. In the opinion of Management and its legal advisors, any eventual additional tax would not be significant for the financial statements as of December 31, 2020 and 2019.

On April 26, 2019, SUNAT notified Interbank about the commencement of the definitive audit process on Income Tax withholdings of non-domiciled entities corresponding to the year 2018. To date, said audit is under process.

On July 31, 2020, Interbank was notified of the Determination and Penalty Resolutions corresponding to the audit of the Income Tax for the fiscal year 2012. The tax debt requested by SUNAT amounts to approximately S/13,000,000.

Lastly, to date, SUNAT is auditing Interbank’s 2014 and 2015 taxable periods. In the opinion of Management and its legal advisors, any eventual additional tax settlement would not be significant for the financial statements as of December 31, 2020 and 2019.

Interseguro:

On January 4, 2019, Interseguro was notified through a Tax Determination notice about the partial audit of the Income Tax for non-domiciled entities for Sura corresponding to January 2015. The tax debt requested by SUNAT amounts to approximately S/19,000,000. On January 30, 2019, the Company filed an appeal against the Resolution of Determination claimed by SUNAT. Considering that this debt corresponds to a period prior to the acquisition of Seguros Sura by the Group and according to the conditions of the purchase and sale agreement of this entity, this debt, if confirmed after the legal actions that Management is to file, would be assumed by the sellers. On November 12, 2020, the Tax Court gave a favorable opinion to Interseguro, thus revoking the Resolution of Determination issued by SUNAT. Interseguro is in waiting of the corresponding deadline in order to be noticed whether SUNAT would appeal the Tax Court’s resolution.

In the opinion of Management and its legal advisors, any eventual additional tax settlement would not be significant for the financial statements as of December 31, 2020 and 2019.

(e)	IFS’s Subsidiaries recognize the period’s Income Tax expense using the best estimate of the tax rate. The table below presents the amounts reported in the interim consolidated statements of income:
	2020			2019
---	---	---	---	---	---
	S/(000)			S/(000)
Current – Expense		42,012			454,772
Deferred – (Income) expense		(114,945	)		38,554
		(72,933	)		493,326
14.	Interest income and expenses, and similar accounts
---	---
(a)	This caption is comprised of the following:
---	---
	2020			2019
---	---	---	---	---	---	---
	S/(000)			S/(000)
Interest and similar income
Interest on loan portfolio		3,769,716			3,830,595
Interest on investments at fair value through other comprehensive income		769,718			723,796
Interest on investments at amortized cost		116,338			93,454
Dividends on financial instruments		103,294			74,698
Interest on due from banks and inter-bank funds		35,906			121,550
Other interest and similar income		4,371			3,123
Subtotal		4,799,343			4,847,216
One-off impact from the modification of contractual cash flows due to the loan rescheduling schemes (*)		(134,376	)		—
Interest and similar income, net		4,664,967			4,847,216
Interest and similar expenses
Interest and fees on deposits and obligations		(522,357	)		(705,824	)
Interest on bonds, notes and other obligations		(381,320	)		(446,543	)
Interest and fees on obligations with financial institutions		(181,675	)		(175,753	)
Deposit insurance fund fees		(56,177	)		(45,199	)
Interest on lease payments		(15,288	)		(16,568	)
Result from hedging transactions		(9,266	)		(9,241	)
Other interest and similar expenses		(26,201	)		(24,835	)
Total		(1,192,284	)		(1,423,963	)
(b)	Corresponds to lower income generated by the modification of contractual cash flows due to customer loans rescheduling, see Note 2.3.1.
---	---
15.	Fee income from financial services, net
---	---
(a)	This caption is comprised of the following:
---	---
	2020			2019
---	---	---	---	---	---	---
	S/(000)			S/(000)
Income
Accounts maintenance, carriage, transfers, and debit and credit card fees		474,822			651,255
Banking services fees		192,588			220,207
Funds management		151,356			147,954
Contingent loans fees		52,156			56,153
Collection services		41,124			41,010
Brokerage and custody services		6,858			9,109
Others		42,207			40,801
Total		961,111			1,166,489
Expenses
Credit cards		(105,772	)		(118,675	)
Debtor’s life insurance premiums		(59,520	)		(48,866	)
Foreign banks fees		(15,105	)		(17,172	)
Brokerage and custody services		(630	)		(642	)
Others		(56,584	)		(55,249	)
Total		(237,611	)		(240,604	)
Net		723,500			925,885
16.	Other income and (expenses)
---	---
(a)	This caption is comprised of the following:
---	---
	2020			2019
---	---	---	---	---	---	---
	S/(000)			S/(000)
Other income
Other technical income from insurance operations		11,547			13,362
Income from investments in associates		9,068			15,647
Services rendered to third parties		7,843			3,859
Income from ATM rentals		3,971			3,789
Other income		29,688			34,003
Total other income		62,117			70,660
Other expenses
Sundry technical insurance expenses		(47,285	)		(42,016	)
Commissions from insurance activities		(28,390	)		(35,266	)
Donations		(5,509	)		(5,352	)
Provision for sundry risk		(4,918	)		(3,872	)
Expenses related to rental income		(1,993	)		(3,456	)
Other expenses		(55,952	)		(41,201	)
Total other expenses		(144,047	)		(131,163	)
17.	Insurance premiums and claims
---	---

(a) The caption of net premiums earned is comprised of the following:

	Premiums assumed (1)				Adjustment of technical reserves (2)						Gross premiums (*)<br><br><br>(3) = (1) - (2)					Premiums ceded to reinsurers (4)						Net premiums earned<br><br><br>(5) = (3) - (4)
	31.12.2020		31.12.2019		31.12.2020			31.12.2019			31.12.2020		31.12.2019			31.12.2020			31.12.2019			31.12.2020		31.12.2019
	S/(000)		S/(000)		S/(000)			S/(000)			S/(000)		S/(000)			S/(000)			S/(000)			S/(000)		S/(000)
Life insurance
Annuities		248,025		315,508		(56,021	)		(196,192	)		192,004		119,316			—			—			192,004		119,316
Group life		138,360		136,513		281			(62	)		138,641		136,451			(4,890	)		(5,463	)		133,751		130,988
Individual life		139,105		135,810		(61,978	)		(82,343	)		77,127		53,467			(4,592	)		(4,430	)		72,535		49,037
Retirement, disability and survival		9,347		12,282		11,912			15,523			21,259		27,805			(527	)		(3,151	)		20,732		24,654
Others		3		2		2,085			(3,421	)		2,088		(3,419	)		—			—			2,088		(3,419	)
Total life insurance		534,840		600,115		(103,721	)		(266,495	)		431,119		333,620			(10,009	)		(13,044	)		421,110		320,576
Total general insurance		91,092		102,402		2,930			(2,218	)		94,022		100,184			(151	)		(127	)		93,871		100,057
Total		625,932		702,517		(100,791	)		(268,713	)		525,141		433,804			(10,160	)		(13,171	)		514,981		420,633
(*)	It includes the annual variation of technical reserves and unearned premiums.
---	---
(b)	The caption of net claims and benefits incurred for life insurance contracts and others is comprised of the following:
---	---
	Gross claims and benefits						Ceded claims and benefits						Net insurance claims and benefits
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	31.12.2020			31.12.2019			31.12.2020			31.12.2019			31.12.2020			31.12.2019
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Life insurance
Annuities		(631,117	)		(597,302	)		—			—			(631,117	)		(597,302	)
Group life		(83,605	)		(45,964	)		4,868			3,792			(78,737	)		(42,172	)
Individual life		(17,495	)		(8,010	)		2,393			3,145			(15,102	)		(4,865	)
Retirement, disability and survival		(41,076	)		(32,496	)		4,206			(747	)		(36,870	)		(33,243	)
Others		(12,794	)		(1,655	)		(216	)		66			(13,010	)		(1,589	)
General insurance		(19,214	)		(20,879	)		(1	)		(214	)		(19,215	)		(21,093	)
		(805,301	)		(706,306	)		11,250			6,042			(794,051	)		(700,264	)
18.	Earnings per share
---	---

The following table presents the calculation of the weighted average number of shares and the basic and diluted (loss) earnings per share, determined and calculated based on the (loss) earnings attributable to the Group:

	Outstanding<br><br><br>shares			Shares<br><br><br>considered in<br><br><br>computation			Effective<br><br><br>days in<br><br><br>the<br><br><br>period		Weighted average number of outstanding shares
	(in thousands)			(in thousands)					(in thousands)
Period 2019
Balance as of January 1, 2019		110,692			110,692			365		110,692
Initial Public Offering, see Note 1(c)		4,755			4,755			161		2,097
Sale of treasury stock		2			2			103		1
Purchase of treasury stock		(3	)		(3	)		216		(1	)
Balance as of December 31, 2019		115,446			115,446					112,789
Net profit for the period S/(000)										1,441,258
Basic and diluted earnings per share (Soles)										12.778
Period 2020
Balance as of January 1, 2020		115,446			115,446			365		115,446
Sale of treasury stock		4			4			266		3
Purchase of treasury stock		(27	)		(27	)		30		(2	)
Balance as of December 31, 2020		115,423			115,423					115,447
Net profit for the period S/(000)										383,259
Basic and diluted earnings per share (Soles)										3.320
19.	Transactions with shareholders, related parties and affiliated entities
---	---
(a)	The table below presents the main transactions with shareholders, related parties and affiliated entities as of December 31, 2020 and 2019:
---	---
	31.12.2020			31.12.2019
---	---	---	---	---	---	---
	S/(000)			S/(000)
Assets
Investments at fair value through profit or loss
Participations - Royalty Pharma		107,530			117,682
Other minors		107			270
Negotiable certificates of deposit – Financiera Oh! S.A.		—			9,372
		107,637			127,324
Investments at fair value through other comprehensive income
Shares - InRetail Perú Corp.		339,945			285,962
Corporate bonds - InRetail Shopping Malls S.A.		53,358			49,728
Corporate bonds - Colegios Peruanos S.A.		1,193			30,977
		394,496			366,667
Loans, net (b)		1,196,143			1,114,211
Accounts receivable (h)		79,504			77,824
Long-term accounts receivable (g)		40,128			39,141
Accounts receivable related to derivative financial instruments		4,276			817
Other assets (f)		21,517			11,928
Liabilities
Deposits and obligations		849,906			944,561
Other liabilities		567			56
Accounts payable related to derivative financial instruments		—			344
Off-balance sheet accounts
Indirect loans (b)		124,366			134,658
Income (expenses)
Interest and similar income		70,261			77,186
Interest and similar expenses		(7,264	)		(17,471	)
Valuation of financial derivative instruments		—			(52	)
Rental income		18,609			22,118
Loss on sale of investment property		—			(7,164	)
Administrative expenses		(42,768	)		(38,717	)
Others, net		7,017			15,294
(b)	As of December 31, 2020 and 2019, the detail of loans is the following:
---	---
	31.12.2020						31.12.2019
---	---	---	---	---	---	---	---	---	---	---	---	---
	Direct		Indirect		Total		Direct		Indirect		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Controlling		—		—		—		17		—		17
Affiliated		931,746		46,967		978,713		847,993		59,267		907,260
Associates		264,397		77,399		341,796		266,201		75,391		341,592
		1,196,143		124,366		1,320,509		1,114,211		134,658		1,248,869
(c)	As of December 31,2020 and 2019, the directors, executives and employees of the Group have been involved in credit transactions with certain subsidiaries of the Group, as permitted by Peruvian law, which regulates and limits on certain transactions with employees, directors and executives of financial entities. As of December 30, 2020 and 2019, direct loans to employees, directors and executives amounted to S/222,076,000 and S/231,546,000, respectively; said loans are repaid monthly and bear interest at market rates. There are no loans to the Group’s directors and key personnel guaranteed with shares of any Subsidiary.
---	---
(d)	The Group’s key personnel basic remuneration for the years ended December 31, 2020 and 2019, are presented below::
---	---
	2020		2019
---	---	---	---	---
	S/(000)		S/(000)
Salaries		21,859		22,180
Board of Directors’ compensations		3,719		2,438
Total		25,578		24,618
(e)	As of December 31, 2020 and 2019, the Group holds participations in different mutual funds managed by Interfondos that are classified as investment at fair value through profit or loss and amount approximately to S/342,000 and S/701,000, respectively.
---	---
(f)	It corresponds mainly to prepaid expenses for spaces ceded to Interbank in the stores of Supermercados Peruanos S.A. for the operation of financial agencies until the year 2030, and for an amount of approximately S/3,400,000 and S/6,628,000 as of December 31, 2020 and 2019, respectively (see Note 7(a)). Interbank may renew the term of the agreement for an additional term of 15 years.
---	---
(g)	It corresponds to a loan with maturity in 2046 and bears interests at market rates.
---	---
(h)	As of December 31, 2020 and 2019, corresponds to a financial lease for the construction of educational facilities in San Juan de Lurigancho and Ate Vitarte districts.
---	---
(i)	In Management’s opinion, transactions with related companies have been performed under market conditions and within the limits permitted by the SBS. Taxes generated by these transactions and the taxable base used for computing them are those customarily used in the industry and they are determined according to the tax rules in force.
---	---
20.	Business segments
---	---

The Chief Operating Decision Maker (“CODM”) of IFS is the Chief Executive Officer (“CEO”). The Group presents three operating segments based on products and services, as follows:

Banking

Mainly loans, credit facilities, deposits and current accounts.

Insurance

It provides annuities and conventional life insurance products, as well as other retail insurance products.

Wealth management

It provides brokerage and investment management services. Inteligo serves mainly Peruvian citizens.

The operating segments monitor the operating results of their business units separately for the purpose of making decisions on the distribution of resources and performance assessment. Segment performance is evaluated based on operating profit or loss and it is measured consistently with operating profit or loss in the interim consolidated financial statements.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

The following table presents the Group’s financial information by business segments for the years ended December 31, 2020 and 2019:

	2020															2019
	Banking			Insurance			Wealth<br><br><br>management			Holding and consolidation adjustments			Total<br><br><br>consolidated			Banking			Insurance<br><br><br>(***)			Wealth<br><br><br>management			Holding and consolidation adjustments			Total<br><br><br>consolidated
	S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)			S/(000)
Total income (*)
Third party		4,900,400			1,365,579			433,941			(19,738	)		6,680,182			5,335,387			1,198,231			390,720			(138,525	)		6,785,813
Inter-segment		(59,267	)		—			(3,273	)		62,540			—			(80,697	)		—			(2,093	)		82,790			—
Total income		4,841,133			1,365,579			430,668			42,802			6,680,182			5,254,690			1,198,231			388,627			(55,735	)		6,785,813
Consolidated income statement data
Interest and similar income		3,970,789			654,975			163,414			10,165			4,799,343			4,073,998			612,549			167,974			(7,305	)		4,847,216
One-off impact from the modification of contractual cash flows due to the loan rescheduling schemes		(134,376	)		—			—			—			(134,376	)		—			—			—			—			—
Interest and similar expenses		(1,053,356	)		(83,992	)		(51,652	)		(3,284	)		(1,192,284	)		(1,290,055	)		(72,485	)		(61,465	)		42			(1,423,963	)
Net interest and similar income		2,783,057			570,983			111,762			6,881			3,472,683			2,783,943			540,064			106,509			(7,263	)		3,423,253
Impairment loss on loans, net of recoveries		(2,393,923	)		—			(21	)		—			(2,393,944	)		(750,787	)		—			(24	)		—			(750,811	)
Impairment loss to impairment on financial investments		170			(33,819	)		745			—			(32,904	)		43			(6,170	)		(663	)		—			(6,790	)
Net interest and similar income after impairment loss		389,304			537,164			112,486			6,881			1,045,835			2,033,199			533,894			105,822			(7,263	)		2,665,652
Fee income from financial services, net		619,842			(6,056	)		163,968			(54,254	)		723,500			827,064			(3,980	)		164,312			(61,511	)		925,885
Net gain on sale of financial investments		103,773			105,038			(23,428	)		—			185,383			30,854			39,234			42,127			—			112,215
Gain from derecognition of financial assets at amortized cost		—			—			—			—			—			8,474			—			—			—			8,474
Other income (**)		340,372			96,641			129,987			24,351			591,351			394,997			129,784			16,307			(69,698	)		471,390
Total net premiums earned minus claims and benefits		—			(279,070	)		—			—			(279,070	)		—			(279,620	)		—			(11	)		(279,631	)
Depreciation and amortization		(234,479	)		(25,590	)		(14,478	)		5,797			(268,750	)		(227,070	)		(22,396	)		(18,321	)		5,772			(262,015	)
Other expenses		(1,299,027	)		(260,405	)		(113,564	)		31,086			(1,641,910	)		(1,384,432	)		(276,350	)		(104,996	)		49,479			(1,716,299	)
Income before translation result and Income Tax		(80,215	)		167,722			254,971			13,861			356,339			1,683,086			120,566			205,251			(83,232	)		1,925,671
Translation result		(5,966	)		(26,591	)		(3,846	)		(9,320	)		(45,723	)		(5,592	)		9,826			1,423			12,113			17,770
Income Tax		80,509			—			(8,000	)		424			72,933			(448,956	)		—			(6,420	)		(37,950	)		(493,326	)
Net profit for the year		(5,672	)		141,131			243,125			4,965			383,549			1,228,538			130,392			200,254			(109,069	)		1,450,115
Attributable to:
IFS’s shareholders		(5,672	)		141,131			243,125			4,675			383,259			1,228,538			130,392			200,254			(117,926	)		1,441,258
Non-controlling interests		—			—			—			290			290			—			—			—			8,857			8,857
		(5,672	)		141,131			243,125			4,965			383,549			1,228,538			130,392			200,254			(109,069	)		1,450,115
(*)	Corresponds to interest and similar income, other income and net premiums earned.
---	---
(**)	For the Banking Segment, the caption “Other income” for the year ended December 31, 2019, includes approximately S/52,580,000, before taxes, as gain on the sale of Interfondos to Inteligo Perú Holding S.A.C., which is eliminated in the accounting consolidation process, see Note 2.2. The net profit (after taxes) amounted to approximately S/32,422,000.
---	---
(***)	As of December 31, 2019, certain balances in the Insurance Segment have been modified following the reclassifications detailed in Note 2.4.
---	---
	31.12.2020
---	---	---	---	---	---	---	---	---	---	---	---
	Banking		Insurance		Wealth<br><br><br>management		Holding and consolidation adjustments			Total<br><br><br>consolidated
	S/(000)		S/(000)		S/(000)		S/(000)			S/(000)
Capital expenditures (*)		193,112		109,786		9,634		—			312,532
Total assets		68,038,621		15,311,267		4,308,618		577,523			88,236,029
Total liabilities		61,814,096		14,375,950		3,233,691		(141,657	)		79,282,080
	31.12.2019
	Banking		Insurance		Wealth<br><br><br>management		Holding and consolidation adjustments			Total<br><br><br>consolidated
	S/(000)		S/(000)		S/(000)		S/(000)			S/(000)
Capital expenditures (*)		195,177		69,643		6,769		—			271,589
Total assets		53,019,361		13,917,641		4,098,057		527,234			71,562,293
Total liabilities		46,676,473		12,943,718		3,244,210		(205,556	)		62,658,845
(*)	It includes the purchase of property, furniture and equipment, intangible assets and investment properties.
---	---
(i)	The distribution of the Group’s total income based on the location of the customer and its assets, for the year ended December 31, 2020, is S/6,307,987,000 in Peru and S/372,195,000 in Panama (for the year ended December 31, 2019, is S/6,458,212,000 in Peru and S/327,601,000 in Panama). The distribution of the Group’s total assets based on the location of the customer and its assets, as of December 31, 2020 is S/84,096,653,000 in Peru and S/4,139,376,000 in Panama (for the year ended December 31, 2019, it is S/67,623,222,000 in Peru and S/3,939,071,000 in Panama).
---	---
21.	Financial instruments classification
---	---

The financial assets and liabilities of the interim consolidated statement of financial position as of December 31, 2020 and 2019, are presented below:

	As of December 31, 2020										As of December 31, 2019
	At fair<br><br><br>value<br><br><br>through<br><br><br>profit<br><br><br>or loss		Debt<br><br><br>instruments<br><br><br>measured<br><br><br>at fair<br><br><br>value through<br><br><br>other<br><br><br>comprehensive<br><br><br>income		Equity<br><br><br>instruments<br><br><br>measured<br><br><br>at fair<br><br><br>value through<br><br><br>other<br><br><br>comprehensive<br><br><br>income		Amortized cost		Total		At fair<br><br><br>value<br><br><br>through<br><br><br>profit<br><br><br>or loss		Debt<br><br><br>instruments<br><br><br>measured<br><br><br>at fair<br><br><br>value through<br><br><br>other<br><br><br>comprehensive<br><br><br>income		Equity<br><br><br>instruments<br><br><br>measured<br><br><br>at fair<br><br><br>value through<br><br><br>other<br><br><br>comprehensive<br><br><br>income		Amortized<br><br><br>cost		Total
	S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)		S/(000)
Financial assets
Cash and due from banks		—		—		—		18,765,482		18,765,482		—		—		—		11,128,875		11,128,875
Inter-bank funds		—		—		—		18,105		18,105		—		—		—		85,006		85,006
Financial investments		2,042,777		18,153,492		1,373,548		2,707,298		24,277,115		1,551,537		14,188,473		1,125,722		2,206,986		19,072,718
Loans, net		—		—		—		40,519,423		40,519,423		—		—		—		37,136,853		37,136,853
Due from customers on acceptances		—		—		—		16,320		16,320		—		—		—		139,685		139,685
Others accounts receivable and other assets, net		395,249		—		—		658,140		1,053,389		220,776		—		—		630,430		851,206
		2,438,026		18,153,492		1,373,548		62,684,768		84,649,834		1,772,313		14,188,473		1,125,722		51,327,835		68,414,343
Financial liabilities
Deposits and obligations		—		—		—		47,149,275		47,149,275		—		—		—		38,093,224		38,093,224
Inter-bank funds		—		—		—		28,971		28,971		—		—		—		169,138		169,138
Due to banks and correspondents		—		—		—		9,660,877		9,660,877		—		—		—		3,979,637		3,979,637
Bonds, notes and other obligations		—		—		—		7,778,751		7,778,751		—		—		—		6,890,290		6,890,290
Due from customers on acceptances		—		—		—		16,320		16,320		—		—		—		139,685		139,685
Insurance contract liabilities		—		—		—		12,501,723		12,501,723		—		—		—		11,426,631		11,426,631
Others accounts payable, provisions and other liabilities		271,326		—		—		1,732,461		2,003,787		222,305		—		—		1,546,422		1,768,727
		271,326		—		—		78,868,378		79,139,704		222,305		—		—		62,245,027		62,467,332
22.	Financial risk management
---	---

It comprises the management of the main risks, that due to the nature of their operations, IFS and its Subsidiaries are exposed to; and correspond to: credit risk, market risk, liquidity risk, insurance risk and real estate risk.

In order to manage this risk, every Subsidiary of the Group has a specialized structure and organization in their management, measurement systems, mitigation and coverage processes that considers the specific needs and regulatory requirements to develop its business. The Group and its Subsidiaries, mainly Interbank, Interseguro and Inteligo Bank, operate independently but in coordination with the general provisions issued by the Board of Directors and the Management of IFS.

A full description of the Group’s financial risk management is presented in Note 30 “Financial risk management” of the Annual Consolidated Financial Statements; following is presented the financial information related to credit risk management for the loan portfolio, offsetting of financial assets and liabilities, and foreign exchange risk.

(a)	Credit risk management for loans

Interbank’s loan portfolio is segmented into homogeneous groups that shared similar credit risk characteristics. These groups are: (i) Retail Banking (credit card, mortgage, payroll loan, consumer loan and vehicular loan), (ii) Small Business Banking (segments S1, S2 and S3), and (iii) Commercial Banking (corporate, institutional, companies and real estate). In addition, at Inteligo Bank, the internal model developed (scorecard) assigns 5 levels of credit risk classified as follows: low risk, medium low risk, medium risk, medium high risk, and high risk. These categories are described in Note 30.1(d) of the Annual Consolidated Financial Statements.

The information that shows the credit quality and maximum exposure to credit risk of direct loans based on the Group's internal credit rating as of December 31, 2020 and 2019, are presented in Note 5.

(b)	Offsetting of financial assets and liabilities

The information contained in the tables below includes financial assets and liabilities that.

-Are offset in the statement of financial position of the Group; or

-	Are subject to an enforceable master netting arrangement or similar agreement that covers similar financial instruments, regardless of whether they are offset in the interim consolidated statement of financial position or not.

Similar arrangements of the Group include derivatives clearing agreements. Financial instruments such as loans and deposits are not disclosed in the following tables since they are not offset in the interim consolidated statement of financial position.

The offsetting framework agreement issued by the International Swaps and Derivatives Association Inc. (“ISDA”) and similar master netting arrangements do not meet the criteria for offsetting in the statement of financial position, because of such agreements were created in order for both parties to have an enforceable offsetting right in cases of default, insolvency or bankruptcy of the Group or the counterparties or following other predetermined events. In addition, the Group and its counterparties do not intend to settle such instruments on a net basis or to realize the assets and settle the liabilities simultaneously.

The Group receives and delivers guarantees in the form of cash with respect to transactions with derivatives; see Note 3.

(b.1)	Financial assets and liabilities subject to offsetting, enforceable master netting arrangements and similar agreements as of December 31, 2020 and 2019, is presented below:
							Related amounts not offset in the interim consolidated statement of financial position
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
	Gross amounts of recognized financial assets		Gross amounts of recognized financial liabilities and offset in the interim consolidated statement of financial position		Net amounts of financial assets presented in the interim consolidated statement of financial position		Financial<br><br><br>instruments<br><br><br>(including<br><br><br>non-cash<br><br><br>collateral)			Cash collateral received (pledged),<br><br><br>Note 3(d)			Net amount
Assets	S/(000)		S/(000)		S/(000)		S/(000)			S/(000)			S/(000)
As of December 31, 2020
Derivatives, Note 7(b)		395,249		—		395,249		(191,844	)		(55,767	)		147,638
		395,249		—		395,249		(191,844	)		(55,767	)		147,638
As of December 31, 2019
Derivatives, Note 7(b)		220,776		—		220,776		(134,103	)		(42,351	)		44,322
		220,776		—		220,776		(134,103	)		(42,351	)		44,322
Liabilities
As of December 31, 2020
Derivatives, Note 7(b)		271,326		—		271,326		(191,844	)		(70,559	)		8,923
		271,326		—		271,326		(191,844	)		(70,559	)		8,923
As of December 31, 2019
Derivatives, Note 7(b)		222,305		—		222,305		(134,103	)		(57,816	)		30,386
		222,305		—		222,305		(134,103	)		(57,816	)		30,386
(c)	Foreign exchange risk
---	---

The Group is exposed to fluctuations in the exchange rates of the foreign currency prevailing in its financial position and cash flows. Management sets limits on the levels of exposure by currency and total daily and overnight positions, which are monitored daily. Most of the assets and liabilities in foreign currency are stated in US Dollars. Transactions in foreign currency are made at the exchange rates of free market.

As of December 31, 2020, the weighted average exchange rate of free market published by the SBS for transactions in US Dollars was S/3.618 per US$1 bid and S/3.624 per US$1 ask (S/3.311 and S/3.317 as of December 31, 2019, respectively). As of December 31, 2020, the exchange rate for the accounting of asset and liability accounts in foreign currency set by the SBS was S/3.621 per US$1 (S/3.314 as of December 31, 2019).

The table below presents the detail of the Group’s position:

	As of December 31, 2020										As of December 31, 2019
	US Dollars		Soles			Other<br><br><br>currencies			Total		US Dollars			Soles			Other<br><br><br>currencies			Total
	S/(000)		S/(000)			S/(000)			S/(000)		S/(000)			S/(000)			S/(000)			S/(000)
Assets
Cash and due from banks		7,232,836		10,959,492			573,154			18,765,482		9,386,504			1,311,291			431,080			11,128,875
Inter-bank funds		18,105		—			—			18,105		—			85,006			—			85,006
Financial investments		8,926,088		15,262,993			88,034			24,277,115		6,948,954			12,111,165			12,599			19,072,718
Loans, net		10,535,743		29,983,680			—			40,519,423		10,919,233			26,217,620			—			37,136,853
Due from customers on acceptances		16,320		—			—			16,320		128,397			—			11,288			139,685
Other accounts receivable and other assets, net		312,407		740,113			869			1,053,389		245,402			604,456			1,348			851,206
		27,041,499		56,946,278			662,057			84,649,834		27,628,490			40,329,538			456,315			68,414,343
Liabilities
Deposits and obligations		16,244,869		30,519,198			385,208			47,149,275		13,840,447			23,888,049			364,728			38,093,224
Inter-bank funds		28,971		—			—			28,971		149,137			20,001			—			169,138
Due to banks and correspondents		643,977		9,016,900			—			9,660,877		830,122			3,149,515			—			3,979,637
Bonds, notes and other obligations		6,887,363		891,388			—			7,778,751		5,857,206			1,033,084			—			6,890,290
Due from customers on acceptances		16,320		—			—			16,320		128,397			—			11,288			139,685
Insurance contract liabilities		4,905,233		7,596,490			—			12,501,723		4,254,662			7,171,969			—			11,426,631
Other accounts payable, provisions and other liabilities		530,180		1,440,976			32,631			2,003,787		394,159			1,374,236			332			1,768,727
		29,256,913		49,464,952			417,839			79,139,704		25,454,130			36,636,854			376,348			62,467,332
Forwards position, net		1,525,029		(1,369,873	)		(155,156	)		—		(2,718,082	)		2,776,866			(58,784	)		—
Currency swaps position, net		264,160		(264,160	)		—			—		138,676			(138,676	)		—			—
Cross currency swaps position, net		1,926,886		(1,926,886	)		—			—		1,763,518			(1,763,518	)		—			—
Options position, net		48		(48	)		—			—		(37	)		37			—			—
Monetary position, net		1,500,709		3,920,359			89,062			5,510,130		1,358,435			4,567,393			21,183			5,947,011

As of December 31, 2020, the Group granted indirect loans (contingent operations) in foreign currency for approximately US$634,242,000, equivalent to S/2,296,590,000 (US$683,214,000, equivalent to S/2,264,171,000 as of December 31, 2019).

23.	Fair value
(a)	Financial instruments measured at their fair value. The following table presents an analysis of the financial instruments that are measured at their fair value. The amounts are based on the balances presented in the interim consolidated statement of financial position:
---	---
	31.12.2020		31.12.2019
---	---	---	---	---
	S/(000)		S/(000)
Financial assets
Financial investments
At fair value through profit or loss (*)		2,042,777		1,551,537
Debt instruments measured at fair value through other comprehensive income		17,902,352		14,010,029
Equity instruments measured at fair value through other comprehensive income		1,373,548		1,125,722
Derivatives receivable		395,249		220,776
		21,713,926		16,908,064
Accrued interest		251,140		178,444
Total financial assets		21,965,066		17,086,508
Financial liabilities
Derivatives payable		271,326		222,305
(*)	As of December 31, 2020, and 2019, correspond mainly to participations in mutual funds and investment funds.
---	---
(b)	Financial instruments not measured at their fair value -
---	---

The table below presents the disclosure of the comparison between the carrying amounts and fair values of the Group’s financial instruments that are not measured at their fair value:

	31.12.2020				31.12.2019
	Fair<br><br><br>value		Book<br><br><br>value		Fair<br><br><br>value		Book<br><br><br>value
	S/(000)		S/(000)		S/(000)		S/(000)
Assets
Cash and due from banks		18,765,482		18,765,482		11,128,875		11,128,875
Inter-bank funds		18,105		18,105		85,006		85,006
Investments at amortized cost		2,988,539		2,707,298		2,328,303		2,206,986
Loans, net		40,809,701		40,519,423		38,115,562		37,136,853
Due from customers on acceptances		16,320		16,320		139,685		139,685
Other accounts receivables and other assets, net		658,140		658,140		630,430		630,430
Total		63,256,287		62,684,768		52,427,861		51,327,835
Liabilities
Deposits and obligations		47,146,077		47,149,275		38,099,641		38,093,224
Inter-bank funds		28,971		28,971		169,138		169,138
Due to banks and correspondents		9,686,361		9,660,877		3,982,373		3,979,637
Bonds, notes and other obligations		8,262,212		7,778,751		7,118,547		6,890,290
Due from customers on acceptances		16,320		16,320		139,685		139,685
Insurance contract liabilities		12,501,723		12,501,723		11,426,631		11,426,631
Other accounts payable and other liabilities		1,732,461		1,732,461		1,546,422		1,546,422
Total		79,374,125		78,868,378		62,482,437		62,245,027

The methodologies and assumptions used to determine fair values depend on the terms and risk characteristics of each financial instrument and they include the following:

(i)	Long- term fixed-rate and variable-rate loans are assessed by the Group based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken into account for the estimated losses of these loans. As of December 31, 2020 and 2019, the book value of loans, net of allowances, was not significantly different from the calculated fair values.
(ii)	Instruments whose fair value approximates their book value: For financial assets and financial liabilities that are liquid or have short-term maturity (less than 3 months) it is assumed that the carrying amounts approximate to their fair values. This assumption is also applied to demand deposits, savings accounts without a specific maturity and variable-rate financial instruments.
---	---
(iii)	Fixed- rate financial instruments: The fair value of fixed-rate financial assets and financial liabilities at amortized cost is determined by comparing market interest rates when they were first recognized with current market rates related to similar financial instruments for their remaining term to maturity. The fair value of fixed interest rate deposits is based on discounted cash flows using market interest rates for financial instruments with similar credit risk and maturity. For quoted debt issued, the fair value is determined based on quoted market prices. When quotations are not available, a discounted cash flow model is used based on the yield curve of the appropriate interest rate for the remaining term to maturity.
---	---
24.	Fiduciary activities and management of funds
---	---

The Group provides custody, trustee, investment management and advisory services to third parties; therefore, the Group makes purchase and sale decisions in relation to a wide range of financial instruments. Assets that are held in trust are not included in the interim consolidated financial statements. These services give rise to the risk that the Group could eventually be held responsible of yield of the assets under its management.

As of December 31, 2020 and 2019, the value of the managed off-balance sheet financial assets is as follows:

	31.12.2020		31.12.2019
	S/(000)		S/(000)
Investment funds		15,008,109		13,243,888
Mutual funds		5,980,724		5,049,034
Total		20,988,833		18,292,922