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6-K

Intercorp Financial Services Inc. (IFS)

6-K 2024-03-18 For: 2024-03-18
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Added on April 08, 2026

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

March 18, 2024

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): ☐

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March 18, 2024

Securities and Exchange Commission - SEC

Re.: MATERIAL EVENT

Dear Sirs:

Please find attached a copy of the consolidated financial statements of Intercorp Financial Services Inc. (“IFS”) and its subsidiaries, for the fiscal year ended December 31, 2023, including the report of the external independent auditor Tanaka, Valdivia & Asociados Sociedad Civil de Responsabilidad Limitada, member of Ernst & Young. These financial Statements were approved by IFS’s Board of Directors in its session held on March 18, 2024 and will be submitted for the evaluation and approval of the Annual General Shareholders Meeting to be held on April 1, 2024.

The information in this Form 6-K (including any exhibit hereto) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.

Sincerely,

/s/ Michela Casassa

Chief financial Officer

Translation of independent auditor’s report and consolidated financial statements originally issued in Spanish – Note 33

Intercorp Financial Services Inc. and Subsidiaries

Consolidated financial statements as of December 31, 2023 and 2022, together with Independent Auditor’s Report

Content

Independent Auditor’s Report 3
Consolidated financial statements
Consolidated statement of financial position 7
Consolidated statement of income 8
Consolidated statement of other comprehensive income 9
Consolidated statement of changes in equity 10
Consolidated statement of cash flows 11
Notes to the consolidated financial statements 13

Translation of independent auditor’s report and consolidated financial statements originally issued in Spanish – Note 33

Independent Auditor’s Report

To the Shareholders and Board of Directors of Intercorp Financial Services Inc. and Subsidiaries

Opinion

  1. We have audited the consolidated financial statements of Intercorp Financial Services Inc. and Subsidiaries (the Group), comprising the consolidated statement of financial position as of December 31, 2023, and the consolidated statement of income, comprehensive income, changes in equity and cash flows for the year then ended; as well as the notes to the financial statements, which include a summary of material accounting policies.

  2. In our opinion, the accompanying consolidated financial statements present fairly, in all significant respects, the Group's consolidated financial position as of December 31, 2023, as well as its financial performance and consolidated statement of cash flows for the year then ended, in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.

Basis of the opinion

  1. We perform our audit in accordance with the International Standards on Auditing (ISA) approved for application in Peru by the Board of Peruvian Associations of Certified Public Accountants. Our responsibilities under these standards are described in more detail in the Auditor's Responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the International Accounting Standards Board Code of Ethics for Accountants (IESBA Code) along with ethical requirements that are relevant to our audit of financial statements in Peru, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained provides a sufficient and adequate basis for our opinion.

Key Audit Matters

  1. Key audit matters are those matters that, in our professional judgment, were more important in our audit of the financial statements for the current period. These matters were addressed in the context of the audit of the financial statements as a whole, and in forming our opinion thereon; so we do not provide a separate opinion on these matters. Based on the above, below is how each key matter was addressed during our audit.

  2. We have fulfilled the responsibilities described in the Auditor's Responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included conducting procedures designed to respond to the risks of material misstatement assessed in the consolidated financial statements. The results of the audit procedures, including the procedures performed to address the matters mentioned below, form the basis for the audit opinion on the accompanying consolidated financial statements.

Key Audit Matter Audit response
Information Technology (IT) Environment
The Group's activities depend to a large extent on the efficient and continuous operation of information technology systems and technology infrastructures, which encompass a large number of IT applications and systems for the processing of all its operations, accounting records and preparation of its consolidated financial statements. The Group's IT system consists of a set of complex computer applications, essential in the Group's various business operations. IT environment controls include: IT governance, overall IT controls over program development and changes, access to programs and data, and IT operations, therefore, such controls must be designed and operated effectively with the aim of ensuring the integrity of accounting records and accurate financial reports, in this way mitigate the potential risk of fraud or error. As same of importance are executed calculations of systems, other IT application controls, and interfaces between IT systems.<br><br><br><br>Therefore, we consider the information technology environment as a key matter, given that the reliability and security of IT key systems plays a fundamental role in ensuring the correct treatment of data processing, accounting records and preparation of consolidated financial statements, that is, they depend to a large extent on automated controls over information systems, so, there is a risk that breaches in the IT control environment could result in financial accounting and information records being materially incorrect. Assisted by our Information Technology specialists, our audit efforts focused on the Group's key systems, carrying out, among others, the following procedures:<br><br><br><br>-<br>We evaluated and tested overall IT controls by performing: an understanding of IT governance, reviewing key (including compensatory) controls over application and data access management, application changes and developments, and IT operations.<br><br>-<br>We tested application controls, considering the design and operational effectiveness of critical automated controls to data processing, accounting records and the preparation of the consolidated financial statement. With respect to identified control deficiencies, we tested the design and operational effectiveness of compensation controls.

Translation of independent auditor’s report and consolidated financial statements originally issued in Spanish – Note 33

Expected loss estimate for loan portfolio
As described in notes 3.4(h)(ii), 6 and 30.1(d) of the consolidated financial statements, the expected loss estimate for the loan portfolio is calculated using an expected credit loss (ECL) model, which determines the losses expected to arise for loans as a result of an increase in risk, from the initial date of the loan or when there is objective evidence of impairment. The estimate ECL is measured: to 12 months; or during the expected life of the credit. ECL considers key elements, such as: probability of default (PD), exposure to default (EAD) and loss from default (LGD); these are based on predictable information about past events, current conditions and forward-looking information. When estimating the expected loss the Group considers three scenarios (optimistic, base and pessimistic), each of these scenarios is associated with different probabilities of default. When relevant, the assessment of these scenarios also incorporates the expectation of recovery of nonperforming loans, including the probability that the loans will be cured, and the value of the warranty or the amount received when selling the asset.<br><br><br><br>Significant assumptions and judgments with respect to the estimate include (i) determining when a loan has experienced a significant increase in credit risk; (ii) forecasting forward-looking information for multiple economic scenarios and weighting the probability of those scenarios; (iii) the calculation of credit losses of 12 months and over the expected life of the credit agreement; and (iv) the application of the credit expert judgment, specifically for the current El Niño event situation.<br><br><br><br>Therefore, we consider that the ECL for the loan portfolio is a key audit matter; since changes in assumptions could have a material impact on the calculation of provision; in addition, the determination of accounting figures requires the participation of specialists due to the inherent complexity of models, assumptions, judgments, the prospective nature of key assumptions and the interrelationship of critical variables in measurement. We gained an understanding, evaluated the design and tested the operational effectiveness of the controls of the provision for loan portfolio ECL estimation process, which included:<br><br>-<br>Evaluation Methodology and criteria established for the calculation according to IFRS standards.<br><br>-<br>Evaluation of the model, premises and significant assumptions established by the Group in the calculation.<br><br>-<br>Identification of deterioration indicators and determination of significant changes in credit risk.<br><br>-<br>Integrity and accuracy of the database in the Group's systems.<br><br>-<br>Calculation of the expected credit loss estimation for loan portfolio.<br><br>-<br>Disclosure in the notes to the consolidated financial statements.<br><br>-<br>We assessed whether the methodology, premises and assumptions used in models estimating ECL are consistent with IFRS requirements and industry standards.<br><br>-<br>We assessed significant changes in trigger the factors of the credit risk, methodology forecasts and compare the Group's forward-looking information with publicly available information from independent sources.<br><br>-<br>We tested the completeness and accuracy of the data used in the calculation of the provision against the source systems and related documentation.<br><br>-<br>We independently tested the calculation of ECL and their respective risk parameters.<br><br>-<br>We evaluated the adequacy of disclosures in the notes to the consolidated financial statements.<br><br><br><br>In addition, assisted by our specialists, we carried out detailed substantive procedures, which included:
Construction of the discount rate of the liability for insurance contracts corresponding to the pension business of Liability for Remaining Coverage (LRC) under General Model
As described in notes 3.2, 3.4(d), 3.7 and 14 of the consolidated financial statements, the Group has adopted International Financial Reporting Standard 17 “Insurance Contracts” (IFRS 17), which establishes a new accounting framework for the recognition, measurement, presentation and disclosure of insurance contracts issued and reinsurance maintained. The insurance contract liability is a material figure in the consolidated financial statements and amounts to S/12,207,536,000, and its estimate is based mainly on: (i) the determination of the measurement models by business (general model or building-block approach- BBA, variable fee approach - VFA and the simplified model - PPA) and (ii) the definition of the discount rate.<br><br><br><br>With respect to the portfolio of insurance contract liabilities that includes pensions, life and massive, the key matter is in the determination of the discount rate applied to pension insurance contract business of the remaining coverage (LRC) due to: We obtained an understanding, evaluated the design and tested the operational effectiveness of the controls of the valuation process in the pensions business of the liability for remaining coverage (LRC) by General Model, which included:<br><br>-<br>Evaluation methodology and criteria established for the calculation according to actuarial methods that are accepted by IFRS 17.<br><br>-<br>Evaluation of the actuarial model, premises and assumptions of general acceptance, established by the Group.<br><br>-<br>Integrity and accuracy of the database used in the Group's information systems to manage, calculate and sensitize of these liabilities.<br><br>-<br>Evaluation of the construction of the rate in the pension business of liability remaining coverage (LRC) for the use of internal and external data.<br><br>-<br>Calculation review of the estimate of valuation of liabilities.<br><br>-<br>Disclosure review in the notes to the consolidated financial statements.

Translation of independent auditor’s report and consolidated financial statements originally issued in Spanish – Note 33

- The valuation of said business is carried out using assumptions and actuarial data, which comprise mortality tables and discount rates.<br><br>- The Group uses the Matching Adjustment (MA) methodology to construct the discount rate for the subsequent measurement of liabilities by the General Model (BBA), which requires data from various internal and external sources for its construction.<br><br>- Any change in the assumptions and data incorporated by the sources could have material effects on the valuation of said liabilities.<br><br>- The determination of liabilities under the General Model is complex and requires the participation of actuarial specialists. In addition, assisted by our actuarial specialists, we performed detailed substantive procedures, including:<br><br>-<br>We evaluated the methodology defined by the Group on actuarial models and assumptions, which are consistent with the application of IFRS including beginning balance.<br><br>-<br>We independently evaluated the model and actuarial assumptions used in the calculation.<br><br>-<br>We evaluated the reasonableness of the assumptions and their adequacy.<br><br>-<br>We tested the completeness and accuracy of the data of the units of account, as well as the variables used in the calculation.<br><br>-<br>We evaluated the appropriate determination of the discount rate used in the calculations.<br><br>-<br>We independently tested the calculation made by the Group.<br><br>-<br>We evaluated the proper movement of liabilities considering changes in actuarial assumptions at the end of the year.<br><br>-<br>We evaluated the sensitivity of changes in certain variables in the determination of these liabilities.<br><br>-<br>We evaluated the adequacy of disclosures in the notes to the consolidated financial statements.

Other matter

  1. During the year 2023, Intercorp Financial Services Inc. and Subsidiaries adopted IFRS 17 “Insurance Contracts”. The accounting effects of the application of IFRS 17 are detailed in notes 3.2 and 3.7. The financial statement balances as of and for the year ended December 31, 2022, including the beginning balance as of January 1, 2022, which are presented for comparative purposes, have been restated due to this implementation.

Other information included in the Group's 2023 Annual Report

  1. Other information consists of the information included in the Group's Annual Report other than the consolidated financial statements or our audit report thereon. Management is responsible for other information.

  2. Our opinion on the consolidated financial statements does not cover other information and we do not express any form of conclusion that provides a degree of assurance thereon.

  3. In relation with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, to consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge gained in the audit or otherwise appears to be materially misstated. If, based on the work we have done, we conclude that there is a material error of this other information, we are obliged to report that fact. We have nothing to report in this regard.

Responsibilities of the Group's Management and responsible of the Group's corporate governance in relation to the consolidated financial statements

  1. Management is responsible for the preparation and fair presentation of consolidated financial statements in accordance with IFRS, and for the internal control that Management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

  2. In preparing the consolidated financial statements, Management is responsible for assessing the Group's ability to continue as a going concern, disclosing as appropriate the matters relating to the going concern and using the going concern basis of accounting, unless Management intends to liquidate the Group or cease operations, or have no other realistic alternative to doing so.

  3. Those responsible for the Group's corporate governance are responsible for supervising the Group's financial reporting process.

Auditor's responsibilities in relation to the audit of the consolidated financial statements

  1. Our objectives are to obtain reasonable assurance as to whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue a report that includes our opinion. Reasonable assurance is a high level of assurance, but it does not guarantee that an audit carried out in accordance with ISAs approved for application in Peru will always detect a material misstatement where it exists. Inaccuracies may arise due to fraud or error and are considered material if, individually or cumulatively, they could reasonably be expected to influence the economic decisions users make based on the consolidated financial statements.

  2. As part of an audit in accordance with the International Standards on Auditing (ISAs) approved for application in Peru by the Board of Peruvian Associations of Certified Public Accountants, we exercise professional judgment and maintain professional skepticism throughout the audit. Also:

• We identify and assess the risks of material misstatement in the consolidated financial statements, whether due to fraud or error, design and execute audit procedures that respond to those risks, and obtain audit evidence that is sufficient and appropriate to

Translation of independent auditor’s report and consolidated financial statements originally issued in Spanish – Note 33

provide us a basis for our opinion. The risk of not detecting a material misstatement due to fraud is greater than that resulting from an error, as fraud may involve collusion, falsification, intentional omissions, misrepresentations or overstepping the internal control system.

• We gained an understanding of the internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.

• We evaluate the adequacy of the accounting policies used, the reasonableness of the accounting estimates and the respective disclosures made by Management.

• We conclude on the suitability of Management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether there is material uncertainty related to events or conditions that may raise significant doubts about the Group's ability to continue as a going concern. If we conclude that material uncertainty exists, we are required to draw attention in our audit report to disclosures relating to the consolidated financial statements or, if such disclosures are inadequate to modify our opinion. Conclusions are based on audit evidence obtained to date from our audit report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• We evaluate the general presentation, structure, content of the consolidated financial statements, including disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves a reasonable presentation.

• We obtained sufficient and adequate audit evidence in relation to the financial information of the entities or business activities that are part of the Group, in order to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and execution of the Group's audit and therefore for our audit opinion.

  1. We communicate to the responsible of the Group's corporate governance, among other matters, the planned scope and timing of the audit, the significant findings of the audit, as well as any significant internal control deficiencies identified in the course of the audit.

  2. We also provide those responsible of the Group's corporate governance with a statement that we have complied with the applicable ethics requirements in relation to independence and that we have disclosed all relationships and other matters that could reasonably be expected to affect our independence and, where applicable, including the respective safeguards.

  3. Among the matters that have been the subject of communication with those responsible of the Group's corporate governance, we determine those that have been of the greatest significance in the audit of the consolidated financial statements for the current period and, therefore, are the key audit matters. We have described such matters in our audit report unless legal or regulatory provisions prohibits public disclosure of the matter or, in extremely rare circumstances, we determine that a matter should not be communicated in our report because it would reasonably be expected that the adverse consequences of doing so would outweigh the public interest benefits of the report.

Lima, Peru,

March 18, 2024

Countersigned by:

/s/ Mónica Padilla

Partner in charge

C.P.C.C. Register No.43105

Translation of consolidated financial statements originally issued in Spanish – Note 33

Intercorp Financial Services Inc. and Subsidiaries

Consolidated statement of financial position

As of December 31, 2023 and 2022, and as of January 1, 2022

Note 2023 2022 01.01.2022 Note 2023 2022 01.01.2022
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Note 3.7 Note 3.7 Note 3.7 Note 3.7
Restated Restated Restated Restated
Assets Liabilities and equity
Cash and due from banks 4(a) Deposits and obligations 11
Non-interest bearing 3,059,226 4,012,293 3,931,419 Non-interest bearing 7,960,318 8,684,678 9,270,255
Interest bearing 6,038,794 8,712,874 12,488,242 Interest bearing 41,227,916 39,846,030 39,627,689
Restricted funds 720,691 468,244 684,804 49,188,234 48,530,708 48,897,944
9,818,711 13,193,411 17,104,465
Inter-bank funds 4(e) 119,712 30,012 —
Inter-bank funds 4(e) 524,915 296,119 30,002 Due to banks and correspondents 12 9,025,930 7,100,646 8,522,849
Financial investments 5 26,721,991 22,787,598 24,547,294 Bonds, notes and other obligations 13 5,551,629 7,906,303 8,389,672
Loans, net: 6 Due from customers on acceptances 40,565 45,809 152,423
Loans, net of unearned interest 48,869,807 47,530,853 45,070,500 Insurance and reinsurance contract liabilities 14 12,207,536 11,231,321 12,788,829
Impairment allowance for loans (2,349,425 ) (2,027,855 ) (2,064,917 ) Other accounts payable, provisions and other liabilities 10 3,407,360 3,129,164 2,468,242
46,520,382 45,502,998 43,005,583 Deferred Income Tax liability, net 15 75,712 81,899 —
Total liabilities 79,616,678 78,055,862 81,219,959
Equity, net 16
Equity attributable to IFS’s shareholders:
Capital stock 1,038,017 1,038,017 1,038,017
Investment property 7 1,298,892 1,287,717 1,224,454 Treasury stock (84,309 ) (3,363 ) (3,363 )
Property, furniture and equipment, net 8 804,832 791,432 815,118 Capital surplus 532,771 532,771 532,771
Due from customers on acceptances 40,565 45,809 152,423 Reserves 6,000,000 6,000,000 5,200,000
Intangibles and goodwill, net 9 1,687,120 1,633,202 1,044,749 Unrealized results, net (457,793 ) (554,421 ) (302,477 )
Other accounts receivable and other assets, net 10 2,125,148 1,743,963 1,834,483 Retained earnings 2,921,531 2,359,464 2,219,902
Reinsurance contract assets 14 26,287 34,053 53,849 9,950,217 9,372,468 8,684,850
Deferred Income Tax asset, net 15 55,936 165,787 142,367 Non-controlling interest 57,884 53,759 49,978
Total equity, net 10,008,101 9,426,227 8,734,828
Total assets 89,624,779 87,482,089 89,954,787 Total liabilities and equity, net 89,624,779 87,482,089 89,954,787

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

7

Translation of consolidated financial statements originally issued in Spanish – Note 33

Intercorp Financial Services Inc. and Subsidiaries

Consolidated statement of income

For the years ended December 31, 2023, 2022 and 2021

Note 2023 2022 2021
S/(000) S/(000) S/(000)
Note 3.7 Note 3.7
Restated
Interest and similar income 19 7,120,411 5,871,302 4,605,625
Interest and similar expenses 19 (2,592,366 ) (1,661,689 ) (1,057,937 )
Net interest and similar income 4,528,045 4,209,613 3,547,688
Impairment loss on loans, net of recoveries 6(d.1) and (d.2) (1,981,818 ) (830,551 ) (381,577 )
(Loss) recovery due to impairment of financial investments 5(c) and 5(d) (7,500 ) (12,752 ) 30,898
Net interest and similar income after impairment loss 2,538,727 3,366,310 3,197,009
Fee income from financial services, net 20 1,178,462 1,137,386 823,808
Net gain on foreign exchange transactions 306,431 380,154 423,022
Net gain (loss) on sale of financial investments 6,431 (14,285 ) 250,626
Net gain (loss) on financial assets at fair value through profit or loss 5(e) and 10(b) 15,181 (308,256 ) 63,097
Net gain on investment property 7(b) 73,072 84,631 79,399
Other income 21 156,700 400,181 89,498
1,736,277 1,679,811 1,729,450
Result from insurance activities 22 (178,392 ) (252,854 ) (272,079 )
(178,392 ) (252,854 ) (272,079 )
Other expenses
Salaries and employee benefits 23 (897,275 ) (870,480 ) (807,382 )
Administrative expenses 24 (1,288,862 ) (1,179,788 ) (965,505 )
Depreciation and amortization 8(a) and 9(a) (379,038 ) (336,226 ) (279,690 )
Other expenses 21 (184,992 ) (240,644 ) (210,192 )
(2,750,167 ) (2,627,138 ) (2,262,769 )
Income before translation result and Income Tax 1,346,445 2,166,129 2,391,611
Exchange difference 8,427 (25,478 ) (89,320 )
Income Tax 15(c) (275,596 ) (462,537 ) (502,112 )
Net profit for the year 1,079,276 1,678,114 1,800,179
Attributable to:
IFS’s shareholders 1,072,728 1,668,026 1,790,155
Non-controlling interest 6,548 10,088 10,024
1,079,276 1,678,114 1,800,179
Earnings per share attributable to IFS’s shareholders, basic and diluted (stated in Soles) 25 9.327 14.452 15.510
Weighted average number of outstanding shares (in thousands) 25 115,012 115,418 115,419

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

8

Translation of consolidated financial statements originally issued in Spanish – Note 33

Intercorp Financial Services Inc. and Subsidiaries

Consolidated statement of other comprehensive income

For the years ended December 31, 2023, 2022 and 2021

Note 2023 2022 2021
S/(000) S/(000) S/(000)
Note 3.7 Note 3.7
Restated
Net profit for the year 1,079,276 1,678,114 1,800,179
Other comprehensive income that will not be reclassified to the consolidated statement of income in subsequent periods:
Gains (losses) on valuation of equity instruments at fair value through other comprehensive income 16(e) 16,220 (21,924 ) 146,161
Income Tax 16(e) (157 ) 218 (31 )
Total gain (loss) unrealized that will not be reclassified to the consolidated statement of income 16,063 (21,706 ) 146,130
Other comprehensive income to be reclassified to the consolidated statement of income in subsequent periods:
Net movement of debt instruments at fair value through other comprehensive income 16(e) 1,134,509 (1,833,856 ) (2,282,111 )
Income Tax 16(e) (3,645 ) 8,250 8,404
1,130,864 (1,825,606 ) (2,273,707 )
Insurance premiums reserve 16(e) — — 1,392,280
Insurance reserves at fair value 16(e) (970,191 ) 1,714,334 —
Net movement of cash flow hedges 16(e) (29,112 ) (62,954 ) 97,943
Income Tax 16(e) 6,336 8,670 (15,696 )
(22,776 ) (54,284 ) 82,247
Translation of foreign operations 16(e) (21,970 ) (50,165 ) 95,674
Total gain (loss) unrealized to be reclassified to the consolidated statement of income in subsequent periods 115,927 (215,721 ) (703,506 )
Other comprehensive income for the year 131,990 (237,427 ) (557,376 )
Total comprehensive income for the year, net of Income Tax 1,211,266 1,440,687 1,242,803
Attributable to:
IFS’s shareholders 1,202,789 1,432,395 1,236,980
Non-controlling interest 8,477 8,292 5,823
1,211,266 1,440,687 1,242,803

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

9

Translation of consolidated financial statements originally issued in Spanish – Note 33

Intercorp Financial Services Inc. and Subsidiaries

Consolidated statement of changes in equity

For the years ended December 31, 2023, 2022 and 2021

Attributable to IFS’s shareholders
Unrealized results, net
Number of shares Instruments<br>that will not be<br>reclassified<br>to the<br>consolidated<br>statement<br>of income Instruments that will be reclassified to the<br>consolidated statement of income
Issued In<br>treasury Capital<br>stock Treasury<br>stock Capital<br>surplus Reserves Equity<br>instruments<br>at fair value Debt<br>instruments<br>at fair value Insurance<br>premiums<br>reserves Cash<br>flow<br>hedges<br>reserve Translation of foreign operations Retained<br>earnings Total Non-<br>controlling<br>interest Total equity,<br>net
(in thousands) (in thousands) 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, 2021 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
Net profit for the year — — — — — — — — — — — — — — — — 1,790,155 1,790,155 10,024 1,800,179
Other comprehensive income — — — — — — 145,899 (2,266,729) 1,389,995 81,986 95,674 — (553,175) (4,201) (557,376)
Total comprehensive income — — — — — — 145,899 (2,266,729) 1,389,995 81,986 95,674 1,790,155 1,236,980 5,823 1,242,803
Declared and paid dividends, Note 16(a) — — — — — — — — — — — (633,853) (633,853) — (633,853)
Purchase of treasury stock, Note 16(b) — (5) — (594) — — — — — — — — (594) — (594)
Dividends paid to non-controlling interest of Subsidiaries — — — - — — — — — — — — — (328) (328)
Sale of equity instruments at fair value through other comprehensive income, Note 5(g) — — — - — — (451,898) — — — — 451,898 — — —
Others — — — - — — — — — — — (6,605) (6,605) (10) (6,615)
Balance as of December 31, 2021, Note 3.7 115,447 (29) 1,038,017 (3,363) 532,771 5,200,000 (8,787) (599,626) 134,150 44,878 261,085 2,904,912 9,504,037 51,325 9,555,362
Changes due to first adoption of IFRS 17 "Insurance Contract", Note 3.7 — — — — — — — — (134,177) — — (685,010) (819,187) (1,347) (820,534)
Balances as of January 1, 2022 - Restated, Note 3.7 115,447 (29) 1,038,017 (3,363) 532,771 5,200,000 (8,787) (599,626) (27) 44,878 261,085 2,219,902 8,684,850 49,978 8,734,828
Net profit for the year — — — — — — — — — — — 1,668,026 1,668,026 10,088 1,678,114
Other comprehensive income — — — — — — (21,663) (1,821,183) 1,711,520 (54,140) (50,165) - (235,631) (1,796) (237,427)
Total comprehensive income — — — — — — (21,663) (1,821,183) 1,711,520 (54,140) (50,165) 1,668,026 1,432,395 8,292 1,440,687
Declared and paid dividends, Note 16(a) — — — — — — — — — — — (751,532) (751,532) — (751,532)
Transfer of retained earnings to reserves, Note 16(g) — — — — — 800,000 — — — — — (800,000) — — —
Dividends paid to non-controlling interest of Subsidiaries — — — — — — — — — — — — — (4,511) (4,511)
Sale of equity instruments at fair value through other comprehensive income, Note 5(g) — — — — — — (16,313) — — — — 16,313 — — —
Others — — — — — — - — — — — 6,755 6,755 — 6,755
Balances as of December 31, 2022 - Restated, Note 3.7 115,447 (29) 1,038,017 (3,363) 532,771 6,000,000 (46,763) (2,420,809) 1,711,493 (9,262) 210,920 2,359,464 9,372,468 53,759 9,426,227
Net profit for the year — — — — — — — — — — — 1,072,728 1,072,728 6,548 1,079,276
Other comprehensive income — — — — — — 16,055 1,127,246 (968,599) (22,671) (21,970) — 130,061 1,929 131,990
Total comprehensive income — — — — - — 16,055 1,127,246 (968,599) (22,671) (21,970) 1,072,728 1,202,789 8,477 1,211,266
Declared and paid dividends, Note 16(a) — — — — — — — — — — — (511,788) (511,788) — (511,788)
Purchase of treasury stock, Note 16(b) — (938) — (80,946) — — — — — — — — (80,946) — (80,946)
Dividends paid to non-controlling interest of Subsidiaries — — — — — — — — — — — — — (4,242) (4,242)
Sale of equity instruments at fair value through other comprehensive income, Note 5(g) — — — — — — (33,433) — — — — 33,433 — — —
Others — — — — — — — — — — — (32,306) (32,306) (110) (32,416)
Balance as of December 31, 2023 115,447 (967) 1,038,017 (84,309) 532,771 6,000,000 (64,141) (1,293,563) 742,894 (31,933) 188,950 2,921,531 9,950,217 57,884 10,008,101

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

10

Translation of consolidated financial statements originally issued in Spanish – Note 33

Intercorp Financial Services Inc. and Subsidiaries

Consolidated statement of cash flows

For the years ended December 31, 2023, 2022 and 2021

2023 2022 2021
S/(000) S/(000) S/(000)
Note 3.7 Note 3.7
Restated
Cash flows from operating activities
Net profit for the year 1,079,276 1,678,114 1,800,179
Plus (minus) adjustments to net profit
Impairment loss on loans, net of recoveries 1,981,818 830,551 381,577
Loss (recovery) due to impairment of financial investments 7,500 12,752 (30,898 )
Depreciation and amortization 379,038 336,226 279,690
Provision for sundry risks 4,138 12,661 14,872
Deffered Income Tax 102,244 (442 ) 205,752
Net (gain) loss on sale of financial investments (6,431 ) 14,285 (250,626 )
Net (gain) loss of financial assets at fair value through profit or loss (15,181 ) 308,256 (63,097 )
Net gain for valuation of investment property (7,111 ) (19,146 ) (21,969 )
Sale of fixed assets (15,300 ) (11,780 ) —
Fair value adjustment on the participation held by Interbank in Izipay, Note 1(d) — (222,513 ) —
Exchange difference (8,427 ) 25,478 89,320
Increase in accrued interest receivable (167,468 ) (168,454 ) (16,108 )
Increase (decrease) in accrued interest payable 194,285 121,324 (63,839 )
Net changes in assets and liabilities
Net increase in loan portfolio (2,883,998 ) (3,204,130 ) (2,949,964 )
Net (increase) decrease in other accounts receivable and other assets (295,748 ) 331,287 (199,227 )
Net (increase) decrease in restricted funds (246,775 ) 225,659 (75,308 )
Increase (decrease) in deposits and obligations 503,544 (467,213 ) 1,893,763
Increase (decrease) in due to banks and correspondents 1,837,830 (1,460,227 ) (1,138,320 )
Increase in other accounts payable, provisions and other liabilities 558,971 498,321 2,430,391
Income Tax paid (450,125 ) (334,173 ) (280,412 )
Decrease (increase) of investments at fair value through profit or loss 323,112 481,087 (659,972 )
Net cash provided by (used in) operating activities 2,875,192 (1,012,077 ) 1,345,804

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

11

Translation of consolidated financial statements originally issued in Spanish – Note 33

Consolidated statement of cash flows (continued)

2023 2022 2021
S/(000) S/(000) S/(000)
Note 3.7 Note 3.7
Restated
Cash flows from investing activities
Purchase of investments at fair value through other comprehensive income and at amortized cost (3,120,456 ) (857,589 ) (1,911,799 )
Purchase of property, furniture and equipment (147,645 ) (135,036 ) (87,282 )
Purchase of intangible assets (280,388 ) (227,270 ) (170,528 )
Purchase of investment property (16,903 ) (34,760 ) (156,892 )
Sale of property, furniture and equipment 32,667 54,313 —
Purchase of subsidiaries, net of cash received — (193,215 ) —
Net cash used in investing activities (3,532,725 ) (1,393,557 ) (2,326,501 )
Cash flows from financing activities
Dividends paid (511,788 ) (751,532 ) (633,853 )
Payments of bonds, notes and other obligations (2,189,040 ) (137,900 ) (91,000 )
Net increase in receivable inter-bank funds (228,796 ) (266,117 ) (11,897 )
Net increase (decrease) in payable inter-bank funds 91,245 30,482 (30,945 )
Purchase of treasury stock, net (80,946 ) — (594 )
Dividend payments to non-controlling interest (4,776 ) (4,174 ) (30 )
Lease payments (89,334 ) (146,982 ) (93,379 )
Net cash used in financing activities (3,013,435 ) (1,276,223 ) (861,698 )
Net decrease in cash and cash equivalents (3,670,968 ) (3,681,857 ) (1,842,395 )
Translation gain (loss) on cash and cash equivalents 37,403 (26,678 ) 112,787
Cash and cash equivalents at the beginning of the year 12,707,776 16,416,311 18,145,919
Cash and cash equivalents at the end of the year, Note 3.4(ag) 9,074,211 12,707,776 16,416,311
Supplementary cash flow information:
Cash paid by -
Interest 2,253,881 1,395,673 988,315
Dividends 516,564 755,706 634,181
Income Tax 450,125 334,173 280,412
Cash received from -
Interest 6,905,711 5,620,231 4,483,746
Dividends received 52,215 88,236 108,931
Operations that do not generate cash flow -
Recognition of right-of-use assets 35,901 33,178 31,692
Effect on the participation in Izipay prior to its acquisition, Note 1(d) — (222,513 ) —

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

12

Translation of consolidated financial statements originally issued in Spanish – Note 33

Intercorp Financial Services Inc. and Subsidiaries

Notes to the consolidated financial statements

As of December 31, 2023 and 2022

1. Business activity, current context and acquisition of Subsidiaries

(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 Peru Ltd. (henceforth “Intercorp Peru”), a holding Company incorporated in 1997 in the Commonwealth of the Bahamas. As of December 31, 2023, Intercorp Peru holds directly and indirectly 71.44 percent of the issued capital stock of IFS, equivalent to 71.20 percent of the outstanding capital stock of IFS (70.65 percent of the issued capital stock of IFS, equivalent to 70.64 percent of the outstanding capital stock of IFS as of December 31, 2022).

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

As of December 31, 2023 and 2022, IFS holds 99.30 percent of the capital stock of Banco Internacional del Peru S.A.A. – Interbank (henceforth “Interbank”), 99.84 percent of the capital stock of Interseguro Compañía de Seguros S.A. (henceforth “Interseguro”), 100 percent of the capital stock of Inteligo Group Corp. (henceforth “Inteligo”) and 100 percent of Procesos de Medios de Pago and its subsidiary Izipay S.A.C (henceforth and together "Izipay"), acquired in April 2022, see (d).

The operations of Interbank, Interseguro and Izipay 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 main activities of IFS’s Subsidiaries and their assets, liabilities, equity, operating income, net income, balances and other relevant information are presented in Note 2.

The consolidated financial statements of IFS and Subsidiaries as of December 31, 2022, and for the year then ended, were approved by the General Shareholders’ Meeting held on March 31, 2023. The consolidated financial statements as of December 31, 2023, and for the year then ended, have been approved and authorized for issuance by Management and the Board of Directors on March 18, 2024, and will be submitted for approval by the General Shareholders’ Meeting that will be held within the deadline established by law.

(b) Political and social context in Peru –

In December 2022, Pedro Castillo, then President of Peru, attempted to carry out a coup attempt and to establish a State of Exception. Due to this, the Peruvian Congress, through extraordinary session, approved the Pedro Castillo destitution, and designated Dina Boluarte, as a new President of the Republic of Peru. Following the aforementioned, protests and social upheaval erupted in the country.

Considering this situation, the Superintendence of Banking, Insurance and Private Pension Funds (henceforth “SBS”, by its Spanish acronym) issued Official Multiple Letters that stablished measures related to loan rescheduling aimed to facilitate the debt payment of the financial sector’s clients. Also, the SBS authorized the entities of the financial sector to modify the contractual conditions of retail loans, provided they comply with several requirements. See further detail in Notes 6(h) and 29.1(d.6).

(c) Pandemic Covid-19 -

In March 2020, the World Health Organization declared Covid-19 a global pandemic, which resulted in several restrictive measures. Since May 2020, the gradual resumption of economic activities began, according to the measures stablished by the Government considering that in the first semester of 2022, the economic activities reached levels before the pandemic. During the Covid-19 pandemic, the Ministry of Economy and Finance (henceforth “MEF”, by its Spanish acronym), Central Reserve Bank of Peru (henceforth “BCRP”, by its Spanish acronym) and the SBS issued several resolutions aimed to alleviate the impacts of the pandemic. These measures are described in further detail in Notes 6(h), 29.1(d.5) and 29.1(d.6).

(d) Acquisition of Procesos de Medios de Pago S.A. and Subsidiary Izipay S.A.C. (“Izipay”)

Until March 2022, the Group (through its subsidiary Interbank) held 50 percent of Izipay. In April 2022, IFS acquired the remaining 50 percent of Izipay's capital stock, thus completing the 100 percent of its capital stock. The amount paid by IFS amounted to US$83,775,000 (equivalent to approximately S/312,647,000). The economic activity of the acquired companies is explained in greater detail in Note 2(g).

The acquisition made by IFS was recorded using the “Step acquisition” accounting method, pursuant to IFRS 3 “Business Combinations”. According to this method, the acquirer company must readjust to fair value the previously held equity interest in the acquiree entities. Additionally, assets and liabilities must be recorded at their fair values

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

estimated at the acquisition date, including the identified intangible assets and the resulting goodwill that were not recorded in the statements of financial position of each acquired entity.

As a result of the acquisition and pursuant to the accounting regulation in force, the previous participation was adjusted to its fair value with an effect of S/222,513,000, recorded in September 2022 and presented in the caption "Other income” of the consolidated statement of income, see note 21. The expenses associated with the acquisition of approximately S/381,000 were presented in the caption “Administrative expenses” of the consolidated statement of income. The fair values of the assets and liabilities of the acquired entities as of March 31, 2022, the date closest to the takeover, are presented below:

Fair value of the acquired entities
S/(000)
Assets -
Cash 119,432
Trade accounts receivable and other receivables 178,982
Inventory 13,600
Deferred assets 102,687
Property, furniture and equipment, Note 8(a) 83,486
Right-of-use assets, Note 8(a) 6,593
Intangibles, Note 9(a) 331,421
Deferred income tax asset 11,014
Other assets 3,903
Liabilities -
Financial obligations 26,251
Trade accounts payable and other payables 319,456
Deferred income 25,190
Lease liability 6,593
Other liabilities 223
Deferred income tax liability, Note 15(a) 86,541
Total identifiable net assets at fair value 386,864
Goodwill, Note 9(a) 238,429
Fair value of acquired entities 625,293

The net cash flow incurred as a result of the acquisition is presented below:

S/(000)
Total price paid 312,647
Cash of acquired companies (119,432 )
193,215

Since the date of its acquisition until December 31, 2022, Izipay contributed to the Group with consolidated revenues of S/595,360,000 and consolidated net income of S/41,075,000. If the acquisition had taken place at the beginning of the year 2022, they would have contributed with consolidated revenues of S/754,284,000 and consolidated net income of S/51,182,000.

2. Subsidiaries

IFS’s Subsidiaries are the following:

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

Interbank is incorporated in Peru and is authorized by the SBS to operate as a universal bank in accordance with Peruvian law. The Interbank's operations are governed by the General Act of the Banking and Insurance System and Organic Act of the SBS – Act No. 26702 and its amendments (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, 2023, Interbank had 153 offices (164 offices as of December 31, 2022). 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”.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(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.

Interseguro holds participations in Patrimonio Fideicometido D.S.093-2002-EF, Interproperties Peru (henceforth “Patrimonio Fideicometido – Interproperties Peru”), that is a structured entity, incorporated in April 2008, and 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 that were included in this structured entity as of December 31, 2023 and 2022, amounted to S/85,272,000 and S/93,994,000, respectively; see Note 7. 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 Peru). IFS has ownership and decision-making power over these properties and the Group 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, 2023 and 2022, 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 Peru Holding S.A.C. Financial holding company incorporated in Peru in December 2018. As of December 31, 2023 and 2022, 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, provides investment consultancy and related services.

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

These entities were acquired by IFS as part of the purchase of Seguros Sura and Hipotecaria Sura in year 2017; Note 9(b). In April 2021, Negocios e Inmuebles S.A. (absorbing company) merged with Holding Retail Peru S.A. (absorbed company), the latter being extinguished without liquidation. As of December 31, 2023 and 2022, Negocios e Inmuebles S.A., holds 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 the commercial name of Shopstar (online Marketplace) dedicated to the sale of products from different stores locally.

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

Entity incorporated in August 2020, which its corporate purpose is to perform any type of investments and related services.

(g) Procesos de Medios de Pago S.A. and subsidiary Izipay S.A.C. (Izipay) -

Both companies were acquired in April 2022, as detailed in Note 1(d). Procesos de Medios de Pago is dedicated to the development, management and operation of the shared service of transaction processing of credit and debit cards, through the acquirer role for the brands MasterCard, Visa and other private brands; also, it renders the processing service, through the issuer role, to entities of the financial system. Izipay is dedicated to the facilitation of payments and services, offering its services of technological, operating and safety infrastructure through the affiliation of commercial stores, as well as installation and maintenance of infrastructure for transactions through the electronic commerce modality, interconnected with the networks of payment methods processors.

As indicated in Note 1(d), in April 2022, IFS acquired control of Izipay, becoming it its Subsidiary. Since this time, Izipay consolidates its financial information together with IFS. The investment that Interbank held in Izipay until March 31, 2022, is presented as investments in associates in the accompanying consolidated financial statements.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

The table below presents a summary of the consolidated financial statements of the main Subsidiaries, before adjustments and eliminations for consolidation, as of December 31, 2023 and 2022, in accordance with the IFRS. Additionally, for information on business segments, see Note 27:

Interbank and Subsidiaries Interseguro-Note 3.7 Inteligo and Subsidiaries Izipay
2023 2022 2023 2022 2023 2022 2023 2022
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Consolidated statement of financial position -
Cash and due from banks 8,598,513 11,052,299 266,311 631,156 844,965 1,457,446 130,149 111,087
Financial Investments 11,964,232 9,586,343 12,776,783 11,295,068 1,855,074 1,698,229 56,459 —
Loans, net 45,004,811 43,725,346 — — 1,519,659 1,784,343 — —
Investment property — — 1,298,892 1,287,717 — — — —
Total assets 68,437,614 66,977,277 14,741,746 13,636,383 4,374,266 5,102,598 1,196,049 902,610
Deposits and obligations 46,053,607 44,597,855 — — 3,311,719 4,098,842 — —
Due to banks and correspondents 8,669,331 6,726,595 215,560 308,164 84,004 53,937 61,024 18,584
Bonds, notes and other obligations 4,253,188 6,571,539 244,599 251,524 — — — —
Insurance contract liabilities — — 12,068,741 11,092,526 — — — —
Total liabilities 60,380,895 59,498,433 13,709,303 12,665,533 3,453,408 4,208,369 946,660 686,292
Equity attributable to IFS’s shareholders 8,056,719 7,478,844 1,032,443 970,850 920,858 894,229 249,389 216,318
Consolidated statement of income -
Net interest and similar income 3,712,220 3,297,436 778,649 861,964 85,556 104,810 4,348 300
(Loss) recovery due to impairment on loans, net of recoveries (1,981,988 ) (832,919 ) — — 170 2,368 — —
Recovery (loss) due to impairment of financial investments 15 (732 ) (7,858 ) (26 ) 347 (11,981 ) — —
Net gain of investment property — — 7,111 19,146 — — — —
Fee income from financial services, net 813,279 797,711 (13,431 ) (7,160 ) 146,223 163,325 345,583 258,728
Result from insurance activities, before expenses — — (178,379 ) (252,854 ) — — — —
Net profit (loss) for the year attributable to IFS’s shareholders 856,149 1,374,121 359,550 320,457 36,180 (141,395 ) 33,069 41,074

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

3. Significant accounting policies

3.1. Basis of presentation -

The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (henceforth “IFRS”) as issued by International Accounting Standards Board (henceforth “IASB”) and are presented in Soles, which is the functional currency of the Group. All values are rounded to the nearest thousand (S/(000)), except when otherwise indicated.

The preparation of the consolidated financial statements in conformity with the IFRS requires Management to make estimations and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of significant events in the notes to the consolidated financial statements; see Note 3.6.

3.2. Adoption of new standards and disclosures -

In these consolidated financial statements, the Group has adopted for the first time the International Financial Reporting Standard 17 “Insurance Contracts” (henceforth “IFRS 17”), effective for periods beginning on or after January 1, 2023. Other standards, interpretations or amendments are also adopted for the first time in 2023, but as of December 31, 2023, they did not have a significant impact on the Group’s consolidated financial statements. The Group has not early adopted any standard, interpretation or amendment that was issued but is not yet effective.

  • First time adoption of IFRS 17 “Insurance Contracts”

IFRS 17 replaces International Financial Reporting Standard 4 “Insurance Contracts” (henceforth “IFRS 4”) for annual periods beginning on or after January 1, 2023.

As permitted by IFRS 17, the Group reformulated the comparative information of the period 2022 for insurance contracts within the scope of IFRS 17. However, the comparative information of the period 2021 is presented within the scope of IFRS 4 and is not comparable to the information presented in the period 2022. The differences arising due to the adoption of IFRS 17 have been recognized directly in retained earnings as of January 1, 2022, and are disclosed in Note 3.7.

The nature of changes in the accounting policies is presented below:

(a) Classification and measurement –

The adoption of IFRS 17 has not changed the classification of the Group’s insurance contracts. However, it establishes specific principles for the recognition and measurement of insurance contracts held by the Group.

The key principles of IFRS 17 consider that the Group:

-Identifies insurance contracts as those under which the entity accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder.

-Recognizes and separates in insurance contracts investment components (financial derivatives) and goods or services components from insurance services and records them according to other standards.

-Divides insurance contracts into groups that it recognizes and measures:

•At the risk-adjusted present value of the future cash flows (fulfillment cash flow, or “FCF”) that incorporates all available information on cash flows in a manner consistent with observable market information.

Plus:

•An amount representing the unearned profit in the group of contracts (the contractual service margin, or “CSM”).

-Recognizes profit on a group of insurance contracts during each period in which the Group provides insurance contract services, as the Group is relieved of risk. If a group of contracts is expected to be onerous (i.e., generate losses) during the remaining coverage period, the Group recognizes the loss immediately.

(b) Changes in disclosures –

The differences between IFRS 17 and IFRS 4 are presented in Note 3.7, together with the transition disclosures. The detailed qualitative and quantitative information of the valuation of insurance contract groups, such as assumptions and inputs used, are presented in Notes 3.4(d.1) and 3.7.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

- Amendments to IAS 8 “Accounting policies, changes in estimates and errors”: Definition of Accounting Estimates

The amendments to IAS 8 clarify the distinction between changes in accounting estimates, changes in accounting policies and the correction of errors. They also clarify how entities use measurement techniques and inputs to develop accounting estimates.

These amendments had no impact on the Group’s consolidated financial statements.

- Amendments to IAS 1 “Presentation of Financial Statements” and IFRS Practice Statement 2: Disclosure of Accounting Policies

The amendments to IAS 1 and IFRS Practice Statement 2 “Making Materiality Judgements” provide guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their ‘material’ accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures.

The amendments did not have a substantial impact on the Group’s disclosures of accounting policies, and did not have an impact on the measurement, recognition, or presentation of any items in the Group’s consolidated financial statements.

- Amendments to IAS 12 “Income Taxes”: Deferred Tax related to assets and Liabilities arising from a single transaction

The amendments to IAS 12 “Income Tax” narrow the scope of the initial recognition exception, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences.

The amendments had no impact on the Group’s consolidated financial statements.

- Amendments to IAS 12 “Income Taxes”: International Tax Reform – Pillar Two Model Rules

The amendments to IAS 12 “Income Taxes” have been introduced in response to the OECD’s Base erosion and profit shifting (BEPS) Pillar Two rules and include:

• A mandatory temporary exception to the recognition and disclosure of deferred taxes arising from the jurisdictional implementation of the Pillar Two model rules; and

• Disclosure requirements for affected entities to help users of the financial statements better understand an entity’s exposure to Pillar Two income taxes arising from that legislation, particularly before its effective date.

The mandatory temporary exception – the use of which is required to be disclosed – applies immediately. The remaining disclosure requirements apply for annual reporting periods beginning on or after 1 January 2023, but not for any interim periods ending on or before 31 December 2023.

In Group Management’s opinion, the amendments had no impact on the consolidated financial statements due to, as of December 31, 2023, and as of the date of this report, the standard has not been adopted in the jurisdictions in which the companies of the Group operate. The Group will monitor the adoption of said standard.

3.3. Basis of consolidation -

The consolidated financial statements comprise the financial statement of IFS and its Subsidiaries (see Note 2).

For consolidation accounting purposes, control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns. Specifically, the Group controls an investee if and only if the Group has:

- Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee);
- Exposure, or rights, to variable returns from its involvement with the investee; and
- The ability to use its power over the investee to affect its returns.

Generally, it is presumed that a majority of voting rights entitles to control. To support this presumption and when the Group has less than the majority of votes or similar rights in the investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

- The contractual arrangement with the other vote holders of the investee;
- Rights arising from other contractual arrangements; and
- The Group’s voting rights and potential voting rights.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

The Group assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation with a Subsidiary begins when the Group obtains control over the Subsidiary and ceases when the Group loses control of the Subsidiary. Assets, liabilities, income and expenses of a acquired or disposed subsidiary during the year are included in the consolidated financial statements from the date the Group acquired control until the date the Group ceases the control of the subsidiary.

Profit and loss and each component of other comprehensive income (“OCI”) are attributed to the equity holders of the Group’s parent Company and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statement of Subsidiaries to bring their accounting policies into line with the Group’s accounting policies.

All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are totally eliminated on consolidation.

If the Group loses control over a subsidiary, it derecognizes the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognized in profit or loss. Any investment retained is recognized at fair value.

Assets in custody or managed by the Group, such as investment funds and others, are not part of the Group’s consolidated financial statements; see Note 3.4(ac).

3.4. Summary of material accounting policies -

(a) Foreign currency translation -

Functional and presentation currency:

The Group has determined that its functional and presentation currency is the Sol, because it reflects the economic substance of the underlying events and circumstances relevant to most of the Group’s entities, insofar as its main operations and/or transactions, such as loans granted, financing obtained, sale of insurance premiums, interest and similar income, interest and similar expenses and an important percentage of purchases are established and settled in Soles; in addition, it corresponds to the functional currency to most of the Subsidiaries; except for Inteligo Bank, whose functional currency is the US Dollar.

Because Inteligo Bank has a functional currency different from the Sol, its balances were translated for consolidation purposes using the methodology established by IAS 21 “The Effects of Changes in Foreign Exchange Rates”, as follows:

- Assets and liabilities at the closing rate at the date of each consolidated statement of financial position.
- Income and expenses, at the average exchange rate for each month.

As a result of the translation, the Group has recorded the difference in the caption “Exchange differences on translation of foreign operations” in the consolidated statement of other comprehensive income.

Foreign currency balances and transactions:

Foreign currency transactions and balances are those performed in currencies different from the functional currency. Transactions in foreign currencies are initially recorded in the functional currency using the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the exchange rate in effect on the reporting date. The differences between the closing rate at the date of each consolidated statement of financial position presented and the exchange rate initially used to record the transactions in foreign currency are recognized in the consolidated statement of income in the period in which they arise, in the caption “Translation result”. Non-monetary assets and liabilities acquired in a foreign currency are recorded at the exchange rate at the date of the initial transaction.

(b) Interest income -

(b.1) Effective interest rate method -

Under IFRS 9, interest income is recorded using the effective interest rate (“EIR”) method for all financial assets measured at amortized cost, interest rate derivatives for which hedge accounting is applied and the related amortization/recycling effect of hedge accounting. The interest income of financial assets that accrue interest measured at fair value through other comprehensive income according to IFRS 9 is also recorded using the EIR method. Interest expenses are also calculated using the EIR method for all financial liabilities held at amortized cost. EIR is the rate that exactly discounts estimated future cash flows through the expected life of the financial instrument or, when appropriate, a shorter period at the net carrying amount of the financial asset.

The EIR (and therefore, the amortised cost of the financial asset) is calculated by taking into account transaction costs and any discount or premium on the acquisition of the financial asset, as well as fees and costs that are an integral part of the EIR. The Group recognizes interest income using the best estimate of a constant rate of return over the expected life of the financial asset. Therefore, the EIR calculation also considers the effect of potentially different interest rates that may be charged at various stages of the financial asset’s expected life, and other characteristics of the product’s life cycle (including prepayments, penalty interest and charges).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

If expectations of fixed rate financial assets’ or liabilities’ cash flows are revised for reasons other than credit risk, then changes to future contractual cash flows are discounted at the original EIR, and the adjustment is recorded as a positive or negative adjustment of the carrying amount of the financial asset in the consolidated statement of financial position with an increase or decrease in Interest revenue.

For floating-rate financial instruments, periodic re-estimation of cash flows to reflect the movements in the market rates of interest also alters the effective interest rate, but when instruments were initially recognized at an amount equal to the principal, re-estimating the future interest payments does not significantly affect the carrying amount of the asset or the liability.

(b.2) Interest income and similar -

The Group calculates the interest income by applying the EIR to the gross carrying amount of non-impaired financial assets.

When a financial asset becomes impaired, and, therefore, it is classified as Stage 3 (as established in Note 3.4(h)), the Group calculates the interest income by applying the EIR at the amortized cost of the asset. If the financial assets “recover”, as detailed in Note 30.1(d), and is no longer impaired, the Group recalculates the interest income in gross figures.

For purchased or originated credit-impaired (POCI) assets, as established in Note 30.1(d), the Group calculates the interest income by determining the credit-adjusted EIR at the amortized cost of the asset. The credit-adjusted EIR is the interest rate that, in the initial recognition, discounts the estimated future cash flows (including credit losses) at the amortized cost of POCI assets.

The interest income for all trading assets, that is, for those that are measured at fair value through profit or loss, are presented under the caption “Net gain of financial assets at fair value through profit or loss” of the consolidated statement of income.

(c) Banking services commissions -

The Group earns fee and commission income from a diverse range of financial services it provides to its customers. Fee and commission income are recognized at an amount that reflects the consideration to which the Group expects to be entitled in exchange for providing the services.

The performance obligations, as well as the timing of their satisfaction, are identified and determined at the inception of the contract. The Group’s income from contracts do not typically include multiple performance obligations.

When the Group provides a service to its clients, the consideration is invoiced and generally due immediately upon satisfaction of a service provided at a point in time or at the end of the contract period for a service provided over time.

The Group has generally concluded that it is the principal in its revenue arrangements because it typically controls the services before transferring them to the customer.

The fees included in the caption “Fees for banking services, net” that make up part of the consolidated statement of income include fee income where performance obligations are satisfied at a specific time or over a period of time.

Fee income where performance obligations are satisfied over a period of time include, among others, collection services, funds management, memberships, fees for contingent loans and credit card insurance. Likewise, fee income where performance obligations are satisfied at a specific time include, among others, banking service fees, brokerage and custody services, and credit card fees.

Below is the main income from contracts with customers that are recognized in the consolidated statement of financial position:

- Fees receivable for credit cards and certain fees receivable for letters of guarantee included in the caption “Other accounts receivable and other assets, net”, represent the Group’s right to an unconditional consideration (i.e., it only requires the passing of time for the consideration payment). This income is measured at amortized cost and is subject to impairment specifications under IFRS 9.
- Deferred income from commissions for letters of guarantee included in the caption “Other accounts payable, provisions and other liabilities”, represent the Group’s obligation to render services to a customer, from whom the Group has received a consideration (or a due amount). A liability for unearned fees and commissions is recognized when the payment is made or when the payment is due (whichever happens first). Unearned fees and commissions are recognized as income when the Group renders the service.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(d) Insurance contracts –

(d.1) Accounting policies for insurance activities (Policy applicable from January 1, 2023)

(d.1.1) Insurance contracts -

(d.1.1.1) Initial recognition -

IFS recognizes, under IFRS 17, a group of insurance contracts when the first of the following events occurs:

  • The beginning of the coverage period of the group of contracts,

  • The date when the first payment from a policyholder in the group is due, or

  • For a group of onerous contracts.

At initial recognition, the company shall measure a group of insurance contracts by the total of:

  • The fulfillment cash flows, which comprise:

-Estimates of the future cash flows.

-An adjustment to reflect the time value of money and the financial risks related to the future cash flows, to the extent that the financial risks are not included in the estimates of the future cash flows.

-A risk adjustment for the non-financial risk.

-The contractual service margin (“CSM”).

The book value at the end of period of a group of insurance contracts shall be the sum of:

-The liability for remaining coverage, which comprises:

-The fulfillment of cash flows related to future services

-The contractual service margin or CSM

-The adjustment rate at market value

-The claims incurred liability, which comprises the fulfillment cash flows related to future services.

(d.1.1.2) Levels of aggregation -

Insurance contract portfolios- The first level of aggregation for insurance contracts consists of determining the portfolio. An insurance portfolio shall be composed by a group of contracts subject to similar risks and managed jointly.

The Group has deemed that the following factors are relevant when defining the insurance portfolios in effect:

-Typology of products and their differentiated management, separating the products by pensions, life, and massive, and below them, based on the specific covered risks: savings, risk, annuities, and accidents, among others. There are not separations of risks within the same contract because they are jointly managed.

-Contract limits: differentiating in equal contracts or shorter than one year and longer than four years.

-Individual or collective insurances.

-Policy currency: differentiating between policies denominated in different currencies. Currently, the currencies considered are the Sol, the US Dollar, and Sol VAC.

-Funeral (in currency VAC): a different portfolio shall be considered because it is understood that its risk management is different from the management of the main risk of the product Annuity (SPP and Private). This criterion shall only be applicable to funeral VAC of the pensions (SPP and Private).

-The assessment based on the indicated attributes shall continue to be performed for the new products that may be designed and marketed in the future.

Cohorts (unit of account) -

The second level of aggregation is the cohort level, whereby the Group shall not include in the same group contracts issued more than one year apart. Contract issued between January 1 and December 31 of each year shall be included within each cohort for each portfolio.

Grouping by onerosity -

The last grouping level that the Group applies is in function of the expected profitability level or the onerosity at the moment of the contract issuance. Given that the standard requires at least three groups,

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

the Group foresees that the products by level of profitability or onerosity will be grouped into two main groups:

-Groups of onerous contracts.

-Groups of non-onerous contracts: Include contracts with low probability of becoming onerous and the remaining non-onerous contracts at initial recognition.

The Group has defined a ratio to differentiate these groups. In this sense, even though it is foreseen that there will be two groups by profitability level, the groups that will eventually be determined will depend on the compliance of the ratio on the predetermined threshold.

(d.1.1.3) Valuation methods -

The Group applies the following valuation methods in the measurement of insurance contracts:

-Building Block Approach (“BBA”). This method will be applied by default to insurance contracts unless there exist conditions to apply any of the other two methods.

-Two BBA variants. The first one will be applied compulsorily if the conditions for it are met, and the second one will be applied optionally if conditions are met:

  • Variable Fee Approach (“VFA”)

  • Premium Allocation Approach (“PAA”)

The application of one or the other method affects the measurement of the liability for remaining coverage (“LRC”) because the liability for incurred claims (“LIC”) will be valued according to the BBA method.

Building Block Approach (BBA) -

This method is applied to contracts with coverage periods longer than one year and whose liability flows do not depend on underlying elements. IFS measures a group of insurance contracts (unit of account) by the total of fulfillment cash flows and the CSM. Following are the elements details of said component group:

-Fulfillment Cash Flows (“FCF”): the fulfillment cash flows are comprised of the following elements:

-Estimation of future cash flows: Weighted estimation by the probability of future cash outflows occurrence minus the future cash inflows from the fulfillment of the contract. It is necessary to consider solely the cash flows that are within the limits of the insurance contract and the attributable acquisition expenses must be included.

The Group revises the estimations performed in the preceding valuation period and updates them so that they reflect the conditions at the valuation date, and that the changes made to the estimation represent the modifications of the period’s conditions.

Discount effect: IFRS 17 establishes that the fulfillment cash flows shall be adjusted to reflect the time value of money and the financial risks related to the future cash flows. The estimation of cash flows and the inclusion of the discount effect may result in the best estimate liability (“BEL”). In the discount rate estimation procedure, observable market values are used; for pensions contracts, the Matching Adjustment Discount Rate is mainly used and for individual life contracts, the Risk Free Rate USA is mainly used.

-Risk Adjustment (“RA”): Represents the compensation that an entity requires to bear the non-financial risk that arises from the uncertainty over the cash flows regarding their amount and the moment of payment of the future cash flows, and it shall be calculated in an explicit and separated manner from the cash flows. Likewise, the risk adjustment also reflects the risk aversion degree and the diversification degrees that the entity includes to determine the compensation to bear said non-financial risks.

-CSM: Represents the expected profit from the insurance contracts, which shall be recognized in income of the entity as the service is rendered in the future, instead of recognizing it at its estimation moment.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

The release of the CSM throughout the contract’s life shall be made in a systematic manner and consistently with the rendering of the service provided by insurance contract in the future.

Variable Fee Approach (VFA) –

The VFA valuation method is intended for insurance contracts with a direct component participation of the insured (the valuation risk is that of the insured) whereby at initial recognition the following conditions are met:

  • The contractual terms specify that the policyholder takes part in a clearly identified set of underlying elements;

  • The entity expects to pay the policyholder an amount equal to a substantial part of the profitability at fair value (market value) of the underlying elements; and

  • The entity expects that a substantial part of any change in the amounts payable to the policyholder varies with the change in fair value of the underlying elements.

The VFA method has the following characteristics:

  • In the CSM, market interest is credited.

  • In the CSM the difference in the value of the funds of the underlying asset's funds is adjusted.

  • The other components remain the same as the BBA method.

Premium Allocation Approach (PAA) -

The PAA valuation method is a simplification of the general method and its application is optional. The entity shall only apply the simplified method to contracts if one of the following criteria is met:

  • If said simplification results in a liability for remaining coverage that does not materially differ from that generated by the general method; or

  • The coverage period of the group of contracts is one year or shorter. The criterion that defines the one-year period must be determined according to the contract limits.

To assign the appropriate valuation method to the insurance contracts issued, the Group has assessed the valuation requirements under each method, as well as the minimum criteria and possible approaches for the eligibility of the PAA method and the VFA method. Following are the valuation methods assigned to each product:

  • Life: BBA, PAA or VFA, depending on the characteristics and evaluation of the contract

  • Pensions: BBA

  • Massive: BBA or PAA, depending on the characteristics and evaluation of the contract

(d.1.1.4) Accounts receivable from insurance activities -

Accounts receivable from insurance activities of the Group are initially recognized when they are enforceable and are measured at the fair value of the compensation received or receivable. Therefore, at initial recognition, insurance receivables are measured at amortized cost. The book value of insurance receivables is

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Notes to the consolidated financial statements (continued)

subject to impairment when events or circumstances indicate that the book value cannot be recoverable; the impairment loss is recorded in the consolidated statement of income.

(d.1.2) Reinsurance -

(d.1.2.1) Classification of reinsurance contracts -

The Group deems that all reinsurance contracts are within the scope of the Standard because all underlying contracts comply with the requirements to be classified as insurance contracts. It should be noted that the Group does not have any facultative reinsurance contracts.

(d.1.2.2) Levels of aggregation -

Contracts portfolio -

The first level that the Standard establishes for the grouping of reinsurance contracts consists of the determination of portfolios.

The Group will determine the insurance portfolios considering similar risks that are jointly managed. The Company has deemed that the following factors are relevant when defining the reinsurance portfolios in effect:

-Typology of products and their differentiated management, separating in all cases the proportional reinsurance contracts and the non- proportional reinsurance contracts, and below them, based on the specific covered risks: credit life, “Vida Ley”, accidents, Individual life, retirement, CAT.

-Contract limits, separating in all cases the annual and multi-year reinsurance contracts.

-Materiality criteria, i.e., when there are individual contracts that do not comply with the previously described conditions to be grouped, the Group will have the possibility of grouping them as long as they are run-off isolated contracts with little relevance to the Company.

-The assessment based on the indicated attributes will continue to be performed for the new products that may be designed and marketed in the future.

Cohorts -

The second grouping level is the cohort level, whereby the Group shall not include in the same group contracts issued more than one year apart.

Cohorts are defined as being equal to the calendar year. i.e., within each cohort there shall be included the contracts issued between January 1 and December 31 of each year.

(d.1.2.3) Reinsurance fee -

Fees from reinsurance contracts for ceded premiums are amortized in relation to the validity period of the related insurance contract.

(d.1.3) Exchange difference in insurance contract liabilities -

According to IAS 21, for the purpose of converting insurance contracts in foreign currency into the functional currency of the Company, they are treated as a monetary item. The exchange difference generated by the update of the insurance contract liability shall be included in the statement of income, except for the exchange difference related to the interest rate effect for contracts under BBA method, which shall be recorded in the caption “Other comprehensive income” as is done with the annual movements of the interest rate effect.

(d.1.4) Recognition of income and expenses -

The Group shall recognize income and expenses for the following changes in the book value of the liability for remaining coverage (LRC):

-Income from ordinary insurance activities: for the decrease in the LRC due to the service rendered in the period.

-Expenses of the insurance service: for losses in the groups of onerous contracts, and reversions of these losses.

-Financial expenses and income for insurance activities: for the effect of the time value of money and the financial risk effect.

The Group shall recognize income and expenses for the following changes in the book value of the liability for incurred claims (LIC):

-Expenses of the insurance service: for the increase in liability due to claims and expenses incurred in the period, excluding investment components.

-Expenses of the insurance service: for the subsequent changes in the cash flows from the compliance related to claims and expenses incurred.

-Financial expenses and income for insurance activities: for the effect of the time value of money and the financial risk effect.

(d.1.5) Expenses attributable to the fulfillment of contracts -

Attributable expenses are related to the fulfillment of contracts, directly or indirectly.

Expenses directly and indirectly attributable - The Group classifies expenses directly attributable to those that can be attributable at portfolio level or individual contracts. Indirect expenses are deemed partially attributable if they are necessary for the fulfillment of the insurance contracts, even if they are not directly associated to a portfolio or

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

individual contract. Expenses indirectly attributable must be allocated to groups of contracts by using a systematic and rational method that can be applied in a consistent manner to all expenses with similar characteristics.

Expenses attributable (without considering the acquisition costs attributable) are included in the LRC, being released as income in the statement of income and decreasing the LRC when the service is rendered. At the same time, the expenses of the insurance service are recognized based on the actual expenses incurred.

(d.1.6) Contractual Service Margin (CSM) -

The CSM represents the expected profit from a group of insurance contracts for the services rendered during the coverage period. It is released in the statement of income for each period to reflect the services rendered to the group in that period.

(d.1.6.1) Initial recognition

For the initial recognition of an insurance contract, the Group accounts for the positive balance of the CSM as part of the LRC for the insurance contracts valued by the BBA method and the VFA method.

At initial recognition of a profitable insurance contract, the CSM does not recognize any income (profit). Income (or profit) must only be recognized to the extent that the insurance contract services are rendered. The CSM cannot be negative, any loss at initial moment or subsequent moments must be recognized in the statement of income and recorded as loss component.

(d.1.6.2) Subsequent valuation

Once the initial recognition of the contract is made, the groups of contracts or Units of Account (UoA) are formed considering their onerosity degree at that moment (additionally to the portfolio and the cohort

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

they belong to); therefore, the CSM shall be measured in the subsequent valuations for the group of contracts.

(d.1.7) Loss component -

Analogous to the CSM, the loss component (LC) is the estimated contract loss. The recording of these two concepts has a different temporality: while the CSM is deferred throughout the contract’s life, the LC must be recognized immediately, thus generating an expense in the statement of income once its existence is known.

(d.1.7.1) Determination of the loss component at initial recognition

At initial recognition of a non-profitable insurance contract, the LC must generate an expense in the statement of income once its existence is known.

In the moment at which the existence of an LC is determined, at each subsequent valuation, it shall be necessary to make the following adjustments:

-It shall be allocated exclusively to the LC, until it is reduced to zero.

-It shall be allocated in a systematic manner between the LC and the liability for remaining coverage, excluding the LC (LRC excluding the LC); the changes in the fulfillment cash flows of the LRC.

(d.1.7.2) Subsequent valuation

Once an LC for a group of onerous contracts has been established, the Group distributes the subsequent changes in the fulfillment cash flows between the LC and the LRC, excluding the LC, by making a systematic allocation between both concepts, as applicable, of the amounts related to.

  • The release of claims and expenses of the LRC expected cash flows.

  • Changes in the risk adjustment (RA) recognized in the income for the period.

  • Financial expenses and income for insurance activities.

(d.1.8) Risk Adjustment (RA) -

The RA reflects the compensation that the entity requires for assuming the uncertainty that arises from the non-financial risk, over the amount and the moment of payment of the future cash flows of the liability. Under IFRS 17, the RA is an explicit amount and is independent of the estimations of cash flows and discount.

The Group calculates the RA for the portfolios of life, pensions, and massive insurances with the purpose of quantifying the non-financial risks associated to the insurance contracts and reflecting the uncertainty of the insurance contracts regarding their amount and validity term. However, in the following cases the RI calculation will not be necessary:

-In portfolios whose provision for LRC is valued by the PAA method. The products that are valued by the simplified PAA method do not require an explicit RI calculation.

-In portfolios whose provision for LRC is valued by the VFA method because the insurance component, and thus the non-financial risks component is not material in this typology of product with direct participation of the insured.

(d.2) Accounting policies for insurance activities (Policy applicable before January 1, 2023)

The Group applied to insurance contracts the existing accounting policies prior to the adoption of IFRS (i.e., accounting standards established by the SBS for financial and insurance entities in Peru) with certain modifications as described below:

Incurred but not reported claims reserves (IBNR): These reserves were calculated and applied at each recording period using the Chain Ladder methodology, which considers past experience based on cumulative claims losses to estimate future claims developments.
Technical reserves for life annuities and retirement, disability and survival pensions: The Group used the Peruvian mortality tables SPP-S-2017 and SPP-I-2017 (men and women), published by the SBS through Resolution No. 886-2018 dated March 7, 2018, and set the discount interest rate through the Matching Adjustment method plus an illiquidity premium to discount all the pension cash flows.

Product classification:

Insurance contracts were those contracts where the Group (the insurer) has accepted significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder for a specified uncertain future event (the insured event) that adversely affects the policyholder. As a general guideline, the Group determined whether it had significant insurance risk by comparing benefits paid with benefits payable if the insured event did not occur. Insurance contracts may also transfer a financial risk. When the contract had a financial component and transfers no relevant insurance risk as established by IFRS 4 “Insurance Contracts”, the contract was recorded based on IFRS 9 “Financial Instruments”. These contracts were presented in the caption “Other accounts payable, provisions and other liabilities” as “Contract liability with investment component” of the consolidated statement of financial position; see Note 10(a).

Once a contract had been classified as an insurance contract, it remains as an insurance contract for the remainder of its life, even if the insurance risk is reduced significantly during this period, unless all rights and obligations are extinguished or expire.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Life insurance contracts offered by the Group included retirement, disability and survival insurance, annuities and group and individual life. Non-life insurance contracts mainly included SOAT (mandatory individual car accident insurance) and credit card insurance, among others.

Insurance receivables:

Insurance receivables were initially recognized when due and were measured at the fair value of the consideration received or receivable. Consequently, in its initial recognition, insurance receivables were measured at amortized cost. As of December 31, 2021, the carrying value of the insurance receivables was similar to their fair value due to their short-term maturity. The carrying value of insurance receivables was reviewed for impairment whenever events or circumstances indicated that the carrying amount may not be recoverable, with the impairment loss recorded in the consolidated statement of income.

Reinsurance:

The Group ceded the insurance risk in the normal course of its operations mainly due to pension fund risks and life insurance risks (individual and group). The reinsurance assets represented balances due and payable by reinsurance companies. Reinsurance was ceded on a proportional basis.

The amounts recoverable from the contracts with reinsurers were estimated consistently with the loss reserve pending settlement or losses settled and with the premiums ceded, associated with policies ceded, in accordance with the clauses established in the related reinsurance contracts.

Reinsurance assets were reviewed for impairment at each date of the consolidated statement of financial position or more frequently when necessary. Impairment arose when there was objective evidence the Group cannot receive all the outstanding amount’s receivable under the contract terms and the event had a reliably measurable impact on the amounts that the Group obtained from the reinsurer. Impairment loss was registered in the consolidated statement of income.

Reinsurance contracts ceded do not released the Group from its obligations to the insured.

The liabilities from reinsurance contracts represented balances due and payable to reinsurance companies. The amounts payable was estimated consistently with the related reinsurance contract.

Premiums and claims were presented as gross amounts for the reinsurance ceded. Reinsurance assets or liabilities were written off when the contractual rights were extinguished, expire, or when the contract was transferred to a third party.

Reinsurance commissions:

The commissions from the reinsurance contracts for premiums ceded were amortized on a straight-line basis over the term of the related insurance contract.

Insurance contract liabilities:

Life insurance contract liabilities were recognized when contracts were entered into.

The technical reserves for retirement, disability and survival insurance and annuities were determined as the sum of the discounted value of expected future pensions to be paid during a defined or non-defined period, computed on the basis of current mortality and morbidity tables and current discount interest rates.

Individual life technical reserves were determined as the sum of the discounted value of expected future benefits, administration expenses, policyholder options and guarantees and investment income, less the discounted value of the expected premiums that would be required to meet the future cash outflows. Furthermore, the technical reserves for group life insurance contracts comprised the provision for unearned premiums and unexpired risks.

Insurance claims reserves include reserves for reported claims and an estimate of the IBNR. As of December 31, 2022, IBNR reserves were determined on the basis of the Chain Ladder methodology, whereby the weighted average of past claims’ development was projected into the future. Adjustments to the liabilities at each reporting date were recorded in the consolidated statement of income. The liability was derecognized when the contract expired, was discharged or cancelled.

At each reporting date an assessment was made on whether the recognized life insurance liabilities were sufficient, by using an existing liability adequacy test as established by IFRS 4. In the case of annuities and retirement, disability and survival insurance, this test was conducted by using current assumptions for mortality and morbidity tables and interest rates. As of December 31, 2021, Management determined that liabilities were sufficient and therefore, it had not recorded any additional life insurance contract liability.

The accounts payable to reinsurers and coinsurers arose from the ceded premiums issued based on the evaluation of the risk assumed and the losses coming from the reinsurance contracts accepted as well as from the clauses executed for the coinsurance received, and were registered in the item “Accounts payable to reinsurers and coinsurers” that was part of the caption “Other accounts payable, provisions and other liabilities” of the consolidated statement of financial position.

Income recognition:

Life insurance contracts:

Gross premiums on life insurance were recognized as revenue when due from the policyholder. For single premium products, revenue was recognized on the date when the policy is effective. The net premiums earned included the annual variation of technical reserves.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Property, casualty and group life insurance contracts:

Unearned premiums were those proportions of premiums written in a year that related to periods of risk afterwards the reporting date. Unearned premiums were calculated on a daily pro rata basis. The proportion attributable to subsequent periods was deferred as a provision for unearned premiums.

Recognition of benefits, claims and expenses:

(i) Gross benefits and claims

Gross benefits and claims for life insurance contracts included the cost of all claims arose during the year, including internal and external claims handling costs that were directly related to the processing and settlement of claims.

Death, survival and disability claims were recorded on the basis of notifications received. Annuities payments were recorded when due.

(ii) Reinsurance premiums

Reinsurance premiums comprised the total premiums payable for the whole coverage provided by contracts entered into in the period and were recognized at the date at which the policy was effective. Unearned ceded premiums were deferred during the period of the related insurance contract.

(iii) Reinsurance claims

Reinsurance claims were recognized when the related gross insurance claim was recognized according to the terms of the relevant contract.

(iv) Acquisition costs

Acquisition costs related to the sale of new policies were recognized when incurred.

(e) Financial instruments: Initial recognition -

(e.1) Date of recognition

Financial assets and liabilities, with the exception of loans, are initially recognized at the trading date. This includes regular transactions of purchases or sales of financial assets that require the delivery of assets within the time frame generally established by regulation or convention on the marketplace. Loans are recognized when the funds are transferred to the customers while deposits and obligations are recognized when the funds are received by the Group.

(e.2) Initial measurement of financial instruments

The classification of financial instruments at initial recognition depends on the characteristics of the business model and contractual flows for managing the instruments, as described in Notes 3.4(f.1.1) and 3.4(f.1.2). Financial instruments are initially measured at their fair value (as defined in Note 3.4(e.4)), except in the case of financial assets and financial liabilities recorded at fair value through profit or loss, transaction costs are added to, or substracted from, this amount. Accounts receivable are measured at the transaction price. When the fair value of financial instruments at initial recognition differs from the transaction price, the Group accounts for the Day 1 profit or loss, as described below.

(e.3) Day 1 profit or loss

When the transaction price of the instrument differs from the fair value at origination and the fair value is based on a valuation technique that only uses inputs observable in market transactions, the Group recognizes the difference between the transaction price and fair value in the net trading income. In those cases where fair value is based on models for which some of the inputs are not observable, the difference between the transaction price and the fair value is deferred and is only recognized in profit or loss when the inputs become observable, or when the instrument is derecognized.

(e.4) Measurement categories of financial assets and liabilities

The Group classifies all of its financial assets based on the business model and the contractual terms, measured at either:

Amortized cost, as explained in Note 3.4(f.1).
Fair value through other comprehensive income, as explained in Notes 3.4(f.4) and (f.5).
Fair value through profit or loss, as explained in Note 3.4(f.7).

The Group classifies and measures its derivative and trading portfolio at fair value through profit or loss as explained in Notes 3.4(f.2) and (f.3). The Group may designate financial instruments at fair value through profit or loss, if so doing eliminates or significantly reduces measurement or recognition inconsistencies, as explained in Note 3.4(f.7).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Financial liabilities, other than financial guarantees, are measured at amortized cost or at fair value through profit or loss when they are held for trading, are derivative instruments or the fair value designation is applied, as explained in Note 3.4(f.6). It should be noted that during 2023 and 2022, the Group only presents derivative financial instruments measured in this way.

(f) Financial assets and liabilities -

Following is the description of the assets and liabilities held by the Group, as well as the criteria for their classification:

(f.1) Assets measured at amortized cost -

As required by IFRS 9, the Group measure cash and due from banks inter-bank funds, financial investments in debt instruments, loans and other financial assets at amortized cost if the following two conditions are met:

The financial asset is held within a business model with the objective to hold financial assets to collect contractual cash flows, and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.

The details of these conditions are presented below:

(f.1.1) Business model assessment -

The Group's business model is assessed at a higher level of aggregated portfolios, and not instrument by instrument, and is based on observable factors such as:

How the performance of the business model and the financial assets held within that business model are assessed and reported to the entity's key management personnel.
The risks that affect the performance of the business model (and the financial assets held within that business model) and, in particular, the way those risks are managed.

The expected frequency, value and timing of sales are also important aspects of the Group’s assessment. The business model assessment is based on reasonably expected scenarios without taking “worst case” or “stress case”. If cash flows after initial recognition are realized in a way that is different from the Group's original expectations, the classification of the remaining financial assets that remain in that business model will not be changed, but incorporates such information when assessing newly purchased financial assets going forward.

(f.1.2) The SPPI test (Solely payments of principal and interest) -

As a second step of its classification process, the Group assesses the contractual terms to identify whether they meet the SPPI test.

“Principal”, for the purpose of this test, is defined as the fair value of the financial asset at initial recognition and may change over the life of the financial asset (for example, if there are repayments of principal or amortization of the premium/discount).

The most significant elements within a lending arrangement are the time value of money and credit risk. To perform the SPPI assessment, the Group applies judgement and considers relevant factors such as the currency in which the financial asset is denominated, and the period for which the interest rate is set. In contrast, contractual terms that introduce volatility in the contractual cash flows that are unrelated to a basic lending arrangement do not give rise to contractual cash flows that are solely payments of principal and interest on the amount outstanding. In such cases, the financial asset is required to be measured at fair value through profit or loss.

(f.2) Derivatives recorded at fair value through profit or loss -

A derivative is a financial instrument or other contract with the following three characteristics:

Its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable; provided that, in the case of a non-financial variable, it is not specific to part of the contract (i.e., the “underlying”).
It requires no initial net investment or an initial net investment that is smaller than the required for other types of contracts expected to have a similar response to changes in market factors.
It is settled at a future date.

The Group enters into derivative transactions with various counterparties, such as: interest rate swaps, cross-currency swaps, foreign currency options and foreign currency forward contracts. Derivatives are recorded at fair value and carried as assets when their fair value is positive and as liabilities when their fair value is negative. The notional amount and fair value of such derivatives are presented separately in Note 10(b). Changes in the fair value of

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

derivatives are included in net trading income unless hedge accounting is applied. Hedge accounting disclosures are presented in Note 3.4(j).

(f.2.1) Embedded derivatives -

An embedded derivative is a component of a hybrid instrument that also includes a non-derivative host contract with the effect that some of the cash flows of the combined instrument vary in a way like a stand-alone derivative. An embedded derivative causes some or all of the cash flows that otherwise would be required by the contract to be modified according to a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided that, in the case of a non-financial variable, it is not specific to a party to the contract. A derivative that is attached to a financial instrument, but is contractually transferable independently of that instrument, or has a different counterparty from that instrument, is not an embedded derivative, but a separate financial instrument.

Embedded derivatives in financial assets, liabilities and non-financial host contacts, were treated as separate derivatives and recorded at fair value if they met the definition of a derivative (as defined above), their economic characteristics and risks were not closely related to those of the host contract, and the host contract was not itself held for trading or designated at fair value through profit or loss. The embedded derivatives separated from the host contract are carried at fair value in the trading portfolio with changes in the fair value recognized in the consolidated statement of income.

In the case of embedded derivatives in financial assets, they are not separated from the financial asset and, therefore, the classification rules are applied to the hybrid instrument in its entirety, as described in Note 3.4(e.4).

As of December 31, 2023 and 2022, the Group does not present embedded derivatives in its financial liabilities needed to be separated from the host contract.

(f.3) Financial assets or financial liabilities held for trading -

The Group classifies financial assets or financial liabilities as held for trading when they have been purchased or issued primarily for short-term profit making through trading activities or form part of a portfolio of financial instruments that are managed together, for which there is evidence of a recent pattern of short-term profit taking. Held-for-trading assets and liabilities are recorded and measured in the consolidated statement of financial position at fair value. Changes in fair value are recognized in the statement of income. Interest income or expense and dividend are recorded in the statement of income according to the terms of the contract, or when the right to payment has been established. Included in this classification are debt securities, equities and short positions that have been acquired mainly for the purpose of selling them in the short term.

(f.4) Debt instruments at fair value through other comprehensive income -

The Group applies the category of debt instruments measured at fair value through other comprehensive income when both of the following conditions are met:

The instrument is held within a business model, the objective of which is achieved by collecting contractual cash flows and selling financial assets.
The contractual terms of the financial asset meet the SPPI test.

Debt instruments at fair value through other comprehensive income are subsequently measured at fair value through other comprehensive income. Interest income and foreign exchange gains and losses are recognized in profit or loss in the same manner as for financial assets measured at amortized cost, as explained in Note 3.4(f.1). The expected credit loss calculation for debt instruments at at fair value through other comprehensive income is explained in Note 3.4(h)(iii). When the Group holds more than one investment in the same security, they are deemed to be disposed of on a “first-in first-out” basis. On derecognition, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss.

(f.5) Equity instruments at fair value through other comprehensive income -

Upon initial recognition , the Group occasionally elects to classify irrevocably some of its equity investments as equity instruments at at fair value through other comprehensive income when not held for trading. Such classification is determined on an instrument-by- instrument basis.

Gains and losses on these equity instruments are never recycled to profit even when the asset is sold. Dividends are recognized in the consolidated statement of income as income when the right of the payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the instrument, in which case, such gains are recorded in other comprehensive income. Equity instruments at at fair value through other comprehensive income are not subject to and impairment assessment.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(f.6) Financial liabilities -

After initial measurement, financial liabilities, except those measured at fair value through profit or loss; see (f.7), are measured at amortized cost. Amortized cost includes commissions and interest, transaction lost and any other premium or discount. A compound financial instrument which contains both a liability and an equity component is separated at the issue date.

The Group first establishes whether the instrument is a compound instrument and classifies such instrument’s components separately as financial liabilities, financial assets, or equity instruments in accordance with IAS 32. Classification of the liability and equity components of a convertible instrument is not revised as a result of a change in the likelihood that a conversion option will be exercised, even when exercising the option may appear to have become economically advantageous to some holders. When allocating the initial carrying amount of a compound financial instrument to the equity and liability components, the equity component is assigned as the residual amount after deducting from the entire fair value of the instrument, the amount separately determined for the liability component. The value of any derivative features (such as call options) embedded in the compound financial instrument, other than the equity component (such as an equity conversion option), is included in the liability component. Once the Group has determined the split between equity and liability, it further assesses whether the liability component has embedded derivatives that must be accounted for separately.

(f.7) Financial assets and financial liabilities at fair value through profit or loss -

Financial assets and financial liabilities in this category are those that are not held for trading and have been either designated by Management upon initial recognition or are mandatorily required to be measured at fair value under IFRS 9. Management designates an instrument at fair value through profit or loss upon initial recognition when one of the following criteria is met:

The designation eliminates, or significantly reduces, the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognizing gains or losses on them on a different basis, or
The liabilities are part of a group of financial liabilities which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, or
The liabilities contain one or more embedded derivatives, unless they do not significantly modify the cash flows that would otherwise be required by the contract.

Financial assets and liabilities at fair value through profit or loss are recorded in the consolidated statement of financial position at fair value. Changes in fair value are recorded in profit and loss with the exception of movements in fair value of liabilities designated at fair value through profit or loss due to changes in the Group’s own credit risk. Such changes in fair value are recorded in other comprehensive income and do not get reclassified to profit or loss. Interest accrued on assets that must be measured at fair value through profit or loss is recorded using the contractual interest rate. Dividend income from equity instruments measured at fair value through profit or loss is recorded in profit or loss as “Interest and similar income”; see Note 19, when the right to the collection has been established.

(f.8) Financial guarantees and letters of credit -

The Group issues financial guarantees, and letters of credit.

Financial guarantees are initially recognized in the consolidated financial statements (within provisions) at fair value, which is equivalent to the commission received. Subsequent to initial recognition, the recognized liability is measured at the higher amount between: a) amount initially recognized less its cumulative amortization; and b) an Expected Credit Loss (“ECL”) provision determined as set out in Note 3.4(h)(ii).

The commission received is recognized in the consolidated statement of income in the caption “Fee income from financial services, net” on a straight-line basis over the life of the guarantee.

Letters of credit are commitments under which, over the duration of the commitment, the Group is required to provide a loan with pre-specified terms to the customer. Similar to financial guarantee contracts, these contracts are within the scope of the ECL requirements.

The nominal contractual value of financial guarantees and letters of credit, where the loan agreed to be provided is on market terms, is not recorded in the consolidated statement of financial position. The nominal values of these instruments together with the corresponding ECLs are disclosed in Note 6(d).

(f.9) Reclassification of financial assets and liabilities -

The reclassification of financial assets will take place as long as the business model that manages the financial assets is changed. It is expected that this change is very rare. These changes are determined by Management because of external or internal changes and must be significant for the Group's operations and demonstrable to third parties. Consequently, a change in the Group's business model will take place only when it begins or ceases to carry out an activity that is significant for its operations. As of December 31, 2023 and 2022, the Group has not reclassified its financial assets after their initial recognition. Financial liabilities are never reclassified.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(f.10) Repurchase agreements -

Securities sold under repurchase agreements on a specified future date are not derecognized from the consolidated statement of financial position since the Group retains substantially all of the risks and rewards inherent to its ownership. Cash received is recognized as an asset with the corresponding obligation to return it, including accrued interest, as a liability, reflecting the transaction’s economic substance as a loan to the Group. The difference between the sale and repurchase price is recorded as interest expense and is accrued over the life of the agreement using the effective interest rate and is recognized in the caption “Interest and similar expenses” of the consolidated statement of income.

As of December 31, 2023 and 2022, the Group did not keep any repurchase agreements.

(g) Modification of financial assets and liabilities -

(g.1) Modification of financial assets

When the contractual cash flows of a financial asset are renegociated or otherwise modified as a result of commercial restructuring activity rather than due to credit risk and impairment considerations, the Group performs an assessment to determine whether the modifications result in the derecognition of tha financial asset. For financial assets, this assessment is based on qualitative factors.

When assessing whether or not to derecognize a loan to a customer, among others, the Group considers the following factors:

Change in the loan’s currency.
Introduction of an equity feature.
Change in customer's credit risk.
If the modification is such that the instrument would no longer meet the SPPI criterion.

In addition, the Group evaluates whether there is a material change based on quantitative factors considering whether the present value of the discounted cash flows under the original effective interest rate and the new conditions differs by at least 10 percent from the discounted present value of the remaining cash flows of the original financial asset. This follows an analogy on the orientation of changes in financial liabilities. This method applies to all contractual changes to financial assets, regardless of the reason for the change.

The Group made modifications to its agreements with its customers as permitted by the SBS, through its subsidiary Interbank, and performed an analysis described above. The results derived from this evaluation are recognized in profit or loss in the account "Impact from the modification of contractual cash flows due to the loan rescheduling schemes", in the caption "Interest income and similar", see note 19.

The Group made modifications of its agreements with clients as requested by the SBS and subsequently performed an analysis to assess whether there were cash flows modifications. The amounts resulting from this assessment were recognized as expenses in the impact of the modification of the contractual cash flows due to the rescheduling in the loan payment schemes in Note 19.

(g.2) Modification of financial liabilities -

When the modification of the terms of an existing financial liability is not judged to be sustancial and, consequently, does not result in derecognition, the amortized cost of the financial liability is recalculated by computing the present value of estimated future contractual cash flows that are discounted at the financial liability's original EIR. Any resulting difference is recognized immediately in profit or loss.

Regarding the financial liabilities, the Group considers a substantial amendment based on qualitative factors and provided it exists a difference between the present value of the discounted cash flows under the new conditions and the original book value of the financial liability is larger than ten percent.

(h) Derecognition of financial assets and liabilities -

(h.1) Derecognition due to substantial change in terms and conditions -

The Group derecognizes a financial asset, such as a loan to a customer, when the terms and conditions have been renegotiated to the extent that, substantially, it becomes a new loan, with the difference recognized as a derecognition gain or loss, to the extent that an impairment loss has not already been recorded.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(h.2) Derecognition other than for substantial modification -
(h.2.1) Financial assets
--- ---

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when the rights to receive cash flows from the financial asset have expired.

The Group has transferred the financial asset if, and only if, either:

- Has transferred its contractual rights to receive cash flows from the financial asset, or
- It retains the rights to the cash flows, but has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement.

Pass-through arrangements are transactions whereby the Group retains the contractual rights to receive the cash flows of a financial asset (the 'original asset'), but assumes a contractual obligation to pay those cash flows to one or more entities (the 'eventual recipients'), when all of the following conditions are met:

- The Group has no obligation to pay amounts to the eventual recipients unless it has collected equivalent amounts from the original asset.
- The Group cannot sell or pledge the original asset other than as security to the eventual recipients.
- The Group has to remit any cash flows it collects on behalf of the eventual recipients without material delay. In addition, the Group is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents including interest earned, during the period between the collection date and the date of agreed revision with the eventual recipients.

A transfer only qualifies for derecognition if either:

- The Group has transferred substantially all the risks and rewards of the asset, or
- The Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

The Group considers that control is transferred if, and only if, the transferee has the ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally.

When the Group has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset, the asset continues to be recognized only to the extent of the Group’s continuing involvement, in which case, the Group also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group retains.

When the continuing involvement takes the form of a guarantee over the transferred asset, the amount of the Group’s continuing involvement will be the lowest between the asset amount and the maximum amount of consideration the Group may be required to pay.

When the continuing involvement takes the form of a written or purchased option (or both) over the transferred asset, the amount of the Group’s continuing involvement will be the amount of the transferred asset that the Group could repurchase. In the case of a written put option on an asset that is measured at fair value, the amount of the Group's continuing involvement will be limited to the lowest between the fair value of the transferred asset and the option exercising Price.

The net loss originated as consequence of the derecognition of financial asset accounts measured at amortized cost is calculated as the difference between the book value (impairment included) and the amount received.

As of December 31, 2023 and 2022, the Group did not recognize net losses as consequence of derecognition of financial assets accounts.

(h.2.2) Financial liabilities

A financial liability is derecognized when the obligation under the liability has been discharged, cancelled or has expired. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognized in profit or loss of the period.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(i) Impairment of financial assets -

(i) Overview of the expected credit loss principles -

The Group records an allowance for expected credit losses for all loans and other debt financial assets not held at fair value through profit or loss, together with financial guarantee contracts. Equity instruments are not subject to impairment under IFRS 9.

The determination of the expected credit loss is based on the credit losses expected to arise over the life of the asset, unless there has been no significant increase in credit risk since origination, in which case, the allowance is based on the 12-month expected credit loss as described in (ii) below. The policies for determining whether there has been a significant increase in credit risk are set out in Note 29.1(d).

Both lifetime expected credit loss and 12-month expected credit loss are calculated on either an individual basis or a collective basis, depending on the nature of the portfolio. The Group’s policy for grouping financial assets measured on a collective basis is explained in Note 29.1(d).

The Group has established a policy to perform an assessment, at the end of each reporting period, of whether a financial instrument’s credit risk has increased significantly since initial recognition. This is further explained in Note 29.1(d).

Based on the above mentioned process, IFS groups its loans into “Stage 1”, “Stage 2”, “Stage 3” and purchased or originated credit impaired financial assets (“POCI”), as described below:

Stage 1: When loans are first recognized, the Group recognizes an allowance based on the 12-month expected credit loss. Stage 1 also includes loans whose credit risk has improved and the loan has been reclassified from Stage 2.

Stage 2: When a loan has shown a significant increase in credit risk since inception, the Group records an allowance based on the expected credit lossfor rhe entire lifetime of the financial asset. Stage 2 also includes loans whose credit risk has improved and the loan has been reclassified from Stage 3.

Stage 3: Loans considered credit impaired (as outlined in Note 29.1(d)). The Group records an allowance for the entire lifetime of the financial asset.

POCI: Purchased or originated credit impaired assets are financial assets that are impaired on initial recognition. POCI assets are recorded at fair value at original recognition and interest income is subsequently recognized based on a credit-adjusted EIR. ECLs are only recognized or released to the extent that there is a subsequent change in the expected credit losses. It should be noted that during the year 2023 and 2022, the Group has not purchased or originated POCI financial assets.

For financial assets for which the Group has no reasonable expectations of recovering either the entire outstanding amount, or a proportion thereof, the gross carrying amount of the financial asset is reduced. This is considered a (partial) derecognition of the financial asset.

The Group recognizes a value correction for expected credit losses on the following financial assets:

 Financial assets that are measured at amortized cost.

 Financial assets that are measured at fair value with changes in other comprehensive income if the following two conditions are met:

(i) The financial asset is maintained within a business model whose objective is achieved by obtaining contractual cash flows and selling financial assets; and

(ii) The contractual terms of the financial asset give rise, on specified dates, to cash flows that are only payments of the principal and interest on the outstanding principal amount.

 Accounts receivable from leases.

 Assets from contracts.

 Financial guarantee contracts.

In this regard, as of December 31, 2023 and 2022, the Group's financial assets subject to a correction for expected credit loss are the following:

 Cash and due from banks.

 Inter-bank funds.

 Financial investments; see Notes 3.4(f), 5 and 30.1(e).

 Loans; see Notes 3.4(f.1), 6 and 30.1(d).

 Due from customers on acceptances.

 Other accounts receivable and other assets.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

The Group assesses periodically impairment alerts derived from factors such as Covid-19, the political and economic context of the country, and the effects of the international conflicts that may affect Peru, with the purpose of timely identifying an increase in the credit loss risk. Thus, for those financial assets other than financial investments and the loan portfolio, Management has estimated the expected credit loss, concluding that it is neither significant nor relevant, given that the maximum period considered for measuring expected credit losses is very small or, even if it implies a longer term, because the main debtor is the Central Reserve Bank (“BCRP”, by its Spanish acronym) or corresponds to cash in vaults of the Group.

(ii) Calculation of ECL -

The Group calculates ECL based on three probability-weighted scenarios to measure the expected cash shortfalls, discounted at an approximation to the EIR. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive.

The mechanics of the ECL calculations are described below, and the key elements are the following:

 PD (“Probability of default”) is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the financial asset has not been previously derecognized and is still in the portfolio. The definition of PD is further explained in Note 29.1(d).

 EAD (“Exposure at default”) is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, including repayments of principal and interest, whether scheduled by contract or otherwise, expected drawdowns on committed facilities, and accrued interest from missed payments. The definition of EAD is further explained in Note 29.1(d).

 LGD (“Loss Given Default”) is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realization of any collateral. It is usually expressed as a percentage of the EAD. The definition of LGD is further explained in Note 29.1(d).

When estimating the ECLs, the Group considers three scenarios (optimistic, base and pessimistic). Each of these is associated with different PDs, as presented in Note 29.1(d). When is relevant, the assessment of multiple scenarios also incorporates how defaulted loans are expected to be recovered, including the probability that the loans will “cure” and the value of collateral or the amount that might be received for selling the asset.

With the exception of credit cards, for which the treatment is separately set out in (iv) below, the maximum period for which the credit losses are determined is the contractual life of a financial instrument (considering the prepayments) unless the Group has the legal right to call it earlier.

Impairment losses and reversals are accounted for and disclosed separately from modification losses or gains that are accounted for as an adjustment of the financial asset’s gross carrying value.

The criteria followed for calculating the ECL based on each stage are described below:

 Stage 1: The provision for credit losses of those financial instruments that do not show a significant increase in risk since the initial recognition, will be calculated as the expected credit losses in the following 12 months. The group calculates the expectation that there is a probability of default (PD) in the 12 months after the reporting date. To this probability of default is multiplied and expected loss in case of default (LGD) and exposure on the date of default (EAD) and discounting the original effective interest rate. This calculation is made for each of the three scenarios (optimistic, base and pessimistic) defined by the Group.

 Stage 2: When the financial instrument shows a significant increase in credit risk since initial recognition, the provision of credit losses of this financial instrument will be calculated as the expected credit loss throughout the life of this asset. The calculation method is similar to that for Stage 1, including the use of multiple scenarios, but expected credit loss is estimated over the lifetime of the instrument.

 Stage 3: When there is objective evidence that the financial instrument is impaired, the provision of credit losses will be calculated as the expected credit loss over the life of the asset. The method is similar to that for Stage 2, with the PD set at 100 percent.

It is possible that the inputs and models used to calculate the expected loss do not reflect all the characteristics of the market as of the date of the financial statements. This is why that, occasionally, subsequent qualitative adjustments to the model are performed when there are significant differences. See Note 29.1(d.7).

Financial guarantee contracts

The Group measures each financial guarantee as the highest of the amount initially recognized minus cumulative amortization recognized in the consolidated statement of income, and the ECL provision. For this purpose, the Group estimates ECL based on the present value of the expected payments to reimburse the holder for a credit loss that it incurs. The deficits are discounted by the risk-adjusted interest rate relevant to the exposure. The ECLs related to financial guarantee contracts are recognized in provisions.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(iii) Debt instruments measured at fair value through other comprehensive income -

The ECLs for debt instruments measured at fair value through other comprehensive income do not reduce the carrying amount of these financial assets in the consolidated statement of financial position, which remains at fair value. However, the expected losses that arise at each measurement date must be reclassified from other comprehensive income to results of the period.

(iv) Credit cards -

The Group calculates the expected losses in a period that reflects the Group's expectations regarding the client's behavior, probability of default and the Group's future risk mitigation procedures that could include the reduction or cancellation of lines of credit. Based on past experience and the Group's expectations, the period during which the Group calculates the expected lifetime losses of this product is 16 months for the periods 2023 and 2022.

The assessment of whether there has been a significant increase in credit risk for revolving products is similar to other credit products. This is based on changes in the customer's credit rating, as explained in Note 29.1(d).

The interest rate used to discount the ECL for credit cards is based on the average effective interest rate that is expected to be charged over the expected period of exposure to the facilities. This estimation takes into account that many facilities are repaid in full each month and are consequently not charged interest.

(v) Forward-looking information -

In its expected credit loss models, the Group relies on the following macroeconomic variables as forward-looking information inputs as of December 31, 2023 and 2022:

2023 2022
GDP growth X
Private formal employment X
Gross capital formation X
Consumer X
Real domestic demand X X
Real formal salary X
Real informal salary X
Real disposable income per capita X

The inputs and models used, see Note 29.1, for calculating ECLs may not always capture all characteristics of the market at the date of the consolidated financial statements. To reflect this, qualitative adjustments or overlays are occasionally made as temporary adjustments when such differences are significantly material. Detailed information about these inputs are provided in Note 29.1(d).

(vi) Valuation of guarantees -

To mitigate the credit risks on financial assets, the Group generally uses three types of guarantees: physical guarantee, personal guarantees and title guarantees.

The guarantee, unless recovered, is not recorded in the Group's consolidated statement of financial position. However, the fair value of the guarantee affects the calculation of the expected losses, and because of that, it is assessed periodically.

The nominal contract value of the guarantees and the letters of credit not used where the loan was agreed to be granted is in market terms, is not recorded in the consolidated statement of financial position. The nominal values of these instruments together with the corresponding expected losses are disclosed in Note 29.1(d).

To the extent possible, the Group uses active market data for valuing financial assets held as guarantees. Non-financial guarantees, such as real estate, is valued based on data provided by third parties such as appraisers.

(vii) Write-offs -

Financial assets are written off only when the Group has stopped pursuing the recovery, at which time the cumulative provision recorded coincides with the total amount of the asset.

(viii) Refinanced and modified loans -

The Group may make concessions or modifications to the original terms of loans as a response to the borrower’s financial difficulties, rather than taking possession or to otherwise enforce collection of guarantees. Once the terms have been renegotiated, any impairment is measured using the original EIR (as calculated before the modification of terms). It is the Group’s policy to monitor refinanced loans to help ensure that future payments continue to be likely to occur.

A refinanced asset is initially classified into Stage 2 and there will be no clean-up period. However, if the financial asset presents a default mark, it will be reclassified from Stage 2 to Stage 3.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(j) Hedge derivatives -

Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently remeasured at their fair value. All derivatives are recognized as assets when the fair value is positive and they are recorded as “Accounts receivables related to derivative financial instruments” under “Other accounts receivable and other assets, net” and as liabilities when they are negative and they are recorded as “Accounts payable related to derivative financial instruments” under “Other accounts payable, provisions and other liabilities” in the consolidated statement of financial position.

Derivatives can be designated as hedging instruments under hedge accounting and in the event they qualify, depending upon the nature of the hedged item, the method for recognizing gains or losses from changes in fair value will be different. These derivatives, which are used to hedge exposures to risk or modify the characteristics of financial assets and liabilities and that meet IFRS 9 criteria, are recognized as hedging accounting.

Derivatives not designated as hedging instruments or that do not qualify for hedging accounting are initially recognized at fair value and are subsequently remeasured at their fair value, which is estimated based on the market exchange rate and interest rate. Gains or losses due to changes in their fair value are recorded in the consolidated statement of income, see Note 3.4(f.2).

In accordance with IFRS 9, to qualify for hedge accounting, all of the following conditions must be met:

(i) The hedging relationship consists of only hedging instruments and eligible hedged items.

(ii) At the inception of the hedge, there is formal designation and documentation of the hedging relationship and the entity’s risk management objective and strategy for undertaking the hedge. This documentation will include the identification of the hedging instrument, the hedged item, the nature of the risk being hedged, and the way the entity will assess if the hedging relationship meets the hedge effectiveness requirements.

(iii) The hedging relationship meets all the following hedge effectiveness requirements:

 There is an economic relationship between the hedged item and the hedging instrument.

 The effect of the credit risk does not dominate the value changes that result from that economic relationship.

 The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of the hedged item.

IFRS 9 presents three hedge accounting categories: fair value hedge, cash flow hedge, and hedge of net investments in a foreign operation. The Group uses derivatives as hedging instruments under cash flow hedges, as detailed in Note 10(b).

For derivatives that are designated and qualify as cash flow hedge, the effective portion of derivative gains or losses is recognized in other comprehensive income for cash flow hedge, and reclassified to income in the same period or periods in which the hedge transaction affects income. The portion of gain or loss on derivatives that represents the ineffective portion or the hedge components excluded from the assessment of effectiveness is recognized immediately in income. Amounts originally recorded in other comprehensive income and subsequently reclassified to income are recorded in the corresponding income or expenses lines in which the related hedged item is reported.

When a hedging instrument expires, is sold, when a hedge no longer meets the criteria for hedge accounting or when the Group re-designates a hedge, the cumulative gain or loss existing in other comprehensive income is kept and recognized in income when the hedged item is ultimately recognized in the consolidated statement of income. When a projected transaction is no longer expected to occur, the cumulative gain or loss recognized in other comprehensive income is immediately transferred to the consolidated statement of income.

(k) Leases -

The determination of whether an arrangement is a lease, or contains a lease, is based on the substance of the arrangement at contract inception: whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets or whether the arrangement conveys a right to use the asset., even if it is not explicitly specified in the contract in exchange for consideration.

(i) The Group as a lessee -

The Group, as a lessee, applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets.

- Right-of-use assets -

The Group recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment loss, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. The Group holds as right-of-use assets: land lots, buildings and facilities and furniture and equipment. Land lots do not depreciate; buildings and facilities and furniture and equipment depreciate based on the straight-line method during the lease term and are presented in Note 8 “Property, furniture and equipment, net”, and are subject to impairment.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

- Lease liabilities -

The Group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. Given that this interest rate implicit in the lease agreement is not easily determinable, in the calculation of the present value of the lease payments, the Group uses the rate it applies to its loans. The lease payments include fixed payments (less any lease incentives receivable), variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the payment occurs. Lease liabilities are presented in Note 10 as “Lease liabilities” in the caption “Other accounts payable, provisions and other liabilities”.

The Group performs accounting estimates related to the determination of terms and rates of the lease agreements, as detailed below:

- Determination of the lease term for lease contracts with renewal and termination options

The Group as a lessee determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control that affects its ability to exercise or not to exercise the option to renew or to terminate (e.g., construction of significant leasehold improvements or significant customisation of the leased asset).

- Estimating the incremental borrowing rate

To determine the interest rate implicit in the lease, the Group uses its incremental borrowing rate - “IBR” to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease (for example, when leases are not in the subsidiary’s functional currency).The Group estimates the IBR using observable inputs such as the free-risk interest rates, Peruvian government yield curves of global bonds (in Dollars) and sovereign bonds (in Soles), and a credit risk differential, using a spread on the most recent debt issuance.

The Group used the exemption proposed by the standard for short term and low value assets; thus, short term and low value lease agreements are kept classified as operating leases, and the disbursements incurred due to these leases are recorded in the caption “Administrative expenses” of the consolidated statement of income.

(ii) The Group as a lessor –

As of December 31, 2023 and 2022, the Group holds the following types of leases:

- Financial leases –

Leases in which the Group substantially transfers all risks and benefits related to the ownership of the asset are classified as financial leases.

Financial leases are recognized as loans at the present value of the installments. The difference between the total value receivable and the present value of the loan is recognized as accrued interest. This income is recognized during the term of the lease using the effective interest rate method, which reflects a constant rate of return.

As of December 31, 2023 and 2022, leasing receivables are subject to the financial asset impairment policy; see Notes 3.4(f.1) and (g).

- Operating leases –

Leases in which the Group does not substantially transfers all risks and benefits related to the ownership of the asset are classified as operating leases.

Lease revenues obtained from investment properties are recorded using the straight-line method for the contract terms, and they are recorded as a revenue in the consolidated statement of income due to their operative nature, except for contingent lease revenues, which are recorded when realized.

The lease term is the non-cancelable period, together with any other additional period for which a lessee has the option of continuing with the lease, where, at the start date of the lease, Management is reasonably confident that a lessee will exercise such option.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Amounts received from tenants to terminate leases or to compensate impairment of leased facilities are recognized as revenues in the consolidated statement of income when the right to receive them arises.

Service charges, administration expenses and other recoverable expenses paid by the lessees and the revenues resulting from expenses charged to the lessees are recognized in the period in which the compensation becomes an account receivable. Service charges and administration expenses and other receipts are included in the gross revenues from rentals of the related costs, given that Management considers that the Group acts as principal party.

(l) Customer Loyalty Program -

The Group has a customer loyalty program, which allows customers to accumulate points that can be exchanged for products. Loyalty points give rise to a separate performance obligation, since they provide a material right to the customer. A part of the transaction price is allocated to the loyalty points granted to customers on the basis of the relative independent selling price and is recognized as a contractual liability until the points are redeemed and presented as "Other accounts payable" in the item "Other accounts payable, provisions and other liabilities" of the consolidated statement of financial position. Expenses are provisioned montlhy regardless of the customer’s redemtion of products.

By estimating the selling price independent of the loyalty points, the Group considers the probability of a client will use the cumulated points. The Group updates the estimates of points to be monthly redeemed and any adjustment to the liability balance will be recognized in the caption "Administrative expenses" of the consolidated statement of income.

(m) Services of purchase-sale of financial investments “principal versus agent”-

The Group has contracts with customers to buy and sell, on their behalf, financial investments on the stock market and over-the-counter market. The Group acts as an agent in these agreements.

When another party participates in the supply of services to their client, the Group determines whether it is a principal or an agent in these transactions when evaluating the nature of its agreement with the client. The Group is a principal and records the revenue by gross amounts if it controls the committed services before transferring to the customer. However, if the Group's role is only to arrange for another entity to provide the services, then the Group is an agent and records the revenues for the net amount it retains for its services as an agent.

(n) Investments in associates -

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the entity, but without having control over those policies. The considerations taken for determining significant influence are similar to those needed to determine control over Subsidiaries.

The Group’s investments in its associates are recognized initially at cost and then are accounted for using the equity method. The Group’s investments in associates are included in the caption “Other accounts receivable and other assets, net” of the consolidated statement of financial position, see note 10. Gains resulting from the use of the equity method of accounting are included in the caption “Other income” of the consolidated statement of income.

(o) Investment property -

Investment property comprises land and buildings (mainly shopping malls, educational institutions and offices) that are not occupied substantially for use in the operations of the Group, nor for sale in the ordinary course of business, but are held primarily to earn rental income and capital appreciation. These buildings are substantially rented and not intended to be sold in the ordinary course of business. Investment property comprises completed property and property under construction or re-development.

The Group measures its investment property at fair value according to the requirements of IAS 40 “Investment Property”, as it has chosen to use the fair value model as its accounting policy.

Investment property is measured initially at cost, including transaction costs, that include transfer taxes, professional fees for legal services and initial leasing commissions to bring the property to the condition necessary to start operating. The carrying amount also includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met.

Properties under construction are measured based on estimates prepared by independent real estate valuation experts, except where such values (e.g. work-in-progress incurred on properties under construction) cannot be readily determined. Accordingly, the work-in-progress incurred on properties under construction is measured at cost until either its fair value becomes reliably measurable or construction is completed (whichever is earlier). Investment property under construction includes the value of land, which is determined by appraisals performed by an accredited appraiser using the price per square meter as a market comparable method.

Subsequent to initial recognition, investment property is recorded at fair value. Gains or losses arising from changes in fair values are included in the caption “Net gain on investment property” of the consolidated statement of income in the year in which they arise.

Fair values are assessed periodically by Management, based on the discounted cash flows that are expected to be obtained from these investments. Fair values of investment properties under construction or investment properties held to operate in the future are assessed by an independent external appraiser, through the application of a recognized valuation model. See Note 7 for details of fair value and related assumptions.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Transfers to or from investment property are made only when a change in the asset’s use exists. If a component of property, furniture and equipment is transferred to an investment property, the Group transfers the net cost of the fixed asset to the caption investment property and subsequently said asset shall be measured at fair value, and the higher value of the investment property shall be recognized as revaluation surplus in the caption “Retained earnings” of the consolidated statement of changes in equity. In the case of a transfer from an investment property to the caption property, furniture and equipment, the reclassified amount corresponds to the fair value of the asset at the date of usage change. The amount recorded in the caption “Retained earnings” of the consolidated statement of changes in equity is recognized in the income of the period as the component of property, furniture and equipment is depreciated; or if said component is disposed, the cumulative balance is recognized directly in the consolidated statement of income.

During 2023, the Group transferred two floors from caption “Investment property” part of the “Orquídeas” building, located in San Isidro, Lima, to caption “Property, furniture and equipment” for S/16,177,000. Additionally, the Group transferred another floor from caption “Property, furniture and equipment “ part of the “Orquídeas” building, located in San Isidro, Lima, to caption “Investment property”, for S/3,984,000 (during 2022, the Group transferred from caption “Property, furniture and equipment “ part of the “Orquídeas and Andres Reyes ” buildings, located in San Isidro, Lima, to caption “Investment property”, for S/9,357,000). During 2021, the Group transferred part of the “Pardo y Aliaga” building, located in San Isidro, Lima, from caption “Property, furniture and equipment” to caption “Investment property”, for S/1,615,000; see Note 7(c).

Investment property is derecognized when it has been disposed or withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset would result in either gains or losses at the retirement or disposal of investment property. Any gains or losses are recognized in the consolidated statement of income of the year of retirement or disposal.

(p) Property, furniture and equipment, net -

Property, furniture and equipment are stated at historical acquisition cost less residual value, cumulative depreciation and impairment losses, if applicable. The historical acquisition cost includes the expenses that are directly attributable to the acquired property, furniture or equipment. Maintenance and repair costs are charged to the consolidated statement of income; significant renewals and improvements are capitalized when it is probable that future economic benefits, in excess of the originally assessed standard of performance, will result from the use of the acquired property, furniture or equipment.

Land does not depreciate. Depreciation of property, furniture and equipment is calculated using the straight-line method over the estimated useful lives, which are as follows:

Years
Buildings and facilities 40 - 75
Leasehold improvements 5
Furniture and equipment 10
Vehicles 5

An item of property, furniture and equipment and any significant part initially recognized, is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising from the derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated statement of income.

The residual value of each asset, its useful life and the selected depreciation method are periodically reviewed to ensure that they are consistent with current economic benefits and useful life expectations.

(q) Assets seized through legal actions -

Assets seized through legal actions are recorded in the item “Others” of the caption “Other accounts receivable and other assets, net” of the consolidated statement of financial position, see Note 10; and are recognized at the lower value between the cost or the estimated market value (minus cost to sell), determined from valuations made by independent appraisers. Reductions in book value are recorded in the consolidated statement of income.

(r) Intangible assets with finite or indefinite useful lives -

Intangible assets with finite or indefinite useful lives are included in the caption “Intangibles and goodwill, net” of the consolidated statement of financial position. Intangibles assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition.

Intangibles assets with finite useful lives include costs incurred in connection with the acquisition of computer software used in operations and other minor intangible assets. The amortization expense is calculated following the straight-line method over the useful life estimated between 4 and 5 years; see Note 9.

Intangibles assets with indefinite useful lives are not amortized, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be sustainable. If not, the charge in usefull life from indefinite to finite is made on a prospective basis.

(s) Goodwill -

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interests, and any previous interest held, if any, over the net identifiable assets acquired and

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

liabilities assumed. If the fair value of net assets acquired is in exceess of the the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all the liabilities assumed and reviews the procedures used to measure the amounts to be recognized at the acquisition date. If from the reassessment still results in an excess of fair value of net assets aquired over the aggregate consideration transferred, then the gain is recognized in the consolidated statement of income.

After initial recognition, goodwill is measured at cost less any cumulative impairment loss, if any. A goodwill impairment testing is performed on a yearly basis. To perform an impairment testing, goodwill acquired in a business combination is allocated, since the acquisition date, to one of the Group’s cash-generating units (henceforth “CGU”) that are expected to benefit from the business combination, irrespective of whether other assets or liabilities of the acquirer are assigned to those units.

Goodwill impairment is determined by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods.

Where the goodwill has been allocated to the CGU and part of the operation within that unit is dispossed of, the goodwill associated to the dispossed operation is included in the carrying amount of the operation when determining the gain or loss of disposal. Goodwill dispsed in these circumstances is measured based on the relative values of the disposed operation and the withheld portion of the CGU retained.

Goodwill, recorded by the Group; see Note 9(b), arises from the acquisition of Izipay, allocated to the CGU of Payments business unit and, Seguros Sura, allocated to the CGU of the insurance business unit.

(t) Business combinations -

Business combinations are accounted for using the acquisition method established by IFRS 3 "Business Combinations". The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at the acquisition date’s fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group chooses whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in the caption “Administrative expenses” of the consolidated statement of income, see Note 1(d).

The Group determines that it has acquired a business when the the acquired set of activities and assets include an input and a substantive process that together significantly contribute to the ability to create outputs. The acquired process is considered substantive if it is critical for the capacity to the ability to continue producing outputs , and the inputs acquired include an organized workforce with the necessary skills, knowledge or experience to performe that process or it significantly contributes to the ability to continue producing outputs and is considered unique or scarce or cannot be replaced without incurring in significant costs, effort or delay in the ability of continue producing outputs.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transferred by the acquirer shall be recognized at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 “Financial Instruments: Recognition and Measurement”, is measured at fair value with the changes in the consolidated statement of income or in the consolidated statement of other comprehensive income. If the contingent consideration is not within the scope of IFRS 9, this shall be measured according to the applicable IFRS. The contingent consideration that is classified as equity must not be measured again and its subsequent settlement shall be recorded in equity. As of December 31, 2023 and 2022, there have been no contingencies arising from business combinations.

A business combination between entities or businesses under common control is beyond the scope of IFRS 3, because it corresponds to a business combination in which all entities or businesses that are combined are ultimately controlled by the same part or parts, both before and after the business combination. In these transactions, the Group recognizes the assets acquired under the method of unification of interest, whereby the assets and liabilities of the combined companies are reflected in their book values and no commercial credit is recognized as a result of the combination.

(u) Impairment of non-financial assets -

Property, furniture and equipment,right-of-use assets and intangible assets with a finite life are assessed to determine whether there are any indications of impairment as of the closing of each period. If any indication exists, the Group estimates the asset’s recoverable value. The recoverable amount of the assets is the highest between the value of an asset or a CGU less the costs of sale and its use value, and it is determined for an individual asset, unless the asset does not generate cash revenues that are largely independent from those of other assets or groups of assets.

When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value minus costs to sell, an appropriate valuation model is used.

Intangible assets with indefinite useful lives, including goodwill, are tested for impairment annually to determine if circumstances indicate that the value of the recoverable amount of the asset or a CGU (or group of CGUs) is greater than its

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

carrying amount or recognize an impairment loss. Impairment losses relating to goodwill cannot be reversed in future periods.

(v) Due from customers on acceptances -

Due from customers on acceptances corresponds to accounts receivable from customers for import and export transactions, whose obligations have been accepted by the Group. The obligations that must be assumed by the Group for such transactions are recorded as liabilities.

(w) Defined contribution pension plan -

The Group only operates a defined contribution pension plan. The defined contribution payable in the pension plan is in proportion to the services rendered to the Group by the employees and it is recorded as an expense in the caption “Salaries and employee benefits” of the consolidated statement of income. Unpaid contributions are recorded as liabilities.

(x) Provisions -

Provisions are recognized when the Group has a present obligation (legal or implicit) as a result of a past event, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is presented in the consolidated statement of income, net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a pre-tax rate that reflects, where appropriate, the specific risks of the liability. When discounting is used, the increase in the provision due to the passage of time is recognized as a financial expense.

(y) Contingencies -

Contingent liabilities are not recognized in the consolidated financial statements, but are disclosed in notes to the consolidated financial statements, unless the probability of an outflow of resources is remote. Contingent assets are not recorded in the consolidated financial statements, but they are disclosed if it is probable that an inflow of economic benefits will emerge.

(z) Fair value measurement -

Fair value is the price that would be received for the sale of an asset or paid for the transfer of a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

 On the principal market for the asset or liability; or

 In the absence of a principal market, on the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group. Also, the fair value of a liability reflects its non-performance risk.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

When possible, the Group measures the fair value of a financial instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price on an active market, then the Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure the fair value, maximizing the use of relevant and observable data and variables, and minimizing the use of unobservable data and variables. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

In the case of investment property, the Group has considered the specific requirements relating to highest and best use, valuation of premises and principal (or most advantageous) market. The determination of investment property fair value requires the use of estimations such as the future cash flows of the assets (e.g., leases, sales, fixed rents for the different lessees, variable rents based on the sales percentage, operating costs, construction costs, maintenance costs, and the use of discount rates).

Additionally, real estate development risks (such as construction and abandonment) are also taken into account when determining the fair value of the land related to the investment property under construction.

The fair value of investment property in the consolidated statement of financial position must reflect the volatile nature of real estate markets; therefore, Management and its appraisers use their market knowledge and professional criteria and do not depend solely on historical comparable transactions. In this sense, there is a higher degree of uncertainty than when a more active market exists for the estimation of fair value. Significant methods and assumptions used in the estimation of fair value of investment property are detailed in Note 7.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

All assets and liabilities for which the fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value hierarchy described below:

 Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

 Level 2 - Valuation techniques for input that is significant to the fair value measurement is directly or indirectly observable.

 Level 3 - Valuation techniques for which data and variables of the lowest significant level to measure fair value are unobservable.

For assets and liabilities that are recognized at fair value in the consolidated financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization at the end of each reporting period.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of hierarchy of the fair value, as explained above.

Fair values of financial instruments measured at amortized cost are disclosed in Note 31(b).

(aa) Income Tax -

Income Tax is computed based on the separate financial statement of each Subsidiary.

Deferred Income Tax is accounted for in accordance with IAS 12 “Income Taxes”. In this sense, the deferred Income Tax reflects the effects of temporary differences between the carrying amounts of assets and liabilities for accounting purposes and the amounts determined for tax purposes. Deferred assets and liabilities are measured using the tax rates that are expected to be in force in the years in which such temporary differences are expected to be recovered or settled. Consequently, the deferred Income Tax has been calculated by applying the rates that are in force; see Note 17(c). The measurement of deferred tax assets and deferred tax liabilities reflects the tax consequences that arise from the manner in which each individual entity of the Group expects, at the consolidated statement of financial position dates, to recover or settle the carrying amount of their assets and liabilities.

Deferred tax assets and liabilities are recognized regardless of when the temporary differences are likely to reverse. Deferred tax assets are recognized when it is probable that sufficient taxable income will be generated against which the deferred tax assets can be offset. At each consolidated statement of financial position date, unrecognized deferred assets and the carrying amount of deferred tax assets registered are assessed. A previously unrecognized deferred tax asset is recognized to the extent that it has now become probable that future taxable income will allow the deferred tax asset to be recovered. Likewise, the carrying amount of a deferred tax asset is reduced when it is no longer probable the generation of a sufficient taxable income that allow the application of the tax deferred asset.

According to IAS 12, the deferred Income Tax is determined by applying the Income Tax rate applicable to the retained earnings, recognizing any additional tax on distribution of dividends that may arise on the date when the liability is recognized.

(ab) Segment information -

IFRS 8 “Operating Segments” requires that the information of operating segments be disclosed consistently with information provided by the chief operating decision maker, who allocates resources to the segments and assesses their performance. Segment information is presented in Note 27.

(ac) Fiduciary activities and management of funds -

The Group provides trust management, investment management, advisory and custody services to third parties that result in the holding of assets on their behalf. These assets and the income arising thereon are excluded from these consolidated financial statements, as they are not assets of the Group; see Note 31.

Commissions generated from these activities are included in the caption “Fee income from financial services, net” of the consolidated statement of income.

(ad) Earnings per share -

The amount of basic earnings per share is calculated by dividing the net profit for the year attributable to common shareholders by the weighted average number of common shares outstanding during the year. As of December 31, 2023 and 2022, the Group does not have financial instruments with dilutive effect, therefore, basic and diluted earnings per share are identical for the years reported.

(ae) Capital surplus -

It is the difference between the nominal value of shares issued and their public offering price made in 2007 and 2019. Capital surplus is presented net of expenses incurred in the issuance of shares.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(af) Treasury stock -

Shares repurchased are recorded in the shareholders’ equity under treasury stock caption at their purchase price. No loss or gain is recorded in the consolidated statement of income arising from the purchase, sale, issuance or amortization of these instruments. Shares that are subsequently sold are recorded as a reduction in treasury stock, measured at the average price of treasury stock held at such date; and the resulting gain or loss is recorded in the consolidated statement of changes in net equity in the caption “Retained earnings”.

(ag) Cash and cash equivalents -

Cash presented in the consolidated statement of cash flows includes cash and due from banks balances with original maturities lower than three months, excludes the restricted funds, which are subject to an insignificant risk of changes in value. The cash and cash equivalent item does not include accrued interest.

On the other hand, the cash collateral committed as part of a repurchase agreement is included in the “Cash and due from banks” caption of the consolidated statement of financial position; see Note 4(d).

(ah) Interest Rate Benchmark Reform -

In recent years, global regulators decided to gradually eliminate LIBOR rates and replace them by an alternative interest rate (risk-free rates). At the end of the period 2022, the Group had exposure to mainly USD-LIBOR rates in the derivative positions (interest rate swaps – IRS, and cross currency swaps – CCS) as well as USD-LIBOR interest-bearing loans. During 2023, the Group managed the transition of all its contracts exposed to the alternative interest rate benchmark Secured Overnight Financial Rate (SOFR). Regarding other interest rate benchmarks, such as EURIBOR, the financial instruments subject to said rate will not need to perform a transition since the rates comply with the strict regulating requirements to qualify as interest rate benchmark.

The exposures that were migrated to other benchmarks included, as mentioned before, commercial loan contracts, liability positions, and derivatives. In the case of commercial loans and liability positions (bonds issued) the new conditions of migration to other benchmark were negotiated or the already existing fallback clauses in the contracts were applied. In the case of derivatives agreed under the framework of the International Swaps and Derivatives Association (ISDA), Interbank signed the ISDA Protocol, which allowed the migration to new benchmarks to follow the standard process defined by said protocol. In the case of derivative contracts agreed outside the ISDA framework, mainly domestic contracts, the transition to the new SOFR benchmark was negotiated one by one.

Also, regarding the derivatives valuation, since June 2023, said valuations ceased to refer to the LIBOR benchmark and became being valued under SOFR rates or equivalents.

Regarding the new exposures, since the beginning of 2023, all new contracts refer to liquid standard risk-free rates (SOFR or similar) or are fixed rates, so that no new exposures are generated on the basis of LIBOR rates.

Note 10(b)(vi) details the nominal value and the average term in years of derivative financial instruments that are subject to the new interest rate benchmark SOFR.

(ai) Financial statements as of December 31, 2023 and 2022 –

When necessary, certain amounts from the previous year have been reclassified to make them comparable with the presentation of the current year.

(aj) Subsequent events -

The events subsequent to the year-end closing that provide additional information about the consolidated financial position of the Group as of the date of the consolidated statement of financial position (adjustment events) are included in the consolidated financial statements. The subsequent events that are important but are not adjustment events are disclosed in the Notes to the consolidated financial statements; see Note 32.

3.5. Standards issued but not yet effective -

Following is the description of the new and amended standards and interpretations issued, but which are not yet in force at the date of issuance of these consolidated financial statements. The Group intends to adopt these new and amended standards and interpretations, if applicable, when they become effective:

  • Amendments to IFRS 16 “Leases”: Lease liability in a sale and leaseback

In September 2022, the IASB issued amendments to IFRS 16 to specify the requirements that a seller-lessee uses in measuring the lease liability arising in a sale and leaseback transaction, to ensure the seller-lessee does not recognise any amount of the gain or loss that relates to the right of use it retains.

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Notes to the consolidated financial statements (continued)

The amendments are effective for annual reporting periods beginning on or after 1 January 2024 and must applied retrospectively to sale and leaseback transactions entered into after the date of initial application of IFRS 16. Earlier application is permitted, and that fact must be disclosed.

Amendments are not expected on the Group’s consolidated financial statements.

  • Amendments to IAS 1 “Presentation of Financial Statements”: Classification of Liabilities as Current or Non-current

In January 2020 and October 2022, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments clarify:

- What is meant by a right to defer a settlement arrangement.
- That a right to defer must exist at the end of the reporting period.
- That liability classification unaffected by the likehood that an entity will exercise its deferral right.
- That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification.

In addition, a requirement has been introduced to require disclosure when a liability arising from a loan agreement is classified as non-current and the entity’s right to defer settlement is contingent on compliance with future covenants within twelve months.

The amendments are effective for annual reporting periods beginning on or after 1 January 2024 and must be applied retrospectively. The Group is currently assessing the impact the amendments will have on current practice and whether existing loan agreements may require renegotiation.

- Amendments to IAS 7 “Statement of Cash Flows” and IFRS 7 “Financial Instruments - Disclosures: Supplier finance arrangements

In May 2023, the IASB issued amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures to clarify the characteristics of supplier finance arrangements and require additional disclosure of such arrangements. The disclosure requirements in the amendments are intended to assist users of financial statements in understanding the effects of supplier finance arrangements on an entity’s liabilities, cash flows and exposure to liquidity risk.

The amendments will be effective for annual reporting periods beginning on or after 1 January 2024. Early adoption is permitted but will need to be disclosed.

The amendments are not expected to have a material impact on the Group’s consolidated financial statements.

3.6. Material accounting judgments, estimates and assumptions -

The preparation of the consolidated financial statement of the Group requires Management to make judgments, estimates and assumptions that affect the reported amount of income, expenses, assets and liabilities, and the accompanying disclosures, as well as the disclosure of contingent liabilities. In the process of applying the Group's accounting policies, Management has used judgments and assumptions about the future and other key sources to make its estimates at the reporting date, which have a significant risk that may cause a material adjustment to the value in books of assets and liabilities within the next financial year. The estimates and existing assumptions may change due to circumstances beyond the control of the Group and are reflected in assumptions if they occur. The items with the most impact recognized in the consolidated financial statements with judgements and/or considerable estimates are the following: the calculation of the impairment of the portfolio of loans and financial investments, the measurement of the fair value of the financial investments and investment properties, the assessment of the impairment of the goodwill and indefinite-lived intangibles, the liabilities for insurance contracts and the measurement of the fair value of derivative financial instruments; also, there are other estimates such as provisions for litigation, the estimated useful life of intangible assets, and property, furniture and equipment, and the estimation of assets and liabilities for deferred Income Tax, and the determination of terms and estimation of the interest rate of lease agreements. The accounting criteria used for each of these items are described in Note 3.4.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

3.7 Transition disclosures of IFRS 17 –

Transition –

As of January 1, 2022, the Group:

-Has identified, recognized, and measured each group of insurance contracts as if IFRS 17 had always applied.

-Has identified, recognized, and measured assets for insurance acquisition cash flows as if IFRS 17 has always applied. However, no recoverability assessment was performed before the transition date. At transition date, a recoverability assessment was performed and no impairment loss was identified.

-Derecognized any existing balances that would not exist had IFRS 17 always applied.

-Recognized any resulting net difference in equity.

Transition methodology –

The transition approach that the standard considers by default is the full retrospective method, which seeks to identify, recognize, and account for the groups of insurance contracts at the transition date as though the standard had always been in effect, unless it is impracticable; after the assessment of information availability and the application of estimates on this information is done. From the assessment performed, the Group identified that the information availability for the application of the full retrospective method is not possible to obtain until January 1, 2022, for the portfolios valued under the general method (BBA) and the VFA without incurring in significant resource and time costs.

Therefore, the Group decided to apply the transition methodology under Fair Value for all portfolios valued under the BBA general method and the VFA method, which consists of obtaining the amount under which a liability portfolio could be transferred to a third party, said methodology is under the IFRS13 “Fair Value” approach. This amount was compared with the balance of the estimate of technical provisions (Best Estimate Liability – “BEL”) and Risk Adjustment existing at the transition date, and the result was the CSM (Contractual Service Margin) as of said date. Also, it was determined the future benefit provided by the insurance contracts CSM and will be decommitted to the statement of income to the extent that the Group renders its services to the insured. The CSM balance at the date of transition into IFRS 17 was applied retrospectively for the policies in force at said date, mainly for Individual life insurance measured under BBA approach.

Calculation methodology –

The calculation methodology that the Group has applied to determine the Fair Value amount of its portfolios in force as of the date of transition into IFRS 17 is the valuation technique of present value. In this sense, the following calculation components are taken into account:

• An estimation of the future cash flows for the asset or liability subject to valuation.

• The expectations of possible variations in the amount and the cash flows calendar that represent the uncertainty inherent to cash flows.

• The time value of money, represented by the interest rate on risk-free monetary assets that present maturity dates or lives that coincide with the periods covered by the cash flows and do not involve neither uncertainty regarding the calendar nor risk of default for the holder (i.e., risk-free interest rate).

• The price to bear the uncertainty inherent to cash flows (i.e., a risk premium).

• Other factors that market participants may take into account considering the circumstances.

• For a liability, the risk of default related to said liability, including the credit risk of the entity (i.e., the debtor).

The Group applies the discount rate for the valuation of insurance portfolios that are estimated by the BBA general method. Therefore, when the valuation method applicable is the simplified general method (PAA), the interest rates are not applied. In this sense, the interest rate curve that is applied to contracts valued by the BBA general method corresponds to the risk-free interest rate curve (“RFR”) as defined for IFRS 17.

Changes in presentation and disclosure –

The disclosures that the Group makes regarding this standard include the recording of insurance and reinsurance contracts issued and the reinsurance contracts held in the consolidated statement of financial position, presented separately:

  • Portfolio of insurance and reinsurance contracts issued that are assets.

  • Portfolio of insurance and reinsurance contracts issued that are liabilities.

  • Portfolio of reinsurance contracts held that are assets.

  • Portfolio of reinsurance contracts held that are liabilities.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Additionally, the descriptions of some captions in the consolidated statement of income and the consolidated statement of other comprehensive income have been significantly modified. Under IFRS 17, it is required the separate presentation of:

  • Income from insurance activities.

  • Expenses of the insurance service.

  • Income or expenses for insurance financing.

  • Income or expenses for reinsurance contracts held.

Also, the Group provides with disaggregated qualitative and quantitative information about:

  • Recognized amounts in the consolidated financial statements from insurance contracts.

  • Significant judgments and changes in said judgments at the application of the standard.

As permitted by IFRS 17, the Group reformulated the comparative information of the period 2022 for insurance contracts within the scope of IFRS 17. However, the comparative information of the period 2021 is presented within the scope of IFRS 4 and is not comparable to the information presented in the period 2022, see note 3.4(d.2).

This table presents the impact of the adoption of IFRS 17 in the consolidated statements of financial position as of January 1, 2022 and December 31, 2022. In addition, it presents the reconciliation between the book values according to IFRS 4 and the balances reported according to IFRS 17:

As of December 31, 2022 As of January 1, 2022
IFRS 4 Adjustments for first adoption of IFRS 17 Ref IFRS 17 IFRS 4 Adjustments for first adoption of IFRS 17 Ref IFRS 17
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Asset
Cash and due from banks 13,193,411 — 13,193,411 17,104,465 — 17,104,465
Financial investments 22,787,598 — 22,787,598 24,547,294 — 24,547,294
Loans, net 45,502,998 — 45,502,998 43,005,583 — 43,005,583
Intangibles and goodwill, net 1,633,202 — 1,633,202 1,044,749 — 1,044,749
Other accounts receivable and other assets, net 1,778,559 (34,596 ) A 1,743,963 1,887,454 (52,971 ) A 1,834,483
Reinsurance contract assets — 34,053 A 34,053 — 53,849 A 53,849
Ohter assets 2,586,864 — 2,586,864 2,364,364 — 2,364,364
Total asset 87,482,632 (543 ) 87,482,089 89,953,909 878 89, 954,787
Liability
Deposits and obligations 48,530,708 — 48,530,708 48,897,944 — 48,897,944
Due to banks and correspondents 7,100,646 — 7,100,646 8,522,849 — 8,522,849
Bonds, notes and other obligations 7,906,303 — 7,906,303 8,389,672 — 8,389,672
Insurance and reinsurance contract liabilities 10,602,372 628,949 B 11,231,321 11,958,058 830,771 B 12,788,829
Other accounts payable, provisions and other liabilities 3,138,932 (9,768 ) B 3,129,164 2,477,601 (9,359 ) B 2,468,242
Other liabilities 157,720 — 157,720 152,423 — 152,423
Total liability 77,436,681 619,181 78,055,862 80,398,547 821,412 81,219, 959
Equity, net
Equity attributable to IFS’s shareholders:
Capital stock, net of treasury stock 1,034,654 — 1,034,654 1,034,654 — 1,034,654
Capital surplus and reserves 6,532,771 — 6,532,771 5,732,771 — 5,732,771
Unrealized results, net (613,280 ) 58,859 C (554,421 ) (168,300 ) (134,177 ) C (302,477 )
Retained earnings 3,037,030 (677,566 ) D 2,359,464 2,904,912 (685,010 ) D 2,219,902
9,991,175 (618,707 ) 9,372,468 9,504,037 (819,187 ) 8,684,850
Non-controlling interest 54,776 (1,017 ) 53,759 51,325 (1,347 ) 49,978
Total equity, net 10,045,951 (619,724 ) 9,426,227 9,555,362 (820,534 ) 8,734,828
Total liabilities and equity, net 87,482,632 (543 ) 87,482,089 89,953,909 878 89, 954,787

A. Corresponds to the recording of the insurance contract asset under IFRS 17.

B. Corresponds to the net reversal amount of insurance contract liabilities under IFRS 4 and the recording of the insurance contract liability under IFRS 17.

C. As of January 1, 2022, corresponds to the reversal of other comprehensive income resulting from the difference of the discount rate used to discount the flows of insurance contract liabilities. This practice was used for annuities, retirement and SCTR under IFRS 4. This transition approach is in accordance with the guidelines of IFRS 17. As of December 31, 2022, corresponds to the constitution of the “look-in rate” effect versus the market rate.

D. Corresponds to the impact on retained earnings due to the first adoption of IFRS 17.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

This table presents the conciliation of the main captions in the consolidated statement of income for the year ended December 31, 2022:

IFRS 4 Adjustments for first adoption of IFRS 17 Ref IFRS 17
S/(000) S/(000) S/(000) S/(000)
Interest and similar income 5,871,302 5,871,302
Interest and similar expenses (1,662,098 ) 409 (1,661,689 )
Net interest and similar income 4,209,204 409 4,209,613
Impairment loss on loans, net of recoveries and financial investments (843,303 ) — (843,303 )
Net interest and similar income after impairment loss 3,365,901 409 3,366,310
Total other income 1,679,832 (21 ) 1,679,811
Insurance premiums and claims
Net premiums earned 668,197 (668,197 ) A —
Net claims and benefits incurred for life insurance contracts and others (859,991 ) 859,991 A —
Total insurance premiums and claims (191,794 ) 191,794 —
Result from insurance activities — (252,854 ) A (252,854 )
Total other expenses (2,683,909 ) 56,771 (2,627,138 )
Income before translation result and Income Tax 2,170,030 (3,901 ) 2166129
Exchange difference (36,836 ) 11,358 (25,478 )
Income Tax (462,537 ) — (462,537 )
Net profit for the year 1,670,657 7,457 1,678,114
Attributable to:
IFS’s shareholders 1,660,581 7,445 1,668,026
Non-controlling interest 10,076 12 10,088
1,670,657 7,457 1,678,114
Earnings per share attributable to IFS’s shareholders, basic and diluted (stated in Soles) 14.388 14.452
Weighted average number of outstanding shares (in thousands) 115,418 — 115,418

A. Corresponds to the net reversal amount of insurance premiums and claims for insurance contracts under IFRS 4 and the recording of the result from insurance activities under IFRS 17.

4. Cash and due from banks and inter-bank funds

(a) The detail of cash and due from banks is as follows:

2023 2022
S/(000) S/(000)
Cash and clearing (b) 2,248,845 2,865,251
Deposits in the BCRP (b) 5,215,762 6,918,526
Deposits in banks (c) 1,609,604 2,923,999
Total cash and cash equivalent 9,074,211 12,707,776
Accrued interest 23,809 17,391
Restricted funds (d) 720,691 468,244
Total 9,818,711 13,193,411

(b) In accordance with rules in force, Interbank is required to maintain a legal reserve to honor its obligations with the public. This reserve is comprised of funds kept in Interbank and in the BCRP and is made up as follows:

2023 2022
S/(000) S/(000)
Legal reserve (*)
Deposits in the BCRP 4,593,592 6,055,726
Cash in vaults 2,005,760 2,719,277
Subtotal legal reserve 6,599,352 8,775,003
Non-mandatory reserve
Overnight deposits in BCRP (**) 622,170 762,800
Cash and clearing 243,029 145,903
Term deposits in BCRP (***) — 100,000
Subtotal non-mandatory reserve 865,199 1,008,703
Cash balances not subject to legal reserve 56 71
Total 7,464,607 9,783,777

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(*) 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 a nominal annual rate, established by the BCRP. Starting in February 2022, the rate used is the Secured Overnight Financing Rate (“SOFR”). As of December 31, 2023 and 2022, the Group presented only excess in foreign currency that accrued interest in US Dollars at an annual average rate of 4.86 and 3.79 percent, respectively.

During the years 2023, 2022 and 2021, the Group recognized income for interest related to the excess of the legal reserve, which amounted to S/194,446,000, S/61,302,000 and S/3,000, respectively, and were recorded in the item "Interest on due from banks and inter-bank funds” of the caption "Interest and similar income" of the consolidated statement of income, see Note 19.

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

(**) As of December 31, 2023, corresponds to an overnight deposit in foreign currency for US$130,000,000 (approximately equivalent to S/482,170,000) and an overnight deposit in local currency for S/140,000,000, with maturity in the first days of January 2024, which accrued interest an annual interest rate of 5.33 and 4.0 percent, respectively (as of December 31, 2022, it corresponded to an overnight deposit in foreign currency for US$200,000,000, approximately equivalent to S/762,800,000, with maturity in the first days of January 2023 and accrued interest an annual interest rate of 4.39 percent).

During the years 2023, 2022 and 2021, the Group recognized income for interest on overnight deposits, which amounted to S/68,850,000, S/35,874,000 and S/799,000, respectively, and were recorded in the item "Interest on due from banks and inter-bank funds” of the caption "Interest and similar income" of the consolidated statement of income, see Note 19.

(***) As of December 31, 2022, corresponded to a term deposit in local currency, matured in the first days of 2023, and accrued interest at an annual interest rate of 7.50 percent.

During the years 2023, 2022 and 2021, the Group recognized interest on time deposits, which amounted to S/36,960,000, S/48,331,000 and S/38,068,000, respectively, and were recorded in the item "Interest on due from banks and inter-bank funds” of the caption "Interest and similar income" of the consolidated statement of income, see Note 19.

(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:

2023 2022
S/(000) S/(000)
Inter-bank transfers (*) 694,118 431,052
Derivative financial instruments, Note 10(b)(i) and Note 29.1(g.2) 24,725 34,784
Others 1,848 2,408
Total 720,691 468,244

(*) Funds held at BCRP to guarantee transfers made through the Electronic Clearing House ("CCE", by its Spanish acronym).

(e) Inter-bank funds

These are loans made between financial institutions with maturity, in general, minor than 30 days. As of December 31, 2023, Inter-bank funds assets and liabilities accrue interest at an annual rate of 6.75 percent in local currency and 5.5 in foreign currency (annual rate of 7.50 percent in local currency for Inter-bank funds assets and liabilities, as of December 31, 2022); and do not have specific guarantees.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

5. Financial investments

(a) This caption is made up as follows:

2023 2022
S/(000) S/(000)
Debt instruments measured at fair value through other comprehensive income (b) and (c) 20,912,184 16,716,517
Investments at amortized cost (d) 3,383,014 3,231,139
Investments at fair value through profit or loss (e) 1,556,540 1,932,993
Equity instruments measured at fair value through other comprehensive income (f) 444,878 512,884
Total financial investments 26,296,616 22,393,533
Accrued income
Debt instruments measured at fair value through other comprehensive income (b) 334,385 322,425
Investments at amortized cost (d) 90,990 71,640
Total 26,721,991 22,787,598

In the determination of the expected loss for the financial investments’ portfolio, the Group has not needed to apply any subsequent adjustment to the model through the expert judgment, as it has been in the case of the loan portfolio, see Note 29.1, because the most significant investments held As of December 31, 2023 and 2022 are permanently evaluated by local and international

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

credit-rating agencies, in an individual manner. Said agencies periodically modify the ratings of the issuers in accordance with the risk variation of each of the financial instrument, based on the particular situation of issuers.

(b) Following is the detail of debt instruments measured at fair value through other comprehensive income:

Unrealized gross amount Annual effective interest rates
Amortized Estimated Maturity S/ US
2023 cost Gains Losses (c) fair value Min Max Min Max
S/(000) S/(000) S/(000) S/(000) % % % %
Corporate, leasing and subordinated bonds (*) 9,443,384 83,511 (865,654 ) 8,661,241 Jan-24 / Feb-97 2.22 14.52 18.00
Sovereign Bonds of the Republic of Peru (**) 8,320,671 13,599 (558,282 ) 7,775,988 Aug-24 / Feb-55 0.95 6.82 —
Negotiable Certificates of Deposit issued by the Central Reserve Bank of Peru (***) 3,445,361 3,638 (15 ) 3,448,984 Jan-24 / Sep-24 5.60 6.66 —
Bonds guaranteed by the Peruvian Government 475,542 7,810 (9,722 ) 473,630 Oct-24 / Oct-33 2.81 4.65 7.92
Global Bonds of the Republic of Peru 498,897 — (35,564 ) 463,333 Jul-25 / Dec-32 — — 5.23
Treasury Bonds of the United States of America 76,556 26 (3,252 ) 73,330 Jan-24 / Feb-32 — — 5.00
Global Bonds of the United States of Mexico 17,769 — (2,091 ) 15,678 Feb-34 — — 5.51
Total 22,278,180 108,584 (1,474,580 ) 20,912,184
Accrued interest 334,385
Total 21,246,569
Unrealized gross amount Annual effective interest rates
Amortized Estimated Maturity S/ US
2022 cost Gains Losses (c) fair value Min Max Min Max
S/(000) S/(000) S/(000) S/(000) % % % %
Corporate, leasing and subordinated bonds (*) 8,707,969 9,477 (1,143,244 ) 7,574,202 Jan-23 / Feb-97 1.60 13.26 13.14
Sovereign Bonds of the Republic of Peru (**) 7,878,445 590 (1,270,254 ) 6,608,781 Sep-23 / Feb-55 1.89 8.14 —
Variable interest Certificates of Deposit issued by the Central Reserve Bank of Peru 1,434,752 89 (5 ) 1,434,836 Jan-23 / Mar-23 7.29 7.46 —
Bonds guaranteed by the Peruvian Government 512,316 1,698 (26,286 ) 487,728 Oct-24 / Oct-33 3.48 6.01 8.25
Global Bonds of the Republic of Peru 508,813 — (55,527 ) 453,286 Jul-25 / Dec-32 — — 5.60
Global Bonds of the Republic of Colombia 82,836 — (2,026 ) 80,810 Mar-23 / Feb-24 — — 6.23
Negotiable Certificates of Deposit issued by the Central Reserve Bank of Peru 44,234 — (366 ) 43,868 Mar-23 2.28 2.28 —
Treasury Bonds of the United States of America 21,387 — (3,661 ) 17,726 Nov-31 / Feb-32 — — 3.85
Global Bonds of the United States of Mexico 18,240 — (2,960 ) 15,280 Feb-34 — — 6.06
Total 19,208,992 11,854 (2,504,329 ) 16,716,517
Accrued interest 322,425
Total 17,038,942

All values are in US Dollars.

(*) As of December 31, 2023 and 2022, Inteligo holds corporate bonds from several entities for approximately S/101,215,000 and S/116,603,000, respectively, which guarantee loans with Bank J. Safra Sarasin, see Note 12(d.12).

(**)As of December 31, 2023 and 2022, Interbank holds Sovereign Bonds of the Republic of Peru for approximately S/887,454,000 and S/1,047,815,000, respectively, which guarantee loans with the BCRP, see Note 12(b). As of December 31, 2023, Interbank holds Sovereign Bonds of the Republic of Peru for approximately S/629,265,000, which guarantee loans with foreign banks, see Note 12(d.1).

(***) As of December 31, 2023, Interbank maintains Negotiable Certificates of Deposits issued by the BCRP for approximately S/785,206,000, which guarantee loans with the BCRP, see Note 12(b).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

The following table shows the credit quality and maximum exposure to credit risk based on the Group's internal credit rating of debt instruments measured at fair value through other comprehensive income as of December 31, 2023 and 2022. The amounts presented do not consider impairment.

2023 2022
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 4,261,926 — — 4,261,926 2,271,038 — — 2,271,038
Standard grade 15,898,382 750,179 — 16,648,561 13,499,740 945,321 — 14,445,061
Sub-standard grade — — — — — — — —
Impaired
Individual — — — 1,697 1,697 — — 418 418
Total 20,160,308 750,179 1,697 20,912,184 15,770,778 945,321 418 16,716,517

(c) The Group, according to the business model applied to these debt instruments, has the capacity to hold these investments for a sufficient period that allows the early recovery of the fair value, up to the maximum period for the early recovery or the due date.

The following table shows the analysis of changes in fair value and the corresponding expected credit loss:

2023
Gross carrying amount of debt instruments measured at fair value through other comprehensive income Stage 1 Stage 2 Stage 3 Total
S/(000) S/(000) S/(000) S/(000)
Beginning of year balances 15,770,778 945,321 418 16,716,517
New originated or purchased assets 5,810,766 — — 5,810,766
Assets matured or derecognized (excluding write-offs) (2,175,611 ) (80,810 ) — (2,256,421 )
Change in fair value 783,826 (58,954 ) 1,289 726,161
Transfers to Stage 1 161,781 (161,781 ) — —
Transfers to Stage 2 (109,392 ) 109,392 — —
Transfers to Stage 3 — — — —
Write-offs — — — —
Foreign exchange effect (81,840 ) (2,989 ) (10 ) (84,839 )
End of year balances 20,160,308 750,179 1,697 20,912,184
2023
Movement of the allowance for expected credit losses for debt instruments measured at fair value through other comprehensive income Stage 1 Stage 2 Stage 3 Total
S/(000) S/(000) S/(000) S/(000)
Expected credit loss at the beginning of the period 10,822 29,600 13,552 53,974
New originated or purchased assets 1,689 — — 1,689
Assets matured or derecognized (excluding write-offs) (877 ) (116 ) — (993 )
Transfers to Stage 1 4,198 (4,198 ) — —
Transfers to Stage 2 (183 ) 183 — —
Transfers to Stage 3 — — — —
Effect on the expected credit loss due to the change of the stage during the year (4,003 ) 3,414 — (589 )
Others (*) (1,739 ) 9,120 — 7,381
Write-offs — — — —
Recoveries — — — —
Foreign exchange effect (30 ) (16 ) (370 ) (416 )
Expected credit loss at the end of the period 9,877 37,987 13,182 61,046

(*) Corresponds mainly to the effects on the expected loss because of changes in investment ratings and that not necessarily have resulted in stage transfers during the year.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

2022
Gross carrying amount of debt instruments measured at fair value through other comprehensive income Stage 1 Stage 2 Stage 3 Total
S/(000) S/(000) S/(000) S/(000)
Beginning of year balances 16,733,281 896,506 — 17,629,787
New originated or purchased assets 3,211,041 — — 3,211,041
Assets matured or derecognized (excluding write0offs) (1,939,686 ) (10,531 ) — (1,950,217 )
Change in fair value (1,906,272 ) (14,416 ) (9,210 ) (1,929,898 )
Transfers to Stage 1 — — — —
Transfers to Stage 2 (88,095 ) 88,095 — —
Transfers to Stage 3 (2,162 ) (7,805 ) 9,967 —
Write-offs — — — —
Foreign exchange effect (237,329 ) (6,528 ) (339 ) (244,196 )
End of year balances 15,770,778 945,321 418 16,716,517
2022
Movement of the allowance for expected credit losses for debt instruments measured at fair value through other comprehensive income Stage 1 Stage 2 Stage 3 Total
S/(000) S/(000) S/(000) S/(000)
Expected credit loss at the beginning of the period 9,456 31,652 — 41,108
New originated or purchased assets 3,132 — — 3,132
Assets matured or derecognized (excluding write0offs) (416 ) (46 ) — (462 )
Transfers to Stage 1 — — — —
Transfers to Stage 2 (105 ) 105 — —
Transfers to Stage 3 (305 ) (993 ) 1,298 —
Effect on the expected credit loss due to the change of the stage during the year — 3,237 12,311 15,548
Others (*) (1,186 ) (4,282 ) — (5,468 )
Write-offs — — — —
Recoveries — — — —
Foreign exchange effect 246 (73 ) (57 ) 116
Expected credit loss at the end of the period 10,822 29,600 13,552 53,974

(*) Corresponds mainly to the effects on the expected loss because of changes in investment ratings and that not necessarily have resulted in stage transfers during the year.

In the determination of the expected loss for the portfolio of financial investments, for the years 2023 and 2022; it has not been necessary to perform a subsequent adjustment to the model because it captures the expected loss in a satisfactory manner considering the Group portfolio investments.

As a result of the assessment of the impairment of its debt instruments at fair value through other comprehensive income, the Group recorded a loss of S/7,500,000 and S/12,752,000 during the year 2023 and 2022, respectively and a reversal of impairment of S/30,898,000 during the year 2021, which are presented in the caption “(Loss) recovery to impairment of financial investments” in the consolidated statement of income. The movement of unrealized results of investments at fair value through other comprehensive income, net of Income Tax and non-controlling interest, is presented in Notes 16(d) and (e).

(d) As of December 31, 2023, investments at amortized cost corresponds mainly to Sovereign Bonds of the Republic of Peru issued in Soles for an amount of S/3,393,962,000, including accrued interest for an amount of S/86,652,000 (as of December 31, 2022, corresponds to Sovereign Bonds of the Republic of Peru issued in Soles for an amount of S/3,304,779,000, including accrued interest for an amount of S/71,640,000). Said investments present low credit risk and the impairment loss is not significant.

As of December 31, 2023, these investments have maturity dates that range from August 2024 to August 2037, have accrued interest at effective annual rates between 4.36 percent and 7.50 percent, and estimated fair value amounting to approximately S/3,277,672,000 (as of December 31, 2022, their maturity dates ranged from September 2023 to August 2037, accrued interest at effective annual rates between 4.29 percent and 6.64 percent, and its estimated fair value amounted to approximately S/2,949,507,000).

Additionally, as of December 31, 2023, term deposits mainly issued in Soles are held, for an amount of S/80,042,000, included accrued interest amounting to S/4,338,000. Said investments present low credit risk and the impairment loss is not material. As of December 31, 2023, the maturity of these investments fluctuates between April 2024 and February 2029, have accrued interest at an annual effective rate between 3.10 percent and 8.80 percent, and their estimated fair value amounts to approximately S/80,042,000.

During 2023, the Government of the Republic of Peru performed public offerings to repurchase certain sovereign bonds, with the purpose of renewing its debt and funding the fiscal deficit. Considering the purpose of this offering, subsequently to it, there should not be existing remaining sovereign bonds of the repurchased issuances or, in case of existing, they would become illiquid on the market. In that sense, Interbank took part of these public offering and sold to the Government of the Republic of Peru sovereign bonds classified as investments at amortized cost for approximately S/482,632,000, generating a loss amounting to S/490,000, which was recorded in the caption “Net gain on sale of financial investments” of the consolidated statement of income. Additionally, with the purpose of maintaining its asset management strategy, Interbank purchased simultaneously other sovereign

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

bonds of the Republic of Peru for approximately S/488,127,000, 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 renewal and the funding of the fiscal deficit of the Republic of Peru, and thus the business model regarding these assets has always been to collection of the contractual cash flows.

As of December 31, 2023 and 2022, Interbank holds loans with the BCRP that are guaranteed with these sovereign bonds, classified as restricted, for approximately S/2,058,931,000 and S/2,310,536,000, respectively; see Note 12(b).

As of December 31, 2023, Interbank holds loans with foreign banks that are guaranteed with these sovereign bonds, classified as restricted, for approximately S/445,909,000; see Note 12(d.1) and (d.3).

(e) The composition of financial instruments at fair value through profit or loss is as follows:

2023 2022
S/(000) S/(000)
Equity instruments
Local and foreign mutual funds and investment funds participations 1,169,491 1,517,075
Listed shares 253,203 315,820
Non-listed shares 122,482 74,430
Debt instruments
Negotiable Certificates of Deposits 6,075 —
Corporate, leasing and subordinated bonds 5,289 25,668
Total 1,556,540 1,932,993

As of December 31, 2023 and 2022, investments at fair value through profit or loss include investments held for trading for approximately S/194,033,000 and S/209,549,000, respectively; and those assets that are necessarily measured at fair value through profit or loss for approximately S/1,362,507,000 and S/1,723,444,000, respectively.

During the year 2023, the Group recognized losses from valuation of instruments at fair value through profit or loss for approximately S/53,134,000 (during the year 2022 recognized loss for S/303,733,000 and during the year 2021, recognized gains for S/123,372,000), which are part of caption “Net (loss) gain from financial assets at fair value through profit or loss” of the consolidated statement of income.

During the years 2023, 2022 and 2021, the Group has received dividends from these investments for approximately S/8,838,000, S/33,897,000 and S/2,536,000, respectively, which are presented in the caption “Interest and similar income” of the consolidated statement of income.

(f) The composition of equity instruments measured at fair value through other comprehensive income is as follow:

2023 2022
S/(000) S/(000)
Listed shares (g) 407,636 474,588
Non-listed shares 37,242 38,296
Total 444,878 512,884

As of December 31, 2023 and 2022, it corresponds to investments in shares in the biological sciences, distribution of machinery, energy, telecommunications, financial and massive consumption sectors that are listed on the domestic and foreign markets.

During the years 2023, 2022 and 2021, the Group received dividends from these investments for approximately S/33,941,000, S/45,031,000 and S/99,200,000, respectively, which are included in the caption “Interest and similar income” in the consolidated statement of income.

(g) During the year 2023, the Group sold shares of several entities, which were irrevocably designated at fair value through other comprehensive income. The total amount of the sales amounted to S/80,372,000 generating total gains for approximately S/33,433,000 (in 2022, the sales amounted to S/345,791,000, generating total gain for approximately S/16,313,000; in 2021, the sales amounted to S/1,240,052,000, generating total losses for approximately S/180,905,000). In accordance with IFRS 9 and considering the classification of this investment said gains were reclassified to caption “Retained Earnings” of the consolidated statement of changes in equity.

In October 2021, the Group sold the 2,396,920 shares it held in InRetail Peru Corp. (a related entity), that represented 2.33 percent of its capital stock, which were irrevocably designated at fair value through other comprehensive income. The sale was trade through Lima Stock Exchange, at market value for a total amount of US$84,108,000, equivalent to S/341,646,000. Since the acquisition date, the Group had recorded a cumulative gain on valuation for approximately S/270,993,000. In accordance with the provisions of IFRS 9 and considering the classification of this investment; said gain was recorded as a decrease in the caption “Unrealized results, net” and an increase in the caption “Retained earnings” of the consolidated statements of changes in equity.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(h) The following is the balance of investments at fair value through other comprehensive income (debt and equity instruments) and investments at amortized cost As of December 31, 2023 and 2022 classified by contractual maturity (without including accrued interest):

2023 2022
Investments at fair value through other comprehensive income Investments at amortized cost Investments at fair value through other comprehensive income Investments at amortized cost
S/(000) S/(000) S/(000) S/(000)
Up to 3 months 1,933,761 — 1,610,691 —
From 3 months to 1 year 2,279,986 634,133 152,533 494,872
From 1 to 3 years 2,347,378 485,590 1,160,014 640,314
From 3 to 5 years 1,660,263 146,633 2,329,056 443,799
From 5 years onwards 12,690,796 2,116,658 11,464,223 1,652,154
Equity instruments (without maturity) 444,878 — 512,884 —
Total 21,357,062 3,383,014 17,229,401 3,231,139

(i) Below are the debt instruments measured at fair value through other comprehensive income and at amortized cost according to the stages indicated by IFRS 9. As of December 31, 2023 and 2022:

2023
Debt instruments measured at fair value through other comprehensive income and at amortized cost Stage 1 Stage 2 Stage 3 Total
S/(000) S/(000) S/(000) S/(000)
Sovereign Bonds of the Republic of Peru 11,083,297 — — 11,083,297
Corporate, leasing and subordinated bonds 7,909,365 750,179 1,697 8,661,241
Negotiable Certificates of Deposit issued by the BCRP 3,448,984 — — 3,448,984
Bonds guaranteed by the Peruvian government 473,630 — — 473,630
Global Bonds of the Republic of Peru 463,333 — — 463,333
Treasury Bonds of the United States of America 73,330 — — 73,330
Global Bonds of the United States of Mexico 15,678 — — 15,678
Others 75,705 — — 75,705
Total 23,543,322 750,179 1,697 24,295,198
2022
Debt instruments measured at fair value through other comprehensive income and at amortized cost Stage 1 Stage 2 Stage 3 Total
S/(000) S/(000) S/(000) S/(000)
Sovereign Bonds of the Republic of Peru 9,839,920 — — 9,839,920
Corporate, leasing and subordinated bonds 6,709,273 864,511 418 7,574,202
Variable interest Certificates of Deposit issued by the BCRP 1,434,836 — — 1,434,836
Bonds guaranteed by the Peruvian government 487,728 — — 487,728
Global Bonds of the Republic of Peru 453,286 — — 453,286
Global Bonds of the Republic of Colombia — 80,810 — 80,810
Negotiable Certificates of Deposit issued by the BCRP 43,868 — — 43,868
Treasury Bonds of the United States of America 17,726 — — 17,726
Global Bonds of the United States of Mexico 15,280 — — 15,280
Total 19,001,917 945,321 418 19,947,656

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

6. Loan, net

(a) This caption is made up as follows:

2023 2022
S/(000) S/(000)
Direct loans
Loans (*) 35,789,130 35,977,734
Credit cards and other loans (**) 6,023,769 6,239,314
Discounted notes 1,567,411 894,588
Leasing 1,495,290 1,174,542
Factoring 1,244,795 1,011,496
Advances and overdrafts 14,617 38,763
Refinanced loans 461,995 322,941
Past due and under legal collection loans 1,652,151 1,365,972
48,249,158 47,025,350
Plus (minus)
Accrued interest from performing loans (f) 657,355 527,615
Unearned interest and interest collected in advance (36,706 ) (22,112 )
Impairment allowance for loans (d) (2,349,425 ) (2,027,855 )
Total direct loans, net 46,520,382 45,502,998
Indirect loans, Note 18(a) 4,743,480 4,487,347

(*) As of December 31, 2023 and 2022, Interbank maintains repo operations of loans represented in securities according to the BCRP’s definition. In consequence, loans provided as guarantee amounts to S/504,158,000 and S/1,909,375,000, respectively, and is presented in the caption “Loan, net”, and the related liability is presented in the caption “Due to banks and correspondents” of the consolidated statement of financial position; see Note 12(b).

(**) As of December 31, 2023 and 2022, it includes non-revolving consumer loans related to credit card lines for approximately S/3,149,149,000 and S/3,225,874,000, respectively.

(b) The classification of the direct loan portfolio is as follows:

2023 2022
S/(000) S/(000)
Commercial loans (c.1) 21,155,476 21,412,126
Consumer loans (c.1) 16,325,460 14,967,799
Mortgage loans (c.1) 9,834,398 9,286,944
Small and micro-business loans (c.1) 933,824 1,358,481
Total 48,249,158 47,025,350

For purposes of estimating the impairment loss in accordance with IFRS 9, the Group's loans are segmented into homogeneous groups that share similar risk characteristic. In this sense, the Group has determined three types of loan portfolios: Retail Banking (consumer and mortgage loans), Commercial Banking (commercial loans) and Small Business Banking (loans to small and micro-business).

(c) The following table shows the credit quality and maximum exposure to credit risk based on the Group's internal credit rating as of December 31, 2023 and 2022. The amounts presented do not consider impairment.

2023 2022
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 35,098,364 1,068,674 — 36,167,038 35,613,991 1,111,421 — 36,725,412
Standard grade 2,832,251 1,510,897 — 4,343,148 4,282,904 835,217 — 5,118,121
Sub-standard grade 1,367,503 1,450,751 — 2,818,254 776,603 940,391 — 1,716,994
Past due but not impaired 1,949,892 1,460,138 — 3,410,030 1,124,557 1,150,139 — 2,274,696
Impaired
Individually — — 36,257 36,257 — — 45,907 45,907
Collectively — — 1,474,431 1,474,431 — — 1,144,220 1,144,220
Total direct loans 41,248,010 5,490,460 1,510,688 48,249,158 41,798,055 4,037,168 1,190,127 47,025,350

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

2023 2022
Contingent Credits: Guarantees and stand by letters, import and export letters of credit (substantially, all indirect loans correspond to commercial 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)
Not impaired
High grade 3,988,999 457,518 — 4,446,517 3,945,307 402,336 — 4,347,643
Standard grade 32,433 214,806 — 247,239 12,083 39,541 — 51,624
Sub-standard grade 2,823 31,101 — 33,924 2,051 59,953 — 62,004
Past due but not impaired — — — — — — — —
Impaired
Individually — — 6,181 6,181 — — 9,330 9,330
Collectively — — 9,619 9,619 — — 16,746 16,746
Total indirect loans 4,024,255 703,425 15,800 4,743,480 3,959,441 501,830 26,076 4,487,347

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

2023 2022
Commercial 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)
Not impaired
High grade 14,979,356 855,890 — 15,835,246 16,213,146 914,480 — 17,127,626
Standard grade 1,347,961 1,013,803 — 2,361,764 1,991,637 230,180 — 2,221,817
Sub-standard grade 450,577 314,063 — 764,640 380,679 171,648 — 552,327
Past due but not impaired 1,431,064 364,603 — 1,795,667 704,067 398,185 — 1,102,252
Impaired
Individually — — 36,257 36,257 — — 45,907 45,907
Collectively — — 361,902 361,902 — — 362,197 362,197
Total direct loans 18,208,958 2,548,359 398,159 21,155,476 19,289,529 1,714,493 408,104 21,412,126
2023 2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Consumer 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)
Not impaired
High grade 11,475,514 199,501 — 11,675,015 11,331,807 181,066 — 11,512,873
Standard grade 945,060 452,811 — 1,397,871 1,139,837 579,625 — 1,719,462
Sub-standard grade 717,526 755,121 — 1,472,647 60,415 542,841 — 603,256
Past due but not impaired 217,712 829,119 — 1,046,831 153,865 526,042 — 679,907
Impaired
Individually — — — — — — — —
Collectively — — 733,096 733,096 — — 452,301 452,301
Total direct loans 13,355,812 2,236,552 733,096 16,325,460 12,685,924 1,829,574 452,301 14,967,799
2023 2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Mortgage 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)
Not impaired
High grade 8,093,031 13,283 — 8,106,314 7,490,495 1,033 — 7,491,528
Standard grade 433,968 17,124 — 451,092 667,599 15,411 — 683,010
Sub-standard grade 193,340 348,274 — 541,614 334,967 200,226 — 535,193
Past due but not impaired 261,100 200,873 — 461,973 205,728 132,958 — 338,686
Impaired
Individually — — — — — — — —
Collectively — — 273,405 273,405 — — 238,527 238,527
Total direct loans 8,981,439 579,554 273,405 9,834,398 8,698,789 349,628 238,527 9,286,944

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

2023 2022
Small and micro-business 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)
Not impaired
High grade 550,463 — — 550,463 578,543 14,842 — 593,385
Standard grade 105,262 27,159 — 132,421 483,831 10,001 — 493,832
Sub-standard grade 6,060 33,293 — 39,353 542 25,676 — 26,218
Past due but not impaired 40,016 65,543 — 105,559 60,897 92,954 — 153,851
Impaired
Individually — — — — — — — —
Collectively — — 106,028 106,028 — — 91,195 91,195
Total direct loans 701,801 125,995 106,028 933,824 1,123,813 143,473 91,195 1,358,481

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(d) The balances of the direct and indirect loan portfolio and the movement of the respective allowance for expected credit loss, calculated according to IFRS 9, is as follows:

(d.1) Direct loans

2023 2022
Gross carrying amount of 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)
Beginning of year balances 41,798,055 4,037,168 1,190,127 47,025,350 40,522,481 2,853,565 1,312,176 44,688,222
New originated or purchased assets 22,372,321 — — 22,372,321 22,393,323 — — 22,393,323
Assets matured or derecognized (excluding write-offs) (14,406,950 ) (977,654 ) (72,977 ) (15,457,581 ) (14,636,477 ) (1,194,405 ) (429,348 ) (16,260,230 )
Transfers to Stage 1 762,554 (760,269 ) (2,285 ) — 1,019,478 (1,014,657 ) (4,821 ) —
Transfers to Stage 2 (4,664,954 ) 4,706,631 (41,677 ) — (3,131,710 ) 3,161,335 (29,625 ) —
Transfers to Stage 3 (1,235,354 ) (1,054,563 ) 2,289,917 — (401,017 ) (317,282 ) 718,299 —
Write-offs — — (1,714,968 ) (1,714,968 ) — — (960,918 ) (960,918 )
Others (*) (3,217,003 ) (449,390 ) (131,273 ) (3,797,666 ) (3,383,889 ) 575,338 590,017 (2,218,534 )
Foreign exchange effect (160,659 ) (11,463 ) (6,176 ) (178,298 ) (584,134 ) (26,726 ) (5,653 ) (616,513 )
End of year balances 41,248,010 5,490,460 1,510,688 48,249,158 41,798,055 4,037,168 1,190,127 47,025,350
2023 2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Changes in the allowance for expected credit losses for direct loans, see (d.1.1) 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)
Expected credit loss at the beginning of year balances 608,558 737,286 682,011 2,027,855 956,456 404,881 703,580 2,064,917
Impact of the expected credit loss in the consolidated statement of income -
New originated or purchased assets 624,484 — — 624,484 503,454 — — 503,454
Assets matured or derecognized (excluding write-offs) (147,086 ) (66,329 ) (25,445 ) (238,860 ) (173,872 ) (237,110 ) (302,861 ) (713,843 )
Transfers to Stage 1 106,745 (104,939 ) (1,806 ) — 166,755 (163,090 ) (3,665 ) —
Transfers to Stage 2 (327,728 ) 339,051 (11,323 ) — (259,226 ) 268,700 (9,474 ) —
Transfers to Stage 3 (163,156 ) (269,881 ) 433,037 — (74,178 ) (88,551 ) 162,729 —
Impact on the expected credit loss for credits that change stage in the year (***) (90,594 ) 259,309 1,407,191 1,575,906 (129,388 ) 176,416 340,244 387,272
Others (**) (65,775 ) (60,358 ) 163,834 37,701 (382,355 ) 375,448 666,581 659,674
Total (63,110 ) 96,853 1,965,488 1,999,231 (348,810 ) 331,813 853,554 836,557
Write-offs — — (1,813,670 ) (1,813,670 ) — — — (1,021,539 ) (1,021,539 )
Recovery of written–off loans — — 138,886 138,886 — — — 155,070 155,070
Foreign exchange effect (206 ) (227 ) (2,444 ) (2,877 ) 912 592 (8,654 ) (7,150 )
Expected credit loss at the end of year balances 545,242 833,912 970,271 2,349,425 608,558 737,286 682,011 2,027,855

(*) Corresponds mainly to: (i) the variation between the amortized cost of the loan at the beginning of the year and its amortized cost at the end of the year (partial amortizations that did not represent a reduction or derecognized of the loan), and (ii) the execution of contingent loans (conversion of indirect debt into direct debt).

(**) Corresponds mainly to: (i) the variation between the amortized cost of the loan at the beginning of the year and its amortized cost at the end of the year (variation in the provision recorded for partial amortizations that did not represent a reduction or derecognized of the loan), (ii) variations in credit risk that did not generate transfers to other stages; and (iii) the execution of contingent loans (conversion of indirect debt into direct debt).

(***) During 2023 and 2022, the Group applied its expert judgement with the purpose of reflecting the effects of the possible impact of the El Niño event and the political and economic, respectively, uncertainty that were not considered in the forward-looking model, that led to incur in a higher provision for expected loss, see Note 29.1(d.7).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

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

2023 2022
Commercial 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 beginning of year 45,474 47,311 154,299 247,084 100,874 60,100 182,467 343,441
Impact of the expected credit loss in the consolidated statement of income -
New originated or purchased assets 47,129 — — 47,129 33,506 — — 33,506
Assets derecognized or matured (excluding write-offs) (26,668 ) (10,113 ) (2,924 ) (39,705 ) (18,984 ) (37,865 ) (92,529 ) (149,378 )
Transfers to Stage 1 2,920 (2,687 ) (233 ) — 41,140 (40,152 ) (988 ) —
Transfers to Stage 2 (27,598 ) 30,826 (3,228 ) — (15,952 ) 16,311 (359 ) —
Transfers to Stage 3 (10,620 ) (16,046 ) 26,666 — (6,603 ) (48,516 ) 55,119 —
Impact on the expected credit loss for credits that change stage in the year (**) (1,988 ) 7,333 40,748 46,093 (31,403 ) 4,752 16,864 (9,787 )
Others (*) 23,154 8,006 6,579 37,739 (57,822 ) 91,880 63,218 97,276
Total 6,329 17,319 67,608 91,256 (56,118 ) (13,590 ) 41,325 (28,383 )
Write-offs — — (62,960 ) (62,960 ) — — (68,362 ) (68,362 )
Recovery of written–off loans — — 5,189 5,189 — — 5,942 5,942
Foreign exchange effect (192 ) (160 ) (1,751 ) (2,103 ) 718 801 (7,073 ) (5,554 )
Expected credit loss at end of year 51,611 64,470 162,385 278,466 45,474 47,311 154,299 247,084
2023 2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Consumer 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 beginning of year 534,005 657,474 430,902 1,622,381 802,421 263,219 336,041 1,401,681
Impact of the expected credit loss in the consolidated statement of income -
New originated or purchased assets 552,847 — — 552,847 438,109 — — 438,109
Assets derecognized or matured (excluding write-offs) (98,984 ) (54,036 ) (10,863 ) (163,883 ) (141,201 ) (144,553 ) (100,740 ) (386,494 )
Transfers to Stage 1 95,173 (93,918 ) (1,255 ) — 44,453 (43,487 ) (966 ) —
Transfers to Stage 2 (282,373 ) 287,164 (4,791 ) — (229,316 ) 234,062 (4,746 ) —
Transfers to Stage 3 (135,476 ) (231,432 ) 366,908 — (59,129 ) (13,433 ) 72,562 —
Impact on the expected credit loss for credits that change stage in the year (**) (81,051 ) 221,421 1,263,515 1,403,885 (35,112 ) 163,681 293,678 422,247
Others (*) (117,534 ) (73,259 ) 162,060 (28,733 ) (286,212 ) 198,393 580,849 493,030
Total (67,398 ) 55,940 1,775,574 1,764,116 (268,408 ) 394,663 840,637 966,892
Write-offs — — (1,647,576 ) (1,647,576 ) — — (886,200 ) (886,200 )
Recovery of written–off loans — — 123,679 123,679 — — 140,438 140,438
Foreign exchange effect (1 ) (53 ) (162 ) (216 ) (8 ) (408 ) (14 ) (430 )
Expected credit loss at end of year 466,606 713,361 682,417 1,862,384 534,005 657,474 430,902 1,622,381

(*)Corresponds mainly to: (i) the variation between the amortized cost of the loan at the beginning of the year and its amortized cost at the end of the year (variation in the provision recorded for partial amortizations that did not represent a reduction or derecognized of the loan), (ii) variations in credit risk that did not generate transfers to other stages; and (iii) the execution of contingent loans (conversion of indirect debt into direct debt). (**) During 2023 and 2022, the Group applied its expert judgement with the purpose of reflecting the effects of the possible impact of the El Niño event and the political and economic, respectively, uncertainty that were not considered in the forward-looking model, that led to incur in a higher provision for expected loss, see Note 29.1(d.7).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

2023 2022
Mortgage 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 beginning of year 4,236 12,285 45,101 61,622 12,669 42,681 99,850 155,200
Impact of the expected credit loss in the consolidated statement of income -
New originated or purchased assets 3,949 — — 3,949 1,473 — — 1,473
Assets derecognized or matured (excluding write-offs) (181 ) (833 ) (10,625 ) (11,639 ) (435 ) (763 ) (10,957 ) (12,155 )
Transfers to Stage 1 6,414 (6,414 ) — — 6,103 (6,103 ) — —
Transfers to Stage 2 (2,052 ) 5,115 (3,063 ) — (778 ) 4,871 (4,093 ) —
Transfers to Stage 3 (1,915 ) (2,423 ) 4,338 — (467 ) (1,254 ) 1,721 —
Impact on the expected credit loss for credits that change stage in the year (**) (5,956 ) 15,996 20,982 31,022 (5,871 ) 4,342 11,518 9,989
Others (*) 2,312 2,040 2,018 6,370 (8,663 ) (31,688 ) (49,097 ) (89,448 )
Total 2,571 13,481 13,650 29,702 (8,638 ) (30,595 ) (50,908 ) (90,141 )
Write-offs — — (3,580 ) (3,580 ) — — (2,267 ) (2,267 )
Recovery of written–off loans — — — — — — — —
Foreign exchange effect (13 ) (13 ) (520 ) (546 ) 205 199 (1,574 ) (1,170 )
Expected credit loss at end of year 6,794 25,753 54,651 87,198 4,236 12,285 45,101 61,622
2023 2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Small and micro-business 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 beginning of year 24,843 20,216 51,709 96,768 40,492 38,881 85,222 164,595
Impact of the expected credit loss in the consolidated statement of income -
New originated or purchased assets 20,559 — — 20,559 30,366 — — 30,366
Assets derecognized or matured (excluding write-offs) (21,253 ) (1,347 ) (1,033 ) (23,633 ) (13,252 ) (53,929 ) (98,635 ) (165,816 )
Transfers to Stage 1 2,238 (1,920 ) (318 ) — 75,059 (73,348 ) (1,711 ) —
Transfers to Stage 2 (15,705 ) 15,946 (241 ) — (13,180 ) 13,456 (276 ) —
Transfers to Stage 3 (15,145 ) (19,980 ) 35,125 — (7,979 ) (25,348 ) 33,327 —
Impact on the expected credit loss for credits that change stage in the year (**) (1,599 ) 14,559 81,946 94,906 (57,002 ) 3,641 18,184 (35,177 )
Others (*) 26,293 2,855 (6,823 ) 22,325 (29,658 ) 116,863 71,611 158,816
Total (4,612 ) 10,113 108,656 114,157 (15,646 ) (18,665 ) 22,500 (11,811 )
Write-offs — — (99,554 ) (99,554 ) — — (64,710 ) (64,710 )
Recovery of written–off loans — — 10,018 10,018 — — 8,690 8,690
Foreign exchange effect — (1 ) (11 ) (12 ) (3 ) — 7 4
Expected credit loss at end of year 20,231 30,328 70,818 121,377 24,843 20,216 51,709 96,768

(*)Corresponds mainly to: (i) the variation between the amortized cost of the loan at the beginning of the year and its amortized cost at the end of the year (variation in the provision recorded for partial amortizations that did not represent a reduction or derecognized of the loan), (ii) variations in credit risk that did not generate transfers to other stages; and (iii) the execution of contingent loans (conversion of indirect debt into direct debt).

(**)During 2023 and 2022, the Group applied its expert judgement with the purpose of reflecting the effects of the possible impact of the El Niño event and the political and economic, respectively, uncertainty that were not considered in the forward-looking model, that led to incur in a higher provision for expected loss, see Note 29.1(d.7).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(d.2) Indirect loans (substantially, all indirect loans correspond to commercial loans)

2023 2022
Gross carrying amount of 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)
Beginning of year balances 3,959,441 501,830 26,076 4,487,347 3,984,362 431,039 25,057 4,440,458
New originated or purchased assets 2,122,067 — — 2,122,067 1,829,985 — — 1,829,985
Assets derecognized or matured (1,606,539 ) (135,042 ) (1,784 ) (1,743,365 ) (1,470,891 ) (168,603 ) (9,627 ) (1,649,121 )
Transfers to Stage 1 30,259 (30,259 ) — — 25,315 (25,315 ) — —
Transfers to Stage 2 (392,176 ) 407,454 (15,278 ) — (258,992 ) 258,992 — —
Transfers to Stage 3 (12 ) (6,687 ) 6,699 — (633 ) (10,035 ) 10,668 —
Others (*) (54,162 ) (26,950 ) 92 (81,020 ) (58,323 ) 25,454 (22 ) (32,891 )
Foreign exchange effect (34,623 ) (6,921 ) (5 ) (41,549 ) (91,382 ) (9,702 ) — (101,084 )
End of year balances 4,024,255 703,425 15,800 4,743,480 3,959,441 501,830 26,076 4,487,347
2023 2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Changes in the allowance for expected credit losses for 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 beginning of year balances 8,354 18,205 8,936 35,495 8,594 18,492 13,243 40,329
Impact of the expected credit loss in the consolidated statement of income -
New originated or purchased assets 4,770 — — 4,770 5,615 — — 5,615
Assets derecognized or matured (1,988 ) (4,205 ) (631 ) (6,824 ) (4,838 ) (2,016 ) (6,241 ) (13,095 )
Transfers to Stage 1 180 (180 ) — — 109 (109 ) — —
Transfers to Stage 2 (1,986 ) 3,626 (1,640 ) — (854 ) 854 — —
Transfers to Stage 3 (1 ) (50 ) 51 — (57 ) (171 ) 228 —
Impact on the expected credit loss for credits that change stage in the year (57 ) (837 ) 684 (210 ) (47 ) 585 623 1,161
Others (**) (2,521 ) (12,600 ) (28 ) (15,149 ) (274 ) (467 ) 1,054 313
Total (1,603 ) (14,246 ) (1,564 ) (17,413 ) (346 ) (1,324 ) (4,336 ) (6,006 )
Foreign exchange effect (127 ) (20 ) (3 ) (150 ) 106 1,037 29 1,172
Expected credit loss at the end of year balances, Note 10(a) 6,624 3,939 7,369 17,932 8,354 18,205 8,936 35,495

(*) Corresponds mainly to: (i) the variation between the amortized cost of the loan at the beginning of the year and its amortized cost at the end of the year (partial amortizations that did not represent a reduction or derecognized of the loan), and (ii) the execution of contingent loans (conversion of indirect debt into direct debt).

(**)Corresponds mainly to: (i) the variation between the amortized cost of the loan at the beginning of the year and its amortized cost at the end of the year (variation in the provision recorded for partial amortizations that did not represent a reduction or derecognized of the loan), (ii) variations in credit risk that did not generate transfers to other stages; and (iii) the execution of contingent loans (conversion of indirect debt into direct debt).

(e) In Group Management’s opinion, the allowance for loan losses recorded As of December 31, 2023 and 2022, has been established in accordance with IFRS 9; and it is sufficient to cover incurred losses on the loan portfolio.

(f) During 2023 and 2022, the interest that the loan portfolio generates is freely agreed considering the interest rates prevailing on the market. Notwithstanding the above, Act No. 31143, “Act Protecting Consumers of Financial Services from Usury” established that the BCRP is the entity that determined maximum and minimum interest rates for consumer, small and micro-business loans in financial institutions. As of December 31, 2023, the maximum interest rate for the period November 2023 - April 2024 is 101.86 percent in national currency and 82.94 percent in foreign currency (the maximum interest rate for the period November 2022 - April 2023 was 87.91 percent in national currency and 68.27 percent in foreign currency, as of December 31, 2022).

(g) Interest income from loans classified in Stage 3 is calculated through the effective interest rate adjusted for credit quality at amortized cost.

(h) The refinanced loans during the 2023 period amounted to approximately S/132,172,000 (S/192,045,000, during the year 2022) which had no significant impact on the consolidated statement of income.

During 2023, the Group has carried out rescheduling of credits related to social conflicts, natural disasters and other resolutions that amounted to S/1,979,342,000. Said loans are not considered as refinanced loans. See further detail in Note 29.1 (d.6.3).

During 2023, 2022 and 2021, the Group modified the contractual conditions of a determined number of loans that were granted under the “Reactiva Peru” program, for a total amount of approximately S/25,928,000, S/133,046,000 and S/2,012,855,000,

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

respectively. Said loans were not deemed as refinanced loans. As of December 31, 2023 and 2022, the balance of rescheduled loans amounts of approximately S/730,508,000 and S/1,473,770,000, respectively; see further detail in Note 29.1 (d.6.2).

Additionally, during 2020, the Group modified the contractual conditions of a determined number of loans as relief for its clients’ liquidity as consequence of the Covid-19 pandemic, for a total of approximately S/12,663,960,000. Said loans are not considered as refinanced loans. As of December 31, 2023 and 2022, the balances of the rescheduled loans amount to approximately S/3,513,905,000 and S/5,048,978,000, respectively; see further detail in Note 29.1 (d.6.1).

(i) The table below presents the maturity of direct loan portfolio without including accrued interest, interest to be accrued and interest collected in advance As of December 31, 2023 and 2022:

2023 2022
S/(000) S/(000)
Outstanding
Up to 1 month 4,461,634 4,945,881
From 1 to 3 months 5,781,509 5,708,262
From 3 months to 1 year 10,831,137 10,220,204
From 1 to 5 years 19,500,481 18,916,603
Over 5 years 6,022,246 5,868,428
46,597,007 45,659,378
Past due and under legal collection loans, see (i.1) -
Up to 4 months 484,808 423,906
Over 4 months 697,246 401,508
Under legal collection 470,097 540,558
48,249,158 47,025,350

(i.1) The tables below present past due and under legal collection loans for each classification of the direct loan portfolio:

2023 2022
S/(000) S/(000)
Commercial loans
Up to 4 months 98,263 150,607
Over 4 months 143,170 106,081
Under legal collection 228,809 245,786
470,242 502,474
Consumer loans
Up to 4 months 284,954 143,867
Over 4 months 401,164 220,226
Under legal collection 78,290 108,162
764,408 472,255
Mortgage loans
Up to 4 months 35,934 30,484
Over 4 months 94,568 48,316
Under legal collection 140,018 155,587
270,520 234,387
Small and micro-business loans
Up to 4 months 65,657 98,948
Over 4 months 58,344 26,885
Under legal collection 22,980 31,023
146,981 156,856

See credit risk analysis in Note 29.1

(j) Part of the loan portfolio is collateralized with guarantees received from clients, which mainly consist of mortgages, trust assignments, financial instruments as well as industrial commercial pledges.

(k) The following tables present the maturities of direct and indirect loans of Stages 2 and 3 As of December 31, 2023 and 2022, as follows:

  • Stage 2: Loans with maturity longer or shorter than 30 days, regardless the criteria that caused their classification into Stage 2.

  • Stage 3: Loans with maturity longer or shorter than 90 days, regardless the criteria that caused their classification into Stage 3.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

2023 2022
Stage 2 Stage 3 Total Stage 2 Stage 3 Total
Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Maturity shorter than:
30 days 5,400,087 609,406 — — 5,400,087 609,406 3,934,328 595,372 — — 3,934,328 595,372
90 days — — 16,219 14,888 16,219 14,888 — — 1,816 1,583 1,816 1,583
Maturity longer than:
30 days 793,798 228,445 — — 793,798 228,445 604,670 160,119 — — 604,670 160,119
90 days — — 1,510,269 962,752 1,510,269 962,752 — — 1,214,387 689,364 1,214,387 689,364
Total 6,193,885 837,851 1,526,488 977,640 7,720,373 1,815,491 4,538,998 755,491 1,216,203 690,947 5,755,201 1,446,438

(k.1) The following tables present the maturities of direct and indirect loans of Stages 2 and 3 As of December 31, 2023 and 2022, for each classification:

2023 2022
Stage 2 Stage 3 Total Stage 2 Stage 3 Total
Commercial loans Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Maturity shorter than:
30 days 3,155,267 60,877 — — 3,155,267 60,877 2,089,059 60,403 — — 2,089,059 60,403
90 days — — 2,686 2,259 2,686 2,259 — — 250 214 250 214
Maturity longer than:
30 days 96,517 7,532 — — 96,517 7,532 127,264 5,113 — — 127,264 5,113
90 days — — 411,273 167,495 411,273 167,495 — — 433,930 163,021 433,930 163,021
Total 3,251,784 68,409 413,959 169,754 3,665,743 238,163 2,216,323 65,516 434,180 163,235 2,650,503 228,751
2023 2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Stage 2 Stage 3 Total Stage 2 Stage 3 Total
Consumer loans Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Maturity shorter than:
30 days 1,700,558 508,045 — — 1,700,558 508,045 1,500,325 511,105 — — 1,500,325 511,105
90 days — — 10,295 9,883 10,295 9,883 — — 1,356 1,194 1,356 1,194
Maturity longer than:
30 days 535,994 205,316 — — 535,994 205,316 329,249 146,369 — — 329,249 146,369
90 days — — 722,801 672,534 722,801 672,534 — — 450,945 429,708 450,945 429,708
Total 2,236,552 713,361 733,096 682,417 2,969,648 1,395,778 1,829,574 657,474 452,301 430,902 2,281,875 1,088,376
2023 2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Stage 2 Stage 3 Total Stage 2 Stage 3 Total
Mortgage loans Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Maturity shorter than:
30 days 463,168 20,311 — — 463,168 20,311 271,622 9,266 — — 271,622 9,266
90 days — — 546 109 546 109 — — — — — —
Maturity longer than:
30 days 116,386 5,442 — — 116,386 5,442 78,006 3,019 — — 78,006 3,019
90 days — — 272,859 54,542 272,859 54,542 — — 238,527 45,101 238,527 45,101
Total 579,554 25,753 273,405 54,651 852,959 80,404 349,628 12,285 238,527 45,101 588,155 57,386

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

2023 2022
Stage 2 Stage 3 Total Stage 2 Stage 3 Total
Small and micro-business loans Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss Gross<br>amount Expected<br>loss
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Maturity shorter than:
30 days 81,094 20,173 — — 81,094 20,173 73,322 14,598 — — 73,322 14,598
90 days — — 2,692 2,637 2,692 2,637 — — 210 175 210 175
Maturity longer than:
30 days 44,901 10,155 — — 44,901 10,155 70,151 5,618 — — 70,151 5,618
90 days — — 103,336 68,181 103,336 68,181 — — 90,985 51,534 90,985 51,534
Total 125,995 30,328 106,028 70,818 232,023 101,146 143,473 20,216 91,195 51,709 234,668 71,925

(l) The following tables present the exposure and the expected credit losses by economic sector for direct loans As of December 31, 2023 and 2022:

2023
Carrying amount Expected credit loss Percentage expected credit loss
Stage 1 Stage 2 Stage 3 Total 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) % % % %
Direct loans
Consumer loans 13,355,812 2,236,552 733,096 16,325,460 466,606 713,361 682,417 1,862,384 3.5 % 31.9 % 93.1 % 11.4 %
Mortgage loans 8,981,439 579,554 273,405 9,834,398 6,794 25,753 54,651 87,198 0.1 % 4.4 % 20.0 % 0.9 %
Commerce 3,220,741 390,704 176,989 3,788,434 24,033 38,186 87,557 149,776 0.7 % 9.8 % 49.5 % 4.0 %
Manufacturing 4,357,971 427,950 58,967 4,844,888 11,196 14,568 24,366 50,130 0.3 % 3.4 % 41.3 % 1.0 %
Professional, scientific and technical activities 3,727,813 555,988 75,172 4,358,973 15,792 18,725 36,580 71,097 0.4 % 3.4 % 48.7 % 1.6 %
Communications, storage and transportation 998,739 167,002 75,474 1,241,215 6,843 7,976 25,450 40,269 0.7 % 4.8 % 33.7 % 3.2 %
Agriculture 1,708,377 173,386 12,667 1,894,430 3,209 1,854 1,632 6,695 0.2 % 1.1 % 12.9 % 0.4 %
Electricity, gas, water and oil 746,792 188,577 1,466 936,835 784 1,767 346 2,897 0.1 % 0.9 % 23.6 % 0.3 %
Leaseholds and real estate activities 457,473 86,954 46,074 590,501 2,628 2,216 20,693 25,537 0.6 % 2.5 % 44.9 % 4.3 %
Construction and infrastructure 404,840 113,431 40,799 559,070 1,499 1,163 27,405 30,067 0.4 % 1.0 % 67.2 % 5.4 %
Others 3,288,013 570,362 16,579 3,874,954 5,858 8,343 9,174 23,375 0.2 % 1.5 % 55.3 % 0.6 %
Total direct loans 41,248,010 5,490,460 1,510,688 48,249,158 545,242 833,912 970,271 2,349,425 1.3 % 15.2 % 64.2 % 4.9 %
2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Carrying amount Expected credit loss Percentage expected credit loss
Stage 1 Stage 2 Stage 3 Total 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) % % % %
Direct loans
Consumer loans 12,685,924 1,829,574 452,301 14,967,799 534,005 657,474 430,902 1,622,381 4.2 % 35.9 % 95.3 % 10.8 %
Mortgage loans 8,698,789 349,628 238,527 9,286,944 4,236 12,285 45,101 61,622 0.0 % 3.5 % 18.9 % 0.7 %
Commerce 3,837,304 402,454 173,236 4,412,994 31,844 29,009 78,028 138,881 0.8 % 7.2 % 45.0 % 3.1 %
Manufacturing 4,346,251 451,393 63,397 4,861,041 8,403 12,389 21,611 42,403 0.2 % 2.7 % 34.1 % 0.9 %
Professional, scientific and technical activities 3,529,961 298,534 64,078 3,892,573 12,056 10,186 26,497 48,739 0.3 % 3.4 % 41.4 % 1.3 %
Communications, storage and transportation 1,102,988 194,840 75,427 1,373,255 7,047 7,035 23,645 37,727 0.6 % 3.6 % 31.3 % 2.7 %
Agriculture 1,747,159 134,545 10,863 1,892,567 1,391 967 1,381 3,739 0.1 % 0.7 % 12.7 % 0.2 %
Electricity, gas, water and oil 867,431 55,187 1,652 924,270 886 462 220 1,568 0.1 % 0.8 % 13.3 % 0.2 %
Leaseholds and real estate activities 499,385 84,056 23,441 606,882 1,595 1,825 14,518 17,938 0.3 % 2.2 % 61.9 % 3.0 %
Construction and infrastructure 415,827 91,910 49,736 557,473 1,667 1,654 32,569 35,890 0.4 % 1.8 % 65.5 % 6.4 %
Others 4,067,036 145,047 37,469 4,249,552 5,428 4,000 7,539 16,967 0.1 % 2.8 % 20.1 % 0.4 %
Total direct loans 41,798,055 4,037,168 1,190,127 47,025,350 608,558 737,286 682,011 2,027,855 1.5 % 18.3 % 57.3 % 4.3 %

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(m) The following tables present the exposure and the expected credit losses by economic sector for indirect loans As of December 31, 2023 and 2022:

2023
Carrying amount Expected credit loss Percentage expected credit loss
Stage 1 Stage 2 Stage 3 Total 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) % % % %
Indirect loans
Commerce 297,127 40,894 2,230 340,251 512 340 279 1,131 0.2 % 0.8 % 12.5 % 0.3 %
Manufacturing 505,674 148,827 — 654,501 548 291 — 839 0.1 % 0.2 % 0.0 % 0.1 %
Professional, scientific and technical activities 1,145,646 110,916 982 1,257,544 1,994 788 105 2,887 0.2 % 0.7 % 10.7 % 0.2 %
Communications, storage and transportation 541,561 25,927 — 567,488 697 349 — 1,046 0.1 % 1.3 % 0.0 % 0.2 %
Agriculture 9,031 37 — 9,068 21 — — 21 0.2 % 0.0 % 0.0 % 0.2 %
Electricity, gas, water and oil 308,428 938 — 309,366 311 6 — 317 0.1 % 0.6 % 0.0 % 0.1 %
Leaseholds and real estate activities 41,097 16,276 259 57,632 298 119 48 465 0.7 % 0.7 % 18.5 % 0.8 %
Construction and infrastructure 306,042 212,589 12,288 530,919 1,021 1,797 6,932 9,750 0.3 % 0.8 % 56.4 % 1.8 %
Others 869,649 147,021 41 1,016,711 1,222 249 5 1,476 0.1 % 0.2 % 12.2 % 0.1 %
Total indirect loans 4,024,255 703,425 15,800 4,743,480 6,624 3,939 7,369 17,932 0.2 % 0.6 % 46.6 % 0.4 %
2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Carrying amount Expected credit loss Percentage expected credit loss
Stage 1 Stage 2 Stage 3 Total 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) % % % %
Indirect loans
Commerce 264,926 40,527 76 305,529 309 424 49 782 0.1 % 1.0 % 64.5 % 0.3 %
Manufacturing 518,115 134,469 — 652,584 487 153 — 640 0.1 % 0.1 % 0.0 % 0.1 %
Professional, scientific and technical activities 1,183,657 75,946 485 1,260,088 1,486 700 52 2,238 0.1 % 0.9 % 10.7 % 0.2 %
Communications, storage and transportation 467,018 19,117 — 486,135 489 91 — 580 0.1 % 0.5 % 0.0 % 0.1 %
Agriculture 4,487 — — 4,487 7 — — 7 0.2 % 0.0 % 0.0 % 0.2 %
Electricity, gas, water and oil 155,621 — — 155,621 135 — — 135 0.1 % 0.0 % 0.0 % 0.1 %
Leaseholds and real estate activities 45,037 19,150 — 64,187 193 97 — 290 0.4 % 0.5 % 0.0 % 0.5 %
Construction and infrastructure 412,388 130,886 24,956 568,230 4,470 4,463 8,775 17,708 1.1 % 3.4 % 35.2 % 3.1 %
Others 908,192 81,735 559 990,486 778 12,277 60 13,115 0.1 % 15.0 % 10.7 % 1.3 %
Total indirect loans 3,959,441 501,830 26,076 4,487,347 8,354 18,205 8,936 35,495 0.2 % 3.6 % 34.3 % 0.8 %

During the years 2023, 2022 and 2021, the Group decided to apply the expert judgment, which led to incur in a higher provision for expected losses, see Note 29.1(d.7).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

7. Investment property

(a) This caption is made up as follows:

2023 2022 Acquisition or<br>construction<br>year Valuation<br>methodology (e)<br>2023 / 2022
S/(000) S/(000)
Land (i)
San Isidro – Lima 269,194 264,868 2009 Appraisal
San Martín de Porres – Lima 77,970 88,182 2015 Appraisal
Nuevo Chimbote 34,724 33,747 2021 Appraisal
Santa Clara – Lima 27,229 26,352 2017 Appraisal
Sullana 23,751 22,689 2012 Appraisal
Others 8,987 8,716 - Appraisal / Cost
441,855 444,554
Completed investment property -<br>   “Real Plaza” shopping malls (i)
Talara 28,991 43,728 2015 DCF
28,991 43,728
Buildings (i)
Ate Vitarte – Lima 160,208 149,720 2006 DCF / Appraisal
Piura 131,144 123,508 2008/2020 DCF / Appraisal
Orquídeas - San Isidro - Lima, (d) Note 3.4(o) 128,593 138,643 2017 DCF
Chorrillos – Lima (d) 94,184 81,516 2017 DCF
Paseo del Bosque (d) 87,168 96,194 2021 DCF
Chimbote 47,054 45,069 2015 DCF
Maestro – Huancayo 34,978 32,342 2017 DCF
Cuzco 28,167 27,513 2017 DCF
Panorama – Lima 22,136 20,669 2016 DCF
Trujillo 16,225 15,815 2016 DCF
Cercado de Lima – Lima 15,908 14,543 2017 DCF
Pardo y Aliaga – Lima 14,790 16,755 2008 DCF
Pardo (Vivanda) (d) 12,903 4,004 2021 DCF
Others 34,588 33,144 - DCF
828,046 799,435
Total 1,298,892 1,287,717

DCF: Discounted cash flow

(i) Financial assets classified by the Group as Level 3. During 2023 and 2022, there were no transfers between levels of hierarchy, see Note 3.4(z)

(ii) As of December 31, 2023 and 2022, there are no liens on investment property.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(b) The net gain on investment properties as of December 31, 2023, 2022 and 2021, consists of the following:

2023 2022 2021
S/(000) S/(000) S/(000)
Income from rental of investment property 65,961 65,485 57,430
Gain on valuation of investment property 7,111 19,146 21,969
Total 73,072 84,631 79,399

(c) The movement of investment property for the years ended December 31, 2023, 2022 and 2021, is as follows:

2023 2022 2021
S/(000) S/(000) S/(000)
Beginning of year balances 1,287,717 1,224,454 1,043,978
Additions 16,903 34,760 156,892
Valuation gain 7,111 19,146 21,969
Net transfers, Note 3.4(o) (12,839 ) 9,357 1,615
End of year balances 1,298,892 1,287,717 1,224,454

(d) During 2023, the main additions correspond to the purchase of the “Pardo (Vivanda)” building, which was purchased from a related party, in cash; and disbursements related to the construction of the building “Orquídeas (San Isidro)”, located in Lima.

During 2022, the main additions correspond to contributions in the participation of a property called "Rex" and disbursements related to the expansion of the educational center called “Chorrillos”.

During 2021, it mainly corresponds to the purchase of the “Paseo del Bosque” building, which was purchased from a third party.

(e) Fair value measurement – Investment property and investment property under construction

Valuation techniques -

The discounted cash flow (“DCF”) method is used for completed shopping malls, buildings and investment property built on land leases and own lands.

This method involves the projection of a series of periodic cash flows at present value through a discount rate. The periodic calculation of the cash flows is normally determined as rental income net of operating expenses. The series of periodic net operating income, together with an estimation of the terminal value (which uses the traditional valuation method) at the end of the projection period, is discounted at present value. The sum of the net current values is equal to the investment property’s fair value.

The fair value of land is determined based on the value assigned by an external appraiser. The external appraiser uses the market comparable method, under this method a property’s fair value is estimated based on comparable transactions.

The unit of comparison applied by the Group is the price per square meter. Following are the minimum ranges, maximum ranges and the average price for the land, before any adjustment:

Minimumrange Maximumrange Average
US per m2 US per m2 US per m2
San Isidro – Lima
San Martin de Porres – Lima
Piura
Ate Vitarte - Lima
Other minors

All values are in US Dollars.

Main assumptions

Below is a brief description of the assumptions considered in the determination of cash flows As of December 31, 2023 and 2022:

- ERV (Estimated Rental Value) -

Corresponds to the Estimated Rental Value, that is, the rent under to which the space could be rent under the market conditions prevailing at the valuation date.

- Long-term inflation -

It is the increase of the general level of prices expected in Peru for the long term.

- Long-term occupancy rate -

It is the expected occupancy level of lessees in the leased properties.

- Average growth rate of rental income -

It is the rate that expresses the rental income growth and includes growth factors of the industry, inflation rates, stable exchange rate, per capita income and increasing expenses.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

- Average Net Operating Income (NOI) margin -

It is projected from the rental income from leasable areas, by property and marketing income, minus costs related to administration fees, other administrative expenses, insurance, taxes and other expenses.

- Discount rate -

It reflects the current market risk and the uncertainty associated to obtaining cash flows.

The main assumptions used in the valuation and estimation of the market value of investment property are detailed below:

US / Percentage
2023 2022
Average ERV US129.3 US125.9
Long-term inflation % %
Long-term occupancy rate % %
Average growth rate of rental income % %
Average NOI margin % %
Discount rate % %

All values are in US Dollars.

Sensitivity analysis -

The sensitivity analysis on the valuation of investment property, against changes in factors deemed relevant by Management, is presented below:

2023 2022
S/(000) S/(000)
Average growth rate of rental income (basis) -
Increase +0.25% 20,853 10,474
Decrease -0.25% (16,791) (10,107)
Long-term inflation (basis) -
Increase +0.25% 17,833 16,133
Decrease -0.25% (13,824) (15,017)
Discount rate (basis) -
Increase +0.5% (50,337) (47,957)
Decrease -0.5% 62,076 55,135

Likewise, a significant increase (decrease) in the price per square meter of the land lots could result in a significantly higher (lower) fair value measurement.

(f) Below are the nominal amounts of the future minimum fixed rental income of the Group’s investment property (operating leases) are as follows:

2023 2022
Year S/(000) S/(000)
Within 1 year 69,078 61,557
After 1 year but not more than 5 years 255,898 241,546
Over 5 years 855,949 865,407
Total 1,180,925 1,168,510

The minimum rental income is computed considering a period between 20 and 27 years as of December 31, 2023 (between 20 and 28 years as of December 31, 2022).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

8. Property, furniture and equipment, net

(a) The movement of property, furniture and equipment and depreciation for the years ended December 31, 2023, 2022 and 2021, is as follows:

Right-of-use assets
Description Land Buildings,<br>facilities and<br>leasehold<br>improvements Furniture<br>and<br>equipment Vehicles Assets<br>and<br>work-in-<br>progress Buildings<br>and<br>facilities Furniture<br>and<br>equipment Total <br>2023 Total <br>2022 Total <br>2021
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Cost
Balance as of January 1 141,206 600,168 806,066 1,233 34,014 279,998 2,292 1,864,977 1,826,051 1,781,765
Acquisition of Izipay, Note 1(d) — — — — — — — - 90,079 —
Additions — 3,684 108,077 — 35,884 35,901 — 183,546 168,214 118,974
Transfers — 6,974 4,171 — (26,494 ) — 15,349 — — —
Transfer (to) from investment property, Note 3.4(o) (1,231 ) 13,426 (2 ) — — — — 12,193 (10,643 ) (2,029 )
Disposals, write-offs and others (d) (14,153 ) (11,434 ) (27,515 ) (17 ) (198 ) (14,973 ) — (68,290 ) (208,724 ) (72,659 )
Balance as of December 31 125,822 612,818 890,797 1,216 43,206 300,926 17,641 1,992,426 1,864,977 1,826,051
Depreciation
Balance as of January 1 — (312,150 ) (582,287 ) (951 ) — (175,961 ) (2,196 ) (1,073,545 ) (1,010,933 ) (937,338 )
Depreciation of the year — (20,599 ) (71,113 ) (119 ) — (49,209 ) (14,983 ) (156,023 ) (133,825 ) (121,932 )
Transfer to (from) investment property, Note 3.4(o) — — — — — — — — 1,286 1,038
Disposals, write-offs and others (d) — 7,282 24,642 12 — 10,038 — 41,974 69,927 47,299
Balance as of December 31 — (325,467 ) (628,758 ) (1,058 ) — (215,132 ) (17,179 ) (1,187,594 ) (1,073,545 ) (1,010,933 )
Net book value 125,822 287,351 262,039 158 43,206 85,794 462 804,832 791,432 815,118

(b) Financial entities in Peru are prohibited from pledging their fixed assets.

(c) Management periodically reviews the residual values, useful life and the depreciation method to ensure they are consistent with the economic benefits and life expectation of property, furniture and equipment. In Management’s opinion, there is no evidence of impairment in property, furniture and equipment as of December 31, 2023, 2022 and 2021.

(d) During 2023, includes the sale of a property, performed by Interbank to a third party, for US$8,552,000 (equivalent to approximately S/32,667,000), with a net disposal cost of S/17,367,000. The gain generated from the sale amounted to S/15,300,000, and was recorded as “Gain on sale of Property, furniture and equipment” in the caption “Other income and (expenses)” in the consolidated statement of income; see Note 21.

During 2022, includes the sale of a land lot, performed by Interbank to a related entity, for US$14,100,000 (equivalent to approximately S/54,313,000), with a net disposal cost of S/44,374,000. The gain generated from the sale amounted to S/9,939,000, and was recorded as “Gain on sale of Property, furniture and equipment” in the caption “Other income and (expenses)” in the consolidated statement of income; see Note 21. Additionally, includes the sale of two land lots from Interseguro to a related entity, recorded as financial lease according to IFRS 16. This sale implied the derecognition of a right-of-use asset, net of depreciation, for S/59,051,000, alongside a derecognition of a right-of-use liability for S/77,305,000 (see Note 8(e)), generating a net disposal cost of S/18,253,000 and a gain amounted to S/1,841,000, presented as “Gain on sale of Property, furniture and equipment” in the caption “Other income and (expenses)” in the consolidated statement of income; see Note 21.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(e) The following table shows the book values of lease liabilities (included in the caption “Other accounts payable, provisions and other liabilties”); see Note 10(a) and the movement of the year:

2023 2022
S/(000) S/(000)
As of January 1 112,581 234,946
Additions 35,900 40,610
Interest expenses, Note 19(a) 5,562 9,283
Disposals (*) (5,433 ) (106,990 )
Exchange differences (279 ) (2,948 )
Payments (57,818 ) (62,320 )
As of December 31 90,513 112,581

(*) As of December 31, 2022, these withdrawals are mainly related to the sale of land carried out by Interseguro, see (d) above.

As of December 31, 2023 and 2022, the amortization schedule of these abligations is as follows:

2023 2022
S/(000) S/(000)
2023 — 38,095
2024 2,709 27,497
2025 31,956 18,571
2026 20,801 15,698
2027 onwards 35,047 12,720
Total 90,513 112,581

The following table shows the amounts recognized in the consolidated statement of income:

2023 2022 2021
S/(000) S/(000) S/(000)
Depreciation expenses of right-of-use assets 49,305 53,134 58,698
Interest expenses of lease liabilities, Note 19(a) 5,562 9,283 14,004
Expenses related to short term and low value assets leases (included in administrative expenses, see Note 24 (c)) 9,643 10,958 11,841
Total amount recognized in the consolidated statement of income 64,510 73,375 84,543

During year 2023, the Group paid leases for approximately S/89,334,000 (S/146,982,000 during year 2022).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

9. Intangible and goodwill, net

(a) Intangible assets

The movement of intangible assets and amortization for the years ended December 31, 2023, 2022 and 2021, is as follows:

2023 2022 2021
Description Software Software <br>development Relationship with clients Brand Database Other<br>intangible Goodwill<br>(b and c) Total Total Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Cost
Balance as of January 1 1,305,807 206,420 110,042 82,546 97,016 227,580 669,075 2,698,486 1,908,144 1,748,222
Acquisition of Izipay, Note 1(d) — — — — — — — — 569,850 —
Additions 189,444 85,575 — — — 5,369 — 280,388 227,270 170,528
Transfers 105,019 (104,979 ) — — — (40 ) — — — —
Disposals and write-offs, Note 21(a) — — — — — (3,842 ) — (3,842 ) (6,778 ) (10,606 )
Balance as of December 31 1,600,270 187,016 110,042 82,546 97,016 229,067 669,075 2,975,032 2,698,486 1,908,144
Amortization
Balance as of January 1 (942,142 ) — (8,253 ) — (7,276 ) (107,613 ) — (1,065,284 ) (863,395 ) (705,637 )
Amortization of the year (183,981 ) — (11,004 ) — (9,702 ) (18,328 ) — (223,015 ) (202,401 ) (157,758 )
Disposals and write-offs — — — — — 387 — 387 512 —
Balance as of December 31 (1,126,123 ) — (19,257 ) — (16,978 ) (125,554 ) — (1,287,912 ) (1,065,284 ) (863,395 )
Net book value 474,147 187,016 90,785 82,546 80,038 103,513 669,075 1,687,120 1,633,202 1,044,749

Management assesses periodically the amortization method used with the purpose of ensuring that it is consistent with the economic benefit of the intangible assets. In Management’s opinion, there is no evidence of impairment in the Group’s intangible assets as of December 31, 2023, 2022 and 2021.

(b) Goodwill of Seguros Sura:

In 2017, IFS acquired 99.39 percent of Seguros Sura’s capital stock and 99.42 percent of Hipotecaria Sura’s capital stock. In March 2018, Interseguro merged with Seguro Sura, using the method of absorption, originating the transfer of all the assets and liabilities of Seguros Sura to the absorbing company and extinguishing without having to liquidate.

The goodwill resulting from the purchase of Seguros Sura and Hipotecaria Sura equivalent to S/430,646,000 represents the future synergies that are expected to arise from the combination of operations, distribution channels, workforce and other efficiencies not included in the intangible assets of the present value of acquired in-force business.

The goodwill recorded by the Group has been allocated to the CGU (cash generated unit) comprised of the merged entity.

The recoverable amount for the CGU was determined based on the income approach, specifically the dividend discount model.

As of December 31, 2023 and 2022, the key assumptions used for the calculation of fair value are:

  • Perpetuity growth rate: 6.3% (2023) and 4.5% (2022)

  • Discount rate: 14.3% (2023) and 12.5% (2022)

10-year cash flows plus an estimation of the value at perpetuity were included in the dividend discount model. The estimated growth rates are based on the historical performance and the expectations of Management over the development of the market. Long-term perpetuity growth rate was determined based on reports from the sector.

The discount rate represents the assessment of the CGU specific risks. The discount rate was established considering the Company’s capital structure, the cost of capital coming from the benefits that the Group’s investors expect to obtain, from the specific risk incorporated by applying comparable individual beta factors adapted to the CGU’s debt structure and from the country and market specific risk premiums for the CGU. Beta factors are assessed on an annual basis using available market information.

The key assumptions described above can change if the market conditions and the economy change. As of December 31, 2023 and 2022, the Group estimates that the reasonableness of possible changes in these assumptions would not make the recoverable amount of the CGU decrease to an amount lower than its book value.

(c) Goodwill and indefinite-lived intangible of Izipay:

In April 2022, IFS acquired 50 percent of Izipay, through the method of step acquisitions, adjusting at fair value the previous participation held by IFS in Izipay through its Subsidiary Interbank (50 percent).

The goodwill resulting from the acquisition of Izipay, equivalent to S/ 238,429,000, represents the future synergies that are expected to arise from the combination of operations and other efficiencies not included in the intangibles of the current value of the ongoing business. The value of the brand resulting from the acquisition of Izipay was equivalent to S/82,546,000.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

The goodwill and the indefinite-lived brand recorded by the Group has been assigned to the CGU (cash-generating unit) consisting of the acquired entities, Izipay.

The recoverable amount for the CGU has been determined based on the method of discounted cash flows.

As of December 31, 2023, the key assumptions used for the calculation of the fair value are the following:

  • Perpetual growth rate: 3.0% (2023 and 2022)

  • Discount rate: 13.95% (2023) and 13.65% (2022)

5-year cash flows plus an estimation of the value at perpetuity were included in the model of discounted cash flows. The estimated growth rates are based on the historical performance and the expectations of Management over the market development. The long-term perpetual growth rate has been determined considering the upper target range of inflation established by the BCRP.

The discount rate represents the assessment of the CGU’s specific risks. The discount rate was originated considering the data obtained from market information sources.

The key assumptions described before can change if market conditions and the economy change. As of December 31, 2023 and 2022, the Group estimates that the reasonableness of these possible changes in these assumptions would not originate that the recoverable amount of the CGU decreases below its book value.

10. Other accounts receivable and other assets, net, and other accounts payable, provisions and other liabilities

(a) These captions are comprised of the following:

2023 2022
S/(000) S/(000)
Other accounts receivable and other assets
Financial instruments
Other accounts receivable, net 663,090 622,690
POS commission receivable 420,644 122,142
Accounts receivable related to derivative financial instruments (b) 158,101 515,800
Operations in process (d) 83,640 112,195
Accounts receivable from sale of investments (c) 63,466 37,987
Others 15,640 24,753
1,404,581 1,435,567
Non-financial instruments
Tax paid to recover 422,248 26,759
Deferred charges 101,551 92,865
Deffered cost of POS affiliation and registration 92,511 95,265
Tax credit for General Sales Tax - IGV 32,482 17,623
Realizable assets, received as payment and seized through legal actions 28,933 27,266
Investments in associates 22,548 22,728
POS equipment supplies (*) 14,854 18,698
Others 5,440 7,192
720,567 308,396
Total 2,125,148 1,743,963

(*) Comprises the Points of Sale (“POS”) required for the rendering of the service. Their supplies are recorded at cost, which is determined by applying the weighted average method.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

2023 2022
S/(000) S/(000)
Other accounts payable, provisions and other liabilities
Financial instruments
Contract liability with investment component, Note 3.4(d) 883,268 873,500
Other accounts payable 855,067 726,983
Third party compensation (**) 763,039 386,136
Operations in process (d) 226,428 184,584
Accounts payable related to derivative financial instruments (b) 145,395 297,038
Accounts payable for acquisitions of investments (c) 106,955 53,905
Workers’ profit sharing and salaries payable 105,734 154,460
Lease liabilities, Note 8(e) 90,513 112,581
Allowance for indirect loan losses, Note 6(d.2) 17,932 35,495
Accounts payable to reinsurers and coinsurers 7,260 5,648
3,201,591 2,830,330
Non-financial instruments
Taxes payable 80,331 138,819
Provision for other contingencies 70,671 79,304
Registration for use of POS 21,962 17,029
Deferred income (***) 23,490 57,001
Others 9,315 6,681
205,769 298,834
Total 3,407,360 3,129,164

(**) Corresponds mainly to outstanding balances payable to affiliated businesses, for the consumptions made by the cards users, net of the respective fee charged by Izipay, which are mainly settled the day after the transaction was made.

(***) Corresponds mainly to deferred fees for indirect loans (mainly guarantee letters) and the transactions registered in Izipay related to installments pending of accrual within the contract’s term with affiliated businesses.

(b) The following table presents, as of December 31, 2023 and 2022, the fair value of derivative financial instruments recorded as assets or liabilities, including their notional amounts. The notional gross amount is the nominal amount of the derivative’s underlying asset and it is the base over which changes in the fair value of derivatives are measured; see Note 18(a):

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Note Assets Liabilities Notional<br>amount Effective part<br>recognized in<br>other<br>comprehensive income during<br>the year Maturity Hedged<br>instruments Caption of the consolidated<br>statement of financial position<br>where the hedged item has<br>been recognized
S/(000) S/(000) S/(000) S/(000)
2023
Derivatives held for trading (*) -
Forward exchange contracts 36,595 29,517 4,875,692 — Between January 2024 and December 2025 — —
Interest rate swaps 40,350 25,196 1,530,493 — Between March 2024 and June 2036 — —
Cross swaps 20,982 44,897 1,370,799 — Between January 2024 and April 2028 — —
Options 1,172 1,174 279,047 — Between January 2024 and December 2024 — —
99,099 100,784 8,056,031 —
Derivatives held as hedges -<br>Cash flow hedges:
Cross currency swaps (CCS) 13(f) 2,958 7,383 1,112,700 (10,199 ) October 2026 Corporate bonds Bonds, notes and obligations outstanding
Cross currency swaps (CCS) 13(h) 56,044 — 556,950 (3,309 ) October 2027 Senior bond Bonds, notes and obligations outstanding
Cross currency swaps (CCS) 12(d.5) — 3,020 241,085 (1,374 ) Between January 2025 and June 2025 Due to banks Due to banks and correspondents
Cross currency swaps (CCS) 12(d.8) — 3,823 185,450 (1,234 ) May 2025 Due to banks Due to banks and correspondents
Cross currency swaps (CCS) 12(d.9) — 6,708 111,270 (578 ) August 2024 Due to banks Due to banks and correspondents
Cross currency swaps (CCS) 12(d.10) — 9,442 111,270 (277 ) October 2024 Due to banks Due to banks and correspondents
Cross currency swaps (CCS) 13(h) — 5,245 74,260 (2,401 ) October 2027 Senior bond Bonds, notes and obligations outstanding
Cross currency swaps (CCS) 13(h) — 5,041 74,260 (1,923 ) October 2027 Senior bond Bonds, notes and obligations outstanding
Cross currency swaps (CCS) 12(d.13) — 811 74,180 (619 ) February 2025 Due to banks Due to banks and correspondents
Cross currency swaps (CCS) 12(e.1) — 3,138 37,090 (88 ) November 2024 Due to banks Due to banks and correspondents
Cross currency swaps (CCS) 13(i) — — — (669 ) - Corporate bonds Bonds, notes and obligations outstanding
59,002 44,611 2,578,515 (22,671 )
158,101 145,395 10,634,546 (22,671 )

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Note Assets Liabilities Notional<br>amount Effective part<br>recognized in<br>other<br>comprehensive<br>income during<br>the year Maturity Hedged<br>instruments Caption of the consolidated<br>statement of financial position<br>where the hedged item has<br>been recognized
S/(000) S/(000) S/(000) S/(000)
2022
Derivatives held for trading (*) -
Forward exchange contracts 58,201 27,556 6,328,060 — Between January 2023 and December 2023 — —
Interest rate swaps 77,045 141,823 2,672,533 — Between January 2023 and March 2029 — —
Currency swaps 67,737 38,551 2,424,566 — Between January 2023 and June 2036 — —
Cross currency swaps — 75,489 224,485 — January 2023 — —
Options 99 463 80,151 — Between January 2023 and December 2023 — —
203,082 283,882 11,729,795 —
Derivatives held as hedges-<br>Cash flow hedges:
Cross currency swaps (CCS) 13(i) 237,438 — 1,681,974 (20,199 ) January 2023 Corporate bonds Bonds, notes and obligations outstanding
Cross currency swaps (CCS) 13(h) 75,280 — 573,000 (33,565 ) October 2027 Senior bond Bonds, notes and obligations outstanding
Cross currency swaps (CCS) 12(d.9) — 3,916 114,420 360 August 2024 Due to banks Due to banks and correspondents
Cross currency swaps (CCS) 12(d.10) — 6,295 114,420 (355 ) October 2024 Due to banks Due to banks and correspondents
Cross currency swaps (CCS) 12(d.5) — 931 57,210 (225 ) January 2025 Due to banks Due to banks and correspondents
Cross currency swaps (CCS) 12(e.1) — 2,014 38,140 (156 ) November 2024 Due to banks Due to banks and correspondents
312,718 13,156 2,579,164 (54,140 )
515,800 297,038 14,308,959 (54,140 )

(*) During the years 2023, 2022 and 2021, the Group recognized gains for S/68,315,000 and losses for S/4,523,000 and S/60,275,000, respectively, as a result of the valuation of derivative financial instruments held for trading, which were recorded in the caption “Net (loss) gain from financial assets at fair value through profit or loss” in the consolidated statement of income.

(i) As of December 31, 2023 and 2022, certain derivative financial instruments hold collateral deposits; see Note 4(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 as of December 31, 2023 and 2022. During 2023 and 2022, there were no discontinued hedges accounting.

(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.

(iv) The future effect of current cash flow hedges on the consolidated statement of income, net of the deferred Income Tax, which will be included in the caption “Net (loss) gain of financial assets at fair value through profit or loss” when realized, is presented below:

As of December 31, 2023 As of December 31, 2022
Up to 1 year From 1 to 3<br>years Over 3<br>years Expected effect Up to 1 year From 1 to 3<br>years Over 3<br>years Expected effect
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Consolidated statement of income – (Expense) income (2,139 ) (13,717 ) (16,077 ) (31,933 ) 429 (731 ) (8,960 ) (9,262 )

The transfer of net unrealized losses on cash flow hedges to the consolidated statement of income is presented in Note 16(d) and 16(e).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(v) The gain (loss) for cash flow hedges reclassified to the consolidated statement of income for the year ended as of December 31, 2023 and 2022, is as follows:

2023 2022
S/(000) S/(000)
Interest expenses from cash flow hedges (116,885 ) (78,300 )
Interest income from cash flow hedges 92,637 62,158
Expenses for exchange differences from cash flow hedges (136,625 ) (337,907 )
Income for exchange differences from cash flow hedges 118,180 225,399
(42,693 ) (128,650 )

These amounts offset the effects of interest rate risk and exchange rate risk of the hedged item.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

The following table shows hedging instruments that the Group uses in its cash flow hedges due to maturities:

December 31, 2023 Up to 1 month 3 to 12 months 1 to 5 years Over 5 years Total
Cross currency swaps (CCS)
Notional — 259,630 2,318,885 — 2,578,515
Average interest rate in US Dollars — 3.60 % 3.07 % — —
Average interest rate in Soles — 8.09 % 3.86 % — —
Average exchange rate Soles / US Dollar — 3.94 3.66 — —
December 31, 2022 Up to 1 month 3 to 12 months 1 to 5 years Over 5 years Total
--- --- --- --- --- --- --- --- --- --- --- --- ---
Cross currency swaps (CCS)
Notional 1,681,974 — 897,190 — 2,579,164
Average interest rate in US Dollars 3.38 % — 3.80 % — —
Average interest rate in Soles 4.87 % — 5.03 % — —
Average exchange rate Soles / US Dollar 3.26 — 3.58 — —

(vi) The following table shows the nominal value and the weighted average maturity of derivative and non-derivative financial instruments that were subject to the reform of the reference interest rate, see Note 3.4(ah):

2022
Derivative financial instruments Derivative nominal value<br>(*)<br>S/(000) Average term<br> in years (*)
Position purchased (LIBOR is paid)
Interest rate swaps
3-month LIBOR 208,002 5.8
6-month LIBOR 278,060 8.2
486,062
Cross currency swaps
6-month LIBOR 114,420 1.5
Total 600,482
Position sold (LIBOR is received)
Interest rate swaps
3-month LIBOR 251,873 5.3
6-month LIBOR 346,712 7.1
598,585
Cross currency swaps
6-month LIBOR 202,142 1.8
Total 800,727

(*) Balances as of December 31, 2022 that changed to the new benchmark rate on June 30, 2023.

As of December 31, 2022, the Group does not present derivative financial instruments classified as hedge accounting that are subject to the interest rate benchmark reform; see Note 3.4(ah).

2022
Non-derivative financial instruments Nominal value<br>S/(000) Average term<br> in years
Assets
Loans
1-month LIBOR — —
3-month LIBOR 465,494 3.8
6-month LIBOR 197,891 11.8
Total 663,385
Liabilities
Issuances
3-month LIBOR 1,144,200 5.0
Total 1,144,200

(c) As of December 31, 2023 and 2022, corresponds to accounts receivable and payable for the sale and purchase of financial investments negotiated during the last days of the month, which were settled at the beginning of the following month. As of said dates, the balance corresponds mainly to the purchase and sale of Sovereign Bonds issued by the Peruvian Government and Global Bonds issued by the Treasury of the United States of America.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(d) Operations in process include transactions made during the last days of the month and other types of similar transactions that are reclassified to their corresponding accounting accounts in the following month. These transactions do not affect the consolidated statement of income.

11. Deposits and obligations

(a) This caption is made up as follows:

2023 2022
S/(000) S/(000)
Saving deposits 17,756,097 20,911,746
Time deposits (e) 17,288,629 12,866,602
Demand deposits 13,376,375 13,824,824
Compensation for service time (c) 760,551 921,288
Other obligations 6,582 6,248
Total 49,188,234 48,530,708

(b) Interest rates applied to deposits and obligations are determined based on the market interest rates.

(c) In May 2022, through Act No. 31480 “Act Authorizing the Withdrawal of Severance Indemnities to Cover Economic Needs Caused by the Covid-19 Pandemic”, the Peruvian government authorized clients, until December 31, 2023, to withdraw the 100 percent of these deposits. As part of this benefit, during 2023 approximately 308,000 clients withdrew approximately S/1,061,734,000 (during 2022, approximately 261,000 clients withdrew approximately S/767,470,000).

(d) As of December 31, 2023 and 2022, deposits and obligations of approximately S/18,668,431,000 and S/18,368,816,000, respectively, are covered by the Peruvian Deposit Insurance Fund. Likewise, at those dates, the coverage of the Deposit Insurance Fund by each client is up to S/123,810 and S/125,603, respectively.

(e) The table below presents the balance of time deposits classified by maturity as of December 31, 2023 and 2022:

2023 2022
S/(000) S/(000)
Up to 1 month 6,131,655 2,797,703
From 1 to 3 months 3,890,589 1,973,288
From 3 months to 1 year 6,458,103 6,788,680
From 1 to 5 years 512,280 1,023,473
Over 5 years 296,002 283,458
Total 17,288,629 12,866,602

12. Due to banks and correspondents

(a) This caption is comprised of the following:

2023 2022
S/(000) S/(000)
By type -
Banco Central de Reserva del Peru (b) 3,683,687 4,481,138
Promotional credit lines (c) 2,014,600 1,863,482
Loans received from foreign entities (d) 2,895,637 339,446
Loans received from Peruvian entities (e) 309,525 357,770
8,903,449 7,041,836
Interest and commissions payable 122,481 58,810
9,025,930 7,100,646
By term -
Short term 4,852,495 2,433,459
Long term 4,173,435 4,667,187
Total 9,025,930 7,100,646

(b) As part of the exceptional measures implemented to mitigate the financial and economic impact generated by the Covid-19 pandemic, see Note 1(c), the BCRP issued a series of regulations related to the loans repurchase agreements. In this sense, during 2022, Interbank took in repurchase agreements of loan portfolio for an amount of S/42,461,000.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

As of December 31, 2023, includes repurchase operations on loans represented by securities according to which Interbank receives a debt in local currency for approximately S/540,158,000 (S/1,909,375,000 as of December 31, 2022), and gives commercial and micro and small business loans as guarantee; see Note 6(a). As of December 31, 2023, these obligations have maturities between July 2024 and November 2025, and accrue interest at effective rates 0.50 percent; these operations accrued interest payable for approximately S/114,000 (as of December 31, 2022, these obligations have maturities between May 2023 and November 2025, and accrued interest at effective rates between 0.50 percent; these operations accrued interest payable for S/4,049,000).

Additionally, as of December 31, 2023, it includes repurchase agreements whereby Interbank receives a debt in Soles for approximately S/3,143,529,000 and delivers securities of its investment portfolio as guarantees. In relation to said operations, Interbank delivered as guarantee Peruvian Sovereign Bonds and Negotiable Certificates of Deposits issued by the BCRP, which are recorded as investments at fair value through other comprehensive income and investments at amortized cost; see Note 5(b) and (d), respectively. These operations have a maturity between January 2024 and October 2024 and accrue interest at effective interest rates between 0.50 percent and 7.33 percent. These operations accrue interest payable for approximately S/59,864,000 (as of December 31, 2022, Interbank received a debt in Soles for approximately S/2,571,763,000, and gave as guarantee Peruvian Sovereign Bonds, which are recorded as investments at fair value through other comprehensive income and at amortized cost, see Note 5(b) and (d), with maturities between January 2023 and October 2024, and accrued interest at effective interest rates between 0.50 percent and 8.64 percent, and accrued interest payable for approximately S/45,150,000).

(c) Promotional credit lines are loans in Soles and US Dollars from the Corporación Financiera de Desarrollo (“COFIDE”) and Fondo Mivivienda (“FMV”) whose purpose is to promote development in Peru. These liabilities are guaranteed by a loan portfolio up to the amount of the line and include specific agreements on the use of funds, the financial conditions to be met and other management issues. In Management’s opinion, Interbank is meeting these requirements.

As of December 31, 2023, COFIDE’s loans accrued, in foreign currency, an effective annual interest rate that fluctuated between 5.81 percent and 10.62 percent, and maturities between December 2029 and October 2034 (as of December 31, 2022, they accrued, in local currency, an effective annual interest rate that fluctuated between 7.55 percent and 7.67 percent, and maturities in January 2027, and in foreign currency fluctuated between 5.81 percent and 8.05 percent, and maturities between December 2029 and October 2034).

As of December 31, 2023, FMV’s loans accrued, in local currency, an effective annual interest rate that fluctuated between 5.0 percent and 8.30 percent, and maturities between January 2024 and December 2048 and in foreign currency of 7.75 percent and maturities between January 2024 and November 2028 (as of December 31, 2022, accrued in local currency, an effective annual interest rate between 5.00 and 8.30 percent, and maturities between January 2023 and December 2047, and in foreign currency, 7.75 percent and maturities between January 2023 and November 2028).

(d) As of December 31, 2023 and 2022, corresponds to the following funding in foreign currency:

Entity Country Final<br>maturity 2023 2022
S/(000) S/(000)
Standard Chartered Bank London (d.1) United Kingdom 2026 662,161 —
Wells Fargo (d.2) United States of America 2024 296,720 —
Citigroup Global Markets Inc. (d.3) United States of America 2026 289,867 —
Sumitomo Mitsui Banking (d.4) Japan 2026 259,630 —
Banco del Estado de Chile (d.5) Chile 2025 241,085 57,210
Bank of America (d.6) United States of America 2024 203,995 —
Bank of Montreal (d.7) Canada 2024 185,450 —
Banco Bilbao Vizcaya Argentaria NY Branch (d.8) Spain 2025 185,450 —
Caixabank S.A. Barcelona (d.9) Spain 2024 166,905 114,420
JP Morgan Chase Bank NY (d.10) United States of America 2024 111,270 114,420
Bank of New York (d.11) United States of America 2024 92,725 —
Bank J. Safra Sarasin (d.12) Switzerland 2024/2023 81,598 53,396
Standard Chartered Bank NY (d.13) United States of America 2025 74,180 —
HSBC Branch India (d.14) India 2024 37,090 —
Banco Interamericano de Desarrollo (d.15) Multilateral 2024 7,511 —
2,895,637 339,446

During the year 2023, the operations with foreign entities accrue average interest rate between 6-month Term SOFR plus 0.75 percent and 6-month Term SOFR plus 1.70 percent (between 6-month Term SOFR plus 0.44 percent and 6-month Term SOFR plus 1.99 percent, during the year 2022).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(d.1)Correspond to two loans received in March and June 2023 for S/281,784,000 and S/380,377,000, respectively, which accrue interest at a nominal annual rate of 7.51 percent and 6.55 percent, respectively.

(d.2) Correspond to two loans received in July and September 2023 for US$30,000,000 and US$50,000,000, respectively, which accrue interest at the 6-month Term SOFR rate plus 0.73 percent.

(d.3) Correspond to a loan received in April 2023 for S/289,867,000, which accrue interest at a nominal annual rate of 7.5 percent.

(d.4) Correspond to a loan received in December 2023 for US$70,000,000, which accrue interest at the 6-month Term SOFR rate plus 1.60 percent.

(d.5) Correspond to two loans received in May 2023 and December 2022 for US$50,000,000 and US$15,000,000, respectively, which accrue interest at the 6-month Term SOFR rate plus 1.70 percent and 6-month Term SOFR rate plus 1.99 percent, respectively. As of December 31, 2023, Interbank holds two cross currency swap contracts for a total of US$65,000,000 (approximately equivalent to S/241,085,000) that were designated as cash flow hedges (a contract for US$15,000,000, approximately equivalent to S/57,210,000, as of December 31, 2022); see Note 10(b). Through these operations, the loans were economically converted to fixed rates of 8.59 percent and 7.88 percent, respectively.

(d.6) Correspond to two loans received in July and December 2023 for US$20,000,000 and US$35,000,000, respectively, which accrue interest at the 6-month Term SOFR rate plus 0.73 percent and 3-month Term SOFR rate plus 0.78 percent, respectively.

(d.7) Correspond to a loan received in March 2023 for US$50,000,000, which accrue interest at the 6-month Term SOFR rate plus 0.95 percent.

(d.8) Correspond to a loan received in April 2023 for US$50,000,000, which accrue interest at the 6-month Term SOFR rate plus 1.70 percent. In April 2023, Interbank signed a cross currency swap contract for a total of US$ 50,000,000 (approximately equivalent to S/185,450,000), which was designated as cash flow hedge; see Note 10(b). Through these operations, the loans were economically converted to a fixed rate of 7.90 percent.

(d.9) Correspond to two loans received in December 2023 and July 2022 for US$15,000,000 and US$30,000,000, respectively, which accrue interest at the 6-month Term SOFR rate plus 0.74 percent and 6-month Term SOFR rate plus 1.35 percent, respectively. As of December 31, 2023, Interbank holds a cross currency swap contract for an amount of US$30,000,000 (approximately equivalent to S/111,270,000), which was designated as cash flow hedge; (a contract of US$30,000,000, approximately equivalent to S/114,420,000, as of December 31, 2022), see Note 10(b). Through this operation, the loan was economically converted to a fixed rate of 7.74 percent.

(d.10) Correspond to a loan received in September 2022 for US$30,000,000, which accrue interest at the 6-month Term SOFR rate plus 1.75 percent. As of December 31, 2023, Interbank holds a cross currency swap contract for an amount of US$30,000,000 (approximately equivalent to S/111,270,000), which was designated as cash flow hedge; (a contract of US$30,000,000, approximately equivalent to S/114,420,000, as of December 31, 2022) see Note 10(b). Through this operation, the loan was economically converted to a fixed rate of 8.40 percent.

(d.11) Correspond to a loan received in October 2023 for US$25,000,000, which accrue interest at the 6-month Term SOFR rate plus 0.73 percent.

(d.12) Correspond to two loans received by Inteligo Bank in December 2023 for US$7,000,000 and US$15,000,000, which accrue interest at annual effective rates of 6.53 percent and 6.58 percent, respectively, and are guaranteed by corporate bonds. As of December 31, 2022, corresponded to a loan received by Inteligo Bank in December 22 for US$14,000,000, which accrued interest at the annual effective rate of 5.61 percent, and was guaranteed by corporate bonds; see Note 5(b).

(d.13) Correspond to a loan received in January 2023 for US$20,000,000, which accrue interest at the 3-month Term SOFR rate plus 1.90 percent. As of December 31, 2023, Interbank holds a cross currency swap contract for an amount of US$20,000,000 (approximately equivalent to S/74,180,000), which was designated as cash flow hedge; see Note 10(b). Through this operation, the loan was economically converted to a fixed rate of 8.59 percent.

(d.14) Correspond to a loan received in March 2023 for US$10,000,000, which accrue interest at the 12-month Term SOFR rate plus 1.35 percent.

(d.15) Correspond to a loan received in October 2023 for US$2,025,000, which accrue interest at the 3-month Term SOFR rate plus 0.75 percent.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(e) As of December 31, 2023 and 2022, corresponds to the following funding in local and foreign currency:

Entity 2023
Maturity Currency
Banco de Credito del Peru S.A. Jan-24 / Jan-26 PEN 127,000
Scotiabank Peru S.A.A. Jan-24 / Oct-25 PEN 75,465
Bank of GNB Peru S.A. Jan-24 PEN 69,970
Bank of China (Peru) S.A. (e.1) Nov-24 37,090
309,525
Entity 2022
Maturity Currency
Scotiabank Peru S.A.A. Jan-23 / Oct-25 PEN 120,718
Banco de Credito del Peru S.A. Jan-23 / Oct-23 PEN 81,644
Bank of GNB Peru S.A. Jan-23 PEN 71,500
Bank BBVA Continental Jan-23 45,768
Bank of China (Peru) S.A. (e.1) Nov-24 38,140
357,770

All values are in US Dollars.

(e.1) As of December 31, 2023, includes a loan received from Bank of China Peru in October 2022 for US$10,000,000, which accrues interest at a 6-month Term SOFR rate plus 1.50 percent. As of December 31, 2023, Interbank holds a cross currency swap contract for an amount of US$10,000,000 (approximately equivalent to S/37,090,000), which was designated as cash flow hedge; (a contract of US$10,000,000, approximately equivalent to S/38,140,000, as of December 31, 2022), see Note 10(b), through this operation, the loan was economically converted to a fixed rate of 8.18 percent.

(f) As of December 31, 2023 and 2022, maturities are the following:

Year 2023 2022
S/(000) S/(000)
2023 — 2,433,459
2024 4,852,495 1,888,657
2025 1,185,753 1,331,489
2026 1,373,363 138,499
2027 onwards 1,614,319 1,308,542
Total 9,025,930 7,100,646

13. Bonds, notes and other obligations

(a) This caption is comprised of the following:

Issuance Issuer Annual<br>interest<br>rate Interest<br>payment Maturity Amountissued 2022
(000) S/(000)
Local issuances
Subordinated bonds – second program (b)
Third (A series) Interbank 7.50% Semi-annually 2023 US50,000 — 190,616
Second (A series) Interbank 5.81% Semi-annually 2023 S/150,000 — 149,998
— 340,614
Subordinated bonds – third program (b)
Third - single series (c) Interseguro 4.84% Semi-annually 2030 US25,000 92,725 95,350
First - single series Interseguro 6.00% Semi-annually 2029 US20,000 74,102 76,213
Second - single series Interseguro 4.34% Semi-annually 2029 US20,000 74,180 76,280
241,007 247,843
Corporate bonds – second program
Fifth (A series) Interbank 3.41% + VAC (*) Semi-annually 2029 S/150,000 150,000 150,000
Total local issuances 391,007 738,457
International issuances
Subordinated bonds (d) Interbank 4.000% Semi-annually 2030 US300,000 1,107,228 1,137,691
Corporate bonds (e) Interbank 5.000% Semi-annually 2026 S/312,000 311,644 311,522
Corporate bonds (f) Interbank 3.250% Semi-annually 2026 US400,000 1,477,909 1,517,661
Subordinated bonds (g) Interbank 6.625% Semi-annually 2029 US300,000 1,112,438 1,142,764
Senior bonds (h) IFS 4.125% Semi-annually 2027 US300,000 1,045,258 1,074,396
Corporate bonds (i) Interbank 3.375% Semi-annually 2023 US484,895 — 1,849,133
Total international issuances 5,054,477 7,033,167
Total local and international issuances 5,445,484 7,771,624
Interest payable 106,145 134,679
Total 5,551,629 7,906,303

All values are in US Dollars.

(*) The Spanish term “Valor de actualización constante“ is referred to amounts in Soles indexed by inflation.

(b) Subordinated bonds do not have specific guarantees and in accordance with SBS rules, qualify as second level equity (Tier 2) in the determination of the effective equity; see Note 16(f).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

On January 11, 2023, Interbank redeemed the bond whose nominal value was S/150,000,000, and on December 13, 2023, redeemed the bond whose nominal value was US$ 50,000,000.

(c) On September 29, 2020, Interseguro issued subordinated bonds denominated “Third Issuance of the Third Program of Subordinated Bonds Interseguro (Single Series)” 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) On June 30, 2020, Interbank placed 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. The issuance date of these bonds was July 8, 2020.

Starting on July 8, 2025, prior authorization by the SBS, Interbank will be able to redeem the entirety of the bonds, having to pay a redemption price of 100 percent of the issued subordinated bonds. From that date onwards, in case Interbank does not perform the early redemption, the interest rate will increase by 371.1 basis points. After July 8, 2025, prior authorization by the SBS, Interbank will be able to redeem the entirety of the bonds, having to pay a redemption price of 100 percent of the issued subordinated bonds plus the present value of each scheduled coupon payment, discounted at the redemption date.

(e) On September 24, 2019, Interbank placed corporate bonds denominated “5.00% Senior Notes due 2026” for S/312,000,000, under Rule 144A and Regulation S of the U.S. Securities Act of 1993 of the United States of America. These bonds were issued on October 1, 2019.

(f) On September 25, 2019, Interbank placed corporate bonds denominated “3.25% Senior Notes due 2026” for US$400,000,000, under Rule 144A and Regulation S of the U.S. Securities Act of 1993 of the United States of America. These bonds were issued on October 4, 2019.

As of December 31, 2023, Interbank holds four cross currency swap contracts for a total of US$300,000,000 (equivalent to approximately S/1,112,700,000), which were designated as cash flow hedges; see Note 10(b); through these operations, part of the amount issued of said bonds was economically converted to Soles at rates of 2.12, 5.10, 5.32 and 4.92 percent.

(g) Beginning in March 2024, the interest rate changes to 8.625 percent. Since said date, Interbank can redeem the entirety of the bonds without penalties.

According to SBS regulations, this issuance qualifies as second level equity (“Tier 2”) in the determination of the effective equity.

As of December 31, 2023, Management does not have the intention to redeem these bonds before their maturity date; said situation could change in the future depending on the market conditions.

(h) From 2018 until July 2027, IFS, on any time, can redeem these bonds, paying a penalty equal to the United States of America Treasury rate plus 30 basis points. The payment of principal will take place on the maturity date of the bonds or when IFS redeems them.

In October 2017, IFS entered a cross currency swap for US$150,000,000 (equivalent to approximately S/556,950,000 and S/573,000,000, as of December 31, 2023 and 2022, respectively). Lastly, during January and February 2023, IFS signed two cross currency swap contracts for US$20,000,000 each (equivalent to approximately S/74,260,000 each); which was designated as a cash flow hedge, see Note 10(b).

As of December 31, 2023, Management does not intend to redeem these bonds before their maturity date; said situation may change in the future, depending on market conditions.

(i) In January 2018, Interbank issued corporate bonds called “3.375 Senior Unsecured Notes” for US$200,000,000, under Rule 144A and Regulation S of the U.S. Securities Act of 1993 of the United States of America.

As part of said program, Interbank performed a bond swapping offer aimed to the bondholders of the corporate bonds called “5.750% Senior Notes due 2020” issued by its Panama branch, thus swapping bonds for an amount of US$263,322,000, which generated a swapping premium for approximately US$21,573,000, for an amount of US$284,895,000.

Considering the issuance of bonds in January 2018 and the exchange of bonds previously issued carried out on said date, the total balance of the "3.375 Senior Unsecured Notes" amounted to US$484,895,000.

As of December 31, 2022, Interbank held fourteen cross-currency swaps for US$441,000,000 (equivalent to approximately S/1,681,974,000), which were designated as cash flow hedges; see Note 10(b); through these operations, part of the issued bonds amount was economically converted into Soles at an annual interest rate of 4.88 percent.

On January 18, 2023, the bond was paid according to its maturity date.

(j) 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, 2023 and 2022, the international issuances maintain mainly this common clause: submit audited financial statements on an annual basis and unaudited financial statements on a quarterly basis (both in Spanish and English). In the opinion of Group Management and its legal advisers, this clause has been met by the Group as of December 31, 2023 and 2022. In addition, Interbank maintains the following additional clauses: (i) limits regarding related party transactions that are not under market conditions and (ii) limits regarding consolidation, merger or transfer

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

of Interbank assets. In the opinion of Interbank Management and its legal advisers, these clauses has been met by Interbank as of December 31, 2023 and 2022.

(k) As of December 31, 2023 and 2022, the repayment schedule of these obligations is as follows:

Year 2023 2022
S/(000) S/(000)
2023 — 2,296,506
2024 71,709 —
2025 — —
2026 1,789,553 1,829,183
2027 onwards 3,690,367 3,780,614
Total 5,551,629 7,906,303

14. Assets and Liabilities for insurance and reinsurance contracts

(a) This caption is comprised of the following:

2023 2022
Assets Liabilities Net Assets Liabilities Net
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Reinsurance contracts held (*) (26,287 ) 1,895 (24,392 ) (34,053 ) 3,476 (30,577 )
Insurance contracts issued
Remaining coverage liability — 12,000,220 12,000,220 — 11,022,665 11,022,665
Liability for claims incurred — 205,421 205,421 — 205,180 205,180
Total insurance contracts issued (b) and (c) — 12,205,641 12,205,641 — 11,227,845 11,227,845
Total reinsurance contracts held and issued (26,287 ) 12,207,536 12,181,249 (34,053 ) 11,231,321 11,197,268

(*) Correspond to the ceded part of the reinsurance contracts mainly life insurance contracts.

The Group disaggregates the information to provide disclosure regarding the life insurance contracts issued and reinsurance contracts issued separately. This disaggregation has been determined based on how the insurance company is managed.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(b) The movement of issued insurance contract liabilities is presented below:

2023
Liabilities remaining coverage Liabilities remaining coverageLiabilities for claims incurred in contracts measured by the general model (BBA) and variable rate model (VFA) Liabilities Claim incurred contracts measured by the Premium Allocation Approach (PAA)
Excluding loss component Loss component Fulfillment <br>Cash Flows (FCF) Risk <br>Adjustment (RA) Fulfillment <br>Cash Flows (FCF) Risk <br>Adjustment (RA) Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Balance as of January 1, 2023 10,337,035 685,630 151,594 5,411 45,278 2,897 11,227,845
Insurance premiums earned (720,636 ) — — — — — (720,636 )
Contracts under fair value, BBA and VFA approach (495,923 ) — — — — — (495,923 )
Contracts under PAA approach (224,713 ) — — — — — (224,713 )
Insurance service expenses 127,009 (12,547 ) 433,958 (81 ) 106,801 (1,566 ) 653,574
Claims and other expenses incurred — — 965,054 (81 ) 58,884 (1,566 ) 1,022,291
Amortization of insurance acquisition cash flows 127,009 — — — — — 127,009
Losses on onerous contracts and reversals of those losses — (12,547 ) — — — — (12,547 )
Changes to liabilities for incurred claims — — (531,096 ) — 47,917 — (483,179 )
Insurance service result (593,627 ) (12,547 ) 433,958 (81 ) 106,801 (1,566 ) (67,062 )
Insurance financial expenses 1,499,572 29,771 — — (545 ) — 1,528,798
Insurance financial result 543,941 29,771 — — (545 ) — 573,167
Interest rate effect (*), see Note 3.4(d.1) 955,631 — — — — — 955,631
Effect of movements in exchange rates (135,726 ) (3,736 ) (447 ) (73 ) (213 ) (53 ) (140,248 )
Total changes in the statement of income and other comprehensive income 770,219 13,488 433,511 (154 ) 106,043 (1,619 ) 1,321,488
Net cash flow and investment component 193,895 (47 ) (429,456 ) — (108,084 ) — (343,692 )
Premiums received 974,312 — — — — — 974,312
Claims and other expenses paid — — (996,755 ) — (108,084 ) — (1,104,839 )
Insurance acquisition cash flows (213,118 ) (47 ) — — — — (213,165 )
Investment component (567,299 ) — 567,299 — — — —
Balance as of December 31, 2023 11,301,149 699,071 155,649 5,257 43,237 1,278 12,205,641

(*) Comprises the variation in market interest rate. In 2023, the rates for pension business in US Dollars presented a decrease from 6.472 percent in 2022 to 6.409 percent in 2023; whereas for pension business in soles presented a decrease from 8.139 percent in 2022 to 6.962 percent in 2023; and for pension business in soles VAC presented a decrease, from 4.765 percent in 2022 to 3.722 percent in 2023.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

2022
Liabilities remaining coverage Liabilities remaining coverageLiabilities for claims incurred in contracts measured by the general model (BBA) and variable rate model (VFA) Liabilities Claim incurred contracts measured by the Premium Allocation Approach (PAA)
Excluding loss component Loss component Fulfillment <br>Cash Flows (FCF) Risk <br>Adjustment (RA) Fulfillment <br>Cash Flows (FCF) Risk <br>Adjustment (RA) Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Balance as of January 1, 2022 12,063,449 509,792 164,040 5,936 43,508 1,242 12,787,967
Insurance premiums earned (677,175 ) — — — — — (677,175 )
Contracts under fair value, BBA and VFA approach (462,266 ) — — — — — (462,266 )
Contracts under PAA approach (214,909 ) — — — — — (214,909 )
Insurance service expenses 118,287 162,882 364,676 (509 ) 77,012 1,524 723,872
Claims and other expenses incurred — — 969,231 130 39,809 16,104 1,025,274
Amortization of insurance acquisition cash flows 118,287 — — — — — 118,287
Losses on onerous contracts and reversals of those losses — 162,882 — — — — 162,882
Changes to liabilities for incurred claims — — (604,555 ) (639 ) 37,203 (14,580 ) (582,571 )
Insurance service result (558,888 ) 162,882 364,676 (509 ) 77,012 1,524 46,697
Insurance financial expenses (1,251,364 ) 24,950 5,270 — 10,073 124 (1,210,947 )
Insurance financial result 462,970 24,950 5,270 — 10,073 124 503,387
Interest rate effect (*), see note 3.4(d.1) (1,714,334 ) — — — — — (1,714,334 )
Effect of movements in exchange rates (227,427 ) (11,994 ) (894 ) (16 ) (349 ) 7 (240,673 )
Total changes in the statement of income and other comprehensive income (2,037,679 ) 175,838 369,052 (525 ) 86,736 1,655 (1,404,923 )
Net cash flow and investment component 311,265 — (381,498 ) — (84,966 ) — (155,199 )
Premiums received 1,036,338 — — — - — 1,036,338
Claims and other expenses paid — — (913,330 ) — (84,966 ) — (998,296 )
Insurance acquisition cash flows (193,241 ) — — — — — (193,241 )
Investment component (531,832 ) — 531,832 — — — -
Balance as of December 31, 2022 10,337,035 685,630 151,594 5,411 45,278 2,897 11,227,845

(*) Comprises the variation in market interest rate. In 2023, the rates for pension business in US Dollars presented an increase from 3.950 percent in 2021 to 6.472 percent in 2022; whereas for pension business in soles presented an increase from 6.817 percent in 2021 to 8.139 percent in 2022; and for pension business in soles VAC presented an increase, from 3.734 percent in 2021 to 4.765 percent in 2022.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(c) Following is the movement of the issued insurance contracts’ net asset or liability, showing the present value estimates of future cash flows, risk adjustment and the contractual service margin (CSM) for portfolios included in the life insurance unit:

2023 2022
Estimates of the present value of future cash flows Risk <br>Adjustment Contractual Service Margin (d) Total Estimates of the present value of future cash flows Risk <br>Adjustment Contractual Service Margin (d) Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Balance as of January 1 10,256,194 277,973 599,799 11,133,966 11,867,379 343,110 491,244 12,701,733
Changes that relate to current services
Contractual service margin recognized for services provided — — (80,622 ) (80,622 ) — — (70,761 ) (70,761 )
Risk adjustment recognized for the risk expired — (306 ) — (306 ) — (3,995 ) — (3,995 )
Experience adjustments (114,952 ) — — (114,952 ) 84,129 — — 84,129
Changes that relate to future services
Contracts initially recognized in the period (249,907 ) 9,441 289,323 48,857 (259,667 ) 12,591 252,526 5,450
Changes in estimates that adjust the contractual service margin 98,096 609 (98,705 ) — 109,771 (16,594 ) (93,177 ) —
Changes in estimates that do not adjust the contractual service margin 70,637 17,930 — 88,567 171,284 (50,137 ) — 121,147
Changes that relate to past services
Adjustments to liabilities for incurred claims 2,866 — — 2,866 (16,698 ) — — (16,698 )
Insurance service result (193,260 ) 27,674 109,996 (55,590 ) 88,819 (58,135 ) 88,588 119,272
Insurance financial expenses 1,471,337 111 37,712 1,509,160 (1,226,728 ) — 27,688 (1,199,040 )
Insurance financial result 515,706 111 37,712 553,529 487,606 — 27,688 515,294
Interest rate effect (*), see Note 3.4(d.1) 955,631 — — 955,631 (1,714,334 ) — — (1,714,334 )
Effect of movements in Exchange rates (111,021 ) (2,994 ) (4,637 ) (118,652 ) (231,240 ) (7,002 ) (7,721 ) (245,963 )
Total changes in the statement of income and other comprehensive income 1,167,056 24,791 143,071 1,334,918 (1,369,149 ) (65,137 ) 108,555 (1,325,731 )
Cash flows (350,975 ) — — (350,975 ) (242,036 ) — — (242,036 )
Premiums received 749,090 — — 749,090 816,911 — — 816,911
Claims and other expenses paid (1,008,640 ) — — (1,008,640 ) (967,912 ) — — (967,912 )
Insurance acquisition cash flows (91,425 ) — — (91,425 ) (91,035 ) — — (91,035 )
Balance as of December 31 11,072,275 302,764 742,870 12,117,909 10,256,194 277,973 599,799 11,133,966

(*) Balance does not include PPA movement of LRC and LIC amounting to S/87,732,000 and S/93,879,000 as of December 31, 2023 and 2022, respectively.

(d) Following is the CSM movement for insurance contract portfolios for the periods 2023 and 2022:

2023 2022
Total Contracts using the fair value approach Total Contracts using the fair value approach
S/(000) S/(000)
Contractual Service Margin as of January 1 599,799 491,244
Changes that relate to current services
Contractual service margin recognized for services provided (80,622 ) (70,761 )
Changes that relate to future services
Contracts initially recognized in the period 289,323 252,526
Changes in estimates that adjust the contractual service margin (98,705 ) (93,177 )
Insurance service result 109,996 88,588
Insurance financial expenses 37,712 27,688
Effect of movements in exchange difference (4,637 ) (7,721 )
Total changes in the statement of income 143,071 108,555
Other movements — —
Balance as of December 31 742,870 599,799

(e) The following table details the components of the new insurance contracts issued and included in the life insurance unit:

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

2023 2022
Contracts issued Contracts issued
Non-onerus Onerous Total Non-onerus Onerous Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Life insurance contract liabilities
Estimate present value of future cash outflows, excluding insurance acquisition cash flows 683,302 99,200 782,502 740,236 119,087 859,323
Estimates of insurance acquisition cash flows 81,957 8,875 90,832 72,206 9,564 81,770
Estimate of present value of future cash outflows 765,259 108,075 873,334 812,442 128,651 941,093
Estimates of present value of future cash inflows (1,063,336 ) (59,905 ) (1,123,241 ) (1,076,183 ) (124,577 ) (1,200,760 )
Risk adjustment 8,754 687 9,441 11,215 1,376 12,591
Contractual service margin 289,323 — 289,323 252,526 — 252,526
Losses on onerous contracts at initial recognition — 48,857 48,857 — 5,450 5,450

(f) Following is the disclosure of when the CSM is expected to be in profit or loss in future years:

2023
Less than a year From 1 to 2 years From 2 to 3 years From 3 to 4 years From 4 to 5 years More than 5 years Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Insurance contracts issued -
Pensions (11,028 ) (10,474 ) (9,441 ) (8,398 ) (7,570 ) 294,707 247,796
Life (3,681 ) (2,111 ) (776 ) 1,271 4,240 347,975 346,918
Massive 38,088 27,662 19,468 12,920 8,397 41,621 148,156
23,379 15,077 9,251 5,793 5,067 684,303 742,870
2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Less than a year From 1 to 2 years From 2 to 3 years From 3 to 4 years From 4 to 5 years More than 5 years Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Insurance contracts issued -
Pensions (7,229 ) (6,989 ) (6,421 ) (5,633 ) (4,719 ) 209,288 178,297
Life (6,205 ) (4,417 ) (2,444 ) (442 ) 1,991 294,616 283,099
Massive 29,172 21,900 16,227 11,473 7,830 51,801 138,403
15,738 10,494 7,362 5,398 5,102 555,705 599,799

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(g) Reconciliation of the amount included in net unrealized income for insurance premium reserves. On transition to IFRS 17, the Group applied the fair value approach for certain groups of contracts with term-life cover and surrender options, see Note 3.7 for further details. The movement in the fair value reserve for related financial assets measured at fair value through other comprehensive income is disclosed below:

2023 2022
S/(000) S/(000)
Cumulative other comprehensive income, opening balance 1,714,334 —
(Loss) Gains recognized in other comprehensive income in the period (955,631 ) 1,714,334
Rate effect of “Renta Particular” contract (*) (14,587 ) —
Cumulative other comprehensive income, closing balance 744,116 1,714,334

(*) Comprises the variation in market interest rate of contracts with investment component recorded in the caption “other accounts payable, provisions and other liabilities”, see Note 10.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

15. Deferred Income Tax asset and liability

(a) As indicated in Note 3.4(aa), the net tax position has been met based on the separate financial statement of each Subsidiary domiciled in Peru. The following table presents a summary of the items comprising the Subsidiaries' deferred Income Tax:

2023 2022
S/(000) S/(000)
Deferred asset
Provision for loan portfolio and other provisions 261,713 291,634
Tax loss 23,686 28,054
Net unrealized losses from fluctuation in investments through other comprehensive income 9,853 11,688
Leveling of assets and liabilities 7,474 16,357
Deferred service income 6,975 7,485
Unrealized loss from derivatives 6,407 245
Right-of-use assets 2,787 3,405
Deferred income from indirect credits (stand-by letters) 2,272 2,319
Modification of rescheduled loan cash flows 731 (7,943 )
Recording of past-due and refinanced loans (121,928 ) (74,401 )
Others 24,543 40,593
Deferred liability
Amortization of intangible assets, net (79,773 ) (62,213 )
Deemed cost of fixed assets (60,731 ) (61,403 )
Deferred cost of POS affiliation and registration (25,348 ) (26,980 )
Others (2,725 ) (3,053 )
Total deferred Income Tax asset, net 55,936 165,787
Deferred liability (*)
Higher value of intangibles generated by business combination, Note 1(d) 74,744 80,852
Higher value of property, furniture and equipment and right-of-use generated by business combination, Note 1(d) 968 1,047
Total deferred Income Tax liability, net 75,712 81,899

(*) During 2022, included S/4,642,000 in results for the period.

(b) In Management’s opinion, the deferred Income Tax assets will be recovered from the taxable income that will be generated by each company of the Group over the coming years, including the portion that is recorded in the consolidated statement of changes in equity.

(c) The table below presents the amounts reported in the consolidated statement of income for the years 2023, 2022 and 2021:

2023 2022 2021
S/(000) S/(000) S/(000)
Current – Expense 140,332 432,392 257,252
Current – ​​Dividend expense, Note 17(b) 33,020 30,587 39,108
Deferred – Expense (income) 102,244 (442 ) 205,752
275,596 462,537 502,112

(d) The table below presents the reconciliation of the effective Income Tax rate to the statutory tax rate for the Group:

2023 2022 2021
S/(000) % S/(000) % S/(000) %
Income before Income Tax 1,354,872 100.0 2,140,651 100.0 2,302,291 100.0
Theoretical tax 399,687 29.5 631,492 29.5 679,176 29.5
Increase (decrease) in income of Subsidiaries not domiciled in Peru 46,453 3.4 11,412 0.5 (39,498 ) (1.7 )
Non-taxable income, net (275,379 ) (20.3 ) (243,003 ) (11.4 ) (224,780 ) (9.8 )
Permanent non-deductible expenses 109,602 8.1 61,833 2.9 69,367 3.0
Non-taxable translation results (4,767 ) (0.4 ) 803 0.1 17,847 0.8
Income Tax 275,596 20.3 462,537 21.6 502,112 21.8

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

16. Equity, net

(a) Capital stock and distribution of dividends –

IFS’s shares are listed on the Lima Stock Exchange and, since July 2019, they are listed also 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, 2023 and 2022, IFS’s capital stock is represented by 115,447,705 subscribed and paid-in common shares.

The General Shareholders’ Meeting of IFS held on March 31, 2023, agreed to distribute dividends charged to profits for the year 2022 for approximately US$136,222,000 (equivalent to approximately S/511,788,000); equivalent to US$1.18 per share, which were paid on May 8, 2023.

The General Shareholders’ Meeting of IFS held on March 31, 2022, agreed to distribute dividends charged to profits for the year 2021 for approximately US$202,025,000 (equivalent to approximately S/751,532,000); equivalent to US$1.75 per share, which were paid on May 6, 2022.

The General Extraordinary Shareholders’ Meeting of IFS held on November 24, 2021, agreed to distribute extraordinary dividends for approximately US$75,038,000 (equivalent to approximately S/301,757,000), equivalent to US$0.65 per share, which was paid on December 20, 2021.

The General Shareholders’ Meeting of IFS held on March 31, 2021, agreed to distribute dividends for the year 2020 for approximately US$88,891,000 (equivalent to approximately S/332,096,000), equivalent to US$0.77 per share, which were paid on May 6, 2021.

(b) Treasury stock -

As of December 31, 2023 and 2022, the Company and some Subsidiaries hold, 967,000 and 29,000 shares issued by IFS, respectively, with an acquisition cost equivalent to S/84,309,000 and S/3,363,000.

On March 31, 2023, the General Shareholders of IFS approved the Share Repurchase Program for an amount of up to US$100 million of common shares, which may be carried out simultaneously on the Lima Stock Exchange – BVL and New York Stock Exchange – NYSE, on one or more dates at market value. The program is expected to continue until terminated by the Board of Directors.

During 2023, within the framework of this Program, Interbank has purchased 938,371 shares, at market values, for the approximate sum of US$21,952,000 (approximately equivalent to S/81,021,000).

On March 29, 2023, Interfondos sold 750 shares for an approximate amount of S/75,000.

(c) Capital surplus -

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

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(d) Unrealized results, net -

This item is made up as follows:

Unrealized gain (loss)
Instruments that will not be reclassified to consolidated statement of income Instruments to be reclassified to the consolidated<br>statement of income
Equity instruments at fair value Debt instruments at fair value Insurance premiums reserve Cash flow<br>hedge reserve Translation of foreign operations Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Balances as of January 1, 2021 297,212 1,667,103 (1,255,845 ) (37,108 ) 165,411 836,773
Effect of changes in the discount rates of pension reserves, Note 3.4(d) — — 1,389,995 — — 1,389,995
Unrealized gain from equity instruments at fair value through other comprehensive income, net of unrealized loss 145,899 — — — — 145,899
Transfer to retained earnings from realized gain from equity instruments at fair value through other comprehensive income, Note 5(g) (451,898 ) — — — — (451,898 )
Unrealized gain from debt instruments at fair value through other comprehensive income, net of unrealized loss — (1,986,046 ) — — — (1,986,046 )
Transfer to realized gain from debt instruments at fair value through other comprehensive income, net of unrealized loss — (249,689 ) — — — (249,689 )
Transfer of impairment gain on debt instruments at fair value through other comprehensive income — (30,994 ) — — — (30,994 )
Variation for net unrealized loss on cash flow hedges — — — 68,615 — 68,615
Transfer of realized loss on cash flow hedges to consolidated statement of income, net of realized gain — — — 13,371 — 13,371
Translation of foreign operations — — — — 95,674 95,674
Balances as of December 31, 2021 (8,787 ) (599,626 ) 134,150 44,878 261,085 (168,300 )
Changes due to first adoption of IFRS 17, see Note 3.7 — — (134,177 ) — — (134,177 )
Balances as of January 1, 2022 - Restated (Note 3.7) (8,787 ) (599,626 ) (27 ) 44,878 261,085 (302,477 )
Effect of changes in the discount rates of pension reserves, Note 3.4(d) — — 1,711,520 — — 1,711,520
Unrealized gain from equity instruments at fair value through other comprehensive income, net of unrealized loss (21,663 ) — — — — (21,663 )
Transfer to retained earnings from realized loss from equity instruments at fair value through other comprehensive income, Note 5(g) (16,313 ) — — — — (16,313 )
Unrealized loss from debt instruments at fair value through other comprehensive income, net of unrealized loss — (1,848,192 ) — — — (1,848,192 )
Transfer to realized gain from debt instruments at fair value through other comprehensive income, net of unrealized loss — 14,263 — — — 14,263
Transfer of impairment recovery on debt instruments at fair value through other comprehensive income — 12,746 — — — 12,746
Variation for net unrealized loss on cash flow hedges — — — (70,170 ) — (70,170 )
Transfer of realized loss on cash flow hedges to consolidated statement of income, net of realized gain — — — 16,030 — 16,030
Translation of foreign operations — — — — (50,165 ) (50,165 )
Balances as of December 31, 2022 - Restated (Note 3.7) (46,763 ) (2,420,809 ) 1,711,493 (9,262 ) 210,920 (554,421 )
Effect of changes in the discount rates of pension reserves, Note 3.4(d) — — (968,599 ) — — (968,599 )
Unrealized gain from equity instruments at fair value through other comprehensive income, net of unrealized loss. 16,055 — — — — 16,055
Transfer to retained earnings from realized gain from equity instruments at fair value through other comprehensive income, Note 5(g) (33,433 ) — — — — (33,433 )
Unrealized gain from debt instruments at fair value through other comprehensive income, net of unrealized loss. — 1,128,206 — — — 1,128,206
Transfer to realized gain from debt instruments at fair value through other comprehensive income, net of realized loss. — (8,350 ) — — — (8,350 )
Transfer of impairment recovery on debt instruments at fair value through other comprehensive income — 7,390 — — — 7,390
Variation for net unrealized loss on cash flow hedges — — — (67,980 ) — (67,980 )
Transfer of realized loss on cash flow hedges to consolidated statement of income, net of realized gain — — — 45,309 — 45,309
Translation of foreign operations — — — — (21,970 ) (21,970 )
Balances as of December 31, 2023 (64,141 ) (1,293,563 ) 742,894 (31,933 ) 188,950 (457,793 )

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(e) Components of other comprehensive income -

The consolidated statement of comprehensive income include: (i) Other comprehensive income that will not be reclassified to the consolidated statement of income in future periods, such as the revaluation of gain (loss) in equity instruments at fair value through other comprehensive income; which will not be reclasified to the consolidated statement of income at the time of its disposal, but will be reclasified to retained earnings; and (ii) Other comprehensive income to be reclassified to the consolidated statement of income in future periods, such as the comprehensive income of financial instruments derivatives used as cash flow hedges, debt instruments at fair value through other comprehensive income and translation for foreign operations. Below is the movement of the caption:

2023 2022 2021
S/(000) S/(000) S/(000)
Other comprehensive income that will not be reclassified to the consolidated statement of income in future periods:
Equity instruments at fair value through other comprehensive income
Gains (losses) on equity instruments at fair value through other comprehensive income, net 16,055 (21,663 ) 145,899
Subtotal 16,055 (21,663 ) 145,899
Non-controlling interest 8 (43 ) 231
Income Tax 157 (218 ) 31
Total 16,220 (21,924 ) 146,161
Other comprehensive income to be reclassified to the consolidated statement of income in future periods:
Debt instruments at fair value through other comprehensive income
Net gain (loss) unrealized on debt instruments at fair value through other comprehensive income 1,128,206 (1,848,192 ) (1,986,046 )
Transfer to income of unrealized net (gain) loss on debt instruments at fair value through other comprehensive income (8,350 ) 14,263 (249,689 )
Transfer to income of loss (recovery) for impairment on debt instruments at fair value through other comprehensive income 7,390 12,746 (30,994 )
Subtotal 1,127,246 (1,821,183 ) (2,266,729 )
Non-controlling interest 3,618 (4,423 ) (6,978 )
Income Tax 3,645 (8,250 ) (8,404 )
Total 1,134,509 (1,833,856 ) (2,282,111 )
Insurance premiums reserve — — 1,389,995
Non-controlling interest — — 2,285
Total — — 1,392,280
Insurance contracts reserve at fair value, Note 14(b) (968,599 ) 1,711,520 —
Non-controlling interest (1,592 ) 2,814 —
Total (970,191 ) 1,714,334 —
Cash flow hedges:
Net (loss) gain from cash flow hedges (67,980 ) (70,170 ) 68,615
Transfer of net realized loss from cash flow hedge to consolidated statement of income 45,309 16,030 13,371
Subtotal (22,671 ) (54,140 ) 81,986
Non-controlling interest (105 ) (144 ) 261
Income Tax (6,336 ) (8,670 ) 15,696
Total (29,112 ) (62,954 ) 97,943
Foreign currency translation (21,970 ) (50,165 ) 95,674

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

IFS is not required to establish a regulatory capital for statutory purposes. As of December 31, 2023 and 2022, the regulatory capital required for Interbank, Interseguro and Inteligo Bank (a Subsidiary of Inteligo Group Corp.), is calculated based on the separate financial statement of each Subsidiary and prepared following the accounting principles and practices of their respective regulators (the SBS or the Central Bank of the Bahamas, in the case of Inteligo Bank).

The regulatory capital required for Interbank, Interseguro and Inteligo Bank is detailed below:

Interbank’s regulatory capital -

According to Legislative Decree No. 1028, Interbank’s regulatory capital must be equal to or higher than 10 percent of the assets and contingent credits weighted by total risk represented by the sum of: the regulatory capital requirement for market risk multiplied by 10, the regulatory capital requirement for operational risk multiplied by 10 and the assets and contingent credits weighted by credit risk.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Through Multiple Official Letter No. 27358-2021 and Emergency Decree 003-2022, it was established that in the period between April 2021 and August 2022, the regulatory capital for financial companies shall be equal or higher than 8 percent of total risk-weighted assets and contingencies and from September 2022 to March 2023, it will be of 8.5 percent, once this period ends, the regulatory capital shall go back to be equal or higher than 10 percent determined as or indicated above.

SBS Resolution No. 3952-2022, and amendments, established that within the period between January and March 2023, the regulatory capital for financial companies must be equal or higher than 8.5 percent of the assets and contingent assets weighted by total risks; equal or higher than 9 percent between April 2023 and February 2024; equal or higher than 9.5 percent between March and August 2024; and 10 percent from September 2024 onwards; this also modifies the regulations for regulatory capital requirements for credit risk, revoking Official Multiple Letter No. 27358-2021-SBS and Emergency Decree No. 003-2022.

As of December 31, 2023 and 2022, in application of the provisions of the SBS Resolutions, Interbank maintains the following amounts related to the risk weighted assets and contingent and regulatory capital (basic and supplementary):

2023 2022
S/(000) S/(000)
Total risk weighted assets and credits 63,494,884 64,690,083
Total regulatory capital 9,811,486 9,754,806
Basic regulatory capital (Level 1) 7,461,727 7,016,417
Supplementary regulatory capital (Level 2) 2,349,759 2,738,389
Global capital to regulatory capital ratio 15.45 % 15.08 %

As of December 31, 2023 and 2022, Interbank has complied with SBS Resolutions No.2115-2009, No.6328-2009, No.14354-2009, No.4128-2014, “Regulations for the Regulatory Capital Requirement for Operational Risk”, “Market Risk” and “Credit Risk”, respectively, and their amendments. These resolutions establish, mainly, the methodologies to be applied by financial entities to calculate the assets and credits weighted per type of risk.

SBS Resolution No. 3953-2022 establishes the calculation of the regulatory capital requirement for additional risks, which shall be equal to the sum of the regulatory capital requirements for concentration risk plus the regulatory capital requirements of interest rate risk in the banking book, thus revoking SBS Resolution No. 8425-2011. Also, it establishes an adaptation period until December 2023. As of December 31, 2023, the regulatory capital requirement for additional risks is approximately S/594,256,000.

Previously, Resolution No. 8425-2011 was in force, and in application of said standard, established the calculation of the additional regulatory capital requirement as the sum of the regulatory capital requirements calculated for each of the following components: economic cycle, concentration risk, market concentration risk, interest rate risk in the banking book and other risks. As of December 31, 2022, the additional regulatory capital requirement estimated by Interbank amounted to approximately S/840,914,000.

On March 26, 2020, the SBS issued SBS Resolution No. 1264-2020, which establishes that the calculation of regulatory capital requirements will not be increased in relation the weighting factor for mortgage loans and non-revolving consumer loans that have been subject to rescheduling that included the maturity term extension. In that sense, this extension in the loan’s maturity term has not generated that Interbank require higher regulatory capital requirements due to the weighting factor. Also, said Resolution authorizes financial entities to use the cumulative additional regulatory capital for the economic cycle component.

Interseguro’s regulatory capital -

In accordance with SBS Resolution No. 1124-2006, and its amendments, Interseguro is required to maintain a level of regulatory capital to maintain a minimum equity to support technical risks and other risks that could affect it. The regulatory capital must be higher than the amount resulting from the sum of the solvency net equity, the guarantee fund and the regulatory capital intended to cover credit risks.

The solvency net equity is represented by the higher amount between the solvency margin and the minimal capital. As of December 31, 2023 and 2022, the solvency net equity is represented by the solvency margin. The solvency margin is the complementary support that insurance entities must maintain to deal with possible situations of excess claims not foreseen in the establishment of technical reserves. The total solvency margin corresponds to the sum of the solvency margins of each branch in which Interseguro operates.

Also, the guarantee fund represents the additional equity support that insurance companies must maintain to deal with the other risks that can affect them and that are not covered by the solvency net equity, such as investment risks and other risks. The monthly amount of said fund must be equivalent to 35 percent of the solvency net equity, calculated in accordance with SBS Resolution No. 1124-2006 and its amendments.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

As of December 31, 2023 and 2022, Interseguro’s surplus equity is as follows:

2023 2022
S/(000) S/(000)
Regulatory capital 1,370,151 1,338,237
Less
Solvency equity (solvency margin) 698,409 714,875
Guarantee fund 455,253 250,207
Surplus 216,489 373,155

Inteligo Bank’s regulatory capital –

The Central Bank of the Bahamas requires Inteligo Bank to maintain a regulatory capital of not less than 8 percent of its risk weighted assets. Inteligo Bank’s capital ratio As of December 31, 2023 and 2022 is the following:

2023 2022
US(000) US(000)
Total eligible capital
Total risk weighted assets
Capital adequacy ratio (in percentage)

All values are in US Dollars.

In Management’s opinion, its Subsidiaries have complied with the requirements set forth by the regulatory entities.

(g) Reserves -

The General Shareholders’ Meeting of IFS held on March 31, 2022, agreed to constitute reserves for S/800,000,000 charged to retained earnings.

(h) Subsidiaries’ legal and special reserves -

In accordance with Peruvian regulations, the Subsidiaries domiciled in Peru are required to establish a reserve equivalent to a certain percentage of their paid-in capital (20 or 35 percent, depending on their economic activity) through annual transfers of not less than 10 percent of their net income. As of December 31, 2023 and 2022, the reserves constituted by the Peruvian subsidiaries amounted to S/1,670,500,000 and S/1,545,471,000, respectively.

17. Tax situation

(a) IFS and its Subsidiaries are incorporated and domiciled in the Republic of Panama and the Commonwealth of the Bahamas (see Note 2), and are not subject to any Income Tax, or any other taxes on capital gains, equity or property. The Subsidiaries incorporated and domiciled in Peru (see Note 2) are subject to the Peruvian Tax legislation; see paragraph (c).

Peruvian life insurance companies are exempt from Income Tax regarding the income derived from assets linked to technical reserves for pension insurance and pensions from the Private Pension Fund Administration System; as well as income generated through assets related to life insurance contracts with savings component.

In Peru, all income from Peruvian sources obtained from the direct or indirect sale of shares of stock capital representing participation of legal persons domiciled in the country are subject to income tax. For that purpose, an indirect sale shall be considered to have occurred when shares of stock or ownership interests of a legal entity are sold and this legal entity is not domiciled in the country and, in turn, is the holder — whether directly or through other legal entity or entities — of shares of stock or ownership interests of one or more legal entities domiciled in the country, provided that certain conditions established by law occur.

In this sense, the Act states that an assumption of indirect transfer of shares arises when in any of the 12 months prior to disposal, the market value of shares or participations of the legal person domiciled is equivalent to 50 percent or more of the market value of shares or participations of the legal person non-domiciled. Additionally, as a concurrent condition, it is established that in any period of 12 months shares or participations representing 10 percent or more of the capital of legal persons non-domiciled be disposal.

Also, an indirect disposal assumption arises when the total amount of the shares of the domiciled legal person whose indirect disposal is performed, is equal or greater than 40,000 Taxation Units (henceforth “UIT”, by its Spanish acronym).

(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 records the amount of the Income Tax on dividends as expense of the financial year of the dividends received. In this sense, during 2023, 2022 and 2021, the Company has recorded a provision for S/33,020,000, S/30,587,000 and S/39,108,000, respectively, in the caption “Income Tax” of the consolidated statement of income.

(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, 2023, 2022 and 2021, was 29.5 percent, over the taxable income.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(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.

Below are the taxable periods subject to inspection by the SUNAT as of December 31, 2023:

  • Interbank: Income Tax returns for the years 2020 to 2023, and Value-Added-Tax returns for the years 2018 to 2023.

  • Interseguro: Income Tax returns for the years 2019, 2021 ,2022 and 2023, and Value-Added-Tax returns for the years 2019 to 2023.

  • Procesos de Medios de Pago: Income Tax returns, and Value-Added-Tax returns for the years 2019 to 2023.

  • Izipay: Income Tax returns and Value-Added-Tax returns for the years 2019 to 2023.

Due to the possible interpretations that the SUNAT may have on the legislation in force, it is not possible to determine at this date whether or not the reviews carried out will result in liabilities for the Subsidiaries; therefore, any higher tax or surcharge that may result from possible tax reviews would be applied to the results of the year in which it is determined.

Following is the description of the main ongoing tax procedures for the Subsidiaries:

Interbank:

Tax periods from 2000 to 2006:

Between 2004 and 2010, Interbank received several 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.

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, Interbank considers that the interest in suspense does not constitute accrued income, in accordance with the SBS’s regulations and IFRS, which is also supported by a ruling by the Permanent Constitutional and Social Law Chamber of the Supreme Court issued in August 2009 and a pronouncement in June 2019.

In June and September 2022, the Permanent Constitutional and Social Law Chamber of the Supreme Court declared unfounded the cassation appeals by SUNAT and the Ministry of Economy and Finance, thus reaffirming the position of Interbank in the sense that interest in suspense does not constitute taxable income, both in the 2001 Income Tax and in the 2004 Income Tax.

In January 2023, Interbank was notified with Resolution of Compliance No. 4070150000145, that rectified and resettled the debt contained in Resolutions of Determination No. 0120030012106 and No. 0120030012107 related to advance payments of the Income Tax for the period 2003, without any amount to pay.

In March 2023, Interbank was notified with Resolution of Compliance No. 4070150000186 regarding Income Tax for the period 2003, that rectified the tax debt contained in the Resolution of Penalty No. 012-002-0011622, thus reducing said penalty from S/69,000,000 to S/25,000,000. Likewise, Interbank filed the respective Appeal Recourse against Resolution of Compliance No. 4070150000186. In September 2023, Interbank was notified with the Tax Court Resolution No. 07915-4-2023, which revokes Resolution No. 4070150000186, dated March 2023, in relation to the updating of the debt contained in Resolution of Penalty No. 012-002-0011622. Thus, SUNAT must proceed according to what said Resolution mandates, and confirm its content. In October 2023, Interbank was notified with Resolution of Compliance No. 4070150000348, and filed a claim recourse that is pending resolution by the Tax Court.

As of December 31, 2023 the tax liability requested for this concept and other minor contingencies, amounts to approximately S/124,000,000 which includes the tax, fines and interest arrears, out of which S/59,000,000 corresponded to interest in suspense and S/65,000,000 corresponded to other repairs. As of December 31, 2022, the tax liability amounted to S/290,000,000 and includes taxes, fines, and interest arrears.

In February 2023, Interbank was notified with the Tax Court Resolution No. 00227-2-2023, that declared null the Resolution of Intendence No. 0150150002380, of May 2020, in relation to the payments of the Income Tax for the period 2004 in the part referred to interest in suspense and related penalties.

In April 2023, Interbank was notified with Resolution No. 4070150000211, issued in compliance with Resolution No. 00227-2-2023, through which it rectified the determination of payments on account of Income Tax for the year 2004. Interbank presented the respective Appeal, which is pending resolution by the Tax Court.

In August 2023, the Cassation Ruling No. 1035-2022 Lima was published, which resolves the claim filed by SUNAT regarding the Income Tax for the period 2004, with judgment favorable for Interbank.

In May 2020, Interbank was notified with the Resolution of Compliance related to the Income Tax and advance payments of the Income Tax for the year 2005 (linked to the interest in suspense). Through said notification, SUNAT increased the requested tax debt from S/1,000,000 to S/35,000,000 because as a result of the Resolution of Compliance, certain previously accepted deductions by SUNAT. In June 2020, Interbank filed an Appeal, which is pending of pronouncement by the Tax Court.

In December 2022, the Tax Court notified of Resolution No. 09431-9-2022, through which it revoked interest in suspense, financial pro-rata, advance payments and fines. As of today, Interbank is awaiting the Resolution of Compliance.

In October 2023, Interbank was notified with Resolution No. 4070150000358, issued in compliance with Tax Court Resolution No. 09431-9-2022. In November 2023, the respective Appeal was presented, which is pending resolution by the Tax Court.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

In December 2023, Interbank was notified with Resolution No. 4070150000379, issued in compliance with Tax Court Resolution No. 09431-9-2022; and presented the respective Appeal, which is pending resolution by the Tax Court.

In February 2021, Interbank was notified with the Resolution of Compliance related to the Income Tax and prepaid income tax of the year 2006 (related to litigations about interest in suspense). Through said notification, SUNAT rejected an excess payment of S/3,500,000 and determined a tax debt of S/23,000,000.

In December 2022, the Tax Court notified of Resolution No. 09451-1-2022, through which it revoked interest in suspense, advance payments coefficient and fines. As of today, Interbank is awaiting the Resolution of Compliance.

Tax period 2010:

In 2017, SUNAT closed the audit procedure corresponding to the Income Tax for the year 2010. Interbank paid the debt under protest and filed a claim recourse. As of today, the procedure has been appealed and it is pending resolution by the Tax Court.

Tax period 2012:

In July 2020, Interbank was notified of the Determination and Penalty Resolutions corresponding to the audit of the Income Tax for the fiscal year 2012. As of December 31, 2023 and 2022, the tax debt claimed by the SUNAT amounted to S/14,400,000 and S/14,000,000, respectively. During 2021 and 2022, Interbank filed diverse Appeal Recourses. SUNAT rejected all these recourses. As of the date of this report, the process is on appeal, pending resolution by the Tax Court.

Tax period 2013:

In 2019, Interbank was notified of the Determination and Penalty Resolutions corresponding to the audit of the Income Tax for the fiscal year 2013.The main concept observed corresponded to the deduction of loan write-offs without proof by the SBS.

During 2021, Interbank filed a claim against the Resolution of the Tax Court, this authority confirmed, revoked, and ordered to resettle the aforementioned concepts. At the end of 2022, the Tax Court reconfirmed its ruling in the aforementioned Resolution. In December 2022, the SUNAT through Resolution of Coactive Collection No. 0110060065138, notified the payment of the third-category Income Tax debt corresponding to the period 2013, for approximately S/62,000,000, which was paid by Interbank on February 2, 2023; however, the process continues in the Judiciary instance. Interbank recorded this payment as account receivable from SUNAT, that was recorded as “Tax paid to recover”, in the caption “Other accounts receivable and other assets, net”; see Note 10(a).

Tax periods 2014 and 2015:

In September and December, 2019, SUNAT notified Interbank about the beginning of the definitive audit procedure on Income Tax corresponding to the year 2014 and 2015, respectively. During 2021 and 2022, Interbank filed diverse Appeal Recourses. SUNAT rejected all these recourses.

As of December 31, 2023 and 2022, the tax debt requested in relation to the Income Tax advance payments for the period 2015 and to the application of the additional Income Tax rate of 4.1 percent, amounted to S/14,600,000 and S/14,000,000, respectively.

Tax period 2017:

In December 2021, SUNAT notified Interbank about the beginning of the definitive audit procedure on Income Tax corresponding to the year 2017. In October 2022, SUNAT notified of Resolutions of Determination No. 0120030127896 and No. 0120030127908, issued regarding the third-category Income Tax corresponding to the period 2017 and Income Tax advance payments from January to December 2017, without additional amounts to pay related to the third-category Income Tax; however, in November 2022, Interbank filed a claim recourse on other minor concepts, observed by the SUNAT.

In June 2023, Interbank was notified with the Resolution No. 4070140000600 declaring the claim recourse unfounded. In July 2023, Interbank filed the respective Appeal against said Resolution, which is pending of pronouncement by the Tax Court.

Tax period 2018:

In April 2019, SUNAT notified the start of the final audit process for non-domiciled income tax withholdings corresponding to the year 2018.

In November 2023, SUNAT notified Interbank with Resolution of Determination No. 012-003-0135114, issued regarding the third-category annual Income Tax for the period 2018, Resolutions of Determination No. 012-003-0135102 to No. 012-003-0135113, issued regarding advance payments from January to December 2018 and resolutions of Penalty issued regarding an alleged infringement of Article 178.1 of the Tax Code for the tax and period indicated. The tax debt claimed by SUNAT amounts to S/74,000,000.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

In December 2023, the respective claim recourse was filed. To date, said recourse is pending resolution by SUNAT.

Interseguro:

In October 2023, SUNAT completed the fiscalization procedure regarding the Income Tax corresponding to the year 2020, without additional observations.

Izipay:

As of December 31, 2023 and 2022, Izipay maintains carryforward tax losses amounting to S/71,552,053 and S/82,931,174, respectively. In application of current tax regulations, Management opted for system “B” to offset its tax losses. Through this system, the tax loss may be offset against the net income obtained in the following years, up to 50 percent of said income until they are extinguished; therefore, they do not have an expiration date.

In the opinion of IFS Management, its Subsidiaries and its legal advisers, any eventual additional tax would not be significant for the financial statements as of December 31, 2023 and 2022.

(e) Peruvian life insurance companies are exempted from the Income Tax on income from assets related to technical reserves for the payment of annuities and retirement, disability and survival annuities of the Private Pension Fund Administration System.

(f) For the purpose of determining the Income Tax, the transfer prices of transactions with related companies and with companies domiciled in countries or territories that are non-cooperating or low or zero tax countries or territories, or with entities or permanent establishments whose income, revenues or gains from said contracts are subject to a preferential tax regime, must be supported by documented information on the valuation methods used and the criteria considered for their determination. On the basis of the analysis of the operations of the Group, Management and its internal legal advisors believe that, as a consequence of the application of these standards, contingencies of importance will not arise for the Subsidiaries domiciled in Peru as of December 31, 2023 and 2022.

Through Legislative Decree No. 1312, published on December 31, 2016, the formal obligations for entities included within the scope of application of transfer pricing were modified, thus incorporating three new information requirements: the first is a Local Report; the second is a Master Report; and the third is a Country Report. The first entered into effect since 2017 for the operations that occurred during year 2016 and the last two since 2018 for the operations that have occurred since the fiscal year 2017.

(g) Through Legislative Decree No.1381, published on August 24, 2018, it was incorporated in the Income Tax Act the concept of “non-cooperating” countries or territories and preferential tax regimes to which defensive measures already existing for countries and territories with low or zero taxation are imposed.

(h) In July 2018, Act No. 30823 was published, whereby the Congress delegated power to the Executive Branch to legislate on various issues, including tax and financial matters. In this sense, the main tax regulations issued are the following:

(i) Beginning on January 1, 2019, the treatment applicable to royalties and remuneration for services rendered by non-domiciled persons was modified, eliminating the obligation to pay the amount equivalent to the withholding due to the accounting record of the cost or expense. Now the Income Tax is withheld at the payment of the compensation. For said cost or expense to be deductible for the local company, the remuneration must have been paid to the filing date of the annual tax return for the Income Tax (Legislative Decree No. 1369).

(ii) The rules that regulate the obligation of legal persons and/or legal entities to inform the identification of their final beneficiaries (Legislative Decree No. 1372) were established. These rules are applicable to legal entities domiciled in the country, in accordance with the provisions of Article 7 of the Income Tax Act, and legal entities established in the country. The obligation covers non-domiciled legal entities and legal entities established abroad, provided that: a) they have a branch, agency or other permanent establishment in the country; b) the natural or juridical person who manages the autonomous patrimony or the investment funds from abroad, or the natural or legal person who has the status of trustee or administrator, is domiciled in the country; c) any of the members of a consortium is domiciled in the country. This obligation will be fulfilled through the presentation to SUNAT of an informative Sworn Statement, which must contain the information of the final beneficiary and be submitted, in accordance with the regulations and within the deadlines established by SUNAT.

(iii) The Tax Code was amended with the purpose of offering taxpayers more assurance regarding the application of the general anti-avoidance rule (Rule XVI of the Preliminary Title of the Tax Code); as well as to provide SUNAT with tools for its effective implementation (Legislative Decree No.1422).

As part of this amendment, a new assumption of joint and several liability is envisaged, when the tax debtor is subject to the application of the measures provided by Rule XVI in the event that presumed tax avoidance cases are detected; in such case, the joint and several liability shall be attributed to the legal representatives provided that they have collaborated with the design or approval or execution of actions or situations or economic relations viewed as tax avoidance in Rule XVI. In the case of companies that have a Board of Directors, it is up to this corporate body to define the tax strategy of the entity, having to decide on the approval or not of actions, situations or economic relations to be carried out within the framework of tax planning, this power being non-delegable. The actions, situations and economic relations carried out within the framework of tax planning and implemented on the date of entry into force of Legislative Decree No. 1422 (September 14, 2018) and which continue to have effect, must be evaluated by the Board of Directors of the entity for the purpose of

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

ratification or modification until March 29, 2019, without prejudice to the fact that the management or other managers of the company have approved the aforementioned actions, situations and economic relations.

Likewise, it has been established that the application of Rule XVI, regarding the re-characterization of tax avoidance assumptions, will take place in the final inspection procedures in which acts, events or situations produced since July 19, 2012.

(iv) Amendments to the Income Tax Act were included, effective as of January 1, 2019, to improve the tax treatment applicable to the following (Legislative Decree No. 1424):

  • Income obtained from the indirect transfer of shares of stock or capital representing participations of legal persons domiciled in the country. Among the most significant changes is the inclusion of a new indirect sale assumption, which is triggered when the total amount of the shares of the domiciled legal entity whose indirect disposal is made is equal to or higher than 40,000 UITs.

  • Permanent establishments of sole proprietorships, companies and entities of any nature incorporated abroad. For this purpose, new cases of permanent establishment have been included, among them, when the rendering of services in the country occurs, with respect to the same project, service or related one, for a period that exceeds 183 calendar days in total within any period of twelve months.

  • The system of credits against Income Tax for taxes paid abroad, to be included in the indirect tax credit (corporate tax paid by foreign subsidiaries) as credit applicable against the Income Tax of domiciled legal persons, to avoid double economic taxation.

  • The deduction of interest expenses for the determination of corporate Income Tax. In the years 2019 and 2020, it shall be applicable the debt limit set at up to three times the net equity as of December 31 of the previous year will be applicable, both to loans with related parties, and to loans with third parties contracted since September 14, 2018. Beginning in 2021, the limit for the deduction of financial expenses shall be equivalent to 30 percent of the entity’s tax EBITDA. There are some exceptions to this limitation, such as in the case of banks, taxpayers with income lower than 2,500 UITs, infrastructure, public services, among others.

  • Supreme Decree No. 402-2021-EF, published on December 30, 2021, and in effect since December 31, 2021, modified the Regulation of the Income Tax Act that regulates the calculation of the taxable EBITDA regarding the limit of debt interest.

(v) Regulations have been established for the accrual of income and expenses for tax purposes beginning on January 1, 2019 (Legislative Decree No. 1425). Until year 2018, there was no rule definition of this concept, so in many cases accounting rules were used for its interpretation. In general terms, with the new criterion, for the purpose of determining the Income Tax, it shall be considered whether the substantial events for the generation of income or expense agreed upon by the parties have occurred, provided they are not subject to a subsequent condition, in which case the recognition shall take place when it is fulfilled and when collection or payment is to take place will not be taken into account; and, if the determination of the consideration depends on a future action or event, the total or part of the corresponding income or expense will be deferred until that action or event occurs.

(i) Supreme Decree No. 430-2020-EF, published on December 31, 2020, approved the Regulation that establishes the financial information that companies of the financial system must provide to SUNAT in the fight against tax evasion and avoidance pursuant to Legislative Decree No. 1434. Such Regulation entered into force on January 1, 2021.

Considering that, said Regulation stablished the concepts that the financial entities must report to SUNAT, which are, among others, cumulative balances and/or amounts, averages or highest amounts and the returns generated in the accounts during the reporting period and are equal or higher than S/30,800 in said period. The information shall be provided to SUNAT semi-annually through informative declarations containing monthly information.

(j) Law No. 31106 extends until December 31, 2023, the validity of all exemptions in force to date contained in Article 19 of the Income Tax Act.

On this matter, among the extended exemptions that are applicable or related to Interbank’s operations, are the subparagraph i) of Article 19 which indicates that shall be exempted any type of fixed or variable interest rate, in local or foreign currency, that is paid for any deposit or levy pursuant to the Law Banking and Insurance, Law No. 26702, as well as the capital increases of said deposits and levies, in local or foreign currency, except when said income constitute third category income.

(k) Legislative Decree No. 1529 was published on March 3, 2022, amending the Bankarization Act in order to promote the use of payment means and reduce the minimum amount for the use of payment means, according to the following:

  • The minimum amount for the use of Payment Means is two thousand Soles (S/2,000) or five hundred American Dollars (US$500).

  • With the purpose of improving the coverage of payment methods and thus broaden the range of traceable operations, Article 3 of the Bankarization Act was amended in order to point out that payment of amounts of money in operations included in said article, for amounts equivalent or higher than 1 UIT, even when the payment is performed partially, can only be performed by using payment methods contemplated by said Act.

  • The payment of obligations to non-domiciled natural and/or legal persons that must be performed through payment methods contemplated by said Act, must be performed through either the Financial System Entities (“FSE”), or non-domiciled

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

banking or finance companies, in the cases that the subject performs foreign trade operations, including the obligations derived from the acquisition of property and rights related to the holding of shares and other transferable securities.

  • The use of payment methods is deemed complied with only if the payment is performed directly to the lender, supplier and/or service provider, or when said payment is made to a third party designated by the former, provided that such designation is informed to SUNAT prior to the Payment.

  • In no case the obligation to use payment methods pursuant to the Act is deemed complied with when the payments are performed through banking or finance companies domiciled in either non-cooperating countries or territories, with low or zero taxation, or permanent establishments (PE) in said countries or territories.

The legislation entered effect on April 1, 2022, except for the amendment referred to the payment of non-domiciled FSEs located in low or zero taxation territories, which was set to enter effect on January 1, 2023.

(l) Supreme Decree No. 137-2023-EF, published on June 29, 2023, amends Article 30 of the Regulation of the Income Tax Act, which regulates the tax rates applicable to operations with non-domiciled parties. The amendment updates the use of the SOFR rate as predominant preferential rate for the purpose of applying the reduced tax rate of 4.99 percent. Said supreme decree entered effect on June 30, 2023.

18. Off-balance sheet accounts

(a) The table below presents the components of this caption:

2023 2022
S/(000) S/(000)
Contingent credits - indirect loans (b), Note 6(a)
Guarantees and stand-by letters 4,302,772 4,001,806
Import and export letters of credit 440,708 485,541
4,743,480 4,487,347
Derivatives
Held for trading: Note 10(b)
Forward foreign currency agreements, see Note 29.2(b)(i):
Forward currency agreements – purchase 1,811,147 1,977,324
Forward currency agreements – sale 2,316,809 4,057,830
Forward foreign currency agreements in other currencies 747,736 292,906
Foreign currency options 279,047 80,151
Swap agreements, see Note 29.2(b)(ii):
Currency swaps: Foreign currency delivery / receipt in Soles 283,648 644,019
Currency swaps: Soles delivery / receipt in foreign currency 1,087,151 2,028,514
Cross currency swaps — 224,485
Interest rate swaps 1,530,493 2,424,566
Designated as hedges: Note 10(b)
Cash flows:
Cross currency swaps 2,578,515 2,579,164
10,634,546 14,308,959
Responsibilities for credit lines granted (cancellable) (c) 11,295,837 13,213,024
Responsibilities for credit lines – commercial and others (d) 2,015,304 1,545,698
Total 28,689,167 33,555,028

(b) In the normal course of its operations, the Group performs contingent operations (indirect loans). These transactions expose the Group to additional credit risks to the amounts recognized in the consolidated statement of financial position.

The Group applies the same credit policies for granting and evaluating the provisions required for direct loans when performing contingent operations (see Note 6(a)), including obtaining guarantees when deemed necessary. Guarantees vary and include deposits in financial institutions or other assets.

Taking into account that most of the contingent operations are expected to expire without the Group having to disburse cash, the total committed amounts do not necessarily represent future cash requirements.

(c) Responsibilities under credit lines agreements include consumer credit lines and other consumer loans that are cancellable by the Interbank.

(d) Corresponds to commitments of disbursement of future loans that Interbank has committed to carry out; provided that the borrower complies with the obligations under the corresponding loan agreements, however, they may be cancelled by Interbank.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

19. Interest income and expenses, and similar accounts

(a) This caption is comprised of the following:

2023 2022 2021
S/(000) S/(000) S/(000)
Interest and similar income
Interest on loan portfolio 5,353,991 4,207,420 3,274,402
Impact from the modification of contractual cash flows due to the loan rescheduling schemes (*) (29,404 ) 41,110 120,193
Interest on investments at fair value through other comprehensive income 1,208,823 1,202,788 928,660
Interest on due from banks and inter-bank funds 367,167 175,401 46,273
Interest on investments at amortized cost 172,602 161,966 130,326
Dividends on financial instruments, Note 5(e) and (f) 42,779 78,928 101,736
Others 4,453 3,689 4,035
Total 7,120,411 5,871,302 4,605,625
Interest and similar expenses
Interest and fees on deposits and obligations (1,662,139 ) (863,335 ) (334,212 )
Interest and fees on obligations with financial institutions (474,362 ) (234,842 ) (156,490 )
Interest on bonds, notes and other obligations (311,665 ) (418,821 ) (433,774 )
Deposit insurance fund fees (81,171 ) (77,920 ) (70,670 )
Interest on lease payments, Note 8(e) (5,562 ) (9,283 ) (14,004 )
Others (57,467 ) (57,488 ) (48,787 )
Total (2,592,366 ) (1,661,689 ) (1,057,937 )

(*) For rescheduled loans, Interbank recalculated the carrying amount of these financial assets as the present value of the modified contractual cash flows, discounted at the loan’s original effective interest rate. During 2023, 2022 and 2021, the interest were recorded according to the rescheduled term for approximately S/9,246,000, S/22,930,000 and S/96,627,000, respectively. Likewise, as result of the rescheduling of loans under “Reactiva Peru” program, expenses for approximately S/38,650,000, and income for approximately S/18,180,000 and S/23,566,000, respectively; were recorded.

(b) The amounts shown in literal (a) above, include interest income and expenses calculated using the effective interest rate (EIR), which are related to the following items:

2023 2022 2021
S/(000) S/(000) S/(000)
Financial assets measured at amortized cost 5,864,356 4,585,897 3,571,194
Financial assets measured at fair value through other comprehensive income 1,208,823 1,202,788 928,660
Total interest from financial assets calculated at EIR 7,073,179 5,788,685 4,499,854
Financial liabilities measured at amortized cost 2,453,728 1,526,281 938,480

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

20. Fee income from financial services, net

(a) For the years ended December 31, 2023, 2022 and 2021, this caption is comprised of the following:

2023 2022 2021
S/(000) S/(000) S/(000)
Income
Performance obligations at a point in time:
Accounts maintenance, carriage, transfers, and debit and credit card fees 747,568 705,188 562,542
Income from services (acquirer and issuer role) (b) 738,177 523,313 —
Banking service fees 208,420 248,175 249,843
Brokerage and custody services (c) 5,811 5,836 8,457
Others 36,393 34,438 —
Performance obligations over time:
Funds management 137,137 153,948 184,703
Contingent loans fees 68,355 70,038 64,964
Collection services 60,648 60,931 52,955
Commission for loans rescheduling “Reactiva Peru” program 9,343 16,909 23,722
Others 19,414 23,259 37,293
Total (d) 2,031,266 1,842,035 1,184,479
Expenses
Expenses for services (acquirer and issuer role) (b) (339,846 ) (238,997 ) —
Credit cards (199,464 ) (164,722 ) (128,580 )
Commissions Mastercard - Visa (85,741 ) (56,845 ) —
Credit life insurance premiums (71,796 ) (97,378 ) (102,844 )
Local banks fees (58,956 ) (50,192 ) (36,836 )
Foreign banks fees (26,285 ) (24,920 ) (31,767 )
Commission for loans rescheduling “Reactiva Peru” program (12,930 ) (22,373 ) (26,215 )
Registry expenses (1,466 ) (2,046 ) (3,009 )
Brokerage and custody services (c) (675 ) (961 ) (824 )
Others (55,645 ) (46,215 ) (30,596 )
Total (852,804 ) (704,649 ) (360,671 )
Net 1,178,462 1,137,386 823,808

(b) Corresponds to the management and operation of the shared service of transaction processing of credit and debit cards, for clients of Izipay since April 2022, month in which Izipay becomes a Subsidiary of IFS.

(c) As of December 31, 2023, 2022 and 2021, the Group has recognized net income for transactions carried out on behalf of its clients amounting to S/5,136,000, S/4,875,000 and S/7,633,000, respectively.

(d) Fee income by geographic distribution for the years ended December 31, 2023, 2022 and 2021 is presented below:

2023 2022 2021
S/(000) S/(000) S/(000)
Country
Peru 1,931,303 1,720,865 1,046,471
Panama 99,963 121,170 138,008
Total 2,031,266 1,842,035 1,184,479

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

21. Other income and (expenses)

(a) This caption is comprised of the following:

2023 2022 2021
S/(000) S/(000) S/(000)
Other income
Maintenance, installation and sale of POS equipment 28,743 22,000 —
Gain from sale of written-off-loans (c) 18,770 19,177 11,848
Profit from sale of property, furniture and equipment, Note 8(d) 15,300 11,780 —
Other technical income from insurance operations 10,163 6,489 8,115
Services rendered to third parties 7,512 7,611 6,836
Income from ATM rentals 5,365 6,459 4,944
Gain from refunds and penalties — 18,783 —
Income from investments in associates (b) — 18,692 33,378
Fair value adjustment of the participation held by Interbank in Izipay, Note 1(d) — 222,513 —
Others 70,847 66,677 24,377
Total other income 156,700 400,181 89,498
Other expenses
Commissions from insurance activities (42,400 ) (90,168 ) (37,920 )
Administrative and tax penalties (20,198 ) (7,317 ) (2,672 )
Provision for accounts receivable (13,847 ) (5,684 ) (1,123 )
Cost of sale of POS equipment (12,819 ) (27,366 ) —
Sundry technical insurance expenses (10,066 ) (11,048 ) (65,757 )
Expenses related to rental income (5,814 ) (7,521 ) (4,026 )
Donations (4,529 ) (4,712 ) (4,991 )
Provision for sundry risk (4,138 ) (12,661 ) (14,872 )
Write-off of intangibles, Note 9(a) (3,455 ) (6,266 ) (10,371 )
Others (*) (67,726 ) (67,901 ) (68,460 )
Total other expenses (184,992 ) (240,644 ) (210,192 )

(*) During the year 2023 and 2022, corresponds mainly to expenses for operational write-offs and technological failures, among other minor expenses. During 2021, correspond mainly to non-recurring expenses derived from the Covid-19 pandemic (implementation of safety protocols and remote working, among others).

(b) As of December 31, 2022, includes S/5,033,000 corresponding to the participation that Interbank held in Izipay until the date of its acquisition, see Note 1(d).

(c) During the years 2023, 2022 and 2021, Interbank sold written-off loan portfolios, in cash and to non-related third parties. The nominal value of the credits sold amounted to S/1,300,296,000, S/973,966,000 and S/501,540,000, respectively.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

22. Result from insurance activities, before expenses

(a) This caption is comprised of the following:

2023 2022
Massive Pensions Life Total Massive Pensions Life Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Insurance service income -
Contracts measured under BBA and VFA (*):
CSM recognized for services rendered 49,191 3,609 27,978 80,778 43,496 1,945 25,320 70,761
Change in Risk adjustment for non-financial risk 1,476 255 (1,850 ) (119 ) 1,562 (828 ) 2,014 2,748
Insurance service expenses and expected claims incurred 69,145 273,396 62,348 404,889 76,567 266,433 42,398 385,398
Recovery of cash for insurance acquisition 3,489 273 6,613 10,375 1,159 121 2,078 3,358
Contracts measured under PAA:
Premiums assigned to the period 220,616 — 4,097 224,713 208,446 — 6,464 214,910
343,917 277,533 99,186 720,636 331,230 267,671 78,274 677,175
Insurance service expenses -
Claims incurred expenses and other expenses (108,805 ) (798,733 ) (114,753 ) (1,022,291 ) (118,621 ) (813,703 ) (92,950 ) (1,025,274 )
Onerous contract losses and loss reversion 38,101 (37,190 ) 11,636 12,547 5,872 (174,608 ) 5,854 (162,882 )
Amortization of insurance acquisition cash flows (120,123 ) (273 ) (6,613 ) (127,009 ) (116,088 ) (121 ) (2,078 ) (118,287 )
Changes to liabilities for incurred claims (58,030 ) 477,027 64,182 483,179 11,757 521,781 49,033 582,571
(248,857 ) (359,169 ) (45,548 ) (653,574 ) (217,080 ) (466,651 ) (40,141 ) (723,872 )
Insurance service results 95,060 (81,636 ) 53,638 67,062 114,150 (198,980 ) 38,133 (46,697 )
Reinsurance income — — — (6,889 ) — — — (16,417 )
Financial result of insurance operations (b) — (542,361 ) (30,806 ) (573,167 ) — (522,725 ) 19,338 (503,387 )
Result from insurance activities (**) 95,060 (623,997 ) 22,832 (512,994 ) 114,150 (721,705 ) 57,471 (566,501 )

(*) BBA Method (Building Block Approach) and VFA Method (Variable Fee Approach).

(**) Before expenses attributed to the insurance activity that are presented in the caption “Other expenses” in the consolidated statement of income, and that correspond to salaries and employee benefits, administrative expenses, depreciation and amortization, and other expenses for S/334,602,000 and S/313,647,000 as of December 31, 2023 and 2022, respectively. See also financial information by segments in Note 27.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(b) The composition of the financial result of insurance operations, is as follows:

2023 2022
Pensions Life Total Pensions Life Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Financial expenses for issued insurance contracts -
Changes in the obligation to pay the fair value holder of the underlying assets of direct participation agreements due to the investment’s return — (10,499 ) (10,499 ) — 27,284 27,284
Interest credited (541,468 ) (23,088 ) (564,556 ) (523,539 ) (9,526 ) (533,065 )
Changes in interest rate and other financial hypotheses (433 ) 3,257 2,824 754 1,728,374 1,729,128
Effect of changes in current estimates and in CSM adjustment rates in relation to the rates used in the initial recognition 4 (621 ) (617 ) (16 ) (1,729,032 ) (1,729,048 )
(541,897 ) (30,951 ) (572,848 ) (522,801 ) 17,100 (505,701 )
Financial income from insurance contracts -
Interest credited (388 ) (1,086 ) (1,474 ) 76 72 148
Effect of changes in interest rates and other financial hypotheses (76 ) 1,130 1,054 — (1,451 ) (1,451 )
Exchange differences — — — — — —
Effect of changes in current estimates and in CSM adjustment rates in relation to the rates used in the initial recognition — 101 101 — 3,617 3,617
(464 ) 145 (319 ) 76 2,238 2,314
Result from insurance activities (542,361 ) (30,806 ) (573,167 ) (522,725 ) 19,338 (503,387 )

(c) The composition of net premiums net for the period 2021, according to IFRS 4, is as follows:

Premiums assumed Adjustment of technical reserves Gross premiums (*) Premiums ceded to reinsurers Net premiums earned
S/(000) S/(000) S/(000) S/(000) S/(000)
Life insurance
Annuities (**) 614,899 (291,076 ) 323,823 — 323,823
Group life 136,743 (2,189 ) 134,554 (4,779 ) 129,775
Individual life 182,032 (76,339 ) 105,693 (5,494 ) 100,199
Retirement (disability and survival) (***) 8,418 (9,661 ) (1,243 ) (534 ) (1,777 )
Others 2 (13,595 ) (13,593 ) — (13,593 )
Total life insurance 942,094 (392,860 ) 549,234 (10,807 ) 538,427
Total general insurance 109,303 (2,405 ) 106,898 (58 ) 106,840
Total general 1,051,397 (395,265 ) 656,132 (10,865 ) 645,267

(*) It includes the annual variation of technical reserves and unearned premiums.

(**) The variation of the adjustment of technical reserves is due mainly to aging over time.

(***) In April 2016, the Congress of the Republic of Peru approved the amendment of the Private Pension System Act, through which the affiliates of the Pension Fund Administrators (AFPs) who turn 65 and retire, can choose, among other existing retirement modalities, the return of 95.5 percent of the total fund available from their Individual Capitalization Account (“CIC”, by its Spanish acronym). During 2017, to offset the contraction of retirement income because of the aforementioned amendment to the SPP Act, Interseguro launched the products “Renta Particular Plus” and “Renta Particular Plus – Vitalicio”. During year 2021, premiums collected for “Renta Particular Plus – Vitalicio” amounted to S/57,479,000 and for “Renta Particular Plus” amounted to S/219,347,000. In 2021, retirement premiums amounted to S/3,713,000.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(d) The composition of net claims and benefits incurred for life insurance contracts and others, according to IFRS 4, is as follows:

Gross claims and benefits Ceded claims and benefits Net insurance claims and benefits
S/(000) S/(000) S/(000)
Life insurance
Annuities (687,208 ) — (687,208 )
Group life (124,308 ) 11,222 (113,086 )
Individual life (37,049 ) 8,789 (28,260 )
Retirement (disability and survival) (53,089 ) 6,505 (46,584 )
Others (14,539 ) 11 (14,528 )
General insurance (27,691 ) 11 (27,680 )
(943,884 ) 26,538 (917,346 )

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

  1. Salaries and employee benefits

This caption is comprised of the following:

2023 2022 2021
S/(000) S/(000) S/(000)
Salaries 655,665 589,773 567,938
Vacations, health insurance and others 87,996 81,581 74,924
Social security 66,331 62,637 60,802
Severance indemnities 49,265 44,447 44,277
Workers’ profit sharing 38,018 92,042 59,441
Total 897,275 870,480 807,382

The average number of employees for the years 2023, 2022 and 2021 was 8,333, 8,076 and 7,378 respectively.

  1. Administrative expenses

(a) This caption is comprised of the following:

2023 2022 2021
S/(000) S/(000) S/(000)
Services received from third parties (b) 1,202,017 1,104,822 909,212
Taxes and contributions 77,202 64,008 44,452
Rental expenses (c) and Note 8(e) 9,643 10,958 11,841
Total 1,288,862 1,179,788 965,505

(b) Services received from third parties correspond mainly to computer equipment repair and maintenance services, credit cards associated expenses, securities transportation services, agency rentals, advertising and public relations, customer loyalty programs, marketing on digital media, telecommunications, professional fees, among others.

(c) During the years 2023, 2022 and 2021 corresponds to disbursements made for short-term leases and low value assets, see Note 3.4(k).

25. Earnings per share

The following table presents the calculation of the weighted average number of shares and the basic and diluted earnings per share, determined and calculated based on the earnings attributable to the Group, as described in Note 3.4(ad):

Outstanding<br>shares Shares<br>considered in<br>computation Effective<br>days in<br>the year Weighted average number of shares
(in thousands) (in thousands) (in thousands)
Year 2021
Balance as of January 1, 2021 115,423 115,423 365 115,423
Sale of treasury stock 1 1 267 1
Purchase of treasury stock (6 ) (6 ) 274 (5 )
Balance as of December 31, 2021 115,418 115,418 115,419
Net earnings attributable to IFS’s shareholders S/(000) 1,790,155
Basic and diluted earnings per share attributable to IFS’s shareholders (Soles) 15.510
Year 2022
Balance as of January 1, 2022 115,418 115,418 365 115,418
Balance as of December 31, 2022 115,418 115,418 115,418
Net earnings attributable to IFS’s shareholders S/(000) 1,668,026
Basic and diluted earnings per share attributable to IFS’s shareholders (Soles) 14.452
Year 2023
Balance as of January 1, 2023 115,418 115,418 365 115,418
Sale of treasury stock 1 1 277 1
Purchase of treasury stock (939 ) (939 ) 158 (407 )
Balance as of December 31, 2023 114,480 114,480 115,012
Net earnings attributable to IFS’s shareholders S/(000) 1,072,728
Basic and diluted earnings per share attributable to IFS’s shareholders (Soles) 9.327

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

26. Transactions with related parties and affiliated entities

(a) The table below presents the main transactions with related parties and affiliated entities as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022 and 2021:

2023 2022
S/(000) S/(000)
Assets
Instruments at fair value through profit or loss 1,165 99
Investments at fair value through other comprehensive income 64,229 58,378
Loans, net (b) 1,686,288 1,317,453
Accounts receivable 87,902 117,273
Other assets 21,260 32,043
Liabilities
Deposits and obligations 1,066,505 1,040,975
Other liabilities 6,522 3,215
Off-balance sheet accounts
Indirect loans (b) 76,652 89,707
2023 2022 2021
--- --- --- --- --- --- --- --- --- ---
S/(000) S/(000) S/(000)
Income (expenses)
Interest and similar income 95,604 72,334 68,166
Rental income 25,532 31,428 30,873
Valuation of financial derivative instruments 106 149 180
Interest and similar expenses (39,749 ) (16,821 ) (3,065 )
Administrative expenses (38,711 ) (33,758 ) (44,249 )
Others, net 60,312 51,241 31,392

(b) As of December 31, 2023 and 2022, the detail of loans is the following:

2023 2022
Direct Loans Indirect Loans Total Direct Loans Indirect Loans Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Affiliated 1,389,463 3,557 1,393,020 1,108,276 18,832 1,127,108
Associates 296,825 73,095 369,920 209,177 70,875 280,052
1,686,288 76,652 1,762,940 1,317,453 89,707 1,407,160

(c) As of December 31, 2023 and 2022, the directors, executives and employees of the Group have been involved in credit transactions with certain subsidiaries of the Group, between the permitted limits by Peruvian law for financial entities. As of December 31, 2023 and 2022, direct loans to employees, directors and executives amounted to S/209,671,000 and S/211,715,000, 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, 2023, 2022 and 2021, is presented below:

2023 2022 2021
S/(000) S/(000) S/(000)
Salaries 28,325 26,964 24,768
Board of Directors’ compensations 3,151 3,923 2,861
Total 31,476 30,887 27,629

(e) As of December 2023, the Group holds participation in different mutual funds that are managed by Interfondos, which are classified as investments at fair value through profit or loss and amount to S/7,358,000.

(f) In Management’s opinion, transactions with related companies have been performed under market conditions and within the limits permitted by the SBS.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

27. Business segments

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

Banking -

Mainly loans, credit facilities, deposits and current accounts.

Insurance -

It provides life annuity products with single-premium payment 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.

Payments –

It provides mainly administration services, operation and processing of credit and debit cards. Taking into account that Izipay became a subsidiary of IFS since April 2022, the results shown for this segment are considered thereafter.

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 consolidated financial statements.

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

No revenue from transactions with a single external customer or counterparty exceeded 10 percent of the Group’s total revenues in the years 2023, 2022 and 2021.

The following table presents the Group’s financial information by business segments for the years ended December 31, 2023, 2022 and 2021:

2023
Banking Insurance Wealth<br>management Payments Holding and<br>consolidation<br>adjustments Total<br>consolidated
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Total income (*)
Third party 7,812,858 1,695,222 291,408 829,766 (199,126 ) 10,430,128
Inter-segment (126,620 ) (4,975 ) (1,386 ) (13,862 ) 146,843 —
Total income 7,686,238 1,690,247 290,022 815,904 (52,283 ) 10,430,128
Consolidated statement of income data
Interest and similar income 6,076,020 851,648 183,926 9,255 (438 ) 7,120,411
Interest and similar expenses (2,363,800 ) (126,704 ) (98,370 ) (4,907 ) 1,415 (2,592,366 )
Net interest and similar income 3,712,220 724,944 85,556 4,348 977 4,528,045
(Loss) recovery to impairment of loans (1,981,988 ) — 170 — — (1,981,818 )
(Loss) recovery due to impairment of financial investments 15 (7,858 ) 347 — (4 ) (7,500 )
Net interest and similar income after impairment loss on loans 1,730,247 717,086 86,073 4,348 973 2,538,727
Fee income from financial services, net 813,279 (13,431 ) 146,223 345,583 (113,192 ) 1,178,462
Net (loss) gain on sale of financial investments (660 ) 9,948 (2,857 ) — — 6,431
Other income (expenses) 495,500 112,990 (37,332 ) 45,942 (65,716 ) 551,384
Result from insurance activities, before expenses — (178,379 ) — — (13 ) (178,392 )
Depreciation and amortization (271,526 ) (21,658 ) (15,018 ) (55,144 ) (15,692 ) (379,038 )
Other expenses (1,678,356 ) (352,933 ) (138,589 ) (277,578 ) 76,327 (2,371,129 )
Income (loss) before translation result and Income Tax 1,088,484 273,623 38,500 63,151 (117,313 ) 1,346,445
Exchange difference (15,969 ) 18,430 761 (2,347 ) 7,552 8,427
Income Tax (216,366 ) — (3,081 ) (27,735 ) (28,414 ) (275,596 )
Net profit (loss) for the year 856,149 292,053 36,180 33,069 (138,175 ) 1,079,276
Attributable to:
IFS’s shareholders 856,149 292,053 36,180 33,069 (144,723 ) 1,072,728
Non-controlling interest — — — — 6,548 6,548
856,149 292,053 36,180 33,069 (138,175 ) 1,079,276

(*) Corresponds to interest income, net profit on the sale of financial investments, other income, income from commissions for banking services and income from insurance services.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

2022
Banking (**) Insurance Wealth<br>management Payments (***) Holding and<br>consolidation<br>adjustments Total<br>consolidated
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Total income (*)
Third party 6,459,232 1,663,992 75,706 595,360 138,647 8,932,937
Inter-segment (125,848 ) (3,288 ) (1,668 ) (12,548 ) 143,352 —
Total income 6,333,384 1,660,704 74,038 582,812 281,999 8,932,937
Consolidated statement of income data
Interest and similar income 4,774,378 940,894 155,116 1,569 (655 ) 5,871,302
Interest and similar expenses (1,476,942 ) (130,049 ) (50,306 ) (1,269 ) (3,123 ) (1,661,689 )
Net interest and similar income 3,297,436 810,845 104,810 300 (3,778 ) 4,209,613
(Loss) recovery to impairment of loans (832,919 ) — 2,368 — — (830,551 )
Loss due to impairment of financial investments (732 ) (26 ) (11,981 ) — (13 ) (12,752 )
Net interest and similar income after impairment loss on loans 2,463,785 810,819 95,197 300 (3,791 ) 3,366,310
Fee income from financial services, net 797,711 (7,160 ) 163,325 258,728 (75,218 ) 1,137,386
Net loss on sale of financial investments (2,891 ) (1,613 ) (9,781 ) — — (14,285 )
Other income 478,308 47,536 (234,702 ) 36,040 229,528 556,710
Result from insurance activities, before expenses — (252,854 ) — — — (252,854 )
Depreciation and amortization (257,210 ) (23,682 ) (15,044 ) (30,185 ) (10,105 ) (336,226 )
Other expenses (1,673,581 ) (318,528 ) (130,453 ) (202,565 ) 34,215 (2,290,912 )
Income (loss) before translation result and Income Tax 1,806,122 254,518 (131,458 ) 62,318 174,629 2,166,129
Exchange difference (22,800 ) 950 (7,146 ) 2,316 1,202 (25,478 )
Income Tax (409,201 ) — (2,791 ) (23,560 ) (26,985 ) (462,537 )
Net profit (loss) for the year 1,374,121 255,468 (141,395 ) 41,074 148,846 1,678,114
Attributable to:
IFS’s shareholders 1,374,121 255,468 (141,395 ) 41,074 138,758 1,668,026
Non-controlling interest — — — — 10,088 10,088
1,374,121 255,468 (141,395 ) 41,074 148,846 1,678,114

(*) Corresponds to interest income, net profit on the sale of financial investments, other income, income from commissions for banking services and income from insurance services.

(**) Includes 50 percent of Interbank’s participation in Izipay until March 2022, date on which Izipay becomes a subsidiary of the Group, see Note 1(d).

(***) As of December 31, 2022, the payments segment corresponds to the profit generated by Izipay during the nine-month period ended December 31, 2022.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

2021
Banking (**) Insurance Wealth<br>management Holding and<br>consolidation<br>adjustments Total<br>consolidated
S/(000) S/(000) S/(000) S/(000) S/(000)
Total income (*)
Third party 4,866,775 1,676,185 487,339 (49,914 ) 6,980,385
Inter-segment (99,094 ) (383 ) (3,402 ) 102,879 —
Total income 4,767,681 1,675,802 483,937 52,965 6,980,385
Consolidated statement of income data
Interest and similar income 3,636,810 802,961 154,328 11,526 4,605,625
Interest and similar expenses (893,060 ) (117,531 ) (39,840 ) (7,506 ) (1,057,937 )
Net interest and similar income 2,743,750 685,430 114,488 4,020 3,547,688
Impairment loss on loans (379,034 ) — (2,543 ) — (381,577 )
(Loss) recovery due to impairment of financial investments (527 ) 33,198 (1,615 ) (158 ) 30,898
Net interest and similar income after impairment loss on loans 2,364,189 718,628 110,330 3,862 3,197,009
Fee income from financial services, net 677,461 (6,802 ) 196,959 (43,810 ) 823,808
Net gain on sale of financial investments 99,938 146,797 3,623 268 250,626
Other income 452,566 87,919 132,429 (17,898 ) 655,016
Total net premiums earned minus claims and benefits — (272,037 ) — (42 ) (272,079 )
Depreciation and amortization (245,432 ) (25,035 ) (14,977 ) 5,754 (279,690 )
Other expenses (1,542,487 ) (325,242 ) (128,444 ) 13,094 (1,983,079 )
Income (loss) before translation result and Income Tax 1,806,235 324,228 299,920 (38,772 ) 2,391,611
Exchange difference 7,241 (51,493 ) (7,570 ) (37,498 ) (89,320 )
Income Tax (453,198 ) — (8,805 ) (40,109 ) (502,112 )
Net profit (loss) for the year 1,360,278 272,735 283,545 (116,379 ) 1,800,179
Attributable to:
IFS’s shareholders 1,360,278 272,735 283,545 (126,403 ) 1,790,155
Non-controlling interest — — — 10,024 10,024
1,360,278 272,735 283,545 (116,379 ) 1,800,179

(*) Corresponds to interest income, net profit on the sale of financial investments, other income, income from commissions for banking services and income from insurance services.

(**) Includes 50 percent of Interbank’s profit from Izipay, which were recorded in the caption “Other income”.

2023
Banking Insurance Wealth<br>management Payments Holding and consolidation adjustments Total<br>consolidated
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Capital investments (*) 327,513 21,184 6,430 89,646 163 444,936
Total assets 68,437,614 15,225,254 4,374,266 1,196,049 391,596 89,624,779
Total liabilities 60,380,895 14,787,105 3,453,408 946,660 48,610 79,616,678
2022
--- --- --- --- --- --- --- --- --- --- --- --- --- ---
Banking Insurance Wealth<br>management Payments Holding and<br>consolidation<br>adjustments Total<br>consolidated
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Capital investments (*) 258,887 41,599 3,443 92,133 1,004 397,066
Total assets 66,977,277 14,133,681 5,102,598 902,610 365,923 87,482,089
Total liabilities 59,498,433 13,769,222 4,208,369 686,292 (106,454 ) 78,055,862

(*) It includes the purchase of property, furniture and equipment, intangible assets and investment properties.

The distribution of the Group’s total income based on the location of the customer and its assets, for the year ended December 31, 2023, is S/10,185,755,000 in Peru and S/244,373,000 in Panama (for the year ended December 31, 2022, was S/8,905,940,000 in Peru and S/26,997,000 in Panama). The distribution of the Group’s total assets based on the location of the customer and its assets as of December 31, 2023 is S/85,387,995,000 in Peru and S/4,236,784,000 in Panama (for the year ended December 31, 2022, was S/82,507,472,000 in Peru and S/4,974,617,000 in Panama).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

28. Financial instruments classification

The financial assets and liabilities of the consolidated statement of financial position as of December 31, 2023 and 2022, are presented below.

As of December 31, 2023
At fair value<br>through<br>profit or loss Debt<br>instruments<br>measured<br>at fair value<br>through other<br>comprehensive<br>income Equity<br>instruments<br>measured<br>at fair value<br>through<br>other<br>comprehensive<br>income Amortized<br>cost Total
S/(000) S/(000) S/(000) S/(000) S/(000)
Financial assets
Cash and due from banks — — — 9,818,711 9,818,711
Inter-bank funds — — — 524,915 524,915
Financial investments 1,556,540 21,246,569 444,878 3,474,004 26,721,991
Loans, net — — — 46,520,382 46,520,382
Due from customers on acceptances — — — 40,565 40,565
Other accounts receivable and other assets, net 158,101 — — 1,246,480 1,404,581
Reinsurance contacts assets — — — 26,287 26,287
1,714,641 21,246,569 444,878 61,651,344 85,057,432
Financial liabilities
Deposits and obligations — — — 49,188,234 49,188,234
Inter-bank funds — — — 119,712 119,712
Due to banks and correspondents — — — 9,025,930 9,025,930
Bonds, notes and other obligations — — — 5,551,629 5,551,629
Due from customers on acceptances — — — 40,565 40,565
Insurance and reinsurance contract liabilities — — — 12,207,536 12,207,536
Other accounts payable, provisions and other liabilities 145,395 — — 3,056,196 3,201,591
145,395 — — 79,189,802 79,335,197
As of December 31, 2022
--- --- --- --- --- --- --- --- --- --- ---
At fair value<br>through profit<br>or loss Debt<br>instruments<br>measured at<br>fair value<br>through<br>other<br>comprehensive<br>income Equity<br>instruments<br>measured at<br>fair value<br>through<br>other<br>comprehensive<br>income Amortized<br>cost Total
S/(000) S/(000) S/(000) S/(000) S/(000)
Financial assets
Cash and due from banks — — — 13,193,411 13,193,411
Inter-bank funds — — — 296,119 296,119
Financial investments 1,932,993 17,038,942 512,884 3,302,779 22,787,598
Loans, net — — — 45,502,998 45,502,998
Due from customers on acceptances — — — 45,809 45,809
Other accounts receivable and other assets, net 515,800 — — 919,767 1,435,567
Reinsurance contacts assets — — — 34,053 34,053
2,448,793 17,038,942 512,884 63,294,936 83,295,555
Financial liabilities
Deposits and obligations — — — 48,530,708 48,530,708
Inter-bank funds — — — 30,012 30,012
Due to banks and correspondents — — — 7,100,646 7,100,646
Bonds, notes and other obligations — — — 7,906,303 7,906,303
Due from customers on acceptances — — — 45,809 45,809
Insurance and reinsurance contract liabilities — — — 11,231,321 11,231,321
Other accounts payable, provisions and other liabilities 297,038 — — 2,533,292 2,830,330
297,038 — — 77,378,091 77,675,129

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

29. 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.

 Credit risk: possibility of loss due to inability or lack to pay of debtors, counterparts or third parties bound to comply with their contractual obligations.

 Market risk: probability of loss in positions on and off the consolidated statement of financial position derived from variations in market conditions; it generally includes the following types of risk: exchange rate; fair value by interest rate, price, among others.

 Liquidity risk: possibility of loss due to noncompliance with the requirements of financing and fund application that arise from mismatches of cash flows.

 Insurance risk: possibility that the actual cost of claims and payments will differ from the estimates.

 Real estate risk: possibility of significant loss in rental income due to the insolvency of the lessee or, a decrease in the market value of real estate investments.

To manage the risks detailed above, every Subsidiary of the Group has a specialized structure and organization in their management, measurement systems, as well as mitigation and coverage processes, according to specific regulatory needs and requirements for the development of its business. The Group and its Subsidiaries, mainly Interbank, Interseguro, Inteligo Bank and Izipay, operate independently but in coordination with the general provisions issued by the Board of Directors and Management of IFS. The Board of Directors and Management of IFS are ultimately responsible for identifying and controlling risks. The Company has an Audit Committee comprised of three independent directors, pursuant to Rule 10A-3 of the Securities Exchange Act of the United States; and one of them is a financial expert according to the regulations of the New York Stock Exchange. The Audit Committee is appointed by the Board of Directors and its main purpose is to monitor and supervise the preparation processes of financial and accounting information, as well as the audits over the financial statements of IFS and its Subsidiaries.

Also, the Audit Committee is responsible of assisting the Board of Directors in the monitoring and supervising, thus helping to ensure:

 The quality and comprehensiveness of IFS’s financial statements, including its disclosures.

 The existence of adequate procedures to assess, objectively and periodically, the effectiveness of the internal control system over the financial report.

 The compliance of the legal and regulatory framework.

 The qualification and independence of external auditors.

 The performance of external auditors.

 The implementation by Management of an adequate internal control system, in particular the internal control system over the financial report.

The Company has an Internal Audit Division which is responsible for monitoring the key processes and controls to ensure an adequate low risk control according to the standards defined in the Sarbanes Oxley Act.

Management is responsible of the preparation, presentation and comprehensiveness of the Group’s consolidated financial statements, the suitability of the principles and accounting policies it uses, the establishment and upkeeping of the internal control over the financial information, as well as the facilitation of communications among external auditors, IFS’s managers, Audit Committee and the Board of Directors.

(a) Structure and organization of risk management -

The Group’s risk management structure and organization for each of its Subsidiaries is as follows:

(i) Interbank -

Board of Directors

Interbank’s Board of Directors is responsible for establishing an appropriate and integral risk management and promoting an internal environment that facilitates its development. The Board is continuously informed about the exposure degree of the various risks managed by Interbank.

The Board has created several specialized committees to which it has delegated specific tasks to strengthen risk management and internal control.

Audit Committee

The Audit Committee’s main purpose is to monitor that the accounting financial reporting processes are appropriate, as well as to evaluate the activities performed by the auditors, both internal and external. The Committee is comprised of three members of the Board and the Chief Executive Officer, the Internal Auditor, the Vice-President of Corporate and Legal Affairs and other executives may also participate therein, when required. The Committee meets at least six times a year in ordinary sessions and informs the Board about the most relevant issues discussed.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Comprehensive Risk Management Committee

The Comprehensive Risk Management Committee (“GIR”, by its Spanish acronym) is responsible for approving the policies and organization for comprehensive risk management, as well as the amendments to said policies. This Committee defines the level of tolerance and the exposure degree to risk that Interbank is willing to assume in its business and also decides on the necessary actions aimed at implementing the required corrective measures in case of deviations from the levels of tolerance to risk. The Committee is comprised of two Directors, the Chief Executive Officer and the Vice-Presidents. The Committee reports monthly to the Board of Directors the main issues it has discussed and the resolutions taken in the previous meeting.

Assets and Liabilities Committee

The main purpose of the Assets and Liabilities Committee (“ALCO”) is to manage the financial structure of the statement of financial position of Interbank, based on profitability and risk targets. The ALCO is also responsible for the proposal of new products or operations that contain components of market risk. Likewise, it is the communication channel with the units that generate market risk. The ALCO meets monthly and it is comprised of the Chief Executive Officer, the Vice-Presidents of Risks, Commercial, Finance, Operations, Distribution Channels, Capital Market and the Manager of Treasury / Position Desk.

Internal Audit Division -

Risk management processes of Interbank are monitored by the Internal Audit Division, which examines both the adequacy of the procedures and the compliance with them. The Internal Audit Division discusses the results of all assessments with Management and reports its findings and recommendations to the Audit Committee and Board of Directors.

(ii) Interseguro -

Board of Directors

The Board of Directors is responsible for the overall approach to risk management and it is responsible for the approval of the policies and strategies currently used. The Board of Directors provides the principles for overall risk management, as well as the policies prepared for specific areas, such as foreign exchange risk, interest rate risk, credit risk and the use of derivative and non-derivative financial instruments.

Audit Committee

The main purpose of the Audit Committee is to monitor that the accounting and financial reporting process are appropriate, as well as to assess the activities performed by External and Internal Auditors. The Audit Committee is comprised of three Board members who do not fulfil any executive position within Interseguro, being at least one of them an Independent Director, who leads the Committee and cannot lead any other Committee within Interseguro. The Committee sessions can be attended by the Chief Executive Officer, the Audit Manager, the External Auditors and other executives when required. The Committee meets at least six times a year in ordinary sessions and informs the Board on the most relevant issues it has addressed.

Risk Committee

The Risk Committee is a corporate body created by the Board. It is responsible of defining the business risk limits of Interseguro through the approval of risk policies and the corrective measures needed to maintain adequate levels of risk tolerance. The Risk Committee is comprised of four Board members, the Risk Manager and the Chief Executive Officer.

Investment Committee

The Investment Committee is responsible of approving the limits of each security or real estate that may be included in Interseguro’s investment portfolio. This Committee is comprised of several Board Members, the Chief Executive Officer and the Vice-President of Investments.

Internal Audit Division

Risk management processes throughout Interseguro are monitored by the Internal Audit Division, which reviews and assesses the design, scope and functioning of the internal control system and verifies the compliance of the legal requirements, policies, standards and procedures. The Internal Audit Division discusses the results of all assessments with Management and reports its findings and recommendations to the Audit Committee and Board of Directors.

(iii) Inteligo Bank -

Inteligo Bank’s Board of Directors is responsible for the establishment and monitoring of the risk administration policies. To manage and monitor the various risks Inteligo Bank is exposed to, the Board of Directors has created the Credit and Investment Committee, the Assets and Liabilities Committee, the Credit Risk Committee and the Audit Committee.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(iv) Izipay -

The Board of Izipay is responsible for the approval of risk management policies. Likewise, in order to monitor the risks to which Izipay is exposed, the Board has created the Risks and Compliance Committee and the Audit Committee.

The Group, through its different risk management bodies, has been monitoring and implementing in its Subsidiaries, diverse measures to address and counter the negative effects caused by the political and social context in the country and the pandemic, which began in March 2020.

(b) Risk measurement and reporting systems -

The Group uses different models and rating tools. These tools measure and value the risk with a prospective vision, thus allowing the making of better risk decisions in the different stages or life cycle of client or product.

Said models and tools are permanently monitored and periodically validated to assure that the levels of prediction and performance are being maintained and to make the corrective actions or adjustments, when needed.

(c) Risk mitigation and risk coverage -

To mitigate its exposure to the various financial risks and provide adequate coverage, the Group has established a series of measures, among which the following stand out:

 Policies, procedures, methodologies, models and parameters aimed to allow for the identification, measurement, control and reporting of diverse financial risks;

 Review and assessment of diverse financial risks, through specialized units of risk screening;

 Timely monitoring and tracking of diverse financial risks and their maintenance within a defined tolerance level;

 Compliance with regulatory limits and establishment of internal limits for exposure concentration; and

 Procedures for guarantees managing.

Likewise, as part of its comprehensive risk management, in certain circumstances the Group uses derivative financial instruments to mitigate its risk exposure, which arises from the variations in interest rates and foreign exchange rates.

(d) Risk concentration -

Through its policies and procedures, the Group has established the guidelines and mechanisms needed to prevent excessive risk concentration. In case any concentration risk is identified, the Group works with specialized units that enable it to control and manage said risks.

29.1. Credit risk

(a) The Group opts for a credit risk policy that ensures sustained and profitable growth in all its products and business segments it operates. In doing so, it applies assessment procedures for the adequate decision-making, and uses tools and methodologies that allow the identification, measurement, mitigation and control of the different risks in the most efficient manner. Likewise, the Group incorporates, develops and reviews regularly management models that allow an adequate measurement, quantification and monitoring of the loans granted by each business unit and also encouraging the continuous improvement of its policies, tools, methodologies and processes. Additionally, as consequence of the political, economic and social context that arose during 2022 and 2021, see Note 1(b), and the high uncertainty of the intensity of the El Niño event in 2023, the behavior and performance of the expected credit losses of the retail and commercial clients has been affected, thus requiring a greater monitoring of results, which has also implied to perform certain subsequent adjustments to the expected loss model to be able to capture the effects of the current situation, which has generated a high level of uncertainty in the estimation of the loans expected loss.

In compliance with the policy of monitoring the Group’s credit risk, during 2023, 2002 and 2021 Interbank performed the recalibration process of its risk parameters for the calculation of the expected credit losses.

(b) The Group is exposed to credit risk, which is the risk that a counterparty causes a financial loss by failing to comply with an obligation. Credit risk is the most important risk for the Group’s business; therefore, Management carefully manages its exposure to credit risk, which arise mainly in lending activities that lead to loans and investment activities that contribute with securities and other financial instruments to the Group’s asset portfolio. There is also credit risk in the financial instruments out of the consolidated statement of financial position, such as contingent credits (indirect loans), which expose the Group to risks similar to those of direct loans, being mitigated with the same control processes and policies. Likewise, credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded in the consolidated statement of financial position.

As of the date of the consolidated statement of financial position and under IFRS 9, impairment allowances are established for expected credit losses. Significant changes in the economy or in the particular situation of an economic sector that represents a concentration in the Group’s portfolio could result in losses that are different from those provisioned for as of the date of the consolidated statement of financial position.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower or groups of borrowers, geographical and industry segments. Said risks are monitored on a revolving basis and subject to continuous review.

The Group’s exposure to credit risk is managed through the regular assessment of debtors and their potential capability to pay the principal and interest of their obligations, and through the change in exposure limits, when appropriate.

The exposure to credit risk is also mitigated, in part, through the obtaining of personal and corporate collateral. Nevertheless, there is a significant part of the financial instruments where said collateral cannot be obtained. Following is a description of the procedures and policies related to collateral management and valuation of collaterals.

Policies and procedures for management and valuation of guarantees -

Collateral required for financial assets other than the loan portfolio are determined according to the nature of the instrument. However, debt instruments, treasury papers and other financial assets are in general not guaranteed, except for securities guaranteed with similar assets and instruments.

The Group has policies and guidelines established for the management of collateral received to back loans granted. The assets that guarantee loan operations bear a certain value prior to the loan approval and the procedures for their updating are described in the internal rules. To manage guarantees, the Group operates specialized divisions for the establishment, management and release of guarantees.

Collateral that back loan operations include different goods, property and financial instruments (including cash and securities). Their preferential status depends on the following conditions:

 Easy convertibility into cash.

 Proper legal documentation, duly registered with the corresponding public registry.

 Do not have previous obligations that could reduce their value.

 Their fair value must be updated.

Long-term loans and fundings granted to corporate entities are generally guaranteed. Consumer loans granted to small companies are not generally guaranteed.

Management monitors the fair value of collateral, and with the purpose of mitigating credit losses, requests additional collateral to the counterparty as soon as impairment evidence exists. The proceeds from the settlement of the collateral obtained are used to reduce or repay the outstanding claim.

In the case of derivative financial instruments, the Group maintains strict control limits on net open derivative positions (the difference between purchase and sale contracts), both in amount and term. The amount subject to credit risk is limited to the current fair value of instruments that are favorable to the Group (for example, an asset when its fair value is positive), which in relation to derivatives is only a small fraction of the contract, or notional amount used to express the volume of instruments outstanding. This credit risk exposure is managed as part of the overall lending limits with customers, together with potential exposures from market movements. Collateral or other securities are not usually obtained for credit risk exposures on these instruments.

Settlement risk arises in any situation where a payment in cash, securities or equity is made in the expectation of a corresponding receipt in cash. Daily settlement limits are established for each counterparty to cover the aggregate of all settlement risk arising from the Group’s market transactions on any single day.

(c) Maximum exposure to credit risk -

As of December 31, 2023 and 2022, Management estimates that the maximum credit risk to which the Group is exposed is represented by the book value of the financial assets which show a potential credit risk and consist mostly of deposits in banks, inter-bank funds, investments, loans (direct and indirect), without considering the fair value of the collateral or guarantees, derivative financial instruments transactions, receivables from insurance transactions and other monetary assets. In this sense, As of December 31, 2023 and 2022, the main captions were formed as follows:

-76.0 percent and 74.2 percent, respectively, of cash corresponds to amounts deposited in the Group’s vaults or in the BCRP;

-85.3 percent and 89.8 percent, respectively, of the loan portfolio is classified into the two lower credit risk categories defined by the Group under IFRS 9 (high and standard grade);

-89.8 percent and 92.6 percent, respectively, of loans is deemed non-past-due and non-impaired. It is worth mentioning that, because of the effects of the Covid-19 pandemic, the Group has rescheduled loans that met certain requirements. The balance of rescheduled loans related to Covid-19 as of December 31, 2023 and 2022 amounts approximately to S/3,513,905,000,000 and S/5,048,978,000, respectively. Additionally, as a consequence of “Reactiva Peru” program, the Group has rescheduled loans that meet certain requirements, therefore, the balance of credits rescheduled under this program as of December 31, 2023 and 2022, amounts approximately to S/730,508,000 and S/1,473,770,000, respectively. Likewise, during 2023, the Group made rescheduling to its retail clients that were affected by social conflicts, natural disasters, and other resolutions for S/1,979,342,000.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

-90.2 percent and 88.0 percent, respectively, of investments at fair value through other comprehensive income and investments at amortized cost have at least an investment grade (BBB- or higher) or are debt instruments issued by the BCRP or the Peruvian Government; and

-97.2 percent and 97.7 percent of accounts receivable from insurance premiums and leases of the investment properties is deemed non-past due and non-impaired.

-In addition, as of December 31, 2023 and 2022, the Group holds loans (direct and indirect) and investments in fixed income instruments issued by entities related to the infrastructure sector that, in recent years, have been exposed to local and international events. As of December 31, 2023 the loans amount approximately to S/588,659,000 (S/200,177,000 in direct loans and S/388,482,000 in indirect loans) and investments in fixed income instruments amount approximately to S/1,011,043,000 (as of December 31, 2022 the loans amount approximately to S/712,662,000 (S/163,534,000 in direct loans and S/549,128,000 in indirect loans) and investments in fixed income instruments amount approximately to S/1,036,763,000).

(d) Impairment assessment for loan portfolios -

The main objective of the impairment requirements is to recognize expected credit losses during the average life of financial instruments when there has been a significant increase in credit risk after the initial recognition as evaluated on a collective or individual basis considering all reasonable and sustainable information, including that which refers to the future. If the financial instrument does not show a significant increase in credit risk after the initial recognition, the provision for credit losses shall be calculated as 12-month expected credit losses (Stage 1), as defined in Note 3.4(i).

Under some circumstances, entities may not have reasonable and sustainable information available without disproportionate effort or cost to measure the expected credit losses during the lifetime of the asset on an individual instrument basis. In that case, expected credit losses during the asset’s lifetime shall be recognized on a collective basis considering information about the overall credit risk. The financial assets for which the Group calculates the expected loss under a collective assessment include:

  • All direct and indirect (contingent) loans related to stand-by letters, guarantees, bank guarantees and letters of credit; except loans under legal collection do not have a payment agreement and for short-term reasons, certain clients that belong to the infrastructure sector.

  • Debt instruments measured at amortized cost or at fair value through other comprehensive income.

The expected credit loss is estimated collectively for each loan portfolio with shared similar risk characteristics. Not only default indicators, but all information such as: macroeconomic projections, type of instrument, credit risk ratings, types of guarantees, date of initial recognition, remaining time to maturity, among other indicators.

For the collective impairment assessment, the financial assets are grouped based on the Group's internal credit rating system, which considers credit risk characteristics, such as: type of asset, economic sector, geographical location, type of guarantee, among other relevant factors.

Expected losses are calculated under the identification and multiplication of the following risk parameters:

  • Probability of Default (PD): It is the likelihood of a default over a particular time horizon that the counterpart will be unable to meet its debt obligations in a certain term and with it is cataloged as default.

  • Loss Given Default (LGD): Measures the loss in percentage terms on total exposure at default (see Exposure at default).

  • Exposure at Default (EAD): Represents the total value that the Group can lose upon default of a counterpart.

(d.1) Definition of default:

In accordance with IFRS 9, the Group determines that there is default on a financial asset when:

  • The borrower is unlikely to pay their credit obligations to the Group in full, without recourse by the Group to actions such as realizing guarantee (if applicable); or

  • The borrower is past due by more than 90 days on any material credit obligation to the Group.

In assessing whether a borrower presents default, the Group considers the following indicators:

- Qualitative: contracts in judicial and prejudicial proceedings.

- Quantitative: contracts in default for more than 90 days; and

- Based on data prepared internally and obtained from external sources such as:

- Significant changes in indicators of credit risk

- Significant changes in external market indicators

- Real or expected significant change in the external and/or internal credit rating

- Existing or forecast adverse changes in the business, economic or financial conditions that are expected to cause a significant change in the borrower’s ability to meet their debt obligations.

- Real or expected significant change in the operating results of the borrower

- Existing or future adverse changes in the regulatory, economic, or technological environment of the borrower that results in a significant change in their ability to meet their debt obligations.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Likewise, losses recognized in the period are affected by several factors, such as:

- Financial assets moving from Stage 1 to Stage 2 or Stage 3 because there has been a significant increase in their risk since initial recognition or they present impairment at the analysis date, respectively. As a result, lifetime expected losses are calculated.

- Impact on the measurement of expected losses due to changes in PD, EAD and LGD resulting from the update of the inputs used.

- Impact on the measurement of expected losses due to changes in the models and assumptions used.

- Additional provisions for new financial instruments reported during the period.

- Periodic reversals of the discount of expected losses due to the passage of time, as they are measured based on the present value.

- Financial assets written off during the period.

- Exchange difference arising from financial assets denominated in foreign currency.

(d.1.1) Internal rating and PD:

The Group’s loans are segmented into homogeneous groups with shared similar credit risk characteristics as detailed below:

- Personal Banking (credit cards, mortgages, payroll loans, consumer loans and vehicular loans)

- Small Business Banking

- Commercial Banking (Corporate, Institutional, Companies and Real estate)

In the case of Interbank, its Credit Risk Department determines its risk level according to the following classification, as of December 31, 2023 and 2022:

2023
High grade Standard grade Grade lower<br>than standard
Banking Segment PD less than or equal (*) PD range (*) PD equal to or higher (*)
Credit card 7.12% 7.13% - 16.98% 16.99%
Mortgage 2.07% 2.08% - 6.80% 6.81%
Payroll loans 2.80% 2.81% - 6.43% 6.44%
Personal Banking Consumer 9.32% 9.33% - 20.78% 20.79%
Vehicular 9.13% 9.14% - 22.90% 22.91%
Small Business Banking 15.26% 15.27% - 31.69% 31.70%
Corporate 0.22% 0.22% 0.22%
Commercial Banking Institutional 0.55% 0.55% 0.55%
Companies 5.23% 5.24% - 9.67% 9.68%
Real estate 3.71% 3.71% 3.71%
2022
High grade Standard grade Grade lower<br>than standard
Banking Segment PD less than or equal (*) PD range (*) PD equal to or higher (*)
Credit card 7.36% 7.37% - 17.52% 17.53%
Mortgage 1.15% 1.16% - 3.76% 3.77%
Payroll loans 3.94% 3.95% - 16.89% 16.90%
Personal Banking Consumer 7.94% 7.95% - 18.15% 18.16%
Vehicular 3.24% 3.25% - 9.09% 9.10%
Small Business Banking 15.05% 15.06% - 24.59% 24.60%
Corporate 0.28% 0.28% 0.28%
Commercial Banking Institutional 0.28% 0.28% 0.28%
Companies 3.72% 3.73% - 6.84% 6.85%
Real estate 1.66% 1.66% 1.66%

(*) The probability of default are exclusively those determined by the statistical model and, therefore, do not include the subsequent adjustments to the model, detailed in Note 29.1 (d.7).

The main objective of the scoring or rating is to generate statistical models that allow forecasting the applicant’s level of credit risk. The development of these models incorporates both qualitative and quantitative information, as well as client specific information that may affect their performance.

These rating models are monitored on a regular basis because with time passing some factors may have a negative impact on the model’s discriminating power, and stability due to changes in the population or its characteristics.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Each rating has an associated PD, which is adjusted to incorporate prospective information. This is replicated for each macroeconomic scenario, as appropriate.

To calculate the PD, two differentiated methodologies have been developed, which are described below:

- Transition matrixes

Its objective is to determine the probability of default over a 12-month horizon based on the maturity of the operation, by analyzing the conditional probability of transition from one credit rating state to another. This method is suitable for loans with high exposure and wide data availability. The intention is to calculate the PD based on the maturity of the operation.

- Default ratio

Its objective is to determine the probability of default over a 12-month horizon based on the level of risk with which the operation begins, based on a counting analysis and the percentage of cases that report a default mark. This method is suitable for loans with poor data availability by type of maturity.

Given the nature of the portfolios and the availability of historical information, the method to estimate the PD for each portfolio is presented below:

Banking / Segments Transition<br>matrix Default ratio
Personal banking:
Credit cards X
Mortgage X
Payroll loans X
Consumer X
Vehicular X
Small business banking X
Commercial banking
Corporate X
Institutional X
Companies X
Real estate X

Likewise, for commercial sector clients, Interbank has implemented a system that allows to monitor more personalized way, based on warnings, changes in rating, reputation problems, among others.

On the other hand, at each reporting date, for indirect loans (contingent), as happens for direct loans, the expected loss is calculated depending on the stage in which each operation is located; that is, if it is in Stage 1, the expected loss is calculated with a 12-month view. If it is in Stage 2 (if the operation shows a significant risk increase since the initial recognition) or Stage 3 (if the operation has a default), the expected loss is calculated for the remaining life of the asset.

The Group considers the changes in credit risk based on the probability that the borrower will fail to comply with the loan agreement.

As of December 31, 2023 and 2022, the Group holds stand-by letters and guarantees with entities related to the infrastructure sector that, in recent years, for circumstantial reasons; were exposed to national and international events, as well as loans under legal collection that do not have payment agreement. To determine the expected losses of these entities, the Group, in a complementary manner, has performed an individual assessment to determine if the operation is in Stage 1, Stage 2 or Stage 3.

The criteria established to assign the risk to each one of the operations that are evaluated under an individual evaluation use the following combination of factors: quantitative, qualitative and financial.

To estimate the PD for the lifetime of a financial asset, a transformation to a 12-month PD is made according to the year of remaining life. That is, the PD is determined for a lifetime by an exponentiation of the 12-month PD.

At Inteligo Bank, both for Personal Banking and Commercial Banking, the internal model developed (scorecard) assigns 5 levels of credit risk: low, medium low, medium, medium high, and high. This methodology evaluates the scoring, increase or decrease of risks, taking into consideration the loan structure and the type of client; therefore, there is one scorecard for Personal Banking and another for Commercial Banking.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(d.2) Loss Given Default (LGD):

It is an estimated loss in case of default. It is the difference between contractual cash flows due and those expected to be received, including guarantees. Generally, it is expressed as an EAD percentage.

In the case of Interbank, the calculation of the LGD has been developed under three differentiated methods, which are described below:

- Closed recoveries

Those in which a client entered and left default (due to debt settlement, application of penalty or refinancing) over a course of up to 100 months and 88 months, as of December 31, 2023 and 2022, respectively.

- Open recoveries

Those in which a client entered and did not manage to exit default over a course of up to 100 months and 88 months, as of December 31, 2023 and 2022, respectively. This method identifies the adjustment factor that allows to simulate the effect of a closed recovery process. Thus, a recovery curve is built from the information of closed recovery processes and a recovery rate curve is estimated based on the number of months of each process.

This methodology is applied to the Mortgage and Commercial Banking loan portfolios.

In the case of Inteligo Bank, for those credits that are classified in Stage 1 or Stage 2 at the reporting date, the regulatory recoveries of the Central Bank of the Bahamas and the Superintendence of Banks of Panama are used, using stressed scenarios for each type of guarantee.

(d.3) Exposure at default (EAD):

Exposure at default represents the gross carrying amount of financial instruments subject to impairment, which involves both the client's ability to increase exposure as default approaches and possible early repayments. To calculate the EAD of a loan in Stage 1, potential default events are evaluated over a 12- month horizon. For financial assets in Stage 2 and Stage 3, exposure at default is determined over the life of the instrument.

A calculation methodology has been developed for those portfolios that present a defined schedule, differentiating those transactions that consider prepayment and those that do not consider prepayment; and another methodology that is based on building the credit risk factor for those portfolios that allow the client the ability to use a line of credit (revolving products) and, therefore, the percentage of additional use of the credit line that the client could use in the event of a default must be calculated.

(d.4) Significant increase in credit risk:

The Group has established a framework that incorporates quantitative and qualitative information to determine whether the credit risk on a financial instrument has significantly increased since initial recognition, both for loans and investments. The framework is aligned with the Group's internal credit risk management process.

In certain cases, using its expert credit judgment and, where possible, with relevant historical experience, the Group may determine that an exposure has experienced a significant increase in credit risk when certain qualitative indicators that may not be captured by a timely quantitative analysis.

At each reporting date, expected losses are calculated depending on the stage of each loan, as each one is evaluated with a different life period.

- Stage 1 -

12-month expected losses are calculated. For this, the following risk parameters are multiplied: the 12-month forward-looking PD for year 1 of the remaining life, the client's LGD, and the EAD for year 1 of the remaining life for operations with payment schedule or the balance as of the reporting date for operations without payment schedule.

- Stage 2 -

Lifetime expected losses are calculated for the entire remaining life of the asset. For operations with payment schedule, they are calculated in each year of remaining life by multiplying the following risk parameters: 12-month forward-looking PD, the client's LGD, and the EAD of the corresponding year of remaining life, and then the summation is done. For operations without payment schedule, they are calculated by multiplying the lifetime forward-looking PD, the client's LGD, and the balance as of the reporting date.

- Stage 3 -

Expected losses are calculated by multiplying the PD (equal to 100 percent) by the client’s LGD and the balance as of the reporting date.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

The Group classifies the operations with a significant increase in the risk of each portfolio such as marked refinanced operations, operations with arrears longer than 30 days (for all portfolios except Mortgages that considers arrears longer than 60 days), or operations marked “Leave” or “Reduce” in the surveillance system for the Commercial Banking portfolio.

Likewise, the evaluation of the significant risk increase is made by comparing the 12-month PD to the date of origin and the 12-month PD to the date of the report adjusted by the forward-looking factor, according to the quantitative criteria of absolute variation and relative variation. As of December 31, 2023, the Group has established a range of simple average absolute variation of 7.5 percent and a simple average relative variation of 417.2 percent (a range of simple average absolute variation of 7 percent and a simple average relative variation of 588 percent, as of December 31, 2022).

The Group periodically evaluates the following warning signs and criteria to assess whether the placement presents a significant increase in credit risk (Stage 2):

- Rescheduled loans.

- Infraction to the covenants.

- Forced interventions by governments in the primary and secondary markets of obligors.

- Involvement of the borrower in illicit, political and fraud business.

- Impairment of guarantees (underlying assets).

- Arrears or short and frequent failures to pay installments.

- Significantly adverse macroeconomic, regulatory, social, technological and environmental changes.

- Other assessments and/or warnings (financial statements, EBIT evaluation, financial indicators by industry, regulatory criteria, others).

On the other hand, the Group monitors the effectiveness of the criteria used to identify significant increases in credit risk through periodic reviews to confirm that:

  • Criteria are able to identify significant increases in credit risk before an exposure is in default;

  • The average time between the identification of a significant increase in credit risk and default is reasonable;

  • Exposures usually do not transfer directly from the measurement of 12-month expected losses to impaired loans; and

  • There is no unjustified volatility in the allocation of expected credit losses between the measurement of 12-month expected credit losses and lifetime expected credit losses.

Subsequently, the expected loss of each scenario (optimistic, base and pessimistic) is calculated as the sum of the expected loss of each Stage. Finally, the expected loss of the portfolio is calculated by assigning weights to each scenario based on their respective probability of occurrence.

An operation shall migrate from Stage 1 to Stage 2 due to significant risk increase, if comparing the current PD with the PD at the moment it was generated it is observed an increase (relative and absolute variation) in the PD that exceeds the established thresholds.

On the other hand, the methodology introduces the concept of cure for the Mortgage, Corporate and Business portfolios. According to this concept, a loan in Stage 3 that has been recovered through the payment of the debt, does not migrate directly to Stage 1, instead of continuing in Stage 2 during an observation window of 12 months, to secure a consistent behavior in the transaction’s risk, as well as to mitigate the migration volatility between risk stages.

(d.5) Reactiva Peru

The National Government Guarantees Program “Reactiva Peru”, created by Legislative Decree No.1455, and amended by Legislative Decree No.1457, aimed to provide a quick and effective response to the liquidity needs faced by companies due to the impact of the Covid -19 pandemic.

During the year 2020, Interbank granted loans for S/6,617,142,000. As of December 31, 2023 and 2022, the Bank maintains loans from the "Reactiva Perú" program, for a balance of approximately S/848,886,000 and S/2,357,201,000, respectively; including accrued interest amounting to S/46,277,000 and S/57,254,000, respectively. The amounts covered by the Peruvian Government guarantee amounted to S/675,492,000 and S/2,040,379,000, respectively.

Also, during the years 2023 and 2022, the Peruvian government established measures for the rescheduling of these loans setting new grace periods additional to the grace periods of the original loan. Also, certain requirements were established that the client had to comply with to access to the rescheduling.

(d.6) Rescheduled loans:

(d.6.1) Reschedules due to Covid-19

Because of the pandemic scenario as consequence of the Covid-19 pandemic explained in Note 1(c), the SBS authorized financial entities to grant credit facilities (rescheduling) to clients that meet certain requirements specified by the regulations issued by this regulatory entity. In that sense, Interbank granted repayment facilities to its customers that included: modification of repayment schedules, granting of grace periods, reduction of interest

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

rates, fractioning and downsizing of installments, among others. The effects of these reschedulings have been recorded in the caption "Interest and similar income" of the consolidated income statement, see Note 19.

As of December 31, 2023 and 2022, the balance of said rescheduling amounted to S/3,513,950,000 and S/5,048,978,000, respectively.

(d.6.2) Reschedules “Reactiva Peru”

During 2023 and 2022, the MEF and the SBS establish measures to reschedule the loans guaranteed under the “Reactiva Peru” program. See Note 29.1 (d.5).

During 2023 and 2022, Interbank performed rescheduling of loans under the “Reactiva Peru” program for an amount of S/25,928,000 and S/133,046,000, respectively. As of December 31, 2023 and 2022, the balance of rescheduled credits of the “Reactiva Peru” program amounts to approximately S/730,508,000 and S/1,473,770,000, respectively. As a result of these reschedulings, during 2023 expenses of approximately S/38,650,000 and during 2022, revenues of approximately S/18,180,000 were recorded. Both amounts are presented as a part of interest and similar income. See Note 19.

Interbank performed an assessment to define whether these rescheduled contracts represented, or not, a substantial modification under IFRS 9 - Financial Instruments. From that assessment, the new cash flows of the rescheduled loans did not generate substantial nor significant changes in the conditions initially contracted by the client; therefore, the adjustments in the conditions did not generate any substantial modification and, thus, neither a derecognition of the asset.

(d.6.3) Rescheduling due to political and social conflicts

As result of the social conflicts the country faced, explained in Note 1(b), during 2023, the SBS authorized the entities of the financial sector to modify the contractual conditions of retail loans (consumer, mortgage, micro and small businesses) in order to facilitate the debt payment of the financial sector’s clients, provided they comply with several conditions related to their risk classification, maximum past due days as of the date of the rescheduling and maximum term extensions, among others. The effects of these rescheduling have been recorded in the caption “Interest and similar income” of the consolidated statement of income; see Note 19.

During the year 2023, in application of the aforementioned measures and other Resolutions, Interbank has performed loan rescheduling for an amount of S/1,979,342,000.

(d.7) Subsequent adjustments to the model

The risks and uncertainties originated by the Covid-19 during the year 2021 and the political and economic context of Peru in the year 2021 and 2022, and the probability of occurrence of the El Niño event in the year 2023, have not been adequately reflected by the existing statistical models which are parameterized to determine the expected loss of the Group, considering that those events are of extraordinary nature and have not had precedents that would have been used as basis to model them in the calculation of the expected loss. For this reason, Interbank incorporated a serie of expert judgments with the purpose of calculating the expected loss pursuant to the requirement established by IFRS 9.

Following is the detail of the subsequent adjustments to the expected loss model performed to include in the calculation the effects of the uncertainty and risks as of December 31, 2023, 2022 and 2021:

(i) Subsequent adjustments to the model included in 2023:

An expert judgment was set out that seek to stress the probability of default from clients due to the uncertainty of the intensity and occurrence probability of the El Niño event.

  • Stress of the probability of default (PD) for loans in Stage 1 and Stage 2

This judgment is related to the reviewing of the forward-looking factors used by the model, which are built from macroeconomic models and forecasts performed by an external provider; and it is based on a more stressed forward-looking scenario of the economy’s performance compared with the weighted factors of the expected loss model. The difference between both represents, for each portfolio, the additional provision requirement. In this sense, it is possible to stress the expected loss by applying more severe macroeconomic forecasts to the probability of default.

Following is the amount of the expected loss to direct and indirect loans as of December 31, 2023, as determined by the model, and the subsequent adjustments to the model explained in previous paragraphs:

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Expected loss (according to model) Subsequent adjustments to the model Expected loss <br>(total)
S/(000) S/(000) S/(000)
Commercial loans 278,145 18,107 296,252
Consumer loans 1,709,256 153,126 1,862,382
Mortgage loans 84,731 2,464 87,195
Small and micro-business loans 114,629 6,899 121,528
Total 2,186,761 180,596 2,367,357

(ii) Sensitivity of life insurance contracts and reinsurance contracts -2:

Two expert judgments were set up that seek to stress the probability of default from customers due to the political and economic situation in Peru, as described in Note 1(b).

- Stress of the probability of default (PD) for loans in Stage 1 and Stage 2

This judgment includes an additional stress scenario for Stages 1 and 2 based on the uncertainty of the political and economic context, and which the expected loss model could not include due to its extraordinary nature. In this sense, it can be incorporated a stress to the forward-looking factors used in the macroeconomic forecasts, thus increasing the provision for expected loss requirement in Stages 1 and 2, considering the historical behavior of the forward-looking factors during a concrete period and excluding any factor that could skew the results of this period by showing an atypical trend as result of the presented environment.

- Stress for clients in Stage 3

The expert judgement applied to these clients considers the relative participation of the exposure of clients in Stage 3 in function of the total portfolio exposure (Stage 3 exposure divided by the total exposure) during a concrete period and excluding any factors that may bias the results of this period, showing an atypical trend due to the presented environment.

Once this period of analysis is excluded, the series average is calculated, and a standard deviation is added with the purpose of determining the level of additional provisions for clients in Stage 3.

Following is the amount of the expected loss to direct and indirect loans as of December 31, 2022, as determined by the model, and the subsequent adjustments to the model explained in previous paragraphs:

Expected loss (according to model) Subsequent adjustments to the model Expected loss <br>(total)
S/(000) S/(000) S/(000)
Commercial loans 261,187 21,231 282,418
Consumer loans 1,296,560 325,822 1,622,382
Mortgage loans (*) 61,618 — 61,618
Small and micro-business loans 90,685 6,247 96,932
Total 1,710,050 353,300 2,063,350

(*) Considering the nature of these loans, it has not been necessary to determine a subsequent adjustment to the model

(iii) Subsequent adjustments to the model included in 2021

To reflect the impact of Peru’s current political and economic uncertainty, Interbank decided to apply its expert judgment to stress the expected loss by applying more severe macroeconomic forecasts to the probability of default for the entirety of its portfolio.

Additionally, given the uncertainty context due to the outbreak of the Omicron variant, new expert criteria were applied for the new wave of infections, that could cause another cycle of loan reschedulings. This criterion has been applied only to the Credit Cards portfolio. On the other hand, an expert judgment in relation to the “Reactiva Peru” program was applied. As of December 31, 2021, the impact of the application of these judgments generated a higher expected loss provision for S/595,643,000.

(d.8) Prospective information

Expected credit losses consider information about the overall credit risk. Information about the overall credit risk must incorporate not only information on delinquency, but also all relevant credit information, including forward-looking macroeconomic information.

To comply with the regulatory requirement, it has been determined that the methodology includes the aforementioned effects within the expected loss.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

The estimation of expected credit losses will always reflect the possibility of a credit loss, even if the most likely result is not credit loss. Therefore, estimates of expected credit losses are required to reflect a weighted, unbiased amount that is determined by evaluating a range of possible outcomes.

To capture these effects, stress models have been used that have been carried out by an external provider and seek to stress the probability of default based on different macroeconomic variable projection scenarios.

The Group has defined three possible scenarios for each portfolio: base, optimistic and pessimistic.

Within the analysis carried out for the projection of probability of default, the projection period determined is 36 months (3 years). For projections after that period, the same information of that last year is considered, because it is deemed that projections beyond this period lose statistical significance, as evidenced by observing thresholds of confidence levels.

Macroeconomic variables used as of December 31, 2023:

Scenario 2024 2025 2026
Domestic demand (annual % var.) Optimistic 3.3 % 2.9 % 2.8 %
Base 3.0 % 2.7 % 2.4 %
Pessimistic 1.8 % 2.8 % 2.3 %
Private formal employment (annual % var.) Optimistic 3.0 % 3.1 % 2.6 %
Base 2.7 % 2.9 % 2.5 %
Pessimistic 1.8 % 2.9 % 3.1 %
Real disposable income per capita (annual % var.) Optimistic 2.3 % 1.8 % 2.9 %
Base 2.0 % 1.6 % 2.6 %
Pessimistic 0.7 % 1.7 % 2.3 %
Real formal salary (annual % var.) Optimistic 1.3 % 1.7 % 2.1 %
Base 1.1 % 1.6 % 1.9 %
Pessimistic (2.6 %) 0.6 % 1.0 %
Real informal salary (annual % var.) Optimistic 3.3 % 3.0 % 3.1 %
Base 2.9 % 2.9 % 2.8 %
Pessimistic (0.1 %) 1.8 % 2.2 %

Macroeconomic variables used as of December 31, 2022:

Scenario 2023 2024 2025
Gross domestic product (annual % var.) Optimistic 2.6 % 3.1 % 3.2 %
Base 2.3 % 2.5 % 2.8 %
Pessimistic 1.3 % 2.0 % 2.4 %
Unemployment rate (annual % var.) Optimistic (13.8 %) (3.9 %) (3.6 %)
Base (10.1 %) (3.7 %) (3.5 %)
Pessimistic (5.5 %) (3.5 %) (3.3 %)
Domestic demand (annual % var.) Optimistic 1.7 % 2.5 % 2.8 %
Base 1.1 % 1.7 % 2.3 %
Pessimistic (0.1 %) 1.0 % 1.9 %
Formal average salary (annual % var.) Optimistic (0.7 %) 1.3 % 1.4 %
Base (1.4 %) 1.0 % 1.2 %
Pessimistic (3.6 %) (0.7 %) 0.5 %
Informal average salary (annual % var.) Optimistic 1.8 % 3.4 % 3.5 %
Base 1.0 % 2.9 % 3.0 %
Pessimistic (1.1 %) 1.3 % 2.3 %

For the determination of these macroeconomic variables, different external sources of recognized prestige have been considered. The impact of these macroeconomic variables on the expected loss differs for each portfolio depending on the sensitivity in each of them.

The following tables summarize the impact of multiple scenarios on the expected credit loss of direct and indirect loans (optimistic, base and pessimistic):

December 31, 2023 % Total
S/ (000)
Optimistic 7 159,536
Base 49 1,127,461
Pessimistic 44 1,080,360
Total 2,367,357

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

December 31, 2022 % Total
S/ (000)
Optimistic 10 198,113
Base 52 1,050,333
Pessimistic 38 814,904
Total 2,063,350

Guarantees:

The fair value of the loan guarantees as of December 31, 2023 and 2022, is presented below:

Fair value of the credit guarantee under the base scenario
As of December 31, 2023 Maximum exposure to credit risk Cash Investments Properties Others Total guarantee (*) Net<br>exposure Expected loss associated
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Subject to impairment
Financial assets
Cash and due from banks 9,818,711 — — — — — 9,818,711 —
Commercial loans 21,155,476 665,532 1,242,105 11,585,327 3,202,231 16,695,195 4,460,281 278,466
Small and micro-business loans 933,824 — — — — — 933,824 121,377
Consumer loans 16,325,460 — — — — — 16,325,460 1,862,384
Mortgage loans 9,834,398 — — 17,005,359 — 17,005,359 (7,170,961 ) 87,198
Direct loans 48,249,158 665,532 1,242,105 28,590,686 3,202,231 33,700,554 14,548,604 2,349,425
Debt instruments at amortized cost 3,474,004 — — — — — 3,474,004 62
Total financial assets at amortized cost 61,541,873 665,532 1,242,105 28,590,686 3,202,231 33,700,554 27,841,319 2,349,487
Debt instruments at fair value through other comprehensive income 21,246,569 — — — — — 21,246,569 61,046
Total debt instruments at fair value through other comprehensive income 21,246,569 — — — — — 21,246,569 61,046
Not subject to impairment
Derivative financial instruments - Trading 99,099 9,755 — — — — — — 9,755 89,344 —
Derivative financial instruments - Hedges 59,002 - — — — — — — — 59,002 —
Financial assets at fair value through profit or loss 1,556,540 - — — — — — — — 1,556,540 —
Total financial instruments at fair value through profit or loss 1,714,641 9,755 — — — 9,755 1,704,886 —
84,503,083 675,287 1,242,105 28,590,686 3,202,231 33,710,309 50,792,774 2,410,533
Financial guarantees (guarantees and stand-by letters) 4,302,772 37,039 111,984 1,838,666 775,774 2,763,463 1,539,309 17,667
Letters of credit for customers 440,708 4,984 27,936 — 10,000 42,920 397,788 265
Indirect loans 4,743,480 42,023 139,920 1,838,666 785,774 2,806,383 1,937,097 17,932
89,246,563 717,310 1,382,025 30,429,352 3,988,005 36,516,692 52,729,871 2,428,465

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Fair value of the credit guarantee under the base scenario
As of December 31, 2022 Maximum exposure to credit risk Cash Investments Properties Others Total guarantee (*) Net<br>exposure Expected loss associated
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Subject to impairment
Financial assets
Cash and due from banks 13,193,411 — — — — — 13,193,411 —
Commercial loans 21,412,126 815,190 1,380,441 11,327,344 4,361,481 17,884,456 3,527,670 247,084
Small and micro-business loans 1,358,481 — — — — — 1,358,481 96,768
Consumer loans 14,967,799 — — — — — 14,967,799 1,622,381
Mortgage loans 9,286,944 — — 16,578,513 — 16,578,513 (7,291,569 ) 61,622
Direct loans 47,025,350 815,190 1,380,441 27,905,857 4,361,481 34,462,969 12,562,381 2,027,855
Debt instruments at amortized cost 3,302,779 — — — — — 3,302,779 —
Total financial assets at amortized cost 63,521,540 815,190 1,380,441 27,905,857 4,361,481 34,462,969 29,058,571 2,027,855
Debt instruments at fair value through other comprehensive income 17,038,942 — — — — — 17,038,942 53,974
Total debt instruments at fair value through other comprehensive income 17,038,942 — — — — — 17,038,942 53,974
Not subject to impairment
Derivative financial instruments - Trading 203,082 235,133 — — — — — — 235,133 (32,051 ) —
Derivative financial instruments - Hedges 312,718 — — — — — — — — 312,718 —
Financial assets at fair value through profit or loss 1,932,993 — — — — — — — — 1,932,993 —
Total financial instruments at fair value through profit or loss 2,448,793 235,133 — — — 235,133 2,213,660 —
83,009,275 1,050,323 1,380,441 27,905,857 4,361,481 34,698,102 48,311,173 2,081,829
Financial guarantees (guarantees and stand-by letters) 4,001,806 17,363 46,810 1,404,684 1,165,573 2,634,430 1,367,376 35,124
Letters of credit for customers 485,541 — 29,588 — 3,814 33,402 452,139 371
Indirect loans 4,487,347 17,363 76,398 1,404,684 1,169,387 2,667,832 1,819,515 35,495
87,496,622 1,067,686 1,456,839 29,310,541 5,530,868 37,365,934 50,130,688 2,117,324

The following table shows the analysis of the fair values of the guarantees classified in Stage 3:

Fair value of the credit guarantee under the base scenario
As of December 31, 2023 Maximum exposure to credit risk Cash Investments Guarantees from third parties or governments Properties Others Total <br>guarantee (*) Net<br>exposure Expected loss associated
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Commercial loans 398,159 — 962 — 608,852 55,610 665,424 (267,265 ) 162,385
Small and micro-business loans 106,028 — — — — — — 106,028 70,818
Consumer loans 733,096 — — — — — — 733,096 682,417
Mortgage loans 273,405 — — — 679,945 — 679,945 (406,540 ) 54,651
Total 1,510,688 — 962 — 1,288,797 55,610 1,345,369 165,319 970,271
Indirect loans 15,800 — 275 — 7,451 — 7,726 8,074 7,369
1,526,488 — 1,237 — 1,296,248 55,610 1,353,095 173,393 977,640
Fair value of the credit guarantee under the base scenario
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
As of December 31, 2022 Maximum exposure to credit risk Cash Investments Guarantees from third parties or governments Properties Others Total <br>guarantee (*) Net<br>exposure Expected loss associated
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Commercial loans 408,104 10 2,818 — 495,872 66,074 564,774 (156,670 ) 154,299
Small and micro-business loans 91,195 — — — — — — 91,195 51,709
Consumer loans 452,301 — — — — — — 452,301 430,902
Mortgage loans 238,527 — — — 624,486 — 624,486 (385,959 ) 45,101
Total 1,190,127 10 2,818 — 1,120,358 66,074 1,189,260 867 682,011
Indirect loans 26,076 — — — — — — 26,076 8,936
1,216,203 10 2,818 — 1,120,358 66,074 1,189,260 26,943 690,947

(*) Includes the total fair value of the guarantees held by the Group as of December 31, 2023 and 2022, regardless the balance of the loan it guarantees.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(e) Credit risk management for investments

(e.1) Scoring or internal rating and PD:

For this type of financial instruments, the Group analyzes the public information available from international risk rating agencies such as: Fitch, Moody's and Standard & Poor's, and assigns a rating to each instrument.

For each rating agency, the ratings associated with higher to lower credit quality are shown:

Fitch Moody's Standard & Poor's
AAA Aaa AAA
AA+ Aa1 AA+
AA Aa2 AA
AA- Aa3 AA-
A+ A1 A+
A A2 A
A- A3 A-
BBB+ Baa1 BBB+
BBB Baa2 BBB
BBB- Baa3 BBB-
BB+ Ba1 BB+
BB Ba2 BB
BB- Ba3 BB-
B+ B1 B+
B B2 B
B- B3 B-
CCC Caa1 CCC+

The Group determines its risk level according to the following classification as of December 31, 2023 and 2022:

High grade Standard grade Grade lower than standard
2023 Rating: from AAA to A Rating: from BBB to B Rating: from CCC to C
PD less than or equal to: PD range PD equal or higher to:
Global 0.04% - 0.11% 0.12% - 2.11% 22.97%
Latin America 0.00% 0.09% - 2.91% 22.80%
Sovereigns 0.00% 0.00% - 1.87% 25.45%
High grade Standard grade Grade lower than standard
2022 Rating: from AAA to A Rating: from BBB to B Rating: from CCC to C
PD less than or equal to: PD range PD equal or higher to:
Global 0.05% - 0.11% 0.12% - 2.09% 23.34%
Latin America 0.00% 0.09% - 3.02% 24.64%
Sovereigns 0.00% 0.00% - 1.55% 27.08%

Finally, each instrument is assigned a PD according to the transition matrices published by Fitch.

(e.2) Loss given default (LGD):

For those issuers that are classified in Stage 1 or Stage 2 at the reporting date, the Group uses the recovery matrix published by Moody's.

For those investments in Stage 3, an evaluation must be made to determine the severity of the expected loss according to the progress of the recovery process initiated.

(e.3) Exposure at default (EAD):

EAD represents the gross book value of the financial instruments subject to impairment. To calculate the EAD of an investment in Stage 1, possible non-compliance events are evaluated within 12 months. For financial assets in Stage 2 and Stage 3, exposure at default is determined for events throughout the life of the instrument.

(e.4) Significant increase in credit risk:

The Group has assumed that the credit risk of a financial instrument has not increased significantly since the initial recognition if it is determined that the investment has a low credit risk at the reporting date, which occurs when the issuer has a strong ability to meet its contractual cash flow obligations in the near term and adverse changes in economic and business conditions in the long term may reduce, but not necessarily, the ability of the issuer to meet its cash flow obligations contractual cash.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

In accordance with the assignment of ratings to each debt instrument, the Group determines whether there is a significant increase in credit risk by comparing the rating at the date of acquisition with the rating at the reporting date, and designates the Stage in which each debt instrument is classified according to the quantitative and qualitative criteria, defined as follows:

(i) Quantitative criteria -

The Group holds an investment that does not present a significant increase in risk if there is a movement of its credit risk rating within the investment grade. In case there is a movement of its credit risk rating outside the investment grade, it is deemed that the instrument presents a significant increase in risk.

(ii) Qualitative criteria -

The Group periodically evaluates the following warning signs and criteria to assess whether the financial instrument presents a significant risk increase (stage 2) at the reporting date:

  • Significant decrease (30 percent of its original value) and prolonged (12 months) of the market value of the investment.

  • Infringements of covenants without a waiver from the bondholders committee.

  • Forced interventions by governments in the primary and secondary markets of the issuers.

  • Linkage of the issuer in illicit, political and fraud activities.

  • Impairment of collaterals (underlying assets) in the case of securitized instruments.

  • Delays or short and frequent breaches in the payment of coupons.

  • Macroeconomic, regulatory, social, technological and environmental changes are significantly adverse.

  • Other evaluations and/or alerts made by each Subsidiary (financial statements, evaluation of EBIT, financial indicators by industry, regulatory criteria, others).

The table below presents the credit risk ratings issued by risk rating agencies of recognized prestige local and international financial investments:

As of December 31, 2023 As of December 31, 2022
S/(000) % S/(000) %
Instruments issued and rated in Peru:
AAA — 0.0 2,944 0.0
BBB- / BBB+ 2,611,807 9.8 2,387,376 10.5
BB- / BB+ 652,347 2.4 685,424 3.0
B- / B+ 4,770 0.0 — 0.0
3,268,924 12.2 3,075,744 13.5
Instruments issued in Peru and rated abroad:
BBB- / BBB+ 13,174,718 49.3 11,710,437 51.4
BB- / BB+ 490,215 1.8 545,868 2.4
B- / B+ 214,083 0.8 — 0.0
13,879,016 51.9 12,256,305 53.8
Instruments issued and rated abroad:
AAA 11,105 0.0 41,198 0.2
AA- / AA+ 145,599 0.5 26,077 0.1
A- / A+ 656,237 2.5 489,765 2.2
BBB- / BBB+ 2,565,054 9.6 2,247,646 9.9
BB- / BB+ 228,812 0.9 295,812 1.3
B- / B+ 16,190 0.1 61,089 0.3
Less than B- 1,723 0.0 983 0.0
3,624,720 13.6 3,162,570 13.9
Unrated
Negotiable certificates of deposit issued by the BCRP 3,448,984 12.9 43,868 0.2
Mutual funds and investment funds participations (*) 1,099,282 4.1 1,402,848 6.2
Securitized bonds 3,008 0.0 — 0.0
Others 81,910 0.3 1 0.0
Certificates of deposits with variable interest rates issued by the BCRP — 0.0 1,434,836 6.3
Listed shares 660,839 2.5 790,408 3.5
Non-listed shares and participations 229,933 0.9 226,953 1.0
Total 26,296,616 98.4 22,393,533 98.3
Accrued interest 425,375 1.6 394,065 1.7
Total 26,721,991 100.0 22,787,598 100.0

(*) It includes mutual and investment funds which do not have risk rating.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(f) Concentration of financial instruments exposed to credit risk -

Financial instruments exposed to credit risk were distributed according to the following economic sectors:

As of December 31, 2023
Designated<br>at fair<br>value<br>through<br>profit or<br>loss Debt<br>instruments<br>measured at<br>fair value<br>through<br>other<br>comprehensive<br>income Equity<br>instruments<br>measured at<br>fair value<br>through<br>other<br>comprehensive<br>income Amortized<br>cost Total
S/(000) S/(000) S/(000) S/(000) S/(000)
Consumer loans — — — 16,354,337 16,354,337
Government of Peru — 8,239,321 — 3,307,309 11,546,630
Mortgage loans — — — 9,844,293 9,844,293
BCRP — 3,448,984 — 5,926,921 9,375,905
Financial services 1,450,713 1,609,137 121,083 5,834,322 (*) 9,015,255
Manufacturing 79,551 807,805 119,938 4,513,506 5,520,800
Professional, scientific and technical activities 841 207,340 — 4,385,889 4,594,070
Commerce 1,144 224,148 — 3,791,306 4,016,598
Construction and infrastructure 2,915 2,566,009 31,917 559,070 3,159,911
Electricity, gas, water and oil 14,561 1,698,582 81,438 936,836 2,731,417
Mining 1,079 1,125,295 — 1,333,655 2,460,029
Communications, storage and transportation 126,455 496,130 78,384 1,249,526 1,950,495
Agriculture 989 26,339 2,806 1,894,430 1,924,564
Commercial and micro-business loans — — — 804,212 804,212
Leaseholds and real estate activities 15,751 184,898 5,707 590,501 796,857
Fishing — — 3,605 600,848 604,453
Community services 871 4,710 — 594,254 599,835
Medicine and biotechnology — 31,367 — 450,704 482,071
Education, health and other services 2 99,097 — 240,736 339,835
Public administration and defense 16,075 41,187 — 42,714 99,976
Foreign governments — 89,007 — — 89,007
Insurance 3,694 8,501 — 2,034 14,229
Others — 4,327 — 31,727 36,054
Total 1,714,641 20,912,184 444,878 63,289,130 86,360,833
Impairment allowance for loans (2,349,425 )
Accrued interest 1,046,024
Total 85,057,432

(*) It includes mainly cash and due from banks deposited in the vaults of Interbank and in foreign banks; see Note 4.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

As of December 31, 2022
Designated<br>at fair<br>value<br>through<br>profit or<br>loss Debt<br>instruments<br>measured at<br>fair value<br>through<br>other<br>comprehensive<br>income Equity<br>instruments<br>measured at<br>fair value<br>through<br>other<br>comprehensive<br>income Amortized<br>cost Total
S/(000) S/(000) S/(000) S/(000) S/(000)
Consumer loans — — — 15,005,146 15,005,146
Financial services 2,080,295 1,694,266 170,250 7,346,592 (*) 11,291,403
Government of Peru — 7,062,066 — 3,231,139 10,293,205
Mortgage loans 22,314 — — 9,293,900 9,316,214
BCRP — 1,478,704 — 7,362,737 8,841,441
Manufacturing 74,791 559,581 111,069 4,873,701 5,619,142
Commerce 6,471 170,540 — 4,412,994 4,590,005
Professional, scientific and technical activities 3,482 196,348 — 3,930,939 4,130,769
Construction and infrastructure 5,915 2,544,815 36,759 557,474 3,144,963
Electricity, gas, water and oil 33,518 1,324,234 95,572 924,270 2,377,594
Mining 3,917 899,083 — 1,228,508 2,131,508
Agriculture 3,085 24,768 3,054 1,892,566 1,923,473
Communications, storage and transportation 140,499 294,171 86,224 1,375,071 1,895,965
Commercial and micro-business loans — — — 1,065,159 1,065,159
Leaseholds and real estate activities 27,243 156,539 5,246 606,883 795,911
Community services 9,027 — — 582,263 591,290
Fishing — — 4,710 448,166 452,876
Education, health and other services 4,367 91,518 — 293,872 389,757
Public administration and defense 23,472 106,068 — 81,371 210,911
Medicine and biotechnology) — — — 190,302 190,302
Foreign governments — 113,816 — — 113,816
Insurance 6,615 — — 1,427 8,042
Others 3,782 — — 41,168 44,950
Total 2,448,793 16,716,517 512,884 64,745,648 84,423,842
Impairment allowance for loans (2,027,855 )
Accrued interest 899,568
Total 83,295,555

(*) It includes mainly cash and due from banks deposited in the vaults of Interbank and in foreign banks; see Note 4.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

The table below presents the financial instruments with exposure to credit risk, by geographic area:

As of December 31, 2023
Designated<br>at fair<br>value<br>through<br>profit or<br>loss Debt<br>instruments<br>measured at<br>fair value<br>through<br>other<br>comprehensive<br>income Equity<br>instruments<br>measured at<br>fair value<br>through<br>other<br>comprehensive<br>income Investments at<br>amortized<br>cost Total
S/(000) S/(000) S/(000) S/(000) S/(000)
Peru 118,277 17,289,485 245,411 60,879,122 78,532,295
United States of America 1,311,432 853,799 78,384 516,788 2,760,403
Mexico 15,559 1,054,480 — 17,031 1,087,070
Panama — 147,198 190 632,672 (*) 780,060
Chile 1 710,106 10,011 46,243 766,361
United Kingdom 64,727 266,974 109,045 32,562 473,308
Canada 12,898 12,095 — 369,993 394,986
Colombia 96 309,994 — 80,764 390,854
Cayman Islands 121,815 4,132 — 101,554 227,501
Brazil — 150,120 — 41,231 191,351
Ecuador — — — 190,181 190,181
Germany 24,487 582 — 58,025 83,094
Luxembourg — 14,395 — 60,909 75,304
Ireland — — — 2,896 2,896
Belgium — — 152 1 153
Others 45,349 98,824 1,685 259,158 405,016
Total 1,714,641 20,912,184 444,878 63,289,130 86,360,833
Impairment allowance for loans (2,349,425 )
Accrued interest 1,046,024
Total 85,057,432

(*) It corresponds mainly to the loan portfolio maintained by Inteligo Bank (domiciled in Panama) with Peruvian citizens.

As of December 31, 2022
Designated<br>at fair<br>value<br>through<br>profit or<br>loss Debt<br>instruments<br>measured at<br>fair value<br>through<br>other<br>comprehensive<br>income Equity<br>instruments<br>measured at<br>fair value<br>through<br>other<br>comprehensive<br>income Amortized<br>cost Total
S/(000) S/(000) S/(000) S/(000) S/(000)
Peru 152,424 13,579,422 270,166 61,849,369 75,851,381
United States of America 1,734,175 360,279 86,224 1,479,634 3,660,312
Mexico 11,410 1,049,305 — 13,178 1,073,893
Chile 1 668,122 — 28,100 696,223
United Kingdom 192,112 306,888 154,476 27,577 681,053
Panama — 206,216 — 333,084 (*) 539,300
Canada 5,560 — — 499,111 504,671
Colombia 95 322,840 — 55,230 378,165
Germany 24,947 — — 175,061 200,008
Brazil — 153,977 — 21,258 175,235
Cayman Islands 141,149 — — — 141,149
Luxembourg 68,553 12,510 — 47,500 128,563
Ecuador — — — 4,990 4,990
Ireland — — — 455 455
Belgium — — 157 3 160
Others 118,367 56,958 1,861 211,098 388,284
Total 2,448,793 16,716,517 512,884 64,745,648 84,423,842
Impairment allowance for loans (2,027,855 )
Accrued interest 899,568
Total 83,295,555

(*) It corresponds mainly to the loan portfolio maintained by Inteligo Bank (domiciled in Panama) with Peruvian citizens.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(g) 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 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 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 4.

(g.1) Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements as of December 31, 2023 and 2022, are presented below:

Gross amounts<br>of recognized<br>financial<br>liabilities<br>and offset Net amounts of<br>financial assets<br>presented in the Related amounts not offset in the<br>consolidated statement of<br>financial position
Gross amounts<br>of recognized<br>financial assets in the consolidated<br>statement<br>of financial<br>position consolidated<br>statement<br>of financial<br>position Financial instruments (including non-cash guarantees) Cash guarantees received Net amount
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
2023
Derivatives, Note 10(b) 158,101 — 158,101 (65,099 ) (9,755 ) 83,247
Total 158,101 — 158,101 (65,099 ) (9,755 ) 83,247
2022
Derivatives, Note 10(b) 515,800 — 515,800 (169,050 ) (235,133 ) 111,617
Total 515,800 — 515,800 (169,050 ) (235,133 ) 111,617

(g.2) Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements as of December 31, 2023 and 2022, are presented below:

Gross amounts<br>of recognized<br>financial assets<br>and offset<br>in the Net amounts<br>of financial<br>liabilities<br>presented<br>in the Related amounts not offset in<br>the consolidated statement of<br>financial position
Gross amounts<br>of recognized<br>financial<br>liabilities consolidated<br>statement of<br>financial<br>position consolidated<br>statement of<br>financial<br>position Financial instruments (including non-cash guarantees) Cash <br>guarantees <br>pledged, Note 4(d) Net amount
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
2023
Derivatives, Note 10(b) 145,395 — 145,395 (65,099 ) (24,725 ) 55,571
Total 145,395 — 145,395 (65,099 ) (24,725 ) 55,571
2022
Derivatives, Note 10(b) 297,038 — 297,038 (169,050 ) (34,784 ) 93,204
Total 297,038 — 297,038 (169,050 ) (34,784 ) 93,204

29.2. Market risk management

Market risk is the possibility of loss due to variations in the financial market conditions. The main variations to which the Group is exposed to are exchange rates, interest rates and prices. Said variations can affect the value of the Group’s financial assets and liabilities.

During 2023, interest rates remained lower, aligned with the reductions defined by the Central Reserve Bank on the reference rate. These reductions are explained by the favorable evolution of inflation, which is approaching the target range. Regarding sovereign bonds, volatility continued with a downward trend accompanied by an improvement in prices.

On the other side, the Banking Book was also affected by the decreases in interest As of December 31, 2023, IFS does not have exposure to USD-LIBORrates in the second half of the year, affecting both assets and liabilities, particularly in products that appreciate quickly such as time deposits.

During 2022, the volatility of interest rates in Soles remained high, but with downward tendency. Also, during the year 2022, interest rates in Soles increased significantly as result of the rise of both the benchmark rate of the BCRP and inflation. This

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

affected the bond prices of the Trading Book, reaching minimum valuations during the third quarter and then recovering by the end of the year.

On the other side, the Banking Book was also affected by the changes in interest rates, especially by the increase of shorter-term rates, which boosted the growth of financial income to a larger extent than expenses, thus resulting in higher margins.

The Group separates its exposure to market risk into two blocks: (i) the one that arises from the fluctuation of the value of the trading investment portfolios, due to movements of market rates or prices (“Trading Book”) and; (ii) the one that arises from the changes in the structural positions (“Banking Book”) due to movements in interest rates, prices and exchange rates.

(a) Trading Book -

To control and monitor the risks arising from the volatility of risk factors involved within each instrument, maximum exposure limits by currency, by type of investment and Value-at-Risk (“VaR”), which are controlled on a daily basis, have been established.

The main measurement technique used to measure and control market risk is VaR, which is a statistical measurement that quantifies the maximum loss expected for a period of time and a determined significance level under normal market conditions. The Group uses the VaR model for a period of one day, and a 99-percent confidence level. VaR is calculated by risk factor: interest rate, price or exchange rate and by type of investment: derivatives, fixed income and variable income.

VaR models are designed to measure the market risk within a normal market environment. Since VaR is based mainly on historical data to provide information and does not clearly predict future changes and modifications in risk factors, the probability of big market movements may be underestimated. VaR can also be under or overestimated due to the hypotheses made on the risk factors and the relation among these factors with the specific instruments. To determine the reliability of VaR models, the actual results are regularly monitored to prove the validity of the assumptions and parameters used in the calculation of VaR.

The Group includes within the VaR calculation the potential loss that may arise from the exposure to exchange rate risk. This risk is included in the VaR calculation because the exchange position is the result of the spot position plus the position in derivative products. Likewise, the total VaR includes the diversification effect that arises as a result of the interaction of the various market risk factors to which the Group is exposed.

The validity of the VaR calculation is proven through back-testing, which uses historical data to ensure that the model adequately estimates the potential losses. Additionally, the sensitivity of risk factors is calculated, which shows the potential portfolio losses in the event of certain fluctuations in factors. Said fluctuations include: interest rate shocks, exchange rate shocks and price shocks.

The VaR results of the Group’s portfolio by type of asset are presented below:

2023 2022
S/(000) S/(000)
Equity investments 26,584 41,083
Debt investments 709 5,088
Derivatives and/or exchange position 1,548 2,925
Diversification effect (237 ) (4,390 )
Consolidated VaR by type of asset (*) 28,604 44,706

The Group’s VaR results by type of risk are the following:

2023 2022
S/(000) S/(000)
Exchange rate risk 4,813 4,859
Interest rate risk 1,417 4,827
Price risk 25,733 39,359
Diversification effect (3,359 ) (4,339 )
Consolidated VaR by type of risk (*) 28,604 44,706

(*) The total VaR is lower than the sum of its components due to the benefits of risk diversification.

(b) Banking Book -

The portfolios which are not for trading are exposed to different financial risks, since they are sensitive to movements of the market rates, which can result in a negative effect on the value of the assets compared to its liabilities and; therefore, on its net value.

(i) Interest rate risk

Interest rates fluctuate permanently on the market. These fluctuations affect the Group in two ways: first, through the change in the valuation of assets and liabilities; and secondly, affecting the cash flows at repricing. The variation in the valuation of assets and liabilities is increasingly sensitive as the term at which the asset or liability is repriced is extended. This process consists in the assessment of repricing periods. On the other hand, cash flows are affected when the instruments reach maturity, when they are invested or placed at new interest rates effective in the market.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Repricing gap

An analysis of the repricing gaps is performed to determine the impact of the interest rates movements. Said analysis consists of assigning the balances of the operations that will change the interest rate into different time gaps. Based on this analysis, the impact of the variation in the valuation of assets and liabilities on each gap is calculated.

(i.1) The following table summarizes the Group’s exposure to interest rate risk. The Group’s financial instruments are presented at book value (including interest accrued), classified by the repricing period of the contract’s interest rate or maturity date, whichever occurs first:

As of December 31, 2023
Up to 1 month From 1 to 3 <br>months From 3 to 12 months From 1 to 5 <br>years More than <br>5 years Non-interest <br>bearing Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Financial assets
Cash and due from banks 6,438,844 77,841 216,012 26,788 — 3,059,226 9,818,711
Inter-bank funds 524,915 — — — — — 524,915
Investments at fair value through other comprehensive income (debt and equity) 501,199 1,540,643 2,293,382 4,041,060 12,870,285 444,878 21,691,447
Investments at amortized cost 23,583 86,652 634,133 636,561 2,093,075 — 3,474,004
Loans, net (*) 4,247,703 5,611,232 11,248,432 19,392,632 6,584,178 (563,795 ) 46,520,382
Other assets (**) 1,034,215 195,323 262,343 219,298 5,590 4,222,912 5,939,681
Total assets 12,770,459 7,511,691 14,654,302 24,316,339 21,553,128 7,163,221 87,969,140
Financial liabilities
Deposits and obligations 30,185,794 3,894,718 6,601,910 498,592 46,902 7,960,318 49,188,234
Inter-bank funds 119,712 — — — — — 119,712
Due to banks and correspondents 1,459,377 1,758,037 2,776,380 1,683,940 1,348,196 — 9,025,930
Bonds, notes and other obligations 200,594 1,138,301 18,233 3,960,246 234,255 — 5,551,629
Insurance and reinsurance contract liabilities 52,793 104,011 470,253 2,549,908 8,784,208 246,363 12,207,536
Other liabilities (***) 867,346 142,339 205,445 514,669 520,057 1,172,997 3,422,853
Equity — — — — — 10,008,101 10,008,101
Total liabilities and equity 32,885,616 7,037,406 10,072,221 9,207,355 10,933,618 19,387,779 89,523,995
Off- balance sheet accounts
Derivatives held as assets 185,450 111,270 1,576,325 705,470 — — 2,578,515
Derivatives held as liabilities 185,450 111,270 1,576,325 705,470 — — 2,578,515
— — — — — — —
Marginal gap (20,115,157 ) 474,285 4,582,081 15,108,984 10,619,510 (12,224,558 ) (1,554,855 )
Cumulative gap (20,115,157 ) (19,640,872 ) (15,058,791 ) 50,193 10,669,703 (1,554,855 ) —

(*) The balance presented in column “non-interest bearing” corresponds mainly to accrued income from loans, past-due loans, loans under judicial collection and the provision for loan losses.

(**) Includes investment property, property, furniture and equipment, net, banker’s acceptances, intangibles and goodwill, net, other accounts receivable and other assets, net (except accounts receivable from derivative financial instruments held for trading), reinsurance contract assets, and deferred income tax assets, net.

(***) Includes banks acceptances and other accounts payable, provisions and other liabilities (except accounts payable for derivative financial instruments held for trading) and deferred income tax liability, net.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Investments at fair value through profit or loss and derivatives held for trading are not considered because these instruments are part of the trading book and the methodology used for the measurement of their market risk is VaR.

As of December 31, 2022
Up to 1 month From 1 to 3 <br>months From 3 to 12 months From 1 to 5 <br>years More than <br>5 years Non-interest <br>bearing Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Financial assets
Cash and due from banks 8,824,601 23,810 303,812 6,815 22,080 4,012,293 13,193,411
Inter-bank funds 296,119 — — — — — 296,119
Investments at fair value through other comprehensive income (debt and equity) 640,301 1,129,911 275,048 4,159,999 10,833,683 512,884 17,551,826
Investments at amortized cost — 71,640 494,872 1,084,113 1,652,154 — 3,302,779
Loans, net (*) 4,596,996 5,750,591 10,366,009 18,886,533 6,443,838 (540,969 ) 45,502,998
Other assets (**) 1,054,431 99,411 69,853 73,355 33,726 4,168,105 5,498,881
Total assets 15,412,448 7,075,363 11,509,594 24,210,815 18,985,481 8,152,313 85,346,014
Financial liabilities
Deposits and obligations 30,713,163 1,688,546 6,098,329 1,022,471 323,521 8,684,678 48,530,708
Inter-bank funds 30,012 — — — — — 30,012
Due to banks and correspondents 606,091 1,239,640 1,072,666 3,023,988 1,158,261 — 7,100,646
Bonds, notes and other obligations 2,532,625 3,614 233,891 4,895,031 241,142 — 7,906,303
Insurance and reinsurance contract liabilities 53,926 107,091 480,885 2,555,889 7,803,150 230,380 11,231,321
Other liabilities (***) 468,255 138,932 165,118 418,962 495,123 1,286,600 2,972,990
Equity — — — - — 9,426,227 9,426,227
Total liabilities and equity, net 34,404,072 3,177,823 8,050,889 11,916,341 10,021,197 19,627,885 87,198,207
Off- balance sheet accounts
Derivatives held as assets 1,681,974 — — 897,190 — — 2,579,164
Derivatives held as liabilities 1,681,974 — — 897,190 — — 2,579,164
— — — — — — —
Marginal gap (18,991,624 ) 3,897,540 3,458,705 12,294,474 8,964,284 (11,475,572 ) (1,852,193 )
Cumulative gap (18,991,624 ) (15,094,084 ) (11,635,379 ) 659,095 9,623,379 (1,852,193 ) —

(*) The balance presented in column “non-interest bearing” corresponds mainly to accrued income from loans, past-due loans, loans under judicial collection and the provision for loan losses.

(**) Includes investment property, property, furniture and equipment, net, banker’s acceptances, intangibles and goodwill, net, other accounts receivable and other assets, net (except accounts receivable from derivative financial instruments held for trading), reinsurance contract assets, and deferred income tax assets, net.

(***) Includes banks acceptances and other accounts payable, provisions and other liabilities (except accounts payable for derivative financial instruments held for trading).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Investments at fair value through profit or loss and derivatives held for trading are not considered because these instruments are part of the trading book and the methodology used for the measurement of their market risk is VaR.

(i.2) Sensitivity to changes in interest rates -

The exposure to the interest rate, in the case of Interbank, is supervised by the GIR Committee and the ALCO Committee. The GIR Committee approves the various limits applicable to the financial instruments’ management. The ALCO Committee analyzes and monitors the results of the asset and liability management strategies and decisions implemented. Likewise, it defines the strategies and analyzes the sources of financing, as well as the coverage of the balance executed by the Bank. In particular, the latter could be considered to cover the exposure due to the variation in cash flows attributed to changes in variable market rates, to fix the cost of funds considering the global context of future movement of rates in the currencies under evaluation, to transform the cost of funds from foreign currency to the functional currency, among other casuistic as reviewed and approved by the Committee, considering the risk limits.

In this regard, the effect of movements in interest rates is analyzed based on the Regulatory Model and considers: (i) the financial margin for the next 12 months or Earning at Risk (EaR) and (ii) the Equity Value at Risk (EVaR), as detailed below:

- Earning at Risk indicator, calculated as a percentage of the Regulatory Capital, the legal limit of 5 percent and an early warning of 4 percent are set.

- Value at Risk indicator, calculated as a percentage of the effective equity, establishes the internal limit of 15 percent and an early warning of 13 percent.

Thus, interest rate risk is managed and supervised by monitoring the aforementioned indicators, which allows Management to assess the potential effect of interest rates movements on the Group’s financial margin and thus manage the terms and the fixed and/or variable yields generated by the financial instruments held by the Group, including strategies on the derivative financial instruments designated as hedge accounting.

For its part, the GIR Committee oversees the approval levels of structural interest-rate risk capacity and appetite, which are detailed in the Bank's Risk Appetite Framework.

In the case of Interseguro and Inteligo Bank, their Boards establish limits, which are controlled by their respective Investment Risk Unit. Izipay's Management considers that the risk is not significant because its interest rates do not differ significantly from the market.

The table below presents the sensitivity to a possible change in interest rates, with all other variables kept constant, in the consolidated statement of income and in the consolidated statement of changes in equity, before Income Tax and non-controlling interest.

As of December 31, 2023
Currency Changes in<br>basis points Sensitivity <br>of net income Sensitivity of other net<br>comprehensive income
S/(000) S/(000)
US Dollar +/-25 +/- 105 +/- 103,189
US Dollar +/-50 +/- 210 +/- 206,551
US Dollar +/-75 +/- 315 +/- 310,258
US Dollar +/-100 +/- 421 +/- 414,485
Sol +/-50 -/+ 44,656 -/+ 444,244
Sol +/-75 -/+ 66,984 -/+ 677,590
Sol +/-100 -/+ 89,313 -/+ 904,721
Sol +/-150 -/+ 133,969 -/+ 1,362,566
As of December 31, 2022
--- --- --- --- --- ---
Currency Changes in<br>basis points Sensitivity <br>of net income Sensitivity of other net<br>comprehensive income
S/(000) S/(000)
US Dollar +/-25 +/- 9,381 +/- 108,457
US Dollar +/-50 +/- 18,762 +/- 217,095
US Dollar +/-75 +/- 28,143 +/- 326,095
US Dollar +/-100 +/- 37,524 +/- 435,640
Sol +/-50 -/+ 40,539 -/+ 388,047
Sol +/-75 -/+ 60,809 -/+ 582,844
Sol +/-100 -/+ 81,079 -/+ 778,196
Sol +/-150 -/+ 121,618 -/+ 1,171,915

The interest rate sensitivities shown in the tables above are only illustrative and are based on simplified scenarios. The figures represent the effect of the pro-forma movements in the net interest income based on the projected scenarios yield curve and the Group’s current interest rate risk profile. However, this effect, does not include actions that would be taken by Management to mitigate the impact of this interest rate risk. In addition, the Group seeks proactively to change the interest rate risk profile to minimize losses and optimize net revenues. The above projections also assume that interest rate of all maturities move by the same amount and, therefore, do not reflect the potential impact on net interest income of some rates

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

changing while others remain unchanged. The projections also include assumptions to facilitate calculations, such as that all positions are held to maturity.

As described in Note 3.4(ah), in previous years, regulators eliminated LIBOR rates and replaced them by an alternative interest rate. During 2023, the Group successfully managed the transition of all its contracts to the alternative interest rate benchmark Secured Overnight Financial Rate (SOFR); the IBOR reform exposes the Group to various risks, which have been closely managed and monitored. These risks include, among others, the following:

  • Conduct risk arising from discussions with clients and market counterparties due to the amendments required to existing contracts necessary to perform the interest rate benchmark reform.

  • Financial risk to the Group and its clients that markets are disrupted due to interest rate benchmark reform giving rise to financial losses.

  • Pricing risk from the potential lack of market information if liquidity in interest rate benchmarks reduces and new alternative interest rates are illiquid and unobservable.

  • Operational risk arising from changes to the Group’s IT systems and processes, also the risk of payments being disrupted if an interest rate benchmark ceases to be available.

  • Accounting risk if the Group’s hedging relationships fail and from unrepresentative income statement volatility as financial instruments transition to the alternative interest rate benchmark.

As of December 31, 2023, IFS does not have exposure to USD-LIBOR rates. The contracts that referenced USD-LIBOR were entirely migrated to new references, whether to other rates such as SOFR or fixed rate exchange.

The exposure to the interest rate in the case of Interseguro is shown in Note 29.5(a.3).

(i.3) Sensitivity to price variation -

Shares classified as investments at fair value through other comprehensive income, for the years 2023 and 2022, are not considered as part of the investments for interest rate sensitivity calculation purposes. However, a calculation of sensitivity in market prices and the effect on expected unrealized gain or loss in the consolidated statement of other comprehensive income, before Income Tax and non-controlling interest, As of December 31, 2023 and 2022, is presented below:

Changes in<br>market<br>price 2023 2022
Sensitivity to market price % S/(000) S/(000)
Shares +/-10 44,488 51,288
Shares +/-25 111,220 128,221
Shares +/-30 133,463 153,865

(ii) 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, 2023, the weighted average exchange rate of free market published by the SBS for transactions in US Dollars was S/3.705 per US$1 bid and S/3.713 per US$1 ask (S/3.808 and S/3.820 as of December 31, 2022, respectively). As of December 31, 2023, the exchange rate for the accounting of asset and liability accounts in foreign currency set by the SBS was S/3.709 per US$1 (S/3.814 as of December 31, 2022).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

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

As of December 31, 2023
US Dollars Soles Other<br>currencies Total
S/(000) S/(000) S/(000) S/(000)
Assets
Cash and due from banks 6,745,220 2,710,275 363,216 9,818,711
Inter-bank funds 55,660 469,255 — 524,915
Financial investments 7,090,138 19,569,726 62,127 26,721,991
Loans, net 14,131,543 32,388,839 — 46,520,382
Due from customers on acceptances 40,565 — — 40,565
Other accounts receivable and other assets, net 242,935 1,161,624 22 1,404,581
Reinsurance contract assets 166 26,121 — 26,287
28,306,227 56,325,840 425,365 85,057,432
Liabilities
Deposits and obligations 18,277,393 30,420,832 490,009 49,188,234
Inter-bank funds 63,081 56,631 — 119,712
Due to banks and correspondents 2,342,325 6,683,605 — 9,025,930
Bonds, notes and other obligations 5,049,942 501,687 — 5,551,629
Due from customers on acceptances 40,565 — — 40,565
Insurance and reinsurance contract liabilities 3,997,075 8,210,461 — 12,207,536
Other accounts payable, provisions and other liabilities 1,272,832 1,928,716 43 3,201,591
31,043,213 47,801,932 490,052 79,335,197
Forwards position, net (631,449 ) 505,661 125,788 —
Currency swaps position, net 951,864 (951,864 ) — —
Cross currency swaps position, net 2,430,155 (2,430,155 ) — —
Options position, net (51 ) 51 — —
Monetary position, net 13,533 5,647,601 61,101 5,722,235
As of December 31, 2022
--- --- --- --- --- --- --- --- --- --- --- ---
US Dollars Soles Other<br>currencies Total
S/(000) S/(000) S/(000) S/(000)
Assets
Cash and due from banks 10,205,093 2,404,942 583,376 13,193,411
Inter-bank funds — 296,119 — 296,119
Financial investments 6,860,558 15,884,533 42,507 22,787,598
Loans, net 13,507,125 31,995,873 — 45,502,998
Due from customers on acceptances 45,809 — — 45,809
Other accounts receivable and other assets, net 303,720 1,131,459 388 1,435,567
Reinsurance contract assets 1,032 33,021 — 34,053
30,923,337 51,745,947 626,271 83,295,555
Liabilities
Deposits and obligations 19,187,300 28,843,457 499,951 48,530,708
Inter-bank funds — 30,012 — 30,012
Due to banks and correspondents 645,706 6,454,940 — 7,100,646
Bonds, notes and other obligations 7,257,098 649,205 — 7,906,303
Due from customers on acceptances 45,809 — — 45,809
Insurance and reinsurance contract liabilities 4,240,359 6,990,962 — 11,231,321
Other accounts payable, provisions and other liabilities 1,229,952 1,599,519 859 2,830,330
32,606,224 44,568,095 500,810 77,675,129
Forwards position, net (1,993,217 ) 2,074,784 (81,567 ) —
Currency swaps position, net 1,384,495 (1,384,495 ) — —
Cross currency swaps position, net 2,354,679 (2,354,679 ) — —
Options position, net (172 ) 172 — —
Monetary position, net 62,898 5,513,634 43,894 5,620,426

As of December 31, 2023, the Group granted indirect loans (contingent operations) in foreign currency for approximately US$741,882,000, equivalent to S/2,751,640,000 (US$614,405,000, equivalent to S/2,343,341,000 as of December 31, 2022); see Note 18.

The Group manages the exchange rate risk through the matching of its assets and liabilities operations, supervising its global exchange position daily. The global exchange position of the Group is equivalent to long positions minus short positions in currencies other than the Sol. The global exchange position includes balance positions (spot) and the positions in derivatives, including the positions of derivatives that have been designated as accounting hedges with the purpose of covering the exposure due to the variation of the exchange rate; see Note10(b). Any depreciation/appreciation of the foreign currency would affect the consolidated statement of income. An imbalance in the monetary position would make the

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Group’s consolidated statement of financial position vulnerable to the fluctuation of the foreign currency (exchange rate “shock”).

The table below shows the analysis of variations of the US Dollar, the main foreign currency to which the Group has exposure As of December 31, 2023 and 2022. The analysis determines the effect of a reasonably possible variation of the exchange rate US Dollar to the Sol, considering all the other variables constant in the consolidated statement of other comprehensive income before Income Tax. A negative amount shows a potential net reduction in the consolidated statement of income, while a positive amount reflects a net potential increase:

Sensitivity analysis Changes in<br>currency rates 2023 2022
% S/(000) S/(000)
Devaluation
US Dollar 5 8,796 8,991
US Dollar 10 17,592 17,982
US Dollar 15 26,388 26,973
Revaluation
US Dollar 5 (8,796 ) (8,991 )
US Dollar 10 (17,592 ) (17,982 )
US Dollar 15 (26,388 ) (26,973 )

The exposure to the interest rate in the case of Interseguro is shown in Note 29.5(a.3).

29.3. Liquidity risk

Liquidity risk consists in the Group’s inability to comply with the maturity of its obligations, thus incurring in losses that significantly affect its equity position. This risk may arise as a result of various events such as: the unexpected decrease of funding sources, the inability to rapidly settle assets, among others.

The Group has a set of indicators that are controlled and reported daily, which establish the minimum liquidity levels allowed for the short-term and reflect several risk aspects such as: concentration, stability, position by currency, main depositors, etc.

Likewise, the Group assesses medium-term and long-term liquidity through a structural analysis of its funds inflows and outflows in different maturity terms. This process allows to know, for each currency, the various funding sources, how liquidity needs increase and which terms are mismatched. Both for assets and liabilities, assumptions are considered for the operations that do not have determined maturity dates, such as revolving loans, savings and similar ones, as well as contingent liabilities, such as non-used letters of credit or lines of credit. Based on this information, the necessary decisions to maintain target liquidity levels are made.

In the case of Interbank, liquidity is managed by the Vice-Presidency of Capital Markets, which chairs the ALCO Committee, in which positions, movements, indicators and limits on liquidity management are presented. Liquidity risk is supervised by the GIR Committee, defining the risk level that Interbank is willing to take and the corresponding indicators, limits and controls are reviewed. The Market Risk Division is in charge of tracking said indicators. Interbank takes short-term deposits and transforms them into longer-term loans. Therefore, its exposure to liquidity risk increases. Interbank maintains a set of deposits that are historically renewed or maintained, and represent a stable funding source.

In the case of Interseguro, it is exposed to requirements other than their cash resources, mainly claims resulting from their short-term insurance contracts. The Board of Directors of the company establishes limits on the minimum proportion of the maturity funds available to meet these requirements and in a minimum level of lines of credit that must be available to cover claims at unexpected claim levels.

Regarding to long-term insurance contracts, considering the types of products offered and the long-term contractual relationship with clients (the liquidity risk is not material) the emphasis is on sufficient availability of flow of assets, and the term matching of the latter with the liability obligations (mathematical technical reserves), for which there are sufficiency and adequacy indicators.

The exposure to the interest rate in the case of Interseguro is shown in Note 29.5(a.2).

In the case of Inteligo Bank, the Board of Directors has established liquidity levels as to the minimum amount of available funds required to meet such requirements and the minimum level of inter-banking facilities and other loan mechanisms that should exist to cover unexpected withdrawals. Inteligo Bank holds a short-term asset portfolio comprised of loans and investments to ensure sufficient liquidity.

Inteligo Bank’s financial assets include unlisted equity investments, which generally are illiquid. In addition, Inteligo Bank holds investments in closed (unlisted) and open-ended investment funds, which may be subject to redemption restrictions such as “side pockets” and redemption limits. As a result, Inteligo Bank may not be able to settle some of its investments in these instruments in due time to meet its liquidity requirements.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

The following table presents the Group’s undiscounted cash flows payable according to contractual terms agreed (including the payment of future interest):

As of December 31, 2023
Up to<br>1 month From 1 to 3 <br>months From 3 to 12<br>months From 1 to 5 <br>years Over 5<br>years Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Financial liabilities by type -
Deposits and obligations 36,150,590 4,042,302 6,874,724 1,212,870 1,473,786 49,754,272
Inter-bank funds 119,712 — — — — 119,712
Due to banks and correspondents 1,310,020 1,522,550 2,452,158 3,310,756 1,918,633 10,514,117
Bonds, notes and other obligations 24,108 1,153,716 133,232 4,280,041 428,712 6,019,809
Due from customers on acceptances 7,080 19,300 14,185 — — 40,565
Insurance and reinsurance contract liabilities — — 821,389 2,908,106 20,449,732 24,179,227
Other accounts payable, provisions and other liabilities 1,568,886 144,250 156,571 133,382 1,053,107 3,056,196
Total non-derivative liabilities 39,180,396 6,882,118 10,452,259 11,845,155 25,323,970 93,683,898
Derivatives held for trading (*) -
Contractual amounts receivable (inflow) 387,872 479,652 1,261,268 993,514 516,340 3,638,646
Contractual amounts payable (outflow) 387,923 479,288 1,274,079 983,356 514,785 3,639,431
Total (51 ) 364 (12,811 ) 10,158 1,555 (785 )
Derivatives held as hedge (**) -
Contractual amounts receivable (inflow) 3,763 4,061 323,273 1,750,880 — 2,081,977
Contractual amounts payable (outflow) 6,215 5,065 390,706 1,759,660 — 2,161,646
Total (2,452 ) (1,004 ) (67,433 ) (8,780 ) — (79,669 )
As of December 31, 2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Up to<br>1 month From 1 to 3 <br>months From 3 to 12<br>months From 1 to 5 <br>years Over 5<br>years Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Financial liabilities by type -
Deposits and obligations 36,674,487 1,842,392 6,642,702 1,523,454 2,392,309 49,075,344
Inter-bank funds 30,012 — — — — 30,012
Due to banks and correspondents 693,550 785,085 2,040,127 2,983,773 1,591,843 8,094,378
Bonds, notes and other obligations 2,059,807 1,155 380,495 5,726,366 435,141 8,602,964
Due from customers on acceptances 18,909 4,854 22,046 — — 45,809
Insurance and reinsurance contract liabilities — — 840,606 2,977,231 20,063,265 23,881,102
Other accounts payable, provisions and other liabilities 1,356,478 204,843 46,535 1,976 923,460 2,533,292
Total non-derivative liabilities 40,833,243 2,838,329 9,972,511 13,212,800 25,406,018 92,262,901
Derivatives held for trading (*) -
Contractual amounts receivable (inflow) 583,440 711,292 2,059,478 841,875 344,267 4,540,352
Contractual amounts payable (outflow) 604,526 568,112 2,051,065 1,041,851 354,758 4,620,312
Total (21,086 ) 143,180 8,413 (199,976 ) (10,491 ) (79,960 )
Derivatives held as hedge (**) -
Contractual amounts receivable (inflow) 1,712,865 3,289 13,772 432,103 — 2,162,029
Contractual amounts payable (outflow) 1,479,047 5,038 28,784 406,806 — 1,919,675
Total 233,818 (1,749 ) (15,012 ) 25,297 — 242,354

(*) It includes contracts whose future flows agreed to be exchanged are settled on a net basis (non-delivery) and a gross basis (full-delivery).

(**) It only includes contracts whose future flows agreed to be exchanged are settled on a net basis (non-delivery)

The table below shows maturity, by contractual term, of the contingent credits (indirect loans) granted by the Group as of the dates of the consolidated statement of financial position:

2023 2022
S/(000) S/(000)
Contingent credits (indirect loans)
Up to 1 month 1,095,339 686,403
From 1 to 3 months 1,062,605 1,358,990
From 3 to 12 months 2,391,145 2,054,523
From 1 to 5 years 193,835 387,431
Over 5 years 556 —
Total 4,743,480 4,487,347

The Group estimates that not all of the contingent loans (indirect) or commitments will be used before the maturity date of the commitments.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

The following table shows the changes in liabilities arising from financing activities according to IAS 7:

2023
Balance<br>as of<br>January 1 Dividends<br>payable Cash flow Effect of movement in exchange rate Others Balance<br>as of<br>December 31
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Inter-bank funds 30,012 — 91,245 (1,592 ) 47 119,712
Bonds, notes and other obligations 7,906,303 — (2,189,040 ) (131,024 ) (34,610 ) 5,551,629
Lease liability related to right-of-use assets 112,581 — (57,818 ) (279 ) 36,029 90,513
Dividends payable 1,461 516,164 (516,564 ) — (150 ) 911
Total liabilities for financing activities 8,050,357 516,164 (2,672,177 ) (132,895 ) 1,316 5,762,765
2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Balance<br>as of<br>January 1 Dividends<br>payable Cash flow Effect of movement in exchange rate Others Balance<br>as of<br>December 31
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Inter-bank funds — — 30,482 (470 ) — 30,012
Bonds, notes and other obligations 8,389,672 — (137,900 ) (385,850 ) 40,381 7,906,303
Lease liability related to right-of-use assets 234,946 — (62,320 ) (2,948 ) (57,097 ) 112,581
Dividends payable 1,219 756,041 (755,706 ) — (93 ) 1,461
Total liabilities for financing activities 8,625,837 756,041 (925,444 ) (389,268 ) (16,809 ) 8,050,357

29.4. Operational risk

Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When internal controls fail, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial loss. The Group cannot expect to eliminate all operational risks, but through a control framework and by monitoring and responding to potential risks, the Group is able to manage these risks. Controls include mainly the segregation of duties, accesses, authorization and reconciliation procedures, staff training and assessment processes, including the review by Internal Audit.

Management has focused its attention on the implementation of a series of measures aimed to ensure the Group’s workers an optimal environment of information technology systems and cybersecurity systems for the execution of their operations within a mixed labor environment (home or office).

29.5. Insurance risk management

The risk under an insurance contract, in any of its various forms, is the possibility that the insured event occurs and; therefore, uncertainty is realized in the amount of the resulting claim. Given the nature of the insurance contract, this risk is aleatory and; therefore, unpredictable.

Regarding a portfolio of insurance contracts where the theory of large numbers and probabilities for pricing and provisions is applied, the main risk faced by the insurance business of the Group, managed by Interseguro, is that claims and/or payments of benefits covered by the policies exceed the book value of insurance liabilities. This could happen to the extent that the frequency and/or severity of claims and benefits are higher than estimated. The factors that are considered to perform the assessment of insurance risks are the following:

  • Frequency and severity of claims;

  • Sources of uncertainty in the calculation of payment of future claims;

  • Mortality tables for different coverage plans in the life insurance segment;

  • Changes in market rates of investments that directly affect the discount rates to calculate mathematical reserves; and

  • Specific requirements established by the SBS according to insurance plans.

On the other hand, Interseguro has signed contracts of automatic reinsurance coverage mainly in credit life, retirement and life insurances that protect it from losses due to frequency and severity. The objective of this reinsurance negotiation is that the total net insurance losses do not affect the equity and liquidity of Interseguro. Interseguro’s policy is to sign contracts with companies with international rating determined by SBS rules. Pension contracts do not have reinsurance coverage.

(a) Life insurance contracts -

Interseguro has developed its insurance underwriting strategy to diversify the type of insurance risks accepted. Factors that aggravate the insurance risk include lack of risk diversification in terms of type and amount of risk and geographic location. The underwriting strategy aims to ensure that underwriting risks are well diversified in terms of type and amount of risk. Underwriting limits serve to implement the selection criteria for appropriate risk. As of December 31, 2023 and 2022, most of the insurance contracts entered into by Interseguro are located in the city of Lima.

The sufficiency of reserves is a principle of insurance management. Technical reserves for claims and premiums are estimated by Interseguro’s actuaries and reviewed by independent experts when deemed necessary.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Interseguro’s Management constantly monitors trends in claims, which allows it to perform estimates of claims incurred but not reported (IBNR) that are supported by recent information.

On the other hand, Interseguro is exposed to the risk that mortality and morbidity rates associated with customers do not reflect the actual mortality and morbidity and may cause the premium calculated for the coverage offered to be insufficient to cover claims. For this reason, Interseguro performs a careful risk selection or underwriting when issuing policies, because by doing so it can classify the degree of risk presented by a proposed insured, analyzing characteristics such as gender, smoking condition, health condition, among others.

In the particular case of pensions, the risk assumed by Interseguro is that the real life expectancy of the insured population is greater than that estimated when determining income, which would mean a deficit of reserves to comply with the payment of pensions.

On the other hand, insurance products do not have particularly relevant terms or clauses that could have a significant impact or represent significant uncertainties over Interseguro’s cash flows.

(a.1) Insurance risk –

Sensitivity of life insurance contracts and reinsurance contracts -

The following sensitivity analysis shows the impact (gross and net of the reinsurance held) on the contractual service margin (“CSM”), income before taxes and net equity for the reasonably possible movements in the key assumptions, the rest of the assumptions remaining constant. The correlation of the assumptions will have a significant effect on the determination of the final impacts, but to demonstrate the impact resulting from changes in each assumption, the assumptions had to be changed individually. It is worth noting that the movements of these assumptions are non-linear. When options exist, these are the main reason of the sensitivities’ asymmetry. The method used to obtain information of the sensitivity and the significant hypotheses did not vary regarding the previous period.

Life insurance contracts issued

2023 2022
Change in assumptions Impact on income before taxes, gross of reinsurance Impact on income before taxes, net of reinsurance Impact on net equity, gross of reinsurance Impact on net equity of reinsurance Impact on income before taxes, gross of reinsurance Impact on income before taxes, net of reinsurance Impact on net equity, gross of reinsurance Impact on net equity of reinsurance
% S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Mortality/morbidity rate +10% (13,198 ) (12,808 ) (5,827 ) (5,264 ) (14,085 ) (13,955 ) (4,767 ) (4,952 )
Longevity +10% (210,185 ) (210,185 ) (172,323 ) (172,323 ) (197,945 ) (197,945 ) (130,110 ) (130,110 )
Expenses +10% (32,980 ) (32,985 ) (28,421 ) (28,426 ) (37,627 ) (37,740 ) (29,039 ) (290,152 )
Expiration and abandonment rate +10% 11,877 11,699 8,871 8,629 13,773 14,232 5,411 5,897
Mortality/morbidity rate +10% 13,048 12,642 6,062 5,488 14,494 14,021 4,995 4,851
Longevity +10% 147,670 147,670 114,215 114,215 146,826 146,826 86,496 86,496
Expenses +10% 32,960 33,006 28,407 28,453 37,611 37,658 29,024 29,071
Expiration and abandonment rate +10% (12,787 ) (12,522 ) (9,367 ) (9,023 ) (14,856 ) (14,182 ) (5,844 ) (5,204 )
2023 2022
--- --- --- --- --- --- --- --- --- --- --- --- --- ---
Change in assumptions Impact on CSM before taxes, gross of reinsurance Impact on CSM before taxes, net of reinsurance Impact on CSM before taxes, gross of reinsurance Impact on CSM before taxes, net of reinsurance
% S/(000) S/(000) S/(000) S/(000)
Mortality/morbidity rate +10% (24,696 ) (17,314 ) (24,079 ) (18,190 )
Longevity +10% (37,318 ) (37,318 ) (47,424 ) (47,424 )
Expenses +10% (20,613 ) (20,608 ) (17,552 ) (17,439 )
Expiration and abandonment rate +10% (1,562 ) (1,972 ) (1,726 ) (2,495 )
Mortality/morbidity rate +10% 25,277 18,034 24,135 18,787
Longevity +10% 77,609 77,609 76,554 76,554
Expenses +10% 20,591 20,544 17,551 17,504
Expiration and abandonment rate +10% 1,944 2,375 1,837 1,524

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(a.2) Liquidity risk –

Analysis of maturities of insurance and reinsurance contracts liabilities (present value of the future cash flows) –

The following table summarizes the maturity profile of the portfolios of insurance contracts issued and the portfolios of reinsurance contracts held that are liabilities of the Group, based on the estimations of the present value of the future cash flows that are expected to be paid in the following periods:

2023
Less than 1 year From 1 to 2 years From 2 to 3 years From 3 to 4 years From 4 to 5 years More than 5 years Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Life insurance contractual liabilities 849,238 660,864 717,179 751,224 781,239 20,348,966 24,108,710
Life reinsurance contractual liabilities (27,849 ) (577 ) — (589 ) — (608 ) — (626 ) — (38,029 ) (68,278 )
Other liabilities 78,253 83,650 118,419 134,337 141,353 858,734 1,414,746
Total 899,642 743,937 835,009 884,953 921,966 21,169,671 25,455,178
2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Less than 1 year From 1 to 2 years From 2 to 3 years From 3 to 4 years From 4 to 5 years More than 5 years Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Life insurance contractual liabilities 874,518 683,879 727,831 772,743 794,191 19,943,775 23,796,937
Life reinsurance contractual liabilities (33,911 ) (336 ) (347 ) (359 ) (373 ) (19,305 ) (54,631 )
Other liabilities 57,085 74,489 81,473 106,116 129,276 810,573 1,259,012
Total 897,692 758,032 808,957 878,500 923,094 20,735,043 25,001,318

Analysis of maturities of financial assets (based on non-discounted contractual cash flows) –

The following table summarizes the maturity profile of the Group’s financial assets in function of the non-discounted contractual cash flows, including interest receivable.

2023
Less than 1 year From 1 to 2 years From 2 to 3 years From 3 to 4 years From 4 to 5 years More than 5 years Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Financial assets
Cash and cash equivalents
Investments at fair value through profit or loss 97 97 97 97 97 2,888 3,373
Debt instruments at fair value through other comprehensive income 1,020,609 969,034 991,445 1,079,552 1,064,316 18,247,679 23,372,635
Investments at amortized cost — — — — — 27,201 27,201
Total 1,020,706 969,131 991,542 1,079,649 1,064,413 18,277,768 23,403,209
2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Less than 1 year From 1 to 2 years From 2 to 3 years From 3 to 4 years From 4 to 5 years More than 5 years Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Financial assets
Cash and cash equivalents
Investments at fair value through profit or loss 99 99 99 99 99 3,070 3,565
Debt instruments at fair value through other comprehensive income 896,760 940,922 887,257 899,474 982,379 18,010,752 22,617,544
Investments at amortized cost — — — — — — —
Total 896,859 941,021 887,356 899,573 982,478 18,013,822 22,621,109

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(a.3) Financial risk –

Exchange rate risk –

It is the risk that the fair value of future cash flows of a financial instrument, assets and/or liabilities of insurance contracts may fluctuate due to changes in the exchange rate.

The main operations of the Group are performed in Soles and their exposure to exchange rate risk arises mainly regarding the US Dollar. The Group’s financial assets are mainly denominated in the same currencies as its insurance contracts liabilities.

The Group partially mitigates the foreign currency risk associated with insurance contracts through the holding of reinsurance contracts denominated in the same currencies as its insurance contractual liabilities.

The following table summarizes the financial assets and the insurance contracts assets and liabilities of the Company by main currency:

2023 2022
US Dollar Sol Total US Dollar Sol Total
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Financial assets
Cash and cash equivalents 48,899 217,411 266,310 419,481 211,676 631,157
Investments at fair value through profit or loss 300,007 7,029 307,036 247,998 11,424 259,422
Debt instruments at fair value through other comprehensive income 4,159,311 8,286,854 12,446,165 3,792,194 7,243,452 11,035,646
Investments at amortized cost — 23,584 23,584 — — —
Insurance contracts assets -
Life insurance issued — — — — — —
Life reinsurance held 166 26,121 26,287 1,032 33,019 34,051
Reinsurance held — — — — — —
Insurance contracts liabilities -
Life insurance issued 3,997,075 8,208,566 12,205,641 4,240,359 6,987,486 11,227,845
Life reinsurance held — 1,895 1,895 — 3,476 3,476
Reinsurance held — — — — — —

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

Interest rate risk

It is the risk that the fair value or future cash flows of a financial instrument or insurance or reinsurance contract may fluctuate due to changes in the market interest rates. Instruments at variable interest rates expose the Group to cash flow interest risk, while instruments at fixed interest rates expose the Group to fair value risk. There is not any direct contractual relation between financial assets and insurance contracts. However, the Group’s policy on interest rate risk requires it to manage the scope of the net interest rate risk by keeping an adequate combination of instruments at variable and fixed rates to support the insurance contract liabilities. Said policy also requires it to manage the maturity of financial assets that accrue interest. The Group does not have a significant concentration of the interest rate risk. The Group’s exposure to insurance and reinsurance contracts sensitive to interest rate risk and debt instruments is the following:

2023 2022
S/(000) S/(000)
Insurance contracts assets -
Life insurance issued — —
Life reinsurance held 26,287 34,051
Reinsurance held — —
Insurance contracts liabilities -
Life insurance issued 12,205,641 11,227,845
Life reinsurance held 1,895 3,476
Reinsurance held — —
Instruments at fair value through profit or loss 307,036 259,422
Debt instruments at fair value through other comprehensive income 12,446,165 11,035,646
Instruments at amortized cost 23,584 -
Total 25,010,608 22,560,440

The following analysis is made for the reasonably possible movements of the key variables, the rest of the variables remaining constant, showing the impact on income before taxes and equity. The correlation of the variables will have a significant effect on the determination of the final impact of the interest rate risk, but to demonstrate the impact due to changes in variables, the variables had to be changed individually. It is worth noting that the movements of these variables are non-linear. The method used to obtain information of the sensitivity and the significant variables did not vary regarding the previous period.

2023 2022
Change in basis points Impact on income before taxes Impact on equity Impact on income before taxes Impact on equity
S/(000) S/(000) S/(000) S/(000)
Insurance and reinsurance contracts +100 16,542 1,075,830 15,554 921,286
Debt instruments +100 (100 ) (906,268 ) (107 ) (796,455 )
Insurance and reinsurance contracts -100 (20,226 ) (1,293,888 ) (18,703 ) (1,096,629 )
Debt instruments -100 115 1,048,722 124 924,796

(b) Real estate risk management -

Real estate risk is defined as the possibility of losses due to changes or volatility of market prices of properties; see Note 7. Investment properties are held by Interseguro to manage its long term inflows and match its technical reserves. SBS Resolution No. 2840-2012, dated May 11, 2012, “Regulations on Real Estate Risk Management in Insurance Companies”, requires that insurance companies adequately identify, measure, control and report the real estate risk level they are exposed to.

Additionally, Interseguro has identified the following risks associated with its real estate portfolios:

  • The cost to develop a project may increase if there are delays in the planning process; however, Interseguro receives services from advisors to reduce the risks that may arise in the planning process.

  • A major lessee may become insolvent thus causing a significant loss in rental income and a reduction in the value of the associated property. To reduce this risk, Interseguro reviews the financial position of all prospective lessees and decides on the appropriate level of safety required, such as lease deposits or guarantees.

  • The fair values of the investment property could be affected by the cash flows generated by the tenants and/or lessees, as well as by the economic conditions of Peru and future expectations.

29.6. Capital management

The Group manages in an active manner a capital base to cover the risks inherent to its activities. Capital adequacy of the Group is monitored by using regulations and ratios established by the different regulators. See Note 16(f).

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

30. Fair value

(a) Financial instruments measured at their fair value and fair value hierarchy

The following table presents an analysis of the financial instruments that are measured at their fair value, including the level of hierarchy of fair value. The amounts are based on the balances presented in the consolidated statement of financial position.

As of December 31, 2023
Level 1 Level 2 Level 3 Total
S/(000) S/(000) S/(000) S/(000)
Financial assets
Financial investments
At fair value through profit or loss (*) 329,609 344,155 882,776 1,556,540
Debt instruments measured at fair value through other comprehensive income 11,779,535 9,132,649 — 20,912,184
Equity instruments measured at fair value through other comprehensive income 397,247 10,541 37,090 444,878
Derivatives receivable — 158,101 — 158,101
12,506,391 9,645,446 919,866 23,071,703
Accrued interest 334,385
Total financial assets 23,406,088
Financial liabilities
Derivatives payable — 145,395 — 145,395
As of December 31, 2022
--- --- --- --- --- --- --- --- ---
Level 1 Level 2 Level 3 Total
S/(000) S/(000) S/(000) S/(000)
Financial assets
Financial investments
At fair value through profit or loss (*) 428,739 564,559 939,695 1,932,993
Debt instruments measured at fair value through other comprehensive income 9,946,427 6,770,090 — 16,716,517
Equity instruments measured at fair value through other comprehensive income 464,556 10,188 38,140 512,884
Derivatives receivable — 515,800 — 515,800
10,839,722 7,860,637 977,835 19,678,194
Accrued interest 322,425
Total financial assets 20,000,619
Financial liabilities
Derivatives payable — 297,038 — 297,038

(*) As of December 31, 2023 and 2022, correspond mainly to participations in mutual funds and investment funds.

Financial assets included in Level 1 are those measured on the basis of information that is available on the market, to the extent that their quoted prices reflect an active and liquid market and that are available in some centralized trading mechanism, trading agent, price supplier or regulatory entity.

Financial instruments included in Level 2 are valued based on the market prices of other instruments with similar characteristics or with financial valuation models based on information of variables observable in the market (interest rate curves, price vectors, etc.).

Financial assets included in Level 3 are valued by using assumptions and data that do not correspond to prices of operations traded on the market. The valuation requires Management to make certain assumptions about the model variables and data, including the forecast of cash flow, discount rate, credit risk and volatility.

During 2023, there were transfers of certain financial instruments from Level 1 to Level 2 for an amount of S/32,577,000, because they stopped being actively traded during the year and, consequently, fair values were obtained by using observable market data. Likewise, during 2023, there were transfers of certain financial instruments from Level 2 to Level 1 for an amount of S/717,011,000. During 2023 and 2022, there were no transfers of financial instruments to or from level 3 to level 1 or level 2.

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

The table below presents a description of significant unobservable data used in valuation:

Valuation<br>technique Significant<br>unobservable<br>inputs Valuation Sensitivity of inputs to fair value
2023 2022
Private Equity Stocks Net asset value NAV Depends on each investment Depends on each investment 10 percent increase (decrease) in the NAVs would result in increase (decrease) in fair value by S/7,678,000 as of December 31, 2023 and S/7,022,000 as of December 31, 2022.
Private equity funds Net asset value NAV Depends on each investment Depends on each investment 10 percent increase (decrease) in the NAVs would result in increase (decrease) in fair value by S/80,597,000 as of December 31, 2023 and S/86,944,000 as of December 31, 2022.
Listed shares Net asset value - According to price risk According to price risk 5 percent increase (decrease) of the price would result in increase in fair value of S/1,854,000 as of December 31, 2023 and S/1,907,000 as of December 31, 2022.

The table below includes a reconciliation of fair value measurement of financial instruments classified by the Group within Level 3 of the valuation hierarchy:

2023 2022
S/(000) S/(000)
Initial balance as of January 1 977,835 1,133,763
Purchases 85,777 180,344
Sales (35,625 ) (280,297 )
Loss recognized on the consolidated statement of income (108,121 ) (55,975 )
Balance as of December 31 919,866 977,835

(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, presented by level of fair value hierarchy:

As of December 31, 2023 As of December 31, 2022
Level 1 Level 2 Level 3 Fair<br>value Book<br>value Level 1 Level 2 Level 3 Fair<br>value Book<br>value
S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)
Assets
Cash and due from banks — 9,818,711 — 9,818,711 9,818,711 — 13,193,411 — 13,193,411 13,193,411
Inter-bank funds — 524,915 — 524,915 524,915 — 296,119 — 296,119 296,119
Investments at amortized cost 3,277,672 80,042 — 3,357,714 3,474,004 2,949,507 — — 2,949,507 3,302,779
Loans, net — 44,737,995 — 44,737,995 46,520,382 — 42,932,260 — 42,932,260 45,502,998
Due from customers on acceptances — 40,565 — 40,565 40,565 — 45,809 — 45,809 45,809
Other accounts receivable and other assets, net — 1,246,480 — 1,246,480 1,246,480 — 919,767 — 919,767 919,767
Reinsurance contract assets — 26,287 — 26,287 26,287 — 34,053 — 34,053 34,053
Total 3,277,672 56,474,995 — 59,752,667 61,651,344 2,949,507 57,421,419 — 60,370,926 63,294,936
Liabilities
Deposits and obligations — 49,394,868 — 49,394,868 49,188,234 — 48,464,095 — 48,464,095 48,530,708
Inter-bank funds — 119,712 — 119,712 119,712 — 30,012 — 30,012 30,012
Due to banks and correspondents — 9,028,209 — 9,028,209 9,025,930 — 6,859,664 — 6,859,664 7,100,646
Bonds, notes and other obligations 4,587,631 708,643 — 5,296,274 5,551,629 6,447,282 990,545 — 7,437,827 7,906,303
Due from customers on acceptances — 40,565 — 40,565 40,565 — 45,809 — 45,809 45,809
Insurance and reinsurance contract liabilities — 12,207,536 — 12,207,536 12,207,536 — 11,231,321 — 11,231,321 11,231,321
Other accounts payable and other liabilities — 3,056,196 — 3,056,196 3,056,196 — 2,533,292 — 2,533,292 2,533,292
Total 4,587,631 74,555,729 — 79,143,360 79,189,802 6,447,282 70,154,738 — 76,602,020 77,378,091

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:

Translation of consolidated financial statements originally issued in Spanish – Note 33

Notes to the consolidated financial statements (continued)

(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, 2023 and 2022, 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.

31. 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 as trust are not included in the consolidated financial statements. These services give rise to the risk that the Group could eventually be held responsible of poor yielding of the assets under its management.

As of December 31, 2023 and 2022, the value of the managed off-balance sheet financial assets is as follows:

2023 2022
S/(000) S/(000)
Investment funds 17,829,262 16,821,566
Mutual funds 5,352,241 4,495,832
Total 23,181,503 21,317,398

32. Subsequent event

On January 16, 2024, Interbank issued subordinated bonds called "7.625 Subordinated Notes due 2034" for the 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. This issuance has maturity in January 2034 and the agreed nominal interest rate was 7.625 percent.

33. Additional explanation for english translation

The accompanying financial statements are presented on the basis of the IFRS. In the event of any discrepancy, the Spanish language version prevails.

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 undesigned, thereunto duly authorized.

INTERCORP FINANCIAL SERVICES INC.
Date: March 18, 2024 By: /s/ Michela Casassa Ramat
Name: Michela Casassa Ramat
Title: Chief Financial Officer

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