Intercorp Financial Services (IFS) 20-F2021 FY Annual report (foreign)

The implementation of alternative benchmark rates is still in progress, although most banks have moved from LIBOR to SOFR in the case agreements indexed to the U.S. dollar LIBOR. The replacement of LIBOR could have an adverse effect on our business, results of operations or financial condition if we are unable to agree on an alternative benchmark, like SOFR, with our customers and financial counterparties in advance. Publication of SOFR began on April 3, 2018 and it therefore has a limited history. In addition, the future performance of SOFR cannot be predicted based on the limited historical performance. Prior observed patterns, if any, in the behavior of market variables and their relation to SOFR, such as correlations, may change in the future. Whiledata have been released by the Federal Reserve Bank of New York, such analysis inherently involves assumptions, estimates and approximations. The future performance of SOFR is impossible to predict and therefore no future performance of SOFR may be inferred from any of the historical simulations or historical performance. Furthermore, we may face a risk of litigation, disputes or other actions from clients, counterparties, customers, investors or others regarding the interpretation or enforcement of related provisions or if we fail to appropriately communicate the effect that the transition to alternative benchmark rates will have on existing and future products. Although we expect to adapt our valuation processes, IT infrastructure and pricing systems as new information arises, we can neither assure you nor calculate the impact this could have on our business and results of operations, if any.

Before 2018, Interseguro used the mortality tables approved by the Chilean Superintendency of Securities and Insurance () and the Chilean Superintendency of Pensions () which incorporated moremortality information than the ones prescribed by the SBS before the approval of Resolutionby the SBS in March 2018.

Interbank’s strategy to grow its loan portfolio will require it to continue to have an active funding strategy. Interbank’s access to funding will depend on many factors, including factors beyond our control, such as any credit crunch, public health crises and epidemics/pandemics (such as thepandemic) or other conditions in global capital markets and investors’ perceptions of the risks of investing in Peru and emerging markets generally. The 2008 and 2009 global financial and economic crisis, the debt crisis in Europe and general market volatility, for example, had a negative impact on the liquidity of global financial markets. In the case of similar events, any equity or debt financing, if available at all, may be on terms that are not favorable to Interbank. If access to funding is limited, Interbank may not be able to implement its strategy, which could have a material adverse effect on our financial condition and results of operations.

Our subsidiaries’ credit ratings are an important component of their respective liquidity profile. Among other factors, Interbank’s credit ratings are based on its financial strength, the credit quality and concentrations in its loan portfolio, the level and volatility of its earnings, its capital adequacy, the quality of management, the liquidity of its balance sheet, the availability of a significant base of core retail and commercial deposits and its ability to access a broad array of funding sources. In addition, our subsidiaries’ lenders may be sensitive to the risk of a ratings downgrade, which could increase the cost of refinancing their existing obligations, raising funds in the capital markets and borrowing funds from private lenders, and could in turn have a material adverse effect on our financial condition and results of operations. Although our subsidiaries’ credit ratings have remained relatively stable over time, including throughout thepandemic, our creditors may be sensitive to changes in our credit ratings, and/or outlook. The risk of a future ratings downgrade could increase the cost of refinancing our existing obligations, raising funds in the capital markets and borrowing funds from private lenders, and could in turn have a material adverse effect on our financial condition and results of operations.

Interseguro also faces credit risks with respect to its real estate investments. Interseguro generally invests in land in order to develop commercial real estate projects. For these projects, Interseguro enters into long-term leases withtenants (typically 25 to 30 years) and medium-term leases with office tenants (typically two to five years). In the case of long- and medium-term leases, Interseguro’s tenants may experience a downturn in their businesses, which could weaken their financial condition and result in the tenants’ inability to make lease payments to Interseguro in a timely manner or at all. In 2021, as the effects of thepandemic began to improve as government occupancy and curfew mandates were gradually lifted, enabling stores to operate almost atlevels, we observed an improvement in tenants’ ability to make lease payments. For the year ended December 31, 2021, 6.5% of Interseguro’s tenants defaulted on payments and 2.3% deferred payments, as compared to 7.7% and 57.7%, respectively, for the year ended December 31, 2020. Despite this improvement, we can offer no assurance that this positive trend will continue, that additional tenants will not default, or that tenants who have deferred payments will ultimately be able to make them. For additional information on the impact of thepandemic on our subsidiaries, see “—Global and local health concerns, including in relation to the ongoingpandemic or other outbreaks of pandemics or contagious diseases, may adversely affect our and our subsidiaries’ business, financial condition and results of operations.”

As financial and insurance institutions, our success depends on the efficient and uninterrupted operation of our subsidiaries’ computer and communications hardware systems and our applications, including systems and applications that support the operation of Interbank’s financial stores, ATMs, Interbank Agente (correspondent agents), mobile applications and website, as well as the infrastructure components that support our operations (communication devices, networking, etc.). Our subsidiaries’ computer and communications systems and operations could be damaged or interrupted by fire, flood, power loss, telecommunications failure, sabotage, computer viruses, cyber-attacks, physical or electronicand similar events or disruptions. Any of these events could cause system interruptions, delays and losses of critical data and could prevent our subsidiaries from operating at optimal levels or at all.

Moreover, additional regulations or new requirements may emerge related to cybersecurity controls and data quality, as well as contractual commitments in accordance with standards established by the Information Security and Cybersecurity Management regulation (the “”), approved by SBS Resolution(as amended). Any failure or perceived failure by financial and insurance institutions to comply with such obligations may result in governmental enforcement actions and regulatory penalties, which could have an adverse effect on our reputation. Moreover, in February 2021, the SBS approved amendments to the Plan Business Continuity regulation (the “”), aimed to manage the enterprise and business unit levels, with business units identifying, measuring, monitoring, managing, and reporting these and other operational risks at a more detailed level. Failure to comply with these rules could result in a loss a material effect on results of operations and financial losses.

Peru’s GDP growth rates, low inflation, and external surplus, reflect, in part, the strength of Peru’s economic fundamentals. However, a deterioration of the global economy or a sharp decrease in commodity prices may adversely affect Peru’s economy. In addition, an economic contraction or weak economic growth in Peru’s trading partners may have an adverse effect on Peru’s economy. Despite Peru’s ongoing economic growth and stabilization, social and political tensions and high levels of poverty and unemployment continue. The combination of these factors may be exacerbated by the macroeconomic impact of the ongoingpandemic and the government’s response to prevent the spread and mitigate its effects, which may lead to economic, social and/or political crises which can spark a wave of protests and social unrest.

A general election was held in on April 11, 2021 to elect Peru’s next President and Congress and as no presidential candidate received a majority in the first round of voting, aelection took place on June 6, 2021 between the two candidates that received the most votes: José Pedro Castillo Terrones (), acandidate, and Keiko Sofia Fujimori Higuchi (), a center-right candidate. Following theelections, Mr. Castillo received the most votes in the second round and was inaugurated President on July 28, 2021.

With respect to the congressional elections, the results were such that the Peruvian Congress is fragmented, composed by members of nine (9) political parties with no single party holding control. A fragmented Congress with no clear majority or controlling blocks, may make it difficult for President Castillo to govern and garner support to pass legislation. The economic and social impact resulting from the political uncertainty generated by these occurrences at the highest levels of government raises concerns on the ability of the government to implement long-term and consistent economic and social policies required to combat social and economic issues in the future, including those designed to promote economic growth and to counteract the impact ofThe government’s failure to do so could materially impact our business and operations.

There can be no assurance that Peru will not face continued or new economic, political or social problems in the future or that these problems will not adversely affect our business, financial condition and results of operations. Future government policies toor respond to social unrest could include, among other things, expropriation, nationalization, suspension of the enforcement of creditors’ rights and new taxation policies. In addition, considering there have been two impeachment attempts initiated in Congress against President Castillo in his first eight months in office, we cannot rule out the possibility of additional vacancy motions on the grounds of permanent moral incapacity in near future.

The Peruvian government continues to deploy various economic and public health measures to address the pandemic caused byThese measures are part of an economic stimulus plan that includes tax incentives among other tools intended to address the immediate impacts of the national state of emergency invoked by the Peruvian government to attempt to contain spread of the virus and lessen the strain on the health care system and the impact on the overall economy. The MEF, the Central Reserve Bank of Peru, the SBS, as well as other government entities have adopted specific measures to provide economic support to segments of the population, such as vulnerable population and small enterprises, which are most at risk in this crisis.

Thepandemic has had a material adverse impact on the Peruvian economy resulting in lower prices for primary goods, volatility in the financial markets, reduced international trade and lower activity in certain of the key drivers of the local economy. Prior to the pandemic, the Central Reserve Bank of Peru (the “Central Bank”) had predicted economic growth of 3.8% for 2020 and 2021; however, as a result of thepandemic, Gross Domestic Product (“GDP”) dropped 11.0% in 2020 as compared to 2019, but GDP growth was 13.3% in 2021 as compared to 2020. Thepandemic has also adversely affected the global economy, including the economies of China and the U.S., resulting in, among other things, decreased demand for goods and services and decreased trade activity, which, in turn, may adversely affect Peru’s economy. In addition, the return of social distancing andquarantine measures may affect dynamism of various productive sectors of the economy. Reduced activity in these economic sectors may result in reduced employment and less income for families and companies, which may again generate a simultaneous shock on supply and demand—a supply shock resulting from the abrupt paralysis of production in multiple sectors and on the demand side as a result of reduced consumption, which may amplify the negative effects on the economy.

As the Peruvian banking system is still partially dollarized, with 26.0% of gross loans and 43.0% of deposits denominated in U.S. dollars as of December 31, 2021, devaluation of theagainst the U.S. dollar could have a negative impact on the ability of Interbank’s clients to repay loans and make premium payments.

We are exposed to currency mismatch risks. Within our insurance segment, a similar adverse effect could occur on Interseguro’s local debt holdings denominated in foreign currency. Despite any devaluation, and absent any change in foreign exchange regulations, Interbank and Interseguro would be required to continue to repay dollar-denominated deposits in U.S. dollars. In addition, while we seek to manage the gap between Interbank’s and Interseguro’s foreign currency-denominated assets and liabilities, by matching, for example, the volumes and maturities of Interbank’s-denominated loans against Interbank’sdenominated deposits, we may not be successful in doing so. Therefore, any significant devaluation of theagainst the U.S. dollar could have a material adverse effect on our financial condition and results of operations. In addition, a devaluation of theagainst the U.S. dollar would decrease the dollar value of any dividends paid to us by our subsidiaries, and, as a result, our ability to pay dividends could be materially and adversely affected. An appreciation of thecould also have an adverse impact on our results of operations as reported in, as Inteligo’s operations are denominated in U.S. dollars but our reporting currency is in.

Any dividends paid to us by Interbank, Interseguro and Inteligo SAB will be paid in. Peruvian law does not impose any restrictions on the ability of companies having operations in Peru to transfer foreign currencies from Peru to other countries, except for restrictions applicable to companies that have been convicted or have admitted to and/or acknowledged committing crimes against the Peruvian public administration or money laundering or equivalent crimes, as set forth in Urgency Decree(Urgency Decree to Ensure Continuity of Public Utility Investment Projects and Safeguard Compensation to the State in Cases of Corruption), which restricts the transfer of both local and foreign currency abroad. Except for the restrictions set forth in such Urgency Decree, companies having operations in Peru may freely transfer foreign currency from Peru to other countries. If the Peruvian government were to implement restrictive exchange rate controls in the future, we might be obligated to seek an authorization from the Peruvian government to make dividend payments. We cannot assure holders of our common shares that such an authorization would be obtained. Any such exchange rate restrictions or the failure to obtain such an authorization could materially and adversely affect our ability to pay our shareholders.

Any interruption to the recovery of the developed economies, the continued effects of the global crises, a worsening or resurgence of the debt crisis in Europe, impacts due to Brexit or a new geopolitical tension in Europe resulting in economic and/or financial crisis, or a combination of the above, could affect the Peruvian economy, and consequently, materially adversely affect our business. Our business is particularly sensitive to economic and market conditions which affect products of various export industries, including textile, fishing, and agriculture. In addition, we are active in the real estate sector, which can also be highly sensitive to macroeconomic developments. Although we have relatively little exposure to the mining sector, a decline in commodity prices could negatively affect the Peruvian economy as a whole. Any increase in the number of delinquencies or defaults would result in higher levels ofassets and provisions for loan losses, which could have a material adverse effect on our financial condition and results of operations.

Finally, the outbreak ofhas affected the economy of some of our main trade partners, such as China, the United States and the European Union, which in turn negatively impacted Peru’s revenues from trade activity in 2020 despite the related increase in commodity prices which supported growth in trade activity in 2021. Furthermore, other adverse developments in regional or global markets or an increase in the perceived risks associated with investing in emerging markets in the future could adversely affect the Peruvian economy and, as a result, adversely affect our businesses.

Peru is affected by, an oceanic and atmospheric phenomenon that causes a warming of temperatures in the Pacific Ocean, resulting in heavy rains off the coast of Peru and various other effects in other parts of the world. The effects of, which typically occurs every two to seven years, include flooding and the destruction of fish populations and agriculture, and it accordingly can have a negative impact on Peru’s economy. For example, in early 2017,adversely affected agricultural production, transportation services, tourism and commercial activity, caused widespread damage to infrastructure and displaced people and resulted in a 1.5% drop in GDP growth in 2017 relative to 2016 figures. The Peruvian government estimated thatcaused U.S.$2.8 billion in damages in affected regions in the first half of 2017. In particular,has affected and could in the future affect our loan activity and asset quality, as loan agreements typically allow borrowers to extend payments for a certain amount of time due toand it could ultimately affect their payment capacity when the extensions run out.

On October 27, 2021, President Castillo introduced a billto the Peruvian Congress, which proposed to delegate to the executive branch the authority to regulate for aperiod, certain tax, fiscal, financial and economic matters. This bill was approved and ratified into law as Law No. 31380 on December 27, 2021. During suchperiod various subsidies and reforms to certain financial system regulations were passed. However, although theterm has expired, and the terms of the approved law differed from those originally proposed by President Castillo, there is no certainty that President Castillo will not continue to pursue similar measures or return to business-friendly and open-market economic policies that stimulate economic growth and stability during his term. The effects of any tax reform that could be proposed in the future and any other changes that could result from the enactment of additional reform or changes in interpretation have not been, and cannot be, quantified. Any changes to the Peruvian tax regime or interpretation thereof may result in an increase of our and our subsidiaries’ tax liabilities and/or overall compliance costs, which could have a material adverse impact on our business, financial condition and results of operations. Furthermore, such political uncertainty, or actual policies implemented by the Peruvian government, could also impact interest rates and currency volatility, as well as adversely and materially affect the Peruvian economy, which could have a material adverse effect on our financial condition and results of operations.

Dollarization generally refers to the degree to which the U.S. dollar has displaced thein the economy. Despite the positive effect that it may have on reducing cross-border transaction costs and preserving purchasing power, the dollarization of the Peruvian economy has also hampered monetary policy by undermining the Central Reserve Bank of Peru’s ability to control the money supply. Despite the government’s efforts to “solarize” the economy, the high degree of dollarization of the economy affects the Peruvian financial system by forcing the Central Reserve Bank of Peru to

Under the Peruvian Banking and Insurance Law, all financial institutions regulated by the SBS (except for small-business developmentinstitutions) are required to maintain a legal reserve () for certain obligations. The Central Reserve Bank of Peru may require additional and marginal reserves. The exact level and method of calculation of the reserve requirement is set by the Central Reserve Bank of Peru, which has issued different sets of regulations for foreign and local currency-denominated obligations of banks. We cannot assure you that the Central Reserve Bank of Peru will not increase the base rate or impose additional requirements in the future, or that such changes in the regulatory environment will not have an adverse effect on our business, financial condition or results of operations.

We are a(corporation) organized under the laws of Panama. Our corporate affairs are governed by our organizational documents and the laws of Panama. Under such documents and laws, our shareholders, and therefore holders of our common shares, may have fewer or less well-defined rights than they might have as shareholders of a corporation incorporated in other jurisdictions, such as in the United States.

We have been advised by our Peruvian counsel that any final and conclusive judgment for a fixed and final sum obtained against us in any foreign court having jurisdiction in respect of any suit, action or proceeding against us for the enforcement of any obligations assumed under our outstanding securities or this Annual Report on Formwould, upon request, will be deemed valid and enforceable in Peru through an exequatur judiciary proceeding (which does not involve the reopening of the case),that (a) there is a treaty in effect between the country where said foreign court sits and Peru regarding the recognition and enforcement of foreign judgments or, (b) in the absence of such a treaty, the original judgment is recognized by Peruvian Courts () under suchproceeding, subject to the provisions of the Peruvian Civil Code and the Peruvian Civil Procedure Code,, that the following conditions and requirements are met: (i) the foreign judgment does not resolve matters under the exclusive jurisdiction of Peruvian Courts, (ii) such foreign court had jurisdiction under its own conflicts of law rules and under general principles of international law on jurisdiction, (iii) the defendant was adequately served and was guaranteed due process under the laws of the jurisdiction of the issuing court, (iv) the foreign judgment has the status ofin the jurisdiction of the court rendering such judgment, (v) there is no pending litigation in Peru between the same parties for the same dispute, which shall have been initiated before the commencement of the proceeding that concluded with such foreign judgment, (vi) the foreign judgment is not incompatible with another judgment that fulfills the requirements of recognition and enforceability established by Peruvian law unless such foreign judgment was rendered first, (vii) the foreign judgment is not contrary to public order () or good morals (), (viii) it has not been proven that such foreign court denies enforcement of Peruvian judgments or engages in a review of the merits thereof, (ix) the judgment has been (a) duly apostilled by the competent authority of the jurisdiction of the issuing court, in case of jurisdictions that are parties to the Hague Apostille Convention and has not opposed Peru’s accession thereto, or (b) certified by Peruvian consular authorities, in case of jurisdictions that are not parties to the Hague Apostille Convention, or then being a signatory country, opposed Peru’s accession thereto and is accompanied by a certified and officially translated copy of such judgment into Spanish, and (x) the applicable court taxes and filing fees have been paid.

If proceedings are brought in the courts of Peru seeking to enforce our obligations in respect of our common shares, we will not be required to discharge our obligations in a currency other than. Under Peruvian exchange control limitations, an obligation in Peru to pay amounts denominated in a currency other thanmay be satisfied in Peruvian currency only at the exchange rate, as determined by the Central Bank, in effect on the date the judgment is obtained, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date. The then prevailing exchange rate may not affordinvestors with full compensation for any claim arising out of or related to our obligations under our common shares.

Based on our current expectations regarding the value and nature of our assets, the sources and nature of our income, relevant market and shareholder data and our current business plans, we believe that we will not be treated as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes with respect to our 2021 and current taxable years, and we do not anticipate becoming a PFIC in the future. Characterization as a PFIC could result in adverse U.S. tax consequences to holders of our common shares if they are U.S. investors. Certain elections may be available to mitigate the consequences if we are treated as a PFIC for U.S. federal income tax purposes. See “Item 10. Additional Information—Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Companies” included elsewhere in this Annual Report on Form

As discussed in more detail in “Taxation—United States Federal Income Tax Considerations,” U.S. investors face unique U.S. tax issues from indirectly owning interests in a PFIC that may result in adverse U.S. tax consequences to them. See “Item 10. Additional Information—Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Companies” included elsewhere in this Annual Report on Form

For example, the NYSE listing standards provide that the board of directors of a U.S. listed company must have a majority of independent directors at the time the company ceases to be a “controlled company”. The listing standards for the NYSE also require that U.S. listed companies, at the time they cease to be “controlled companies,” have a nominating/corporate governance committee and a compensation committee (in addition to an audit committee). Each of these committees must consist solely of independent directors and must have a written charter that addresses certain matters specified in the listing standards. Under both Panamanian and Peruvian law, companies may, but are not required to, form special governance committees, which may be composed partially or entirely ofdirectors. In addition, NYSE rules require the independentdirectors of U.S. listed companies to meet on a regular basis without management being present. There is no similar requirement under Peruvian and Panamanian law.

In accordance with Peruvian income tax laws and regulations, in the case of the direct or indirect transfer by aresident of shares issued by a Peruvian corporation, the Peruvian corporation whose shares were directly or indirectly transacted will be jointly liable with thetransferor for any unpaid capital gain tax obligations (plus accrued interest and penalties) arising from such sale/purchase, if during any of the 12 months preceding the transaction,, (i) thetransferor held an indirect or direct interest of more than 10% in the equity of the Peruvian corporation that issued the shares being directly or indirectly transferred, or (ii) thetransferor and the Peruvian corporation that issued the shares being transferred consolidate financial statements. If such a transfer were to occur and the resulting Peruvian capital gains tax were not paid by the transferor, it could have a material adverse effect on our business, financial condition or results of operations.

Interbank is an open-stock corporation (). Interbank was incorporated in Lima, Peru in 1897 and formerly conducted business under the names “Banco Internacional del Perú S.A.” and “Interbank”. In August 1994, as part of the government’s privatization efforts, 91% of Interbank’s share capital was acquired by Corporación Interbank, which subsequently transferred its holdings in Interbank to the Rodríguez-Pastor family through Intercorp Peru, a limited liability company organized under the laws of the Commonwealth of The Bahamas that is listed on the Lima Stock Exchange. After Interbank’s acquisition by Intercorp Peru in 1994, Interbank began conducting business under the name “Interbank” as part of a rebranding and modernization effort, and has become a leading universal bank in Peru. As of December 31, 2021, IFS holds 99.30% of the capital stock of Interbank.

Interseguro is a corporation () that was incorporated in 1998 by Intercorp Peru, pursuant to an agreement between Intercorp Peru and The Bankers Trust Company (“Bankers Trust”) (at the time the controlling shareholder of Consorcio Nacional de Seguros S.A.A., the largest insurer in Chile) to benefit from the expansion of the insurance business in Peru. In connection with the sale of Bankers Trust to Deutsche Bank AG in 1999, Bankers Trust’s interest in Interseguro was sold to a group of Chilean investors, and in 2000 Intercorp Peru acquired the portion of Interseguro that it did not own.

Inteligo was incorporated under the laws of the Republic of Panama in 2006. Inteligo Bank is a corporation that was incorporated in 1995 in The Bahamas and formerly conducted business under the names of Interbank Overseas Ltd. and Blubank Ltd. Inteligo SAB is a corporation (that started operations in 1993. On July 18, 2014, the board of directors of IFS approved the acquisition of Inteligo, effective on August 1, 2014. This reorganization entailed the acquisition of 100% of Intercorp Peru’s shares in Inteligo by IFS in exchange for 19.5 million IFS common shares. Inteligo SAB is organized under the laws of Peru, and is licensed by the SMV to operate in Peru and conduct brokerage, custody, portfolio management and advisory services.

Interfondos S.A., Sociedad Administradora de Fondos (“Interfondos”) is a corporation () that started operations in 1994. It is organized under the laws of Peru, and is licensed by the SMV to operate in Peru and conduct mutual funds and investment funds management services.

Finally, in July 2019 we, together with Interbank, Intercorp Peru and ashareholder conducted ainitial public offering as a result of which IFS sold 1,150,000 newly-issued common shares and 2,418,754 treasury common shares (including shares sold by Interbank), Intercorp Peru sold 2,531,246 common shares and theshareholder sold 3,000,000 common shares. In addition, the underwriters partially exercised their option to purchase 1,350,000 additional shares, which resulted in the purchase of 1,186,841 newly-issued common shares.

Although historically since 2008 we have delivered returns for our shareholders supported by a strong bottom-line generation, our distribution of dividends in 2021, based on our 2020 results, were negatively affected by thepandemic. In 2020, dividends were U.S.$202 million based on 2019 results. In 2021, we paid U.S.$88.9 million in dividends based on 2020 results.Furthermore, in November 2021, IFS

The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The materials included in this Annual Report on Formmay be downloaded at the SEC’s website:. Any filings we make are also available to the public over the Internet at the SEC’s website and at our website at. (This URL and other URLs in this Annual Report on Formare intended to be inactive textual references only. None are intended to be active hyperlinks to websites. Any information which might be accessible through a hyperlink referenced from any URL referenced in this report, is not and shall not be deemed to be incorporated into this Annual Report on Form

Our key strategic priority is to achieve digital excellence for our customers by providing them with a world-class, flexible and secure digital platform. We believe our digital transformation is vital to our continued growth and profitability, and for this reason we have been investing in developing the capabilities necessary to offer digital products and services to our customers. In December 2021, more than 2,129,000 retail customers used our digital platform compared to more than 600,000 retail customers in December 2017. More than 1,576,000 retail customers no longer utilize physical channels other than ATMs as of December 2021. We are aiming to allow our customers to have a 100% digital relationship with us in an efficient and secure manner. We have also streamlined our physical presence and reduced the number of branches by approximately 35% since its peak in 2016, focusing on educating our customers in the use of our digital platform. To accompany this transformation, we are in the process of redesigning our physical presence in order to better serve the evolving needs of our customers. We have substantially increased migration oftransactions to more efficient digital channels, and we have increased sales of products to existing customers, as well as increased new customer acquisition of which a growing number are being acquired digitally or “born-digital.”

For the year ended December 31, 2021, our consolidated net profit was S/1,800.2 million as compared to S/383.5 million in 2020. Despite the ongoingpandemic and the economic and political uncertainty in the run up to the presidential general election in Peru, net profit recovered in 2021 mainly due to (i) higher revenues across all subsidiaries and (ii) lower provisions at Interbank, as compared to 2020 when consolidated net profit was materially adversely affected as a result of the impact of thepandemic on our subsidiaries’ businesses.

The Peruvian government’s prudent management of the economy, conservative fiscal policy, coupled with the Central Reserve Bank of Peru’s cautious management of inflation and international reserves have contributed to economic development, increased internal consumption and strong macroeconomic fundamentals, including low levels of public debt, low inflation, low fiscal deficit and high levels of international reserves. However, 2021 was characterized by global inflationary pressures that have resulted in an inflation rate that has been temporarily above the Central Reserve Bank of Peru’s target and higher inflation expectations for 2022 and beyond. Peru’s strong track record of macroeconomic policy credibility, consistency and ability to adapt to changes has helped it to achieve investment grade ratings of Baal by Moody’s Investor Service (“Moody’s”), BBB+ by Standard & Poor’s Rating Services (“S&P”) and BBB by Fitch Ratings Ltd. (“Fitch”) as of December 31, 2021. In its most recent forecast as of March 2022, the Central Reserve Bank of Peru has estimated real GDP growth for Peru of 3.4% for 2022 and 3.2% for 2023, as compared to the 13.3% increase registered in 2021 due to the low comparison as a result of the effects of thepandemic.

Our commercial banking business serves a range of clients spanning large corporates,andandcompanies (“SMEs”). We are focusing on increasing our market share inand SMEs while maintaining our large corporate business with a profit-oriented approach. In this context, our participation in the Reactiva Peru program allowed us to start new business relationships with clients from theand SME segments, reaching a market share of 7.7% forand 5.8% for SMEs as of December 31, 2021, according to the SBS. We believe that these segments will continue to provide additional growth opportunities in the coming years. Moreover, our overall commercial loan portfolio provides us with a lower risk component that balances our total loan portfolio.

Within our wealth management segment, we believe Inteligo is well positioned to capture an increasing share of the number of high net worth clients. Inteligo’s CAGR in assets under management was 9.1% between December 31, 2017 and December 31, 2021. We believe that both Inteligo’s position as a provider of tailored wealth management services and its ability to provide its customers with both local and international investment products will help increase its share of wallet amongindividuals, while delivering high levels of growth and profitability.

Furthermore, digital customer acquisition, or clients that were ‘born digital’, reached approximately 29,300 in December 2021, or 38% of new individual clients, compared to approximately 41,600 in December 2020, 47% of new individual clients. Similarly, we are continuously improving our digital capabilities for SME and corporate clients, enhancing our value-added proposition and tools to foster our commercial customers’ growth despite the disruptions caused by thepandemic. For example, we have streamlined our account opening process for businesses (“Cuenta Negocios”) from 15 days to a digitalprocess, which allowed us to 100% digitally assist our SME customers that required an account to apply for government facilities. This innovation has driven growth in customer acquisition for small companies through our digital platform, accounting for 95% of our total new small business accounts in December 2021 compared to 54% in December 2020. In 2021, we developed a similar process for larger companies. Today, even customers in our corporate segment can open an account 100% digitally.

Supported by our digital platform, we have also increased the number of products held by a digital customer. The number of products held by our digital customers has increased 25% from December 2020 to December 2021. As a result of the growth in digital customers, the cross-selling ratio for such clients increased from 1.90 products per digital customer in December 2020 to 1.98 products per digital customer in December 2021. The cross-selling ratio is calculated as the sum of the number of products held by any given group of customers divided by the number of customers in such group. Similarly, the number of products held by our total customers increased by 21%, however, given the growth in our total customer base, this resulted in a higher cross-selling ratio for total customers, which increased from 1.65 products per customer in December 2020 to 1.69 products per customer in December 2021. As part of our digital transformation, we have introduced new technologies and processes which enable us to improveof new solutions. We have also made significant changes in the way we work. We are currently working with 93 teams using an agile framework on a number of projects, ranging from applications, digital products, new functionalities, and we are currently exploring different solutions targeting new customer segments and piloting new initiatives. For example, we have an innovation lab called “LaBentana”, which focuses on continuous innovation and development of new ideas and pilot initiatives, using design thinking methodologies developed together with the consulting firm IDEO.

Interbank has built a convenient omni-channel distribution network in Peru, serving over 4.7 million customers. As of December 31, 2021, Interbank had 189 financial stores and operated the third-largest ATM network in Peru with 1,581 ATMs, which includes one of the largestATM network (under our Global Net brand). Interbank has the largest number of financial stores inside supermarkets in Peru. Moreover, with the intention of providing underserved customers with more convenient services, Interbank operates a network of correspondent agents, called Interbank Agentes. The correspondent agent concept consists of providing third-party commercial establishments withelectronic terminals which allow Interbank’s customers to perform basic cash-based operations such as cash withdrawals, credit card and bill payments, and deposits at a lower marginal cost to Interbank relative to transactions performed in our financial stores. As of December 31, 2021, Interbank had 6,027 correspondent agents (includes external network).

Since 2013 and in line with our strategy, we have implemented a profitability model for financial stores and ATMs which ranks them according to certain profitability metrics relevant to each distribution channel. This has allowed us to identify the less profitable units in order to close them and to prioritize new openings in more strategic locations with higher demand for value-added financial services. As a result, the number of financial stores, which peaked at 290 in 2016, has decreased by 35% to 189 as of December 31, 2021, while productivity of financial stores, measured as the volume of retail deposits sold per branch, has increased. This drove retail deposits per branch to grow from approximately S/40.5 million per branch as of December 2016 to approximately S/121.2 million per branch as of December 2021. Likewise, Interbank’s market share in retail deposits under SBS GAAP grew from 12.8% as of December 31, 2016 to 15.0% as of December 31, 2021. Additionally, the number of ATMs has increased to 1,581 in December 2021 from 2,159 in 2016. Furthermore, the number of Interbank and Interseguro sales agents has increased from 897 in 2016 to 1,077 in 2021, while call center agents decreased from 390 to 369 in the same period. Given the lockdown implemented by the Peruvian government in response to thepandemic, the call center has become a more relevant channel to interact with our customers as well as to answer questions regarding assistance to help address the crisis. Likewise attending to queries via Whatsapp also became a common and efficient point of contact with our customers.

Interseguro offers and sells its annuities and individual life insurance products through its own dedicated sales force to ensure the delivery of high-quality service and advice to customers. Interseguro’s specialized sales force is trained to provide a differentiated service for various customer types. As of December 31, 2021, Interseguro employed 120 agents exclusively dedicated to selling annuities and 370 agents to selling life insurance products. Due to thepandemic, Interseguro retooled its sales force to provide customers with a 100% remote assistance and digital operation. Prior to the pandemic, sales in annuities and life insurance products were only conductedbut digitalization of these sales was accelerated.

Interbank’s underwriting procedures are based on strong analytics and proprietary models. Additionally, Interbank’s investments in technology and improvements in its ability to process and apply data have enriched our risk models and enhanced their accuracy and predictiveness. Interbank’s credit risk policies are approved by its risk committee and board of directors. Despite Interbank’s concentration in retail loans, which tend to have higher levels of delinquency, Interbank’sloans as a percentage of total gross loans ratio as of December 31, 2021 was 3.6%, lower than the 3.8% average of the three largest banks in Peru. As of December 31, 2021, Interbank’sloans coverage ratio was 132.8%, as compared to the average for the Peruvian banking system of 155.5%, according to the SBS. In general, coverage ratios for Peruvian banks decreased during 2021 due to the reversal of provisions as improved payment behavior was observed across retail loans.

Interbank’s capitalization ratio, which is calculated as Interbank’s regulatory capital divided by its risk-weighted assets, was the highest compared to the other three largest banks. Additionally, as of December 31, 2021, Interbank’s capitalization ratio stood at 15.9% as compared to 14.9% for the Peruvian banking system, according to the SBS. The minimum capitalization ratio required by Peruvian banking regulations is 8.0% plus an additional capital requirement which depends on certain levels of loan concentration in each institution. For Interbank, this additional capital requirement amounts to 1.0% as of December 31, 2021. Interbank’s core equity Tier 1 ratio was 12.5% as of December 31, 2021. In addition, in June 2021, the SBS issued Official Document No. 27358-2021 which revises Emergency Decreeand reduced the minimum regulatory capital ratio requirement from 10% to 8% from April 2021 to March 2022.

Interseguro’s investment team and its investment management approach have achieved a 7.5% investment return for the year ended December 31, 2021, compared to the Peruvian insurance industry’s 6.5%, according to the SBS, while maintaining prudent levels of risk and following the SBS risk guidelines. Thepandemic led to a general decline in the global economy and financial markets. Accordingly, Interseguro’s investment strategy was focused on identifying and reducing potential risks in the portfolio and looking for assets of solid companies with strong credit metrics.

Given our competitive advantage in the retail segment, over the last two years, increased growth in deposits was attributable to an increase in our clients’ liquidity as the result of (i) partial cash withdrawals from CTS accounts systemwide and the private pension system, (ii) commercial deposits related to unused funds from the Reactiva Peru program, and (iii) the widespread adoption of a “savings” mindset, all as a result of the effects of thepandemic.

We are focused on attracting, developing and retaining highly qualified personnel and believe that a merit-based culture that emphasizes teamwork enables us to maintain a motivated workforce that delivers high-quality service. Interbank is the only Peruvian company that has been chosen by the Peruvian Great Place to Work Institute as one of the 20 best places to work in Peru for the past 20 consecutive years and one of the top 20 places to work in Latin America in the past nine years. In the most recently available rankings, Interbank was selected number one best company to work for in Peru in the large size category (2022), number one in Latin America (2021), number eleven for women in Peru (2021), number one for work from home in Peru (2021), number seven for diversity and inclusion in Peru in 2021, and number two for millennials in Peru (2021). Similarly, Interseguro was selected as the fifth best company to work for Peru in thecategory (2022) and is the only Peruvian insurance company that has been chosen as one of the top 10 best places to work in Perucategory) by the Peruvian Great Place to Work Institute. In 2020, Inteligo SAB was ranked among the top 15 companies in its category (companies with 30 to 250 employees) in Peru between 2011 and 2019. Furthermore, it ranked second in 2019. In 2022, Inteligo’s three subsidiaries located in Peru (Inteligo SAB, Inteligo Peru Holdings and Interfondos) participated together under the name “Inteligo Group Peru” and Inteligo Group Peru was selected as the third best company to work for in Peru in thecategory. Inteligo Bank’s branch in Panama began participating in the Great Place to Work Institute survey in 2014 and since 2015 has been ranked among the top 10 companies in its category (companies with 30 to 250 employees) in Panama.

The alliance’s product offerings include a savings account with payments capabilities (bills, mobilecardless ATM withdrawal, interbank in/out transfers, among others), and the(and only)and name-less debit and credit cards that are delivered as fast as within the hour in locations under Rappi coverage. As of December 2021, RappiBank had 209,000 customers.

Furthermore, our parent company, Intercorp Peru, is one of Peru’s largest economic conglomerates, with activities spanning financial services, retail, education and real estate, among others. In 2021 and 2020, Intercorp Peru’s businesses represented approximately 3.5% and 3.7% of Peru’s GDP, respectively, while generating U.S.$7,625 million and U.S.$7,209 million in revenue, respectively. We believe that being part of this group gives us a competitive edge, because of the group’s deep knowledge of the Peruvian consumer, extensive focus andin the Peruvian retail market, highly visiblepresence and rapid decision-making capabilities. Intercorp provides significant synergy and cross-selling opportunities for IFS. For example, starting in 2018, we, jointly with Intercorp Peru, launched an effort to strengthen our presence and commercial efforts in seven of Peru’s main regions: Arequipa, Cusco, Trujillo, Chiclayo, Ica, Huancayo and Piura, by leveraging on Intercorp’s already established network.

Investments in technology represent the pillar of this strategic initiative, and we are working in a variety of areas to achieve this goal, including data and infrastructure, advanced marketing analytics, and risk profiling and pricing models, as well as improving our customer management system (“CRM”) capabilities, including contextual marketing. With the support of our team of data scientists, we centrally design and distribute most of our sales campaigns, have substantially improved our campaign effectiveness and are currently employing real-time decision making on certain campaigns. This combination of investments has helped make us more dynamic and able to approach customers in real time, by offeringinformation and agile and transparent processes that generate trust in us. Additionally, we have bolstered our investments in cybersecurity as we believe it is fundamental to provide a secure platform to be able to continue with our digital transformation.

These efforts also include different actions undertaken to have a better understanding of the self-employed segment of the population, which constitute a significant opportunity for financial services given the current low penetration levels. We are working on alternative risk profile models for new customer acquisition using new sources andsources of data.

Interbank, Interseguro and Inteligo will continue their efforts to attract, develop and retain highly qualified personnel and to maintain a performance-based culture that emphasizes teamwork to keep employees motivated and deliver high-quality service and strong results. In this context, thepandemic has given us the opportunity to attract talented people from all around the world because we do not require them to be physically located in Peru.

In this sense, the combination of our purpose, ourdigital strategy and our capabilities allow us to focus on five main areas to be accomplished in the following years:

At Interseguro, we are expanding our product offering through our digital platform, which started with the launch of the online sale of SOAT in 2016 and continued with the sale of new digital products such as travel insurance, car insurance and individual life insurance. In 2021, premiums for retail and individual life insurance products sold through digital channels grew 52.7% compared to in 2020. In addition, due to thepandemic, Interseguro accelerated the digitalization of its sales of annuities and life insurance products.

To achieve all of the above, a scalable, flexible, trustworthy, stable and secure technological platform is essential. We believe that we have deployed the key initial investments necessary to scale our platform and are committed to continue improving by maintaining and updating our current levels of investment in technology. Our IT strategy is focused on dedicating more resources to projects that add value for the customer. In this context, Interbank continuously invests in core applications with the aim of keeping themwhile additional effort and resources are invested in the digitalization and transformation of processes and channels in order to provide a 100% digital experience to internal and external customers. Our ongoing focus is based on four main areas of work: (i) development of a new digital platform based on open technologies and application programming interfaces (“APIs”), (ii) focus on the high performance and stability of our technological platforms, including cloud services, (iii) new processes for continuous delivery of new developments, and (iv) focus on cybersecurity. Although there have been no material security breaches to date, we are highly vigilant and we have created a policy that provides general security guidelines that employees and suppliers must comply with to mitigate cyber-security risks. General-purpose technologies have also been implemented to mitigate the materialization of cyber-security risks and these controls are constantly evolving and aligning with industry trends.

Moreover, we have moved from working with 17 agile teams in 2017 to 93 agile teams in 2021, allowing us to substantially decreaseand to develop more innovative ideas.

In 2020, Interbank became the only private bank to offer a 100% digital solution to distribute the monetary transfers offered by the Peruvian government to the people most affected by thecrisis. In such year, we implemented a biometric authentication system in order to allow users (including both clients andto enroll in Tunki and receive the government’s financial aid offered in the context of thepandemic. As a result, Tunki users grew more than three times between March 2020 and December 2020, from around 162,000 to 762,000. As of December 31, 2021, Tunki users reached 1,626,000 users. We expect that such an offering of a 100% digital and simple payment experience, strengthened with new functionalities and financial products, will lead to an increase in the number of users and as such, our ability to monetize on this trend.

Finally, Shopstar is an online marketplace offering housewares, electronics, toys, and many other goods, through which we aim to become the preferredoption for IFS customers and utilize as a sandbox to test some of our initiatives such as Dividelo (Interbank’s buy now, pay later solution) and Interbank Benefit (Interbank’s reward program). As of December 31, 2021, Shopstar reached 68,000 users.

We believe these digital initiatives allowed us to access new information and new monetization opportunities that will be reflected in our market share in consumer loans,and POS processing, and merchant financing penetration. To the extent we are able to leverage these opportunities, we believe Interbank’s strategic relevance in the consumer financing landscape will be enhanced, supported by our risk management capabilities. As of December 31, 2021, our market share in consumer loans was 22.6%, which positions us as the second largest provider of these loans among banks in Peru.

IFS’s three subsidiaries are working on continuing to develop customers’ journeys to provide customers with the best experience possible. The customer journey begins with new client acquisition andcontinues with customer development to earn loyalty, and finally, is maintained through ourefforts. We have been implementing various initiatives to improve the customer relationship cycle.

In the case of Interbank, we are continuously improving our value proposition for different customer segments including improvements to basic products such as accounts, payments and financing. We have developed several digital features and products to serve different customer needs, such as: the loyalty program Interbank Benefit, the digital wallet Tunki, the budget tool, the digital savings account Piggybank, and RappiBank, Peru’s first neobank. In order to ensure we deliver customer-oriented products, we use design thinking, which we have learned through several partnerships with IDEO.

Regarding our cash management platform has three types of client groups based on sales volume, which allows us to employ different strategies accordingly. For large corporations, we focus our efforts on generation of fees from cash management and corporate finance; forcompanies we focus on growth, productivity and cash management; and for small companies we focus on sustainable growth and productivity with strong support from analytics and collection. For small businesses, since its introduction in August 2018, our Cuenta Negocios, an account that can be opened 100% digitally and within 10 minutes, has grown to 183,371 accounts as of December 31, 2021. Moreover, we are testing an application which provides an alternative method of financing based on digital tools and information.

Between 2018 and 2021, Interbank’s data and analytics approach was focused on developing capabilities based on creating new models and contextual enablers. However, this approach has evolved and is now targeting the development ofexperiences, working under agile teams and following three pillars:

Moreover, at Interseguro our customer journey is focused on anexperience, from the issuance of a policy to the after-sale services we offer to clients. In this context, our digital offering is gaining relevance. As an example, digital SOAT policies reached 81.3% of total SOAT sales in the month of December 2021, compared to 80.6% in the month of December 2020. Moreover, our after-sale offerings are expected to become a virtual self-service experience, with the aim of ensuring customers have a simple and positive interaction with us.

Finally, Inteligo’s approach is focused on its value proposition, offering digital onboarding and products and services by segment, with aview of its customers. Inteligo’s brand focuses on offshore wealth management services and has launched a digital platform that allowsfinancial planning, and advisory and execution services to be part of our digital customer journey. As an example, during 2021, Inteligo Bank developed new digital offerings for its clients, which combine with the existing services provided by their relationship officer under a “phygital” model.

We will continue to focus on our digital transformation to enhance efficiency through the automation of internal processes and use of technology. Our goal is to be more efficient while utilizing fewer resources in our customer interactions by focusing our efforts on: (i) simplifying our structures, (ii) implementing more independent robot usage which includes artificial intelligence features, and (iii) digitalizingcustomer processes.

As a result of the adverse economic effects of thepandemic, key targets for us in 2020 and 2021 were to execute efficient and successful cost control measures to offset such effects on our business. In this context, we have improved our efficiency ratio from 36.9% in 2017 to 34.7% in 2021, with initiatives such as branch rationalization, the development and implementation ofprocesses, and the simplification of our systems. We plan to continue to pursue such initiatives which are bolstered by new digital features.

For the years ended December 31, 2021, 2020 and 2019, Interbank’s net results were a net profit of S/1,360.3 million (U.S.$341.2 million), net loss of S/5.7 million (U.S.$1.6 million) and net profits of S/1,228.5 million (U.S.$370.7 million), respectively. As of December 31, 2021, 2020 and 2019, Interbank had shareholders’ equity of S/7,002.0 million (U.S.$1,756.2 million), S/6,224.5 million (U.S.$ 1,719.0 million) and S/6,342.9 million (U.S.$ 1,914.0 million), respectively. Interbank’s ROE and ROA for the year ended December 31, 2021 were 21.0% and 2.0%, respectively. Interbank’s ROE for the years ended December 31, 2020 and 2019 was negative 0.1% and 21.2%, respectively, and ROA for the years ended December 31, 2020 and 2019 was negative 0.0% and 2.4%, respectively. (See “Item 4. Information on the Company—BusinessFinancial Measures” for an explanation of the adjustments made 2019).

Interbank also participated in the Reactiva Peru Program, which was designed to ensure the continuity of payments to lenders and stabilize the economy by allowing Peruvian banks to originate low interest-rate, Central Bank-funded, commercial loans, guaranteed between 80% and 98% by the Peruvian government. These loans have tenors of up to 36 months and grace periods of up to 12 months. In March 2021, the Peruvian government approved an initiative to provide further relief for loans disbursed under the Reactiva Peru program, by providing for a rescheduling process for such loans, including a new grace period of up to 12 months. The rescheduling program initially covered up to S/16 billion (27% of the initial program) in loans disbursed and companies had until July 15, 2021 to request the rescheduling of their outstanding loans under certain conditions, which was assessed by the respective financial institutions according to the size of the company and of the loan that was initially granted. Moreover, in order to establish measures to continue promoting the financing of SMEs affected by thepandemic, the Peruvian government extended the deadline to request the rescheduling of Reactiva Peru loans until December 31, 2021. As of December 31, 2021, outstanding loans disbursed by Interbank under the program amounted to S/4.9 billion, a reduction of 26% compared to the previous year. As of the same date, the balance of rescheduled Reactiva Peru loans was 40% of the total Reactiva Peru loan portfolio.

Furthermore, at the start of thepandemic, the Peruvian government and institutions such as the Central Reserve Bank of Peru responded quickly to the crisis and implemented expansionary fiscal and monetary measures immediately, aiming to provide liquidity, including, among others: