Intercorp Perú Ltd. and Subsidiaries Interim condensed ......Translation of consolidated financial statements originally issued in Spanish – Note 29 Intercorp Perú Ltd. and Subsidiaries

Translation of consolidated financial statements originally issued in Spanish – Note 29

Intercorp Perú Ltd. and Subsidiaries

Interim condensed consolidated financial statements as of September 30,

2019, December 31, 2018 and for the nine-month periods ended September

30, 2019 and 2018



Interim condensed consolidated financial statements as of September 30, 2019,

December 31, 2018 and for the nine-month periods ended September 30, 2019 and

2018

Content

Interim condensed consolidated financial statements

Interim condensed consolidated statements of financial position

Interim condensed consolidated statements of income

Interim condensed consolidated statements of other comprehensive income

Interim condensed consolidated statements of changes in equity

Interim condensed consolidated statements of cash flows

Notes to the interim condensed consolidated financial statements


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


Interim condensed consolidated statements of financial position As of September 30, 2019 (unaudited) and December 31, 2018 (audited)

Note As of September

31, 2019

As of December

31, 2018

S/(000) S/(000)

Assets

Cash and due from banks 5

Cash and clearing 1,647,142 1,890,173

Deposits in the Central Reserve Bank of Peru 6,023,439 3,689,662

Deposits in local and foreign banks 3,081,436 2,017,228

Restricted funds 1,589,716 1,318,911

12,341,733 8,915,974

Inter-bank funds - 495,037

Financial investments 6 18,488,868 17,663,095

Loans, net 7 36,206,964 33,424,704

Investment property 8 4,325,124 4,072,977

Inventories, net 9 2,432,339 2,310,254

Property, furniture and equipment, net 4.2.2(a) 9,891,179 7,415,320

Due from customers on acceptances 124,691 132,437

Accounts receivable and other assets, net 10 4,221,969 2,817,093

Goodwill, trademark and other intangible assets, net 4,530,173 4,567,162

Deferred Income Tax asset, net 289,233 310,789

80,510,540 73,208,868

Total assets 92,852,273 82,124,842

Note As of September

31, 2019

As of December

31, 2018

S/(000) S/(000)

Liabilities

Deposits and obligations 11 35,765,012 33,262,266

Inter-bank funds 15,001 -

Due to banks and correspondents 12 7,352,704 7,226,209

Bonds, notes and other obligations 13 14,751,547 11,929,628

Due from customers on acceptances 124,691 132,437

Insurance contract liabilities 14 11,453,272 10,300,468

Accounts payable, provisions and other liabilities 10 8,266,648 6,162,926

Deferred Income Tax liability, net 688,456 710,324

Total liabilities 78,417,331 69,724,258

Equity, net 15

Equity attributable to Intercorp Perú Ltd.‘s shareholders:

Capital stock 4,502,155 4,010,690

Reserves 3,798,659 3,740,123

Unrealized results 72,963 (102,476)

Retained earnings 1,533,318 1,063,864

9,907,095 8,712,201

Non-controlling interest 4,527,847 3,688,383

Total equity, net 14,434,942 12,400,584

Total liabilities and equity net 92,852,273 82,124,842




Interim condensed consolidated statements of income F or the nine-month periods ended September 30, 2019 and 2018

Note 2019 2018

S/(000) S/(000)

Interest and similar income 17 4,036,769 3,558,644

Interest and similar expenses 17 (1,617,119) (1,397,600)

Net interest and similar income 2,419,650 2,161,044

Impairment loss on loans, net of recoveries 7(c) (763,977) (562,608)

Impairment recovery on financial investments 6(c) 1,529 2,326

Net interest and similar income after impairment loss 1,657,202 1,600,762

Net sales from retail business 21 10,864,764 10,056,305

Cost of sales from retail business 21 (7,885,377) (7,378,267)

Fee income from financial services, net 18 706,621 667,409

Net gain on foreign exchange transactions 191,542 163,018

Net gain on sale of financial investments 105,295 25,861

Net gain on financial assets at fair value through profit or loss 3,836 47,097

Income from educational services 682,212 568,442

Net gain on investment property 8(b) 312,407 276,175

Other income 19 77,268 84,495

5,058,568 4,510,535

Insurance premiums and claims

Net premiums earned 20 318,723 206,698

Net claims and benefits incurred for life insurance contracts and others (535,145) (546,557) (216,422) (339,859)

Other expenses

Salaries and employee benefits (2,007,496) (1,866,959)

Selling and administrative expenses (1,801,888) (1,947,057)

Depreciation and amortization (773,238) (400,692)

Other expenses 19 (140,685) (154,040) (4,723,307) (4,368,748)

Income before translation result and Income Tax 1,776,041 1,402,690

Translation result (883) (70,232)

Income tax 16(j) (579,444) (496,170)

Net profit for the period 1,195,714 836,288

Attributable to:

Intercorp Perú‘s shareholders 755,610 542,479

Non-controlling interest 440,104 293,809

1,195,714 836,288

Earnings per share attributable to Intercorp Perú’s shareholders (A and B classes) basic and

diluted (stated in Soles) 22 5.07 3.64

Weighted average number of outstanding shares (A and B classes) (in thousands) 22 149,019 149,019




Interim condensed consolidated statements of other comprehensive income For the nine-month periods ended September 30, 2019 and 2018

2019 2018

S/(000) S/(000)

Net profit for the period 1,195,714 836,288

Other comprehensive income that will not be reclassified to the consolidated income

statements in subsequent periods:

Net movement of equity instruments at fair value through other comprehensive income 73,252 39,328

Income Tax (32,195) (36,142)

Total unrealized gain (loss) that will not be reclassified to the consolidated income

statements

41,057 3,186

Other comprehensive income to be reclassified to the consolidated income statements

in subsequent periods:

Net movement of debt instruments at fair value through other comprehensive income 1,276,816 (368,149)

Income Tax (2,088) (321)

1,274,728 (368,470)

Net movement of insurance premiums reserve (1,066,585) 901,069

Net movement of cash flow hedges (7,200) (6,980)

Income Tax 1,836 (9,224)

(5,364) (16,204)

Translation of foreign operations 852 8,179

Others 177 -

Total unrealized gains to be reclassified to the consolidated income statements in

subsequent periods

203,808 524,574

Total other comprehensive income for the period, net of Income Tax 1,440,579 1,364,048

Attributable to:

Intercorp Peru’s shareholders 931,049 952,672

Non-controlling interest 509,530 411,376

1,440,579 1,364,048




Interim condensed consolidated statements of changes in equity For the nine-month periods ended September 30, 2019 and 2018

Attributable to Intercorp Perú’s shareholders

Unrealized results, net

Number of

shares

Instruments that

will not be

reclassified to

the consolidated

income

statements Instruments that will be reclassified to the consolidated income statements

Issued

Capital

stock Reserves

Equity

instruments at

fair value

Debt

instruments at

fair value

Insurance

premiums

reserves

Cash flow

hedges

reserve

Translation of

foreign

operations Others

Retained

earnings Total

Non-

controlling

interest

Total equity,

net (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)

Balances as of January 1, 2018 (Restated, Note 4.2.1) 149,019 3,524,799 2,626,014 56,942 148,012 (527,021) (641) 2,580 - 1,572,803 7,403,488 2,991,825 10,395,313

Net profit for the period - - - - - - - - - 542,479 542,479 293,809 836,288

Other comprehensive income - - - 646 (280,090) 697,511 (13,110) 5,236 - - 410,193 117,567 527,760

Total other comprehensive income - - - 646 (280,090) 697,511 (13,110) 5,236 - 542,479 952,672 411,376 1,364,048

Earnings capitalization, Note 15(a) - 485,891 - - - - - - - (485,891) - - -

Transfer of retained earnings to reserves - - 1,114,109 - - - - - - (1,114,109) - - -

Declared dividends, Note 15(a) - - - - - - - - - (97,818) (97,818) (125,677) (223,495)

Net variation of treasury stock held by Subsidiaries, net of

dividends received - - - - - - - - - 230,328 230,328 66,941 297,269

Effect of change in Subsidiaries’ shareholding - - - - - - - - - (83,394) (83,394) 83,394 -

Merge of subsidiaries, Note 2.2 - - - - - - - - - 293,368 293,368 186,367 479,735

Others - - - - - - - - - (71,218) (71,218) 4,105 (67,113)

Balance as of September 30, 2018 149,019 4,010,690 3,740,123 57,588 (132,078) 170,490 (13,751) 7,816 - 786,548 8,627,426 3,618,331 12,245,757

Balances as of January 1, 2019 149,019 4,010,690 3,740,123 42,969 (217,527) 57,395 (7,216) 21,903 - 1,063,864 8,712,201 3,688,383 12,400,584

Net profit for the period - - - - - - - - - 755,610 755,610 440,104 1,195,714

Other comprehensive income - - - 32,251 898,481 (751,986) 1,964 (5,383) 112 - 175,439 69,426 244,865

Total other comprehensive income - - - 32,251 898,481 (751,986) 1,964 (5,383) 112 755,610 931,049 509,530 1,440,579

Earnings capitalization, Note 15(a) - 491,465 - - - - - - - (491,465) - - -

Transfer of retained earnings to reserves - - 58,536 - - - - - - (58,536) - - -

Declared dividends, Note 15(a) - - - - - - - - - (98,940) (98,940) - (98,940)

Dividends declared to non-controlling interest of Subsidiaries - - - - - - - - - - - (194,289) (194,289)

Capital contribution from non-controlling interest in Subsidiaries - - - - - - - - - - - 31,681 31,681

Acquisition of non-controlling interest, Note 3.2(i) - - - - - - - - - (131,819) (131,819) 64,094 (67,725)

Initial Public Offering of Subsidiary, Note 1.2 - - - - - - - - - 495,449 495,449 410,152 905,601

Others - - - - - - - - - (845) (845) (15,775) (16,620)

Balance as of September 30, 2019 149,019 4,502,155 3,798,659 75,220 680,954 (694,591) (5,252) 16,520 112 1,533,318 9,907,095 4,527,847 14,434,942



Interim condensed consolidated statements of cash flows For the nine-month periods ended September 30, 2019 and 2018

2019 2018

S/(000) S/(000)

Cash flows from operating activities Net profit for the period 1,195,714 836,288

Plus (minus) Impairment loss on loans, net of recoveries 763,977 562,608

Depreciation and amortization 773,238 400,692

Deferred Income Tax (14,940) 66,673

Net gain on sale of financial investments (105,295) (25,861)

Impairment recovery on financial investments (1,529) (2,329)

Net gain of financial assets at fair value through profit or loss (3,836) (47,097)

Gain for valuation of investment property (47,232) (16,188)

Translation result 883 70,232

Provision for impairment of inventories, net of recoveries 17,598 28,827

Net increase in accrued interest payable 9,426 62,481

Net increase in accrued interest receivable (29,842) (20,827)

Net changes in assets and liabilities Net increase in loans (3,516,395) (3,734,514)

Net increase of financial investments through profit or loss (19,058) (63,899)

Net increase in inventories (139,683) (3,526)

Net (increase) decrease in restricted funds (270,805) 344,185

Net increase (decrease) in deposits and obligations 2,494,245 (1,774,843)

Net decrease (increase) in other assets (1,134,688) (521,755)

Net increase in other liabilities 728,452 325,215

Net cash provided by (used in) operating activities 700,230 (3,513,638)

Cash flows from investing activities

Purchase of investments at fair value through other comprehensive income and at amortized

cost (452,042) (241,201)

Purchase of investment property (211,470) (162,704)

Purchase of property, furniture and equipment (749,540) (685,012)

Purchase of intangible assets (113,941) (121,306)

Acquisition of Subsidiaries (4,867) (1,871,430)

Sale of subsidiary shares, net of commisions paid 368,256 -

Net cash used in investing activities (1,163,604) (3,081,653)



Interim condensed consolidated statements of cash flows (continued)

2019 2018

S/(000) S/(000)

Cash flows from financing activities Net increase in due to banks and correspondents 126,495 186,735

Net increase in bonds, notes and other obligations 2,821,919 2,160,474

Net decrease in inter-bank funds assets 495,037 373,519

Net increase in inter-bank funds liabilities 15,001 203,545

Payment of dividends to shareholders (74,691) (72,626)

Payment of dividends to non-controlling interest (194,289) (125,677)

Net income for purchase of treasury stock of Subsidiaries - 297,269

Capital contribution from non-controlling interest 31,681 -

Initial Public Offering of subsidiary, net of related expenses, Note 1.2 397,175 -

Net cash provided by financing activities 3,618,328 3,023,239

Net increase (decrease) in cash and cash equivalents 3,154,954 (3,572,052)

Cash and cash equivalents at the beginning of the period 7,597,063 9,527,746 Cash and cash equivalents at the end of the period 10,752,017 5,955,694



Notes to the interim condensed consolidated financial statements As of September 30, 2019 and December 31, 2018

1. Business activity and Initial public offering of Subsidiary shares -

1.1 Business activity

Intercorp Perú Ltd. (henceforth “Intercorp Perú” or “the Company”) is a limited liability holding company incorporated in

November 1997 in The Commonwealth of The Bahamas. Intercorp Perú is the holding company of the group of Subsidiaries

of the denominated “Intercorp Group” (or “the Group”), thus coordinating their policies and management. Intercorp Perú as

a holding company also maintains certain investments in all types of securities.

The Company’s legal address is Sassoon House Shirley Street & Victoria Avenue, Nassau, The Bahamas. Management and

its administrative offices are located at Av. Carlos Villarán 140, Urb. Santa Catalina, La Victoria, Lima, Peru.

The operations of Intercorp Perú and its Subsidiaries are concentrated mainly in Peru, but it also maintains operations in

The Bahamas, Panama, Ecuador, Colombia and Bolivia, see Note 2.1; with activities in the financial, insurance, retail,

pharma, real estate and educational businesses. The relevant activities and data of the Subsidiaries as of September 30,

2019, and December 31, 2018, are disclosed in Note 3.

The consolidated financial statements as of September 30, 2019, have been approved by the Management on November

15, 2019. The audited consolidated financial statements of Intercorp and Subsidiaries as of December 31, 2018,

December 31, 2017, and January 1, 2017, were approved by the General Shareholders’ Meeting on April 1, 2019.

1.2 Initial Public Offering of Intercorp Financial Services Inc.

On July 3, 2019, following the approval by the Board, Intercorp Financial Services, Subsidiary of Intercorp, filed with the

Securities and Exchange Commission of the United States of America (“SEC”), a Registration Statement under Form F-1 of

the Securities Exchange Act of 1933 of the United States of America, in relation with a proposal of an Initial Public Offering

of IFS’ (The Offering).

On July 18, 2019, IFS announced the Initial Public Offering of approximately 9,000,000 common shares at a price of

US$46.00 per share with sellers being: (i) IFS, (ii) Interbank, (iii) Intercorp Perú Ltd., and (iv) a non-related shareholder.

Also, IFS granted the underwriters an option for a period of 30 days to purchase up to an aggregate of 1,350,000 additional

new common shares.

As part of the Offering, IFS sold 2,418,754 common shares held as treasury stock (including shares sold by Interbank), and

1,150,000 new common shares to be issued. Intercorp Perú sold 2,531,246 shares, and the non-related shareholder sold

3,000,000 shares. Also, the underwriters exercised the purchase option over 1,186,841 new common shares.

In this sense, Intercorp Perú and Subsidiaries jointly sold 7,286,841 shares at US$46.00 per share. The sale value

amounted to approximately US$335,195,000 (before issuance expenses).

Translation of consolidated financial statements originally issued in Spanish – Note 29 Notes to the interim condensed consolidated financial statements (continued)

2

The total impact of the Offering over Intercorp Perú’s consolidated net equity, after discounting the issuance expenses,

amounted to S/495,449,000, which is mainly explained by:

(i) Issuance of 2,336,841 shares and sale of shares held as treasury stock by IFS (2,418,754 shares) with a total impact

of S/287,995,000 recorded as retained earnings.

(ii) Sale of shares held by Intercorp Perú (2,531,246 shares), which generated gains, net of cost (S/160,802,000)

amounting to S/207,454,000 which is presented in the caption “Retained Earnings” according to accounting

standards, for consolidated financial statements.

2. Business combinations-

2.1 Corporación Educativa Hispanoamericana, S.C. -

In June 2019, Intercorp’s Subsidiaries Transformando la Educación de México, S.A de C.V. and Servicios Administrativos

Transformando la Educación de México, S.C., acquired 100 percent of the shareholding of Corporación Educativa

Hispanoamericana, S.C., a Mexican entity that operates the private educational institution “Comunidad Educativa

Hispanoamericana”.

The value of this operation amounted to approximately S/6,156,000, equivalent to $35,800,000 (Mexican Pesos), out of

which 80 percent, approximately, has been paid. The balance will be paid in the following three years.

As of the date of acquisition, the highest value paid for this acquisition amounts to approximately S/5,678,000, equivalent

to $33,000,000 (Mexican Pesos).

2.2 Quicorp S.A. and Subsidiaries –

In January 2018, InRetail Pharma S.A. (formerly Eckerd Perú S.A.) and NG Infra II S.A.C. (a non-related entity) constituted IR

Pharma S.A.C. (formerly Chakana Salud S.A.C.), through cash contributions that resulted in a shareholding of 73.21

percent and 26.79 percent, respectively. The purpose of constituting IR Pharma S.A.C. was to acquire, through it, 100

percent of Quicorp and its Subsidiaries. The acquired conglomerate (henceforth and collectively, “Quicorp Group”) was

comprised of the following companies: Química Suiza Comercial S.A.C., Química Suiza S.A.C., Cifarma S.A.C., Mifarma

S.A.C., Empresa Comercializadora Mifarma S.A. (Bolivia), Botica Torres de Limatambo S.A.C., BTL Amazonía S.A.C.,

Vanttive S.A.C., Farmacias Peruanas S.A.C., Droguería La Victoria S.A.C., Vanttive Cía. Ltda. (Ecuador), Quifatex S.A.

(Ecuador), Quimiza Ltda. (Bolivia), Quideca S.A. (Colombia), Albis S.A.C., Jorsa de la Selva S.A.C. and Superfarma

Mayorista S.A.C. These entities operate in manufacturing, distribution and retail segments within the pharmaceutical sector

in Peru, Ecuador, Bolivia and Colombia.

The acquisition of Quicorp Group closed in January 2018, for approximately US$592,000,000, was financed by a loan

granted to InRetail Pharma S.A. by Citibank N.A. and J.P. Morgan Chase Bank N.A.; which was paid in full in June 2018,

principally with proceeds from issuances of “Senior Unsecured Notes” by InRetail Pharma S.A.

In April 2018, InRetail Pharma S.A. absorbed IR Pharma S.A.C., which was dissolved without liquidation, thereby reducing

the participation percentage of its main shareholder (InRetail Perú Corp.) to 87.02 percent (before said merger, InRetail

Perú Corp. held 100 percent of the capital stock of InRetail Pharma S.A.) and adding NG Infra II S.A.C. with 12.98 percent

as a shareholder. It is worth mentioning that the contribution made by NG Infra II S.A.C. for the acquisition of Quicorp Group

amounted to S/481,500,000. As a result, as of December 31, 2018, InRetail Pharma S.A. is the sole owner of Quicorp

Group.


3

Furthermore, between March and July 2018, various merging processes between the acquired entities were performed,

through which Mifarma S.A.C. absorbed Farmacias Peruanas S.A.C., Droguería La Victoria S.A.C. and Boticas Torres de

Limatambo S.A.C., while Quicorp S.A.C. absorbed Química Suiza Comercial S.A.C.

The acquisition of Quicorp Group was recorded in accordance with IFRS 3 "Business Combinations", applying the purchase

accounting method. Under this method, assets and liabilities were recorded at their estimated fair values at the date of

purchase, including identified intangible assets not recorded in the financial statements position of each entity acquired.

The cost related to the acquisition, amounting to S/16,340,000, was recorded as an expense and is presented in the

caption “Selling and administrative expenses” of the consolidated income statements for the period 2018.

Following are the fair values of the identifiable assets and liabilities of Quicorp Group at the date of acquisition:

Fair value of the

acquired entities

S/(000)

Assets

Cash and short-term deposits (cash and due from banks) 33,911

Trade accounts receivable 488,215

Other accounts receivable 160,762

Inventories 677,880

Property, furniture and equipment 429,289

Intangibles 721,526

Deferred Income Tax assets, net 64,562

Other assets 45,995

Liabilities

Trade accounts payable (935,264)

Other accounts payable (255,504)

Other payables – contingencies (35,556)

Financial obligations (500,687)

Deferred Income Tax liabilities (269,508) __________

Total net assets identified at fair value 625,621

Goodwill generated in the acquisition 1,272,634 __________

Consideration transferred 1,898,255 ___________


4

The net cash flow used in the acquisition is presented below:

S/(000)

Consideration transferred 1,897,347

Price adjustment 908

Cash and due from Banks of the acquired companies (33,911) __________

1,864,344 __________

Goodwill amounting to S/1,272,634,000, 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 the acquired in-force business.

2.3 Acquisition of Seguros Sura and Hipotecaria Sura

In May 2017, IFS entered into an agreement with Sura Asset Management S.A. (Colombia), Sura Asset Management Perú

S.A. (Peru) and Grupo Wiese (Peru) for the purchase of shares, which resulted in the direct and indirect acquisition of up

to 100 percent of Seguros Sura S.A. (henceforth “Seguros Sura”) and up to 100 percent of Hipotecaria Sura. The

acquisition was approved by Peru’s Superintendence of Banking, Insurance and Private Pension Funds Administrators

(henceforth “SBS”, by its Spanish acronym) on September 28, 2017.

As a consequence, in November 2017, IFS acquired directly and indirectly 99.39 percent of Seguros Sura’s capital stock

and 99.40 percent of Hipotecaria Sura’s capital stock.

The acquisition was recorded in accordance with the “Acquisition method” established by IFRS 3 "Business

Combinations". The costs related to the acquisition, amounting to S/7,863,000, were recorded as expenses at the

acquisition date.

The following are the fair values of the entities acquired:

Fair value

S/(000)

Seguros Sura S.A.

Assets 5,543,147

Liabilities (5,287,650)

Hipotecaria Sura S.A.

Assets 12,560

Liabilities (2,452) _________

Total net assets identified 265,605

Non-controlling interest (1,912)

Goodwill 628,218 _________

Consideration transferred 891,911 _________


5

The net cash flow used in the acquisition is presented below:

S/(000)

Consideration transferred 891,911

Cash and due from banks of the acquired entities (239,247)

Acquisition costs 7,863 _________

Net cash flow 660,527 _________

The net assets recognized in the consolidated financial statements of Intercorp at the acquisition date were based on a

preliminary fair value assessment. During 2018, Management completed the review of the fair value estimation of

insurance contracts liabilities as of the acquisition date and, as consequence, the net identifiable assets were modified.

Amendments were therefore made to the net identifiable assets, as detailed below:

Preliminary

balance Amendment Amended balance S/(000) S/(000) S/(000)

Insurance contracts liabilities (5,210,487) 195,339 (5,015,148)

Goodwill 628,218 (195,339) 432,879

3. Organization of Intercorp Group

Below is the information about the entities that are part of Intercorp Group:

3.1 Financial and insurance entities

Intercorp Financial Services Inc. - (henceforth “IFS”)

It is a limited liability holding, incorporated in September 2006 in the Republic of Panama, in order to group the

companies of Intercorp Group engaged in financial and insurance businesses.

As of September 30, 2019, after the Initial Public Offering of IFS (see Note 1.2), the Company holds directly and indirectly

70.62 percent of the issued capital stock and the outstanding capital stock of IFS (76.46 percent of the issued capital

stock of IFS and 75.94 percent of the outstanding capital stock of IFS as of December 31, 2018). The percentage of

indirect ownership over IFS’ issued capital stock is held by Intercorp Perú through its Subsidiaries IFH Capital Corp. and

Intercorp Capital Investments Inc., in which Intercorp Perú holds 100 percent of their capital stock and, at the same time,

each of these Subsidiaries hold 8.62 percent of IFS’ capital stock as of September 30, 2019 and December 31, 2018.

As of September 30, 2019, and December 31, 2018, IFS holds 99.30 percent of the outstanding capital stock of Banco

Internacional del Perú S.A.A. – Interbank (henceforth “Interbank”), 99.84 percent of the outstanding capital stock of

Interseguro Compañía de Seguros S.A. (henceforth “Interseguro”) and 100 percent of Inteligo Group Corp. (henceforth

“Inteligo”) and San Borja Global Opportunities S.A.C. In addition, as of December 31, 2018, it holds 99.42 percent of the

capital stock of Hipotecaria Sura Empresa Administradora Hipotecaria S.A. (henceforth “Hipotecaria Sura”), which was

liquidated in February 2019. The operations of Interbank, Interseguro and Hipotecaria Sura are concentrated in Peru,

while the operations of Inteligo and its Subsidiaries (Inteligo Sociedad Agente de Bolsa S.A., Inteligo Bank Ltd,

Interfondos S.A. Sociedad Administradora de Fondos – Interfondos S.A.F. and Inteligo USA.), are concentrated in Peru

and Panama.


6

The Subsidiaries of IFS and their economic activities are presented below:

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

Interbank is incorporated in Peru and is authorized to operate as a universal bank by the SBS, in accordance with

Peruvian legislation. Interbank's operations are governed by the General Act of the Financial and Insurance

System and Organic Act of the SBS – Act No. 26702 (henceforth “Banking and Insurance Act”), which

establishes the requirements, rights, obligations, restrictions and other operating conditions that Peruvian

financial and insurance entities must comply with in Peru.

As of September 30, 2019, and December 31, 2018, Interbank operates 264 and 269 offices, respectively, and

a branch established in the Republic of Panama. Additionally, it holds 100 percent of the shares of the following

Subsidiaries:

Entity Activity

Internacional de Títulos Sociedad Titulizadora S.A. -

Intertítulos S.T. Management of securitization funds.

Inversiones Huancavelica S.A. Real estate activities. In September 2019, the company

was absorbed by Interbank.

Contacto Servicios Integrales de Créditos y Cobranzas S.A. Collection services. In September 2019 the company

was absorbed by Interbank. At the time of the merger,

the absorbed assets amounted to approximately

S/305,000.

Compañía de Servicios Conexos Expressnet S.A.C. Services related to credit card transactions or products

related to the brand “American Express”.

In January 2019, Interbank entered into a sales agreement over its entire participation in Interfondos S.A.,

Sociedad Administradora de Fondos (henceforth “Interfondos”) with Inteligo Perú Holdings S.A.C., a related

entity, Subsidiary of Inteligo Group. This operation did not have any effect on the accompanying consolidated

financial statements.

(b) Interseguro Compañía de Seguros S.A.

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.

Likewise, Interseguro holds contributions in Patrimonio Fideicometido D.S.093-2002-EF, Interproperties Perú

(henceforth “Patrimonio Fideicometido – Interproperties Perú”), a structured entity incorporated in April 2008,

and in which several investors (related parties to the Intercorp Group) contributed investment property; each

investor has ownership of and specific control over the contributed investment property. For accounting purposes

and under IFRS 10 “Consolidated Financial Statements”, the assets included in said structure are considered

“silos”, because they are ring-fenced parts of the wider structured entity (the Patrimonio Fideicometido -

Interproperties Perú). Intercorp Group has ownership of and decision-making power over these properties, and

the Group has the exposure or rights to their returns; therefore, the Group has consolidated the silos containing

the investment property that it controls.


7

(c) Inteligo Group Corp. and Subsidiaries

Inteligo Group Corp. is an entity incorporated in the Republic of Panama. As of September 30, 2019, and

December 31, 2018, it holds 100 percent of the shares of the following Subsidiaries:

Entity Activity

Inteligo Bank Ltd. It was incorporated in the Commonwealth of The Bahamas and has a

branch established in the Republic of Panama that operates under

an international license issued by the Superintendence of Banks of

the Republic of Panama. Its main activity is to provide private and

institutional banking services mainly to Peruvian citizens.

Inteligo Sociedad Agente de Bolsa S.A. Brokerage firm incorporated in Peru.

Inteligo Perú Holding S.A.C Holding company incorporated in Peru. As of September 30, 2019, it

holds 100 percent of the shares in:

Interfondos S.A. Sociedad Administradora de Fondos:

management of mutual funds and investment funds.

Inteligo USA It was incorporated in the United States of America that has as its

main objective to provide investment advisory services to fund

managers.

(d) Hipotecaria Sura Empresa Administradora Hipotecaria S.A. – In liquidation

As of September 30, 2019, the company has been liquidated, by virtue of the agreement adopted in the

Universal Shareholders' Meeting held on February 20, 2019. This company was incorporated in Peru, was

regulated by the SBS and its main activity was to grant mortgage loans. Since 2015, it had not granted mortgage

loans.

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

Its corporate purpose is the marketing of products and services through Internet, telephony or related mediums.

As of September 30, 2019, and December 31, 2018, it maintains paid-in capital of S/1,461,000.

3.2 Retail and real estate businesses

(i) Intercorp Retail Inc.

It is a limited liability holding company incorporated in the Republic of Panama in December 2010, in order to

group the entities of Intercorp Group engaged in the retail business in Peru.

In June 2019, Intercorp Retail Inc. (a 100-percent Subsidiary of Intercorp Perú) acquired 9.98 percent of the

shareholding of NG HPSA Corp., a minority shareholder of HPSA Corp., for approximately US$24.0 million.

Additionally, at the same date, Intercorp Retail Inc. acquired from NG Retail Credit Corp., a minority shareholder

of IFH Retail Corp., 9.99 percent of the latter’s class A shares for approximately US$34.0 million. Subsequently

to these acquisitions, Intercorp Retail Inc. increased its participation in said companies from 65.01 percent to

74.99 percent (in HPSA Corp.) and from 78.35 percent to 84.28 percent (in IFH Retail Corp.). It is worth

mentioning that Intercorp Retail Inc. increased its participation in class A shares of IFH Retail Corp. from 63.54

percent to 73.53 percent.


8

As of September 30, 2019 and December 31,2018, the Company holds 100 percent of its capital stock and

owns the following Subsidiaries:

Entity Activity

InRetail Perú Corp

(As of September 30, 2019, and December 31,

2018, Intercorp Retail Inc. holds 59.04 percent

of its outstanding capital stock. Also, Intercorp

Perú, through its Subsidiaries, holds 70.80 and

70.98 percent, respectively (directly and

indirectly) of InRetail Perú Corp.'s outstanding

capital stock).

Holding incorporated in the Republic of Panama in January 2011, which

holds 100 percent of the capital stock of the following Subsidiaries, which

operate several businesses:

(a) Shopping malls: Developed by InRetail Real Estate Corp., owner of

Patrimonio en Fideicomiso InRetail Shopping Malls, which in turn

is owner of (i) Real Plaza S.R.L. and (ii) Patrimonio en Fideicomiso

- D.S. No. 093-2002-EF-Interproperties Holding and Patrimonio

en Fideicomiso -D.S. No. 093-2002-EF Interproperties Holding II,

equity trusts which are special-purpose entities; see description in

paragraph 3.2(v);

(b) Patrimonio en Fideicomiso Inretail Consumer: Incorporated in August

2014, which develops the following retail businesses:

(i) Supermarkets: Developed by Supermercados Peruanos

S.A. and Subsidiaries, a company that, as of September

30, 2019 and December 31, 2018, operates stores

under the trademarks “Plaza Vea”, “Plaza Vea Súper”,

“Vivanda”, “Mass” and “Economax”.

(ii) Drugstores: Developed by InRetail Pharma S.A. (formerly

Eckerd Perú) and Subsidiaries, a company that, as of

September 30, 2019, and December 31, 2018,

operates under the trademark “Inkafarma”.

In January 2018, InRetail Pharma S.A. through its

Subsidiary IR Pharma S.A.C., acquired 100 percent of

Quicorp S.A. and Subsidiaries, which operate under the

trademarks “Mifarma” and “BTL”; see Note 2.2.

(c) InRetail Management S.R.L., company dedicated to the

administration of personnel and operations of the aforementioned

Patrimonios en Fideicomiso.

IFH Retail Corp.



and 78.35 percent, respectively, of its capital

stock).

Holding incorporated in the Republic of Panama in September 2006. As of

September 30, 2019, and December 31, 2018, holds 22.63 percent, of

Tiendas Peruanas S.A. and Subsidiaries; see Note 3.2(ii), a company

engaged in the retail business through department stores under the

trademark “Oechsle”; and of 96 percent of Financiera OH! S.A., as of

September 30, 2019 and December 31, 2018, which provides financial

support to the companies of Intercorp Group dedicated to the retail

business.


9

Entity Activity

HPSA Corp.



and 65.00 percent, respectively, of its capital

stock).

Holding incorporated in the Republic of Panama, owner of Homecenters

Peruanos S.A. and Subsidiary, a company engaged in the operation of the

business of home improvement stores under the trademark “Promart”.

Lince Global Opportunities Corp.


2018, Intercorp Retail Inc. holds 100 percent of

its capital stock).

Holding incorporated in the Republic of Panama in December 2010, which

holds 98.79 percent of the capital stock of Inmobiliaria Milenia S.A., which

is engaged in the real estate business.

(ii) Callao Global Opportunities

Subsidiary of Intercorp Perú, incorporated in 2011 as a limited liability holding company in the Republic of Panama. As of

September 30, 2019, and December 31, 2018, it holds 76.18 percent of the capital stock of Tiendas Peruanas S.A.

As of September 30, 2019 and December 31, 2018, holds 22.63 percent of Tiendas Peruanas S.A., therefore the

ownership of Intercorp Perú in Tiendas Peruanas, through IFH Retail corp. and Callao Global Opportunities, is equivalent

to 98.81 percent of its capital stock.

(iii) Intercorp Investments Perú Inc.

It is a limited liability holding company incorporated in September 2006 in the Republic of Panama. As of September 30,

2019, and December 31, 2018, the Company holds 100 percent of its capital stock. Intercorp Investments Perú Inc. is

the sole shareholder of Horizonte Global Opportunities Corp., a holding company incorporated in the Republic of

Panama, owner of Horizonte Global Opportunities Perú S.A.C., whose sole asset is a land lot located in the district of

Independencia in Lima.

(iv) Urbi Propiedades S.A.

As of September 30, 2019, and December 31, 2018, the Company holds 100 percent of the capital stock of this entity,

incorporated in Peru in 1998, engaged in real estate management and in the provision of structuring and real estate

project management. In addition, and through its Subsidiaries, develops several real estate projects.

As of September 30, 2019, and December 31, 2018, Urbi holds 100 percent of the following Subsidiaries:

Entity Activity

Alameda Colonial S.A. Incorporated in Lima in May 2006, to build apartments under the Government’s

program “Mi Vivienda”.

Domus Hogares del Norte S.A. Incorporated in Lima in June 2009, to develop a real estate project called “Domus

Hogares del Norte”.

Urbi Solutions S.A.C. Incorporated in Lima in June 2014 to engage in the construction of real estate

projects.


10

In April 2018, Intercorp Peru and Urbi Propiedades sold their ownership in Club de Socios S.A. to third parties, not related

to the Group.

(v) Patrimonio en Fideicomiso – D.S. N°093-2002 EF, Interproperties Holding and Interproperties Holding II -

In September 2011 and May 2012, Patrimonio en Fideicomiso – D.S. No. 093-2002-EF, Interproperties Holding and

Patrimonio en Fideicomiso – D.S. No. 093-2002-EF, Interproperties Holding II (henceforth and collectively

“Interproperties Holding”) were incorporated with the purpose of creating autonomous equity trusts, independent from

each investor constituted as originator.

Through these equity trusts, investments in real estate projects are made, and their yields support (i) the certificates of

participation issued, and (ii) the compliance with other obligations assumed directly or through third parties in order to

obtain the resources that are necessary to make said investments. As of September 30, 2019, and December 31, 2018,

the company that consolidates financial information with Intercorp Perú and that holds 100 percent of the participations

in Interproperties Holding is InRetail Perú Corp.

Through these equity trusts, Intercorp Group holds the ownership of the property where the shopping malls called “Real

Plaza” operate. As of September 30, 2019, and December 31, 2018, the main shopping malls are located in different

cities of Peru.

(vi) Intercorp Re Inc.

It is a limited liability holding incorporated in August 2015 in the Republic of Panama. As of September 30, 2019, and

December 31, 2018, the Company holds 100 percent of its capital stock and, in turn, Intercorp Re Inc. is the sole

shareholder of Inteligo Real Estate Corp., a holding company incorporated in the Republic of Panama, owner of Inteligo

Real Estate Perú S.A.C.

3.3 Educational business

(i) NG Education Holdings Corp.

It is a limited liability holding company incorporated in January 2011 in the Republic of Panama, whose purpose

is to group the Subsidiaries of Intercorp Group engaged in the educational business in Peru.

As of September 30, 2019, and December 31, 2018, Intercorp Perú holds 100 percent of Class A shares and

51.47 percent of Class B shares of NG Education Holdings Corp.’s capital stock that holds the following

Subsidiaries (main):

Entity Activity

Colegios Peruanos S.A.


2018, NG Education Holdings Corp. holds 33.99

percent of its capital stock).

As of September 30, 2019, it operates 54 schools under the

trademark “Innova Schools” (49 schools as of December 31, 2018).

NG Education S.A.C.

( As of September 30, 2019, and December 31,

2018, NG Education Holdings Corp. holds 48.67

percent of its capital stock).

Holding incorporated in Peru in November 2011. As of September 30,

2019, and December 31, 2018, NG Education S.A.C. holds 100

percent of the following Subsidiaries:

a) Universidad Tecnológica del Perú S.A.C.: Incorporated in Lima in

February 1998. It has the following 3 business units: UTP

University, IDAT Institute and Post-Graduate School. As of


11

September 30, 2019, and December 31, 2018, UTP holds 100

percent of shareholding in the following Subsidiaries:

(i) Corriente Alterna S.A.C.: School of artistic education that

offers the career of Visual Arts and has 1 premise in Lima.

(ii) Instituto Superior Tecnológico Corriente Alterna S.A.C.: As

of date of this report, it is not operating.

b) Promotora de la Universidad Tecnológica de Chiclayo S.A.C.: An

entity with operations in Peru which as of September 30, 2019,

and December 31, 2018, has 1 premise.

(ii) NG Education Holdings II Corp.

It is a limited liability holding company incorporated in October 2013 in the Republic of Panama. As of

September 30, 2019, and December 31, 2018, Intercorp Perú holds 50 percent of the capital stock of NG

Education Holdings II Corp., which in turn owns the following Subsidiary:

Entity Activity

Servicios Educativos Perú S.A.C.

(As of September 30, 2019, and December

31, 2018, NG Education Holdings II Corp.

holds 100 percent of its capital stock).

Company incorporated in Peru in October 2013. As of September 30, 2019,

and December 31, 2018, it holds 100 percent of the capital stock of

Servicios Educativos Empresariales S.A.C., incorporated in Lima in February

2012. As of September 30, 2019, operates 8 premises under the

trademark “Zegel-IPAE” and 2 premises under construction located in

Arequipa and Lima. ( As of December 31, 2018, operates 5 premises and 2

premises under construction located in Arequipa and Ica)

(iii) NG Education Holdings III Corp.

It is a limited liability holding company incorporated in July 2013 in the Republic of Panama. As of September

30, 2019, and December 31, 2018, Intercorp Perú holds 85.31 percent of its capital stock and, in turn, at the

same dates, it holds 16.52 percent of the capital stock of Colegios Peruanos S.A.

(iv) Intercorp Education Services, S.L.

It is a limited liability holding company incorporated in November 2017 in Spain. As of September 30, 2019,

and December 31, 2018, Intercorp Perú holds 100 percent of its capital stock. This subsidiary has 55 percent of

the capital stock of Transformando la Educación en México S.L. de C.V., which, at the same time, holds 99.99

percent (99.85 percent as of December 31, 2018) of the capital stock of Servicios Administrativos

Transformando la Educación en Mexico S.C. The latter operates under the brand “Innova Schools” and is

headquartered in Mexico.

In June 2019, Transformando la Educación en México, S.L. de C.V. and Servicios Administrativos Transformando

la Educación en México, S.C. entered into an accord to acquire Corporación Educativa Hispanoamericana, S.C.,

a company incorporated in Mexico and operating in the educational sector. See Note 2.1.


12

3.4 Other entities

As of September 30, 2019 and December 31, 2018, the Company holds 100 percent of the capital stock of the following

Subsidiaries:

Company Activity Country of incorporation

Inversiones Río Nuevo S.A.C. Real estate business Peru

San Miguel Global Opportunities S.A.C. Real estate business Peru

Intercorp Management S.A.C. Administrative services Peru

Puente de San Miguel Arcángel S.A. Holding Republic of Panama

Centro Cívico S.A. Real estate business Peru

Ronepeto S.A. Real estate business Peru

La Punta Global Opportunities Corp. Specialized investments Republic of Panama

Urbi Proyectos S.A. Real estate projects Peru

Beacon Healthcare S.A.C. Holding Peru

Centros de Salud Peruanos S.A.C. Health sector Peru


13

The following table presents the financial information of the main Subsidiaries, before eliminations and adjustments for consolidation purposes with Intercorp Perú, as of September 30, 2019, and December 31, 2018; and for the nine-month periods ended September 30, 2019 and

2018:

Net profit (loss)

Total assets Total liabilities Net equity As of September 30,

Entity

As of September

30, 2019

As of December

31, 2018

As of September

30, 2019

As of December

31, 2018

As of September

30, 2019

As of December

31, 2018

2019 2018

S/(000) S/(000)

S/(000) S/(000)

S/(000) S/(000)

S/(000) S/(000)

Intercorp Financial Services Inc. and Subsidiaries 71,404,880 63,744,409 62,924,248 56,655,933 8,480,632 7,088,476 1,037,342 811,054

Intercorp Retail Inc. and Subsidiaries 18,963,177 16,787,509 13,625,274 11,666,986 5,337,903 5,120,523 340,922 (10,242)

NG Education Holdings Corp. and Subsidiaries 2,664,850 2,087,676 1,819,666 1,277,490 845,184 810,186 55,679 25,647

Urbi Propiedades S.A. and Subsidiaries 526,853 458,851 118,451 234,128 408,402 224,723 (13,373) (123)

La Punta Global Opportunities Corp. 322,810 291,477 - - 322,810 291,477 31,332 19,491

NG Education Holdings II Corp. and Subsidiaries 207,452 95,990 87,353 21,050 120,099 74,940 (8,622) (1,805)

Intercorp Investments Perú Inc. and Subsidiaries 134,804 133,602 32,007 33,072 102,797 100,530 (8,828) (3,908)

Callao Global Opportunities Corp. 111,862 134,705 - - 111,862 134,705 (21,582) (14,117)

Beacon Healthcare S.A.C. and Subsidiary 122,746 64,388 63,796 22,870 58,950 41,518 (6,131) (1,904)

Intercorp Education Services S.L. 78,638 51,370 11,278 2,654 67,360 48,716 (6,830) -

San Miguel Global Opportunities S.A.C. 59,105 47,268 10,594 7,654 48,511 39,614 8,607 (130)

NG Education Holdings III Corp. 56,847 58,553 2 3 56,845 58,550 (1,703) (503)

Others 16,699 20,066 6,557 3,739 10,142 16,327 (29,700) (14,168)


14

4. Significant accounting principles and practices

4.1 Basis of presentation

The interim condensed consolidated financial statements as of September 30, 2019, and for the nine-month periods

ended September 30, 2019 and 2018 have been prepared in accordance with IAS 34 “Interim Financial Reporting”.

The interim condensed consolidated financial statements do not include all the information and disclosures required in

the annual consolidated financial statements and should be read in conjunction with the Group’s consolidated audited

financial statements as of December 31, 2018 and 2017, and as of January 1, 2017 (henceforth “2018 Annual

Consolidated Financial Statements”).

The interim condensed consolidated financial statements have been prepared on a historical cost basis, except for

investment property, derivative financial instruments, financial investments at fair value through profit or loss and through

other comprehensive income, which have been measured at fair value. The interim condensed consolidated financial

statements are presented in Soles, which is the functional currency of the Group, and all values are rounded to the

nearest thousand (S/ (000)), except when otherwise indicated.

The preparation of the interim condensed consolidated financial statements, in conformity with the International

Financial Reporting Standards (henceforth “IFRS”) as issued by the International Accounting Standards Board (IASB),

requires Management to make estimations and assumptions that affect the reported amounts of assets, liabilities,

revenues and expenses and the disclosure of significant events in the notes to the interim condensed consolidated


4.2 Changes in accounting policies, adoption of new IFRS and disclosures -

4.2.1 Change in accounting policy

As of December 31, 2017, the Subsidiary Interseguro recognized in its income statements the effect of the

change in the value of liabilities coming from retirement, disability and survival pensions, caused by the

variations in the market interest rates used to discount these liabilities. In the first quarter of 2018, Management

decided to modify its accounting policy in order to show the effect of the change in market interest rates on the

interim condensed consolidated statements of other comprehensive income. This change was made to reduce

volatility in the profits or losses associated with the effect of changes in market interest rates, as the financial

assets supporting such insurance liabilities are measured at fair value through other comprehensive income.

According to IAS 8, as the aforementioned change constitutes a voluntary change in the accounting policy of the

Company and, in compliance with said the standard, was applied retrospectively; see Note 4.2.1 of the 2018

Annual Consolidated Financial Statements.

4.2.2 New accounting standards, adopted by the group

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements

are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for

the year ended December 31, 2018, except for the adoption of new standards effective as of January 1, 2019.

The Group has adopted, for the first time, IFRS 16 “Leases” and, as required by IAS 34, the nature and effect of

these changes are disclosed below. Several other amendments and interpretations have been adopted for the

first time in 2019, but do not have an impact on the interim condensed consolidated financial statements of the

Group.


15

(a) First adoption of IFRS 16 “Leases”

IFRS 16 supersedes IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement Contains a Lease”,

SIC 15 “Operating Leases-Incentives” and SIC 27 “Evaluating the Substance of Transactions Involving

the Legal Form of a Lease”. The standard sets out the principles for the recognition, measurement,

presentation and disclosure of leases and requires lessees to account for all leases under a single on-

balance sheet model. Lessor accounting under IFRS 16 is substantially unchanged from the one under

IAS 17. Lessors will continue to classify leases as either operating or finance leases using similar

principles as in IAS 17. Therefore, IFRS 16 did not have an impact for leases where the Group is the

lessor.

As permitted by the transitional provisions of IFRS 16, the Group elected to apply the modified

retrospective approach and has not restated comparative figures. Under this method, the Group

recognizes lease liabilities for an amount equivalent to the current values of future payments agreed as

of January 1, 2019. The Group also chose to use the recognition exemptions for lease contracts that, at

the commencement date, the underlying asset is of low value (‘low-value assets’).

The effect of first adoption of IFRS 16, as of January 1, 2019, was as follows:

S/(000)

Assets

Property, furniture and equipment (Right-of-use assets) 2,183,555

Liabilities

Accounts payable, provisions and other liabilities (Lease liabilities) 2,183,555

The first adoption of IFRS 16 did not have impact neither on the interim condensed consolidated

statements of income nor on the interim condensed consolidated statements of changes in equity, as of

January 1, 2019.

(a.1) Nature of the effect of adoption of IFRS 16

Before the adoption of IFRS 16, the Group classified each of its leases (as lessee) at the

inception date as either a finance lease or an operating lease. A lease was classified as a

finance lease if it transferred substantially all of the risks and rewards incidental to ownership

of the leased asset to the Group; otherwise it was classified as an operating lease. Finance

leases were capitalized at the commencement of the lease at the fair value of the inception

date of the leased property or, if lower, at the present value of the minimum lease payments.

Lease payments were apportioned between interest (recognized as finance costs) and

reduction of the lease liability. In an operating lease, the leased property was not capitalized

and the lease payments were recognized as rent expense in the consolidated income

statements on a straight-line basis over the lease term. Any prepaid rent and accrued rent were

recognized under the captions “Prepaid rights” and “Other accounts payable”, respectively.

Upon adoption of IFRS 16, the Group applied a single recognition and measurement approach

for all leases, except for leases of low-value assets. The standard provides specific transition

requirements and practical expedients, which have been applied by the Group.


16

- Leases previously classified as finance leases

The Group did not change the initial carrying amounts of recognized assets and

liabilities at the date of initial adoption for leases previously classified as finance

leases (i.e., the right-of-use assets and lease liabilities equal the lease assets and

liabilities recognized under IAS 17). The requirements of IFRS 16 were applied to these

leases from January 1, 2019.

- Leases previously classified as operating leases

The Group recognized right-of-use assets and lease liabilities for leases previously

classified as operating leases, except for leases of low-value assets. The right-of-use

assets for most leases were recognized based on the amount equal to the lease

liabilities, adjusted for any related prepaid and accrued lease payments previously

recognized. Lease liabilities were recognized based on the present value of the

remaining lease payments, discounted by using the incremental borrowing rate at the

date of initial application.

The leases liabilities as of January 1, 2019, can be reconciled to the operating lease

commitments as of December 31, 2018, as follows:

S/(000)

Operating lease commitments as of December 31, 2018 3,168,950

Weighted average incremental borrowing rate as of January 1, 2019 6.50%

Discounted operating lease commitments as of January 1, 2019 2,183,779

Minus:

Commitments relating to leases of low-value assets (224) __________

Lease liabilities as of January 1, 2019 2,183,555 __________

(a.2) Summary of new accounting policies

Set out below are the new accounting policies of the Group upon adoption of IFRS 16, which

have been applied from the date of initial application:

- 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, minus any accumulated depreciation and impairment losses, 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. Unless

the Group is reasonably certain to obtain ownership of the leased asset at the end of

the lease term, the recognized right-of-use assets are depreciated on a straight-line

basis over the shorter of its estimated useful life and the lease term. Right-of-use

assets are subject to impairment.


17

- Lease liabilities

At the commencement date of the lease, the Group recognizes lease liabilities

measured at the present value of lease payments to be made over the lease term. The

lease payments include fixed payments (including in- substance 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 a lease, if the lease

term reflects the Group exercising the option to terminate it. The variable lease

payments that do not depend on an index or a rate are recognized as expense in the

period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses the incremental

borrowing rate at the lease commencement date if the interest rate implicit in the

lease is not readily determinable. After the commencement date, the amount of lease

liabilities is increased to reflect the accretion of interest and reduced for the lease

payments made. In addition, the carrying amount of lease liabilities is remeasured if

there is a modification, a change in the lease term, a change in the in-substance fixed

lease payments or a change in the assessment to purchase the underlying asset.

- Low-value assets

The Group applies the lease of low-value assets recognition exemption to leases of

small items of office furniture. Lease payments and leases of low-value assets are

recognized as expense on a straight-line basis over the lease term.

- Significant judgement in determining the lease term of contracts with renewal options

The Group 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 has the option, under some of its leases, to lease the assets for additional

terms. The Group applies judgement in evaluating whether it is reasonably certain to

exercise the option to renew the lease. That is, it considers all relevant factors that

create an economic incentive for it to exercise the renewal the lease. 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 and affects its ability to

exercise (or not to exercise) the option to renew the lease (e.g., a change in business

strategy).

The Group includes the renewal period as part of the lease term for leases, if it is

appropriate, based on the paragraphs described above.


18

(a.3) Amounts recognized in the interim condensed statements of financial position and interim condensed consolidated statements of income as of September 30, 2019, as an effect of adoption of IFRS 16:

Right-of-use-assets

Land

Buildings and

facilities

Furniture and

equipment Vehicles Total Lease liabilities

S/(000) S/(000) S/(000) S/(000) S/(000)

S/(000)

As of January 1, 2019 292,542 1,885,377 4,406 1,230 2,183,555

2,183,555

Additions 37,054 194,525 6,258 737 238,574

236,094

Disposals and/or sales (21,201) (44,702) (359) - (66,262)

(65,951)

Depreciation expense (15,770) (281,874) (2,217) (205) (300,066)

-

Interest expense - - - - -

113,731

Translation (95) 20 (4) 5 (74)

2,245

Payments - - - - -

(363,599)

As of September 30, 2019 292,530 1,753,346 8,084 1,767 2,055,727

2,106,075

(b) Interpretation of IFRIC 23 “Uncertainty over Income Tax Treatments”

The Interpretation addresses the accounting for income taxes when tax treatments involve uncertainty that affects the application of IAS 12 “Income Taxes”. The interpretation does not apply

to taxes or levies outside the scope of IAS 12, nor does it specifically include requirements relating to interest and penalties associated with uncertain tax treatments.

The Interpretation specifically addresses the following:

- Whether an entity considers uncertain tax treatments separately.

- The assumptions an entity makes about the examination of tax treatments by taxation authorities.

- How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.

- How an entity considers changes in facts and circumstances.

An entity has to determine whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments. The approach that better predicts the

resolution of the uncertainty should be followed.

Although Intercorp and its Subsidiaries domiciled in the Republic of Panama and The Bahamas are not subject to any income tax or capital gains tax, the Group applied the interpretation

from the entry into force; however, as a result of the evaluation made, Management concluded that this interpretation has not affected the interim condensed consolidated financial

statements.

(c) Amendments to IFRS 9 “Financial Instruments”: Prepayment features with negative compensation Under IFRS 9

A debt instrument can be measured at amortized cost or at fair value through other comprehensive income, provided that the contractual cash flows are ‘solely payments of principal and interest on the principal amount outstanding’ (the SPPI criterion) and the instrument is held within

the appropriate business model for that classification. The amendments to IFRS 9 clarify that a financial asset passes the SPPI criterion regardless of the event or circumstance that causes the early termination of the contract and irrespective of which party pays or receives reasonable

compensation for the early termination of the contract. These amendments had no significant impact on the interim condensed consolidated financial statements of the Group.

(d) Amendments to IAS 19 “Employee Benefits”

Plan amendment, curtailment or settlement the amendments to IAS 19 address the accounting when a plan amendment, curtailment or settlement occurs during a reporting period. The amendments specify that when a plan amendment, curtailment or settlement occurs during the

annual reporting period, an entity is required to determine the cost of current services for the remainder of the period after the plan amendment, curtailment or settlement the benefits.


19

The amendments had no impact on the interim condensed consolidated financial statements of the

Group as it does not maintain defined benefit plans.

(e) Amendments to IAS 28 “Investments in Associates and Joint Ventures”: Long- term interests in

associates and joint ventures.

The amendments clarify that an entity applies IFRS 9 to long-term interests in an associate or joint

venture to which the equity method is not applied but that, in substance, form part of the net investment

in the associate or joint venture (long-term interests). This clarification is relevant because it implies that

the expected credit loss model in IFRS 9 applies to such long-term interests.

The amendments also clarified that, when applying IFRS 9, an entity does not have into account

neither any loss of the associated or joint venture, nor any impairment loss of the net investment,

which is recognized as adjustments to net investment in associated o joint venture that arise from IAS

28 “Investments in Associates and Joint Ventures”.

In Management’s opinion, these amendments had no impact on the interim condensed consolidated

financial statements as the Group does not have long-term interests in associates and joint ventures.

(f) IFRS improvements (2015 – 2017 cycle)

- IFRS 3 “Business Combinations”, the amendments clarify that, when an entity obtains control

of a business that is a joint operation, it applies the requirements for a business combination

achieved in stages, including remeasuring previously held interests in the assets and liabilities

of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously

held interest in the joint operation.

An entity applies those amendments to business combinations for which the acquisition date is

on or after the beginning of the first annual reporting period beginning on or after January 1,

2019, with early adoption permitted.

In Management’s opinion, these amendments had no impact on the interim condensed

consolidated financial statements of the Group.

- IFRS 11 “Joint Arrangements”, a party that participates in, but does not have joint control of, a

joint operation might obtain joint control of the joint operation in which the activity of the joint

operation constitutes a business as defined by IFRS 3. The amendments clarify that the

previously held interests in that joint operation are not remeasured.

An entity applies those amendments to transactions in which it obtains joint control on or after

the beginning of the first annual reporting period beginning on or after January 1, 2019, with

early adoption permitted.

In Management’s opinion, these amendments had no impact on the interim condensed

consolidated financial statements of the Group as there is no transaction where joint control is

obtained.


20

- IAS 12 “Income Taxes”, the amendments clarify that the income tax consequences of dividends

are linked more directly to past transactions or events that generated distributable profits than

to distributions to owners. Therefore, an entity recognizes the income tax consequences of

dividends in profit or loss, other comprehensive income or equity according to where the entity

originally recognized those past transactions or events.

An entity applies those amendments for annual reporting periods beginning on or after January

1, 2019, with early adoption permitted. When an entity first adopts those amendments, it

applies them to the income tax consequences of dividends recognized on or after the beginning

of the earliest comparative period.

Although Intercorp and its Subsidiaries domiciled in the Republic of Panama and The Bahamas

are not subject to any income tax or capital gains tax – see Note 16(a), natural persons not

domiciled in Peru are subject to an additional tax on dividends received from entities domiciled

in Peru. In this regard, since the Company controls the Subsidiaries that distribute the

dividends, it recognizes the amount of the Income Tax as an expense of the year to which these

dividends correspond. Since the Group´s current practice is in line with these amendments,

they had no impact on the interim condensed consolidated financial statements of the Group.

- IAS 23 “Borrowing Costs”, the amendments clarify that an entity treats as part of general

borrowings any borrowing originally made to develop a qualifying asset when substantially all of

the activities necessary to prepare that asset for its intended use or sale are complete.

An entity applies those amendments to borrowing costs incurred on or after the beginning of

the annual reporting period in which the entity first adopts those amendments. An entity

applies those amendments for annual reporting periods beginning on or after January 1, 2019,

with early adoption permitted.

In Management’s opinion, these modifications had no impact on the Group's interim

condensed consolidated financial statements because they do not develop qualified assets or

obtain financing for these purposes.

4.3 Significant accounting judgments, estimates and assumptions –

The preparation of the consolidated financial statements 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


21

of the fair value of the financial investments and investment properties, the provision for inventory losses, the assessment

of the impairment of the goodwill, the liabilities for insurance contracts and the measurement of the fair value of

derivative financial instruments; also, there are other estimates such as the estimated useful life of intangible assets,

property, furniture and equipment, and the estimation of deferred Income Tax assets and liabilities.

During 2018, the Group made the following changes in the accounting estimate related to the determination of insurance

contracts liabilities, as detailed below:

4.3.1 Adoption of new mortality tables (SPP 2017)

Through SBS Resolution No.886-2018 dated March 7, 2018, the SBS published the new Peruvian mortality and

morbidity tables “SPP-S-2017” and “SPP-I-2017” (for men and women) to be used in mathematical reserve

calculations of pensions from the Private Pension System (“SPP”, by its Spanish acronym) and the

Complementary Insurance of Hazardous Work. These tables gather updated information from Peru’s SPP and

show the recent changes in life expectancy. The population used for the analysis and study were those affiliated

to the SPP. From June 1, 2018, the Group decided to use these new tables for its pension reserve calculation.

4.3.2 Changes in the assumptions used in calculating interest rates to discount pension reserves

Until May 31, 2018, in order to discount claim reserves, Interseguro used the average market rate of its financial

assets portfolio for the matching currency pension flows and a reinvestment rate of 3 percent for non-matching

currency pension flows. From the second quarter 2018, Interseguro modified the estimation of these

assumptions, using the risk-free rate due to the currency of Peruvian government’s sovereign yield curves plus an

illiquidity premium as a portion of the corporate bonds spread to loss given default or the cost of credit rating

downgrade. These corporate bonds spread is calculated based on the performance of the asset portfolio

designated by Interseguro to cover its pension obligations.

In accordance with IAS 8, “Accounting Policies, Changes in Accounting Estimates and Errors” as the changes above result

from new information or events and are not error corrections nor related to previous periods, they are considered changes

in accounting estimations and the effects were recognized prospectively and included in the interim condensed

consolidated income statements for:

(i) The period in which a change occurs, if it affects only such period; or

(ii) The period in which a change occurs and future periods, if it affects all of them.

As a consequence, Management considers that the changes in the mortality and morbidity tables and in the method for

determining the discount interest rate reflect a better accounting estimation of insurance contracts liabilities; see Note

4.6 (a) and (b) of the 2018 Annual Consolidated Financial Statements. Since these changes in accounting estimates

were recorded during the second quarter of 2018, the interim condensed consolidated financial statements as of

September 30, 2018, did not contain such modifications.


22

4.4 Basis of consolidation

There were no changes in the composition of the Group in the period. The interim condensed consolidated financial

statements of the Group comprise the condensed financial statements of Intercorp Perú Ltd. and Subsidiaries. The

method adopted by the Group to consolidate its Subsidiaries is described in Note 4.3 of the 2018 Annual Consolidated

Financial Statements.

5. Cash and due from banks

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

As of September

30, 2019

As of December

31, 2018

S/(000) S/(000)

Cash and clearing 1,647,142 1,890,173

Deposits in the Central Reserve Bank of Peru – BCRP 6,016,933 3,682,844

Deposits in banks 3,081,436 2,017,228

Accrued interest 6,506 6,818

10,752,017 7,597,063

Restricted funds (b) 1,589,716 1,318,911

Total 12,341,733 8,915,974

Cash and cash equivalents presented in the interim condensed consolidated statements of cash flows exclude the

restricted funds and accrued interest related to the computation of the legal reserve.

(b) The Group maintains restricted funds related to:

As of September

30, 2019 As of December

31, 2018

S/(000)

S/(000)

Repurchase agreements with BCRP (*) 1,430,213 1,189,454

Derivative financial instruments, Note 10(b) 78,306 92,456

Others 81,197 37,001

Total 1,589,716 1,318,911

(*) As of September 30, 2019, correspond to deposits maintained in the BCRP which guarantee repurchase

agreements amounting to S/1,400,200,000 including interest (guaranteed repurchase agreements amounting

to S/1,154,500,000 including interest as of December 31, 2018), see Note 12(a).


23

6. Financial investments

(a) As of September 30, 2019, and December 31, 2018, this caption is made up as follows:

As of September


31, 2018

S/(000)

S/(000)

Debt instruments at fair value through other comprehensive income (b) 13,537,584 13,013,959

Investments at fair value through profit or loss (d) 1,990,447 1,967,553

Investments at amortized cost (e) 2,115,773 1,843,944

Equity instruments at fair value through other comprehensive income (f) 684,428 617,289

Total financial investments 18,328,232 17,442,745

Accrued income -

Debt instruments at fair value through other comprehensive income (b) 145,615 180,227

Investments at amortized cost (e) 15,021 40,123

Total 18,488,868 17,663,095


24

(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

S/ US$

cost Gains Losses (c) fair value Maturity Min Max Min Max

As of September 30, 2019 S/(000) S/(000) S/(000) S/(000) % % % %

Corporate, leasing and subordinated bonds (*) 7,413,487 625,644 (12,288) 8,026,843 Oct-19 / Jan-114 1.42 9.33 2.43 10.73

Peruvian Sovereign Bonds 3,021,118 354,426 (320) 3,375,224 Sep-23 / Feb-55 1.55 8.19 - -

Negotiable Certificates of Deposit issued by BCRP 1,200,532 1,954 (9) 1,202,477 Oct-19 / Aug-20 2.26 2.32 - -

Bonds guaranteed by the Peruvian Government 707,227 41,092 (370) 747,949 Oct-24 / Jul -34 4.10 6.01 4.23 6.60

United States of America Treasury Bonds 67,654 6 - 67,660 Oct-19 - - 1.63 1.63

Global Bonds of the Republic of Colombia 116,787 644 - 117,431 Jul-21 / Mar-23 - - 2.41 2.53

Total 12,526,805 1,023,766 (12,987) 13,537,584

Accrued interest 145,615

Total 13,683,199

Unrealized gross amount Annual effective interest rates

Amortized Estimated

S/ US$

cost Gains Losses (c) fair value Maturity Min Max Min Max

As of December 31, 2018 S/(000) S/(000) S/(000) S/(000) % % % %

Corporate, leasing and subordinated bonds (*) 7,559,293 77,778 (285,494) 7,351,577 Jan-19 / Ene-114 2.01 9.58 2.80 8.90

Peruvian Sovereign Bonds 2,702,571 46,714 (65,955) 2,683,330 Aug-20 / Feb-55 2.37 8.19 - -

Negotiable Certificates of Deposit issued by BCRP (**) 1,381,011 179 (711) 1,380,479 Jan-19 / Apr-20 2.73 3.05 - -

Bonds guaranteed by the Peruvian Government 804,309 5,166 (14,477) 794,998 May-24 / Jul-34 4.10 6.01 4.97 8.81

Global Bonds of the Republic of Peru 332,311 1,439 (14,692) 319,058 Jul-25 / Feb-55 6.39 7.40 3.66 3.71

Global Bonds of the Republic of Colombia 271,482 - (4,046) 267,436 Mar-19 / Sep-37 - - 2.29 7.48

Global Bonds of the United Mexican States 105,749 - (7,133) 98,616 Oct-23 / Sep-34 - - 4.16 6.28

United States of America Treasury Bonds 83,888 - (1,039) 82,849 Dec-20 / Oct-23 - - 2.47 2.53

Global Bonds of the Republic of Chile 36,983 - (1,367) 35,616 Feb-28 - - 3.74 3.74

Total 13,277,597 131,276 (394,914) 13,013,959


Total 13,194,186

(*) As of September 30, 2019 and December 31, 2018, Inteligo holds corporate bonds from different entities for approximately S/456,734,000 and S/411,047,000, respectively, which guarantee loans with Credit Suisse First Boston and J. Safra Sarasin; see Note 12(a).

(**) As of December 31, 2018, Interbank holds certificates of deposit issued by the BCRP for approximately S/256,777,000 respectively which guarantee loans with said entity for approximately S/247,456,000; see Note 12(a).

(c) The Group has determined that the unrealized losses on debt instruments as of September 30, 2019, and December 31, 2018, not related to credit risk, are of temporary nature.


25

The Group, according to the business model applied to these debt instruments, has the capacity to maintain 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.

As of September 30, 2019, and December 31, 2018, the detail of the unrealized losses of the debt instruments classified as at fair value through other comprehensive income is as follows:

As of September 30, 2019

As of December 31, 2018

Issuer

Amortized

cost

Unrealized gross

gain

Unrealized gross

loss

Amortized

cost

Unrealized gross

gain

Unrealized gross

loss

Maturity as of

September 30,

2019

Risk rating as of

30.09.19 and

31.12.18

S/(000) S/(000) S/(000)

S/(000) S/(000) S/(000) (***)

BBVA Banco Continental 287,933 14,139 (3,954) 199,326 2,039 (4,737) 2020-2033 AA+ (*)

Banco de Crédito del Perú S.A. 120,075 167 (1,013) 222,072 - (14,536) 2019-2023 AA+ (**)

Southern Perú Copper Corporation S.A.A. 62,576 2,366 (657) 220,634 - (7,653) 2028-2035 BBB+ (*)

Taboada Finance Ltda 91,656 2,343 (370) 93,010 612 (4,694) 2029-2033 BBB+ (*)

Peruvian Sovereign Bonds 3,021,118 354,426 (320) 2,702,571 46,714 (65,955) 2023-2055 A- (*)

Enel Distribución Perú S.A.A. (before Edelnor S.A.A.) 85,660 7,964 (111) 85,665 426 (5,864) 2025-2038 AAA (**)

Corporación Financiera de Desarrollo S.A. 240,969 31,259 - 386,240 - (19,238) 2025-2046 AA (**)

H2Olmos S.A. 228,763 9,428 - 230,838 - (4,793) 2025-2032 AA (**)

Fermaca Enterprises S.R.L. 223,401 1,657 - 229,906 - (11,778) 2038 BBB (*)

Fideicomiso de Bienes Raíces Uno 183,973 11,018 - 183,572 - (23,301) 2044 BBB (*)

Mexichem S.A. 178,832 8,542 - 178,387 - (18,048) 2042-2044 BBB- (*)

Línea Amarilla S.A.C. 174,345 13,748 - 173,130 1,042 (4,998) 2037 AA (**)

Fideicomiso PA Pacifico 165,451 980 - 166,049 - (12,280) 2035 BBB- (*)

Celulosa Arauco y Constitución S.A. 164,138 15,383 - 163,796 - (12,295) 2047 BBB- (*)

Lima Metro Line 2 Finance Limited 149,534 6,638 - 149,512 - (7,935) 2034 BBB (*)

Global Bonds of the Republic of Colombia 116,787 644 - 271,482 - (4,046) 2021-2023 BBB (*)

Red de Energía del Perú 101,997 6,395 - 109,665 - (4,111) 2026-2031 AAA (**)

Falabella Perú S.A.A. 101,255 6,793 - 101,341 - (6,474) 2028-2035 AA+ (**)

Celeo Redes Operación CL 94,190 10,042 - 94,252 - (6,014) 2047 BBB (*)

Cencosud S.A. 79,479 1,218 - 191,388 - (20,819) 2045 BBB- (*)

Electricity de France S.A. 72,901 5,679 - 72,431 - (8,673) 2114 A- (*)

México Generadora de Energía 70,479 3,176 - 72,009 - (5,324) 2032 BBB (*)

Goldman Sachs 64,182 10,355 - 63,129 - (6,572) 2030-2042 BBB+ (*)

Global Bonds of the Republic of Peru - - - 332,311 1,439 (14,692) - BBB+ (*)

Global Bonds of the United Mexican States - - - 105,749 - (7,133) - BBB+ (*)

Mexico City Airport Trust S.A. - - - 94,948 - (11,129) - BBB (*)

Instruments with individual losses lower than S/4 million 315,402 6,370 (6,562) 3,985,325 7,797 (81,822) - -

Total 6,395,096 530,728 (12,987)

10,878,738 60,069 (394,914)

(*) Instrument rated abroad.

(**) Instrument rated in Peru.

(***) Corresponds to the instrument’s rating with the largest unrealized loss.


26

The movement of the allowance for expected credit losses for debt instruments measured at fair value through other

comprehensive income is presented below:

As of

September

30, 2019

As of

December 31,

2018

As of

September

30, 2018

S/(000) S/(000) S/(000)

Expected credit loss under IFRS 9 at the beginning of the period 28,050 40,840 40,840

New assets originated or purchased 1,379 1,215 764

Assets derecognized or matured (excluding write-offs) (1,146) (13,463) (2,238)

Effect on the expected credit loss different to changes of the Stage during the

period (*) (1,762) (829) (852)

Foreign exchange effect - 287 202

Expected credit loss under IFRS 9 at the end of the period 26,521

28,050

38,716

(*) Corresponds mainly to the variation in the inputs used for calculating the expected credit losses.

As a result of the assessment of the impairment of its debt instruments at fair value through other comprehensive income,

the Group recorded a recovery of the impairment of S/1,529,000 and S/2,326,000 for the nine-month periods ended

September 30, 2019 and 2018, respectively; which were presented in the caption “Impairment recovery on financial

investments” in the annual consolidated statements of income.

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

As of September

30, 2019

As of December

31, 2018

S/(000) S/(000)

Equity instruments

Local and foreign mutual funds and investment funds participations 1,443,272 1,566,934

BioPharma Credit PLC 134,152 144,157

Royalty Pharma, Note 23(a) 105,706 78,808

LendUp 81,696 23,720

ViaSat Inc. 28,029 21,705

Ishare Core MSCI Word UCIT 21,506 18,195

Others 105,894 66,982

Debt instruments

Corporate, leasing and subordinated bonds 70,192 21,611

Peruvian Sovereign Bonds - 21,927

United States of America Treasury Bonds - 3,514

Total 1,990,447 1,967,553


27

(e) As of September 30, 2019, and December 31, 2018, the investments at amortized costs are comprised of Peruvian

Sovereign Bonds for an amount of S/2,130,794,000 and S/1,884,067,000, respectively, including accrued interest.

These investments present a low credit risk and the expected credit loss is insignificant.

As of September 30, 2019, the estimated fair value of these investments amounts to approximately S/2,244,611,000

(S/1,856,325,000, as of December 31, 2018).

As of September 30, 2019, and December 31, 2018, Interbank holds loans with the BCRP for approximately

S/959,031,000 and S/671,963,000, respectively – see Note 12(a), that are guaranteed through the Peruvian Sovereign

Bonds; which are classified as restricted for approximately S/1,042,220,000 and S/738,635,000, respectively.

(f) As of September 30, 2019, and December 31, 2018, the composition of equity instruments measured at fair value

through other comprehensive income is as follows:

As of September

30, 2019

As of December

31, 2018

S/(000) S/(000)

BioPharma Credit PLC 275,333 261,484

Ishares diverse countries (ETF) 104,134 130,155

Ferreycorp S.A.A. 76,574 78,528

Engie- Energía Perú S.A. 79,928 51,384

Luz del Sur S.A.A. 78,587 23,727

Others below S/ 26 million 69,872 72,011

Total 684,428 617,289

(g) As described in detail in Note 34.1 of the Annual Consolidated Financial Statements, the Group rates its financial assets

into Stage 1, Stage 2 and Stage 3, as described below:

- Stage 1: When the financial assets are first recognized, the Group recognizes an allowance based on 12 months ECLs.

Stage 1 also includes financial assets whose credit risk has improved, and the loan has been reclassified from Stage 2.

- Stage 2: When a financial asset has shown a significant increase in credit risk since origination, the Group records an

allowance for the lifetime ECLs. Stage 2 also includes financial assets whose credit risk has improved and the financial

asset has been reclassified from Stage 3.

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


28

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 September 30, 2019 and December 31, 2018:


Debt instruments measured at fair value throgh other comprehensive

income and at amortized cost Stage 1 Stage 2 Stage 3 Total

S/(000) S/(000) S/(000) S/(000)

Corporate, leasing and subordinated bonds 7,617,978 408,865 - 8,026,843

Peruvian Sovereign Bonds 5,490,997 - - 5,490,997

Negotiable Certificates of Deposit issued by BCRP 1,202,477 - - 1,202,477

Bonds guaranteed by the Peruvian Government 747,949 - - 747,949

Global Bonds of the Republic of Colombia 117,431 - - 117,431

United States of America Treasury Bonds 67,660 - - 67,660

Total 15,244,492 408,865 - 15,653,357


Debt instruments measured at fair value throgh other comprehensive

income and at amortized cost Stage 1 Stage 2 Stage 3 Total

S/(000) S/(000) S/(000) S/(000)

Corporate, leasing and subordinated bonds

7,038,332 313,245 - 7,351,577

Peruvian Sovereign Bonds

4,527,274 - - 4,527,274

Negotiable Certificates of Deposit issued by BCRP

1,380,479 - - 1,380,479

Bonds guaranteed by the Peruvian Government

794,998 - - 794,998

Global Bonds of the Republic of Peru

319,058 - - 319,058

Global Bonds of the Republic of Colombia

267,436 - - 267,436

Global Bonds of the United Mexican States

98,616 - - 98,616

United States of America Treasury Bonds

82,849 - - 82,849

Global Bonds of the Republic of Chile

35,616 - - 35,616

Total 14,544,658 313,245 - 14,857,903


29

7. Loans, net

(a) This caption is made up as follows:

As of September 30,

2019

As of December 31,

2018

S/(000) S/(000)

Direct loans

Loans 27,353,067 25,508,140

Credit cards 6,527,881 5,653,124

Leasing 1,346,867 1,461,286

Discounted notes 582,718 492,202

Factoring 300,086 283,885

Advances and overdrafts 62,720 50,219

Refinanced loans 243,497 227,882

Past due and under legal collection loans 1,059,229 926,216

37,476,065 34,602,954

Plus (minus)

Accrued interest from performing loans 389,581 359,739

Unearned interest and interest collected in advance (42,621) (47,737)

Impairment allowance for loans (c) (1,616,061) (1,490,252)

Total direct loans, net 36,206,964 33,424,704

Indirect loans 3,960,043 4,024,244

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

As of September 30,

2019

As of December 31,

2018

S/(000)

S/(000)

Commercial loans 15,783,192 15,248,545

Consumer loans 13,932,088 12,220,305

Mortgage loans 7,011,465 6,407,479

Small and micro-business loans 749,320 726,625

Total 37,476,065 34,602,954

For purposes of estimating the impairment loss in accordance with IFRS 9, the Group's loan portfolio is segmented by

homogeneous groups that share similar risk characteristics; the Group determined these 3 types of portfolios: Retail

Banking (groups consumer and mortgage loans), Commercial Banking (groups commercial loans) and Small Business

Banking (groups loans to small and micro-business).


Notes to the interim condensed consolidated financial statements (continued)

30

(c) The movement of the allowance for expected credit loss, calculated according to IFRS 9, is as follows:

(c.1) Total direct loans

As of September 30, 2019 As of September 30, 2018

As of December 31,

2018

Changes in the allowance for expected credit losses for direct loans Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Total

S/(000) S/(000) S/(000) S/(000)

S/(000) S/(000) S/(000) S/(000)

S/(000)

Expected credit loss under IFRS 9 at the beginning of period balances 444,159 492,778 553,315 1,490,252

369,104 501,758 475,255 1,346,117

1,346,117

Impact of the expected credit loss in the consolidated income statements

New assets originated or purchased 600,007 - - 600,007

474,550 - - 474,550

706,282

Assets derecognized or paid (224,320) (82,982) (33,519) (340,821)

(183,448) (80,439) (29,851) (293,738)

(385,594)

Transfers to Stage 1 118,162 (116,396) (1,766) -

93,437 (92,571) (866) -

-

Transfers to Stage 2 (143,959) 160,030 (16,071) -

(148,737) 165,016 (16,279) -

-

Transfers to Stage 3 (175,128) (134,016) 309,144 -

(115,240) (145,750) 260,990 -

-

Impact on the expected credit loss for credits that change stage in the period (101,346) 143,177 468,158 509,989

(82,931) 150,534 350,047 417,650

586,327

Others (*) 44,703 (28,211) (1,870) 14,622

13,391 (15,613) 27,828 25,606

(14,370)

118,119 (58,398) 724,076 783,797

51,022 (18,823) 591,869 624,068

892,645

Write offs (**) - - (786,466) (786,466)

- - (710,728) (710,728)

(935,584)

Recovery of written–off loans - - 128,032 128,032

- - 133,328 133,328

176,320

Foreign exchange effect (***) 61 139 246 446

377 1,631 3,232 5,240

10,754

Expected credit loss under IFRS 9 at the end of period balances 562,339 434,519 619,203 1,616,061

420,503 484,566 492,956 1,398,025

1,490,252

(c.1.1) The following tables present the changes in the allowance for expected credit losses for direct loans for each classification of the direct loan portfolio:

Changes in the allowance for expected credit losses for direct loans – Commercial loans As of September 30, 2019


As of December 31,

2018

Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Total S/(000) S/(000) S/(000) S/(000)

S/(000) S/(000) S/(000) S/(000)

S/(000)

Expected credit loss under IFRS 9 at the beginning of period balances 68,705 27,397 98,111 194,213

48,699 28,437 75,335 152,471

152,471



56,676 - - 56,676

72,297


(26,390) (10,025) (6,724) (43,139)

(50,354)

Transfers to Stage 1 7,623 (7,623) - -

7,221 (7,221) - -

-


(16,277) 17,665 (1,388) -

-


(2,947) (3,034) 5,981 -

-

Impact on the expected credit loss for credits that change stage in the period (5,466) 3,445 20,976 18,955 (4,645) 7,338 29,789 32,482 40,119

Others (*) (2,953) (1,038) 2,701 (1,290)

(330) (2,059) 12,187 9,798

10,835

5,188 (3,275) 29,561 31,474

13,308 2,664 39,845 55,817

72,897

Write offs (**) - - (14,892) (14,892)

- - (31,250) (31,250)

(34,355)

Recovery of written–off loans - - 794 794

- - 963 963

1,163


296 194 548 1,038

2,037

Expected credit loss under IFRS 9 at the end of period balances 73,965 24,144 113,652 211,761

62,303 31,295 85,441 179,039

194,213


31

Changes in the allowance for expected credit losses for direct loans – Consumer loans


As of December 31,

2018

Stage 1 Stage 2 Stage 3 Total Stage 1 Stage 2 Stage 3 Total Total

S/(000) S/(000) S/(000) S/(000)

S/(000) S/(000) S/(000) S/(000)

S/(000)

Expected credit loss under IFRS 9 at the beginning of period balances 353,262 428,341 330,483 1,112,086

302,724 432,279 297,263 1,032,266

1,032,266



402,896 - - 402,896

616,062


(153,081) (66,822) (14,622) (234,525)

(315,610)

Transfers to Stage 1 102,473 (100,707) (1,766) -

77,222 (76,356) (866) -

-


(127,017) 131,877 (4,860) -

-


(110,959) (132,248) 243,207 -

-


Others (*) 51,445 (26,937) (3,620) 20,888

15,961 (11,109) 9,202 14,054

(25,882)

112,977 (58,546) 654,762 709,193

34,719 (17,214) 511,713 529,218

757,600

Write offs (**) - - (732,451) (732,451)

- - (649,034) (649,034)

(855,457)


- - 128,936 128,936

170,783


49 1,339 1,981 3,369

6,894

Expected credit loss under IFRS 9 at the end of period balances 466,247 369,914 376,088 1,212,249

337,492 416,404 290,859 1,044,755

1,112,086

Changes in the allowance for expected credit losses for direct loans – Mortgage loans



As of December 31,

2018


S/(000) S/(000) S/(000) S/(000)

S/(000) S/(000) S/(000) S/(000)

S/(000)


8,368 24,742 71,977 105,087

105,087



1,700 - - 1,700

2,035

Assets derecognized or paid (639) (793) (9,914) (11,346)

(1,092) (1,388) (6,869) (9,349)

(11,857)


6,793 (6,793) - -

-


(912) 10,943 (10,031) -

-

Transfers to Stage 3 (229) (3,073) 3,302 -

(180) (3,720) 3,900 -

-

Impact on the expected credit loss for credits that change stage in the period (5,753) 1,684 24,979 20,910 (6,207) (1,188) 18,233 10,838 23,422

Others (*) 541 (622) (2,733) (2,814)

62 (2,876) 1,448 (1,366)

(3,032)

776 1,977 5,618 8,371

164 (5,022) 6,681 1,823

10,568

Write offs (**) - - (1,386) (1,386)

- - (1,079) (1,079)

(2,689)


23 88 632 743

1,644


8,555 19,808 78,211 106,574

114,610


32

Changes in the allowance for expected credit losses for direct loans – Small and micro-business loans



As of December 31,

2018


S/(000) S/(000) S/(000) S/(000)

S/(000) S/(000) S/(000) S/(000)

S/(000)


9,313 16,300 30,680 56,293

56,293



13,278 - - 13,278

15,888


(2,885) (2,204) (1,636) (6,725)

(7,773)


2,201 (2,201) - -

-

Transfers to Stage 2 (4,387) 4,440 (53) -

(4,531) 4,531 - -

-


(1,154) (6,748) 7,902 -

-


Others (*) (4,330) 386 1,782 (2,162)

(2,302) 431 4,991 3,120

3,709

(822) 1,446 34,135 34,759

2,831 749 33,630 37,210

51,580

Write offs (**) - - (37,737) (37,737)

- - (29,365) (29,365)

(43,083)


- - 3,429 3,429

4,374

Foreign exchange effect (***) (21) (8) (96) (125)

9 10 71 90

179


12,153 17,059 38,445 67,657

69,343


33

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



As of December 31,

2018


S(000) S(000) S(000) S(000)

S(000) S(000) S(000) S(000)

S(000)

Expected credit loss under IFRS 9 at the beginning of period balances 19,829 19,753 22,469 62,051 46,890 77,299 14,989 139,178 139,178

Impact of the expected credit loss in the consolidated income statements-


13,186 - - 13,186

12,138


(6,729) (26,933) (10,136) (43,798)

(53,790)


9,746 (9,746) - -

-

Transfers to Stage 2 (1,928) 1,928 - -

(1,588) 3,300 (1,712) -

-

Transfers to Stage 3 (183) (9) 192 -

(12) (5) 17 -

-

Impact on the expected credit loss for credits that change stage in the period (3,450) (1,225) 390 (4,285)

(3,628) 4,050 120 542

(3,009)

Others (*) (639) (1,803) (1,049) (3,491)

(14,420) (17,059) 89 (31,390)

(34,490) 47 (16,098) (3,769) (19,820) (3,445) (46,393) (11,622) (61,460)

(79,151)

Write offs (**) - - - -

- - (24) (24)

(70)

Foreign exchange effect and others 28 41 2 71

451 442 42 935

2,094

Expected credit loss under IFRS 9 at the end of period balances 19,904 3,696 18,702 42,302 43,896 31,348 3,385 78,629

62,051

(*) Corresponds mainly to: (i) the variation between the amortized cost of the loan at the beginning of period and its amortized cost at the end of period (variation in the provision recorded for partial amortizations that did not represent a reduction or cancellation 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).

(**) The Group writes off financial assets that are still subject to collection activities. In this regard, the Group seeks to recover the amounts legally owed in full, but have been written off because there is no reasonable expectation of recovery.

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

(d) In Management’s opinion, the impairment allowance for loans recorded as of September 30, 2019 and December 31, 2018 has been established in accordance with IFRS 9 and is sufficient to cover incurred losses on the loan portfolio.



34

8. Investment property


As of September

30, 2019

As of December

31, 2018

Acquisition or

construction year

Hierarchy

level (i) Valuation methodology

S/(000) S/(000) As of September 30, 2019 / As of

December 31, 2018

Land -

Miraflores - Lima 481,567 477,307 2010 Level 3 Appraisal

San Martín de Porres - Lima 270,775 263,974 2015 Level 3 Appraisal

San Isidro - Lima 253,554 249,377 2009 Level 3 Appraisal

Piura 51,446 50,708 2008 Level 3 Appraisal

Lurín - Lima 52,146 47,562 2012 Level 3 Appraisal

Ate Vitarte - Lima 39,168 45,522 2008 Level 3 Appraisal

Chacarilla - Lima 36,352 36,221 2014 Level 3 Appraisal

Centro Urbano Nuevo Chimbote 23,099 32,563 2010 Level 3 Appraisal

Others, below S/ 30 million 125,664 121,790 Level 3 Appraisal

1,333,771 1,325,024

Built investment property -

“Real Plaza” Shopping Malls

Puruchuco - Lima 461,062 324,780 2008 Level 3 DCF / Appraisal

Primavera - Lima 171,603 165,929 2009 Level 3 DCF

Chiclayo 161,913 165,212 2005 Level 3 DCF

Centro Comercial San Isidro - Lima 159,550 162,526 2010 Level 3 DCF

Trujillo 143,790 145,701 2007 Level 3 DCF

Piura 115,307 131,984 2010 Level 3 DCF

Pucallpa 85,428 84,143 2014 Level 3 DCF

Cajamarca 70,701 69,950 2013 Level 3 DCF

Pro - Lima 52,261 51,696 2008 Level 3 DCF

Chorrillos - Lima 48,773 48,260 2011 Level 3 DCF

Santa Clara - Lima 33,879 33,095 2009 Level 3 DCF

Ilo 37,534 - 2019 Level 3 DCF

Others, below S/ 30 million 77,108 69,015 Level 3 DCF

1,618,909 1,452,291


35

As of September

30, 2019

As of December

31, 2018

Acquisition or

construction year

Hierarchy

level (i)

Valuation methodology As of

September 30, 2019 / As of

December 31, 2018

S/(000) S/(000)

Built on leased land -

Salaverry - Lima 330,178 325,745 2014 Level 3 DCF

Cuzco 147,309 127,615 2013 Level 3 DCF

Centro Cívico - Lima 122,274 112,450 2007 - 2014 Level 3 DCF

Huancayo 100,262 99,199 2008 Level 3 DCF

Villa Maria del Triunfo - La Curva - Lima 55,946 55,105 2013 - 2016 Level 3 DCF

Juliaca 54,839 54,437 2010 Level 3 DCF

Huánuco 54,584 53,562 2012 Level 3 DCF

Arequipa 44,887 45,072 2010 Level 3 DCF

Villa El Salvador - La Plazita - Lima 30,051 28,906 2017 Level 3 DCF

Moquegua 20,298 19,952 2015 Level 3 DCF

960,628 922,043

Buildings -

Orquídeas -San Isidro- Lima 161,005 144,645 2017 Level 3 DCF

Ate Vitarte - Lima 78,655 67,894 2006 Level 3 DCF

Chorrillos - Lima 67,961 51,552 2017 Level 3 DCF

Huancayo 32,715 32,901 2017 Level 3 DCF

Others, below S/ 30 million 71,480 76,627 Level 3 DCF/Cost

411,816 373,619

Total 4,325,124 4,072,977

DCF: Discounted cash flow.

(i) There were no transfers between levels of hierarchy.

(ii) As of September 30, 2019 and December 31, 2018, there are no liens on any investment property.


36

(b) The net gain on investment property for the nine-month periods ended September 30, 2019 and 2018, consists of the

following:

2019 2018 S/(000) S/(000)

Income from rental of investment property 264,413 259,580

Gain on valuation of investment property 47,232 16,188

Gain on sale of investment property 762 407

Total 312,407 276,175

(c) The movement of investment property is as follows:

As of September 30,

2019 As of September 30,

2018

S/(000) S/(000)

Beginning of period balances 4,072,977 3,740,321

Additions (d) 236,095 169,341

Sales (24,625) (6,637)

Additions due to acquisition of Quicorp, Note 2.2 - 10,131

Gain on valuation, net 47,232 16,188

Net transfers (e) (6,555) (25,151)

Ending balances 4,325,124 3,904,193

Balance as of December 31, 2018 4,072,977

(d) During 2019, main additions correspond to buildings in the shopping malls (mainly “Puruchuco”, “Chiclayo” and

“Trujillo”).

During 2018, main additions correspond to buildings in the shopping malls (mainly “Puruchuco”) and to the outlays

related to the construction of the “Orquídeas” buildings (San Isidro – Lima).

(e) During 2019 and 2018, transfers were made between real estate investments and fixed assets mainly by properties in

Pucallpa, Talara, Trujillo, Puruchuco and Cusco, which are used by Subsidiaries of the Group for their own operations.

(f) Fair value measurement – Investment property - Valuation techniques

The valuation techniques to estimate the fair value and the main assumptions used are described in Note 8 “Investment

property” of the 2018 Annual Consolidated Financial Statements.


37

The main assumptions used in the valuation and estimation of the market value of investment properties

US$ / Percentage

As of September

30, 2019

As of December 31,

2018

Average ERV US$73.3 US$59.1

Long-term inflation 2.6 2.6

Long-term occupancy rate 88.0 / 99.0 90.9 / 98.9

Average growth rate of rental income 2.5 / 3.0 2.5 / 2.75

Average NOI margin 65.0 / 92.7 50.7 / 95.3

Discount rate 9.0 9.0

9. Inventories, net


As of September 30,

2019 As of December 31,

2018

S/(000) S/(000)

Inventories from retail activities, net (b) 2,411,541 2,288,168

Inventories from real estate activities, net 20,798 22,086

Total 2,432,339 2,310,254

(b) The table below presents the balance of inventories from retail activities:

As of September 30,


2018

S/(000) S/(000)

Inventories 2,265,737 2,169,794

Finished goods 122 689

Raw material 13,984 13,044

In-transit inventories 152,704 115,169

Miscellaneous supplies 5,738 5,836 2,438,285 2,304,532

Minus:

Allowance for obsolescence of inventories (b.1) (26,744) (16,364)

2,411,541 2,288,168


38

(b.1) The movement of the allowance for impairment of inventories by retail activities is as follows:

As of September 30,

2019 As of September 30,

2018

S/(000) S/(000)

Beginning of period balances 16,364 13,949

Provision for the period 17,598 28,827

Recoveries (2,937) (2,718)

Write-offs (4,281) (14,801)

Additions due to acquisition of Quicorp, Note 2.2 - 24,684

Translation - 80

End of period balances 26,744 50,021

Balance as of December 31, 2018

16,364

The allowance for impairment of inventories is determined based on rotation levels, discounts for clearance sales and other

characteristics based on periodical assessments performed by Management. In Management’s opinion, the balance of this

provision covers adequately the risk of impairment of inventories as of September 30, 2019 and 2018.


39

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

(a) These captions are comprised of the following:

As of September 30,


2018 S/(000) S/(000)

Accounts receivable and other assets

Financial instruments

Trade accounts receivable, net 608,917 692,692

Accounts receivable from the sale of investments 183,537 367,902

Other accounts receivable 578,919 535,270

Rights related to Interbank Corporate Bonds 2026, Note 13 (c) 1,665,200 -

Accounts receivable related to derivative financial instruments (b) 434,665 349,718

Assets for technical reserves for claims and premiums by reinsurers 87,762 147,891

Operations in process 60,410 55,024

Accounts receivable from reinsurers and coinsurers 31,615 39,875

Accounts receivable from insurance operations, net 9,682 42,795

Credit cards commissions receivable 13,748 13,366

Total 3,674,455 2,244,533

Non-financial instruments

Deferred charges 212,851 183,602

Recoverable taxes 171,430 160,171

Investments in associates 71,390 67,621

Value-Added Tax credit – VAT 61,034 72,770

Prepaid rentals 15,305 16,953

Public works tax deduction 7,556 22,608

Others 7,948 48,835

547,514 572,560

Total 4,221,969 2,817,093


40

As of September 30,

2019

As of December 31,

2018

S/(000) S/(000)

Accounts payable, provisions and other liabilities


Trade accounts payable 3,453,085 3,497,540

Liability for leases, Note 4.2.2(a) 2,106,075 -

Liability for contract with investment component 438,474 298,382

Accounts payable for acquisitions of investments 319,100 250,433

Other accounts payable 444,365 718,672

Workers’ profit sharing and salaries payable 411,450 349,291

Accounts payable related to derivative financial instruments (b) 261,028 154,116

Operations in process 158,356 122,723

Allowance for indirect loan losses, Note 7(c.2) 42,302 62,051

Accounts payable to reinsurers and coinsurers 19,390 62,879

7,653,625 5,516,087

Non-financial instruments

Taxes payable 424,588 440,664

Deferred income 112,601 128,318

Provision for other contingencies 64,072 56,329

Others 11,762 21,528

613,023 646,839

Total 8,266,648 6,162,926


41

(b) The following table presents, as of September 30, 2019, and December 31, 2018, the fair value of derivative financial instruments recorded as assets or liabilities, including their notional amounts.

As of September 30, 2019 Assets Liabilities Notional amount

Effective part recognized in other

comprehensive income during

the nine-month period ended

September 30, 2019 Maturity Hedged instruments

Caption of the consolidated statements

of financial position where the hedged

item has been recognized S/(000) S/(000) S/(000) S/(000)

Derivatives held for trading -

Forward exchange contracts 34,197 41,798 8,652,218 - Between October 2019 and January 2021 - -

Interest rate swaps 104,702 115,674 4,152,089 - Between November 2020 and December 2029 - -

Foreign currency options 33,993 39,223 1,579,371 - Between October 2019 and September 2026 - -

Cross currency swaps - 58,852 199,116 - January 2023 - -

Options 297 699 136,891 - Between October 2019 and September 2020 - -

173,189 256,246 14,719,685 - Derivatives held as hedges -

Cash flow hedges:

Call Spreads (*) 79,904 - 1,354,000 (675) May 2023 Senior note not guaranteed Bonds, notes and other obligations

Call Spreads (*) 85,613 - 1,184,750 6,931 April 2028 Senior note not guaranteed Bonds, notes and other obligations

Cross currency swaps (CCS) 73,359 - 1,491,903 (8,424) January 2023 Senior bonds Bonds, notes and other obligations

Cross currency swaps (CCS) 22,268 - 507,450 (1,851) October 2027 Senior bonds Bonds, notes and other obligations

Cross currency swaps (CCS) 332 - 67,660 302 October 2020 Senior bonds Bonds, notes and other obligations

Interest rate swaps (IRS) - 1,335 84,575 (484) December 2020 Due to banks Due to banks and correspondents

Interest rate swaps (IRS) - 1,330 84,575 (486) December 2020 Due to banks Due to banks and correspondents

Interest rate swaps (IRS) - 2,117 135,320 (612) November 2020 Due to banks Due to banks and correspondents

261,476 4,782 4,910,233 (5,299)

434,665 261,028 19,629,918 (5,299)


42

As December 31, 2018 Assets Liabilities Notional amount

Effective part recognized in

other comprehensive income

during the year Maturity Hedged instruments

Caption of the consolidated statements of

financial position where the hedged item

has been recognized

S/(000) S/(000) S/(000) S/(000)

Derivatives held for trading -

Forward exchange contracts 20,400 21,529 5,194,105 - Between January 2019 and February 2020 - -

Interest rate swaps 19,249 19,854 2,018,220 -

Between November 2020 and December 2029 - -

Currency swaps 48,452 48,915 909,114 - Between January 2019 and January 2025 - -

Cross currency swaps - 59,683 198,527 - January 2023 - -

Options 628 1,956 234,780 - Between January 2019 and June 2020 - -

88,729 151,937 8,554,746 -

Derivatives held as hedges -

Cash flow hedges:

Call Spreads (*) 86,694 - 1,351,600 (12,356) May 2023 Senior note not guaranteed Bonds, notes and other obligations

Call Spreads (*) 77,257 - 1,182,650 (29,276) April 2028 Senior note not guaranteed Bonds, notes and other obligations

Cross currency swaps (CCS) 74,144 - 1,349,200 25,775 January 2023 Senior bonds Bonds, notes and other obligations

Cross currency swaps (CCS) 22,675 - 505,950 3,420 October 2027 Senior bonds Bonds, notes and other obligations

Interest rate swaps (IRS) - 1,002 134,920 (684) November 2020 Due to banks Due to banks and correspondents

Interest rate swaps (IRS) - 588 84,325 (393) December 2020 Due to banks Due to banks and correspondents

Interest rate swaps (IRS) - 589 84,325 (394) December 2020 Due to banks Due to banks and correspondents

Cross currency swaps (CCS) 219 - 67,460 2,562 October 2020 Senior bonds Bonds, notes and other obligations

260,989 2,179 4,760,430 (11,346)

349,718 154,116 13,315,176 (11,346)

(*) The call spread contracts were settled during 2018 with JP Morgan Chase & Co. and Citibank N.A. for a total reference value of US$350,000,000 and US$400,000,000, respectively; and were agreed in order to reduce the exchange rate risk exposure caused by the part of foreign currency debt issued by

InRetail Shopping Malls and InRetail Pharma S.A., in April and May 2018. In addition, the purchase price paid for such derivative financial instruments (premium) was financed in installments, generating a liability, whose total balance as of September 30, 2019, and December 31, 2018, amounts

approximately to S/121,750,000 and S/133,099,000; respectively, see Note 12(a).

(i) As of September 30,2019, and December 31, 2018 there are certain derivative financial instruments which according to the contracts signed have required the constitution of guarantee deposits; see Note 5.

(ii) For the designated hedging derivatives mentioned in the chart 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 during the nine-month period ended September 30, 2019 and during the

fiscal year 2018.

(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 hedge accounting requirements.


43

11. Deposits and obligations


As of September 30,


2018

S/(000) S/(000)

Time deposits 11,257,429 11,035,800

Demand deposits 10,905,081 9,692,363

Saving deposits 11,708,263 10,727,772

Compensation for service time 1,880,779 1,801,372

Other obligations 13,460 4,959

Total 35,765,012 33,262,266

(b) Interest rates applied to deposits and obligations are determined based on the market interest rates.

(c) As of September 30, 2019, and December 31, 2018, out of total deposits and obligations, approximately

S/10,318,100,000 and S/9,734,215,000, respectively, are covered by the Peruvian Deposit Insurance Fund.

12. Due to banks and correspondents

(a) This caption is comprised of the following:

As of September


31, 2018

S/(000) S/(000)

By type

Loans received from Peruvian entities 2,571,929 2,123,186

BCRP, Notes 5(b), 6(b) (**) and 6(e) 2,359,231 2,073,919

Promotional credit lines 1,408,006 1,454,603

Loans received from foreign entities, (b) and Note 6(b)(*) 760,890 1,088,373

Loans received from third parties 66,887 293,214

Loans for purchase of derivative financial instruments, Note 10(b)(*) 125,259 133,099 7,292,202 7,166,394

Interest and commissions payable 60,502 59,815

7,352,704 7,226,209

By term

Short term 4,383,736 3,862,214

Long term 2,968,968 3,363,995

Total 7,352,704 7,226,209


44

(b) As of September 30, 2019 and December 31, 2018, some of the Group loan agreements include standard clauses

regarding the compliance of financial ratios, assets disposals and intercompany transactions under certain conditions,

the use of funds and other management issues, such as:

(i) Submit audited financial statements on an annual basis and unaudited financial statements on a quarterly

basis (both in Spanish and English).

(ii) Maintain a determined global capital ratio.

(iii) Maintain a determined coverage margin of non-performing loan portfolio.

(iv) Maintain a determined past due loans rate.

In the opinion of Management, the Group complies with these covenants as of September 30, 2019 and December 31,

2018.


45

13. Bonds, notes and other obligations


Issuance Issuer Annual interest rate

Interest

payment Maturity Amount issued

As of September

30, 2019

As of December

31, 2018

S/(000) S/(000) S/(000)

Local issuances

Subordinated bonds – first program Second (B series) Interbank 9.50% Semi-annually 2023 US$30,000 - 94,086

Third (A series) Interbank 3.5% + VAC (*) Semi-annually 2023 S/110,000 91,000 70,000

Fifth (A series) Interbank 8.50% Semi-annually Jul 2019 S/3,300 - 3,300

Sixth (A series) Interbank 8.16% Semi-annually Jul 2019 US$15,110 - 50,966

Eighth (A series) Interbank 6.91% Semi-annually 2022 S/137,900 137,105 137,130

Second, first tranch (* *) Interseguro 6.97% Semi-annually 2024 US$35,000 - 118,055

Second, second tranch Interseguro 6.00% Semi-annually 2024 US$15,000 50,745 50,594

278,850 524,131

Subordinated bonds – second program Second (A series) Interbank 5.81% Semi-annually 2023 S/150,000 149,814 149,776

Third (A series) Interbank 7.50% Semi-annually 2023 US$50,000 168,855 168,312

318,669 318,088

Subordinated bonds – third program

First issue - Interseguro Interseguro 9.50% Semi-annually 2029 US$20,000 67,660 -

67,660 -

Corporate bonds – first program First (A series) Financiera OH! 7.69% Quarterly 2021 S/120,000 119,745 119,626

First (B series) Financiera OH! 6.97% Quarterly 2021 S/99,419 99,209 99,129

Second (A series) Financiera OH! 6.28% Quarterly 2021 S/100,000 99,750 99,670

Second (B series) Financiera OH! 5.84% Quarterly 2022 S/60,000 59,813 59,765

Third (A series) Financiera OH! 6.41% Quarterly 2023 S/95,885 95,554 -

474,071 378,190

Corporate bonds – second program Fifth (A series) Interbank 3.41% + VAC (*) Annually 2029 S/ 150,000 150,000 -

150,000 -

Securitized Bonds First issuance– A and B series Colegios Peruanos 8.78% Semi-annually 2035 S/66,000 33,022 27,614

Second issuance– A series Colegios Peruanos 8.78% Semi-annually 2035 S/50,000 46,983 28,791

Third issuance– A series Colegios Peruanos 7.69% Semi-annually 2037 S/70,000 69,414 69,372

Fourth issuance– A series Colegios Peruanos 5.96% Semi-annually 2034 S/230,000 227,017 -

First issuance– A class, 1 series Homecenter Peruanos 6.59% Quarterly 2025 S/100,000 96,044 99,014

472,480 224,791


46

Issuance Issuer Annual interest rate

Interest

payment Maturity Amount issued

As of September

30, 2019

As of December

31, 2018

S/(000) S/(000) S/(000)

Negotiable certificates of deposit

Negotiable certificates of deposit Financiera OH! Between 4.41% and 4.97% Annually Between October 2019

and Jun 2020 370,740 361,328 368,815

Negotiable certificates of deposit Interbank 4.28% Annually 2020 150,000 146,986 -

508,314 368,815

Total local issuances 2,270,044 1,814,015

International issuances

Subordinated bonds Interbank 6.63% Semi-annually 2029 US$300,000 1,010,630 1,006,875

Junior subordinated notes Interbank 8.50% Semi-annually 2070 US$200,000 674,114 671,546

Senior bonds – first and second issue Interbank 5.75% Semi-annually 2020 US$650,000 1,311,009 1,309,248

Senior bonds (c) Interbank 5.00% Semi-annually 2026 S/312,400 312,000 -

Senior bonds (c) Interbank 3.25% Semi-annually 2026 US$400,000 1,352,420 -

Senior bonds Intercorp Financial Services 4.13% Semi-annually 2027 US$300,000 1,001,210 993,241

Corporate senior bonds Interbank 3.38% Semi-annually 2023 US$484,895 1,588,781 1,558,979

Senior bonds Intercorp Perú 7.66% Semi-annually 2030 S/301,500 298,213 288,224

Senior bonds (d) Intercorp Perú 5.88% Semi-annually 2025 US$250,000 - 788,018

Senior bonds (e) Intercorp Perú 3.88% Semi-annually 2029 US$325,000 1,052,223 -

Senior bonds (e) Intercorp Perú 5.78% Semi-annually 2029 S/300,000 295,969 -

Senior notes not guaranteed Inretail Shopping Malls 7.88% Semi-annually 2034 S/141,000 135,497 128,366

Senior notes not guaranteed Inretail Shopping Malls 5.75% Semi-annually 2028 US$350,000 1,107,608 1,095,755

Senior notes not guaranteed Inretail Shopping Malls 6.56% Semi-annually 2028 S/313,500 262,254 264,200

Senior notes not guaranteed Inretail Pharma 5.38% Semi-annually 2023 US$400,000 1,336,474 1,330,762

Senior notes not guaranteed Inretail Pharma 6.44% Semi-annually 2025 S/385,800 383,628 383,390

First issue Intercorp Retail 7.00% Annually 2020 US$25,000 84,624 84,475

Total international issuances 12,206,654 9,903,079

Total local and international issuances 14,476,698 11,717,094

Interest payable 274,849 212,534

Total 14,751,547 11,929,628

(*) The Spanish term “Valor de actualización constante“ is referred indexed amounts.

(**) On February 12, 2019, Interseguro performed the early redemption of said instruments and paid interest for approximately US$1,200,000.


47

(b) The international issuances are listed at the Luxembourg Stock Exchange. On the other hand, the local and international

issuances include standard clauses of compliance with financial ratios, the use of funds and other administrative

matters.

As of September 30, 2019 and December 31, 2018, the international issuances maintain mainly this covenant: 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 Management, this covenant has been met by the Group as of September 30, 2019 and December 31,

2018. See detailed information in Note 14 of the Annual Consolidated Financial Statements.

(c) On the other hand, during September 2019, Interbank issued corporate bonds called “5.00% Senior Notes due 2026” for

S/312,000,000 and corporate bonds called “3.250% Senior Notes due 2026” for US$400,000,000, both issuances

were made under Rule 144A and Regulation S of the U.S. Securities Act of 1933 of the United States of America. As of

September 30, 2019, proceeds from both issuances are recognized as an account receivable amounting to

S/1,665,200,000 and were collected on October 1 and October 4, 2019, see Note 10(a).

(d) In July 2019, Intercorp Perú performed the repurchase of corporate bonds denominated “5.875% Senior Notes due

2025”; which originated the premium payment for approximately US$11,400,000 (equivalent to S/36,027,000) which

is presented in the caption “Financial expenses” in the statements of income; see Nota 17.

(e) In July 2019, the Company performed a private offering abroad and on the local market of bonds denominated “3.875

Senior Notes due 2029” and “5.78125 Senior Notes due 2029” for US$325,000,000 and S/300,000,000,

respectively. The bonds were issued under Rule 114A and Regulation S of the U.S. Securities Act of 1993 of the United

States of America. The proceeds from these issuances were used mainly for the repurchase and redemption of corporate

bonds “5.875% Secured Notes due 2025” issued by Intercorp Perú and payment of the premium for the repurchase of

said bonds.

Issuance expenses amounted to approximately S/39,000,000, which are presented as an issued bonds deduction; as of

September 30, 2019, have accrued as part of the interest rate approximately S/542,000.


48

14. Insurance contract liabilities


As of September


31, 2018

S/(000) S/(000)

Technical reserves for insurance premiums (b) 11,236,197 10,006,960

Technical reserves for claim 217,075 293,508

11,453,272 10,300,468

By term

Short term 949,066 935,182

Long term 10,504,206 9,365,286

Total 11,453,272 10,300,468


49

(b) The movement of technical reserves for insurance premiums disclosed by type of insurance for the nine-month periods ended September 30, 2019 and 2018, is as follows:


Annuities

Retirement,

disability and

survival annuities

Life

insurance General insurance Total

Annuities

Retirement,

disability and

survival annuities

Life

insurance General insurance Total

S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)

Beginning of period balances 8,665,894 715,217 586,166 39,683 10,006,960 9,034,796 676,949 525,662 36,482 10,273,889

Insurance subscriptions 228,127 - 3,116 36,729 267,972 187,510 - 7,097 35,104 229,711

Interest rate effect 951,093 85,463 - - 1,036,556 (900,970) (99) - - (901,069)

Time passage adjustments (100,292) (12,047) 95,917 (34,644) (51,066) 31,963 12,823 58,414 (31,659) 71,541

Maturities and recoveries - - (36,777) - (36,777) - - (28,867) - (28,867)

Exchange differences 10,628 - 1,914 10 12,552 67,159 68 9,043 (669) 75,601

End of period balances 9,755,450 788,633 650,336 41,778 11,236,197 8,420,458 689,741 571,349 39,258 9,720,806

Balance as of December 31, 2018

8,665,894 715,217 586,166 39,683 10,006,960

(c) In Management’s opinion, these balances reflect the exposure of life and general insurance contracts as of September 30, 2019, and December 31, 2018, in accordance with IFRS 4.

(d) As of September 30, 2019 and December 31, 2018, the main assumptions used in the estimation of retirement, disability and survival annuities and individual life reserves are the following:

Technical rates

Type Mortality table 30.09.2019 31.12.2018

Annuities SPP-S-2017, SPP-I-2017 4.65% in US$ 5.63% in US$

with improvement factor 1.84% in Soles VAC 2.74% in S/ VAC

for mortality 4.93% in adjusted S/ 5.84% in adjusted S/

Retirement, disability and survival SPP-S-2017, SPP-I-2017 1.84% in Soles VAC 2.74% in S/ VAC

with improvement factor

for mortality

Individual life insurance contracts (included linked insurance contracts) CSO 80 adjusted 4.00 - 5.00% 4.00 - 6.00%


50

The sensitivity of the estimates used by the Group to measure its insurance risks is represented primarily by life insurance risks; the main variables as of September 30, 2019 and December 31, 2018, are the interest

rates and the mortality tables. The Group has assessed the changes of the reserves related to its most significant life insurance contracts included in the reserves of annuities, retirement, disability and survival of +/-

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

As of September 30, 2019 As of December 31, 2018

Variation of the reserves Variation of the reserves

Reserves Amount Percentage Reserves Amount Percentage

S/(000) S/(000) % S/(000) S/(000) %

Portfolio in S/ and US Dollars - Basis amount

Changes in interest rate: + 100 bps 8,731,096 (1,024,355) (10.50) 7,816,973 (848,921) (9.80)

Changes in interest rate: - 100 bps 11,015,474 1,260,023 12.92 9,696,893 1,030,999 11.90

Changes in mortality table at 105% 9,655,380 (100,070) (1.03) 8,587,633 (78,261) (0.90)

Changes in mortality table at 95% 9,860,490 105,040 1.08 8,747,817 81,923 0.95

Retirements, disability and survival

Portfolio in S/ – Basis amount

Changes in interest rate: + 100 bps 694,792 (93,841) (11.90) 635,838 (79,379) (11.10)

Changes in interest rate: - 100 bps 906,276 117,643 14.92 813,614 98,397 13.76

Changes in mortality table at 105% 778,097 (10,536) (1.34) 706,495 (8,722) (1.22)

Changes in mortality table at 95% 799,714 11,081 1.41 724,366 9,149 1.28


51

15. Equity

(a) Capital stock and dividend distribution

As of September 30, 2019, and December 31, 2018, the Company’s capital stock was represented by 14,901,892 Class

A shares and 134,117,024 Class B shares. Both classes have the same economic rights. The difference between them is

that Class A shares grant the right to choose the majority of the Board of Directors’ members (5 directors), while Class B

shares can choose one director.

The shareholding structure of the Company as of September 30, 2019, and December 31,2018 is presented below:

Shareholder Total ownership

%

Class “A” shares:

International Financial Holding Inc. 7.73

Southern Hill Corp. 2.27

Class “B” shares:

Bank of New York-ADR Programs 39.78

International Financial Holding Inc. 21.79

Shetland Securities Inc. 16.37

Southern Hill Corp. 10.60

Others 1.46 _______

100.00 _______

The Board of Directors’ session, held on August 20, 2019, agreed to capitalize retained earnings and earnings generated

in the year for future capitalizations for the amount of S/200,000,000.

The Board of Directors’ session, held on May 21, 2019, agreed to capitalize the earnings generated in the year for future

capitalizations for the amount of S/420,000,000.

The General Shareholders’ Meeting held on April 1, 2019, agreed to capitalize approximately S/491,464,000 over

retained earnings. Likewise, it was agreed to distribute dividends for US$30,000,000 (equivalent to S/98,940,000),

which will be paid in four equal installments (US$7,500,000) from June 2019 to March 2020. In the same meeting, the

nominal value per share was modified from US$9 to US$10, while the number of shares was kept the same.

The Board of Directors’ session, held on February 27, 2019, agreed to capitalize the retained earnings for the amount of

S/320,000,000.

The General Shareholders’ Meeting held on April 2, 2018, agreed to capitalize approximately S/485,891,000. Likewise,

it was agreed to distribute dividends for US$30,000,000 (equivalent to 97,818,000), which will be paid in four quarterly

and equal installments (US$7,500,000) from June 2018 to March 2019. In the same meeting, the nominal value per

share was modified from US$8 to US$9, while the number of shares was kept the same.

The Board of Directors’ Meeting held on May 22, 2018, agreed to capitalize the earnings to be generated in 2018 up to

the amount of S/250,000,000, delegating in the general manager the decision of the exact amount to be capitalized.


52

(b) Shareholders’ equity for legal purposes (regulatory capital)

Intercorp Perú must meet certain capital requirements as well as global and concentration limits set out by the

Regulation on Consolidated Supervision of Financial and Mixed Conglomerates, approved on September 29, 2010, by

the SBS through Resolution No. 11823-2010, as amended. As of September 30, 2019 and December 31, 2018, the

regulatory capital required for Interbank, Interseguro and Financiera OH!, is calculated based on the separate financial

statements of each Subsidiary prepared following the accounting principles and practices stated by the SBS. Also, as of

those dates, the regulatory capital required for Inteligo Bank is calculated in accordance with the requirements of the

Central Bank of The Bahamas. The regulatory capital required for Interbank, Interseguro, Inteligo Bank and Financiera

OH!, is detailed in Note 18(e) of the 2018 Annual Consolidated Financial Statements.

As of September 30, 2019, and December 31, 2018, the Group has met the requirements and complementary provisions

established by the SBS as of said dates.

(c) Reserves

The General Shareholders’ Meeting held on April 1, 2019, agreed to constitute a reserve for S/58,536,000 charged to

retained earnings.

The General Shareholders’ Meeting held on April 2, 2018, agreed to constitute a reserve for S/114,109,000 charged to

retained earnings.

16. Tax situation

(a) Intercorp Perú and its Subsidiaries incorporated and domiciled in The Bahamas and Republic of Panama (see Note 3),

are not subject to any Income Tax or any taxes on capital gains, equity or property. The Subsidiaries of the Company

incorporated and domiciled in countries different to the mentioned before are subject to the Tax legislation of the country

where they operate; see paragraph (b).

Peruvian life insurance companies are exempted from Income Tax regarding the income derived from assets linked to

technical reserves for pension insurance (retirement, disability and survival pensions) and annuities from the Private

Pension Fund Administration System.

On the other hand, it is considered as Peruvian-source income those arisen from the direct or indirect sale of shares of

stock or ownership interests of legal entities domiciled in the country.

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 or ownership interests of one or more legal entities domiciled in the

country, provided that certain conditions established by law.

In this sense, the Income Tax Act establishes that a case of indirect transfer of shares occurs when, in any of the twelve

(12) months prior to the sale, the market value of the shares or ownership interests of the domiciled legal entity is

equivalent to 50 percent or more of the market value of the shares of stock or ownership interests of the non-domiciled

legal entity. In addition, as a concurrent condition, it is established that, in any 12-month period, shares or ownership

interests that represent 10 percent or more of the capital stock of a non-domiciled legal entity shall be sold.


53

(b) The Company’s Subsidiaries are subject to the tax regime of the country in which they operate; and pay taxes on the basis

of their separate financial statements. As of September 30, 2019 and December 31, 2018, the applicable Income Tax

rates on the taxable income in the main countries where the Company and its Subsidiaries operate are presented below.

Tax rates __________________________________

2019 2018

% %

Spain (*) 25.00 25.00

Peru 29.50 29.50

Ecuador 25.00 25.00

Colombia 33.00 33.00

Bolivia 25.00 25.00

Mexico 30.00 30.00

According to existing legislation in some countries, as of September 30, 2019, and December 31, 2018, cash dividends

for non-domiciled shareholders are taxable for Income Tax according to the following rates:

Tax rates __________________________________

2019 2018

% %

Spain (*) - -

Peru 5.00 5.00

Ecuador 10.00 10.00

Colombia 7.50 5.00

Bolivia 12.50 12.50

Mexico (**) - -

(*) The distribution of dividends from Spain to The Bahamas is not subject to this tax.

(**) The distribution of dividends from Mexico to Spain is not subject to this tax.

(c) The Tax Authority is legally entitled to review and dispute tax returns for up to four years subsequent to the date at which

they are filed. It also has the legally entitled to challenge the income tax calculated for subsidiaries on their tax return.

Given the possible interpretations that the Tax Authority may have for the current legal regulations, it is not possible to

determine as of the corresponding date if future revisions will result or not in additional liabilities for Subsidiaries of the

Intercorp Group, therefore, if eventual tax revisions result in higher taxes, they will be applied to the profit or loss of the

fiscal year in which they are determined.

(d) Financial and insurance entities -

Interbank -

In the case of Interbank, in April 2004, June 2006, February 2007, June 2007, November 2007, October 2008 and

December 2010, it received several of Tax Determination and Tax Penalty notices corresponding mainly to the Income Tax

determination for the fiscal years 2000 to 2006. As a result, claims and appeals were filed and subsequent contentious

administrative proceedings were started, with the exception of Income Tax 2006, which is still pending in the Tax Court.


54

Regarding the tax litigations followed by Interbank related to the annual Income Tax returns for the years 2000 to 2006,

the most relevant matter subject to discrepancy with SUNAT corresponds to whether the “interest in suspense” are

subject to Income Tax or not. In this sense, Interbank considers that the interest in suspense do not constitute accrued

income, in accordance with the SBS and the IFRS, which is also supported by a ruling of the Permanent Constitutional

and Social Law Chamber of the Supreme Court issued in August 2009.

Notwithstanding the foregoing, in February 2018, Interbank was informed that the Third Transitory Chamber of

Constitutional and Social Law of the Supreme Court, issued a ruling regarding a third bank that impacts Interbank’s

original estimation regarding the degree of contingency indicated in the previous paragraph; which, based on this new

circumstance and in compliance with the IFRS, Interbank estimates as possible as of the date of this report.

Afterwards, in September 2019, the Permanent Chamber of Constitutional and Social Law of the Supreme Court of

Justice of the Republic, in an identical case, has resolved in favor of the taxing treatment on the suspended interest

followed by the financial institution; which based on this new circumstance and in compliance with the IFRS, Interbank

deems as remote.

The tax liability requested for this concept and other minor matters by SUNAT as of September 30, 2019, amounts to

approximately S/300,000,000 of which S/34,000,000 correspond to taxes and the difference to fines and default

interests.

From the tax and legal analysis carried out, Interbank's Management and its external legal advisors consider that there is

sufficient technical support for the prevalence of Interbank's position; as a result, it has not recorded any provision for

this contingency as of September 30, 2019 and December 31, 2018.

On the other hand, during the years 2013 and 2014, SUNAT closed the audit processes corresponding to the assessment

of the Income Tax of the fiscal years 2007, 2008 and 2009, respectively, thus issuing a series of Assessment Resolutions

without any additional levying of said tax.

On January 11, 2016, SUNAT closed the partial audit corresponding to the fiscal year 2013 for withholding of Income Tax

from non-domiciled beneficiaries, issuing a series of Final Assessment Resolutions without any additional levying of the

tax in question.

On February 3, 2017, SUNAT closed the inspection corresponding to the fiscal year 2010 related to Income Tax. The Bank

paid the amount of the deficiency under protest and filed a complaint. On November 6, 2018, the Tax Authority closed

again the inspection corresponding to the fiscal year 2010 in relation to the Income Tax. Interbank paid the amount

indebted under protest and files a tax complaint and later on, a fiscal appeal. Currently, the appeal is pending resolution

by the Tax Court.

On February 14, 2018, SUNAT notified Interbank of the beginning of the partial inspection process for the Income Tax for

the year 2014.

On September 7, 2018, SUNAT closed the partial inspection process for the income tax for the year 2014; without

additional tax request.


55

On January 14, 2019, Interbank was notified of the Determination and Penalty Resolutions corresponding to the audit of

the Income Tax for the fiscal year 2013. The tax debt sought by SUNAT amounts to approximately S/56,000,000. In

February and October 2019, Interbank Management has submitted the respective complaint to the resolutions indicated

above. In Management opinion and its legal advisors, any additional tax assessment would not be significant for the

interim condensed consolidated financial statements as of September 30, 2019 and December 31, 2018.

On April 26, 2019, SUNAT notified of the beginning of the definitive inspection process for withholding of Income Tax from

non-domiciled beneficiaries for the year 2018.

Interseguro -

On January 4, 2019, Interseguro was notified through a Tax Determination notice about the partial auditing of the Income

Tax for non-domiciled entities for Sura corresponding to January 2015. The tax debt claimed by SUNAT amounts to

approximately S/19,000,000. Considering that this debt corresponds to a period prior to the acquisition of Seguros Sura

by the Group, and according to the conditions of the purchase and sale agreement of this entity, this tax assessment, if

confirmed after the legal actions that Management is to file, would be assumed by the sellers. On January 30, 2019, the

Company filed an appeal against the determination decision with the Tax Authority.

On August 28, 2019, Interseguro was notified by the Tax Authority through official letter and requirement in relation to the

Income Tax of the fiscal year 2008, as definitive inspection to Seguros Sura.

Finally, as of the date of this report, SUNAT is reviewing the 2012 tax return of Interbank. In the opinion of Management,

any eventual additional tax assessment would not be significant for the interim condensed consolidated financial

statements as of September 30, 2019 and December 31, 2018.

(e) Retail and real estate -

Supermercados Peruanos S.A. has been audited by SUNAT on its Income Tax returns and its monthly IGV returns for the

years 2004 to 2010. Said audits resulted in Determination Resolutions generating higher tax payments, fines and

interest for an approximate total of S/167,666,000 as of September 30, 2019 (S/175,000,000 as of December 31,

2018).

The resolutions issued for the years 2004 to 2010 have been challenged and these cases are pending resolution by the

Tax Court. In the opinion of Management and its legal advisors, Supermercados Peruanos S.A. has sufficient arguments

that defend its position.

Eckerd Amazonia S.A.C. filed claims against several Determination and Fine Resolutions on alleged omissions of the

payment of IGV for the period between January 2013 and June 2015 for approximately S/17,431,000. In Management

opinion and its legal advisors, any additional tax assessment would not be significant for the interim condensed

consolidated financial statements.

Mifarma S.A.C. (formerly Farmacias Peruanas S.A.C.) filed an appeal against SUNAT for resolutions with alleged

omissions in the determination of tax base for the profits of 2001, 2003, 2008, 2009, 2011, 2012, 2013, 2014 and

2015, as well as the IGV of the year 2001 for approximately S/9,037,000 as of September 30, 2019. Management and


56

its legal advisors do not consider it necessary to create additional provisions to those that are already recorded as of

September 30, 2019, for these processes.

(f) Educational business -

As of September 30, 2019, and December 31, 2018, UTP S.A.C. maintains several lawsuits (labor, tax and civil) and

contentious administrative procedures with different municipalities and SUNAT, which have been assessed and qualified

by Management and its legal advisors as possible. As of September 30, 2019, the approximate amount of such

proceedings and procedures amounts to approximately S/6,778,000 (S/5,006,000 as of December 31, 2018). In the

opinion of Management and its legal advisors, these legal actions will not generate liabilities of importance to the


(g) Regarding the determination of the Income Tax, transfer prices of transactions with related companies and companies

located in non-cooperating countries or territories or with low or zero taxation, or with legal persons or permanent

establishments whose profits, income or earnings from such contracts are subject to a preferential fiscal regime, must be

supported with documentation and information about valuation methods and criteria considered for its determination.

Based on the analysis of the Company’s and its Subsidiaries’ operations, Management and its legal advisors believe that,

as a result of the application of these standards, there will not be significant contingencies for the Company and its

Subsidiaries as of September 30, 2019, and December 31, 2018.

Through Legislative Decree No. 1312, published on December 31, 2016, the formal obligations for entities included

within the scope of application of transfer pricing are modified, thus incorporating three new informative affidavits: (i)

Local Report; (ii) Master Report; and (iii) Country Report. The first validity of the first affidavit started in 2017 for the

operations that occurred during 2016, while the validity of the latest two started in 2018 for the operations that have

occurred since the fiscal year 2017.

(h) 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 are imposed the defensive

measures already existing for countries and territories with low or zero taxation.

In this regard, it is important to emphasize that, at present, Interbank maintains a branch in Panama, a country that is

considered “non-cooperating”, in accordance with Legislative Decree No. 1381.

(i) 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 or accreditation of the compensation. In order for said cost or expense to be deductible for the local

company, the remuneration must have been paid or credited up 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


57

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 juridical person who has the status of protector or administrator, is domiciled in the country; c)

any of the parts of a consortium is domiciled in the country. This obligation will be fulfilled through the

presentation to SUNAT of an informative report, which must contain the information of the final beneficiary and

be submitted, in accordance with the regulations and within the deadlines established by Superintendence

Resolution issued by SUNAT.

(iii) The Tax Code was amended regarding the application of the general anti-avoidance rule (Rule XVI of the

Preliminary Title of the Tax Code - 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 tax evasion 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 evasion 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 at 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 legal entity for the purpose of

ratification or modification until March 29, 2019, without prejudice to the fact that the management or other

administrators of the Company and its Subsidiaries 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

evasion cases, will take place in the final inspection procedures in which actions, events or situations

produced since July 19, 2012, are reviewed.

(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 relevant changes is the

inclusion of a new indirect sale assumption, which is configured 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 Tax Units.

- Permanent establishments of sole proprietorship, 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 12-month

period.


58

- The regime of credits against Income Tax for taxes paid abroad, to be included in the indirect

credit (corporate tax paid by foreign subsidiaries) as credit applicable against the Income Tax of

domiciled legal persons, in order to avoid the double economic imposition.

- 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 as of September 14, 2018. Beginning in 2021, the limit for

the deduction of financial expenses shall be equivalent to 30 percent of the entity’s EBITDA.

(v) Regulations have been established for the accrual of income and expenses for tax purposes as of January 1,

2019 (Legislative Decree No. 1425). Until 2018, there was no normative 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 the

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

established is to take place shall 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.

(j) Intercorp Perú calculates the period’s Income Tax expense using the best estimate of the weighted average annual tax

rate expected for the full annual earnings. The table below presents the amounts reported in the interim condensed

consolidated statements of income for the nine-month periods ended September 30, 2019 and 2018:

For the nine-month periods

ended September 30

2019 2018

S/(000)

S/(000)

Current – Expense (594,384) (429,497)

Deferred – (Income) expense 14,940 (66,673)

(579,444) (496,170)


59

17. Interest and similar income; Interest and similar expenses



ended September 30

2019 2018

S/(000) S/(000)

Interest and similar income -

Interest on loan portfolio 3,261,114 2,813,851

Interest on investments at fair value through other comprehensive income 546,130 577,050

Interest on due from banks and inter-bank funds 105,121 46,927

Interest on investments at amortized cost 67,903 63,783

Dividends on financial instruments 54,522 51,898

Other interest and similar income 1,979 5,135

Total 4,036,769 3,558,644

Interest and similar expenses

Interest on bonds, notes and other obligations (488,414) (493,337)

Interest and fees on deposits and obligations (601,890) (404,050)

Interest and fees on obligations with financial institutions (291,123) (334,968)

Interest on leases, Note 4.2.2 (113,731) -

Deposit insurance fund premium (33,967) (30,175)

Result from hedging transactions (6,912) (6,912)

Time value of Call Spreads premium (11,415) (28,232)

Premium for early cancellation of bonds, notes and other obligations (36,027) (52,942)

Expenses for early settlement of Call Spreads, Note 10(b) - (24,129)

Other interest and similar expenses (33,640) (22,855)

Total (1,617,119) (1,397,600)


60

18. Fee income from financial services, net

This caption is comprised of the following:


ended September 30

2019 2018

S/(000) S/(000)

Income

Maintenance and mailing of accounts, transfer fees and commissions on credit and debit

card 509,232 483,631

Commissions for banking services 158,481 127,131

Funds management 104,293 110,560

Fees from indirect loans 42,421 46,841

Collection services fees 28,971 26,623

Brokerage and custody services fees 6,168 7,410

Others 32,204 23,388

Total 881,770 825,584

Expenses

Credit cards (87,750) (62,748)

Debtor’s life insurance premiums (37,273) (50,172)

Fees paid to foreign banks (12,748) (11,306)

Brokerage and custody services (467) (1,747)

Others (36,911) (32,202)

Total (175,149) (158,175)

Total, net 706,621 667,409


61

19. Other income and expenses

This caption is comprised of the following:


ended September 30

2019 2018

S/(000) S/(000)

Other income

Income from lease 30,005 29,237

Income from investments in associates 12,912 14,640

Other technical income from insurance operations 9,766 9,103

Services rendered to third parties 2,455 4,408

Others 22,130 27,107

Total other income 77,268 84,495

Other expenses

Provision for accounts receivable (48,612) (49,843)

Sundry technical insurance expenses (31,519) (29,782)

Commissions from insurance activities (8,702) (18,699)

Provision for sundry risks (5,713) (6,203)

Donations (3,982) (3,576)

Administrative and tax penalties (1,610) (2,976)

Expenses related to rental income (1,020) -

Others (39,527) (42,961)

Total other expenses (140,685) (154,040)


62

20. Net premiums earned

For the nine-month periods ended September 30, 2019, and 2018, this caption is comprised of the following:

Premiums assumed Adjustment of technical reserves

Gross

premiums earned (*) Premiums ceded to reinsurers Net premiums earned

2019 2018 2019 2018 2019 2018 2019 2018 2019 2018

S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)

Life insurance

Annuities (**) 214,148 187,732 (35,373) (213,499) 178,775 (25,767) - - 178,775 (25,767)

Group life 100,685 80,999 (417) 1,065 100,268 82,064 (3,901) (3,342) 96,367 78,722

Individual life 100,436 96,895 (58,843) (36,150) 41,593 60,745 (3,319) (4,365) 38,274 56,380

Retirement, disability and survival 10,476 119,801 (74,031) (12,822) (63,555) 106,979 (2,812) (75,605) (66,367) 31,374

Others 2 3 (2,993) (1,559) (2,991) (1,556) - - (2,991) (1,556)

Total life insurance 425,747 485,430 (171,657) (262,965) 254,090 222,465 (10,032) (83,312) 244,058 139,153

Total general insurance 77,512 72,323 (2,691) (3,445) 74,821 68,878 (156) (1,333) 74,665 67,545

Total 503,259 557,753 (174,348) (266,410) 328,911 291,343 (10,188) (84,645) 318,723 206,698

(*) Includes the annual variation of technical reserves and unearned premiums.

(**) The variation of the adjustment of technical reserves is due to variation in the rates with which technical reserves are determined, see rates in Note 14(d).


63

21. Gross profit from retail business



ended September 30

2019 2018

S/(000) S/(000)

Net sales (b) 10,864,764 10,056,305

Cost of sales (7,885,377) (7,378,267)

Total 2,979,387 2,678,038

(b) Net sales corresponding to retail activities mainly comprise the sale of goods. These sales were mainly made in Peru.

22. 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:

Outstanding

shares

Shares

considered in

computation

Effective days in

the year

Weighted average

number of shares

(in thousands) (in thousands) (in thousands)

2018

Balance as of January 1, 2018 149,019 149,019 270 149,019

Balance as of September 30, 2018 149,019 149,019 149,019

Net earnings attributable to Intercorp Perú S/(000) 542,479

Basic and diluted net earnings per share attributable to

Intercorp (Soles) 3.64

2019

Balance as of January 1, 2019 149,019 149,019 270 149,019

Balance as of September 30, 2019 149,019 149,019 149,019

Net earnings attributable to Intercorp Perú S/(000) 755,610

Basic and diluted net earnings per share attributable to

Intercorp (Soles) 5.07


64

23. Transactions with shareholders, related parties and affiliated entities

(a) The table below presents the main transactions with shareholders, related parties and affiliated companies as of September

30, 2019 and December 31, 2018:

As of September

30, 2019

As of December

31, 2018

S/(000) S/(000)

Assets

Financial instruments at fair value through profit or loss

Mutual and investment funds - NG Capital Partners II 321,143 290,314

Participations - Royalty Pharma, Note 6(d) 105,706 78,808

Mutual and investment funds - NG Capital Partners I 19,350 46,165

Others 66 12,571

Financial instruments at fair value through other comprehensive income

Corporate bonds - Cineplex S.A. - 7,317

Loans, net (c) 368,577 371,758

Accounts receivable related to derivative financial instruments 2,627 3,908

Liabilities

Deposits and obligations 266,121 106,521

Loans payable (b) - 232,876

Off-balance sheet accounts

Indirect loans (c) 69,173 91,962


ended September 30

2019 2018

S/(000)

S/(000)

Income (expenses)

Interest and similar income 19,206 22,511

Interest and similar expenses (2,129) (911)

Income from rental of investment property 25,173 29,133

Administrative expenses (17,964) (13,811)

Others 28,376 31,529


65

(b) As of September 30, 2019 and December 31, 2018, the directors, executives and employees of the Intercorp Group have

been involved, directly and indirectly, in credit transactions with certain subsidiaries of the Group, as permitted by

Peruvian law, which regulates and limits on certain transactions with employees, directors and officers of financial

entities. As of September 30, 2019 and December 31, 2018, direct loans to employees, directors and officers amounted

to S/242,474,000 and S/233,813,000, respectively; said loans are repaid monthly and bear interest at market rates.

There are no loans to the Company’s directors and key personnel guaranteed with shares of any Subsidiary.

(c) The Group’s key personnel compensations, including the Income Tax assumed for the nine-month periods ended

September 30, 2019 and 2018, are presented below:


ended September 30

2019

2018

S/(000)

S/(000)

Salaries 78,942

88,190

Board of Directors’ compensations 1,415

1,496

Total 80,357

89,686

(d) In Management’s opinion, transactions with related companies have been performed under standard market conditions

and within the limits permitted by the SBS. Taxes generated by these transactions and the taxable base used for

computing them are those customarily used in the industry and they are determined according to the tax rules in force.

24. Business segments

The Chief Operating Decision Maker (CODM) of Intercorp Group is the General Manager (CEO). The Group has six operating

segments: (i) Banking, (ii) Insurance, (iii) Wealth management, (iv) Food retail, (v) Pharma and (vi) Shopping malls, based on

products and services.

Banking -

Mainly loans, credit facilities, deposits and demand deposits.

Insurance -

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

Wealth management -

Provides brokerage and investment management services. Inteligo serves mainly Peruvian citizens.

Food retail -

Engaged in the retail sale of consumer products, through chain stores at a national level.

Pharma -


66

Provides pharmaceuthical products, cosmetics, nutritional medical products and other items intended for the protection and

recovery of health through its chain of drugstores. Also provides manufacturing, distribution and marketing services to the

drugstores.

Shopping malls -

It is engaged in the management and administration of shopping malls consisting of department stores, medium stores and sales

booths; some shopping malls include cinema complexes and entertainment areas.

The consolidated entities monitor the operating results of their business units separately for the purpose of making decisions on

the distribution of resources and performance assessment. Segments 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 Company’s total

revenues in the nine-month periods ended September 30, 2019 and 2018.


67

The following table presents the Group’s financial information by business segments for the nine-month periods ended September 30, 2019 and 2018:


Banking Insurance Wealth management Shopping Malls Food retail Pharma

Holding, others and

consolidation adjustments

Total

consolidated

S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)

Total income (*) Third party 3,956,642 890,912 272,758 310,161 1,136,339 1,590,518 1,256,730 9,414,060

Inter-segment (62,878) - (1,420) (126,290) (55,220) (52,409) 298,217 -

Total income 3,893,764 890,912 271,338 183,871 1,081,119 1,538,109 1,554,947 9,414,060

Interest and similar income 3,022,293 456,941 126,999 22,337 2,088 12,490 393,621 4,036,769

Interest and similar expenses (***) (936,848) (40,429) (45,201) (108,224) (106,834) (151,710) (227,873) (1,617,119)

Net interest and similar income 2,085,445 416,512 81,798 (85,887) (104,746) (139,220) 165,748 2,419,650

Impairment loss on loans, net of recoveries (602,908) - (49) - - - (161,020) (763,977)

Recovery (loss) due to impairment of financial investments 42 2,133 (646) - - - - 1,529

Net interest and similar income after impairment loss 1,482,579 418,645 81,103 (85,887) (104,746) (139,220) 4,728 1,657,202

Net sales from retail business (****) - - - (517) 1,037,701 1,527,903 414,300 2,979,387

Fee income from financial services, net 607,346 (3,148) 117,314 225 37,048 2,792 (54,956) 706,621

Income from educational services - - - - - - 682,212 682,212

Net gain on investment property (*****) - 75,192 - 288,116 61,897 48,603 (161,401) 312,407

Net gain on exchange operations 191,542 - - - - - - 191,542

Net gain on sale of financial investments 37,213 25,767 42,316 - - - (1) 105,295

Net gains (losses) on financial assets at fair value through profit or loss (3,257) 6,286 (9,592) - - - 10,399 3,836

Other income (**) 101,505 11,151 (4,280) - (2,395) (1,270) (27,443) 77,268

934,349 115,248 145,758 287,824 1,134,251 1,578,028 863,110 5,058,568

Insurance premiums and claims Net premiums earned - 318,723 - - - - - 318,723

Net claims and benefits incurred for life insurance contracts and others - (535,145) - - - - - (535,145)

- (216,422) - - - - - (216,422)

Other expenses Salaries and employee benefits (495,431) (53,998) (46,985) (18,900) (288,143) (558,039) (546,000) (2,007,496)

Selling and administrative expenses (507,937) (38,305) (29,210) (6,908) (476,047) (328,608) (414,873) (1,801,888)

Depreciation and amortization (168,727) (16,677) (13,721) (8,675) (178,022) (253,110) (134,306) (773,238)

Other expenses (26,281) (110,875) (244) 896 (7,774) (3,628) 7,221 (140,685)

(1,198,376) (219,855) (90,160) (33,587) (949,986) (1,143,385) (1,087,958) (4,723,307)

Income before translation result and Income Tax 1,218,552 97,616 136,701 168,350 79,519 295,423 (220,120) 1,776,041

Translation result (2,272) (1,888) (912) (738) (556) 825 4,658 (883)

Income Tax (325,209) - (5,159) (50,250) (35,794) (97,277) (65,755) (579,444)

Net profit for the period 891,071 95,728 130,630 117,362 43,169 198,971 (281,217) 1,195,714

Attributable to: Intercorp Perú Ltd.‘s shareholders 891,071 95,728 130,630 117,362 43,169 198,971 (721,321) 755,610

Non-controlling interest - - - - - - 440,104 440,104

891,071 95,728 130,630 117,362 43,169 198,971 (281,217) 1,195,714



68


Banking Insurance Wealth management Shopping Malls Food retail Pharma

Holding, others and

consolidation adjustments

Total

consolidated

S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)

Total income (*) Third party 3,403,177 714,449 263,296 274,398 976,666 1,457,070 1,186,821 8,275,877

Inter-segment (39,427) - 11,251 274,398 976,666 1,457,070 (2,679,958) -

Total income 3,363,750 714,449 274,547 548,796 1,953,332 2,914,140 (1,493,137) 8,275,877

Interest and similar income 2,621,388 462,489 111,986 16,690 2,705 20,845 322,541 3,558,644

Interest and similar expenses (***) (782,321) (40,853) (31,534) (134,380) (53,803) (134,776) (219,933) (1,397,600)

Net interest and similar income 1,839,067 421,636 80,452 (117,690) (51,098) (113,931) 102,608 2,161,044

Impairment loss on loans, net of recoveries (452,031) - 772 - - - (111,349) (562,608)

Recovery (loss) due to impairment of financial investments 9 316 2,001 - - - - 2,326

Net interest and similar income after impairment loss 1,387,045 421,952 83,225 (117,690) (51,098) (113,931) (8,741) 1,600,762

Net sales from retail business (****) - - - (7,660) 906,424 1,387,149 392,125 2,678,038

Fee income from financial services, net 550,705 (3,445) 122,575 1,892 - 13,829 (18,147) 667,409

Income from educational services - - - - - - 568,442 568,442

Net gain on investment property (*****) - 56,936 - 267,437 51,093 47,651 (146,942) 276,175

Net gain on exchange operations 163,017 - - - - - 1 163,018

Net gain on sale of financial investments 11,529 (9,560) 19,400 1,256 - - 3,236 25,861

Net gains (losses) on financial assets at fair value through profit or loss 13,063 (10,667) 17,346 (5,217) - - 32,572 47,097

Other income (**) 43,475 11,885 (8,011) - 16,444 (12,404) 33,106 84,495

781,789 45,149 151,310 257,708 973,961 1,436,225 864,393 4,510,535

Insurance premiums and claims Net premiums earned - 206,811 - - - - (113) 206,698

Net claims and benefits incurred for life insurance contracts and others - (546,557) - - - - - (546,557)

- (339,746) - - - - (113) (339,859)

Other expenses Salaries and employee benefits (460,550) (55,122) (43,799) (18,149) (254,192) (568,340) (466,807) (1,866,959)

Selling and administrative expenses (512,584) (30,210) (29,161) (7,357) (485,705) (495,266) (386,774) (1,947,057)

Depreciation and amortization (99,908) (11,986) (6,683) (2,939) (96,947) (62,374) (119,855) (400,692)

Other expenses (30,605) (103,161) 1,817 (1,200) (7,842) (4,000) (9,049) (154,040)

(1,103,647) (200,479) (77,826) (29,645) (844,686) (1,129,980) (982,485) (4,368,748)

Income before translation result and Income Tax 1,065,187 (73,124) 156,709 110,373 78,177 192,314 (126,946) 1,402,690

Translation result (5,193) (6,139) (277) (2,351) (2,022) (31,671) (22,579) (70,232)

Income Tax (287,931) - (3,942) (33,461) (37,819) (63,816) (69,201) (496,170)

Net profit for the period 772,063 (79,263) 152,490 74,561 38,336 96,827 (218,726) 836,288

Attributable to: Intercorp Perú Ltd.‘s shareholders 772,063 (79,263) 152,490 74,561 38,336 96,827 (512,535) 542,479

Non-controlling interest - - - - - - 293,809 293,809

772,063 (79,263) 152,490 74,561 38,336 96,827 (218,726) 836,288



69


Banking Insurance Wealth management Food retail Pharma Shopping Malls

Holding, others and

consolidation

adjustments Total Consolidated

S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)

Total assets 52,769,236 14,046,380 4,265,376 4,888,492 5,508,154 4,970,215 6,404,420 92,852,273

Total liabilities 46,731,023 13,127,574 3,462,524 3,845,057 4,797,419 2,603,153 3,850,581 78,417,331


Banking Insurance Wealth management Food retail Pharma Shopping Malls

Holding, others and

consolidation

adjustments Total Consolidated

S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)

Total assets 47,440,393 12,572,396 3,808,939 3,697,162 5,079,488 4,460,486 5,065,978 82,124,842

Total liabilities 41,986,416 11,795,308 2,996,179 2,682,732 4,480,422 2,232,549 3,550,652 69,724,258

(*) Corresponds to interest and similar income, other income and net premiums earned.

(**) For the banking segment, “Other income” for the nine-month period ended September 30, 2019, included approximately S/32,422,000, after taxes, as gain on the sale of Interfondos to Inteligo Perú Holding S.A.C., which is eliminated upon consolidation, see Note 4.4.

(***) For corporate purposes, interest expenses from the food retail, pharma and shopping malls, that represents the finance cost of each non-financial segment, are presented in this caption.

(****) For corporate purposes, Income for rental of investment property is presented in the caption “Net gain on investment property”.

(*****) For the nine-month period ended September 30, 2019, includes income for rental of investment property for S/54,111,000, S/48,603,000, S/269,010,000 from the food retail, pharma and shopping malls segments, respectively (for the nine-month period ended September 30, 2018, amounts to S/51,049,000,

S/47,651,000 and S/254,608,000 from the food retail, pharma and shopping malls segments, respectively).

(i) The distribution of the Group’s total income based on the location of its customers and its assets, for the nine-month period ended September 30, 2019, amounts to S/8,527,586,000 in Peru and S/916,795,000 in Panama, Ecuador and other countries (for the nine-month period

ended September 30, 2018, amounts to S/7,289,366,000 in Peru and S/986,511,000 in Panama and other countries). The distribution of the Group’s total assets based on the location of the customer and its assets, as of September 30, 2019 is S/88,189,450,000 in Peru and

S/4,662,823,000 in Panama, Ecuador and other countries (S/78,284,467,000 in Peru and S/3,840,195,000 in Panama and other countries as of December 31, 2018). It should be noted that both income and assets located in Panama correspond mainly to Peruvian citizens.



70

25. Financial instruments classification

The financial assets and liabilities of the interim condensed consolidated statements of financial position as of September 30, 2019 and December 31, 2018, are presented below:


At fair value

through profit or

loss

Debt instruments at fair

value through other

comprehensive income

Equity instruments at fair

value through other


Amortized

cost Total

S/(000) S/(000) S/(000) S/(000) S/(000)

Financial assets

Cash and due from banks - - - 12,341,733 12,341,733

Inter-bank funds - - - - -

Financial investments 1,990,447 13,683,199 684,428 2,130,794 18,488,868

Loans, net - - - 36,206,964 36,206,964

Due from customers on acceptances - - - 124,691 124,691

Accounts receivable and other assets, net 434,665 - - 3,239,790 3,674,455

2,425,112 13,683,199 684,428 54,044,597 70,836,711

Financial liabilities

Deposits and obligations - - - 35,765,012 35,765,012

Inter-bank funds - - - 15,001 15,001

Due to banks and correspondents - - - 7,352,704 7,352,704

Bonds, notes and other obligations - - - 14,751,547 14,751,547


Insurance contract liabilities - - - 11,453,272 11,453,272

Accounts payable, provisions and other liabilities 261,028 - - 7,392,597 7,653,625

261,028 - - 76,854,824 77,115,852



71


At fair value

through profit or

loss

Debt instruments at fair

value through other


Equity instruments at fair

value through other


Amortized

cost Total

S/(000) S/(000) S/(000) S/(000) S/(000)

Financial assets

Cash and due from banks - - - 8,915,974 8,915,974

Inter-bank funds - - - 495,037 495,037

Financial investments 1,967,553 13,194,186 617,289 1,884,067 17,663,095

Loans, net - - - 33,424,704 33,424,704


Accounts receivable and other assets, net 349,718 - - 1,894,815 2,244,533

2,317,271 13,194,186 617,289 46,747,034 62,875,780

Financial liabilities

Deposits and obligations - - - 33,262,266 33,262,266

Inter-bank funds - - - - -

Due to banks and correspondents - - - 7,226,209 7,226,209

Bonds, notes and other obligations - - - 11,929,628 11,929,628


Insurance contract liabilities - - - 10,300,468 10,300,468

Accounts payable, provisions and other liabilities 154,116 - - 5,361,971 5,516,087

154,116 - - 68,212,979 68,367,095


72

26. Financial risk management

In order to manage financial risks, every Subsidiary of the Group has a specialized structure and organization in their

management, measurement systems, mitigation and coverage processes that considers the specific needs and regulatory

requirements to develop its business. The Group and its Subsidiaries operate independently but in coordination with the general

provisions issued by the Directors and Management of Intercorp Perú; however, the Board of Directors and Management of

Intercorp Perú are ultimately responsible for identifying and controlling risks. In addition, the Board of Directors of Intercorp Perú

has among its objectives is to verify the adequacy of the accounting processes and financial information of each Subsidiary, as

well as to evaluate the activities carried out by internal and external auditors. The Board of Directors of Intercorp Perú is comprised

of three Directors and the Management, and directly reports to the General Shareholders’ Meeting.

A full description of the Group’s financial risk management is presented in Note 34 “Financial risk management” of the 2018

Annual Consolidated Financial Statements; following is presented the financial information related to credit risk management for

the loan portfolio, offsetting of financial assets and liabilities, and foreign exchange risk.

(a) Credit risk management for loans

Interbank’s loan portfolio is segmented into homogeneous groups that share similar credit risk characteristics. These

groups are: (i) Retail Banking (credit card, mortgage, payroll loan, consumer loan and vehicular loan), (ii) Small Business

Banking (segments S1, S2 and S3), and (iii) Commercial Banking (corporate, institutional, companies and real estate). In

addition, at Inteligo Bank, the internal model developed (scorecard) assigns 5 levels of credit risk classified as follows:

low risk, medium low risk, medium risk, medium high risk, and high risk. These categories are described in Note 34.1(d)

of the 2018 Annual Consolidated Financial Statements.


73

The following table shows the credit quality and maximum exposure to credit risk of loans (direct and indirect) based on the Group's internal credit rating as of September 30, 2019, and December 31, 2018. The amounts

presented do not consider impairment.


Total 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)

Not impaired

High grade 27,345,820 150,822 - 27,496,642

25,147,872 372,459 - 25,520,331

Standard grade 4,705,343 601,062 - 5,306,405

3,941,247 881,975 - 4,823,222

Sub-standard grade 478,762 1,084,373 - 1,563,135

506,499 936,441 - 1,442,940

Past due but not impaired 1,101,982 1,030,239 - 2,132,221

1,082,215 858,950 - 1,941,165

Impaired

Individually impaired - - 9,752 9,752

- - 7,349 7,349

Collectively impaired - - 967,910 967,910

- - 867,947 867,947

Total direct loans 33,631,907 2,866,496 977,662 37,476,065

30,677,833 3,049,825 875,296 34,602,954

Commercial loans As of September 30, 2019


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 10,788,281 58,653 - 10,846,934

11,305,223 106,480 - 11,411,703

Standard grade 3,181,645 52,321 - 3,233,966

2,305,607 125,090 - 2,430,697

Sub-standard grade 169,896 287,614 - 457,510

226,849 124,051 - 350,900

Past due but not impaired 753,620 254,420 - 1,008,040

714,034 134,730 - 848,764

Impaired


- - 7,349 7,349


- - 199,132 199,132

Total direct loans 14,893,442 653,008 236,742 15,783,192

14,551,713 490,351 206,481 15,248,545



74



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 10,499,368 49,922 - 10,549,290

8,349,176 223,523 - 8,572,699

Standard grade 884,009 460,470 - 1,344,479

1,068,431 676,414 - 1,744,845


251,813 624,476 - 876,289

Past due but not impaired 174,548 553,229 - 727,777

131,537 510,141 - 641,678

Impaired


- - 384,794 384,794

Total direct loans 11,838,798 1,647,684 445,606 13,932,088

9,800,957 2,034,554 384,794 12,220,305



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 5,547,901 24,823 - 5,572,724

5,003,914 22,297 - 5,026,211

Standard grade 550,183 67,441 - 617,624

478,576 56,958 - 535,534


22,575 170,556 - 193,131


224,588 188,839 - 413,427

Impaired


- - 239,176 239,176

Total direct loans 6,283,452 477,885 250,128 7,011,465

5,729,653 438,650 239,176 6,407,479



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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 510,270 17,424 - 527,694

489,559 20,159 - 509,718

Standard grade 89,506 20,830 - 110,336

88,633 23,513 - 112,146


5,262 17,358 - 22,620


12,056 25,240 - 37,296

Impaired


- - 44,845 44,845

Total direct loans 616,215 87,919 45,186 749,320

595,510 86,270 44,845 726,625

Total indirect loans (substantially all indirect loans correspond to commercial loans)



Contingent Credits 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 3,271,610 113,447 - 3,385,057

3,209,064 223,735 - 3,432,799

Standard grade 448,200 43,674 - 491,874

211,784 110,420 - 322,204


33,472 192,699 - 226,171

Impaired


- - 35,738 35,738


- - 7,332 7,332

Total indirect loans 3,753,213 175,220 31,610 3,960,043

3,454,320 526,854 43,070 4,024,244

(b) Offsetting of financial assets and liabilities

The information contained in the tables below includes financial assets and liabilities that: (i) are offset in the interim condensed consolidated statements of financial position of the Group or; (ii) are subject to an enforceable master netting arrangement or similar agreement that covers similar

financial instruments, regardless of whether they are offset in the interim condensed consolidated statements 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 offset in the interim condensed consolidated statements 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 interim condensed consolidated statements 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 simultaneousl


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The Group receives and delivers guarantees collaterals in the form of cash with respect to transactions with derivatives; see Note 5.

Financial assets and liabilities subject to offsetting, enforceable master netting arrangement and similar agreements as of September 30, 2019, and December 31, 2018 are as follows:

Related amounts not offset in the interim condensed

consolidated statements of financial position

Gross amounts of

recognized financial

instruments

Gross amounts of

recognized financial

instruments and offset in

the interim condensed

consolidated statements

of financial position

Net amounts of financial

instruments presented in

the interim condensed

consolidated statements

of financial position


(including non-cash

collateral)

Cash collateral

received (pledged),

Note 5(b)

Net amount

S/(000) S/(000) S/(000) S/(000) S/(000) S/(000)

Assets


Derivatives, Note 10(b) 434,665 - 434,665 (159,250) - 275,415

Total assets 434,665 - 434,665 (159,250) - 275,415


Derivatives, Note 10(b) 349,718 - 349,718 (41) - 349,677

Total assets 349,718 - 349,718 (41) - 349,677

Liabilities


Derivatives, Note 10(b) 261,028 - 261,028 (159,250) (78,306) 23,472

Total liabilities 261,028 - 261,028 (159,250) (78,306) 23,472


Derivatives, Note 10(b) 154,116 - 154,116 (41) 61,619 215,694

Total liabilities 154,116 - 154,116 (41) 61,619 215,694

(c) Foreign exchange risk

The Company and its Subsidiaries are 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 September 30, 2019, the weighted average exchange rate of free market published by the SBS for transactions in US Dollars was S/3.382 per US$1 ask and S/3.385 per US$1 bid (S/3.369 and S/3.379 as of December 31, 2018, respectively). As of September 30,

2019, the exchange rate for the accounting of asset and liability accounts in foreign currency set by the SBS was S/3.383 per US$1 (S/3.373 as of December 31, 2018).



77

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


US Dollars Soles Other currencies Total US Dollars Soles Other currencies Total

S/(000) S/(000) S/(000) S/(000)

S/(000) S/(000) S/(000) S/(000)

Assets

Cash and due from banks 9,960,550 1,971,429 409,754 12,341,733

6,819,952 1,728,019 368,003 8,915,974

Inter-bank funds - - - -

- 495,037 - 495,037

Financial investments 7,106,544 11,352,237 30,087 18,488,868

7,821,764 9,823,428 17,903 17,663,095

Loans, net 10,530,383 25,676,581 - 36,206,964

10,017,269 23,407,435 - 33,424,704

Due from customers on acceptances 124,691 - - 124,691

112,129 - 20,308 132,437

Accounts receivable and other assets, net 1,861,163 1,760,596 52,696 3,674,455

212,637 1,996,822 35,074 2,244,533

29,583,331 40,760,843 492,537 70,836,711

24,983,751 37,450,741 441,288 62,875,780

Liabilities

Deposits and obligations 14,094,283 21,299,478 371,251 35,765,012

13,584,983 19,387,960 289,323 33,262,266

Inter-bank funds - 15,001 - 15,001

- - - -

Due to banks and correspondents 1,183,334 6,165,850 3,520 7,352,704

1,526,240 5,699,969 - 7,226,209

Bonds, notes and other obligations 10,559,355 4,192,192 - 14,751,547

9,432,234 2,497,394 - 11,929,628

Due from customers on acceptances 124,691 - - 124,691

112,129 - 20,308 132,437

Insurance contract liabilities 4,283,790 7,169,482 - 11,453,272

4,072,811 6,227,657 - 10,300,468

Accounts payable, provisions and other liabilities 2,245,412 5,353,634 54,580 7,653,625

764,727 4,739,676 11,684 5,516,087

32,490,865 44,195,636 429,351 77,115,852

29,493,124 38,552,656 321,315 68,367,095

Forwards position, net (2,479,396) 2,475,403 3,993 - (646,042) 702,708 (56,666) -

Currency swaps position, net 1,298 (1,298) - -

(59,991) 59,991 - -

Cross currency swaps position, net 1,853,496 (1,853,496) - - 1,724,081 (1,724,081) - -

Options position, net (214) 214 - - 81 (81) - -

“Call Spreads” position (*) 2,538,750 (2,538,750) - - 2,534,250 (2,534,250) - -

Monetary position, net (993,600) (5,352,720) 67,179 (6,279,142)

(956,994) (4,597,628) 63,307 (5,491,315)

(*) These call spread agreements were entered into during 2018 with JP Morgan Chase & Co. and Citibank N.A. for a total reference value of US$350,000,000 and US$400,000,000, respectively, agreed with the purpose of reducing the exposure to foreign currency risk

originated by foreign currency debts issued by InRetail Shopping Malls and InRetail Pharma SA, in April and May 2018, respectively, see Note 10 (b).

As of September 30, 2019, the Group granted indirect loans (contingent operations) in foreign currency for approximately US$605,834,000, equivalent to S/2,049,536,000 (US$635,543,000, equivalent to S/2,143,687,000 as of December 31, 2018).



78

27. 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 interim condensed consolidated statements of

financial position:


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 (*) 842,718 327,446 820,283 1,990,447

Debt instruments at fair value through other comprehensive income 10,795,318 2,742,266 - 13,537,584

Equity instruments at fair value through other comprehensive income 682,752 1,676 - 684,428

Derivatives receivable - 434,665 - 434,665

12,320,788 3,506,053 820,283 16,647,124


16,792,739

Financial liabilities Derivatives payable - 261,028 - 261,028

(*) As of September 30, 2019, and December 31, 2018, 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 on 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. Fair value is estimated using a discounted cash flow (DCF) model. The valuation requires Management to make

certain assumptions about the model variables and data, including the forecasting of cash flows, discount rate, credit risk and volatility.



79

The table below presents a description of significant unobservable data used in valuation:

Valuation

technique

Insumos significativos no

observables Valuation Sensitivity of inputs to fair value

Royalty Pharma DCF Method Sales forecast Average sector analysis, estimates

10 percent increase (decrease) in the sales forecast would result in increase (decrease) in

fair value by S/14,963,000.

WACC 8.00%

500 basis points increase in the WACC would result in decrease in fair value by

S/27,561,000.

500 basis points decrease in the WACC would result in increase in fair value by

S/39,463,000.

Mutual funds and investment funds participations DCF Method Discount rate Depends on the credit risk

500 basis points increase in the discount rate would result in decrease in fair value by

S/4,861,000.

500 basis points decrease in the discount rate would result in increase in fair value by

S/6,343,000.

WACC 9.00%

500 basis points increase in the discount rate would result in increase in fair value by

S/1,370,000.


S/1,664,000.

Comparable multiples Price-to-sales ratio Depends on industry’s entity

10 percent increase (decrease) in the price-to-sales ratio would result in increase (decrease)

in fair value by S/2,507,000.

Equity value Depends on the credit risk

500 basis points increase (decrease) in the discount rate would result in increase (decrease)

in fair value by S/294,000.

Market Value Price Depends on the business sector

500 basis points increase (decrease) in the price would result in increase (decrease) in fair

value by S/701,000

Discount rate 15.35%

500 basis points increase in the discount rate would result in increase in fair value by

S/4,124,000.


S/3,878,000.

EBITDA Multiple Total value of the company /

EBITDA of the last 12 months Depends on the business sector

500 basis points increase (decrease) in the price-to-sales ratio would result in increase

(decrease) in fair value by S/5,392,000.

The table below includes a reconciliation of fair value measurement of financial instruments classified by the Group within Level 3 of the valuation hierarchy:

As of September

30, 2019

As of December

31, 2018 S/(000) S/(000)

Initial balance as of January 1 743,617 500,182

Purchases 232,261 207,059

Sales (140,624) (61,328)

Total gain recognized on the consolidated income statements (14,971) 97,704

Balance as of September 30 820,283 743,617

During the nine-month period ended September 30, 2019, and during the year 2018, there were no transfers of financial instruments from Level 3 to Level 1 or to Level 2. Also, during the nine-month period ended September 30, 2019 and uring the year 2018, there were no

transfers of financial instruments between Level 1 and Level 2.



80

(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:


Level 1 Level 2 Level 3 Fair value Book value

Level 1 Level 2 Level 3 Fair value Book 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 - 12,341,733 - 12,341,733 12,341,733 - 8,915,974 - 8,915,974 8,915,974

Inter-bank funds - - - - - - 495,037 - 495,037 495,037

Investments at amortized cost 2,244,611 - - 2,244,611 2,130,794 700,177 1,156,148 - 1,856,325 1,884,067

Loans, net - 36,873,219 - 36,873,219 36,206,964 - 33,740,717 - 33,740,717 33,424,704

Due from customers on acceptances - 124,691 - 124,691 124,691 - 132,437 - 132,437 132,437

Accounts receivable and other assets, net - 3,239,790 - 3,239,790 3,239,790 - 1,894,815 - 1,894,815 1,894,815

Total 2,244,611 52,579,433 - 54,824,044 54,043,972 700,177 46,335,128 - 47,035,305 46,747,034

Liabilities

Deposits and obligations - 35,772,037 - 35,772,037 35,765,012 - 33,279,942 - 33,279,942 33,262,266

Inter-bank funds - 15,001 - 15,001 15,001 - - - - -

Due to banks and correspondents - 7,455,122 - 7,455,122 7,352,704 - 7,343,640 - 7,343,640 7,226,209

Bonds, notes and notes issued 7,471,011 7,687,234 - 15,158,245 14,751,547 5,569,970 6,507,870 - 12,077,840 11,929,628

Due from customers on acceptances - 124,691 - 124,691 124,691 - 132,437 - 132,437 132,437

Insurance contract liabilities - 11,453,272 - 11,453,272 11,453,272 - 10,300,468 - 10,300,468 10,300,468

Accounts payable and other liabilities - 7,392,598 - 7,392,598 7,392,597 - 5,361,971 - 5,361,971 5,361,971

Total 7,471,011 69,899,955 - 77,370,966 76,854,824 5,569,970 62,926,328 - 68,496,298 68,212,979

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

(i) Long-term fixed-rate and variable-rate loans are assessed by the Group based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation,

allowances are taken into account for the estimated losses of these loans. As of September 30, 2019, and December 31, 2018, 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.


81

28. Fiduciary activities and management of funds

The Group provides custody, trustee, investment management and advisory services to third parties; therefore, the Group makes

purchase and sale decisions in relation to a wide range of financial instruments. Assets that are held in trust are not included in

the 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 administration.

As of September 30, 2019, and December 31, 2018, the value of the managed off-balance sheet financial assets is as follows:

As of September 30,

2019 As of December

31, 2018

S/(000) S/(000)

Investment funds 13,233,985 12,924,575

Mutual funds 4,852,777 4,668,076

Total 18,086,762 17,592,651

29. Additional explanation for English translation

Thge accompanying financial statements are presented on the basis of the IFRS. In the event of any discrepancy, the Spanish

language version prevails.

Documents

Intercorp Perú Ltd. and Subsidiaries Interim condensed ......Translation of consolidated financial statements originally issued in Spanish – Note 29 Intercorp Perú Ltd. and Subsidiaries