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Intercorp Financial Services (IFS) Q1 2020 Earnings Call Transcript

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IFS earnings call for the period ending March 31, 2020.

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Intercorp Financial Services (NYSE: IFS)
Q1 2020 Earnings Call
May 13, 2020, 10:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Rafael Borja

Good morning everyone. On today's call, Intercorp Financial Services will discuss its first-quarter 2020 earnings. We are very pleased to have with us Mr. Luis Felipe Castellanos, chief executive officer of Intercorp Financial Services; Mrs.

Michela Casassa, chief financial officer of Intercorp Financial Services; Mr. Gonzalo Basadre, chief executive officer of Interseguro; and Mr. Bruno Ferreccio, chief executive officer of Inteligo. They will be discussing the results that were distributed by the company yesterday.

There is also a webcast presentation to accompany these results. If you didn't receive a copy of the presentation or the earnings, it is now available on the company's website,, to download a copy. Otherwise for any reason, if you need any assistance today, please call i-advize in New York at (212) 406-3693. I would like to remind you that today's call is for investors and analysts only.

Therefore, questions from the media will not be taken. Please be advised that forward-looking statements may be made during this conference call. These will not account for future economic circumstances, industry conditions, the company's future performance or financial results. As such, statements may are based on several assumptions and factors that could change causing actual results to materially differ from the current expectations.

For a complete note on forward-looking statements, please refer to the quarterly report issued yesterday. It is now my pleasure to turn the call over to Mr. Luis Felipe Castellanos, chief executive officer of Intercorp Financial Services, for his presentation. Mr.

Castellanos, please go ahead, sir.

Luis Felipe Castellanos -- Chief Executive Officer

Thank you very much. Thanks, everyone, and good morning. Welcome to IFS' first-quarter 2020 earnings call. To start, I want to thank you for taking the time to participate in our call, and again, wishing that all the families included are in good health and safe during these difficult times.

On this call, we will have the opportunity to review IFS' first-quarter results, as well as, to provide an update of the actions taken by IFS to ensure future business continuity and to help our clients under the current circumstances. Also, we will touch upon the main measures that the government has taken to face this situation. As mentioned in our COVID-19 call that took place a couple of weeks ago, our main objective is to ensure that our employees and clients remain safe. We continue in the middle of weathering the storm.

We will continue to vision difficult days ahead. Unfortunately, the number of people infected in Peru continues to rise and the country continues to run an emergency state with mandatory confinement so far lasting over 55 days, which has recently been extended for two more weeks as of now. The government plans are to recover the economy in four phases, with Phase 1 starting only two days ago. The expectation for GDP contraction this year continues to change, with ranges of minus 5% to minus 20% being discussed by economic analysts.

It is worth to note that this crisis finds a banking system, and IFS in particular, with good solvency levels and well capitalized. In addition, the government actions to face the crisis have been within the most aggressive in the region, building upon the solid macroeconomic fundamentals that Peru has enjoyed during the last close to 30 years. We are certain that IFS has an important role to play in helping Peruvians through this situation, and more importantly, in recovering the enterprise expense. We know that it's going to take some time for the country and the economy to recover.

Our [Inaudible] platform is ready to take a leading role in the recovery process and also to adapt our strategy and capabilities to become even more relevant in the life of Peruvians under the new normal to be realized as a result of the COVID phenomenon that has impacted everybody's life. We remain committed to execute our long-term strategy where digital and analytics play a key role and to continue providing high-quality financial services to our customers to contribute to the country's sustainable growth by empowering all Peruvians to achieve financial well-being. Now, let me pass it on to Michela Casassa for a deeper review of our results.

Michela Casassa -- Chief Financial Officer

Thank you, Luis Felipe. Good morning, everybody, and welcome again to Intercorp Financial Services first-quarter 2020 earnings call. Again, I want to thank you all for sharing with us this call and hope you and your loved ones are safe from wherever country you are listening to this call from. This time, we have divided our presentation in four parts, which includes highlights, an update to the COVID situation, the first-quarter results in detail, and some few takeaways at the end.

Main highlights are: as Intercorp Financial Services profits reached PEN 145 million in the first quarter and ROE reached 6.6%, affected by higher provisions at Interbank and impact on investments at Interseguro and Inteligo. At Interbank, net profit decreased 17.1% year on year mainly due to higher provisions and ROE was 13.8%. The initial impact of COVID-19 are already reflected in the first-quarter 2020 key banking indicators. Continued growth in retail deposits and market share up to 13.7% after lockdown.

There has been a deceleration of loan growth and activity after the lockdown, especially in retail, which now grows 12.3% year over year. We registered the first impact of provisions, with NPL coverage up 136% and the core equity Tier 1 ratio has improved 180 basis points year over year to 12%, enhanced by higher capitalization. At Interseguro, quarterly results affected by negative impacts on investment portfolio. Net premiums grew 10.8% in the quarter and 1% in the year mainly driven by retail insurance business.

We continue to be the market leader in annuities with a 27.9% market share and the return on the investment of the portfolio is at 4.2%, or 6.1% excluding the one-offs, compared to 5.8% in the previous quarter. At Inteligo, quarterly results were also affected by negative impact on the investment portfolio. Fee income divided by the average asset under management remained stable at 1% and the asset under management decreased quarter-on-quarter due to the mark to market despite growth in net new money. Now, let me give you an update on COVID-19 main actions on Slide 5 to 10.

Today, we are completing two full months of lockdown, which is set to finish by May 24th. Since March 15th, only supermarkets, markets, pharmacies, and financial services institutions are being allowed to operate. And as Luis Felipe mentioned, it has only been two days since some few other activities have started to operate. As discussed during the COVID-19 update we had on April 14th, there are four key messages that we would like you to keep in mind.

First, we had a early and fast response to this unprecedented situation. This response has successfully guaranteed the continuity of our operations. Second, most of the actions we have taken during the past weeks has been focused on helping our people and our customers to overcome the problems that we have been facing under the current circumstances. Third, we have reinforced our liquidity and capital positions in all of our businesses in order to face the uncertain months to come.

We believe our key solvency liquidity indicators are at sound level to face the months to come. Finally, we see an opportunity to further accelerate digital adoption by our customers under the new normal, a situation supported by the investments that we have deployed during the last year's to build our digital platform. On Slide 6, we are showing a summary of the comprehensive government support program, which is considered one of the most aggressive in Latin America and in the world in terms of its relative size when compared to a country's products. This government report has been increased further this last day as a result of the extension of the lockdown.

In the first weeks of the lockdown, the government announced a support program reached. At that time, it represented around 12% of the Peruvian GDP. This was a three-phase economic stimulus plan led by both the Ministry of Economy and the Central Bank that sought to offset the COVID-19 outbreak. It included emergency measures for the health system and measures aiming at helping low-income families and companies.

The biggest part of the program was [Inaudible] Peru with initially PEN 30 billion aiming at helping companies to fund their working capital needs to overcome the interuption in their activities. This program has been expanded to PEN 60 billion this last Saturday in order to further help companies, given the extension of the lockdown period. We will discuss more of these programs further ahead in the presentation. With this extension, the overall government support program represents already 15% of the Peruvian GDP.

We continue to work very closely with the Ministry of Finance, the Central Banks, the Superintendency and ASBANC in order to manage the crisis and coordinate all measures needed. And we are also helping the government as a channel to distribute to individuals and companies the above-mentioned financial aid. On Pages 7 and 8, we are showing a brief summary of the main measures taken since the beginning of the crisis. Since early March, we started taking actions to face what we believe was going to be a severe crisis even before the government declared the state of emergency on March 15th.

Based on our business continuity program, we established a crisis committee with daily meetings to closely monitor eight fronts involving key stakeholders: first, our people; two, our operations including the suppliers; three, our distribution channels, physical and digital; four, our communication strategies, internal and external; five, a review of our retail and commercial clients and portfolio; six, design strategic credit facilities for them; seven, assessment and reinforcement of liquidity and solvency positions; and eight, measures for cost containment. All of these efforts, we're always taking a close coordination with our board of directors and with the relevant board committees. At Interbank, one of the key focus is our people. Some of the action phases include the development of protocols in health surveillance, development of an active combination plans, and actions for employee engagement.

We were able to quickly implement home office for most of our SaaS people as we have decently made IT investments for this to happen. So today, we are able to operate with 98% of administrative staff and 50% of our call center employees working from home. Additionally, we have reduced brand hours following government parameters, and as such, reduced by 50% the employees per branch on any given day, thus, allowing social distance and employee rotation to minimize the risk of contagion of big groups and similar actions have been taken in our call centers. Regarding our operations, the IT measures taken was related to guaranteeing critical IT employees the tools and capabilities required, the focus on tools and process to ensure [Inaudible] for all areas, and treating the deployment of new projects that could generate [Inaudible] stability.

In the strategic operations front, we have established new protocols for business continuity under the currency circumstances. We fastened together a new contingency plan for our call center and we have reinforced our operational capacity to process the volume of loans. We steadily [Inaudible] the loan required by our customers under our trade facilities program. Regarding our physical suppliers, we have been monitoring their contingency plans, having online and daily status with their executive teams and monitoring and reinforcing cash supply to our branches and ATMs, given that we are actively involved in helping the government in deploying money to the vulnerable population.

Finally, we all know that new cybersecurity threats have risen. To deal with them, we have been very active in resourcing our private capabilities on our IT networks, including the monitoring of our key infrastructure with relevant alert by our cyber self-support. We have also been very active, [Inaudible] customers and employees with alerts on these new threats and we go to apply and deploying security protocols for employees working from home. Our distribution channels are taking a very important role today, not only because the financial system continues to operate as it has been considered as an essential industry for the country, but also because as mentioned, we are supporting the government in the distribution of the different aid packages to the vulnerable population.

Regarding our financial stores, the opening hours changed many times. We currently have around 225 financial stores operating out of 255, Same-store service at 87% of our branch people are working on a rotating scheme and 3% are on vacation or medical leave. We have reduced customer capacity per branch by 50% following social distancing protocols. Our contact center operating hours have also changed.

We have increased operators from 180 to 290 to manage service requests without increasing total headcount as we have reconverted sales people to perform this new role. We are providing private transportation to our employees also to ensure we are properly staffing our call centers, given the existing transportation restrictions in the country. Finally, our digital channels, through our app and home banking, allow us to continue interacting with our customers in a digital, easily, and fairly way. We have designed special protocols for troubleshooting.

We have created special landings, deploying meaningful loan reprogramming schemes, we have [Inaudible] the program, and have developed digital and enough communications to make sure we are close to our customers. Moreover, in turnkey, we are providing clients 100% digital solutions to be able to receive government financial aid 100% digitally, which we will discuss in a moment. Now, let's talk about the liquidity and solvency positions, which are strong and have been reinforced when the COVID-19 started. In terms of liquidity, we have taken several measures to maintain solid liquidity ratios.

After the lockdown, we have obtained extra soles and dollars liquidity, such as new soles funding from Central Bank and new dollar funding from international banks. Our loan-to-deposit ratio at 103.4% as of the end of March is below the 104.6% of the financial system as a whole and our liquidity coverage ratio, net stable funding ratios remained at healthy levels. We have continued to increase our retail deposits base and have gained 20 basis points market share in the quarter. With respect to our solvency position, we have also taken important measures to strengthen our capital such as: first, increasing the capitalization of 2019 earnings to 75% from previously approved 55% to strengthen core equity Tier 1 ratio and total capital ratio and have also fully capitalized the first-quarter earnings.

Historically, our capitalization ratio for the many past years have been 55%. With this, our total capital ratio as of the end of March was 17 -- sorry, 16.1%, compared to 14.2% of the system and 11.4% required by the superintendency. And our core equity Tier 1 ratio was 12%. Both of these ratios will slightly decrease in April due to the redemption of the 200 million hybrid Tier 1 bond by the end of April.

Moreover, we have different stress analysis for solvency and are daily monitoring the balance sheet to optimize liquidity, capital, and profitability. On Slide 8, Interseguro and Inteligo also had a fast and efficient reaction to COVID-19. On one side, Interseguro also implemented home office for its administrative staff, reduced portfolio risk profile by reducing equity positions, decreased our short dollar position and increased our cash position. We are closely monitoring the life premium collection and rescheduling of payments to life insurance policyholders, getting ready to recapture backlog of annuity market premiums once lockdown is over.

In terms of potential increase in claims, in the first quarter, we are setting up additional reserves for unemployment credit insurance policies, which cover up to six months of credit payment given to Interbank and [Inaudible] our clients who become employed. There is no exposure to health insurance and we have a natural hedge between life insurance business and the annuities business. Interseguro continues to hold a solid surplus of required capital and low debt ratio. On the other side, Inteligo also established an emergency committee early March and implemented home office for their staff at Inteligo Bank and [Inaudible].

Moreover, the communication with clients is frequent and all services are available, trading, transfers, withdrawals, and loan renewals. There is a higher liquidity at Inteligo when compared with pre-COVID levels and strong capital adequacy ratio, as well as, for Interseguro, the biggest risk for Inteligo is the mark to market of the portfolio, given the current volatility. Now, let me comment on the positive impact we have experienced with the lockdown in terms of acceleration of banking via bank and in relation to digital. As a result of the lockdown in are efforts to boost the use of digital, we have seen an acceleration of digital indicators as shown in Slide 9.

Digital users as of March are 69%, up from 57% one year ago and has reached 78% as of the end of April. One hundred percent of digital customers, which are clients that do not use branches or contact center any longer and who use digital channels plus ATM correspondent agents only for cash in and cash out, has reached 42%, up from 27% one year ago, and has reached 62% as of the end of April. Digital sales have also seen a rapid increase, but the total level of sales has decreased given fleet in new sales in retail. Our investments to build our digital capability during the last year have definitely played to an advantage for our customers and our operations and with the current circumstances.

We've seen a huge pickup in the number of new digital accounts being opened, both for individuals and small businesses in the time of lockdown especially in April as the lockdown was extended. At the end of March, 44% of new retail saving accounts were opened digital and the sales were 70% of business accounts, compared to 24% and 38% one year ago respectively. New digital client acquisition of retail customers reached 21% as of March, compared to 12% the year before, and fast reached 51% as of the end of April. This, in line with solid increase in the number of retail clients and businesses we have experienced lately, most of which are coming through our digital channels.

We have opened 4 times more new digital retail saving accounts in business accounts during April versus March. The second big impact in April in Slide 10 is the [Inaudible], The P2P payment feature among multiple banks with social numbers is already active in roughly 800,000 clients only in three months, 40% of which use Interbank as key account. As [Audio gap] means that we have opened 50,000 new accounts in one week in 2Q, 100% digital solution for payments in order to deliver the government financial aid for families and have allowed them to collect their money, 100% digitally, avoiding them having to go to bank branches. We believe this peak in new accounts is mainly due to two factors.

On one side, the extension of the lockdown is too soon an acceleration of digital. And on the other side, the need to have an account to be able to receive the government's aid packages faster both for individuals and small businesses, as well as, to receive the pension time deposits. On Slide 12 and 13, now let's have a closer look at the quarterly performance. IFS reported earnings of PEN 145 million in the first quarter and PEN 286 million when excluding the negative impact from investments at Interseguro and Inteligo.

This led to a quarterly ROE of 6.6% for IFS. All three operating segments have different impacts from COVID-19. Interbank registered earnings of PEN 221 million and 13.8% ROE in the first quarter, mainly due to the increase in cost of risk which reached 3.4% in the quarter, as well as, to the top line which was affected by lower activity especially in retail. Both Interseguro and Inteligo registered losses in the quarter of PEN 22 million and PEN 55 million respectively, negatively impacted by market trends from their investment portfolio.

Excluding the PEN 56 million and PEN 84 million negative impact on investments, Interseguro and Inteligo would have registered profits of PEN 34 million and PEN 29 million in the quarter respectively. Total revenues were hit in the quarter mainly by other income from Interseguro and Inteligo, which decreased 10% on a quarterly basis but grew 0.7% on a yearly basis. At Interbank, total revenues continued to increase 1% in the quarter and 5% in the year. Net interest and similar income was up 0.9% in the quarter and 10.3% when compared to the same quarter last year.

The efficiency effect was also hit by other income, increasing 310 basis points in the quarter, but is still a very low ratio at 36.4% in the quarter. At Interbank, efficiency ratio was 38.8% in the quarter as costs remained relatively stable on the quarter and improved from 40.3% versus last year. The first measures of cost containment were started to be implemented by the end of March. But we expect to see bigger impacts in the next quarter as we will have the full three-month impact from the measures we are adopting.

NIM at Interbank decreased 20 basis points in the quarter but increased 10 basis points in the year. Reported risk-adjusted NIMs show a small decrease to 3.2% due to the increase in cost of risk previously mentioned. Fees from financial services decreased 13.4% in the quarter and 1.6% in the year mainly due to credit card-related fees due to the sharp decrease in transactional volume over the last two weeks of March. At the insurance segment, gross premium plus collections increased 8.9% in the quarter but decreased 8.4% in the year.

Return on investment decreased 160 basis points in the quarter and the year mainly due to the negative impacts previously mentioned. And at our wealth management segment, assets under management decreased 5.1% on a quarterly basis and 2.2% in the year, and fees were down 8.5% in the quarter but increased 10.5% in the year. The quarterly trends are mainly explained by the negative impacts on the investment portfolio. On Slide 14, IFS relevant net income, the base of dividend payments, reached PEN 213 million and is PEN 68 million higher than the IFRS profit mainly due to a difference at Interseguro, which has reduced their profits of PEN 40 million in local GAAP versus a 32 million loss under IFRS for the different accounting treatments on the investment portfolio.

Now, let's have a look at each segment's performance in detail. Starting with the banking segment on Slide 16, we are showing that COVID-19 is already impacting most of the key banking indicators. As mentioned before, NIM, adjusted NIM has been a decline and total other income decreased 8.2% in the quarter and 8.1% in the year mainly impacted by a reduction in fee income due to the strong decrease of transactional volumes. On Slide 17, retail deposits speed up their growth during this quarter at 5.2% and reaching a yearly growth of 15%, allowing us to gain 20 basis points market share in the quarter and 50 basis points market share in the last 12 months, reaching a record 13.7%.

Total deposits decreased 1.4% in the quarter as we have replaced corporate and institutional deposits with more cost-efficient funding from the Central Bank. Due to banks, which includes this funding, as well as, funding from international banks, has increased more than 30% during this quarter as we obtained both extra liquidity from the Central Bank in soles, as well as, dollar liquidity from certain international banks to increase our liquidity levels, given the uncertainty at that time. Average cost of funding has already improved 10 basis points in the quarter and 30 basis points in the year, down to 2.7%. And we expect further improvements in cost of funding coming both from the redemption of the $200 million Tier 1 bond in late April and from lower rates on deposits and [Inaudible] bond.

Loan-to-deposit ratio at 103.4% is below the system average of 104.6%. This ratio will see a deterioration in the coming months for Interbank and for the system as a whole from the participation of [Inaudible] new loans, which have a special funding from Central Bank. So, we will be showing this ratio also excluding those loans for comparability purposes. On Slide 18, our yearly loan growth has decelerated after the lockdown, down to 10% year over year, with retail loans growing 12.3% and commercial loans growing 7.4%.

We continue to grow faster than the market in retail, but we were very cautious on commercial banking, especially in big tickets with corporate at the end of March when the COVID outbreak started. So we proactively managed the balance sheet, giving priority to liquidity at that time rather than growing loans. This has led a decrease in our total loan market share of 30 basis points in the quarter, with a stable market share in retail and a decrease in commercial banking. On Slide 19, let me give you some characteristics of the Reactiva Peru program launched by the government.

The original amount of this program was PEN 30 billion targeting around 350,000 companies. There are four different levels of coverage provided by the government, which goes from 80% for the big corporates to 98% for the smaller SMEs. Loans have a 12-month grace period, and total maturity is up to 36 months. They are linked to the amount to which -- of each loan, which relates to one month of sales and up to PEN 10 million.

There are no capital for provisioning requirements for the guaranteed portion of these loans. This weekend, the government has announced the extension of the program to PEN 60 million with specific sales to be refund. As of May 11, there were 11 repo auctions that have already taken place for a total amount of PEN 27 billion or 91% of the original launched program, which now will be extended. Interbank has been able to obtain PEN 3.1 billion or 12% of the fund, which is slightly above its market share in commercial banking of around 9%.

Most of the funds are related to corporate and midsize companies with PEN 1.7 billion in 80% guaranteed assets and PEN 1.1 billion in the 90% guarantee bucket. We have already disbursed as of today, it will most likely reverse all the PEN 3.1 billion throughout the rest of this week. On Slide 20, we wanted to give you an update of the loans rescheduled so far, which has reached 30% of the total loan portfolio of the bank as of the end of April, slightly below the 33% of the system as a whole. This represents PEN 10.9 billion for Interbank and PEN 116 billion for the total system.

This percentage was 12% for Interbank as of the end of March. As far our retail portfolio is concerned, loans rescheduled reached 35% of the retail portfolio or PEN 6.9 billion, which corresponds to loans granted to roughly speaking, 300,000 clients. In commercial banking, 24% of the commercial portfolio has been rescheduled or PEN 4 billion, which corresponded to two, three more businesses in terms of [Audio gap] but more skewed toward corporate and midsize companies in terms of volumes. On Slide 21, we wanted to give you a sense of the main portfolios exposed to COVID-19's impact.

Eleven percent of the portfolio is comprised of loans to small businesses, consumer loans to self-employed workforce and credit and personal loans, and mortgages to self-employed workforce, which we consider to be the most exposed. But which at the same time have higher coverage ratios with consumer loan NPL coverage ratios above 200%. On the other hand, the least exposed portfolio represents 55% of the total loan book and includes corporate and midsize companies and consumer loans to the public sector employees, which are more resilient to crisis or most exposed to unemployment. Within our commercial loan portfolio, only around 3% of the commercial portfolio of Interbank is related to affected sectors such an oil and gas, to leasing, transport, or entertainment.

On Slide 22 and 23 starting with 22, we are showing the evolution of the stock of provisions of our total exposure or expected loss. This trend shows that the risk profile of the bank has already seen a slowed and further deterioration in this quarter as a result of COVID, with expected loss up 20 basis points in the quarter at total bank level and also both in retail and commercial. This is much stronger in credit cards, which has seen an increase of 50 basis points in the quarter. Having said that, we believe this has not -- does not show yet the full extent of the impacts.

As we mentioned in previous pages, it's not being fully recorded this quarter due to the rescheduling schemes in place. A large part of the impacts registered in the first quarter is coming to the update on the forward-looking models, which as of March included a GDP forecast of minus 5% and which as today has been revised many times with different numbers forecasted in a range from minus 5% to minus 20% approximately. On Slide 23, cost of risk was up 60 basis points in the quarter and 110 basis points in the year, reaching 3.4% in line with what previously explained, with cost of risk in retail banking reaching 5.5%, and up 70 basis points in the quarter and 130 basis points in the year. In commercial banking, cost of risk reached 0.9%, and up 50 basis points in the quarter and 90 basis points in the year.

The NPL coverage ratio for the bank was 136.1% as of the end of March, up from 131% one year ago, with retail coverage ratio at 160%, up from 148% one year ago. In commercial banking, coverage ratio at 81.6%, down from 93% one year ago when we had a tight situation to the construction sector companies. On Slide 24, we are showing you the breakdown of the year over year increase in expenses as of the first quarter. As you can see from the breakdown, what drives the yearly growth to be 6.4% are first, technology expenses, which grew 16%, 16% year over year as a result of higher IT investments due to the transformation process, and second, variable costs related to the strong growth in credit cards, up 13% year over year.

All other expenses grew at a rate of 3% to 4%. Right after the outbreak of COVID-19 and as soon as we entered the lockdown, we started working on a a line of opportunities for cost savings in the short term. Some variable costs will decrease just to lower transactional volumes as in the case of credit cards-related expenses and variable in [Inaudible]. On the other hand, we are taking many initiatives to decrease costs, including hiring and salary increase freezes; renegotiation of all contracts including rentals, IT contracts, and all relevant suppliers; reduction of discretionary expenses such as advertising.

And during the month of April, we have already registered a decrease in costs of around 10% versus April 2019. On Slide 25, we wanted to share with you and reinforce the actions taken on capital, which include the increase of the 2018 earnings from 55% to 75i% and the full capitalization of the third-quarter earnings. With this, our capital ratio as of March is 16.1% and is -- the core Tier 1 ratio is 12%. As of the end of April, we have called the $200 million Tier 1 bond for optional reduction.

And as we announced in the previous call, after this in the distribution of the [Inaudible], our total capital ratio stands at 14.9% at the end of April and core equity Tier 1 ratio stands of 11.4%, levels similar to February and well above the minimum required. Please now turn the following pages to discuss our insurance segment results. On Slide 27, gross premiums increased 8.9% on a quarterly basis, with growth in almost all the segments and Interseguro remaining as the market leader in annuity with 27.9% market share. During the first quarter, gross premiums increased 8.9% on a quarterly basis but decreased 8.4% on a yearly basis.

The growth in retail insurance was double digits for the quarter and the year. Likewise, regulated and private annuities increased in the quarter but remained below year over year mainly explained by a market contraction. On Slide 28, in the first quarter, Interseguro's investment portfolio reached PEN 11.8 billion, which represents a decrease of 5.4% in the quarter and relatively flat year-on-year. Results from investments in the first quarter were PEN 127 million, which represents a 4% return on investment portfolio, down 150 basis points on a quarterly and yearly basis.

On Slide 30, we can see Inteligo's main indicators. Net interest and similar income was PEN 25 million, a 3.4% increase, compared with the fourth quarter mainly explained by interest income generated by a higher average balance of fixed-income investments in addition to a reduction in interest expense related to lower funding costs on both client deposits and external lines of credit. Net interest and similar income decreased PEN 5 million or 13% year over year mainly attributed to lower average returns on financial investments and higher cost of client deposits. Net fee income from financial services was PEN 43 million, a decrease of 8% when compared to the previous quarter mainly explained by a base effect due to the above-average returns in -- during the fourth quarter, as well as, increased recurring income due to higher mark to market on assets under management in such quarter.

On a yearly basis, net fee income from financial services increased 10% mainly explained by higher brokerage fees due to increased trading volumes, driven by higher price volatility and client appetite for investing or rebalanced in portfolio. In terms of other income, reached a loss of PEN 85.8 million, a decrease of [Audio gap] on a quarterly basis and PEN 122 million on a yearly basis attributable to mark-to-market valuations and realized losses on Inteligo's [Inaudible] portfolio during the second half of the quarter mainly as a result of the COVID-19 outbreak. Revenue generated by Inteligo for the quarter were negative PEN 17 million. On Slide 31, Inteligo's assets under management reached PEN 18 billion, a 1.6% decrease on a quarterly basis but a 1.3% growth on a yearly basis.

The quarterly reduction was mainly related to the negative mark-to-market valuation as a result of the COVID-19 outbreak for the period. Conversely, the annual increase was mainly explained by new account openings and we generated an increase of funds after strengthening professional client conversion strategies at Inteligo. Finally, let's have a look at the potential trends coming forward and some key takeaways of this earnings call. On Slide 33, we are not providing guidance at this time, given the high level of uncertainty of the months to come.

We said we wanted to share with you some trends, but given the information that we currently have and the assumptions that we are able to make today could materialize in the coming months. We believe we will be able to maintain solid levels of capital, given the increased capitalization and lower growth and adequate levels of liquidity due to the Central Bank measures and flight to quality in the quarter. We expect lower growth in loan volumes due to the slowdown of the economy and to the tightening of our credit standards, these excluding the Reactiva credit program. We also expect lower revenues, lower net interest income and NIM due to lower growth in activity in addition to the loan rescheduling impacts.

Cost of funds will likely decrease further as a result of lower rates and the already in-place redemption of the Tier 1 bonds executed. We expect higher provisions and cost of risk due to the deterioration of the portfolio. Then, we will most likely reduce lower costs, thanks to the cost containment measures being deployed and the lower activity. And as a result of all the previously above-mentioned trends, we expect lower profits and ROE but mainly coming from higher provisions and the impact on investments already registered.

On Slide 34, I want to close the presentation with a brief summary of five key messages. First, the quarterly earnings and ROE are affected by higher provisions at Interbank and negative impact from investments at Interseguro and Inteligo. Second, we had an early and fast response to this unprecedented situation and this response has successfully guaranteed the continuity of our operations. Third, most of the actions we have taken during the past weeks have been focused on helping our people and our customers to overcome the problems that they have been facing under the current circumstances.

Fourth, we have reinforced our liquidity and capital position in all of our businesses in order to face the uncertain months to come. We believe our key solvency liquidity indicators are at sound levels to face demand to come. Finally, we see an opportunity to further accelerate digital adoption by our customers under the new normal, our situation supported the investment that we have deployed during the last two years to build our digital platform. Thank you very much.

Now, we welcome any questions you may have.

Questions & Answers:


Your first question comes from the line of Ernesto Gabilondo from Bank of America. Your line is live. Please proceed with your question.

Ernesto Gabilondo -- Bank of America Merrill Lynch -- Analyst

Hi, good morning, Luis Felipe and Michela. Good morning to the rest of the management team. Thanks for the opportunity. My first question is on the economic outlook.

You have mentioned growth expectations are between minus 5% to minus 13%. But what would be the average level of GDP that you will be considering for part or your assumptions? And how should we think about the economic growth next year? And then, my second question is on provision charges and cost of risk. Can you share with us how much of your provision charges in the quarter were related to COVID-19 and when do you expect to have the peak in provisions? And then my last question is on the Reactiva program. So, if the client has already a credit with you, then, you can also provide a Reactiva program, right? So how much do you estimate that the Reactiva program could add to your total loan portfolio? And can you explain us how was the selection to assign the Reactiva programs per bank? And have you estimated that could be the impact to your total NOL interest rate by the incorporation of the Reactiva programs? Thank you.

Luis Felipe Castellanos -- Chief Executive Officer

Hey, Ernesto. It's Luis Felipe. Thank you very much for your question. Let me go on the GDP growth which is, as we mentioned, it's been changing.

The loans we're seeing, starting at minus 5% right when the outbreak broke. However, now, we see loans between minus 10% and minus 20% and this is evolving for a number of reasons. First, because the confinement continues to be extended. So every two weeks, we're getting a new component, and that obviously, every week that the country is closed, GDP goes go down by a factor.

So it's tough to say. We are very actively talking term to the Central Bank and talking to different [Inaudible] and economic analysts to have a discussion. But so far, the range is that wide, minus 10% to minus 20%, and you kind of realize trading remains under those parameters to see the potential impact. So if the government does extend, these numbers will continue to move.

The fact that the government is starting to open the economy is positive news. However, it's been very shy in terms of how much we can move and the protocols that have to be put together by companies in order to come into action are very strict. So, we don't see a huge impact in the short-term of the economy in open. And lastly, it's something that nobody is being able to come to -- to put down the strategic analysis with the impact of the government programs, including Reactive, [Inaudible] which are more targeted to small companies in the whole process, OK? Because of tight liquidity, it is a challenge to come to market.

So the government continues. They're expecting before May to touch like 6 million people with PEN 760 bonus for vulnerable population, plus, the liquidity coming from the government programs like the Reactiva and [Inaudible]. Those should have a positive impact. They're hard to quantify right now because the money is not going back quickly because it [Inaudible], so that it can reach the target people.

So that's it on the liquidity outlook. Let me comment on Reactive, and then maybe, Michela can close with the provisions part of your question and also the impact of Reactiva in our numbers. Reactiva is the program set by the Central Bank and the Ministry of Finance, whereby, all the financial institutions can lend to any type of clients. It can be existing clients or non-existing clients, these are guarantees.

So you look for the clients that require this funding and that certain [Inaudible] activities that are restricted to certain type of companies in terms of the credit profile that are restricted. But then, it's open for everybody. So the way this works is the Central Bank does an auction almost every week for the last -- almost every day for the last two weeks, where they put an amount that can -- the bank or financial institutions can bid upon depending on the level of the guarantee. So for instance, they say, OK, we have PEN 3 billion for auction in -- for the 80% package.

So the banks come in with their postures in terms of the maximum rate that one will charge those funds and whoever bids lower gets the funds. The only restriction is that you cannot lend to new customers at a higher rate than was bid and that's quite the way it works. So you have auctions every day for different buckets and the bank does the posture. And then, you get the fund, you turn around, you place with new customers.

And then, once the money is paid, you take the paperwork to the Central Bank and you do that repo for that loan. So they get the funding back for the part that is guaranteed by the government. It's like the way it was. So we're free to participate.

We are free to share with your existing customers or grant it to new customers. Obviously, given that we need to make sure that we have [Inaudible], so we could do that in our own repo with the bank but also for -- in behalf of the government. The credit analysis stuff is going through. But I think you do have to like fast track processes in order to address certain sectors where we want to focus more to certain types of customers.

Everyone has a different strategy on that front also and the rates are lows. The lowest rate, I think, the funding from the Central Bank comes at 0.5% plus 0.5% per year for the guarantee of the government and some of the auctions have come out at 0.55% rate, and up to 3.5%, depending on the bucket and the guarantee that you are seeing from the government. So now, maybe, Michela can help me on the provisions and the impact of that in our numbers.

Michela Casassa -- Chief Financial Officer

Yes. OK. Maybe just to close on the Reactiva in issues in actually so far in -- we have PEN 3 billion out of the first PEN 30 billion. So, I mean, at the very beginning when we were analyzing the impact of that on our new -- we estimate something between 20 and 30 basis points.

And this because Reactiva new loans are really close to zero margin. It's funding at 0.5%, rates below 1%, so this is really a zero-sum game. But now that the Reactiva Peru program has been extended now, we need to understand how much more of this second package we will have. But just, I mean, as a global fund, if we have additional PEN 3 billion, so a similar portion to the first one, that doesn't mean it can reach up to 50 basis points.

And then, the fixed --

Luis Felipe Castellanos -- Chief Executive Officer

Yes, Michela. Sorry to interrupt. This is not kind of a business in it is providing liquidity for your customers to be stronger and they can continue to do business. So as Michela mentioned, very marginal for us in terms of contribution to profits.

It's more driven to sustainability and viability to the current customers, our clients so they do not break the channel [Inaudible].

Michela Casassa -- Chief Financial Officer

Yes. So actually it is very important to continue to look at the bank, like, I don't know, like two banks. We will continue to monitor all our ratios and key indicators. Excluding Reactiva, the new guaranteed portion because it's like this big amount but close to zero profitability.

And related to cost of risk in -- what we have seen in this first quarter in -- it's like, I mean, more than 50% of the provisions that we are doing are coming from COVID. And why? Because we updated the forward-looking variable. So basically, we were coming from a scenario which was a positive scenario with growth in GDP of around 3%, growth of internal demand of around 3% to 4%. So the scenario that we had prior to this change were very positive.

So basically, by changing the forward-looking scenarios to align with five GDP growth, which is the one we had at the time that we closed the numbers, the portfolios, which are more, if you want, related to this, which are for credit cards and small businesses, were the ones that are shown in the expected loss number, registered higher increases in provisions. Now having said so, this is just a partial number of what is still to come. First, because the forward-looking variables have worsened from the time that we closed our numbers. And second, because we still need to see the behavior of the portfolio in terms of migration between stages and to understand what portion of loans that have been rescheduled will actually become bad debt.

Because, of course, it would not be all of it. But that effect the migration between stages is not yet there in the numbers of the first quarter. So, we do expect more provisions in the second quarter and have in mind that second quarter has two full months of lockdown, April and May. So we will have also some impact in terms of revenues.

Ernesto Gabilondo -- Bank of America Merrill Lynch -- Analyst

Very helpful, Luis Felipe and Michela. Thank you very much. Just a follow-up in terms of Reactiva, have you estimated what could be the impact in terms of provisions? Because I believe there will be a 12-month grace period. So, I just want to understand how this will work because as you mentioned, there will be a portion of guaranteed, so the impact will be very small.

But just to understand on the time line, how it will evolve.

Michela Casassa -- Chief Financial Officer

Ernesto, thanks for the questions. The impact on provision is very limited because there are no provisions on the guaranteed portion. In the clients where the guarantee is only 80%, there we're talking about corporate. So basically, it's not such a high provision.

So it's not something that material, what we will see in terms of those provisions.

Ernesto Gabilondo -- Bank of America Merrill Lynch -- Analyst

Perfect. Thank you very much.


Your next question comes from the line of Mason Mollin from Scotiabank. Please go ahead. YOur line is open.

Jason Mollin -- Scotiabank -- Analyst

Thank you very much. My first question is on capital. In particular, we saw other comprehensive income take a hit this quarter. I think it was about PEN 500 million in our calculation.

Can you talk -- and you mentioned the 12% CET1. And then, if you can repeat what you said about where capital would be in April, and then, talk about where would be the minimum level. We know the regulatory minimum, but what is the minimum that IFS would feel comfortable with in terms of CET1? And then, my second question is just a follow-up on provisioning, just to make sure I understood clearly. So you mentioned that of course the macro indicators are weaker from when you close these numbers already.

You mentioned that there's going to be more provisions coming. So really the forward-looking provisions were forward-looking at that time. So, we're going to see more forward-looking provisions in the second quarter, not just reflecting the actual delinquency in the second quarter, but some gauge of what kind of losses you would expect on those loans that were restructured. Is that correct? Thank you.

Michela Casassa -- Chief Financial Officer

Good morning --

Luis Felipe Castellanos -- Chief Executive Officer

I'm going to pass it to Michela because she's very familiar with it. Go ahead, Michela.

Michela Casassa -- Chief Financial Officer

Good morning, Jason. Thank you for your questions. Maybe, let's start with the cost of risk one. I guess, what you described is the answer is yes.

We expect a further update of the macro variables in the second quarter, as we have mentioned, that the different variables have changed since for use by the end of [Audio gap] these numbers. So this will be the first impact. And the second, the answer is also yes. We see some movement between stages that will materialize.

I'm not sure whether it is going to be all of it because have in mind that the rescheduling programs that we have in place are longer than that. But we will start to see the effect of the third group of clients that will not be able to pay their debt, no? So, there will be more migration between stages than what we have related in the first quarter of this year. And in terms of capital, the ratios as of the end of April are 14.9% for total capital ratio and 11.4% for core equity Tier 1 ratio. And besides the -- as you mentioned, the minimum regulatory that in Peru, we only have a total capital ratio in which as of April, is 11.2%, what the Superintendency requires.

We have internal limit, which is 200 basis points above the minimum regulatory requirement. So, that regulatory requirement actually has been changing and increasing. So as of April, that number is 11.2%. Our internal limit should be 13.2% and we are 14.9%.

That's for core -- for total capital ratio. And as of the core equity Tier 1 ratio is concerned, as of April, 11.4%. we have an internal limit of 10%. So even here, we are well above our internal limit.

We do not have a limit for core equity Tier 1 ratio from the Superintendency. But of course, we align our internal limit to also what all the rating agencies have seen and with this level we feel comfortable at the time.

Jason Mollin -- Scotiabank -- Analyst

Thank you very much. I appreciate that.


Your next question comes from the line of Piedad Alessandri with Credicorp Capital. Please go ahead. Your line is open.

Piedad Alessandri -- Credicorp Capital -- Analyst

Hi, thank you very much for allowing questions. I wanted to ask regarding the investment portfolio of Inteligo and Interseguro, if you had made some changes regarding variability and the risk exposure of those portfolios, given the current market circumstances, preparing yourself for the following quarters? If you could give us a bit more details of your measures regarding the investment portfolio in Interseguro and Inteligo.

Luis Felipe Castellanos -- Chief Executive Officer

Sure. Well, thanks very much for your question. Let me pass it on to each of the responsible of both Inteligo and Interseguro for comments on each of their strategies. Gonzalo Basadre for Interseguro, and then, we will pass it on to Bruno so he can touch upon it as well.


Gonzalo Basadre -- Chief Executive Officer of Interseguro

Yes, sure. Hi, we've done couple of things to reduce the risk of our portfolio. First of all, we reduced the equity allocation to our portfolio. We were -- some of our positions and some of the names.

The other thing is we closed some of our short position in U.S. dollars and to make us less -- our exposure less -- a smaller exposure to variability of the exchange rate. We've also been reviewing all the names in our portfolio to check what the impact on -- of the new scenario and we are doing some changes in the position. The Superintendency, by the way, has made it more flexible for us to do some of our sales.

So that will facilitate the change of the positions in the portfolio. We have Bruno from Inteligo.

Bruno Ferreccio -- Chief Executive Officer of Inteligo

Yes. In our case, we did reduce some of the exposure to investments that we had during March. And that's why we realized some losses during the month of March that have been -- that are shown in the results, mainly, some fixed income and equity exposure that we had. Going forward, our portfolio is still very much geared toward fixed income investments.

So, we think we should be OK going forward, but there's still market volatility. It's still too high, we think. And so, the only way we limit that would be [Inaudible] the entire portfolio, and that's certainly not possible, but we think we have taken the appropriate steps.

Piedad Alessandri -- Credicorp Capital -- Analyst

OK. You could say that Interseguro's portfolio had high exposure to FX, so that affected the results?

Gonzalo Basadre -- Chief Executive Officer of Interseguro

We are -- I mean in terms of the size of the portfolio, it's not that deep. It's our long -- our short dollar position, it's around less than 0.2% of our overall size, but still has an impact on our results. Still, what we did was we reduced our short position on the portfolio.

Piedad Alessandri -- Credicorp Capital -- Analyst

Thank you very much.


Your next question comes from Yuri Fernandes with JP Morgan. Please go ahead.

Yuri Fernandes -- J.P. Morgan -- Analyst

Good morning, Luis Felipe and Michela and team. I had the question also. I would like to start by margins. My point is how much the loan reschedule could impact your margins? I guess, you're giving zero rate loans to some credit cards and other personal loans for the installments in April and May.

So, my question is how that could impact your margins? Should you see this impact in the second Q, it will be a hit on margins? Or should we see this negative reflected in another account? I don't know, like an impairment account or something like this. I guess where I want to reach is the global impact for the margins, right, because you have several headwinds. You have the lower rates in Peru. You have Reactiva, the 20 to 30 bps Michela mentioned and you also have the renegotiated loans.

So my -- I guess where I'm going to reach is like how bad could be NII go this year? Can we be miss, like a very negative trend on NII this year? And my second question is regarding costs. You mentioned some measures to reduce costs and you are starting to do this in March. So my point is how much costs can you cut? Like could you see administrative expenses converging close to inflation? Is that possible? Like what's the guideline for costs here? Thank you.

Luis Felipe Castellanos -- Chief Executive Officer

Sure. Let me give you first an overview of how I see, and then, we can go to Michela for details. It's largely obviously going to be under pressure. The extent the reduction in income, I don't think it will overcome the reduction in financial costs.

We won't start really to fully get a sense now because we're still going through the process. The way it works is we have granted and -- we will have two impacts from the programming coming from the programs that we have launched. First, we did summer programming at the beginning of -- late March, sorry. We this are the programming with interest being charged, OK? in April, we switched to a program where there was to interest, not only for the installments, during April and May.

So it's not the whole loan that changed, it's only the installments. Similarly for a minimum payment of the credit card, minimum. And that at the end based on the numbers that we have now is between granting PEN 400 million to PEN 500 million at a zero rate. Everything else will come with interest.

So that will impact -- first, the results. Second, we need to see the actual behavior of our customers once the programs end. And that usually, we have some parameters. I don't want to go very profound on this.

Probably we have some calculations on what would we expect. However, this phenomenon is really a [Inaudible] because it's been very rough in our economy. Now we made it very easy for the customers to access to this program and given the nature of the crisis, many people, some just to be conservative, decided to go into the program. And many others probably will have lots of difficulty.

But that, at this stage, is very tough for us to measure. A counterpoint to this will be again all the liquidity programs that are coming into it, OK? So doing the numbers is not -- what we know is that customers, they expect an opening up and the customers are transitioning through the payment process. The value will be affected by the people that cannot pay, no, because they will have to do an assessment of any interest that were delayed to those that will have to come back. And there is there also the part of the loans granted at zero rate and this is discussed with accounts on the IFRS position.

Michela, can give us a little bit more? But there's a discussion on the one-time fees that we will have to take the cost of loans, interest rates. And the rate is usually the NPV for that [Inaudible]. It can be the day of your average loan and rates. So that's all being discussed right now.

It's very new. It has impacted most of the banks around the world. So, that's something we're working around and probably will have more clarity when we have the next call. And then in terms of costs, you mentioned inflation.

We will be much more aggressive than that. We will see our cost base plus to lower than that maybe the Michela can give us more detail in these two subjects.

Michela Casassa -- Chief Financial Officer

Yes. Thank you, Luis Felipe. But just to complete on the portion of margins and how it should be recorded under IFRS and actual impact the Luis Felipe mentioned, IFRS 9 requires you to do a provision of NPV, no, of the loans that have been reprogrammed with different conditions than the original, which is the case for a portion of the loan that we have rescheduled with lower interest rates. And you should compare the NPV of the new loans with the original rates for those loans.

So basically there, the discussion is which rate to use to do the sector, right? Because as you imagine with that, it can be credit cards. Small businesses will have higher rates. This impact can be big and the issues that you have to register all in one shot. So, if it goes like all the portfolio that you have rescheduled have to be recorded in the second quarter as an impairment of that value that goes directly to revenues, no? So it's a negative on the net interest margin.

So we do not know the extent yet of that number because we are in many sessions. Because actually as for many things [Inaudible] as was the case for provisions. At the end of the -- the international auditing community decided that models couldn't be applied just as they were and the financial experts, a criteria should be used for provisions for COVID. These same discussions are happening now for this impact on revenues.

So, we still need to figure out what would be that number for the second quarter. And in terms of costs, just to complement what Luis Felipe mentioned. And there are some variable costs that we have that actually already as of April, we have seen the impact. Because our cost base was growing mainly because of IT expenditure and that will continue maybe with a little bit of less growth, but we will not stop the legal transformation.

But the variable costs related growth, especially for the credit card portfolio, that has stopped. So basically, everything related to rewards, to incentives, etc. to the credit card portfolio as of April has been much less than in the past. And also, everything related to variable costs of incentives to employees as obviously the earnings are not as before.

So what we have already seen in April, which is the result of both factors, lower variable costs, and the measures we are implementing is that the month of April at the bank level has seen a decrease of 10% versus the month of April 2019. And what we are targeting is, as I mentioned, we have a platform last year, not more than that. And we continue to work to find some other cost containment measures we can put in place. But remember that we already have been planning before COVID in a reduction of branches.

So we are continuing with that plan and that sees some additional branches to be closed this year, no, on top of what we have already closed in the past two, three years, which have close to 10% of the overall branch network. And what we are also reviewing is that given the new normal, the acceleration of digital, the new overall distribution model could require less branches. So, there are many exercises that on top of the ones that we have already closed and are implementing, we're evaluating to see what other things we can put in place.

Luis Felipe Castellanos -- Chief Executive Officer

So -- sorry to interrupt. Just to close. We have also streamlined our IT projects. However, we have identified certain where we will double or triple down because we see that the digital traction that customers are getting will allow us to grow.

So the only thing that we will continue to invest heavily will be in deploying new retail capabilities. Everything else has been kind of rationalized.

Yuri Fernandes -- J.P. Morgan -- Analyst

Thank you, gentlemen. If I may just a third one, I think Peru is doing very well. You Peruvian banks, you are very quick on disbursing the program on Reactiva. We are seeing other countries still struggling and Peru already disbursed all the money.

Actually at least due to the auctions in about 40 days, we are doing the rate renegotiations. But still, my concern is about regulation. Are you seeing any kind of regulatory pressure in addition to the cat -- not cat, the post-COVID formats for interest rate payments. I think we saw that.

But just checking if there is some going on in Peru that we are missing here regarding regulation for banks on taxations, [Inaudible] or any kind of stuff that is a concern for you at this point.

Luis Felipe Castellanos -- Chief Executive Officer

Yes, Thank you. Yes, we're not seeing anything to this date. There's a lot of pressure in many fronts. Specifically for the financial system, there is some especially coming from COVID, this idea for additional taxes, or you understand what companies can charge, or moratorium in terms of charging for certain services or installments throughout the emergency state.

So already, that's a point of concerns for everybody. We're actively monitoring that. We hope that given that what has been [Inaudible] in the last 12 years has been in response to the market forces. And also the discipline in terms of macroeconomic prudence are well regulated, a competitive financial system will prevail.

However, it's a concern for everybody and we are watching that very closely.

Yuri Fernandes -- J.P. Morgan -- Analyst

OK. Thank you very much. Thank you.


Question comes from the line of Daniel Mora with Credicorp Capital. Your line is live. Please proceed with your question.

Daniel Mora -- Credicorp Capital -- Analyst

Hi, good morning and thank you for the presentaion. I have question regarding the commercial segment. Unlike other banks in the region, we did not observe a spike on growth in the commercial segment during the quarter. What is the best way to think about it? It could be due to a low demand from clients? Or the company probably was cautious disposing credits to this segment? Thank you so much.

Luis Felipe Castellanos -- Chief Executive Officer

Hi, [Inaudible] actually as you well know, we are universal bank. We're very strong in all of our business. However, we are not a good a big corporate bank. So, I guess, we can be considered not that like go-to for the big corporates and the first reaction in -- so basically, I think, what we're seeing is happening is that.

The big corporate bank have ones have been granted the big lines in order to take precaution in light of what was coming at the end of March. What we think is that after the close in March, our activity have come back. They have grown. And also, as Michela mentioned, we kind of took a conservative approach.

We kind of were reading the crisis to be much bigger than what's appearing at beginning or mid-March. So, we also were not very proactive in going out to offering credit to big ticket. Just because we were worried about liquidity and we wanted to a good sense on assessment of the situation before actually opening our books. And once we saw that our deposits continue to grow and that the turn of events, we are providing lots of liquidity and [Inaudible].

We kind of have been more comfortable and also selling bigger tickets for some of our customers.

Daniel Mora -- Credicorp Capital -- Analyst

OK. Thank you so much.

Michela Casassa -- Chief Financial Officer

And mainly just to complement, as of the month of April, we have seen an increase in the commercial loan book of close to 4%. So on April, you will see something more of those loans going to especially corporates.


Your line of Andres Soto with Santander. Please go ahead. Your line is open.

Andres Soto -- Santander Consumer USA Inc. -- Analyst

Hi. Thank you for th presentation. I kwould like just to clarify the accounting treatment of these rescheduled loans in terms of asset quality and cost of risk. I understand that under the local regulation, those rescheduled loans are considered as performing loans.

And I would like to understand is that the same way you are going to reflect that under IFRS? And if you are consequently are considering provisions on those rescheduled loans? Thank you.

Luis Felipe Castellanos -- Chief Executive Officer

Sure. Michela, you have the response.

Michela Casassa -- Chief Financial Officer

Yeah. Good morning and thank you for the questions. You are correct. In local GAAP, those loans are considered in -- as a normal loan.

But actually, what we have been doing in local GAAP both -- I mean in April is that despite the fact that we are not required to do provisions because the local outstanding and normal, we have booked voluntary provision, OK? That's local GAAP. Now, when we talk IFRS as we are talking about expected losses, we do have already a first impact from the forward-looking variables, OK? It's not one-to-one correlated to the rescheduling of loans. But for sure, it includes higher provisions because of the new macro scenario. So then to be already what's in, what are going to do, we have been watching the first quarter.

In fact, I mean, we are not going to be keeping our loans as normal. So, we are going to plan some estimates in terms of the migration between the different stages and constitute provisions based on the behavior, the expected loss in LTV for the different client portfolios and products. It will not be treated as what the Superintendency, if you want it, is allowing us to do.

Andres Soto -- Santander Consumer USA Inc. -- Analyst

Perfect. Thank you and I understand you use same-store asset quality. When you show the asset quality indicators, you are going to also reflect some of the effect of this reschedule. Is that correct?

Michela Casassa -- Chief Financial Officer

Yes. Yes, sure.

Andres Soto -- Santander Consumer USA Inc. -- Analyst

Perfect. Thank you so much.

Michela Casassa -- Chief Financial Officer

You're welcome.


And our next question comes from Carlos Gomez with HSBC. Please go ahead. Your line is open. Carlos Gomez, your line is open.

If you're able to hear us, we are unable to hear you. Can you please check your mute switch on your telephone handset? [Technical difficulty] At this time, we will take the webcast questions. I will now turn the call over to i-advize.

Rafael Borja

Luis Felipe and Michela, we have a couple of questions from the webcast. Both are related to Inteligo. The first one is coming from Luis Ordonez from [Inaudible]. Can you please give more details about the losses on the Inteligo proprietary portfolio? What kind of certain investment strategies hit its performance? And the second is on Juan Berrio from LBS.

Were those losses due to mark-to-market or valuation changes from independent evaluator? Could we know what GDP assumptions you used for IFRS 9 and provisions purposes?

Luis Felipe Castellanos -- Chief Executive Officer

OK. Thank you. And I think, you can -- Michela, why don't you help me with the last part of the provisions and the GDP for IFRS 9. And then, we pass on to Bruno for the question about the losses at Inteligo.

Michela Casassa -- Chief Financial Officer

OK. Actually, we mentioned it already. The GDP growth that we use for provisions as of the first quarter was minus 5%. That was the estimate, not that we had at the time that we run the numbers.

Luis Felipe Castellanos -- Chief Executive Officer

OK. And now, Bruno, maybe you can help us with the question about Inteligo's portfolio.

Bruno Ferreccio -- Chief Executive Officer of Inteligo

Yes. On the first part of the question, our portfolio is mainly fixed income, about two-thirds, I would say, the other part divided between alternative and equity. The mark-to-market or realized losses that we've seen were both in fixed income and equity. Unfortunately, both were down during March.

We basically net flat in the alternative side of the portfolio. So both fixed income and equity saw declines during the first quarter. On the second part, we -- as I mentioned before, we did reduce some exposure in the portfolio and that's why we have a portion that's realized, and that realized was sold at spot market prices. So, there's no third-party valuation to it.

It's market operations and the positions were sold to the market with market prices.

Rafael Borja

At this time -- yes. At this time, I'm showing no further questions. I would like to turn the call over to the operator.


And at this time, we have no further questions. I would now like to turn the call back to Mrs. Casassa for any closing remarks.

Michela Casassa -- Chief Financial Officer

Just to thank again everybody for the time for this call, and we will be listening to each other again for our second quarter in August. Bye, everybody.

Luis Felipe Castellanos -- Chief Executive Officer

Keep safe. Thank you.

Duration: 89 minutes

Call participants:

Rafael Borja

Luis Felipe Castellanos -- Chief Executive Officer

Michela Casassa -- Chief Financial Officer

Ernesto Gabilondo -- Bank of America Merrill Lynch -- Analyst

Jason Mollin -- Scotiabank -- Analyst

Piedad Alessandri -- Credicorp Capital -- Analyst

Gonzalo Basadre -- Chief Executive Officer of Interseguro

Bruno Ferreccio -- Chief Executive Officer of Inteligo

Yuri Fernandes -- J.P. Morgan -- Analyst

Daniel Mora -- Credicorp Capital -- Analyst

Andres Soto -- Santander Consumer USA Inc. -- Analyst

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