Welcome to the Grupo Financiero Galicia second quarter 2020 earnings release conference call. This call is being recorded. At this time, I'd like to turn the call over to Pablo Firvida. Please go ahead.
Thank you. Good morning, and welcome to this conference call. I will make a short introduction, and then we will take your questions. Some of the statements made during this conference call will be forward-looking statements within the meaning of the safe harbor provisions of the U.S. federal securities laws, and are subject to risk and uncertainty that could cause actual results to differ materially from those expressed. According to the National Institute of Statistics' monthly economic activity estimator, or MAE in Spanish, the Argentine economy recorded a 19.6% year-over-year contraction during the second quarter of 2020, from a 5.4% year-over-year contraction in the first quarter. April, in particular, displayed an abrupt contraction, plummeting a monthly 13.6% in seasonally adjusted terms as a consequence of the COVID-19 pandemic and the implementation of mandatory social distancing in order to reduce the risk of contagion.
In May, the economy recovered 9.7% against April, and in June, the economy picked up 7.4% when compared to May. During the quarter, the primary fiscal balance amounted to a ARS 734 billion deficit, or 2.7% of GDP. As of the end of June, the accumulated fiscal deficit for a year rose to 3.3% of GDP, resulting from an increase in public spending and a contraction of fiscal revenues.
This was a consequence of the implementation of the fiscal stimulus package, mainly consisting of direct transfers to the unemployed, social plan beneficiaries, and informal sector workers, as well as of aid to companies in the form of labor tax reductions and partial payment of salaries. In the case of revenues, the reduction was caused by the economic paralysis during the months of social distancing measures. During the second quarter of the year, the consumer price index recorded a 5.4% increase.
On the monetary front, the monetary base fell by ARS 127.6 billion, a 5.6% reduction against the first quarter of 2020. This resulted from a contraction during April, ARS 425 billion, that more than offset the central bank's monetary expansion that took place between May and June, ARS 297.4 billion. The expansionary trend continued in July and was mainly prompted by transfers from the central bank to the treasury for a total amount of ARS 1.16 trillion between April and July to finance the fiscal stimulus package, partially compensated by operations with LELIQ. Meanwhile, the official exchange rate averaged ARS 69.54 per USD in June, a 10.2% increase against the average for March 2020, and a 58.8% from June 2019. The average interest rate on ARS-denominated private sector time deposits for up to 59 days was 29.51% for June, 0.24 percentage points above the average recorded last March.
Private sector deposits in ARS amounted to ARS 4.3 trillion in June, increasing 25.2% during the second quarter and 79.9% when compared to June 2019. Transactional deposits in ARS rose 28.9% against March 2020, and increased 116.5% in the year. While ARS-denominated time deposits increased 25.4% in the second quarter and 49.3% year-over-year. As of the end of June, ARS-denominated loans to the private sector amounted to ARS 2.26 trillion, recording a 14.3% increase during the quarter and a 46.6% increase when compared to June 2019. Turning now to Grupo Financiero Galicia, it is worth to remind you that since the beginning of 2020, reported figures are adjusted by inflation and apply the expected credit loss model for provisioning. Taking this into consideration and going to information for the second quarter, net income amounted to ARS 5.6 billion, down 43% from the year-ago quarter.
This profit was mainly due to gains from Banco Galicia for ARS 4.8 billion, from Sudamericana Holding for ARS 364 million, from Galicia Administradora de Fondos for ARS 296 million, and from Tarjetas Regionales for ARS 18 million. The annualized return on our average assets was 2.7%, and the return on average shareholder equity is 16.5%.
Comprehensive income attributable to Grupo reached ARS 7.5 billion, 25% lower than the ARS 10 billion recorded in the same quarter of 2019. Going to Banco Galicia, net income for the quarter decreased 48% from the year-ago quarter as a consequence of a 34% decline in operating income, mainly due to a 50% lower net income from financial instruments and 61% higher operating expenses, offset by a 1,275% growth of net interest income. Interest income for the quarter increased 9%, as compared to the same period of 2019, while interest expenses were down 47%.
Average interest earning assets were down ARS 19 billion or 3% year-over-year, mainly due to the decrease of dollar-denominated loans and of government securities, partially offset by the growth of the peso-denominated loans and of other interest earning assets. In the same period, its yield decreased 872 basic points, primarily due to lower yields on other interest earning assets in pesos and in dollars and on government securities, offset by higher average yields on government securities in foreign currency due to price increases. Interest-bearing liabilities decreased ARS 66 billion or 12% from the second quarter of 2019, primarily due to lower balances of dollar-denominated deposits, and its cost decreased 861 basic points, mainly as a result of a lower average interest rate on other interest-bearing liabilities in pesos and on peso-denominated time deposits.
Net fee income increased 5% in the last 12 months, being the fees related to credit card activity, the ones that stood out. Net income from financial instruments decreased 50% because of lower holdings and yields on Argentine Central Bank paper. Profit from gold and foreign currency quotation differences amounted to ARS 865 million, including a ARS 986 million gain from foreign currency trading. Provision for loan losses was 28% higher than in the same quarter of the prior year, mainly due to the evolution of the parameters used in the expected credit loss model. Personnel expenses decreased 5% as compared to the year before, in line with the decrease in the headcount. In addition, administrative expenses decreased 3%, mainly due to lower fees and compensations for services.
Other operating expenses reached ARS 12.5 billion, increasing 61% as compared with the second quarter of 2019, mainly as a consequence of higher provisions related to the evolution of the impact of COVID-19. The bank's financing to the private sector reached ARS 419 billion at the end of the quarter, up 5% in the last 12 months, mainly due to the increase of loans in ARS, that was partially offset by lower USD-denominated loans. Net exposure to the public sector increased 7% year-over-year, excluding the LELIQ, it represented 6% of total assets, compared to 5% at the second quarter of 2019. Deposits reached ARS 593 billion, up 2% in a year, as ARS-denominated deposits increased 44%, while USD deposits fell 55%.
At the same time, there was an improvement in the mix of peso deposits, as current accounts grew 71% and savings accounts 91%, while time deposits increased 11%. The bank's estimated market share of loans to the private sector was 12.9%, 230 basic points higher than at the end of the year-ago quarter, and the market share of deposits from the private sector was 10.4%, decreasing 25 basic points in the same period. As regards asset quality, the NPL ratio ended the quarter at 2.7%, recording a 171 basic points improvement as compared with the 4.4% of the second quarter of the prior year, and the coverage of NPLs with allowances reached 152.5%, up from 81.4% from a year ago.
As of the end of June 2020, the bank's consolidated computable capital increased by ARS 74 billion or 139%, the ARS 53 billion minimum capital requirement, and the total regulatory capital ratio reached 19.6%, increasing by 260 basic points from the end of the same quarter of fiscal year 2019. In summary, during the second quarter of 2020, Grupo Financiero Galicia has shown good results in a very challenging and volatile market environment, keeping liquidity, solvency, and profitability metrics at good levels. We are now ready to answer the questions that you may have. Thank you. Jennifer?
Yes. If you'd like to ask a question on today's call, that is star one on your telephone keypad. We'll go first to Ernesto Gabilondo with Bank of America.
Hi, good morning, Pablo. Hope you're well. My first question is related to the creation of higher charges for additional provisions that were recognized in other expenses. Shouldn't they be recognized in provisions as write-offs, or what is the rationale to include them in other expenses? We have seen that you created high year-over-year charges for write-offs of around ARS 4.6 billion. How much additional provisions do you expect to register in the next quarters? Can you elaborate of how much of the total loan portfolio has been reprogrammed or restructured? I think it will be interesting to see how much of additional provisions in other expenses represented of the reprogram or restructured portfolio. My second question is on the regulation on banking fees. I believe you cannot charge the withdrawals in ATMs, and you cannot reprice fees until next year.
Just want to see your view on this and how do you expect to mitigate the impact? My last question is on the cap on credit cards. I believe this has been offset by the lower deposit requirements. However, thinking about next year, do you think this could have an impact in margins? Thank you.
Okay. Hi, Ernesto. Too many questions. Let's go with the first one. As you know, this year we began with the expected credit loss model, and the provisioning we have in the line of loan loss provision is what comes from this model. We also have this flexibilization in the regulation that the Central Bank put in place when the pandemic began, that basically gives 60 more days to consider a loan that is not current or bad loan. Also, I would say, answering part of one of your questions, part of the credit card balance that was due at the end of March, beginning of April, was reprogrammed. Roughly 70% of that payment due was paid. Considering all this, we made some anticipatory provisioning that is not in any specific loan, or it's not even in the balance sheet. It's off balance sheet.
For example, all the unused balances of credit cards or overdraft. We decided to have this additional provisioning there. Going on with the asset quality, let's say, when we look at the numbers of the bank, the 2.69% NPL ratio, without this flexibilization in the regulation, would have been around 3.8%. That's why also the coverage increased to 150-plus%. Going forward, we think that once the loans that were reprogrammed will be payable, we will see some further deterioration in the NPL. The cost of risk for the full year, right now, we are estimating it at around 5.5%. I gave you a lot of different explanations on asset quality. Any follow-on question is more than welcome.
Regarding banking fees, at the beginning of, again, this period, the central bank prohibited banks to raise prices of the services we grant at the beginning till June 30th. They postponed it to the end of December this year. Basically, what we are seeing is an improvement in net fee income, basically, I would say, saving in fee-related expenses. We are growing, I would say, cross-selling on a number of operations, not prices. The way we mitigate this lack of adjustment on prices is with the, I would say, cost control on administrative expenses. As you saw, they were, I would say, very limited in terms of the growth evolution.
Regarding the cap on credit card financing at 43%, really we are seeing all this, I would say, even till today, a very important drop in all the interest rates, beginning with the LELIQs, or even BADLAR, and all the active interest rates we charged for the different loans. Really, what will have more pressure on margin will be the minimum interest rate we are paying for term deposits. Yes, we foresee some kind of margin compression, mainly in the third quarter. Perhaps in the fourth quarter, we could see some kind of recovery as we expect inflation will pick up a little bit more, and also we are forecasting some increase in all these interest rates that I mentioned, LELIQ, BADLAR, and I would say, the average active interest rate.
Thank you very much, Pablo. Just a follow-up in the reprogram portfolio. If I am not mistaken, you mentioned 17% in credit cards. What about the rest of the products or your expectation of the total reprogram portfolio as a percentage of the consolidated loan book?
Around 70% was actually what was paid in credit cards when the statements came due at the beginning of April. With the 43% interest rate used to, three months grace period, all the balance paid in equal nine-month installments, many people decided to take that advantage. Later, some people decided to pre-cancel what they had pre-financed. Really, it's not that big. I'm not really comfortable telling you a specific number, but it's not that relevant. Beginning in August, we will see what will be the payment behavior, because the first installment comes due. We will see really the net effect at the end of this month or beginning of September. The other line that grew, it was not really the program, was the line granted to SMEs at 24%. That, as of the end of June, represented roughly 11% of total loans.
We consider that this will be paid very good because really, the interest rate is low and definitely negative in real terms. Really the outstanding challenge is to see how the back to normal or to certain normality appears in the next two quarters and see the impact on GDP, real salary, inflation, and so on. Basically, we are estimating the peak of NPLs at the end of the third quarter, perhaps something flattish at the end of the fourth quarter. Really, it's a, I would say, complicated moment to give specific and accurate guidance.
No, super helpful. Thank you very much, Pablo.
You're welcome, Ernesto.
The next to Juan Ricalde with Scotiabank.
Hi. Good afternoon, Pablo. Thank you for the opportunity to ask questions. I have two questions, one on the profitability outlook and one on Tarjetas Regionales. Regarding the outlook, inflation is expected to pick up in the second half of 2020. I think that consensus is around 40% inflation for the full year 2020, and year-to-date inflation, I think it has been around 16%. With that in mind, can you talk a little bit about how the group is preparing to protect profitability from the expected increase in inflation? Should we see ROEs remaining at mid-single digit for the rest of the year, or how do you think that's going to evolve? The second question would be regarding Tarjetas Regionales. We saw profitability declining there. The ROE was almost 0% in this quarter.
Can you talk a little bit more about the main drivers of that deterioration, and how should we think about profitability at Tarjetas Regionales evolving in the next coming quarters? Thank you.
Hello. Well, first, our expectation on inflation right now is 37%. The rebound in inflation shifted for the first month or last month of this year and first month of next year. We are currently forecasting a higher inflation for next year, around 45%. 37 this year, 45 next year. Profitability, when we look at ROE for Grupo Financiero Galicia, was around 27% in the first quarter, 15.5% in the second one. For the first half, it's something around 21%. We are seeing some slight reduction in the following two quarters in terms of ROE. Definitely, we see for the full year, a two-digit return on equity. Of course, this is real. In the past, the question was, well, we had very high nominal ROE, inflation is high, what is the real one? Now, all these numbers we are speaking out is the real one.
In terms of Tarjetas Regionales, they have many different moving parts. I would say that they also made anticipatory provisioning. In their case, it was around ARS 500 million, because, again, the expected credit loss model originated a lower loan loss provision. Also, during these months, the use of credit card was lower. They didn't increase fees in order to, I would say, to help their clientele. And also, there were some additional expenses with all the Naranja X development. All this, I would say, virtual wallet is investing in order to get new releases or a better user experience. So, going forward, we think profitability should turn to the levels we saw in the first quarter.
Perfect. That's very clear. Thank you very much, Pablo.
You're welcome.
We'll go next to Jason Molins with Scotiabank.
[Foreign language] Pablo. Thanks for the opportunity. Juan already asked some questions, but maybe you can just talk about what goes into Galicia's expected loss models. What's your base case at this point? You mentioned that there might be, obviously, it's difficult to forecast this, but perhaps we could see a peak in non-performing loans in the fourth quarter of this year or the first quarter of next year. What are the base case assumptions? Maybe if you can talk about some of the stress scenarios that could be part of the outlook for Argentina and the group. Thank you.
Yes. Well, first, this expected credit loss model is, I would say, audited by our external auditor once a year. Also, it, I would say, audited perhaps is the other right word, by the central bank, and at least once a year. Each quarter, we update the main macroeconomic variables that basically are GDP evolution, unemployment, real salary. These, I would say, are the main three. We have a base case scenario with a 70% probability, and then a best one and worst one with 15% probability each. The revision we included in June considered a GDP contraction of 13% for the year. In March, it was something lower. If I recall correctly, it was around 11% or 10%. Unemployment growing to 12.6% from 10.7%, it was the previous number.
Real wages contracting on average 10%, considering March to March, because the expectation or the numbers are considering March 19, 2020, to March 2021. It was around 20% loss in wage power or salary power. It also considers the current situation of our loan book, the asset quality. That's why we decided to create this anticipatory provisioning in some of the off-balance sheet financing. If we consider, I would say, the worst-case scenario, instead of having a 5.5% cost of risk for the full- year 2020, the worst case was around 8%, I don't remember the other variables, but really it was a very bad scenario.
That's very helpful, Pablo. Just thinking about that gives us some color on scenarios for the base case for this year. Does it include this base case, like next year? I mean, looking at expected loss, does that have a big weighting, the recovery in 2021 or 2022? The duration of the loans aren't that long, so maybe it's not that important, the longer-term outlook. How important is it that we get the recovery next year for this outlook?
Well, as I said, from March to March, the estimation of macroeconomic variables, in order to calculate the forward-looking. Really, the medium-term expectation didn't have any impact on the numbers.
Okay.
For next year, we are forecasting right now a recovery of around 6.5% of GDP, again, coming from -13 this year. It didn't have an impact on the forward-looking numbers we calculated.
Understood. That's very helpful. [Foreign language] Muchas gracias.
De nada, Jason.
We'll go next to Alonso Garcia with Credit Suisse.
Thank you for taking my question. Good morning, everyone. I just wanted to first start with a follow-up on the cost of risk. You mentioned 5.5% for the full
Hello?
We'll move to the next caller with Yuri Fernandes with JPMorgan.
Hi, Pablo. Thank you. What was the size of this provision you book in other expenses? Can you comment on the size? You mentioned this was an off-balance, I assume it is not reflected on your allowance on your balance sheet. How big was this provision? That's the first one. The second one is regarding the credit card payment post the reliefs. I'm not sure, in the first question, I guess you mentioned that 70% was paid. Does it mean that 30% was not paid? What does it mean here? My third and last question is regarding your cost of funding. That was very good this quarter. Looking to the breakdown, time deposits had a very good quarter. The average yield in pesos, in local currency, was about 20%.
My question is, given the regulation that you need to have like a minimal remuneration for individuals, why you had such a big improvement in the time deposits funding cost? Is it because you have more wholesale funding? Like, what drove this improvement in funding cost? Thank you.
Yuri, the audio was not very clear, so let me see if I understood everything you asked. The first question regarding the provisioning of off-balance sheet accounts was around ARS 5.4 billion. As I said, these are unused balances of credit cards or overdraft or certain guarantees. You asked about the time deposit evolution. There, basically the decision of the bank is to pay and accept, I would say, all the retail time deposits. When liquidity is very high, we many times not consolidate interest rates with wholesale investors. The cost of funding went down because the transactional accounts, basically savings accounts and checking accounts, grew more than the time deposits, despite this hike in the minimum interest rate we pay. Also, if you look at the consolidated cost of funding there and margin, also what has its impact is the breakdown between pesos and dollars.
All the dollar bucket has been shrinking, mainly if you look at the second quarter of the previous year, while the peso bucket has been growing steadily and with very high rates. I don't know if I missed something else on your questions.
No, I was just concerned on the time deposit because you have the regulation now, right? That you need to pay from 80%-90% of the LELIQ. If you look today at 37.80, 89, we are talking about something close to 30%.
on time deposits you reported on local currency was about 20. My question is, why is this close to 20 and not close to 30?
That would be the kind of funding cost, given the new regulation on time deposits.
Because the breakdown of deposits gives you the weighted average, and there are time deposits, other ones with cost, but the transactional accounts, saving accounts, and checking accounts have basically a zero cost. That's why the funding cost is not the time deposit rate. As I said in a previous answer, the margin compression particularly could come from this increase in the minimum interest rate we are forced to pay for time deposits. Again, the cost of funding is not the 30% or 33% we are paying for time deposits.
Okay. Now that's clear. The final one that you missed was regarding the credit card, the 70%.
Yeah
being paid implying 30% losses, if that's correct.
All the credit card financing that was due at the beginning of April, that clients had the chance to refinance at 43% with a three-month grace period, and then the balance payable in nine equal monthly installments. 70% of the clients paid at that moment, 70. We need 30% took advantage of that. Some of them, I would say, couldn't pay, perhaps others, took advantage and made an arbitrage or speculated. Actually, in the following months, some people prepaid that debt. Really that refinancing debt, the first installment comes due now in August. We will see if the people that refinanced or took advantage of that possibility that the Central Bank offered will be paying or not. With preliminary information, we don't see any, I would say, problem.
No. That's clear. Thank you very much, Pablo.
You're welcome, Yuri.
We'll connect you, Carlos Gomez-Lopez with HSBC.
Hello, Pablo, and good day. My question is also about these reserves, and that is, as you mentioned, off-balance sheet. We wanted to understand how it will work, in practice, because if it's not on the balance sheet, if I understand correctly, it refers to also off-balance sheet items. Presumably, if it is used, it will be when these off-balance sheet items become activated, and then you can provision against them. Are we going to see any impact on the income statement beyond what we have seen today? Ultimately, again, why is it what it is in the costs as opposed to the normal provisions? One more thing regarding this. This is personally not part of your reserve. Is it also, or is it not part of the cost of risk that you are describing? Thank you.
Hi, Carlos. Well, in this provisioning that, as I said, is not in the loan loss provision, and not in the allowances, it's in a separate account, is for off-balance sheet, I would say transactions or financing, and it could be recovered. Actually, if you look at other operating income in other quarters, you could see some recovery in this kind of provisions. Going forward, I think that it will be better to try to disclose better this off-balance sheet financing because created a lot of, I would say confusion or noise in the way we presented the numbers. Really the policy is to have in the loan loss provision, what the expected credit loss model says, and the rest is within other provisions. In the cost of risk, and in the coverage is not included.
There is one particular ratio that we showed in the press release, in one of the first pages that includes this additional provisioning and takes the coverage above 212%, 214%. When you look at the NPLs, the coverage or cost of risk, it's without this additional or anticipatory provisioning that we have been discussing.
Okay. I need to clarify. If you included these additional provisions, you would have a coverage of 214%, of course, that doesn't include any off-balance sheet risks because they haven't been realized yet.
Sorry, it was not clear, the question, Carlos.
Sorry.
The audio not
Yes. I'm just repeating what I understand that you said. If we included these additional off-balance sheet provisions in the total, if we add them to your normal reserves, your coverage would be 214%, but it will be 214% on the NPLs that you currently have. Is that correct?
Yes, that's correct.
Okay. If I can throw in one more question. Your tax rate is much higher now. We understand that you can only deduct so much every quarter. Should we expect the same level of tax rate in the coming two quarters, regardless of what happens to inflation?
Well, there, the effective tax rate was in the order of 40%. If you are comparing it with the second quarter of the previous year, it was much lower, basically because in the second quarter of last year, we began with inflation adjustment for tax purposes, and basically, in the second quarter, we made the adjustment of the first half of the year, so two quarters. Going forward, there are certain differences between the tax accounting and the legal accounting. The net worth has some differences and also how, from tax purposes, the loan loss provision is considered. I think the effective tax rate will be closer to this level of 40% than the 30% that is the headline number.
Okay. We should expect around 40% for this year. Is this permanent? Is this something also for 2022 and beyond, 2021 and beyond?
Well, I think that will depend on the evolution and how the adjustment on network is, and the difference between adjustment is between the reported accounting and the tax accounting. It has some, I would say, technicalities. In theory, again, it should be higher than 30, but I'm not sure if in 2021 will be around 40. Really, it should be above 30, but not necessarily as high as 40.
Very clear. Thank you so much.
You're welcome, Carlos.
We'll go next to Gabriel Neuberger with Citi.
Hi, Pablo. Thank you for the opportunity to ask questions. The first one I have is, are you looking at any specific segments or sectors that you are exposed to which are being more affected now by the lockdown measures and by the overall macroeconomic scenario as well? Then how are you looking at strategies to maybe mitigate these risks? My second question is actually looking at efficiency. We have been seeing a lot of banks working very hard on this, especially because of the higher costs which they're seeing. I would just like to understand, what are the bank's strategies for efficiency this year? Thank you.
Hi. Well, regarding efficiency, we have, I would say, limits on the growth we can have on fees and revenues coming from fees because of the price, let's say, cap or control. We are having, I would say, savings on fee expenses. The other action we are taking is cost control on the rest of the administrative expenses. Financial income could be, I would say, resilient, as we are forecasting positive real growth in loans, while we see some contraction in margins. Efficiency should remain at this level in the coming quarters. Of course, with the information we have today and without any additional, I would say, regulation coming from the central bank. Sorry, what was the other question, Gabriel?
Yeah.
The sectors.
The other question-
The sectors.
Hi. Are you hearing me now?
Yes. The economic sectors we like or we fear. Of course, the rates and risk departments analyze permanently the loan book and the clientele. It's easy to see some sectors that are better than others. Typically, agricultural sector is always a good sector, and you saw some growth there in our loan book. Although SMEs loans also grew. As of June, we had granted, as I said, around 11% of our loan book to these SMEs, or with this program of 24% interest rate to roughly 23,000 or 24,000 SMEs out of a universe of clients of around 85,000 SMEs. It's definitely these kind of loans are being chosen by the bank. The certain manufacturing sectors are very good. Certain service sectors are very good.
Definitely, the ones that are suffering more are all that have to do with tourism, restaurants, cinemas, and all these kind of things, really is so small in terms of loan exposure, compared with agricultural sector, oil and gas, even construction, utilities, or car industry. Really, it's very small, very optimized, and the loans we granted are to the segments we feel more comfortable with. As I said, April was a very bad month, I would say, across all the sectors. May and June, we saw recovery, and also in July. Going forward, perhaps some sectors will be not so bad, thinking from a risk aversion in terms of lending from the side of the bank.
All right. That's typical, too. Thank you so much.
You're welcome, Roger.
We'll go next to Pedro Farrell with AR Partners.
Hi, everybody. Thank you for taking my question. I believe most of the questions have been answered already. Pablo, does inflation accounting change in any way your strategy? Do you approach any differently how you manage day-to-day liquidity or which businesses segments you want to increase exposure to?
Hi, Pedro. The question is, if the level of inflation affects our strategy?
Yes, the effect the inflation has on the accounting, on view.
Yes, the liquidity management.
Well, definitely, I would say the accounts you see in the P&L, the inflation adjustment, I would say, is higher as the inflation in any quarter is higher. The way to calculate or try to calculate is basically taking the initial net worth, deduct the fixed assets and certain intangible assets and some other assets that basically are equity participation, and that liquid net worth is what is affected by the inflation index. The higher the inflation in the quarter, the higher the impact on that account I mentioned in the P&L. When inflation gets higher, there are many moving parts, and what you can do or typically, what happens is that interest rates go up, both for funding and also for lending. Definitely, there is a more, I would say, conservative or short-term approach to the asset and liability management.
Really, the possibility to be hedged with dollar position is limited due to regulations, and also the level of fixed assets we have, in my opinion, is good and enough. Really, these are the things we can do.
Great. Thank you very much.
You're welcome.
At this time, there are no further questions.
Okay. Thank you, Jennifer. Thank you all for attending this call.