Welcome to the Grupo Financiera 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 Ferreira. 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 are subject to risk and uncertainty that could cause actual results to differ materially from those expressed. According to the National Institute of Statistics, the Monthly Economic Activity Estimator or MI in Spanish, the Argentine economy recorded a 19.6% year over year contraction during the Q2 of 2020 from a 5.4% year over year contraction in the Q1. April, in particular, displayed an abrupt contraction, limiting a monthly 17.6% in seasonally adjusted terms as a consequence of the COVID-nineteen 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 guidance amounted to a MXN734 billion deficit or 2.7 percent of GDP.
As of the end of June, the accumulated fiscal deficit for the 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 transfer 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 impartial payment of salary. In the case of revenues, the reduction was caused by the economic paralysis during the months of social distancing measures. During the Q2 of the year, the consumer price index recorded a 5.4% increase. On the monetary front, the monetary base fell by MXN 127.6 billion, a 5.6% reduction against the Q1 of 2020.
This resulted from a contraction during April, ARS 425,000,000,000 that more than offset the Central Bank's monetary expansion that took place between May June, ARS297,400,000,000. The expansionary trend continued in July and was mainly prompted by transfer from the Central Bank to the Treasury for a total amount of ARS 1,160,000,000,000 between April July. To finance the fiscal stimulus package, partially compensated by operations with the Meanwhile, the official exchange rate averaged MXN69.54 per dollar in June, a 10.2% increase against the average for March 2020 and 58.8% from June 2019. The average interest rate on peso denominated private sector term deposits for up to 59 days was 29.51 percent for June, 0.24 percentage points above the average recorded last March. Private sector deposits in pesos amounted to ARS 4,300,000,000 in June, increasing 25.2% during the Q2 and 79.9% when compared to June 2019.
Transaction on deposits in pesos rose 28.9% against March 2020 and increased 116.5% in the year. While peso denominated term deposits increased 25.4% in the 2nd quarter and 49.3% year over year. As of the end of June, peso denominated loans to private sector amounted to ARS 2,260,000,000,000, recording a 14.3% increase during the quarter and a 46.6% increase when compared to June 2019. Turning now to Grupo Financiero Alicia. 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 2nd quarter, net income amounted to ARS 5,600,000,000, down 43% from the year ago quarter. This profit was mainly due to gains from Banco Alicia for ARS 4,800,000,000 from Sura Mezgana Holdings for ARS 364,000,000 from Galicia and Interra Fundos for ARS296,000,000 and from Tati Caressionales for ARS18 1,000,000. The annualized return on average assets was 2.7% and the return on average shareholders' equity is 16.5%. Comprehensive income attributable to Rupo reached ARS 7,500,000,000, 25 percent lower than the ARS 10,000,000,000 recorded in the same quarter of 2018. Going to Banco Adichia, 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 1275% 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 inter selling assets were down ARS 19,000,000,000 or 3% year over year, mainly due to the decrease of dollar denominated loans and of foreign and security, partially offset by the growth of the peso denominated loans and of other interest earning assets. In the same period, this yield decreased 872 points, basis points, primarily due to lower yields on the other inter selling assets in pesos and in dollars and on government securities, offset by higher average yield on government securities in foreign currency due to price increases. Interest bearing liabilities decreased ARS66 1,000,000,000 or 12% from the Q2 of 2019, primarily due to lower balances of dollar denominated deposits and its cost decreased 8.61 basis points, mainly as a result of a lower average interest rate on other interest bearing liabilities in pesos and in peso denominated time deposits. Net 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. Profits from gold and foreign currency quotation differences amounted to ARS 865,000,000, including a ARS 986,000,000 gain from foreign currency trading. Provision for loan losses was 78% higher than in the same quarter of the prior year, mainly due to the evolution of the parameters used in the expected freight loss model. Personnel expenses decreased 5% as compared to year before, in line with the decrease in the headcount. In addition, administrative expenses decreased 3%, mainly due to lower fees and compensation for services.
Other operating expenses reached ARS 12,500,000,000, increasing 61% as compared with the Q2 of 2019, mainly as a consequence of higher provisions related to the evolution of the impact of COVID-nineteen. The bank's financing to the private sector reached ARS 4.19 billion at the end of the quarter, up 5% in the last 12 months, mainly due to the increase of loans in pesos that was partially offset by lower dollar denominated loans. Net exposure to the public sector increased 7% year over year and excluding the lease, it represented 6% of total assets compared to 5% at the Q2 of 2019. Deposits reached ARS 593,000,000,000, up 2% in the year as peso denominated deposits increased 44%, while dollar deposits fell 55%. At the same time, there was an improvement in the mix of fixed deposits as current accounts grew 71% and senior accounts 91%, while term deposits increased 11%.
The bank's estimated market share of loans to credit sector was 12.9%, 2 30 basis 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 basis points in the same period. As regards as a 20, the NPL ratio ended the quarter at 2.7%, recording 171 basis points improvement as compared with the 4.4% of the Q2 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 capital exceeded by ARS 74,000,000,000 or 139 percent, the ARS 53,000,000,000 minimum capital requirement and the total regulatory capital ratio reached 19.6%, increasing by 260 basis points from the end of the same quarter of fiscal year 2019. In summary, during the Q2 of 2020, Grupo Financio Valencia 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. We'll go first to Ernesto Gabilondo with Bank of America.
Hi, good morning, Pablo. I 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?
Also, we have seen that you created high year over year charges or write offs of around ARS 4,600,000,000 Argentine pesos. So how much additional provisions do you expect to register in the next quarters? And 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 reprogrammed or restructured portfolio. And then 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. So you just want to see your view on these and how do you expect to mitigate the impact? And then 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, a mess of well, too many questions. Let's go with the first one. As you know, this year, we began with the expected trade loss model and the provisioning we have in the line of loan loss provision, issued comes from this model. And 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.
So and 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 statement due was paid. So 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 are overdraft. So we decided to have this additional provisioning there. So then going to the 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 flexification in the regulation would have been around 3.8%.
That's why also the coverage increased to 150 plus percent. So going forward, we think that once the loans that were reprogrammed will be payable. We will see some further deterioration in the NPL. And the cost of risk for the full year, right now, we are estimating it at around 5.5%. So 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 to June 30, then they postponed it to December the end of December this year. So basically, what we are seeing is an improvement in net fee income, basically, I would say, saving in fee related expenses. And we are growing, I would say, across selling and a number of operations, not prices.
The way we mitigate this lack of adjustment on prices is with, I would say, cost control on administrative expenses. But 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 in today, a very important drop in all the interest rates, beginning with the Leliqs or even Bvlar and all the active interest rates we charge for the different loans. We need what will have more pressure on margin will be the minimum interest rate we are paying for term deposits. So yes, we foresee some kind of margin compression, mainly in the Q3.
Perhaps in the Q4, 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, the leak, the lag and the interest rates, I would say, the average active interest rate.
Perfect. Thank you very much, Pablo. Just a follow-up in the reprogram portfolio. So if I am not mistaken, you mentioned 17% in credit cards. What about the rest of the products or your expectation of the total reprogrammed portfolio as a percentage of the consolidated loan book?
70% was actually 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 3 months grace period and all the balance paid in equal 9 monthly installments, Many people decided to take that advantage. Later, some people decided to recancel what they have refinanced. So really, it's not that big. I'm not really comfortable telling you a specific number that is not that relevant.
And some beginning in August, we will see what will be the payment behavior of because the first installment comes due. So we will see we need a net effect at the end of this month or beginning of September. The other line that grew and it was not really the program was the line granted to SMEs at 24%. That as of the end of June, we presented 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 time.
So really the alternative 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. So basically, we are estimating the peak of NPLs at the end of the third quarter, perhaps something flattish at the end of the Q4. But we need it's a, I would say, complicated moment to give specific and accurate guidance.
Super helpful. Thank you very much, Pablo.
You're welcome, Ernesto.
We'll go next to Juan Ricalde with Scotiad Inc.
Hi, good afternoon, Paolo. Thank you for the opportunity to ask questions. I have two questions, one on the profitability outlook and one on Takeda Reccionales. So regarding the outlook, inflation is expected to pick up in the second half of twenty twenty. I think that consensus is around 40% inflation for the full year 2020.
And year to date inflation, I think, has been around 16%. So 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? How do you think that's going to evolve? And the second question would be regarding Interqueta Regionales.
So we saw profitability decline in there. The ROE was almost 0% in this quarter. So can you talk a little bit more about the main drivers of that deterioration? And if you how should we think about profitability at Taca Darcionales 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 1st month or last month of this year and 1st month of next year. So we are currently forecasting the higher inflation for next year, say around 45%, so 37% this year, 45% next year. Profitability, when we look at ROE for Grupo Sinha Sinha Brasil, it was around 20 7% in the Q1, 16.5% in the first in the second one or the first half is something around 21%.
We are seeing some slight reduction in the following two quarters in terms of ROE. But definitely, we see for the full year a 2 digit return on equity. Of course, this is real. In the past, the question was, well, you had very high nominal ROE, inflation in fact, what is the real one? Now all these numbers we are picking out is the real one.
In terms of the target of regional, these have many different moving parts. I would say that they also made anticipatory provisioning in their case was around ARS 500,000,000 because the again, the expected trade loss model brought originated a lower loan loss provision. Also during this month, the use of credit card was lower. But 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 of this hotel virtual wallet is investing in order to get new releases or better user experience.
So going forward, we think profitability should turn to the levels we saw in the Q1.
Got it. That's very clear. Thank you very much, Pavel.
You're welcome.
We'll go next to Jason Mollin with Scotiabank.
Hola, 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 Q4 of this year or the Q1 of next year. But what are the base case assumptions? And maybe if you can talk about some of the stress scenarios that could turn that could be part of the outlook for Argentina and the group? Thank you.
Yes. Well, first, this expected credit loss for model is, I would say, audited by our external auditor once a year. And also, I would say, audited perhaps easier than other right words by the central bank and at least once a year. And each quarter, we update the main macroeconomic violence But basically, we are GDP evolution, unemployment, real salary, which I would say are the main strength. We have a best case scenario with a 70% probability and then best one and worst one with 15% probability each.
The region we included in June, consider a GDP contraction of 13% for the year. In March, it was something lower. I think if I recall correctly, it was around 11% or 10%. Unemployment growing to 12.6% from 10.7% was the previous number. And real wages contracting on average 10% considering March to March because the expectation or the numbers are considering March 2019 2020 to March 2021, there was around 20% loss in weight power or satellite.
So but 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 top balance sheet financing. If we in order to strictly 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%, but really I don't remember the other variables, but really it was a very bad scenario.
Pablo, just thinking about that, 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 it does that have a big weighting, the recovery in 2021 or 2022? Or the duration of the loans aren't that long, so maybe it's not that important, the longer term outlook. But how important is it that we get the recovery next year for this outlook?
Well, as I said, the it's from March to March, the estimation of macroeconomic variables in order to calculate the forward looking. So we believe the medium term expectation didn't have any impact on the numbers. For next year, we are forecasting right now a recovery of around 6.5% of GDP, again, coming from minus 13% this year. But it didn't have an impact on the forward looking numbers we calculated.
Understood. That's very helpful.
We'll go next to Lonzo 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. So what was the size of this provision you book in other expenses? Can you comment on the size because you mentioned this was an off balance. So I assume it is not reflected on your allowance on your balance sheet.
So how big was this provision? That's the first one. The second one is regarding the credit card payment post the release. I'm not sure, but in the first question, I guess you mentioned that 70% was paid. So does it mean that 30% was not paid?
Like what does it mean here? And my third and last question is regarding your cost of funding that was very good this quarter. But looking to the breakdown, time deposits had a very good quarter, like the average yield in pesos in local currency was about 20%. So 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 entire deposits funding cost. Is it because you have more wholesale funding like what drove this improvement in funding cost?
Thank you.
Hi, Yuri. The audio was not very clear. So let me see if I understood everything you asked. The first question regarding the provisioning of balance sheet accounts was around ARS 5,400,000,000. As I said, these are unused balances of credit cards or overdraft or certain guarantees.
Then you ask about the time deposits evolution. They are basically the decision of the bank is to pay and accept, I would say, all the retail term deposits. And when liquid is very high, we many times not combine the interest rates with wholesale investors. What was the cost of funding went down because the transactional accounts, basically saving accounts and checking accounts grew more than the same deposits despite the hike in the minimum interest rate we paid. And also if you look at the consolidated cost of funding there and margin, Also what has impact is the breakdown between pesos and dollars.
All the dollar bucket has been shrinking, mainly if you look at the Q2 of the previous year, while the peso bucket has been growing steadily and with very high rates. So 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% to 89% of the Leliq. And if you look to Leliq today at 37, 80, 89, we are talking about something close to 30%. And
the yield
on time deposits you reported on local currency was about 20. So my question is, why is this close to 20 and not close to 30? That would be like the kind of funding cost, even the new regulation on time deposits?
Well, because the breakdown of deposits gives you the weighted average and there are 10 deposits, other ones with cost, but the transactional accounts, savings accounts and checking accounts have basically a zero cost. So that's why the funding cost is not the time deposit rate. And 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 10 deposits. But again, the cost of funding is not this 30% or 33% we are paying before 10 deposits.
Okay. That's clear. And the final one that you missed was regarding the credit card, the 70% you paid implying 30% losses, if that's correct?
Well, the all the credit card financing that was due at the beginning of April, that clients have the chance to refinance at 43% with 3 months grace period and then the balance payable in 9 equal monthly installments, 70% of the clients paid at that moment, seven-zero. So we need 30% to take advantage of that. And some of them, I would say, couldn't pay, perhaps others took advantage and made an arbitrage or speculated. And actually, in the following months, some people prepaid that debt. And really, that refinancing debt, the first installment comes due now in August.
So we will see if the people that refinance or took advantage of that probability that the Central Bank offered will be paying or not. With preliminary information, we don't see any, I would say, a problem.
That's clear.
Thank you
very much, Paolo. You're welcome, Yuri.
We'll connect to Carlos Gomez with HSBC.
My question is also about this reserve that is, as you mentioned, off balance sheet. So we wanted to understand how it will work in practice because it is not on the balance sheet. If I understand correctly, it refers to also off balance sheet items. So 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 balance on the income statement beyond what we have seen today?
And ultimately, why is it again, why is it where it is in the costs as opposed to the normal provisions? One more thing regarding this. So 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, this provisioning that as I said, is not in the loan loss provision and not in the allowances, it's in a separate account. It's for of balance sheet, I'd say, transactions or financing, and it could be recovered. So you can 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 we need creating a lot of, I would say, confusion or noise in the way we presented the numbers.
That's really the policies to having 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, it's not included. In the only there is one particular ratio that we showed in the press release, one of the first pages that includes this additional provisioning and takes the coverage above 212 percent 214%. But 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. So I'm going to clarify. If you included these additional provisions, then you have a coverage of 2 14 questions. But 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. I'm just repeating, I understand that you said that if we included these additional off balance sheet provisions in the total we add them to your normal reserves, your coverage would be 2 14%, but it will be 2 14% on the NPL that you currently have. Is that correct?
Yes, that's correct.
Okay. And 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 2 quarters regardless of what happens to inflation?
Well, there in the effective tax rate was in the order of 40%. If you are comparing it with the Q2 of the previous year, it was much lower basically because in the Q2 of last year, we began with inflation adjustment for cost purposes. And basically, we in the second quarter, we made the adjustment of the first half of the year, so 2 quarters. Going forward, there are certain differences between the tax accounting and also the legal accounting. The network has some differences and also how from tax purposes the loan loss provision is considered.
So I think the effective tax rate will be closer to this level of 40% than the 30% that is the, let's say, the headline number.
Okay. So we should expect around 40% for this year. And is this permanent, this has been also for 2022 and beyond 2021 and beyond?
Well, I think that will depend on the evolution on how the adjustment on network is the difference between adjustment is between the accounting and the the reporting 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 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 da Berga 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 lateral measures and by the overall macroeconomic scenarios though? And then how are you looking at strategies to maybe mitigate these risks? And 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 to which they're seeing. And I would just like to understand what are the banking 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, more revenues coming from fees because of the price, let's say, cap or control. So we are having, I would say, savings on fee expenses. And 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.
So 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?
Yes. The other question,
Yes. The economic sectors, we like or we fear. Of course, we analyze 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 have 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.
So 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 has to do with the tourism, restaurants, cinemas and all these kind of things that really is so small in terms of loan exposure compared with agricultural sector, oil and gas, even construction utilities or car industry. So really, it's very small, very optimized, and the loans we granted are to the segments we feel more comfortable with.
And as I said, April was a very bad month, I would say, across all the sectors, but May June saw recovery and also in July. So 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.
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. But 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, ex segments you want to increase exposure to?
Hi, Roger. The question is, is the level of inflation affects our strategy?
Yes. And the effect the inflation has on the accounting, if you yes, the liquidity management.
Well, definitely, the accounts you see in the P and 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 on certain intangible assets and some other assets that basically are equity participations. And that liquid network is what is affected by the inflation index. So the higher the inflation in the quarter, the higher the impact on that account I mentioned in the P and L. But when inflation gets higher, there are many moving parts And what you can do is or typically what happens is that interest rates go up both for funding and also for lending.
And in definitely, there is a more, I would say, conservative or short term approach to the asset and liability management. But 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 enough. So really, these are the things we can do.
Great. Thank you very much.
You're welcome.
And at this time, there are no further questions.
Okay. Thank you, Jennifer. Thank you all for attending this call.