Earnings Call: Q2 2021

Jul 23, 2021

Good morning, and welcome to the Second Quarter 2021 Generis Conference Call. Now I would like to turn the call over to Mr. Enrique Borreira, Investor Relations Officer for the company. Sir, you may begin. Thank you. Good morning. Thank you all for joining us and for your continued interest in Hentera. I'm Enrique Barrera, the company's Investor Relations Officer. I'm very pleased to introduce our management team. With us today are Mr. Enrique Magyol, Hentera's Chief Executive Officer. Centerra's Chief Financial Officer. They will review the results as per the report that was issued yesterday. Please note that during this presentation, Entera may make forward looking statements. These and are account for future economic circumstances, The industry conditions, company performance or financial results. Additional information from forward looking statements Can you please please go ahead and open the floor. If you did not receive a copy of the release or if you have any questions, Please do not hesitate to contact our Investor Relations department in Mexico City. If you are a member of the media, We ask you to contact us directly. I would now like to turn the call over to Mr. Enrique Mayotte for his presentation. Enrique, Please go ahead. Thank you. Good morning or good afternoon to everyone. Thank you for being with us in this Q2 2021 Fintecha's report. It's always a pleasure to be here with you. In our last call, we shared with you the first signs of positive results after a year of dealing with one of the most Important global crisis ever. And as we said last quarter, the first half of the year was going to be about controlling and consolidating our operations. Today, we were proud to say that we are delivering. Net income For the Q2 of 2021 was MXN653 1,000,000. This means A net improvement of MXN1383 million from the Q2 2020 And 72% growth compared with last quarter. ROTE is back to double digit in 11.4%. So because our good results at this point of the year, we have good news for you. We will increase our guidance for the year in this call. In summary, Mexico is showing outstanding results. And at the same time, we are also aware of the uncertain social, political and health environment that we are living, especially in Peru and we will talk about this. However, we are confident that we are doing what we need to do to control and manage these challenges. We know that the context will The team is to be complicated for everyone. However, last year we had a much more uncertain context And we made it through successfully. We have the team and we have the strategy to keep on growing and improving Our value proposition in the current environment. So if I had to deliver just a single message Today, I will say that we have control of the difficult context we are facing. And at the same time, We are putting our eyes on a promising future with very good perspectives. In this call, I will briefly talk about Three things. The first one, our performance during the first half of the year. The second one, our expectations for the second half of the year. And sir, he will talk about an update on our digital transformation strategy and initiatives. So let me start by talking about the status of the business as of the end of the first half of the year. Results for Fendera are beyond expectations. In Mexico, we have good results and good perspective for the rest of the year. Now NPLs is in 1.5% as of the Q2 20 21, which is an outstanding NPLs level. Customer base has grown close to 4% in the last quarter, Which also shows an increase in market share from 40% we had last year to 42% that we have now. The last week's originations of new clients has been 20% higher than in 2019, which as you know, It was an outstanding year. And Patricio will provide more detailed information about this. So let me now go to Peru. In Peru, we know the situation is complicated. We are proactively controlling in managing the business with good results, however. He reinforced our commitment in Peru with Capitalization of MXN 500,000,000 will help us face any stress scenario. We believe we have a clear strategy to face the challenges of the current Peruvian context. Speaking about Guatemala, as we communicated recently, we are selling our Guatemala's operations an important NGO with long experience in our business. For the last couple of years, we have been working to transfer our Guatemala operations to a third party institution. We wanted to focus our efforts on the main business that we have in Mexico and Peru. It is important to mention that Guatemala represented a very small 1.5% of Renteria's portfolio. In this move, the main challenge was to preserve the value that Centerra has created in Guatemala for the last 10 years. And I'm talking not only about value in terms of number of clients, but also in terms of job creation. We now are proud to tell you that with this transaction in a way that we have executed, We accomplished this challenge. From now on, we are going to be able to increase our focus In our strategy in Mexico and Peru without losing the value that we created for the people in Guatemala along the past 10 years. What can we expect for the second half of the year? In summary, Our strategy for the second half of the year can be explained in 4 points. First, we will keep focused on growth and portfolio quality in Mexico. 2nd, we will focus on the quality of the portfolio in Peru to successfully address the challenges that we are facing there. 3rd, we will accelerate our digital transformation Process to gradually capture volume starting on the Q4 of this year. And 4th, We will keep our expenses under control. So talking about the expected results for the year, Even when we are reducing our expectations on Peru's results for this year, The outstanding results in Mexico will more than compensate for overall Centerra's results. Therefore, based on the first and second quarter results, we are changing our 2021 guidance. We are increasing our guidance. Earnings per share was 0.85 percent to 0.95 no, Sorry, not present, MXN0.85 to MXN0.95. Our new EPS will be from MXN1 to MXN1.10. Portfolio growth will be at 13% to 15%, So it remains as it was before. As you can see, EPS improvement comes mainly from better expectations for the quality of our portfolio, better margins, the close control of expenses. Now looking forward and talking about the digital transformation process, as I mentioned in our last conference call, And there has to continue evolving to a more convenient and more efficient business model based on the tools that digital technology provides us. We have been in the digital transformation journey for a while now. More specifically, we created Finlab in 2016. Every company at any industry talks about digital transformation. However, the relevance of digital transformation is to use technology to really improve results for the customer and for the company. I feel very close to capture the value that this work will create for our customers at the same time that Fintira achieved much better financial results. So let me provide some specific updates on the progress of our main digital transformation initiatives. Our digital credit management platform, which as you know will allow us in Mexico Compartanos Banco to better control our processes, Have a better segmentation of our customer base and at the end improve the productivity of our loan officers. We'll roll out In the Q1 of 2022, we estimate that with this platform The following 24 months will be gradually improving our load offices productivity by at least 25%. Regarding ViaSatas, we continue improving our digital capabilities. We are migrating our core transactional platform from a traditional POS terminal for a mobile application. We expect to implement our new core by the Q1 2022. And by the second half of the year, our IAPTAS representatives will increase their productivity by 2x. And functionality for our agents will improve in terms of their user experience. Talking about Concreto, we are also having great progress on the transformation its operations into a more digital business. As of this quarter, Concreto has successfully implemented a 100% branchless model operating in more than 143 cities and 23 states in Mexico. This really is a great achievement. This changes in addition to the growth of Federity Enda, which as you know is on credit to SmartClick platform, will allow us to increase our efficiency by 25% in terms of our customer growth in 2022. To guarantee the success of our digital transformation plan, I'm proud to say that we have partnered with McKinsey to help us implementing our transformation business strategy. We have been working with McKinsey together for the last 3 months now and we expect to work together through this year and the next one. We are looking very good results from this partnership. Working together with the support of Makinta's methodology, Planning and execution internal processes clearly improved in only a few weeks. I feel very confident that data support will give us great effectiveness on the implementation and results of Centera's Strategy. And just to finish, let me share with you my overall thoughts about the times we're living in. We can face any crisis on our survival mode, which means being defensive, but we can face it as an opportunity to grow and be proactive. Candida, we choose to be proactive. We proactively manage the business and control it by challenging the situations and facing them with courage. However, We are putting our eyes not only on the challenges of the present, but in a promising future. We really believe we have great growth opportunities ahead. I always said, we have the best team ever. People is the most valuable asset for any company. Our People is the most reliable guarantee to assure that we will successfully achieve our plans. So thank you for staying with us and supporting us with your trust. We will now pass the call to Patricio and Mario and then we will be happy to take Thank you so much. Thank you, Enrique, and good day to everyone. As always, we appreciate your interest in Thank you. Now over a year since the pandemic was declared and since then moment, we have been very in implementing different plans to support our clients in these challenging times and giving them alternatives to reactivate their business. After 15 months of operating in different manner and adapting our processes to face the reality of the Sanitary Contingency. I can tell you that after the consolidation process that we started at the end of last year, This is dynamic having significant people. As you could see in our Q2 2021 results, Centeno Financial Subsidiary sent us very solid numbers and metrics. And in the case of our largest subsidiary, Banco Compartamos, Some of the financial and operational metrics we achieved in this quarter were even better of pre pandemic vehicles. To highlight some of the achievements in the subsidiary are: 1st, we have delivered 6 months of continued customer growth, attracting over 160,000 clients in this 1st semester, which took us to conclude the We're serving 2,300,000 customers. With the most recent figures published by Prode Rio Microfinance Network, I'll go from Parfums calls 42% of market share in number of customers and 40% in terms of portfolio, An improvement from a year ago where we sat 40% 38% respectively. 2nd, we cleaned up the portfolio, which at the end of the Q2 of 2021 stood at ARS21.5 billion in micro loans, we delivered NPL at 1.57%, She's the best label in the past 13 years. Customers value their unique to credit in Banco Compact Cash. The year proved better dynamics in the portfolio is the cost of risk, which for the 1st semester ended at 4.5% in Banco Compartas. 3rd, now the portfolio is disabled And with strong asset quality, we're ready to grow. In this month of July, the loan origination is 50% higher than July 2019. We believe that this loan alone will represent the most important In terms of loan origination in our 30 years of history, the previous record was reaching March Thank you, Juan. When we disbursed MXN10.3 billion in 1 month alone, This reflects the strong demand for credit in the market. 4, because of better mix performance Between performing loans and non performing loans, it has contributed to generate a larger interest income And lower levels of provisions compared to what we originally anticipated and thus improving margins. These dynamics along further improvements in decommission and cost control initiatives that Mario Well, addressing his remarks, have supported to deliver a very strong debt to the quarter, reaching a net income of ARS 895,000,000 in Banco Representing 191 percent recovery compared to the 2nd quarter and I will spend results for any even quarter over 4 years. Another important metric to highlight is the exigent figure read In the turnover rate, we have our employees, which stood at a record low of 14.5% for the last 12 months. It is very relevant for us that this is approved of a good and safe work environment that container and Compartamos promote and generate more their employees. But it's more also is very important for us because as we retain employees, We have a more experienced loan officers that will serve in a better way to current and future clients. So as you can see, Banco Compartanos is experiencing very solid performance and our expectation is to keep This good momentum in the following months and with no doubt in the coming years. Let me briefly jump to the Brigham and what the Malian Financial Subsidiary. In the case of Peru, Compratos Sinancira, it feels creating challenges related to the impacts of the economic activity generated by COVID-nineteen. Because of this, we have taken different actions to support this Our biggest concern locally has been the quality of the portfolio. To be open to this rig, we have Taking different actions. 1st, we restructured loans to those customers in need. We have now 88% of the portfolio came on time. 2nd, to those customers delinquent, we also offer discounts to keep them motivated to pay on time. And third, we reinforced these actions with a strong incentive program for our loan officers. Despite these actions, sales for the quarter stood at 4.6%. The remaining 7.7% is still half between 1 90 days behind the schedule and it's our focus for collection. Now that we have this clear visibility at the end of the quarter, Cetera Cap priced MXN 500,000,000 in Compaq Tomas inancina, to generate additional reserves to absorb potential losses while maintaining a strong capitalization locally. Other risks that we dealt recently was the interest rate cap that was imposed at 83.4 percent on July 1, 2021. So actual regulation affects exclusively the group lending portfolio, which represents 21.4 percent of the loan bookings per unit. To mitigate the impact, we have taken different actions. 1st, We have increased the minimum ticket by 30%. This will allow us to generate larger interest income despite the smaller rate. 2nd, the length of the loan was increased by 1 month or 25%. This measure Allow us to reduce the cost of the renewal process. 3rd, we have reduced our staff by 14% into this portfolio, Includes 4 branches that were not productive and the potential market was not large enough on pending. 4th, We started a fee related income for the product to generate other income with the same customers. All these actions will allow us to have an impact ARS 60,000,000 in this portfolio this year and we expect that to go back to profitability in 2022. After the actions they came in this letter in Peru, We believe that the worst ratio we think for this subsidiary is behind us. We need to maintain our efforts in understanding the customer needs, Developing alternative to meet and maintain a strong team in the country to manage the volatile environment that we are facing. We are confident and committed to our Peruvian customers and team because Compas Amos will make a difference locally. Regarding our Machiavellian operation, on July 5, we formalized the transfer of our loan Portfolio of business and operations in that country. His decision was aligned with the strategy I'm a priority that we outlined for the following years, where we will focus our efforts and resources, Better serve our work to live in Mexico campaign. To keep continuing the key to the service expectations of the client service to Compas Ramos. As a result of these decisions, this was the last Order in which Copa San Jose, Guatemala will be consolidated to Gente Rosaniacs Financials. I want to take this opportunity to recognize And thanks for the contributions, passion and commitment that the Compasano of Guatemala teams Having our 10 years of history in the country, helping us adapt the group led leading model in Guatemala To bring credit assets to the underserved population in this country. To finalize my remarks, It's important to highlight that even with the current challenges, the implementation and execution of the plan Followed in the past month, we continue with a very strong financial position and a strong operational performance. All of these have been supported by our team who is fully committed to serve more clients In this year, I mean more efficient and digital manner in the future. The size of the financially underserved market in In Mexico, it's still very large and we are certain that we will capture the opportunities that are right in these and following years In this way, being the best financial provider in our segment. Once again, many thanks for your continued support to Redeira And for your interest in following our transformation process to become the best and most convenient financial option for the low income segment of the population. For now, we will keep working hard on supporting our clients in their path for economic recovery and fulfillment of their dreams. I will now hand the conference to Mario Langarica, who will review his Q2 financials. Thank you all. Mario, please go ahead. Thank you, Enrique and Patricio, and good day to everyone. I hope that you and your families remain safe and healthy. I would like to focus my second Q 'twenty one presentation in the following remarks. 1, the improvement of our margins 2, the adequate level of allowances and healthy NPLs cost of risk and coverage ratios 3, the continued growth of our net income 4, the strength of our liquidity funding and capitalization positions And 5, a quick note on 2 corporate events recently announced. 1, our margins have kept improving. As mentioned before, Quintera's total loan portfolio amounted to MXN 39,100,000 in 2nd Q 2021, A 1.9% contraction compared to the figure reported in 1st Q 2021 and 3.9% smaller compared to 2nd Q 2020. It is important to note that this contraction the contraction of this quarter was mainly driven by the FX consolidation effects of Compassionate Sinatra, Federal Fins and Local Currency, we observed that all performing loan portfolios grew quarter to quarter. Interest income grew 8.7% compared to the previous quarter, mainly driven by better performing quality at Banco Compasano Portfolio. We have also been able to reduce 7% interest expenses through Active liability management. These results in net interest income growth of 10.5 percent quarter on quarter and EBITDA improving to 35.2% in 2Q 2021 compared to 32.1% in 1st Q 2021 and 29% in 4Q 2020, Showing a consistent recovery trend. Provision for loan losses at Quintera amounted to MXN 1,160,000,000, Presenting a MXN 440,000,000 increase compared to 1st in 2021 after a provincial provision of MXN304 Even after this addition of provisions in Peru and supported by the outstanding risk dynamics in the loan portfolio of Banco Compartamos, Net interest income after provisions amounted to COP3.948 billion resulting in an impact of provisions Thank you, 20 20 of 13.5%. It is important to highlight that we expect to see NIM before and after provisions Moving closer to 40% 30% respectively by the end of the year. So we should expect further improvement in these ratios. Cost of risk stood at 11.7% in Q2 'twenty one and 9.4% for the first half of the year. Thus moving below the low end of the range guided for the year at 10.5%. Net commissions also an improvement mainly driven by our insurance business and other fee collections. Operational expenses He had a 6.7% contraction compared to 1st year 2021. Consuming the 1st semester of new year, Expenses amounted to MXN6.9 billion representing a 5.9 percent growth compared to the same period of 2020. We are maintaining our 10% guidance on both areas expenses for the year, mainly driven by plant increases in expenses, Some inflationary adjustments and the effects of the consideration from Kedito are mentioned in the past. Thank you. We have sufficient allowances based on the observed trend, sound asset quality and improving NPLs. Alarm sales amounted to COP3.2 billion on a consolidated level with a coverage ratio of 280.5 percent above 228 presented last quarter. NPLs amounted to 2.96%, improving compared to the 3.74 And 3.79 percent of 1st Q 2021 and 2nd Q2020. As we have mentioned before, most of the original pandemic impact Has already been reflected and absorbed in our income statement and capital base. 3, net income has kept growing, maintaining a positive trend. Ending positive trends. Estera's 2nd quarter 2021 income amounted to MXN653 1,000,000, 72.8 percent double 1st Q 2021 with Banco Compuerta showing an impressive growth compared to the previous quarter of 186 The controlling company participation in net income amounted to MXN 5.95 Resulted in the equivalent of COP0.37 EPS. 4, we maintain strong liquidity in funding and capital positions. Who Kintera concluded 2nd Q21 with a very robust liquidity position amounting to MXN20 1,000,000. The metals and zinc subsidiary are solid and sufficient to form our expected growth for the rest of the year And are strong to face additional challenges and or opportunities in each local market. Access to funding continued strong We've been working hard and maintaining excellent communication with all our relationships to maintain this. Centella's strong capital to assets ratio amounted to 33% in Q2 2021. And Banco Compartamos concluded the quarter with 36.9 percent EBITDA. Compartamos Financiera with a solvency level of 17.7 And Concreto with a capital asset capital to assets ratio of 6.59%. Finally, I would like to inform you about 2 important wins that Happened at the end of the Q2 and at the beginning of July and I have already presented above. First, on June 25, Helterra made a MXN500 million, MXN99 million transferred to Compartano Financier in Peru to increase its capital reserves and to strengthen its capital position. This to support the additional provisions of MXN304 1,000,000 mentioned before. 2nd, on July 5, Guatemala's loan portfolio business and operations to Funacion Genesys in Brasilia. This transition process will be concluded during the Q3 of this year. So it's important to note that the potential expenses of this transfer have already been reflected in Gimpera's 2nd quarter 2021 income statement amounting to COP207 1,000,000,000. But the Compatamo Guatemala loan portfolio and other lines related to the balance sheet will be out of the consolidated balance sheet in the next quarter. Finally, and recognizing that we still are facing a challenging environment, we're very proud and enthusiastic about the results delivered so far, Particularly Banco Compartamos and Concredito have already delivered ROEs above 20% for the 1st semester of 2021. We are very motivated with the plan for the second half of the year. We have 3 objectives That should drive revenues that alone with a normalized and monitored cost of risk and adequate expense control would allow us for additional improvement in margin and profitability levels. Thank you all for your attention. This is all for my presentation, and we can now Move forward to the Q and A session. Pereira. Thank you. Our first question comes from Ernesto Gabilondo with Bank of America. Please proceed with your question. Hi, good morning, both Henriques, Patricio, Mario, and good morning, everyone. Congratulations on your Mexico's operation. The first question is on your sensitivity to interest rates. Can you remind us what is the potential impact with an increase in interest rates of 100 basis points in 12 months. My second question is on competition. We have seen a lot of competitors looking to attend the low income segment such as new digital banks like Panorpe, Nova, Quova, And other fintechs, I believe the expansion of the Mexican Digital Banks will be rational. However, Newbank and other fintechs tend to take market share and then worry about profitability in the long term. So considering your experience with Azteca in 2010, they entered aggressively in the market I've always known for a couple of years. How are you preparing to get competition and for a potential indebtedness in the sector? And finally, my last question is related to cap rates in Peru and in Mexico. In case of Peru, you know, Castillo Du Lapointe, the new Head of the Central Bank, closed 3 new members down 7. The current bill and it's already implemented by Velarde to oppose the coverage and establish it as a target with the industry. We will have more news on this in the next September. So how are you positioning from And then for a tougher cap rate in Peru. And then for Mexico, specifically about a potential Suri Range in Mexico, you think this could be a problem for 1 of your products? I think for the traditional business of renterra, I see no concern. For example, when looking to Concredito, We're seeing that the final plan is having an interest rate of 120%, while in the online market, There's an average insurance rate of 100%. I believe you still have remained equal to current. So How are you seeing the potential risk of this injury rate in Mexico? And now that you have been talking a lot of utilization, I'm expecting to lower rate, in order to align some creditors' interest rates with, the traditional Finteres funds. Thank you. Mr. Remo, Cernesto. I'll Answer the first one and then Enrique will continue. As you know, we have been during the years Having a very active liability management strategy. So regarding a potential increase in interest rates in Mexico, Particularly, we already have part of that potential increase in our projections. But also, as you know, we have flexibility He is moving in fixed rate and variable rate and we have already started positioning for that potential Scenario and also remembering that we We still have a large funding position with the liquidity in our balance sheet That we think that we can also manage in order to maintain our expenses level in an adequate level. So, Eduardo, this is Enrique. Let me talk a little bit about competition fintech And the concerns that you put in the table. I will start by saying that, yes, I believe that these Fintech players will definitely become more and more relevant. And I think that In any case, and this is our experience since we started our innovation lab and team lab, And the more critical challenge that we are both facing all the players that are that we are trying to do something in the digital world It is a risk assessment model. I think that technology give us a lot of benefits in terms of customer Experience and even cross selling and segmentation, etcetera, There really big challenge that we have there is in risk assessment model. So as you are saying, the major risk for upgrading or upscaling any of these models is to be very careful with the delinquency. That's the reason we believe that our strategy is the right strategy to go through. And I mean we are As you can see in my explanation, what we are doing is we are combining the digital touch with customers with a human touch. And we are culminating with the technology providers to a better risk assessment model through algorithm and artificial intelligence. We are also Doing it on top of our traditional operation. That's the case of our digital Platform 2 was said the credit that I talked about. So we have to be very careful with delinquency, But I do believe we have the winner form last year because we are going to be very close not only to provide the customers More convenient in the way we deliver the products, but also in the way we assess the risk with these new technologies, As I said, I think it is the main challenge that we are all facing. And when I say we, I refer to all the new Fintech players. So yes, I think there's a Great opportunity there and we have to go with a very clear strategy to capture that opportunity. And let me put together my answer with your questions around Comcredito. And Yes. I think that what Conferresto is very powerful and the reason we believe it's A very strategic business for Compalpamos is for Compo I mean for Rentera is because It offers us maybe 2 strategic advantages. The first one is that we are providing new products, New consumer products and that's increasing our product offer. And on the other hand, it gives us A new strategic channel distribution channel is more than 50,000 empresarios. So and I know we all understand this and the concern comes more in terms of the interest rates. But as I said, we are Making a lot of progress on digitalizing and putting in digital technology, the operations, we are operating, We are capable now to operate branchlet, so that will bring us efficiencies. And eventually, we think That we can capture those efficiencies and bring down as far as we can the interest rate to customers. Just to complement on this thing, it is also worth to remember that in Mexico, we don't have Interest Cap Initiative. We have an initiative that Monreal For this, and it's related with the same mandate that Banco de Mexico has before in terms of regulating rates and So we don't see in the short run Threat in terms of interest cap rates in Mexico. Well, I believe that can answer your question. And I think Patricio has the answer for the third one. And thank you, Ernesto. As you know, the interest rate gap risk has always been there and we Actually, we manage the rig. In Peru, as you know, the 83.4% is now in place. As I mentioned during my remarks, we've taken actions to increase the ticket size to reduce the operational costs and we will continue to work to find ways for productivity to Make these products work despite the fact of this upgrade. Again, as you mentioned, this might be revised over time. But again, the message here is that for financial inclusion, Having such gaps are not necessarily good and there is data from this information. So we, as any other administration, need to go and talk with the new government in Peru, See and talk as we've done in the past about the why because it's where it is and this is a process that we normally be Not only in Peru, we also manage the risk in Mexico. Again, what we can do today is Talking with regulators, in Mexico also, we will have a new Congress by September. And again, we need to go through the process and talk with these ladies and state of yours in case the deal is again proposed. But what we could do in the meantime is what Enrique mentioned of our digital transformation and try to have The lean prop decision model has digitized properties To be able to reduce the cost and be able to also reduce the rates as we gain economies of scale. Again, this is, as I said, a risk that has always been there. We manage it And we don't see that it's a higher risk today in Mexico than it has been in the past. And through again, we With the actions we've taken, the impact is today small and we expect that with the actions that we've taken, the Profitability of the product will return in 2022. Yes. Thank you very much, Enrique, Patricio and Mario. Thank you, Ernesto. Thank you. Our next question comes from Juan Ricaldi with Scotiabank. Please proceed with your question. Hi, good morning. Thank you for taking my question. My question would be related to Concreto. So we saw the client rising around I think 17% quarter on quarter. The portfolio rose 13% quarter on quarter And the ROE was close to 19%. So things are looking quite good there. So I was wondering How big can this business become and what portion of your earnings will be generated from Concreito in the mid to long term. So Juan, thank you for your questions. Yes. Concelerito is looking very good and we are very excited with the results and the perspective that has in the future. As you said, the growth is being quite good. And we expect that with all the The formation that we're making on the operation with this platform, digital platform that I talked about, we are going to continue this path. Now we are looking at a growth of around the 13%, 15%. We believe that for the next month and maybe the next 12 months, we could see the growth around 20% or even a little bit above 20%. So that looks good. And yes, the other thing that is worth to Plain is that as you can see, the net income for Cogreiro this quarter was less than the Previous one. And it was because we made some regulatory research on the Related to the change in our insurance company. So we just made those reserves. And if we discount that effect, we would have had an additional MXN37 1,000,000 net income. So it is looking good. It is looking good and we're very excited about what we're doing with Thank you. Our next question comes from Ricardo Boquipexel with BTG Pactual. Please proceed with your question. Good morning, everyone. Congrats on the very strong results. I first just want to confirm your 2021 guidance of 1 to 1.1 business. And just to understand, if you analyze the EPS for the Q2 So we'll be talking about around 1.5% again. So probably this guidance is saying that We should see some acceleration on earnings for the second half of the year compared to the Only to the second Q of 2021. And mainly, I want you to understand if this is the case, Is it mainly related to top line dynamics or perhaps some effect on the Peruvian subsidiary? And for my second question, I want you to understand a little bit more what is the rationale for the operation expenses that you book In terms of the how they exit to the Guatemala branch, right? So I guess you have a bit more light on What's the premise that you have to reach this around COP 2,000,000,000 for the quarter? Thank you. Yes. Thank you very much. Yes, as you mentioned, we guided 1 to 1.10 for EPS for the rest of the year. We still think that we have some wins on the environment. We need to be very careful about the next quarter. We have the next semester. We're very confident on the growth. So that's why we clearly believe that our results are going to be very positive, but we still need to see how the rest of the year develops, Mainly in Peru. And also, as I mentioned in my remarks, there are some operational expenses That are expected to happen in the 2nd semester related to increases in some expenses mostly driven By inflation, so that's why we are putting our guidance in those levels. Regarding the MXN 207,000,000 pesos of expenses booked at the Guatemala subsidiary, that is the net effect of the transaction. So considering all of the effect that will result in the transfer of the portfolio And some of our colleagues moving to Fundacion Genesys. The net effect of the transaction It represents those MXN277 1,000,000 and that's the rationale behind it. Very clear. Just one quick follow-up. You mentioned that higher operation expenses would lead to We've had earnings on the second half. Like N. A. Still uncertainty on Peru, but this will also reflect $1,000,000,000 in the NII and fee income estimates, right? So we should expect maybe something A lower NII or a lower fee income for when compared to the 2nd Q2021 for a very, very strong rep. NII, as I mentioned before, the margins will improve. It's more related To the provision well, part of the provision was but we expect both the NIM before provisions and after provisions to reach the levels that I mentioned Around 40% 30%, and the operation expenses will come at the lower line. Thank you. Our next question comes from Yuri Fernandes with JPMorgan. Please proceed with your question. Hi, everybody. Happy to take you on the road, Enrique. Good morning, everyone. And again, congratulations on the results. And the first question regarding the consolidated earnings, the CNY 650,000,000. When you look to the subsidiaries, right, when you try to add Mexico, Peru, Guatemala, congrats. And even the data that we report for the first half, I guess you just had first hats for Aperna and the other new business you have. There is still like a personal belief that I cannot know where it's coming from. Like, I thought it was related to the non bank business. I can't get. I guess my point is, for the Sonae MCG, like where is these other earnings Historically, when we look, the needs of the areas, they were about 90% Of the earnings, right? And this quarter, they were about 80 percent of the earnings. So I don't know if they're holding it's helping. I thought they're holding the cost Thank you. Not like providing notice, but I don't know. Like, his first question is more to understand where The portion of the earnings are coming from $2,650,000,000 And my second question is regarding the asset quality for Mexico. It has been great, And I guess you did a very good work charging off that clients or just making just like for the sectors that you think Are better during COVID, but still the cost of risk, they are below 4%. And historically in Mexico, the cost of risk were 8% to 10%. So My point is, do you think because of the better origination, you can keep the cost of risk low for this year and maybe just 'twenty two, We start to see cost of risk in Mexico perhaps moving back to the normal levels. Although we should start to see cost of risk in Mexico starts to increase Because again, 4% needs to be a very big good number. Again, my And how long should we continue to see this level of provisions in Mexico? Thank you very much. Hello. How are you? Thank you very much for your question. Yes, most of the earnings have come from Mexico, as we have already explained. Compatamos is a very important driver. Credo is a very important driver. But also, Jazz Cast and Aperna have kept contributing And better performance. So all the 4 subsidiaries in Mexico are performing well and contributing to the earnings. Yes, but you report the earnings also there in any of the regulatory reporting release the earnings for the first Thanks for the year, not the second in queue. And even adding this, there are still like 100 minute business that I don't know where they come from. Okay. That would be great. And in terms of asset quality, Yuri, yes, It's a number that is even better than the one we were expecting and this is for many Reasons, right? Of course, origination has been key. The monitoring process that we During process that we followed with the customers throughout the length of the credit, it's also helping. And also as I said during my remarks, given the fact that the competition is getting weaker As Compartamos has become one of the most reliable sources of funding, customers are Trying to keep a good credit history with us. So they are paying us Back on time. Again, this is the best NPL that we've had for the last 13 years. What again, today we have not been growing much the portfolio. The portfolio has been stable for this semester. This second part of the year will be more of growth. We aim to grow double digit for the year, And we are flat as of June. So as you know, as we accelerate, We increased new customers with who tend to be riskier at the beginning. And once they see some we see some of the customers throughout the cycle, they become more much Better customers and more stable asset quality. So to resume, yes, today it's a very low point. We have It's some duration as we grow, but these will be seen on the first half of next year. And our aim is to keep the cost credit as low as possible. Again, Thinking about sustainable one, 8% is the one we had in the past. We aim to have something around there For 2022, but it's not something that you'll see in this year. Super clear, guys. Thank you very much. And again, congrats on the solid results in Exco. Thank you, Judy. Thank you. Our next question comes from Jorge Henderson with Santander. Please proceed with your question. Thank you very much for the presentation and also congratulations for the results. And just one question It's regarding asset quality in Peru. When do you see the NPL ratio on the Brazilian subsidiary? And also at what levels do you see in pure retail? That would be another question. Thank you. Thank you. And Regardless of the as we live in Mexico, you remember that back in September, we provisioned The potential losses that we were expecting in Mexico generating losses during the Q3 of last year. Once we took the heat, even though the assets were decelerated in October November, The reality is that the expense for provisioning didn't move a lot. So you shouldn't be worried As NPL increases in Peru, because we have now provisioned most of the It's the losses that we have for the subsidiary. So as you know, our write off Quality in the group is to write off loans of 180 days of arrears. So We provision today what we expect to lose for the coming quarter and You might see an spike in NPL, but not necessarily a higher provision For the subsidiary. So if it moves to 7%, 8% and then we'll be written off those loans, That's the normal process that we did in Mexico and we expect to crack in Peru. The good news is that we already Generated the provisioning, we have still a strong capitalization and this is not now a Concerned as it was a couple of months ago, now we have a clear visibility on what you should expect for the coming quarters. Thank you very much, Richard. Thank you. Our next question comes from Carlos Legaureva with GBM. Please proceed with your question. Hi, thank you. Good morning and thank you for taking the question. Just regarding the credit portfolio growth of 13%, That is for the entire year for the entire company, right? But does this include the movements of, Say, deconsolidating Guatemala versus consolidating only Concreto for half of last year. Just I mean, I think that it's a little noisy to it. So perhaps you could comment on Mexico, particularly Compartamos' expectation in Yes. The growth is we're maintaining the guidance that we gave at the beginning of the year. And most of the growth will come from Mexico. And we also expect to see some additional growth from Peru, but the main driver will be Mexico. And as we have already mentioned before, Guatemara will be out of the consolidated numbers in the next quarter. Okay. Thank you. And I apologize for this because I did miss the sensitivity to interest rates that you provided, I think, earlier If there are any questions, could you repeat that for us, please? Yes, sure, sure. What I said is that we, as most of the markets, expect So, we're in the reference rate of Banquico. So, we have part of that considered in our projections. And as I mentioned before, we have liability management tools in order to mitigate the potential effect on the interest expenses. We have part of the portfolio fixed rate. We have the ability to move from variable to fixed and our variable levels are Very, very cheap at this point and it makes sense to stay with variable rate at some point. And the last point that I mentioned before was that we have this excess funding that we can also reduce it in order to mitigate the potential growth in There will be expenses. Okay. That makes a lot of sense. I appreciate it. And just to add, Carlos, to your question about the So in Mexico, just remember that in Mexico, we will have now and it's becoming more relevant the combination Not only of the portfolio of Banco Compas Damos, but also the portfolio of Concreipo. So the results in the growth of portfolio in Mexico will be the a combination of those 2 businesses. Absolutely. Thank you. Thank you. Our next question comes from Rico Benavides with HFC State. Please proceed with your question. Thank you. My question has been answered. Our next question comes from Gilberto Garcia with Barclays. Please proceed with your question. Hi, good morning. Thank you for the call. Even the fairly consistent improvement of the prospects trend, do You'll be able to provide a rough guidance of what your expectations are for 2022. And following the departure from Brutal America, I know that payroll is You can see it's larger for your overall portfolio, but would you consider divest in Pedro, to just focus on Mexico. Thank you. Regarding In 2022, obviously, we will provide the guidance by year end. But what we mentioned in the past is that we expect that In 2022, we will be able to reach earnings above 2019. That's what we have said in the Well, I think the shipping guidance will only be we will give it a year end or year start. Regarding your second question, the divesting in Guatemala, as I explained, is For a very clear and strategic reason, we wanted to focus on the businesses in Mexico and Peru because we Degrades growth opportunities and because we see that if we transform To a more efficient company through technology, we have a lot to take out of talking about value in Mexico and Peru. So in the short run, we will concentrate in Mexico and Peru. And maybe in the future, we will be talking about Any other expansion, but not at this point, not for the following at least 2 years. Understood. Thank you very much. Thank you. There are no further questions. I would now like to hand the call back over to management for any final comments. Well, thank you all for staying with us in this call. It was a pleasure again. And Just to point out maybe 2 or 3 takeaways. The first one is, I believe it is clear that we are proactively Managing and controlling the challenges and the difficult situations that we are living all over the region. And as well, we feel comfortable about the way we are controlling the situation. The second thing is that, as you can see here, we expect very good results for the second half of the year. So I think we have the elements, we have the Strategy and mostly we have the team to execute a very good second semester. And third, That we are very excited about the value that we will capture through our digital transformation initiatives And we are preparing ourselves to have a very good 2022 year in terms of capturing value through new technologies through improvements in the way we serve our clients And through the efficiencies that we will capture through technology. So thank you so much for staying with us. Thank you for your interest, for the follow-up and for the support that we always received from you and have a nice day. Thank you for your participation in today's conference call. You may now disconnect. Have a wonderful weekend.