Good morning and welcome to the First Quarter 2025 Gentera Conference Call. Now, I would like to turn the call to Mr. Enrique Barrera, Investor Relations Officer of the company. Sir, you may begin.
Good morning. Thank you all for joining us and for your continued interest in Gentera. 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 Majós, Gentera's Chief Executive Officer, and Mario Langarica, Gentera's Chief Financial Officer. Enrique Majós and Mario Langarica will present Gentera's results for the first quarter period as per the report that was issued yesterday, and will actively participate in the Q&A session of this conference call. As a reminder, now that we are holding our conference call via Zoom, it is important to highlight that if you want to ask questions during the Q&A session of this conference call, this will only be taken if you are connected via Zoom. Now, please note that during this presentation, Gentera may make forward-looking statements.
These do not account for future economic circumstances, industry conditions, company performance, or financial results. Additional information on forward-looking statements can be found in the disclaimer located in our earnings release. 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 Majós for his presentation. Enrique, please go ahead.
Thank you. Good morning, good afternoon to everyone, and welcome to our first quarter 2025 report. We appreciate your time and your interest in this call. Let me start by saying that we feel very proud to report another solid quarter for Gentera and also a promising start of the year for each one of our subsidiaries. Our growth estimation in terms of clients and portfolio is being accomplished as expected. At the same time, we are looking at a better quality of our loan portfolio in Mexico as well as in Peru. As you know, this reduces our cost of risk and therefore improves our bottom line performance. It is also relevant to point out that our expenses have been slightly higher than expected, which is a natural seasonality effect that Mario will explain in a moment.
Net income is already showing trends that suggest to us that we will get over our initial guidance. At this point, we would like to have a better assessment and analysis through the following months. However, by the second quarter report, we could modify and increase our original guidance. In any case, we will let you know. As you can see, we are looking at a first quarter that suggests a promising year. As you have noted, we have been consistently delivering remarkable growth results for several quarters now. If we should explain the main reason of this, we should point out two main things. The first one, we still have a big market opportunity. The second one, we have a clear strategy and transformation initiatives that we have been deploying and developing for a while now in recent years.
Let me talk about this and about our digital transformation journey. In the first place, we are pleased to tell you that we keep making good progress. Since the beginning, our digital transformation strategy is designed to reach two main goals. The first one, to provide our customers a better and more convenient experience. The second one, to make Gentera's operations and business results more efficient. In order to accomplish this, we have been working on more than 300 transformation initiatives all across our business units for the last years. This set of initiatives was created to build three main groups of new digital capabilities. In the first group is our digital platforms to manage our business processes. In the second one, digital payment methods to provide our customers better and safer ways of making their financial transactions.
In the third one, business intelligence capabilities and algorithms to make better business decisions. Some of the most impactful initiatives that have to do with the construction of our digital platforms to manage our credit process in Mexico and Peru is what we have been talking about for a while now, that are the digital platform for the credit process in Peru, which is called Calpa, and the one in Mexico. Another set of powerful initiatives are those related with the use of business intelligence and algorithms to have better risk assessment tools and more efficient cross-selling digital strategies. Actually, I'm sure you remember the chart that I shared with you last quarter, in which I show how Gentera's net income was historically growing at 6% annually before 2019. In the recent years, net income started growing at 14% in average for the last, let's say, five years.
The group of initiatives that I'm describing here are the ones that have enabled Gentera to double its annual growth recently. We believe they will allow us to keep on growing above 10% in the following years. Definitely, we will keep you posted on the deployment of these initiatives. Before opening the space to Mario to give us more information about our business results, let me talk about some relevant housekeeping matters. Talking about the CEO position at Banco Compartamos Peru, as you remember, last quarter, we announced that our regulators in Peru authorized to give Compartamos the license to operate as a bank. As part of the transition from being a financial institution to becoming a bank, Ralph Guerra, our former CEO, stepped down after 32 years and a remarkable career in the organization since its foundation in 1992.
Ralph left the organization as of March 31st with a profound and enormous legacy and leading Banco Compartamos Peru to the most recent accomplishment of transforming Financiera Compartamos to Banco Compartamos. On behalf of Gentera and personally, I want to express my profound gratitude to Ralph for all the years of work, of commitment, and all the joyful moments that we shared. As of April 1st, we are very pleased to have appointed Adolfo Peniche as the new CEO for Banco Compartamos in Peru. Adolfo has a large experience in our organization with more than 28 years of experience in Compartamos and in Gentera. He joined Compartamos as branch manager in 1997, and he has grown professionally within the organization, not only in frontline positions, but also in corporate roles. The most recent responsibility Adolfo held was as Gentera's Executive Director of People and Talent.
He also spent five successful years as CEO of our operations in Guatemala. Help me welcoming Adolfo, and I am sure he will foster Compartamos Banco Peru's growth and transformation plans for the following years. Now, I would like to talk to you about some recent changes in our board of directors. This quarter, we are announcing a couple of changes in our board of directors. Gentera has been known as a company that has always had strong corporate best practices, and we have always had outstanding people in our board team. After 17 years of service, John Santa María is stepping down. Since 2008, John's experience in the retail industry and as one of the most senior top executives in Mexico has given to Gentera enormous value along the way.
On the other hand, Luis Nicolau, who has also been a key member of our board since 2019, is also stepping down. His experience and contribution in corporate governance, regulation, and legal affairs has been critical for the transformation and the evolution journey of Gentera in the recent years. Please join us in expressing our profound gratitude to Luis and to John. Now, we want to welcome Ignacio Echevarría and Gerardo Esquivel as the two new board members in Gentera. With more than 25 years of experience in the IT and retail business, Ignacio Echevarría will add to Gentera his large experience in corporate management and specifically in the territory of the transformational and technological strategies and tools. On the other hand, Gerardo Esquivel has a long and profound experience as an economist in Mexico and globally.
More recently, he held the position of Deputy Governor of Banco de México from 2019 to 2022. We are sure that he will strongly contribute to make Gentera a more solid and understanding company navigating through the challenging and changing times that we are living in Mexico as well as in Peru. I would also like to talk about the remaining 25% of ConCrédito that we are acquiring. As I mentioned in our previous call, Gentera is in the process of reaching an agreement with our partners to acquire the remaining 25.1% of ConCrédito. The recent conversations have been very, very productive, and we are certain that we will close this operation shortly and in the best interest for all its parts. We will also keep you posted on this transaction.
Finally, let me confirm to you that we will be distributing the 2024 dividends according to our 40% dividend policy. 50% of the payment will be distributed on May 16th, and the other 50% no later than November 28th, 2025. Now let me pass the call to Mario Langarica, who will provide some comment and specific information regarding our business results. Afterwards, Mario, Enrique Barrera, and myself will be happy to answer any questions you may have.
Thank you, Enrique, and good day to everyone. As always, we appreciate your interest in Gentera. As Enrique mentioned in his remarks, we are very excited with the historic and solid results that Gentera is presenting at the start of this year. We are very excited with the positive dynamics and opportunities that we are seeing for the subsequent quarters of this and the following years.
In first Q2025, we reached a new record of 5.8 million people using our financial services, adding around 532,000 people on a year-over-year comparison, representing a 10.1% growth compared to first Q2024. As Enrique described in his remarks, the modernization initiatives that we started in past years and the benefits coming from them have allowed Gentera to deliver very solid results as shown this first Q2025. One consequence is the amount of our loan portfolio, which kept similar historic levels as those of fourth Q2024, amounting to MXN 82.7 billion, representing a 26.3% annual growth compared to first Q2024. It is important to highlight that our credit subsidiaries, Banco Compartamos and ConCrédito, started the year with double-digit annual growth in their specific loan portfolios, while Banco Compartamos Peru started the year with a smaller growth, but with improving and solid dynamics in its asset quality and profitability levels.
With this strong start of the year, we expect to grow the consolidated loan portfolio around 15% in 2025. Now, let me jump to talk about the evolution of the different lines of our income statement. As anticipated in past conferences, Gentera's interest income is growing at solid levels, showing a 19.9% growth in first Q25 compared to first Q24, amounting to MXN 11.2 billion. Net interest income grew 24.3% to amount MXN 9.35 billion, following the robust growth in portfolio and clients. NIM amounted to 39.5% in first Q25, in line with our expectations for the year. As mentioned by Enrique, we have observed better-than-expected asset quality at the start of the year, both in Mexico and Peru, with a cost of risk for first Q25 amounting to 11.6%.
At this point, we are maintaining our 2025 expected level of cost of risk around 13%, but we will look closely to our June numbers to see if there could be room for improvement. As Enrique mentioned, we will let you know in our next conference call. Gentera's first Q25 provisions for loan losses amounted to MXN 2.4 billion, implying a 37.6% growth, which is in line with the portfolio growth and its mix. NIM after provisions for first Q25 amounted to 29.3% compared to 30.3% in first Q24, and slightly above the expectation for the year 2025, which is a number that should be moving around between 28% and 29%. Net fees amounted to MXN 1.337 billion in first Q25 compared to MXN 878 million in first Q24, representing a 52.3% annual growth.
These fees have been mostly driven by better-than-expected results on our insurance business, which, as we have explained in the past, represent around 90% of the collected commissions. It is also important to continue highlighting the incremental and important contribution that Yastás and Banco Compartamos branches have in our business model, allowing Gentera to depend less on third-party channels, therefore reducing fee expenses in relative term. Operational expenses for first Q2025 amounted to MXN 5.4 billion, representing a 20% increase compared to first Q2024, mainly explained by a larger base of our sales force, the growth of our business, and in line with our strategic initiatives and investments, with the objective to make Gentera more productive and efficient.
Worth highlighting that given the observable growth and solid asset quality, expenses could finalize the year growing closer to 15% instead of the 13% originally guided, but these additional expenses would mostly be sales and incentive payments resulting from our better-than-expected performance. We consider these expenses as productive since they generate a multiplying effect on revenue. Net income in first Q25 reached another historic quarter record amounting to MXN 2.221 billion, growing 47% compared to first Q24. Gentera's controlling participation of net income amounted to MXN 2.106 billion, representing an EPS of MXN 1.33, 49% above our first quarter 2024 EPS. For the year-end, we believe that we're going to reach the high end of our EPS guidance with a room for an additional 5% improvement.
It is important to note that at this point, we're not changing the range of our EPS guidance since we want to have additional information on our business trends and macro evolution. We will come back to you in our second quarter report to provide specifics on our full-year expectation. Gentera's controlling ROE for first Q1 2025 stood at 26.3%, above our original expectation for the year. For 2025, we would expect controlling ROE to move around 22%, but again, with the revision that we will do in the second quarter, we will provide more specifics regarding this line then. All of these results have been achieved while maintaining solid and healthy liquidity levels, strong and diverse access to funding sources, and a very robust capitalization.
Now, to conclude my remarks, as you could see from the results that we're reaching in this first Q25, we're delivering as promised, and we expect to continue reaching double-digit growth in Gentera's loan portfolio in the coming quarters while generating solid growth in total revenues, with a healthy cost of risk and operational expenses under control to keep generating positive jobs that should allow us to keep generating strong levels of profitability. To conclude, we at Gentera are very motivated with the fact that we're starting the year with these extraordinary results in all our subsidiaries, which are in line and in some cases above the plan that we defined for the year.
These results further commit us to continue working hard to serve millions of Mexicans and Peruvians, and aiming to support them in their financial needs so they can reach their dreams, while at the same time generating shared value for all. That is all for my remarks. Thank you for all of your attention, and now we can move forward to the Q&A session.
Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please use the raise-your-hand button of your Zoom tool.
Our first question comes from Ernesto Gabilondo of Bank of America. Please, sir, go ahead.
Thank you. Hi, good morning, Enrique, Mario, and Enrique. Thanks for the opportunity to ask questions and congrats on your strong first quarter results. I have three questions. The first question will be on ConCrédito. Just wondering in which quarter can we expect that you will acquire the remaining part of ConCrédito? What would be the financial options to acquire it? How much would be related to cash or interbank loans? My second question is on OpEx, and probably you already answered that you are expecting OpEx growth of around 15%. It was before 13% the guidance, so I just want to double-check that. My last question is related to competition. We are starting to see new entrants in the low-income segment. For example, not the typical fintechs, but Bimbo, Arca, Walmart, OXXO. Just wondering, what are you starting to see in these new entrants? What are Gentera's initiatives to remain as a leader in the microfinance sector? Thank you.
Thank you, Ernesto. We expect to finalize the acquisition in this second quarter. We will only announce to you when we have the final acquisition contract signed. We will fund the acquisition with a combination of dividends from the subsidiaries and some external funding that will fund Gentera to purchase the shares. Regarding OpEx, yes, exactly, you're right. We are saying that we expect now that instead of the 13% guidance on OpEx that we gave, it's going to be 15%. Again, as I mentioned, these expenses are mostly related to the sales and the business, so they will have a multiplying effect on revenues. Now, regarding competition, Enrique, we'll probably.
Hi, Ernesto, good morning. Yes, we have been talking in previous calls about competition and the different kinds of competitors that we face. I mean, we have on one group the traditional microfinance competitors, but on the other hand, we have these fintechs and these new models and new companies that want to get into the financial services business. Of course, we always see the new entrants as good news because if we have more offer for our customers, they will have more convenience, and we will have a more strong industry. I think that the name of the game for any player, a traditional player, a player as us that we have been here, but we are transforming or new players, is convenience. I would be specific here, convenience through technology. That is what we are working for.
We are working for developing digital capabilities to give our customers more convenience and to be a more efficient company. I think that the main challenge has been and will still be the lending knowledge, the knowledge on the lending business. I think that if we talk specifically about the credit products, and I mean working capital loans or consumer loans, the challenge here is how can we be the best specifically in lending and collecting the loans. I think that if we as an industry become more strong on this, we will all win on this.
Perfect. Thank you very much, Enrique and Mario.
Thank you.
Our next question comes from Brian Flores of Citi. Please, sir, go ahead.
Thank you, Enrique, Mario, for the opportunity to ask a question. I wanted to ask you on your guidance. You mentioned you could achieve the upper side of the range with an additional room for 5%. Is this correct? 5% more net income, 5% more growth. Could you specify a bit? A follow-up on that question is, of course, if you could guide us through, let's say, the profitability levers, what particular item on the income statement is driving this, I would say, optimism or your constructive view regarding the guidance? Thank you very much.
Yes, thank you very much. Yeah, it's 5% about the EPS level, what we could expect. Again, we want to have the numbers of the first semester in order to be more precise on what would be the new guidance for the year-end. Now, regarding the drivers, I think that we have very good dynamics in all the drivers of the net income, starting with, obviously, first, the growth in the portfolio, which drives interest income. Second, interest expenses. We have seen faster rates reduction from the central bank than originally expected, so that should add to the interest income. We believe that cost of risk is going very well. Therefore, again, as we said, we might also review that number in the second half, and things are looking very, very solid, but we need further confirmation. Even though that expenses will be a little higher than originally guided, as just said, these expenses would be completely linked to productive assets generation. I think that at this point, all of the drivers of the income statement are showing positive trends.
Very clear. Thank you and congratulations.
Thank you.
Our next question comes from Yuri Fernandes of JP Morgan. Please, sir, go ahead.
Thank you, Enrique, Mario, and Enrique Barrera, also for the question here. Congrats on the quarter. I have a question regarding Peru. Peru was very strong, and we saw ROEs returning to 20% for the country, something that we have not been seeing for years, right? Just trying to understand what are the trends here, if Peru is back to 20, or if we believe Peru is not there yet, and we will go back to mid-teens. That is one. Just to follow up on Brian's questions on the guidance, right? Because you already delivered 30%, you have the tailwind of the GNA, as you mentioned. We have lower rates in Mexico, and we all know that you are a liability-sensitive bank, so lower margins help you. Why not revising the guidance? Are you calling?
Are you seeing something like on, I don't know, asset quality, or maybe you are going to reduce prices? Just trying to understand because after this strong bid, only 5% guidance provisions, I don't know, appears a little bit low. Just trying to understand the moving parts, why not a guidance provisions? Why not higher EPS for you? Thank you.
Thank you, Yuri. Yes. Yes. As Mario said, we have to have a better analysis of the trends that we are looking at in the beginning of the year, which are very positive. Yeah, I think that what we are looking now is that we are having a better margin because we are having a better quality of the portfolio, and that is giving us a better income. Yeah, those are the main, let's say, pieces on the puzzle that obviously show that we are going to revise or go through the guidance and bring maybe a new one in the next quarter.
We would not like to give you more detail or color on this because I think that we need to understand a little bit better how the second quarter of the year is going to see or look like, not because of our operations, but mostly because of the context. That is why we are not able now to give you a specific number. I think that having a new guidance by the second quarter of the year is a reasonable moment to do it, and we will come back with you with this.
Thank you. It's super clear. What about Peru? Is Peru 20% our way back or not yet?
No, I mean, it's a quarter effect. Obviously, that's our objective as we have spoken many times. We believe that by the end of the year, we will be going in that trend, and probably we will be closing somewhere in the mid-teens. Obviously, also that is something that we will be more precise in the numbers when we have much more solid data to give you a more fine expectation.
Super clear, Mario. Thank you, Mario. Thank you, Enrique.
Thank you.
Our next question comes from Carlos Gomez- Lopez of HSBC. Please, sir, go ahead. Please deactivate.
Yeah, sorry. I did not unmute myself. I wanted to congratulate you like everybody else. This is an excellent result. There is no question about that. We also understand that you want to see a couple of these before you change the guidance. That is understandable. I have a question, and I do not want to sound too negative, but you are growing your loan portfolio a lot. You are growing 25%-26%. Your clients' numbers are growing by 5% or 6%. Your balances with each client are increasing well into the double digits, I mean, close to 20%, which is great. I mean, it is part of your success here. How much longer can this be sustained? How much more credit can the client base absorb?
Which is another way of asking, I mean, are we going to—I mean, and I know that you had a 15% guidance for this year, which is very reasonable and lower than what you have achieved. What should we expect for 2026, 2027, 2028? At what point do we get into perhaps excessive indebtedness of the clients that you already have? Thank you so much.
Thank you, Carlos. Here, the key question is the addressable market. Again, what we have said is that between Mexico and Peru, in segment C and B, there are around 65 million people above 18 years old that are underserved. Today, we have 5 million people. I think that the opportunities to keep growing and expanding and servicing this population, it's huge. That's our focus. We are not focusing in the original or the traditional way that we have had. We are expanding into new segments with new products in the next years to come. We expect that we would at least hope to keep growing above 10% in the long run.
Okay. Does that mean that we should expect more increase in the number of clients in addition to see more increase in the loan portfolio?
Yes.
Thank you. Thank you so much.
Carlos, maybe the other thing, yeah, I think that the main factor is the one that already Mario mentioned. I think that also if we can have a more close relationship with our customers through digital tools, we can have a better understanding of the different products that we can offer them. I think that that's something that in the future is also going to play a big role in our growth.
Okay. Perhaps to follow up there, would you say that you are already in a position in which you can accompany your clients as they have more demands and need to get new products? Or do you need to perhaps upgrade the offering to be more like a traditional bank as your clients advance in their net income?
Right now, we are working on, well, our traditional working capital loans, but we also know that they need and they demand the consumer loans. If you add to this the insurance products and the savings products, we have a big potential there to grow our relationship with them.
Okay. Thank you so much.
Our next question comes from Pablo Ordoñez of GBM. Please, sir, go ahead.
Yes. Hi, good morning, Enrique, Mario. Congratulations on your shorts. I have a couple of questions. First, on your fees that mostly come from Yastá s, you also mentioned the fees that you are getting from Aterna. This continues to have a super strong performance. What should we expect for the year in terms of growth for this client? Also, what continues to be the addressable market? You mentioned in your report that you have 16 insurance policies out there. You have 5 million clients. At what point should we expect the growth of this line to converge to the same growth level of your portfolio? That's my first question.
Okay. Yeah. What we have said is that we should be growing our penetration in the insurance product at the high end of the portfolio growth guidance, something around 16%-17%. Now, the addressable market is very, very good because if Mexico is underserved in insurance for the base of the credit and financial services for the base of the population, in insurance, it's less served. There is a big opportunity to keep growing there with new products. As you know, we have expanded. We now have four insurance products that have been very well accepted by the clients. I think that there is still a lot of room to keep bringing insurance solutions for our clients. I think that we should at least expect to keep growing at the high end of the range of our credit portfolio growth.
Thank you, Mario. That is also for 2025? Should we expect some convergence to the high end of your portfolio? Or is that thinking more like in the medium term?
No. Good question. Maybe this year, we will be a little above, but in the long run, we should be growing at the same pace as the portfolio.
Thank you. My second question is on asset quality. As you mentioned, this was one of the surprises of the quarter. Your provisioning was lower than you mentioned in the previous call. Can you give us more color on what are you seeing at the portfolio level? Our understanding was that the individual loans are the ones that were requiring higher provisioning. Can you give us more color on what are you seeing in this first quarter at the portfolio level and also in Peru?
Yes. The way we see a risk is from a bottom-up perspective. What we do is we start with a weekly payment. What we have been seeing is outstanding weekly payments from our clients, both in Mexico and Peru. That goes all the way up. The weekly payment obviously reduces the 90-day bonds of past dues, which are improving. That also feeds the construction of provisions. When we observe all of that, it implies that we need lower provisions, and that improves cost of risk. What we are looking at is the weekly payment that has been performing outstandingly.
Okay. Thank you very much, Mario.
Our next question comes from Tito Lab arta of Goldman Sachs. Please, sir, go ahead.
Hi. Good morning. Thanks for the call and taking my question. Congrats also on the results. I guess my question on your loan growth, I know you reiterated the guidance there on 15%, which implies sort of a gradual slowdown from here. In general, I guess two parts to it, right? Given the uncertainty globally, do you think that can have an impact? Could there be downside risks because of that and potential impacts on Mexico? Conversely, given the growth has remained so strong, asset quality has been healthy, and maybe some of this uncertainty dies down, could there also be some upside risk? Just how are you thinking about the upside downside risk to the guidance, just given the current uncertainty globally and in Mexico? Thank you.
Very good question. I mean, that is why we also want to wait until June to have more clarity on all of the things that are moving. Things are changing day by day. What does not change is the demand that we are seeing and the well-performance of the base of the pyramid economics. We are seeing that very strong and with a lot of need. We also obviously have to be looking to see if any of these macro impacts affect that. We need to be very prudent, and we want to make sure that these trends sustain by June. That is why we want to wait a little bit to change some of our guidance lines.
Yeah. Why do we think that we can have a good year even under this global uncertainty? It's because we have to remember that our clients, their business, are about very basic products and needs and services. That's why the stability that they have in their business is better than, let's say, average stability of the economy because the demand, as Mario said, is more stable because we are talking about very basic needs on food, on medicines, or health kind of services. Yeah, I address what Mario told.
Okay. No, that's very clear. Thank you.
Our next question comes from Andrés Soto of Santander. Please, sir, go ahead.
Good morning, Enrique, Mario. Enrique, thank you for the presentation and the opportunity to ask a question. My question is a follow-up regarding a previous answer that you provided. When I look at your loan growth over the past year, two-thirds of that is explained by increasing debt in existing customers. I would like to understand, is this the result of you gaining market share from other players? If that's the answer, who are those other players you are gaining market share from? Is it the result of you feeling more confident about the customers you are lending money to, and that's why you are putting more debt onto them? Is this the result of a change in the loan mix, probably a higher ticket for the individual lending compared to group lending?
Thank you, Andrés. I mean, it's the trio of the ones that you said. Let me start with the last. Yeah. Number one is the change in the loan mix. As you know, individual lending is growing at a very strong pace. Second, yes, we feel much more comfortable with our risk assessment tools, as Enrique said. I think that a very important change is the one that we did in Mexico in 2023 with the fusion of the group lending products, where we are, additionally to the strong group lending methodology, we're incorporating analysis on each person in the group. That is also making us more comfortable on expanding the wallet share of each client and understanding better each specific client on their needs. Yes, also part of what we're seeing in this growth is the unfortunate exit or reduction of competition, mostly in the traditional microfinance companies. It is a shame because we would have always fostered for a better competitive environment where our clients have more options, but that is also part of it.
Thank you so much, Mario. Two follow-ups there. The first one is, what is your current market share in the microlending space in Mexico?
Sorry? Can you repeat?
Your current market share in microlending in Mexico?
We do not like to talk about that one because that is like just putting life, just looking at lost things where the life is. The size of the demand, it is very large. That is where we think that our market share, even us being one of the most important players in the industry, is still low. There is a lot of way to go. We have a lot of opportunity to keep expanding in the credit needs of the base of the pyramid. If we say that we have 5 million clients of a potential 65 million population, we still have a lot to go.
Yeah. Just to put numbers on what Mario just told you, if we have 5 million customers, maybe the potential market for the loan products is around 15-20 million. If we talk about financial services, we're talking about over 40, let's say maybe 50 million people. Yeah, it's large.
Understood. The second follow-up question is about the individual lending business. Can you remind us of the difference in the economics in this business versus your traditional group lending, both in terms of size, average ticket size, and profitability metrics such as NIM, cost of risk, and efficiency?
Yeah. Both products are obviously very well priced. We take a look, obviously, at the different dynamics of each product. In average, group lending is MXN 10,000, and the average that we're lending in individual lending is MXN 40,000-MXN 50,000. In the individual lending, we have room to expand up. Obviously, individual lending is a larger loan with a little higher risk profile, but with better cost dynamics, and the margins at the end are similar. We do not provide disclosure of those levels.
Understood. It is 50% higher ticket with similar profitability, and the difference is between cost of risk and, sorry, margins and efficiency. Margins should be relatively equal, I suppose, right? The difference should be cost of risk higher offsetting lower efficiency in the case of individual lending, right?
Yes. Yes, Andrés.
Perfect. Thank you so much. Congratulations again.
Thank you.
We got a follow-up question of Ernesto Gabilondo of Bank of America. Please, sir, go ahead.
Thank you again. Just a quick question. What would be your assumptions for the interest rate in Mexico for this and next year, and what were you expecting before? Can you remind us your sensitivity to interest rates? I believe this could be another earnings driver for this and next year.
Hi, Ernesto. How are you? This is Enrique. I mean, the original projection for this year in the reference rate was 8.75%. We are still in that level. Obviously, I know that consensus now is moving towards 8%. We have explained during the conference call that would be an additional benefit, and that would translate in the bottom line. It is 8.75%. For next year, we are estimating around 7.75%. Also, the interest rate sensitivity, as we have explained in different calls, with the liabilities that we currently have and considering a full year, if there is a 100 basis points reduction, the benefit would be MXN 580 million before taxes.
Perfect. Excellent. Enrique, thank you very much.
Thank you.
Once again, if you'd like to ask a question, please use the raise your hand button of your Zoom tool.
Our next question comes from Juan Domínguez of [Ornitz Equity Management.] Please, sir, go ahead.
Hi, guys. Can you hear me?
Yes, sir.
Hi, guys. Outstanding quarter. Congratulations. It was pretty impressive. I just have a kind of a strategic question for you guys. You are firing on all cylinders, getting a pretty high ROE. You are pretty much reaping the benefits of the investment that you have made in the past. I am just wondering, how are you thinking about pricing going forward? Because it kind of makes sense to kind of share those benefits with the clients, right? It will be not only good for the clients, but it will be a moat enhancer for you guys. How are you guys thinking about that?
Yeah. That's a very, very important point that we will review probably by year-end on what we are going to do going forward. As we have said in past conference calls, there are a couple of things that we need to have seen before taking that next step. The first one is we need all of subsidiaries to be delivering ROEs above 20%. As you can see, Peru still has to get there. Second, and most important is to see the real numbers of the digitalization of the credit process in Mexico, which we're launching this year. Individual lending, we will finalize the full digitalization of the process by mid-year. We will need to see there how much productivity and how much efficiency we will get on that.
With all those numbers together with the digitalization of group lending, which we will probably finalize in the first quarter of 2026, then with all of those numbers, we will be able to assess how much we can deliver to the different constituencies that we have: our clients, our employees, and obviously our shareholders. It is a very important question that we think that we will be able to answer more precisely by year-end.
Perfect. Thank you.
Thank you. There are no further questions at this time. I would like to hand the floor back over to management for closing comments.
Thank you for your questions. Thank you for your comments. Thank you for this conversation and the conversations that I know we have in different one-on-one meetings. Just to wrap up, let me tell you that we want to confirm to you that we are really committed with our purpose of boosting the dreams of our customers through financial solutions. We are committed with them and the rest of the stakeholders for the long run. We promise we will keep pushing to transform and constantly improve the experience of our customers and the performance of our business. Having said that, thank you for your trust and your support, not only to Gentera, but also to this management team. We hope you have a nice rest of the day. Thank you so much.
With this, concludes the conference of today. You may now disconnect.