Earnings Call: Q2 2025

Jul 22, 2025

Morning and welcome to the second 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 Ramírez, Gentera's Chief Executive Officer, and Mr. Mario Langarica Ávila, Gentera's Chief Financial Officer. Enrique Majós Ramírez and Mario Langarica Ávila will present Gentera's results for the second quarter period as per the report that was issued yesterday and will actively participate in the Q and 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 and A session, 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 condition, company performance, or financial results. 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. I would now like to turn the call over to Mr. Enrique Majós Ramírez for his presentation. Enrique, please go ahead. Good morning. Good morning and welcome to our second quarter 2025 report. We really appreciate your interest and I know that you have been very close to Enrique and to Mario, especially in the last quarters. We really appreciate that you are interested in our operation and now in our second quarter results. Thank you for being here. As you read in our report released yesterday, Gentera closed another quarter with outstanding results. As you can see, all of our subsidiaries are having good performance and healthy growth. Just to give you some highlights and relevant points, let me tell you that Banco Compartamos in Peru is recovering momentum with a good asset quality. In the last 12 months it grew by 10% in clients and 8% in portfolio in local currency. Banco Compartamos in Mexico continues growing strong and increasing its position in the market. Annual portfolio growth in Banco Compartamos stood at 22% and in clients reached 3.3 million clients, which represents a growth of 6.5%. ConCrédito continues growing strong and solid with an annual portfolio growth of 20%. We are now fully present in all the 32 states nationwide. This happened just a couple of weeks ago in Mexico with a presence in 195 cities in Mexico. Creditienda, as you know, is ConCrédito's e-commerce platform and has experienced an important growth this year with a product offer close to 40,000 products in appliances in Mexico and 16,000 products in Peru. Creditienda increased its income by 90% if we compare it with the second quarter 2024 and the global consolidated NPLs for Gentera ended the quarter at 3.32% and remains below the range of 3.5% and 4% that we have defined as our healthy threshold. Also, the cost of risk is below the 13% that we originally guided. At the beginning of the year our insurance business had an outstanding 32% growth in terms of intermediated policies and we ended the quarter with 17 million active policies and an outstanding figure. This quarter, Gentera's net income growth, if we compare it with the first semester of 2024, net income shows an annual growth of over 50%. Mario will provide more precise information about the main lines of contribution to this growth and also, very important, we closed the second quarter with 5,991,000 people served. We are very, very close to reach the 6 million customers in Gentera, which is by the way a very, very relevant milestone that shows our commitment with the purpose of the organization. Reaching a larger number of clients contributes to accomplish our social purpose, which is to be present in our customers' lives to reach their dreams. Based on these results, and as we already anticipated in our last call, the quarter we are adjusting the guidance that we gave you at the beginning of the year. While we are remaining our guidance in terms of portfolio growth, EPS guidance will increase as much as 10%, and before getting into further financial details, I would like to talk about the main elements and strategic actions behind the outstanding results that we have been delivering since several quarters. Now. I would like to start by making a quick recap of some of the main messages that we have been communicating since our fourth quarter 2024 report. As you can see in this slide, in our fourth quarter 2024 report we pointed out that since we started our transformation plan in 2019, net income dramatically grew, even having the COVID crisis in between. While in the 10 years before 2019 Gentera grew 6.5% annually in average, our modernization initiatives started to clearly show good results and in the past five years compounded annual net income grew more than 14%. In our first quarter report of this year we explained that we have improved customer experience and we have captured business efficiencies through more than 300 initiatives related to process improvement, digital payment capabilities, and the use of data to make better business decisions based on algorithms and data analytics. Some of these initiatives have been deployed very recently, but some others have been adding incremental value for more than two years now. As the result of this transformation plan, we have had significant positive business results. In the past three years, our client base has grown 12% annually in average and portfolio annual growth has been 18% in average. Our NPLs have remained below 4% threshold, which is the level that we have defined as a healthy range, and Gentera's efficiency rate here has improved from 69% to 64%. Also, our ROE has increased significantly. A relevant question that we have been asked is which are the main factors that contributed to these results? There is no doubt that there are a whole set of reasons to explain these results and we can group them into four main factors. The first one is that over the years we have learned that any business decision has to be made based on customer needs. Customers are the reason why we exist and if they are satisfied, everything will work and improve as a consequence. Second, since several years now we have been building capabilities to make business decisions based on hard data and not only based on intuition or very limited information. In the third place, we have been improving our product offer and cross selling strategies. Digital data and algorithms have contributed to implement these strategies in a more efficient way. Finally, we know that collection is a fundamental piece of our business model, and through data and predictive analytics we have been able to better manage the good quality of our portfolio. Let me finish by talking about the next milestones in terms of our modernization and transformation plans. We will continue to deploy the group lending and individual lending digital platforms to manage our credit processes. Last year we finished deploying our GALPA platform in Peru for both methodologies, individual and group lending. In this quarter we just finished deploying the individual lending platform in Mexico. The next milestone regarding the credit process platform is to fully deploy the group lending methodology platform in Mexico, and this will happen by mid-2026. In terms of digital payments, Peru is now very strong with the use of mobile banking application and with BIM, which is our E Wallet application. In Mexico we are also working in our digital channels to have an improved digital payment ecosystem by the end of this year. We will continue growing and consolidating ConCrédito's business through two main products, Valedinero, which is the traditional ConCrédito product, and Creditienda, our e-commerce platform, and of course through the use of digital technology we will continue improving our risk assessment process and cross-selling algorithms since there is still plenty of room to capture more value there. Now, before I turn the call to Mario, as I already mentioned, we are increasing our EPS guidance as much as 10%, so our new EPS guidance stands between $5 and $5.15 pesos. Our portfolio growth guidance remains between 13% and 16%. However, we believe we will finish the year closer to the high end of this range. Thank you for your attention, and I will now turn the call to Mario, who will provide more context on our financial results, and afterwards we will have our traditional Q&A session. 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 extraordinary progress that we have been achieving in the modernization transformation of Gentera, which has allowed us to generate historic and solid results as the ones we are presenting for this first semester of the year. We're very excited with the positive dynamics and prospects that we're seeing for the second semester and going forward. By second Q25 we reached a historic record of 5.99 million people using our financial services, adding almost 600,000 people on a year-to-year comparison, representing an 11.1% growth compared to second Q24. The modernization initiatives that we have described in the past years and the benefits coming from them have allowed Gentera to reach a new record figure of our loan portfolio of $83.7 billion pesos, representing a 21.6% annual growth compared to second Q24. It is important to highlight that in Mexico, both Banco Compartamos and ConCrédito have maintained annual growth above 20% in their specific loan portfolios. In Peru, we have reinitiated loan portfolio growth, improving operation, asset quality, and profitability levels. As Enrique mentioned before, we expect to grow the consolidated loan portfolio for Gentera around 15% for 2025. Now let me jump to talk about the evolution of the different lines of our income statement. In second Q25, Gentera's interest income amounted to $11.8 billion pesos with a solid 21.8% growth compared to last year. Even after the growth in our portfolio, financing expenses had a marginal increase of 1.7% compared to second Q24, mostly driven by the reduction of reference interest rates in our liabilities. Therefore, net interest income grew 25.7% and NIM improved to 40.9%, which is above our expectations at the beginning of the year. For the first semester 2025, NIM stood at 40.2% and we believe that there is still some room for improvement and we expect to finish the year with NIM around 41%. As we have also highlighted before, we keep observing stable asset quality in Mexico and continuous improvements in Peru. Gentera's consolidated NPLs amounted to 3.32% and cost of risk to 12.7% in this quarter. For the first semester of the year, cost of risk amounted to 12.2% compared to 12.1% in the same comparable period last year. We now expect to have a cost of risk around 12.5% by year end, which is better than the 13% originally guided. Gentera's Secute 25 provisions for loan losses amounted to 2.65%, a 15.8% growth, which is an adequate increase considering a larger loan portfolio growth and its mix. NIM after provisions for second Q25 amounted to 29.8% compared to 28% in second Q24, which is also better than our original expectation for 2025 and we expect to close the year moving around 30%. Net fees amounted to $1.4 billion pesos compared to $1.01 billion in second Q24, representing a 52.3% annual growth. These fees, as explained before, have been mostly driven by better than expected results of our insurance business that represented around 90% of the collected commissions. We now expect net fees to grow around 25% for the year. Operational expenses amounted to $5.75 billion, representing a 22.3% growth compared to second Q24. This role is mainly explained by a larger base of employees, the variable compensation associated to the solid growth of our business and with the strategic initiatives and investment that we're making that are helping Gentera to be more productive, efficient and profitable. Therefore, we expect expenses to grow around 19% for the full year, higher than the 15% originally guided. These additional expenses are productive expenses and are mainly associated to the sales process and incentive programs, so they have a multiplying effect in revenues. In second Q25, net income amounted to $2.108 billion pesos, growing 63% compared to second Q20. Controlling participation of net income amounted to $2.105 billion pesos, representing an EPS of $1.33, 77% above the same period in 2024. As of June 2025, net income amounted to $4.329 billion pesos, the highest six months number in our history. As Enrique previously said and after these strong results, our new EPS guidance for DGs will be $5 to $5.15 in the midpoint, around 32% higher than our 2024 EPS of $3.8 pesos. Gentera's controlling ROE for the second quarter amounted to 25.9%, above our original expectation for the year. For the first semester it stood at 26.3%. After this strong performance, we now expect that Gentera's controlling ROE for the year will move around 24%. All of these great results have been achieved maintaining very solid and healthy liquidity levels, strong and diverse access to funding sources and a very robust capitalization. To conclude my remarks, as you have seen from our first semester results, we have been delivering as promised and we expect to continue attaining double digit growth in Gentera's loan portfolio in the coming quarters while generating solid growth in total revenues with healthy cost of risk and operational expenses growing below total income to keep generating positive jobs. That should also allow us to keep generating strong levels of profitability. That is all for my remarks. Thank you for all attention. Now we can move forward to the Q and 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. Congrats on your results. Contrary to other bank trends, you are showing double-digit loan growth, good asset quality, strong capital ratio, and on top of that you are increasing your guidance pointing for strong earnings growth. Congrats again. My first question will be on loan growth. If you can elaborate on why you feel comfortable to keep growing the loan book at double-digit. You shared some of your recent strategies in terms of the digitalization and all the technology that you are putting in place. Maybe you can talk also about the weakened competition in the microfinance sector and the entry barriers for FinTechs to enter your segment, given that the low-income segment is still very cash intensive. My second question is on your capital management. You deliver a common equity tier 1 ratio of 38%. I just wanted to see if you are thinking something on this excess of capital usage. Thank you. Thank you, Ernesto. Yeah, very interesting questions. I will address the first one. Let me just confirm you that the growth that we are looking at for the future, not only the second semester of this year, but the next years, has to do with the strategic initiatives in the strategic plan that we have been following and defining since several years now as I described in my remarks. Basically, those initiatives are the foundation for the future growth as you already explained in your question. We believe that the digital data, the use of technology, combined with our human touch and the contact and trust that we have being present in the communities with our customers, are the two main elements that will build the, let's say, new hybrid model for the future for Gentera and its subsidiaries. That's mainly the main fundamentals for our vision for the future growth. The other part of your question, thank you for asking it because I believe that for the last maybe two or three quarters the competitive environment has been a question that you have been asking and we haven't given you maybe the whole context and information about this. Let me dedicate maybe five minutes to this topic at this point talking about our competitive environment. First of all, it is important to define that we are in the segment C and D of the population. When we talk about players and institutions which we compete, we have to consider that we are addressing the C and D segment of the population and we compete in three different subsegments of this C and D part of the population, three subsegments of credit products. The first subsegment is the working capital lending products that is identified as a group lending methodology products that we have. The second subsegment is a working capital with individual lending methodology that, as you know, these are businesses that need working capital loans but they are a little bit more established and more formal. Then you have all these consumer credit products or this consumer business market. I will talk about these three. What is our position on each of these three ones? In the working capital lending products with our group lending methodology, we are the leaders in a group of about 10 main competitors. While we have around 3 million customers here in Mexico with this product, the second place, which is Credit Club, has around 200,000 clients. Clearly, we have around 70% of the market share there. Talking about the institutions that offer this kind of product for this kind of need, which is working capital products for very small and informal businesses, the second subsegment is the working capital within the individual lending methodology, which are a little bit more bigger businesses. With 280,000 customers that we have in Banco Compartamos, we are the leaders from a group of six relevant players there. The second and third place are Caja Popular Mexicana and Provident with 200,000 and 150,000 customers, and we have around 30% of the market share there. As you can see, in those first two subsegments we have a relevant position, but the potential market there and the need that the market has for this kind of product is huge. We have not only the potential market to keep on growing but also the strength as an institution, as a leader institution, to continue capturing this market. If we talk about consumer credit products, we are talking about a different group of players here. In the case of Gentera, we compete with ConCrédito's products, which are Valerinero and Creditienda, and we estimate that we have only 3% of the market share of what is out there addressed by all the institutions that are focused in the C and D segment and in the consumer lending arena. Here we find BanCoppel and Banco Azteca, obviously, which are very strong, and we also find some other players with the same business model as ConCrédito. Here also we find the fintechs. Fintechs are also mainly focused on the consumer lending market. However, most of them are addressing the A and B segment. There are others that might want to address the C and D segment. However, these others are still very small and they haven't proved yet a business case. Talking about the big ones, the fintechs, we identify six relevant players that are pretty big. One of them is Nu. The other one is Stori, we have Klar, we have Hey Banco, we have Wala, and we have Plaid. At this point, these companies are addressing the A and B segment. They are not addressing the C and D segment. I will talk about our strategy in terms of our competitive position, but before that, just let me give you the context for Peru. In Peru we compete with very strong players in the working capital individual lending products and we have 7% of the market share in a list of more than 20 institutions, holding the position number six after institutions like Mivanco, Cajarequipa, Huancayo, Pura, Cajapusco, and this is in the individual lending products. In the group lending product we hold the number one position and we know that there are some players that have started to offer these products, but they are still very small. Now, having told this, our strategy in terms of our competitive position is, one, to remain our leadership in the working capital loans for the C and D segment, and we have the products, we have the experience, we have the contact with the clients, the trust of the market to do so. The second is to address the consumer loan segment through the product offer that we have in ConCrédito, which we believe has a lot of potential and it's growing, as you can see in our results. Obviously, to continue developing our digital capabilities, to migrate to a solid hybrid model. We are making all these transformation initiatives to have stronger digital capabilities and to build a more convenient customer experience combined with human touch and obviously maintaining the trust of our customers and, very important, maintaining our collection capabilities. We believe that talking about fintech business models, talking about digital business models, maintaining a strong connection and contact with customers is very important because that's the way you have and you build strong collection capabilities. We believe that if we keep on working on that, we will not only be leaders as we are with the actual products and product offer, but we will also be able to evolve our product offer, digital product offer, to compete in the future. That's basically how we see this and based on this is that we see that we have a lot of growing potential in the future if we do and we execute well the strategy that we have. Oh wow, this was very, very, very helpful. I appreciate it. Thank you very much, Enrique. You're welcome. On your second question on capital strategy, as we have said in the past, our first objective is to have sufficient capital to support our organic growth. As you have seen and as we have said and with this very deep explanation of Enrique, we expect to maintain important growth organically. That's the first use of capital that we will have and always have had. One is, as Enrique said, there are a lot of different products and financial services that the base of the pyramid needs. We will be analyzing also if there is any opportunity to close these gaps inorganically. We will be obviously very, very, very selective. That could also be a second source of the use of capital. Always, always following our strategy, as Enrique mentioned. The third is obviously also to maintain a stable and very well communicated dividend payout policy. As you have seen, we have been trying to do that for several years now. That's why we have the 40% payout policy that in principle we want to keep. As you have seen, capital accumulation is growing afford a possible use of capital in the future if we keep accumulating capital and we have been able to achieve the first three objectives. It could potentially be at some point a review of the dividend policy, but that it's not at this point in the table. That is how we see capital management. Any buyback program would be part of the fourth. We typically prefer to go directly, to give dividends directly instead of buying out now. Excellent. Thank you very much. Congratulations again on your results. Thank you, Ernesto. Our next question comes from Yuri Fernandez of JP Morgan. Please, sir, go ahead. Thank you all. Also, congrats, very good results. This is not just a bit, right? This has been a series of bits. Congrats on that. I have just a question regarding your shareholders' equity. We note a drop this quarter, right? Even considering the dividends that you announced, the drop was bigger, right? Considering the earnings growth in the quarter and the dividends. Just checking what happened here. My guess is congratulations to acquisition, but I would love to understand the explanation why the equity dropped here and not could we move it up? A second question I have is regarding margins. Many times we heard you saying that you could share part of the profitability with clients. In this quarter, we saw the benefits from lower rates, right? Your NIM moved up. My question here is to understand what should we expect for NIM. Should NIMs remain where it is? Should you continue to see data benefiting and kind of keeping the NIMs moving up, or should we see your NIMs eventually trending down as you share part of this profitability with clients? Thank you very much. Thank you very much, Judy. Yes. The capital effect that you mentioned, it's very easy to explain. One is the dividend as you said. The second is the premium in the stock acquisition of the 25% of ConCrédito that basically represented around $580 million pesos. That basically is, if you want, the equivalent to the goodwill. The goodwill you cannot affect it directly because it's a number that is given by the acquisition. The account where you put this additional cost over book value is at the line of premium on sales of stock, and that is $575 million. The rest is the OCI basically. As you know, OCI are unrealized mark to market effects. Those are the three components that had this effect on equity. They're pretty normal. We don't worry about that. Regarding the profitability, yes, as I've just said, we are seeing that maybe for the rest of the year ROE would probably be 24%. As we have said in the. Past. We have already started an analysis on how these incremental profitability can be shared going forward between our shareholders, our clients, and our employees. We are working on that analysis and probably we will give you a specific plan when we announce 2026 plan in February next year. We are working on that and we will provide you an answer very soon. Specifically, NIMs, obviously NIMs this year I already said what we expect, and the future NIMs will depend on these new actions that we take going forward. Thank you. Thank you very much, Mario. If I may, just to follow up on the first one. In the past, congratulations, acquisitions, we saw your goodwill line moving up. Right. Why this time was different? Why this time was not goodwill and was a direct impact on accident? Sorry for my ignorance here, just trying to understand a little bit better. No, I mean by accounting rules, the place where you add any incremental values of book value is in this account, different to what you book at the acquisition, which is at the goodwill account. It's just accounting rules. Okay, thank you very much and congrats again. You're welcome. Thank you. Our next question comes from Luis Brian Flores of Citi. Please, sir, go ahead. Hi Tim. Thank you for the opportunity to ask questions. I have maybe a quick follow-up here on Yuri's question because I think it's a good question. The delta in equity is actually $1.2 billion downwards. Right. You mentioned, Mario, an impact of $575 million. To be very frank with you, I thought the answer here was coming more from the funding side. I wanted to ask you on the funding side, actually we saw an increase in long-term notes that was significant quarter over quarter. I just wanted to ask you how are you thinking about that? You provide a table in the press release with a decrease in funding cost. That is significant, right? I think Banco's expectations for their changes in rates are still for some changes downwards. I just wanted to check with you, how are you thinking about positioning yourself and the balance sheet for maybe 2026? I think that is an interesting question. A second one, just a quick follow-up. You mentioned in the opening remarks you feel confident on achieving the upper side of the guidance and you said specifically growth. Can I confirm with you if this is only growth or this includes also the $5.15 pesos per share in net income or in EPS? Thank you. Okay. Regarding the funding structure, as we have said in the past, it's very important for us to keep a very strong capital level in order to be able to achieve the very strong ratings on our debt funding and for the future we are going to keep that balance. We have been having very good access to funding with different new sources and new ideas. Enrique Barrera manages that. Also, Antigua has done a tremendous job obtaining funding for the different subsidiaries. Together with our CFOs at Peru and from ConCrédito, we have been doing a great job there. We expect to keep this balance between equity and liabilities going forward. Obviously, we're seeing also a positive effect on the reduction of rates. A couple of years ago or a little bit more, we started taking a variable rate funding to take advantage of this expected reduction in rates. That has been playing well, as you have seen. In these plans that we have for this year, we still have an 8% in Mexico. At that line we may see some other potential improvements if rates come down. We think that going forward what we should be looking at is that we keep these very strong capitalization and liability management. When we said the high end of the guidance, we refer to the portfolio between 15% and 16%, as Enrique said, and EPS was, we're giving the range and we still have to. We will keep it at the midpoint if you want now and trying to deliver within that range. No, perfect. Super clear. Thank you, Mario. Our next question comes from Tito Lavarta of Goldman Sachs. Please, sir, go ahead. Hi, good morning. Thank you for the call. Congrats also on the results, very strong quarter and the guidance. My question, I guess on asset quality, very good trends there. You mentioned on the cost of risk, you expect around 12.5% from the 13% before. I guess just do you think there's room for asset quality to improve any further from here? When you think maybe a little bit longer term on the cost of risk, is this roughly 12.5%, is this sort of a sustainable level that we should think about maybe longer term or will the mix impact any more from here? Similarly, in terms of your profitability, right around that 24%, very good levels. Do you think that's also a sustainable level for the next few years, given all the investments you've done in the business? Thank you. Thank you, Tito. Yes, the improvements in asset quality are very interesting and how that is going to play going forward is also very interesting. Let me first rephrase what Enrique said at the beginning. A very important driver of improvement in asset quality is all of the investments that we have done in data analysis, in efficiency, using technology, better tools, and as Enrique said, and we have said, a big. Big. goal that we had this quarter was to get full digitalization for individual lending in Mexico, which is now nationally deployed. It's bringing a lot of improvements in asset quality. I would say that the first thing is that these improvements are bringing a very good level of stable asset quality in all of the products. The second is the mix. If we have a better asset quality both in group lending and individual lending, both in Mexico and in Peru, that obviously will be important for the future projections of asset quality. We believe that at this point the 12.5% is very, very well, very, very strong. Obviously, in the next year when we give you the future plan, we will talk about what to expect for 2026 and going forward. Regarding profitability, as you have seen, profitability fits with the different lines in net income. We're seeing positive trends in all of them. Number one, interest income is growing. Number two, interest expenses are keeping stable with the benefits of the reduction on rates and the liability management strategy that I just talked about. Also, asset quality will play the role that I just said. The fees will keep growing at a little faster rate than the portfolio and expenses, even though they will be a little higher than originally expected, we still always maintain the rule of positive jobs. All of that gives you the storytelling of the income statement on why profitability, efficiency, profitability, and productivity can keep coming. Okay, now that's clear. Thank you, Mario. Our next question comes from Carlos Gomez Lopez of HSBC. Please, sir, go ahead. Hello. Congratulations again and thank you for taking the question, a follow up on the goodwill from the acquisition of minorities. If I understand correctly, that goes directly to equity. Essentially, it is as if you have written off the goodwill. As you acquire it, you get a bigger element in the equity, and that's why the equity declines. We also see the minority line decline, and that is a permanent effect. Is that correct? Yes. That means the minority income, which had been significant, obviously it's a portion of ConCrédito, now has become much smaller. We should also expect this number to be minimal going forward, is that correct? That relates specifically to our partnership, 50% with interpretation for a. This quarter was particularly low, but in the future we should go back to similar levels or. The way to see that is the net income that we expect for Gentera for the services it provides, 50% of that on an annual basis goes to our partner. Okay, this should actually be a growing number going forward because you're selling well. This is a bit choppy, right? The first quarter was 115 and now if I see correctly, you have almost zero in this quarter. Yeah. Okay, for the year as a whole you had INR 46,000,000 here. For this year, what would be a reasonable number? Yeah, something around $600 million for half of it, not $300 million for that line? Yes, more or less. Okay. All right, my last question. Your average loan in Mexico has gone up in value by 15%, which means that there is more indebtedness on your consumers. I mean, we have discussed this in the past. How much farther can this go? How much more can you grow the average size of the loan without the parallel growth in the economy, employment, and income? That comes much more from the mix moving to individual lending that we're growing at 50% more or less annually above the growth of group lending. That's where main driver of that change in average loan. Okay. That shift in composition you expect to continue in the coming years? Yes. Yeah. Just to give you some numbers here, Carlos, the portfolio growth on an annual basis, and I'm talking about Mexico and Peru, altogether the growth for group lending methodology in portfolio was 13% while in individual portfolio was almost 30%. That's the change of mix that Mario is referring. Thank you very much, and congratulations again. Thank you, Carlos. Our next question comes from Pablo Ordores of GBM. Please, sir, go ahead. Yes, hi, good morning, Enrique. Mario and Enrique, congratulations on the results. Can we talk a little bit about Peru? We continue to see ROEs. Very good, 22%. Correct me if I'm wrong, but we started the year with expectation of mid teens. What levels, what's improving here? What levels of ROE do you think that are sustainable in Peru? Also in ConCrédito last year we had ROEs of 25%. We continue to see an improvement here. Can you talk a little bit about what sustainable levels of ROE for these two subsidiaries should we expect in the coming quarters? Thank you. Thank you very much. Yes, very, very good news have come from Peru, mostly from the asset quality, and that has allowed us to start growth again. The results so far give us confidence and trust to keep growing a little faster, always controlling asset quality. Now, maybe that one specifically, we should change it from 15% to maybe 20% ROE for Peru this year in local currency. That would be great because that was one of the objectives that we had. If you want midterm, but now we're seeing the possibility of reaching that milestone of 20% in Peru by the end of the year. ConCrédito is performing very well. We talked a little bit about that when we announced the remaining acquisition, and creditops will also keep delivering ROEs above probably 25% for the year. Thanks, Mario. A quick follow up on Carlos' question on your growth guidance for your loan portfolio and the mix, what are you expecting for the individual methodology and for the group methodology? We don't have a mixed objective. There are different products that serve different segments. We want to keep growing both group and individual lending as much as our demand drives, and we don't have, like, you know, a mixed target. The good thing is that both products are profitable, that both products are very well priced, that both products serve different segments. The mix, we will be reviewing year by year what we should expect for each year. Pablo, maybe this will help you. If we talk specifically about Peru and we talk specifically about portfolio growth, group lending portfolio grew in the last year 16%, 16% while individual lending grew 5%. That gives you an idea of the potential looking at the future. Yeah, that combination of in Mexico growing individual lending faster and in Peru growing group lending faster will have these effects on mix. We will be giving you the guidance every year more or less how it will be going develop. That's very helpful. Thanks a lot, guys. Our next question comes from Rodrigo Ortega of BBVA. Please, sir, go ahead. Rodrigo, please deactivate the mute of your microphone. Hello, can you hear me guys? Yes, yes, sorry, sorry about that. Thanks for the opportunity to ask questions. I guess it's quite, quite a quick one. It's always that with the kind of ROEs that we're seeing, risks are more than adequately priced. However, looking at asset quality in ConCrédito of around 25% it's still a little bit itchy to me. I guess my question is, can you elaborate on the kind of cost of risk levels that we should see in ConCrédito and Peru over the long term? My parameter is obviously that you have done a remarkable job in maintaining cost of risk in the low teens at compared to times Mexico while growing at the mid to high teen rates. How about the other two? Very good question and it has to do with the products and the countries. You know we have talked about at the bank. In terms of cost of risk for Peru, we expect that this year we could be in levels of around 11% and that has to do also with the mix that it's. We just explained, as Enrique said. Also we will see the specific dynamics of risk in Peru that are marginally different than in Mexico. That is very important for us to keep. If you want both are the same products and we can keep track of those two products in the different countries. Compared to is a little different, comprehensive. The products that we have there have a different profile, different segments and we feel comfortable with the high level of cost of risk of ConCrédito because it's well priced and we can make the profitability that we want after cost of risk. Obviously a key objective for Gentera is to keep improving asset quality in the long run. It's important to understand that each product is different and each country is different. We feel comfortable where we are and for next year we will provide you also what our expectations for cost of risk for the different subsidiaries. Thanks, Mario. When you say you're comfortable with the cost of risk that is high, obviously the range is wide because we're talking about a range of 20% to maybe 30% working credit, which is quite high, but again adequately priced, as you said. Yes. Should we think that this is the way it should, or we should expect it to remain over the, I mean structurally speaking, over the next five to 10 years? That is a long chart. 25 you should take as if you want the structural cost of the business. We're running on ConCrédito and for next year that would be a fair assumption. If we find ways to improve that, improving data, intelligence analysis or whatever, that's part of our job. At this point you should keep it at 25. The point here is that talking about the future, let's say two to five years from now, we are going to address different markets. We might be also building different distribution channels, which will have naturally different levels of risk. We cannot answer that at this point, but I think that taking what we have now, it's a good baseline. Thanks a lot, Mario. Enrique, thank you very much. You're welcome. 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 Daniel Miranda of Santander. Please go ahead. Good morning Mario and both Enriques, thank you for taking my question and congrats on the results. Just a quick follow up on Carlos' question and individual lending. I understand you do not have a target mix, but individual now represents over 40%, coming from 35% last year. Right. You are continuing the shift due to higher growth in individual right now. You also mentioned in the report cost of risk deterioration in Banco Compartamos, Mexico this quarter was driven by loan growth, of course, but also by a mix change. Right. If you continue to shift towards individual lending, what further implication are we having in cost of risk in the short to medium term? Thank you. It's not that we're shifting from group lending to individual, it's different segments. We always need to remember that group lending is more for the very base of the pyramid that have different business activities, that may have different business activities in the day, in the week, or during the year. Individual lending is focused on a more stable, permanent business activity. It's a different client base. Some of the group lending clients that make their businesses grow move to the individual lending. There are different segments. What is important for us is to serve the needs of those different segments and different customers. It's not shifting. You're right, the size of the loan, the demand that exists there that we didn't cover before, is still large. That mix will be evolving now to the specific cost of risk of each product. Both have different cost of risk and they have different pricing. What we feel comfortable with is that both in their specific P&Ls have positive margins. I don't know if that answers your question or if Enrique wants to compliment. The typical cost of risk in individual lending in Mexico is moving around 15%, and that's a normal cost of risk. The typical cost of risk in the group lending methodology is moving around 10%, which is normal cost of risk. Also, depending on the plan, it could change. It is fair to assume that if individual lending now represents more of your portfolio in Mexico, cost of risk should be pressured, right? Yes and no. Let me tell you something. We got at 13% for this year, assuming that change in the mix. What is a new tool and that it's very important and we're sure it will bring us additional efficiency and productivity and also better control of asset quality is the digitalization. The digitalization, we just in this quarter, we finalized the national launching of the digital tools for individual lending. There are a lot of benefits from that in the business case. Maybe we expect that this improvement will be permanent. We will tell you in February what is our expectation for cost of risk for the year. At this point, you could keep it between 12.5% and 13% if you want. We will provide specifics on that in February. Very clear. 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 presence in this call. We really, really appreciate your interest and support to continue generating not only economic value, but also social and human value for customers, employees, and of course, for shareholders. Thank you for your support. I want also to recognize once again, each one of our employees in Gentera, from our loan officers to our top management and board members. All the results that we are showing today is a result of the hard work, the commitment that they have. It has been crucial to keep growing and adding value to our customers. Thank you. Finally, I want to confirm to you that we have a promising second semester ahead and we are committed with our customers and all our stakeholders to continue generating total value. Thank you so much and have a nice rest of the day. With this, concludes the conference of today. You may now disconnect.