Good morning. I'm Tomas Lozano, Head of Corporate Development, Investor Relations and ESG. Welcome to Grupo Financiero Banorte Third Quarter Earnings Call. Please note that today's presentation may include forward looking statements that are subject to risk and Uncertainties, which may cause actual results to differ materially. Our CEO, Marco Ramirez, will provide the highlights of the quarter, including the relevant progress in asset quality, as well as better growth dynamics in fees and loan growth.
He will also provide an update on the digital Strategy for the group, together with key milestones in our ESG strategy. Later on, Rafael Arangona, our COO and CFO, will provide further detail on asset quality, improvements in the cost of funds, progress on the sensitivity to rates and continued cost control. We will conclude our call with a Q and A session. Thank you. Marcos, please go ahead.
Thank you, Tomas. I hope everyone is doing well, and thank you for joining our call today. The Q3 of the year presented a mix of factors that resulted in overall recovery. During July August, the highly contagious delta variant of COVID-nineteen generated fear of new lockdowns President to the delay, the ECB's recovery in economic activity in Mexico. Fortunately, less severe symptoms are contained with lower mortality rates Investments.
Higher vaccination rates in Mexico have led to recreation across different industries such as construction, tourism and entertainment. And Investor Relations. In addition to the manufacturing supply chain with the United States, which has been present since the beginning of the year, Total vaccines have already surpassed 110,000,000 doses with more than 40% of the population being fully vaccinated. GDP growth estimates for the year are still ranging between 5% on 5% and 6%. However, economic recovery came at a price, with the most recent inflation estimates now reaching 6.8% at the end of the year, well above the Central Bank target of 3%.
And Investor Relations. Monetary policy decision by the Central Bank took the reference rate 50 basis points higher during the quarter, ending at 4.75%. Our economic analysis teams expect 2 more hikes for the remainder of the year to reach 5.25%. Later on, Rafael Arana will comment on the positive implication of this for the bank's market. Overall, as you will see with greater detail throughout this presentation, results for the group have evolved favorably with better than expected asset quality, margin improvement, cost control and solid capital ratios.
In our daily operation, customer experience is permanently at the core of our strategy. We have listened to customers' feedback and have had Significant improvement in the NPS score across all our channels, particularly in our mobile app. So in response to this feedback, We recently launched a newly designed mobile app with improved features, including intuitive and faster navigation, which has had a remarkable acceptance among our digital customers. Diving into the financial results for the quarter, Slide 4, We saw a 4% improvement in the bottom line for the group, driven by stronger net interest income from the bank, better asset quality across our portfolios and better dynamics in this despite a still pressured insurance result from the high COVID-nineteen related reserves and claims. And Investor Relations.
ROE of the group was further impacted by the unpaid dividends that are sitting at the group's level, While ROE of the bank is progressing favorably, already above 19% for the quarter. On Slide number 5, NII was driven by a stronger loan dynamics in consumer and commercial portfolios. Increased mobility and Rativation across different economic sectors pushed fees 5% during the quarter, while trading income showed a normalized behavior. Going deeper into fees on Slide 6, net fees are already at pre pandemic levels, driven by higher origination fees in consumer, Mortgages and Commercial Portfolios as well as by higher activity in credit and debit card transactions. And Company.
Loan growth, Slide 7, showed positive recovery signs for the quarter, led by government, commercial and corporate portfolios, While consumer loans have not eased their pace, despite the pandemic, our loan market share rose more than 50 basis points during the year. Asset quality continues to exceed our expectations. NPLs, on Slide number 8, ended the quarter at 1.2%, EBITDA 1,200,000,000 below the previous quarter, driven by a one off corporate pace that progressed favorably together with improvements in credit cards. Looking at the rest of the subsidiaries of the group on Slide number 9, the insurance business regrettably continues to face a high number of COVID-nineteen related claims in the Life segment. Remember, Life accounts for more than 30% of the portfolio of insurance, and Company, making COVID-nineteen the most expensive event in the history of insurance companies in Mexico.
The rest of the segments, however, show a steady quarter, contributing to the overall results for the group. Regarding our JV with Rafi, the new digital credit card origination continues at a strong pace with more than 300,000 active credit cards, well in line to reach the 400,000 car target at the end of the year. Our partnership with Google Cloud is also evolving well on the and CEO. 3 main fronts. The first one, culture, to improve our teamwork methodology the second, security, implementing solutions to improve cybersecurity at the group and the third one, cloud, where we have made very good progress towards moving Services to the Cloud.
We are finalizing the details of our upcoming Banorte Investor Day, which will take place early next year. In this event, we will communicate our next medium term plan, including new operating and financial targets for the bank, our JV with Rafi and our brand new digital brand, which will position Ban Norte at the frontline of the digital arena in Mexico. You will soon receive our invitation for this event. As many of you know, ESG continues to be fundamental part of our core strategy, and I would like to highlight some of the most relevant updates on each of the strategic pillars. 1, On the environmental front, Panorte made a commitment to decarbonize its loan portfolio by the year 2,050 by becoming founding signatory of the NetZero Banking Alliance.
During the quarter, we implemented different work groups to establish the short, [SPEAKER TONI LOSAMO CASTELLO BRANCO:] The medium and the long term plans to achieve this objective. On the social area, we are implementing a 3 stage program to improve inclusion across the financial group. The first step is gender equality, where we will adopt best practices to value talent, making sure everyone has the next couple of years. Last but not least, on the governance side, we have just completed a comprehensive board self evaluation and initiated our TESG training program to our Board members. You will find this and more additional TESG information on the final slides of this Investor Relations.
With this, I conclude my remarks. Now, Rafael de Arana will provide you further insight into and Investor Relations. [SPEAKER TONOLO GUZMAN PERERA:] Our operating results, asset quality and progress in the bank's sensitivity to rate changes. Rafael, please, Joaquin.
Thank you, Marcos, and thank you all for attending the conference. And also thank you very much for the reports that allow us to concentrate on the key issues that you want to discuss on the conference that help us a lot to really focus on what we really want to communicate further some of the points. If I would like to see how the evolution of to the Q3 and based upon what Marcos has mentioned, I think we are managing the crisis in the I would say, not in the final stages or later stages of Crisis. And during this period, basically what we have been doing is taking care of the following issues that I think we We can then communicate specific metrics. All the stuff that is basically all the loan book, we have been taking very good care of the loan book.
On the risk side, as you can have seen on what Marcos presented, we have very, very notable numbers on cost of risk and NPLs. And that's the result of a very careful management of the crisis on the recovery side and the onboarding side and on the risk side to tailor specific products for the clients. So there was a first [SPEAKER JOSE ANTONIO ALVAREZ ALVAREZ:] Commitment to put on the organization to take very good care of the group. The second part was the funding side. The funding side in order to not because of the lack of possible growth that you have seen that we have regained growth from the 3rd quarter.
The first two quarters were very slow. We needed to basically concentrate on the funding side in order to make The net interest margin and the inventory was profitable, and I will go in numbers specifically to prove that. The other thing that has been helping us is the sensitivity of the balance sheet to the hike on the interest rates that has accelerated the net interest margin growth, and we see a continuous evolution of that part. The other part is that, as Marcos mentioned, we continue to gain market share in the market. Even the we have a slow economy on this, but we continue to gain market share at a very good risk and a very reasonable crisis.
On the digital space, we continue to evolve aggressively. And we are happy to say that most of the products of the bank can be now on board in less than 10 minutes on the digital space. That has helped us to keep on building the franchise in the new in the new economy that we see coming for the time. So now that we, in a nutshell, define [SPEAKER TONI JOSE MARIA ALVAREZ PALLETE:] What has been the concentration of these three quarters? I would not like to mention a thing that has been Some comments about expenses.
Expenses, as you see, are growing 4% below inflation on that part. And on the expense line, you have to take into consideration that on the Q3, you now will see and Investment Management. [SPEAKER JOSE ANTONIO ALVAREZ ALVAREZ:] A movement because of the new law, the outsourcing law that as you remember, we have been and Company. Telling in the past two quarters that the growth in fees has been quite strong, but also the part of fees paid has also been growing basically because we needed to put external sales forces to balance out The requirements of the clients on the mortgage side and on the car side on the car loan side, those now are going to be Because of the outsourcing law, we'll be part of the coastline of the bank. So now the expense growth that you see on the Q3 is basically MXN ARS 150,000,000 that basically was before on fees paid and now has been moved internally to and Investments.
If you take away that SEK150,000,000, the expense line on a quarter to quarter basis was flat Investor. On that part. But that part, you have to continue to see in the next quarters and in next year that effect Investor. On the other side, what you will see is a growth on the fees on the fees that we charge to the market because now those fees that in the past were Basically, on the variable rate for these external sales forces, now we'll be passing to the expense line because that will be an internal cost. So you will see Our growth in net fees, I would say, pretty reasonable for the Q4 and on for the next for the next year.
After that, if I would go now to on a line to line basis, basically, What you will see and Marcos already mentioned that is that the cost of risk is at record lows. You have to take into account that this number is at record lows. And once we start growing again, You should see that the cost of risk of the bank should return to the usual numbers, maybe a little lower than the usual 2% to 2.2%, two numbers around the 1.8% to 1.9%. Another thing that has been Also very positive is the write off rate. The write off rate in the Q3 was below even the 2nd quarter.
[SPEAKER TONI ALVAREZ ALVAREZ:] But you have to take into consideration that we have already cleaned on write off the credit card book, The payroll book and the credit card book, car loan book and payable, But it's still pending the mortgage book a portion of the mortgage book and a portion of the SMEs. That numbers on write off will pick up in the Q3 and on the Q1 of 2022 Invest. To the levels basically around the 0.55, 0.56 that you see that. So don't be alarmed if you see a pickup on the write off because the remaining portfolio of the SME and the mortgage part, we still have some write offs to do Investor. On the net interest margin, I think it's relevant to mention that We have already had a pretty good trend even before the hike in the interest rates, and that's basically because of the funding cost that we continue to evolve.
I will go into that in a minute. But what we see is now that the effect of the hike I'll start really to be noticed on the net interest margin is now at 6.1%, and we see That evolving into the Q4 to a better number around the 6.2% on that and then continue into the next year to a better evolution than what we saw this year. On the net interest margin of the group, you already see that the effect of the insurance company is what is hindering the return to the normal levels. You have to normalize that number. If you add on a recurring basis close to ARS 3,700,000,000 of margin that we have been losing on the insurance business, Okay.
That will recover start to recover in the Q4 and continue to recover in the next year. But the bank, as you see, will continue to have an upward trend on the net interest margin. I've mentioned the cost of funds and there have been a lot of questions about how where we meet the funding costs. We started the year on the Funding Costs, close to the 48% concern to status. We are now sitting at 42%, but we still have room to improve.
As you can see, the 2 banks Investments. We see that we will finalize the year close to 40% or a little below 40% and continue to have that evolution in the next year basically because all the actions that we're taking on the on boarding and and Incentive Scheme for the branches. The margin sensitivity that also has been a recurring and Investment from the market. Now we are sitting at 842 up to 638, and we continue that the sensitivity will continue to move upwards close to the BRL 1,000,000,000 that we have in the Q4 of 2018. The expenses that I just mentioned a bit in a bit Expenses.
If you look at the growth in the expense line of from 10.8% to 11.01 It's basically what I just mentioned that we internalize the external sales forces that I just mentioned on the mortgage and on the car loan side. And that is the effect. That is around €150,000,000 That is a growth in expenses. That Bessekar. [SPEAKER DOCTOR.
JOSE MARIA ALVAREZ PALLETE:] Jose Luis:] Also reflects on the other side, on the net income side. That is a positive expansion on the fees that we charge to the market. The liquidity continues to be strong, too strong from our point of view because It is costing us money. We have been losing that, but I think we will stay around SEK 180,000,000 to SEK 160,000,000. That will be the desired number on the liquidity side.
And on the capital ratio, we continue to see A pretty strong evolution on the capital ratio up to 21.9% and core Tier 1 is around 14.9%. There has been a lot of questions from the market about what's going to happen with the upcoming Q1 Investor. That is Easter next year if we're going to call. Yes, we always honor the calls. And as you know, we are always on the look for opportunity to grow and strengthen our balance sheet with a potential issuance into the market.
If we see that is opportunistic for us at a price that we think is the right one. On the digital evolution, I just mentioned before, I think we have been made a lot of progress on BANORTE, All of the consumer loan products, but mortgages and car loans, you can Everything originate online on your mobile in less than 10 minutes most of the products. The only one that still we have above 10 minutes and is around 11 point 5 minutes is the basic checking account that you open at the branches. For everything else, you can onboard in less than 10 minutes, whatever you want to do, on the funding, on the wealth management side, Investor. On the lending side and also on the digital checking accounts on that part.
So Manote has been improving a lot on that and we will continue to do so. On the Marcos just mentioned the RAPI, and I think later there will be more questions about that. So I I would say that it's going where we expect that to happen. I think we'll be accelerating on the 4th quarter to reach the 400,000 commitment that we have with the Board. The Google Cloud also Marco already mentioned that.
And on the Google, I just want to mention one thing because there have been some questions from the market that if Google replaces IBM or And the answer is we have been building from the ground up. 1st, we started with IBM to change all the Infrastructure, Communications, Cybersecurity, Architecture of the bank, the multichannel facilities. And then once we start feeling comfortable that we have a much more agile way to deal with the legacy and with the architecture of the bank, We start building layers upon those. We will have the help from other suppliers like SAP. And then we'll continue to build up flexibility into the response to the market.
And the latest part that we needed is the to really tied up with a company that is Very, very concentrated on the behavior of the client. And when you see the Google Cloud indication that we will have a lot of benefits on the cloud and things. But I think the main benefit is really to really evolve at the same way that Google knows the client. And that's why we are very, very happy with the relationship with Google. We have a lot of services that will go into the cloud and that will be a lot more efficiency on that.
But I think the key gain here is that We are building from the ground up from the basic architecture to flexibility to agile and now to the understanding and behavior of the client. That's why we are very pleased with the latest partnership that we have with you. With that, I would say that That's all from my part. And now I'll pass the ball to you.
We are open to your questions. Yes.
Thank you, Marcos and Rafael. Now we will continue with our Q and A session. Please raise your hand on the platform and we will unmute you when your turn comes. Questions will be ordered automatically on a 1st come, 1st serve basis. Jose Luis and myself will be calling the name of the person that is next on the line.
If there are any technical difficulties, please let us know by using the chat. Thank you. We are ready now to start the Q and A session.
Thank you. We will take our first question from George Friedman from Citi. George, go ahead.
Thank you. Can you hear me?
Perfectly.
Perfect. Thank you so much for the opportunity to make questions, Saluis, Marcos, Rafael. Thank you very much for the presentation as well. I have a couple of questions. First, with regards to your guidance of cost of risk, I heard you talking about It's running at very low levels and potentially normalizing at 1.8%, 1.9% level.
But you have full year guidance for cost of risk between 1.9% 2.1%. And for you to reach the guidance, you would have to be at, I know, 3% and over in the last quarter. So how do you see this evolving? And if this guidance still makes sense, I see that you did not update guidance, but I think It is now away from being reasonable. This is the first question.
And the second question, I was looking here into the evolution of COVID fatalities in Mexico. And of course, since the peak achieved earlier in the year, we have been making Very strong progress with the vaccination. Last numbers that I have here for October show, I know that's below €200 per day. So I was a bit surprised when you mentioned, Rafael, that the normalization of insurance should start only under the beginning of 2022. So given that the great part of Air Liquins are related to life, we would not be expected
Investing. To pay the fatalities and that's why you will see the recovery until 2022, but Fernando Solis will speak about that. And the first one, you are right. We are too conservative in the numbers. And I think it's okay now Because yes, we need accretive in order to get to that number, but we still don't know and that's why we're saying the same.
But I hope we will Again, I have numbers for you. I will pass to Fernando Solis. Please go ahead.
Yes. Thank you, Marcos. Well, actually, yes, we are already seeing Some progress in terms of the loss ratio and the claims, actually the leading indicators in terms of claims. We have in BC, Alconcari. So actually, it has already started.
However, the normalization of to go to the Normal levels of net income will always have a lag because there is a lag, which has been taken Vets. Several weeks for some to come up with the claims in terms of gathering the information that is required that to process the claim. But definitely, there is a recovery already taking place. Actually, in the last month, We have better results, better than what we have expected. And we do foresee that normalization is already starting to take place.
And I will take the opportunity just to mention that if we take into consideration all these effects of COVID and if we look at the results without this effect, actually, the net income would have been higher than last year by 15% because other lines of business are doing much better. So all the impact, as you know, is from COVID. But yes, the answer is to your question, Recovery has already started fortunately.
Perfect. Thank you very much. So just to understand on the point of cost of risk as a follow-up. When you talk about the normalization of 1.8%, 1.9%. Should this be what is expected already for the Q4 Or more normal levels into the midterm such as 2022 and beyond?
Thank you.
Georgios, this is exactly as you mentioned the second one. It's the running rate at the bank should be around 1.8. No, you will continue to see pretty strong numbers on to the Q4. We haven't changed the guidance for a simple reason. I mean, We already you see the evolution of the numbers on the that we present.
And To us to change the guidance at this point in time in the year, it really doesn't make much sense. What I think is important to notice what you mentioned, The 1.8% to 2% is the running rate that we see eventually reaching that number when we normalize the rate of growth of the loan group.
That's perfect, Rafa. Thank you very much, and thank you everyone for the clarifications. Congratulations for the results.
Thank you, George.
Thank you. Now we will take our next question from Ernesto Gabilondo from Bank of America. Ernesto, Please go ahead.
Hi, good morning, Marcos, Rafael, Jose Luis and all your team. Congratulations on the solid asset Quality in the quarter, and thanks for the opportunity. I have three questions from my side. The first one is On your expectations for loan growth and net interest income, we have seen still modest loan growth in the 1st 9 months. However, looking to next year, do you think that the net interest income should be favoring from ECG over year comps in the insurance business from higher rates and from increased retail exposure and this helping the loan book To gain some time to show again strong activity.
My second question is on provision charges. I remember you Stock of preventive restrictions
from the
ones that you built last year and that you can be releasing at some point, If I am not mistaken, around MXN 1. So considering that the country is already in green in most of the status In terms of COVID, what do you need to see to release those provisions? Or do you prefer to keep conservative for the rest of this year and maybe to release them early next year. And then my last question is on the dividend payment. I just want to know if there is any update with the regulator to let you fully pay the deferred dividends by year end or early next year.
Thank you.
Thank you, Ernesto. I will start for the 3rd one, the dividend. Yes, we are Talking with the regulator, we will have another meeting. And we think we will have good news for you at the end of the year. We still don't know, but it makes sense now for everybody.
So We will tell the market as soon as we know. Talking about the provisions, We will wait until the end of the year to make the numbers and let's say before to return Investor. So we're leading the extra ones. So it's going to be at the end of the year, the beginning of the next year, we will start fresh and we will Make the numbers there. And the first one, the long run of Rafa and the NII, please, Jorge.
Yes. No, I think, Mr. What you say about the NII, yes, I think if you project the Q3 Based upon the loan growth that we have in the ones that were lagging behind like the corporate, I mean, It's worth to mention on the corporate is that we were coming from a very strong last year of around 15% loan growth in the corporate because of the liquidity lines that the company is through. But and we start as you know, the Q2 was minus 12. Now we are going to minus 7 because we have a pretty good growth on the Q3 on the corporate.
So that's already in a good trend. I think I see very difficult to go to positive, but we will be Much better than the minus 12% that we were that and that will continue to evolve on the next year on the corporate. The government book is also picking up pretty fast. So we will continue in the Q4, I would say, a good acceleration Investor. On the government book, that already started to happen in the Q3.
So that will help the NII. The consumer will continue to be, as Marcos mentioned, pretty strong on the mortgage and on the accounts. The only issue with the currency is the availability of cars, but I think we have all the processes in place. And the credit card is already regaining a pretty good growth and the best part of the year is now in November in December. Payables continue to evolve nicely.
So yes, we will see that the NII We'll continue to expand nicely into the 3rd into the 4th quarter and also into the next year. I would say a big piece of that will also will come from the insurance company. As We just mentioned from Fernando that we already see the start of the recovery there. So also a big push will come Investment from the insurance company that if you will see the insurance Investment. The annuity company NII is minus 21 up to today.
So that will balance out Investor. On the next year, so NII will improve, I would say, in a very reasonable number. Also, The funding side also with Perkoa's because we are growing pretty strong on the funding side and the cost continue to go down as and I'll show you now in that part. So I would say that we think the margin also will continue to expand, the net interest margin. Two numbers around 6.2 for the Q4 and going into the Q1 of next year Based upon the hikes that we expect to happen on the at the end of the year, we will continue to see our evolution to numbers before The start of the downward trend in the interest rates.
So that's the overall. And I will just start to What Markus mentioned about provisions, we still have DKK2.9 billion of provisions to be released. We are looking at when is the best time, as Marco's mentioned, at the end of the year, because I mean, we were criticized at the beginning that we were not prudent building up provisions. And we show that we were very prudent building up provisions and we will be as prudent in the release of the provisions.
This is super helpful. Thank you very much. Just last question Investec. Related to some regulatory risks in the energy sector and the cap rate for the Aforis. Just wanted to know your thoughts on Potential impacts on your business.
What would I say is you're responsible now to talk about What's going to happen? We don't know, but we know that in the top server right now and we
need to
wait. So let's wait a little bit and then you will hear from us. But We can say that we are not worried so far and we expect the best on that. And what was the other day?
The energy
Ernesto,
what I would tell you that we have and extremely manageable exposure to green energy. And as of now, NPL ratios within that part of the loan book are equal to 0. I will tell you that for the time being, I mean, this energy transition, The relation to fossil energy to bring energy exposures is more than 8:one. So in any case, what we have done is that we have modeled a stepped severity That is on the terms of and conditions of legal modifications potential legal modifications of the self supply contracts on the green energy realm, and we remain very and Company. Comfortable in managing that kind of a scenario.
We will wait, as Marco said, and to provide you with the precise information once this regulatory reform or constitutional change takes place.
Talking about the following, I will ask Fernando Solis to talk a little bit about that. But yes, we have a bad news that the These are going down and we have a good news that the volume is going to grow. So it's not the same, [SPEAKER JOSE ANTONIO ALVAREZ ALVAREZ:] But you need to add the 2 factors to the equation.
Fernando, please, Barcel. Yes. Thank you, Marcos. Just You mentioned the rest of there has been a major change in the regulation of authorities. There was a change in the law.
And as you mentioned, they put a cap and the cap is established taking into consideration 3 markets, the one in Chile, the one in Colombia and also the 401s in the U. S. I will not talk whether that methodologies are proper or not. We believe it is not, but I will not elaborate on that. The Board of the regulatory body last week gathered and the information that we have The reduction in the commissions will be very high.
Actually, the cap, as far as we know, It may change because it has not been published and we are aware that the Association and some authorities are Talking with regulators to see whether they can change this cap that has been mentioned. I will give you the number in a moment. So Take into consideration that this may change, but I'm not quite sure that will be the case. We will see and we will see what will be the legal action Investor. If it happens from some place, we don't know.
But what we have heard unofficially is that the cap 0.57 percent. For us, that means a reduction. And this is we're currently charging EUR 0.8 billion on assets under management. It means a reduction of 23 basis points. This is a huge impact.
And this will be the cap for all the authorities. That's something that will be changing. That will change in terms of what has been seen in the past, because in the past, we are the except for the public institution, pensioniste, We are the lowest in terms of prices. So the impact to OIBDA ForEx will be even higher. So this will everything else the same, of course.
We do not do anything. We work Spain in the same way in commercial and so on and so forth. Certainly, this will have an impact on net income. As As you can imagine, it would mean with the assets under management currently, we have been a reduction perhaps of MXN 700 1,000,000 pesos to a norte. The double of that would be for the 40,000,000 because as you know, we only own 50% of this firm.
However, that is everything else the same. What is it's very hard to forecast what will happen in the future, but BEST. We do think that for some of Horace, it will be hard to remain in market. So I think it will there will be some consolidation. Bessemer.
Also, we foresee, but as I have just said, we have to wait and see how the players We'll do with this change, but we do foresee also that the sales forces will be reduced and also what has been paid for the sales forces will reduce. So there will be some offset on these numbers that I just mentioned, but it's hard to tell how much we will be able to offset The impact, the negative impact. I would also say that the impact for us will be less than for others. And I would also say that we are the best place for to this change because we have the largest assets under management, We are the most efficient AFFO in terms of expenses. We also have a very high quality of the portfolio that is if you take the average Investo.
With the assets under management taken into account divided by the accounts that we manage, we are among the best. Bets. So we're very positioned for this impact. This will impact us in the short term. But we do think that in the long term, We are going to be the player that perhaps will benefit the most of these change.
And also, something that we have To take into consideration is that we have 2 very strong partners. We have Investment. And we have been and that will also provide Some advantage to us in what sense? For instance, we will have a very productive sales force and then we have to see how, taking into consideration the laws and the regulations and so on and so forth. That to help us into what is called the portability of the people that is on a payroll.
So I think there are some other things that we can do to offset this impact. But definitely, in the short term, it will hurt us, as Marcos mentioned. But that's the considerations at this moment.
Thank you very much, Marcos and Fernando.
Thank you. Now we will take the next question from Thiago Batista from UBS. Thiago, please go ahead.
Hi, guys. Thanks for the opportunity. I have two questions. The first one about The profile of Happy cards holder. So when you look for the clients that you've got in Happy, in the partnership with Hapi.
Are those clients already or they used to be already clients of Panorte. Are those guys, they used to be unbanked. So if you can give it to us some profile of the clients that you've got on HappyCard? And the second one about the ROE of Banorte. Clearly, the bank is posting a very good operating trends, But ROE still, let's say, at 15% for sure because of the high level of capital position that the bank has right now.
So when you look for next year, I know that you don't have the guidance, But is it possible to see already ROE of, let's say, high teens next year or at least in the next years?
Thank you, Javier. I will start with the profile of the private cash holders. It's another business that's why we call it another business and it's another platform profile.
Thank you, Thiago. The profile is 28% of the customers That of those 300,000 customers, they have not a previous credit card. They were all Rappi customers. They were all using Rappi, but they were using Rappi in cash. The 28% were not users of a credit card.
From the rest 72%, if we assume The market share that we have, 10%, 11% will have a Norte credit card. The rest the other 89% will have credit card from other banks.
Thank you, Paco. Talking about the ROE, can we see ROE in the high teens next year? Yes, as soon as we pay dividends, remember that in the bank, we already have almost 20%. So It's not so difficult, let's say that. And as soon as we pay dividends, we are hoping and aiming to go to Go through 2020 as soon as at the end of next year, yes.
Clear. Very clear. Thanks.
Yes. Just talking about this, what Marcos mentioned on the bank, I think the bank that is already funneled up dividends, you already see, as Marcos mentioned, above 19% on that. On the group, as soon as we get the normalization of the insurance company, you will see a strong pickup as soon as and also with the dividend payout that Those numbers were normal, I think I'm totally agree with Marcos. We are in a very good trend on the key metrics. And if you look at the ROA for the bank, it's already close to the 2.1%, 2.2%.
So I think the key metrics are already in the right trend.
Thank you. Now we will continue with Tito LaVarta from Goldman Sachs. Tito, please go ahead.
Hi, good morning, everyone. Thank you for the call and taking the question. Two follow-up questions, I guess, on my end. First, going back on the provisions and more thinking about it from asset quality, right, because NPLs have improved further, right? Your coverage ratio is 170%.
So When you're thinking about potentially releasing provisions, I assume the trend for asset quality Investments. You may play a role. So any color you can provide? I mean, do you think asset quality head is bottomed here? Do you expect to see Some deterioration through year end and into next year?
How do we think about the NPL evolution going forward? And then the second go ahead, you can answer and then I'll ask my second question. Okay.
First question, I will ask Rafael then Gerardo to
Yes. I think everybody is looking at numbers that are extremely low. And remember that when we have these numbers and then suddenly we have a pickup because of the charge off that we did on the credit card on the second quarter, Then some people know that this is going to go to the on a very aggressive upward trend because The deterioration, no, that's not the case. As we mentioned before, and I will Gerardo will go and flip into this. The only things that we need to clean up on the consumer book are the mortgage book and the SME book at levels that are Pretty low compared to the expectations that we had at the beginning of the pandemia.
If you look at the NPLs that are running 1.1, 1.3 Investor. On the mortgage side, that number is once we apply the chart off in the Q4 and remains on the Per quarter will go down again to the 1.1. So the overall numbers that you will continue to see At the beginning of next year, we'll also be very strong on the cost of risk. Eventually, we will go back to the usual numbers of 1.8%. And it's not because we don't see any deterioration Investor.
On the consumer book, on the commercial book, we are managing As you know, there was no relief programs like on the consumer, and there are specific relief situations for each of the clients that could have some issues on the commercial. So maybe on the commercial, we will eventually, we'll see a pickup, But also from coming down from a very low numbers. And the remains are the SMEs that we still need to pass the 4th quarter to charge off The numbers on the SMEs. But if you look at the NPLs of the SME are extremely low. So we have A lot of room to expand the number before we're going back to normal.
Now I'll go to Gerardo for the risk point of view on this.
Yes. We are also surprised, but positively surprised. We are convinced that from loan origination to loan recovery, Sooner or later, credit process quality equals asset quality. We have seen that. Remember, we were first to market in relief and forbearance programs.
Internally, we use agile methodologies. Leggett. We engage and organize with sales in order to originate and also to recover loans. We have had quick and important workout efforts. We use internal modeling with a thorough cost benefit analysis in order to propose restructuring schemes.
We overall have reasonably low loan to value and loan to cost parameters. We do lots of follow-up to restructuring schemes. We have good second sources of payment. That's the importance of collateral, mainly in the SME loan book. We also have good timing with the payroll and credit cards debtors in regards to income generation.
We collect until there is income to be collected, and we use a holistic active management of non performing loans. We are continuously calculating probabilities of default, exposure of defaults, loss given defaults and so forth. We are accustomed internally to compare Expected losses as the loan is currently in one state of nature versus the expected loss With the selected payment alternatives, we calculate the expected Benefits. We compare that to the cost of recovery. We expect positive net values and we proceed and we continuously review those schemes.
So we have been surprised about the behavior and performance of the loan book. This asset quality has been very good as you have seen. And of course, we do not believe This is going to be stable. As Marcos and Rafael said, we are expecting the cost of risk to go higher and also the PBLs to go higher.
All
right. Thank you. That's very helpful. And my second question was back on the
insurance results. And 2 parts, I know you
said the claims are Insurance Results. And 2 parts, I know you said that Queens are coming down. But just to understand, because if I go back in July, You initially thought claims were also coming down and it looks like it did pick up marginally. So I mean, is the main difference just vaccinations have increased. So I guess the question is, do you have more confidence now that the claims should come down going into the Q4?
And then the other part was the technical reserves picked up a lot because of inflation, right? And inflation seems to be trending a bit staying at that higher end for now at least. So is there a risk that those technical reserves remain high or go even higher into 4Q? Just to think about, I guess, the insurance on those two
Please, Joaquin, Fernando, please.
I'm sorry, I passed Last question because I was answering one by Chad. Could you repeat the one of the insurance, please?
Start with the first question.
Sorry, sorry about that.
Yes. No, no problem. Yes, just the insurance, right, because if you go back in July, claims were also initially coming down. So I just want to understand that What gives you more confidence that claims will come down in 4Q? Is it just vaccination levels have increased?
Or is there any other risk that claims can go up again Because we did see them go up in 3Q even though they had initially started to come down. And the second part was on the technical reserves. They went up a lot this quarter on higher inflation. Inflation seems to be remaining a bit high. Is there a risk that those technical reserves have to go up more?
Well, actually, Yuval, for the first one, I think that things are better are not going to be better because as you mentioned, vaccination is accelerating. And also even though people get sick, the protocols in the medical experience are better. In this. So I think and I'm confident that things are going to be better for the last quarter. And as I just mentioned, the last observation that we have that has the previous month.
It was much better than we expected. So it's very hard to forecast the things that happens every 100 years and so on and so forth. But I'm very confident that things are going to be much better in this quarter. But I have to put the disclaimer that we cannot foresee the future. And now about the technical reserves, what happens in technical reserves is explained mainly because we have the annuity firm has been growing very fast.
So that's mainly what is explained in the and also because of the inflation, but mainly because we are doing so well In terms of how much we're selling premiums, actually the size of the market was much higher than expected. And even though we have our market share more or less of 46%, But mainly what explains because last year at this point, we were having perhaps the same or perhaps 4%, 7%. But the size of the market was much more higher. And therefore, maintaining this market share, That explains and remember that in the annuity business, when we sell the annuities and most of it goes at The first one to reserves, which eventually are used to pay to the pensioners over time. And of course, these reserves also, We will have to actualize them by inflation.
I mean, we will have to because remember that the pensions ARPA in real terms. And therefore, whenever the inflation goes up, then the technical reserve will have to go up. But mainly, it's because of the growth of the market. And remember also that, of course, we do not have a problem in terms of the asset management of the asset liability management because even if liability goes up Due to inflation, we are investing in securities, which are linked to inflation. So There's a hedge there, so it's no problem for us.
So that's what you will see the technical reserves. That. It's because we have been growing so much. That's the explanation. Actually, in the insurance business, it's actually in the loss ratio where you will see a where we have 2 things, sir.
We have where we have the claims that have been paid, but also we have what we call the incurred but not reported reserve. And that's according to the previous behavior of the claims, We forecast how much has not been reported but has already occurred. And since and the experience with this pandemic is that we have seen a lag as far as 4, 5 days to get Investor Relations. The documents that show that the beneficiaries have the right to claim. So the incurred but non reported reserve also is in this loss ratio is not in the other technical reserves.
I hope I have it clear with the answer. If not, then you know.
Yes. No, no, very clear. Thank you. That's very helpful. If I could ask just one Quick question.
Just back on the guidance, on the net income guidance, 34% to 35.5%, you're on track to deliver that. So and you're not changing
Investor Relations.
Yes, okay, perfect. Thank you.
Thank you, Tito.
Thank you. We will take the next
Investor.
Odeno Bank is doing an IPO process and Mexico is actually one of their target markets. In Brazil, we saw that valuation of incumbent banks have been very much impacted by this competition with Saicom Bank. So I was first of all, I want to understand a little bit how do you understand that competition with Fintech's impact to your business and How VanArts is preparing for that, right? You mentioned the partnership with HAPI has some initiatives in the digital as well, right? And for my second question, I wanted to understand a little bit if you could give us an update on COGIE in Mexico, the Eastern Payment Initiative.
I understand it hasn't picked up as much as we saw in Brazil with peaks. So can you help us understand why is that and What is the expectations I had for COGIE? Thank you.
I'll start with the first one with Paco.
Thank you, Ricardo. Well, we have 3 different players for the strategy and to this prepared ourselves to compete with the fintechs. One is the as Zafar mentioned in his exposition, the Accelerate the digital transformation of Anorpe. You can open all the product in less than 10 minutes in mainly digitally. If you have to go to the branch, the processes are completely linked.
So that's on one hand. The other hand is the new digital bank, brand new that we are working on. And the third one is the strategy with Rappi that we already mentioned. So the key point here is, As they are not being as regulated as we are because they are not the bank, we have to move forward towards the digital onboarding where we are working on and we will be ready to launch before the end of the year. So and as I mentioned the last quarter, Ricardo and I will insist on that, Not all the Fintechs are the Nirvana neither the banks are the hell, no?
There are plenty of room in the middle and we have to work on that. And if you want me to answer the second one to the CODI one. Yes, please. It's a big challenge, Ricardo, because the CODI we have been tracking peaks. And the challenge here in Mexico is that CODI, you need an account to open the to operate CODI.
So it's not a design based on financial inclusion because you need to open the account. So we are working with the authorities to see if we can leverage Codee in a different way, we can In some way, let the people use some kind of payments as happened in India Below some amount that can be under the fiscal or the taxes review, So we can improve and we can foster the use of COLI. But mainly, the main challenge is that one, you need the account and the financial inclusion. As you know, in Mexico. The financial penetration is less than 50%.
Thank you.
Thank you. Now we will take our next question from Alonso Garcia from Credit Suisse. Alonso, please go ahead. Alonso, please unmute yourselves.
Hello, everyone. Can you hear me?
Perfect.
Thanks for taking my question and good morning to everyone. My first question is on insurance. I mean, you mentioned an impact of BRL 3,100,000,000 in claims from COVID for the 1st 9 months of the year. Based on that, I estimate that it's 400 for the 3rd quarter, which is less than half in the Q2. But I was wondering if there was something else, Any other line of your insurance business that was impacted by COVID in this Q3?
Yes, I think you mentioned in a previous question about the incurred but not reported reserves. So I don't know if you can possibly [SPEAKER TONIO ALVAREZ ALVAREZ:] I quantify the impact on that mine during the Q3. And my second question is on RAPI. I don't know if you could provide A bit more color on that initiative. For instance, how do you define active rates for your clients if you have already set a target in terms of cards for next year.
And finally, if there is if you could provide color on the average ticket so far in those cards. Thank you.
Thank you, Alonso. I will start with the insurance business. We don't see any remember that as I said, 70% of the insurance business is the life insurance. So everything is there. So we don't see anything more, no?
Talking about Rafi, Paco is going to
Thank you, Alonso. We prefer to give you all the information in the Investor Day. As you know, the as you can imagine, all the numbers are very volatile. [SPEAKER JOSE MARIA ALVAREZ DE SOTO:] So we're working on then for giving you some forecasts and definitive numbers.
Investments. And Alonso, just on your first question about insurance, the number you have, 400,000 is almost 1,000 this. Once you adjust by the reserves, so in total for the year, the impact has been MXN 3,100,000,000. So the 3rd quarter accounts for MXN 1, if you net this.
This is €400,000,000 impact in claims and €600,000,000 in technical reserves from COVID.
That's correct. So the impact from COVID in the Q3 is MXN 1,000,000,000. Okay.
Very good. Thank you, Tomas. Thank you, everyone.
Thank you. We will take the next question from Jorge Henderson from Santander. Go ahead, Jorge.
Hi. Thank you very much for the opportunity to ask questions. So I have a follow-up question on your loan growth expectations. I I mean, you already spoke about the government, corporate and consumer segments. But regarding SMEs, Your growth was flat on a quarter to quarter basis.
So my question is what do you expect or when do you expect SMEs To pick up and reactivate and how do you see the asset quality trends in this segment? And also I have another question. I mean, this is on rapid card. I know you are saying that You want to provide more detail on your Investor Day, but I was wondering if you have Any asset quality data such as NPL ratio or something like that? Thank you.
Let me start with the second one. As you think, Mario, when you start business, you not even see the vintages of the first part. This would be very difficult to give numbers. That's why I think what Paco mentioned about wait to see the evolution of The cars and looked at the evolution. What I can tell you is that the milestone at the beginning was in activation and the number of cars, And we are right on track to achieve that.
And we are taking all the elements to make that business as profitable as it needs to be. The other one that you mentioned is the SME. It's not that we are retreating from the SME at all. I mean, If you look at the numbers up to the Q2, we were the only ones that we were gaining on the market. We were flat as you mentioned in the Q3, not because we want to retreat from that, but because it's a segment that you need to be very careful on that.
What we are doing right now is creating the right products for that segment based upon the new normal that we see and also taking advantage of the huge funding that that segment is giving us. So we are concentrating a lot more on the service side on the SME, and we are not disregarding the lending side at all. But with the service side, we understand the behavior of the client and then we move into the lending side. So you will start to see Pretty good momentum on the SME starting on the Q1 of next year.
Okay. Thank you. Just a follow-up on the rapid card. So I was wondering if you I mean, I think you already asked this, if you have any target for next year. And I mean, you've talked a lot about A lot about this, you see a lot of competition coming from NuBank and coming from Huawei and other credit cards.
So I don't know if Do you think you're going to be able to compete with this like being the leader on this segment? Or do you expect like to I don't know more detail on the competition like on your opinion on that. Thanks.
No. Look, I think what Paco mentioned is key. And Investor Relations. Three strategies Van Norte decided in 2019. Complete the evolution of Van Norte in the digital space.
You can open a digital card on Banorte now in less than 5 minutes with an extremely good customer experience. So that's not the lack of competitive advantages for Panorpe. I think the advantage that the new banks have is the cost because they don't have any branches at all. That's why the launch of the digital bank that Paco mentioned is key because that bank will operate at even a less costincome ratio than the new banks because of the share services that we will provide from Banorte. So We are we don't disregard the competitions.
We like the competition a lot. And in order to compete with the Initiatives like the new bank, you have Rappi on one side and the digital bank on the other side that will not only provide the lending side, but also the wealth management side and all the services of a full bank with the digital costs. I think that's the way we are preparing for the competition.
Okay. Thank you. Just one last question. Do you have data of the net promoting score
Investor. At this point in time, what we have is We are testing the market on that part, and we will start getting the NPS once we normalize all the processes and products that we are launching in the market Because right now to launch the NPS, as you know, in Banote, we have an NPS online real time every single moment Investor Relations. And on that, it will happen the same. We are building up that feedback in order to have that metrics for you. As Paco mentioned, Pretty soon, you will get those numbers.
Thank you very much for the detail.
Thank you. We have received 2 questions in the chat. So one is from Inigo Vega about wrapping Inigo, I think that with this your question was already answered. The other one from Jeff from Amundi regarding the variation in the CET1. Jeff, it was basically the dividend that the bank paid to the group
that is MXN 10,000,000,000. That basically explains the difference.
So with that, now we will take the next question from Edson Murglia. Edson, please go ahead.
Hi, good morning. Do you hear me?
Yes.
Thank you. I have a couple of them. The first one is related to digital transformation, not only in the bank, But what about the other part of the businesses as the group? Maybe the brokerage business or even the pension or the Afore, or there is a part of the strategy that it's going to take maybe couple of years from now. The second one is related A follow-up on the dividend statement.
I know that you already mentioned that you're in talks with the regulatory authorities. But my concern is, It is something about the regulators are not comfortable with. It seems that the economic recovery is in a good pace and maybe the worst is over. So I just want to understand, is it part of the regulators or it's a concern from regulators or it's more than a market concern.
I will start with the second one. I think the regulators are waiting a little bit to have more clarity on what's going on. But they definitely want to increase the dividends. They need Hard data to release them, but we expect that to happen before the end of the year. We still don't know, obviously, and we are talking with them, but that's my feeling.
And the first one is you are right. We don't want to be a digital bank. We want to be a group that work in a digital world, And that's the whole difference. So we want to be digital everywhere. So in the pension funds, in the brokers, in La Fora.
Alegre Pare, you will see that we are taking some steps going there. So it's our decision to move in a digital And we are everywhere. And you will see that we are working in all the fronts. And that's our main target for the 1, 2, 3, which we will release in the
Investment. Okay. And last question about maybe efficiency that you discovered during this pandemic in Times. Are you expecting to be in a hybrid working mode for the following years and maybe efficiency on the profit levels, maybe you don't need all the office spaces that you have in Mexico. And regarding on that, what is your thoughts?
Yes. We'd like to learn something about all these. So we released like I don't remember a lot of meters of rent Here in Mexico, it's like €200,000,000 per year. So we will go hybrid and everybody is happy to do it. So I hope we learn something.
And in the future, we will work hard, but a little bit flexible. It depends on the areas. Obviously, if you go to a branch, you need to be there, no? But a lot of people is preferring to work Iberit and we will respect that and then we will make some accountability and see if that's working. And my bet is going to work perfectly.
So We want to be a modern bank and the people is going to be happy. And if they are happy, they will produce more and it's a win win situation. We will both of that, Bruce.
Okay. Thank you so much, Magnus.
Thank you, We will take
the next question from Gilberto Garcia from Barclays. Gil, go ahead.
Hello. Good morning and
thank you for the call. Several state governments, particularly those where there were elections
this year, have been in the news lately due to having that. Have you seen any impact from this? Are you comfortable with your exposures to state governments. Thank you. Yes, the answer is yes.
We don't see any problem there, and we would love to go to work with them. Remember, when we made this work Invest. Everybody was concerned, but all the competitors, all of them, they went Investor. After the governments and the rates went down drastically and now everybody is there. So we were the first ones.
We know how to do it and we are very happy with them.
Thank you very much.
Thank you, Hill. Now we will continue with Jason Mollin from Scotia. Jason, please go ahead.
Hello. Can you hear me? Good morning.
Yes. Thank you
for the presentation, Investor. Marcos, Raffa and team. I have two questions. 1 on potential risks and 1 on the group's digital strategy objectives. I mean, you've made comments on insurance normalizing next year in 2022, loan growth picking up, NII, NIM recovering.
What are GF Banorte's management's greatest concerns related to generating the kind of pre COVID ROE levels of 20 Investment. 1, I think that you mentioned was that the potential regulatory change for the Aforis, the pension funds. Investor. And actually, I just want to make sure I got that number. I think you guys disclosed or spoke about a All else equal, hit to net income if the commission's level was indeed to be reduced to 0.57%.
But also what are the other main risks you see? And just on the it seems like we're waiting, we're excited to hear about More details on the 3 pronged digitalization strategy that you've talked about and that We should hear more at the Ivano today. Have you guys established a firm date for that? Thanks.
Around April, we still don't know. As soon as we know, we will send the invitation to you. And but Let me give you some guidance on that. We call it the 1, 2, 3, the new step of Investment. The bank is to be the first one in the year 'twenty three, talking about the Italy.
So we better move there and you will see a lot Of the stuff that we are working on, no? And in April, we will see the Investor Day. And the potential risk, yes, the A40 remember that A40 is likely 6% of our business, no, around that. And this is going to be hard, maybe. We still don't know.
We will fight for that. But you will see some good news in the portfolio in the future. So I am concerned obviously, but not so concerned. We need to work. And the potential risks, all of them, so is we have a lot of business in Mexico.
And whatever happens to Mexico happen to us. And my immediate concern is we're proxy of Mexico. So whatever happens to Political issue, immediately, the reaction comes to us. So but it is what it is
Jason. And about the clarifications you asked about the impact on the foray that Fernando discussed, he stated EUR 700,000,000 assuming we don't do anything, but of course, we will take actions to reduce.
So I mean, I thank you. And I understand Clearly the proxy of Mexico and political risks. But on an operating on the operating side, What are the things that could limit your ability To achieve the profitability prospects that you've been talking about, is it competition? Is it irrational Pricing, is it that costs for some reason get out of control? Or What keeps you up at night when we think about the operating side and not meeting these you have and I think you've shown it and talked about it and we like Talk about the diversified nature.
Yes, Sephora is only 6% and insurance is X. But what can you tell us on the operating side That you want to control and make sure or concerned about going
forward. I would say, Jason, that it's not external. It's internal. It's our ability Investo. Guadatta, using in Mexico and using in digital world.
So we better be prepared. We better be prepared to be hybrid, whatever you call it, Investing. To work, we need to work a lot. But my concerns are internal to work as a team to make it to understand everything And to move faster than the others because we are in Mexico and we know the situation. And if you if we do that, I'm sure that we will go faster than our good competitors because they
are very good
And we can provide good results for you. That's my main concern internally Work as a team and to understand perfectly what's going on and to be faster than others.
Is that a way of saying that is the market getting tight for good talent in Mexico, given these startups Willing to pay? Is that concern about the talent pool and that being pulled towards Dutch. These new ventures that are achieving looks like so far potential value.
No. The way I see it is we were the first one to launch This program to our customers, we were the past is very good for us. But now, Yes. All the competitors are there. All of them, they want to be in Mexico.
Mexico is a great country. And if you want to be on the world map, you need to be in Mexico. So they will unleash us everything, and we need to be prepared, and we need to move fast. I'm saying that We have the best talent on my front of me in Mexico, and we need to put that into work.
Thank you. Jason, just one thing. The digital evolution of AnorTe and you will see that on Investor Day, but we can also show to To the investors whenever they want because you can do that on our mobile application. I think we have achieved A very a really big advantage on the digital onboarding process on the consumer and also moving aggressively into the transactional fees of the bank. When you see what and Marcos mentioned, the culture of Van Norte has evolved a lot in the last 5 years.
So I think culture is also a key factor for Van Norte and it's what is helping us to attract Investment. And another thing that we want all to tell the market is that We are joining forces with the most prestigious institution in Mexico, University and Graduate Programs that is almost Mexico, Tejirovcom on the rate. In order to keep providing all the services to the young and coming to the high talented individuals on that alliance. So we are moving in every single part that we need to put the brand of funnel. And the digitalization process is in that space.
And the culture we hit evolution of Anorte is also something to be proud of.
Super helpful, gentlemen. Thank you.
Thank you, Usos. Thank you. Now we'll continue with Yuri Fernandes. Yuri, please go ahead.
Hi, all. Can you hear me?
Yes, you're here.
Hi, Rafa, Marcos, everyone. Thank you for the opportunity. I'll be brief here. I have just one question, actually a follow-up regarding asset quality. This quarter, your settlement gains On the new Inigo formation, I guess, the cash collection was a bit higher than normal, like 3, 4 times the usual run rate.
And again, I got your NPLs are very good. Asset quality trends are very good this quarter. But we don't know what drove the settlements to be much Hire. So my question is, what is explaining this, I guess, ARS 2,200,000,000 like reversal this quarter regarding settlements? That's my question.
Thank you.
I don't think nothing is strong in our jury. As you can compare to that to other years, You see that there's a kind of seasonality in that part. What I can tell you about also is that the cash recovery in the collection Shop has been going up and not we expect to have compared to last year close to 40% more cash collections that the year before. So nothing extraordinary. I think this part of the seasonality if you compare on year to year Partners.
So that's what I can say, nothing really out of the ordinary. The only thing that we have improved a lot is the cash collection process in this funding.
Perfect. Thank you, Rafael.
And we will take the next question from Carlos Gomez Lopez from HSBC. Carlos, go ahead. Carlos, please unmute yourself.
Yes, sorry about that. Thanks again for the call and for your patience. Two very quick Solutions. The first one, I cannot know the answer. If you already have the name and the date of launch of your new digital bank, I suspect that is going to come in the Investor Day.
And second, regarding competition, we have seen asset quality being very good across the board. And I wonder How come that is not reflected in some of the bases, I think, to be more aggressive and seeing narrower spreads? Are you considering that for yourself? Or are you seeing that in any other player that competition has started to put a route, especially simply because BEST. The asset quality performance has been so good.
Thank you.
This was the company of the bank, but yes, we will initiate the sorry. Investor. It's fresh and different. Different. So you will hear from that.
And competition is and this is a start of pressure, yes. But we have been working with this competition. We have 50 banks in Mexico. So Invest. For us, it's not new.
And we know that everything that could happen and everyone is going to be there. And we need to be prepared. And it's good for the country at the end. So welcome, yes. We know how to work with that.
We prefer to work internally and not to worry too much about that type of competition.
And Carlos, if I may to add what Carlos mentioned, Panorte has the balance sheet, has the liquidity, has the capital to compete in the market at a very strong position and also the best risk numbers in the market. So our risk adjusted margin is the best in the market, second to only one bank because of the mix of the portfolio. But the risk adjusted margin and the risk numbers are extremely strong. So whenever we see that the risk is right, Bernorte will be there.
Okay. But again, you have not seen a significant increase in competition. You have not seen somebody becoming Significantly more aggressive after the pandemic than they were before.
No, as usual, it's a lot, but as usual.
Thank you so much.
Thank you. We'll take our next question from Federico. Federico and Adripo Velasi, sorry. Now he undress his hands. So thank you, everyone.
Thank you for your interest in Manorte. With this, we conclude our presentation. Thank you very much. Thank you.