Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Regional's third quarter 2026 earnings conference call. We are joined today by Manuel Rivero Zambrano, Chief Executive Officer of Regional, Enrique Navarro Ramírez, Chief Financial Officer, and Alejandro Lobeira, Head of Strategy and Planning and Investor Relations. At this moment, all participants are in listen-only mode. After the speaker presentation, there will be a question-and-answer session. To ask questions during the session, you will need to press the raise hand button. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Manuel Rivero Zambrano. Thank you, and please go ahead.
Good morning, everyone. I hope you and your families are doing well. Today, we're presenting our third quarter results of 2026, which show an improvement in profitability and signs of stabilization that we see as the beginning of a recovery. We continue to operate in our challenging environment while seeing opportunities to grow in our target markets. Our commercial priorities remain focused on generating revenue, developing the business of our newer branches, and strengthening our funding base through checking accounts and deeper customer relationships. Net income for the quarter reached MXN 1,676 million, up approximately 10% year-on-year, and return on average equity stood at 17.6% on LTM basis. These results represent progress from the first half, although sustaining the recovery will require continued improvement in revenue generation and productivity. We have been some deterioration in credit quality this year, reflecting in higher Stage 3 loan balances.
Our consolidated NPL ratio stood at 1.5%, compared to the 1.3% at the year-end and 1.4% in June. Quarterly cost of risk declined 0.9%. We continue to monitor credit trends and individual exposures closely, while a focus on collections and discipline underwriting. Regional delivered 10% year-on-year loan growth, while core deposits increased 9% and net interest reached MXN 4,025 million, up 3% year-on-year. Excuse me. Quarterly net interest margin stood at 5.7%. Our current outlook assumes stable benchmark interest rates, and we continue working to improve the funding and lending mix, with benefits that we expect to develop gradually. Demand deposits were positive, developed this quarter, growing 16% year-on-year and 4% sequentially. Their share of core deposits increased 47.6%, from 45.2% in June.
Building checking account relationships remain a central priority because of their contribution of funding costs and their role in developing broader relationships with our customers. Other diversification efforts also contributed to this quarter. Non-financial income increased 9% year-on-year, supported by 46% growth in insurance income. Within fee business, card and merchant fees grew 7%, and current account services increased 13%, although total net income and fees declined 1%. We continue to focus on growing these customer revenues. Insurance and valuation income also form part of our growing business, although their contribution varies between quarters. Part of technology investment cycle is now complete, and we have moderated the pace of new branch openings. Our focus is on converting the capacity we have built into greater revenue and productivity. We will continue investing selectively while working to improve operating efficiency as these investments mature.
Within wholesale banking, Mexico City continued to show strong momentum, with its portfolio growing 33% year-on-year. Looking ahead, we see opportunities to continue growing small and medium-sized businesses while taking a more selective approach to residential real estate lending. Our priority is to develop profitable relationships while maintaining our underwriting standards. Retail banking also continued to grow. Performing customer loans increased 13% year-on-year, while mortgages grew 11%. Our commercial effort remains focused on deepening relationships across lending, deposits, and transactional service, including through the branches we have opened in recent years. As we previously discussed, Hey Banco is increasingly focused on business customers, including companies and individual entrepreneurs. We continue to see strong customer growth in these segments.
In terms of the loan portfolio, in terms of business, loans reached MXN 4,999 million, and we expect business lending to continue growing and increase in the shares of total loan portfolio. The reduction in individual customers that we have previously discussed reflects credit card customers whose balance have been written off following the default, together with our limited appetite to replace those accounts with new credit card customers at this stage. Our commercial effort is concentrated on developing profitable business relationships, and we expect this shift to support a more balanced risk profile, and we continue to monitor the recent increase in delinquency. On funding, Hey Banco has maintained a discipline in retail pricing. We are pursuing additional institutional market funding supported by credit rating as part of our strategy to diversify funding sources.
Quarterly net income at Hey Banco reached MXN 75 million, compared to MXN 70 million in the second quarter. We are pleased with the improvement in profitability. If this continues in line with our plans, we expect revenue growth in our existing infrastructure to generate greater operating leverage and further improvements in our profitability over the incoming quarters. Turning to Hey Banco, total billing increased 17% year-on-year, led by payment facilitators, while billing grew 48%. Hey Banco is now the sixth-largest acquirer in Mexico. We see potential to continue growing acquiring volumes at an annual pace of between 15% to 20%, and with a continued focus on profitable growth and capabilities needed to serve our customers. We maintain our full year net income growth guidance of -5% to flat.
Our current expectation is to finish the year approximately around 3%, and we also maintain the rest of our published guidance. The progress in the demand deposits and our commercial focus support this outlook, while they continue to monitor margin and credit trends closely. Banco Regional ended September with a total capitalization ratio of 15.9%, almost entirely Tier 1, in line with the capital allocation approach we have previously communicated. We will pay an extraordinary dividend in November equivalent to additional 40% payout following the 25% payout distributed in April. Our approach is to retain excess capital when we see opportunities to deploy it over the next 18 months, and to return it to shareholders when we do not. This distribution reflects the approach while preserving the capacity to support selective growth.
As announced yesterday as part of our succession plan, the board approved the appointment of Guillermo Estrada Attolini as Chief Executive Officer of Banco Regional, effective November 3rd. Guillermo brings 37 years of experience at BBVA México, most recently Head of Commercial Banking. The current CEO, Héctor Cantú, is stepping down, but will remain as part of the board and as an advisement to management, ensuring orderly transition. Our strategy and priorities remain unchanged. The third quarter gives us stronger basis for which to continue improving results. We maintain focus on revenue generation and funding, on making better use of our investments, and consolidating profitability at the banco. We believe these priorities will support a sustained recovery and better returns for our shareholders. Thank you very much. We appreciate any question.
Ladies and gentlemen, to ask a question, you will need to press the raise hand button. To withdraw your question, press the lower hand button. Please stand by as we compile our Q&A roster. Our first question comes from Eric Ito with Bradesco BBI.
Hi, guys. Good afternoon. Thank you for the opportunity of making questions. First of all, congrats, Guillermo, on the new role, and thank you, Héctor, for all the partnership over these years. My question is, first on loan growth. I just wanted to touch, I think you guys are running on the top range of your loan growth guidance of 5%-10%. But when we look at the breakdown here for commercial loans specifically, we saw a deceleration in the quarter. Year-on-year, it went down from 7.4% to 5.7%. When we look at the regions that you are most exposed, I think Nuevo León was one that maybe slowed down the most. The first question would be just to understand the latest update on the dynamics there. Also maybe attached to that, my second question is regarding asset quality.
We saw a deterioration mainly in the wholesale business. Just wanted to get an update on that, and if you guys could provide any color on loan growth and asset quality for 2027 or the initial expectation, that would be great. Thank you.
Thank you for your question. Eric, sorry. Yes. I will start with the second one because it's the one that we have been receiving more frequently about the deterioration on the large companies. As you can see in the report, there is also a little bit of deterioration on, it says consumer, but it's auto loans. We had some issues on some regions, but we have already fixed that. In terms of auto, mortgage were two very large mortgage loans, and that happened. But in terms of commercial and medium-sized businesses, it is similar to other quarters, some large, some medium. The medium ones are more in the agricultural or on the agro business, and the large ones are mainly in real estate, housing real estate. Most of them will be solved, not in the next quarter, but in the next two quarters.
One, because the cycle of the agro and the insurance and the foreign exchange is helping them finally. It's going back, the pricing for the ones that export. And in terms of the home builders, they are taking longer to sell the houses, then it's taking longer to pay their loans, the bridge loans. But it's similar to other quarters, and we expect an improvement for the last quarter, not as good as the last year that we decreased via foreclosure and via restructuring more than MXN 500 million. But in a very good manner, more than MXN 200 million of recoveries.
That is in terms of asset quality, in these two sectors, it's getting complicated, the business, but we still like a lot these two sectors. The growth has not been. We are being more selective, especially on home builders, on vertical developments or flats buildings. We are being more selective on what type and in where cities and which specific locations. In terms of growth, we are pushing part of the mandate that Guillermo has for as new CEO of Banco Regional, is to focus on the growth in all the regions, not only in Nuevo León. Then we expect to continue.
We have seen a better demand, not too positive to say very optimistic for 2027, but we can maintain a similar growth in high single-digit or low two digits for the next year. Specifically where we do not have that type of vision, but by market share, is still center Mexico City and surroundings and the south, where we can grow faster.
Okay. Thank you.
Thank you to you, Eric.
Our next question comes from Ricardo Buchpiguel from BTG Pactual.
Hi, everyone, and thank you for the opportunity of making questions. Can you comment where do you see the structural ROE of the bank and how important it is to rebound the growth on non-interest bearing demand deposits to achieve that? In that matter, if you could just give an update on what the bank has changed in its strategy to attract more deposits and eventually improve ROE will also be great. Thank you.
Yes. The long-term ROE, we still see it around 18%, between 18% and 20%. It depends on what numbers do you select. For the next year, we see an improvement. We see that the 16% is the lowest one, improving to 17%, at least. As you heard, we will be paying a dividend of 42% payout, the total payout for the year will be 67%. As we mentioned in last quarter, we will maintain this, I don't want to call it policy, but the same frequency on April and October to pay two dividends, and the second one to do the evaluation. That will help to the ROE in the long term to maintain the excess of equity being redistributed to the investors. What was the other question?
The other question is more on deposits and how important.
The strategy is, in businesses, it's mainly to offer more, to become the main account, to become the treasury of the companies. We have been present in many states already enough to not be only a lender, to become a full relationship, a deeper relationship with our customers. This year, we have increased a lot of the payroll disbursement. We are not yet in the payroll lending very aggressive, but payroll disbursement with our companies, the companies that we lend, we have increased the goals and we have improved a lot all the technology, both to do the onboarding of the payroll for the company in the electronic treasury system, Banregio electronic banking or web banking, but also the process for the individual to move from level 2 to level 4 and receive deposits through the app.
All this technology is already in place to help facilitate the execution of the migration, because it's a hassle for the company to change from one bank to another bank and replace all the debit cards and all this process. We have automated a lot of the process. We expect that type. We have also included more tax and more flexibility on payments on our electronic banking, and also for collections, our Hey Tech solution is working very well for collections and, how do you say, domiciliations or direct debits. That is in the part of the companies where we expect to increase demand deposits of low cost. In the individuals, it's mainly through the new branches and through the existing branches and through the bankers. Also, we are launching promotions.
In Hey Banco, we maintain the Supercashback and the account for minors, and some promotions in that matter. We are also remembering our customer base about our rates in time deposits. We still have, from the traditional banks, one of the better rates, and we are constantly reminding that because we saw an increase a lot in mutual funds, and not at the same pace in time deposits. That's part of the commercial efforts and specific, I don't call strategies, but tactics that are already in place, and we are defining the new ones for 2027.
That's clear. Thank you very much.
Our next question comes from Tito Labarta with Goldman Sachs.
Hi. Good morning, or good afternoon. Thanks for the call and taking my question. Two questions. I guess on the fee income, a little bit muted this quarter, particularly the card fees. Just how do you see that continuing to evolve from here? Second question on your net interest margin, also, still down a little bit as we're probably at the end of the easing cycle. Do you think this begins to stabilize if loan growth picks up? Can you see any upside risks to the margin? How should we think about net interest margin continuing to evolve? Thank you.
Yes. On the margin, yes, we saw in the total NIM, we saw a decrease of 6 basis points. If you see the NIM for loans improve a little bit, is the one that we monitor closer. But being securities investments as large as they are right now, there are MXN 60 billion, they have some impact. Also on the repurchase agreements, some of our pricing we are considering to change from CETES to TIIE. CETES is having some volatility, and that is not helping to fully stabilize the NIM. It is just 5 basis points or 6 basis points upside or downside. We do not see a structural change. As we have mentioned, and you can see it was the first question, wholesale is growing 6%, 7%, 8%. And if you take out the government loan that we granted on December last year, it will be like 6%.
But we remain positive to continue growing all the other credit lines of business, growing faster than 15%, that within time will change the structure, but it will not happen next quarter or the next one. But going down, as long as the policy rate does not get reduced in the next meeting or the next two meetings, we do not see any further deterioration for the loans. On the treasury-related and investment securities, it's part of the market movement, especially the CETES 28, that is our reference for pricing time deposits. In terms of fees, that line includes mainly the acquiring business and most of the cards transaction interchange fees. It's very stable as you can see, the, how do you say? The total-
Total cost.
The TPV for acquiring business.
TPV, what?
No, total volume of acquiring business. I forgot what the P stands for.
Yeah, payment. Total payment volume.
Total payment volume, exactly. The total payment volume only increased a little bit, and is a business that was very stable on this quarter. For next quarter, we expect to improve, not only because the volume, the total payment volume, but also because the pricing that we are adjusting with the large customers, as we have explained on previous conference calls. Some of them are very new, some of them have a very different behavior than a normal merchant. We have some customers like Uber or Netflix through these payments facilitators, not directly. But the behavior is different, more rejections, more trials, more volume in general, that we have to adjust our pricing. Say that is a line that should grow back.
Also, it's related to the reduction that Manuel explained at the beginning, that part of the explanation on Hey Banco of the reduction of customers is credit cards that are not being replaced once they default. That is part of the explanation also on the volume of the credit card usage.
Okay. No, that's very helpful. Thank you. And maybe just on the potential cap on interchange, what type of impact do you think that can have?
It looks like it will take place, the cap on 1.3%. Last week was an announcement that the negotiations are still going on. There is an impact or potential impact on the issuer side, but it's a potential benefit that, in our case, is similar for the size of our two businesses. That could net. In the long term, we see it positive because it could increase demand deposits in terms of more merchants and deposit accounts. That's our view up to now. During the week, the news was that we will postpone a rule that was approved, but it became in part of the negotiation about the merchants with the zero cost with sales above MXN 3.5 million. Everything put in the mix will be net for the acquiring business.
Okay. That's very helpful. Thank you.
Would that be more product expansion or is that what you mean?
Our next question comes from Ernesto Gabilondo with Bank of America.
Thank you. Hi, good morning, Manuel, Enrique, and Alex, and thanks for the opportunity to ask questions. My first question is on your net income growth expectation. You guided between -5% to 0% this year. We look into the first nine months, you are located at the low end of the range. Having said that, the economy seems to be growing faster, your loan book expanding at double digit, and you mentioned it could be around 3% growth this year. If that is correct, the net income growth for the last quarter could be between 15% to 16%. Just wanted to double-check that with you. Also, I believe it's too early to tell, but any color on what are you seeing the trend or the expectation of the earnings growth next year? Is it something around single-digit, low double-digit?
Anything that you can provide and what would be the rationale behind it? Thank you.
I didn't follow, Ernesto, the arithmetic for the net profit, but we maintain the guidance in -5% to 0%, and our expected is, well, is not just in the middle, is around -3%.
-3%. Okay.
-3%. Yes. To do the +3%, it will be more than a MXN 2 billion quarter. Even we are very positive to match the last year quarter, not that much.
Okay. Considering what I was saying to you, that loan book is growing at a double-digit, the economy is kind of improving. Any color on what should we expect for next year?
Very similar on the growth, as we have mentioned also last quarter. Very similar. Even though we could do more than 10%, we see around 10% growth as Regional, both Banregio and Hey Banco. As I mentioned in the previous question, we see more demand, not only for working capital credit lines, but also for some projects. But it's not remotely 50/50 as used to be the growth in our loan book.
Okay.
It's still more working capital lines.
That's on loan book. For any expectation, for example, net income that this year is contracting because of different issues. Now the easing cycle, lower tax deductions, but thinking about next year, how optimistic can we be in terms of the earnings improving next year?
Well, we could be more optimistic because we will not have the 2% impact on the net profit from taxes. Still to see the new cap on deductions that is being released for this fiscal year. We calculated around between half and 1% as additional of effective tax. It's more like half percent. That will be part of the negative side. In terms of margin, as we don't see any further reduction on the policy rate, we expect the margin to grow back in line to the loan growth. Not exactly in line because as you have seen, the demand deposits is not growing at the same pace. We are funding more with time deposits, but the changes that we see this quarter make us positive that we can maintain at least yearly, 50/50, the funding growth between time deposits and demand deposits.
Perfect. Thank you. Just a last question in terms of Hey. It is already contributing close to 5% of Regional's net income. What should be the target for Hey's contribution to Regional in the next years? Any color on competition? We have seen it has been kind of tougher in the credit card business. You have been downsizing and focusing differently in other digital products. I also wanted to hear from you, how are you thinking about Hey contribution and competition in the Hey's landscape?
In terms of competition is the same. There are no new players. There are more than enough. It's still Nu, Plata, Openbank, Revolut, and Mercado Pago, the largest ones. Recently, we saw some promotions from Klar, after they acquired the license from Bineo. Say that nothing really aggressive as 2023 or the beginning of 2024. 2023 and 2024 were the more aggressive ones. Again, we are not focused right now on growing credit cards.
Okay.
It's over-demand right now, over-offer. Basically. We are more focused on auto loans and business loans.
Deposits.
Deposits, yes.
Customer growth.
Excellent. Any idea of how much Hey could be contributing to Regional's net income in the next years?
6%-7% next year. The goal is still 10% in the next three to five years, considering that we want to continue growing Banco Regional.
Perfect. Thank you very much, Enrique.
Thank you to you, Ernesto.
Thank you, Ernesto. Thank you.
Our next question comes from Yuri Fernandes with JPMorgan.
Hey, guys. Good morning, good afternoon. I have one regarding the new CEO, the bank CEO change on Banregio. Just checking if there is any change on strategy. Maybe too soon, but if you can comment what should be new here on the management change. I have a second one regarding expenses. I think this was a good quarter for you on expenses here. Very controlled, especially on the personal and administrative expenses. So just checking what should we expect for this line. If you can comment just on the rates and depreciation and amortization. This line was a little bit heavier this quarter, like up 50%-60% quarter-over-quarter. Even though total expenses, they were good, just checking what drove this higher, rate depreciation amortization line. Thank you very much.
Thank you to you, Yuri. I will start with the second, that it was a mistake. We published the wrong number. There is an expense that was wrongly classified. I don't know if you can. Can you project, or it's already replaced? An apology for that. Say that-
Regarding total expenses, should we-
In total expense, there is no change. It's just a change between administrative and depreciation, because it looks like depreciation grew a lot, and depreciation is very stable. There is no more increase there as we have reduced the number of branches, of new branches. Here it is in the screen, the correct number. In the administrative side, basically, what increases all the variable costs, mainly related to cards and, in general, business marketing and publicity, the cost of the cash transfers, that will be most of it. What we expect for the next year, we expect less than 10%, above 5%, because the expected inflation. But finally, we will have one single-digit growth on 2027, as we have maintained the discipline both in not hiring more people. Still, we are less than 7,300 employees. We used to be 7,600 last year on September.
We maintain the discipline there as well as in all the lines of the expenses.
In regards of Guillermo, the strategy continues. Our priorities stay the same, and I think when it stays, the main aspect that we were looking for was a strong commercial talent. That's what we were looking for. That's what we found. We're very happy. I think things are going to be pretty well in terms of how the team is going to receive Guillermo, and we're hopefully strengthen the team with more talent that we can generate through the year. I think we're very enthusiastic about this change, and things will carry on as we normally do.
No, thank you, Manuel. Basically hiring bankers, trying to diversify on the north, going to Mexico City, that kind of strategy remains in place, right?
Yes, totally. Guillermo has been 38 years, most of its time on commercial and transformation responsibility. Right on the money in terms of what we were looking for, and I think we're so excited about what Guillermo brings to the table.
No, perfect. Thank you very much, Manuel and Enrique.
Thank you, Yuri.
Thank you, Yuri.
Our next question comes from Andres Soto with Santander.
Hello, Manuel, Enrique. Thank you for the presentation. My first question is a follow-up on the NIM dynamics. From your comments previously, Enrique, I understand we should expect more stability, given the change in the reference rate for the REPO's, if I understood correctly. When you look at 2027, you mentioned as the main driver the policy rate, but I was curious. When you think about in terms of funding and asset yield, what are the dynamics that are you seeing here? Should we expect NIM to improve, assuming there is a recovery in lending into more profitable segments and longer duration loans? Or how are you seeing the asset side of the NIM for next year?
Yes. On the asset side, we see a very similar behavior per product, per segment as this year. I explain myself. We will continue growing on corporates and not really on government. It will be a matter of these specific loans that are granted by the government, by the Secretary of the Hacienda. But we see a stable average margin on empresarial or large companies, in medium size and small companies. But as I mentioned, we expect faster growth in small companies and consumer lending. Auto also has a better margin than the larger ones. Yes, we expect a similar level. What happened last year, or these last 12 months, not last year as 2025, last 12 months, is that because there was a lack of demand of lending, we had to compete on price on some segments. We have seen a stabilization that will be the growth.
The word is not really a recovery, it's a stabilization. We don't see a reduction on active rates, and we see an improvement slowly of the mix. More auto, more mortgage, more small businesses. Also in Hey Banco, it's mainly more businesses and more auto also.
That is very helpful, Enrique. Given this stabilization on yields and improved mix, shouldn't we expect an improvement into next year? Or you prefer to take a more cautious stance and assume that the NIM is going to be fairly stable?
We see it fairly stable because we have the other mix that is on the funding. As you have seen, the CASA ratio has increased and then decreased in this quarter. If we can maintain that around 50%, that is our goal, or below it, or higher, sorry, not below, or higher, then we will see an improvement, a little bit of improvement as the mix on the active side change.
Understood. The other topic that I wanted to discuss was dividends. Can you give us an update on how do you see the capital ratio now and what that implies in terms of space for additional distributions this year?
Yes. This year, as you saw, the last one, official one was 15.85%, almost 15.9%, the capital index ratio for Banco Regional. There is another one that we usually don't mention, that is Start. Start was around 18%, 18.2%. We decided to increase the dividend. As I mentioned, we don't see a faster growth in loans, maybe 11%, 12%, but not 16%, 17%, 20%. We don't see any acquisition or inorganic prospect in the near future. We decided to increase to 42% the dividend payout, but it was this additional 17% from the 25% that completed the 50% is extraordinary, and we would like to remark. The capital index will go down to 14% and then increase back for the next year dividend in April. As we have mentioned, we feel comfortable between 13% and 14%.
Why we decided to stop in this time in 14% is, I don't know if you saw, we got, for the first time ever, a AAA credit rating with Standard & Poor's and Moody's, and they mentioned that they like that level of capital ratio. Even though our internal policies for risk appetite can go all the way to 13%, we decided to maintain in 14% for that matter.
Super clear. Thank you, Enrique.
Our next question comes from Gustavo Araujo.
Hi, guys. Congratulations on the results, and thanks for the opportunity for asking questions. I just wanted to do a quick follow-up on the Stage movement. We saw Stage 2 loans decline sequentially, while we saw the Stage 3 increase in this quarter. Was this increase related to loans migrating from Stage 2 into Stage 3, and what were the main drivers behind the deterioration? I have a second follow-up on the insurance business. The results were really strong this quarter. Could you discuss a little bit about the drivers and how sustainable is that level going forward? Thanks.
Well, yes. In the first question, the answer is yes. The growth in Stage 3 is basically deterioration from Stage 2 to Stage 3. As I mentioned, it's a mix of specific cases on auto and mortgage. The auto is shown in consumer on the report, on the quarterly report. Mainly in agro and real estate, not in any specific region. It's just these two segments in different states. What we expect for the future is similar movements, some recoveries. Most of the real estate, or, well, not most, all the real estate loans have collateral. That is the real estate by itself, plus additional ones in some cases. We are on all the process or foreclosing either or restructuring the loan.
In terms of the agro ones, they say it's part of the cycle, some issues with the payment and the ones that export, but we expect to collect during the next quarter. That's about the migration from Stage 2 to Stage 3. As you can see in the quarterly report, there is a minor part, but it's MXN 200 million of recoveries in the quarter, of recoveries and more than MXN 200 million on payments. That's the formation of the new ones. There are MXN 500 million of deterioration on commercial ones. The other question was, Alejandro?
About the insurance business.
Insurance?
Yeah.
Insurance. The easiest way to explain is we expected to have at least MXN 65 million, an increasing on the regular sale of premiums that, after each premium, we collect a fee. Then, three times on the year, we receive payments that you can see as profit sharing, related to the new alliance that we signed last year. We have now this year three times, in the first quarter, third quarter, and a smaller one on fourth quarter. That's what makes the peaks is recurrent because it will happen every year. But we cannot forecast specifically how much will be, because it will depend on the losses that the specific business has in terms of, let's say, deaths on the life insurance or a car wreck crash in the auto insurance.
Say that an average of MXN 200 million per quarter, plus this profit sharing in these three quarters, specifically in the first and in the third, will be higher.
Okay, super clear. Thanks.
Thank you to you.
Our next question comes from Arnon Shirazi.
Hello, thank you for taking my question. I want to dive into asset quality. We saw that Stage 3 loans increased while cost of risk decreased for this quarter, and consequently, the coverage ratio. Should I expect also a pickup in coverage ratio for the fourth quarter? Thank you.
In terms of the coverage, we do not manage a buffer or an excess of provisions. We use exactly the one from the CNBV. As we manage to recover part of the ones that I mentioned in Stage 3, mainly on real estate, home builders, either way of collections or restructuring or foreclosing any of the three options, we will free some provisions, but also we will move some loans from Stage 3 to Stage 1. Or if it's a foreclosure, it will go out of the loan book of the balance. But that's the way we could see an improvement. Also, if we don't have more deterioration as we see on consumer lending or mortgage this quarter, we will see also an improvement in the coverage. But it's not something that we manage. We feel comfortable about above 1.2.
But right now, the reason is that the largest loans, as you can see in the wholesale deterioration, because they have collaterals, they do not create or increase the provisions.
Got it. Thank you.
Thank you to you.
Since there are no more questions on behalf of our senior management, I would like to thank everyone for joining the call, and we look forward to speaking with many of you in the coming weeks. If additional questions arise, please do not hesitate to reach out to Alejandro and our investor relations team. Thank you for your interest in Regional, and have a good day.
Thank you.
Thank you, everyone.