All right. Good morning, everyone, and welcome to our second quarter 2026 conference call. I'm Andrés Atala, Head of Investor Relations at Bci, and it's a pleasure to have you all back with us today to review our results during the first half of this year. Joining me today are Roberto Pulido, Bci's CFO, Sergio Lehmann, our Chief Economist, and Jose Marina, City National Bank's CFO. We are proud to share the financial achievements and the strategic advancements that have defined this quarter. Let me briefly walk you through today's agenda. We will start with Sergio providing a macroeconomic overview of the key markets where we operate, which is essential context for our numbers. Following that, Roberto will review our financial results, breaking down our performance and indicators at both the consolidated and local levels.
Next, Jose will provide an update on the positive momentum at CNB in Florida, as well as the progress made in Project WIN. We will then conclude with our closing remarks and updated guidance before opening the floor for your questions. Now, I will hand the call over to Sergio.
Good morning, everybody. Welcome. Thank you, Andrés. I will provide you, as Andrés said, an update of the macroeconomic environment for the U.S., Peru, and Chile. Volatility and uncertainty regarding the conflict in the Middle East have reappeared, even though more recently, we have received news suggesting that negotiation between the U.S. and Iran have been reassumed. To this complex scenario, we had slight concern associated with the enormous amounts behind AI bets. This has led to a slightly lower global growth prospects and upward pressures on headline inflation, driven mainly by energy prices. Consequently, central banks are expected to maintain caution for the remainder of the year until there is greater clarity regarding the Middle East conflict. The U.S. economy remained resilient during the first half of 2026. This was driven fundamentally by investment linked to artificial intelligence and private consumption.
Looking at the labor market, after showing some sign of weakness, it has regained traction in job creation, even though the participation rate has remained a downward trend due to demographic factors, reaching 61.5% in the second quarter. Now let's discuss inflation and the evolution of U.S. monetary policy. Regarding inflation, headline CPI has accelerated as a consequence of higher fuel costs, reaching 3.9% year-over-year in the second quarter. Furthermore, core inflation has shown renewed upward pressures remaining above the central bank target. Looking ahead, we expect inflation to finish the year around 3.2%. This dynamic has prompted the Federal Reserve to maintain a restrictive stance. Given that inflation came in slightly lower than anticipated last June, combined with labor market that has dispelled signs of deterioration, we anticipate that the Fed will keep its reference share rate unchanged.
This is supported by the view that the Fed's governor, Kevin Warsh, who is now providing guidance to the monetary policy in the U.S. Now, let's transition to Peru. The Peruvian economy has continued to show solid performance, with an average expansion of 3.4% over the last four quarters, supported by firm domestic demand. However, headline inflation experienced a market acceleration in June, reaching 4% year-over-year due to climate shocks, international tension, and energy supply disruptions. While we anticipate this trend to be temporary and easy by year-end, the Central Reserve Bank of Peru has currently maintained its monetary policy rate at 4.25%. Nevertheless, the recent inflation spike suggests a potential 25 basis point upward adjustment before the year concludes.
Finally, turning to the political landscape, while Keiko Fujimori's victory dissipates policy and economic uncertainty, anchored by her agenda of fiscal discipline, private investment promotion, and a hard-line stance on public security, any lingering political noise should remain secondary to the market fundamentals. Turning to Chile, during the first half of this year, the economy showed a marked loss of momentum, accumulating five consecutive months of annual contraction. However, starting from June reading, an inflection point in this weakness has emerged, pointing to a greater dynamism ahead. The behavior responds mainly to supply factors as well as domestic demand losing traction due to weaknesses in the labor market, with an employment rate reaching 9.4% in the second quarter. As a result, we expect the economy to grow below its potential this year, though we project a recovery towards the end of the year.
As I mentioned, the most recent data regarding economic activity suggests that the economy reached an inflection point in June after extremely weak performance in the initial months of the year. This more positive view is supported by the National Reconstruction Government Initiative, already approved by the Congress, which includes tax reduction and incentive for new investments. Moving on, the inflation in Chile and rates, we observed that the inflation peak due to higher fuel prices, though the increase was smaller than expected, and the core inflation remained well controlled in line with historical levels. However, the current scenario poses a dual challenge for the central bank. On one hand, economic deceleration and deteriorating labor market tilt risk to the downside. On the other hand, the Chilean peso depreciation, reaching recently close to CLP 920 per dollar, combined with Middle East tensions, create short-term upside inflation pressures.
In light to this, we expect the central bank to keep the monetary rate unchanged at 4.4%, maintaining a cautious view, data-dependent approach, alongside a slight dovish bias until there is a greater clarity. With that, I will now hand over to Roberto, who will continue with this presentation. Roberto.
Thank you, Sergio, and good morning, everyone. It is a pleasure to be with you today. I'll start with an overview of our consolidated performance before walking you through the details of our local operations. During the first half of 2026, Bci delivered strong fundamentals. As the slide highlights, our net income increased by 21% year-over-year to $699 million. This performance reflects the strength of our diversified business model and our prudent balance sheet management, which allow us to successfully navigate the macroeconomic environment. Starting with our income statement, our consolidated NIM stood at 3.7%, driven by higher-than-expected inflation and growth in our loan portfolio. We complemented this with a 10% increase in fee income, both in retail and wholesale banking.
At the same time, we notably improved our efficiency ratio by 452 basis points year-over-year as one of our key priorities, with cost control efforts reflected in operating expenses decreasing by 2.5% year-over-year. Furthermore, our asset quality remained strong, with credit loss expenses decreasing by 14%. Second, in our balance sheet, total loans grew by 6.1% year-over-year, anchored by our continued leadership in the commercial segment and a strong momentum in our consumer portfolio, reflected in a market share increase of 31 basis points. On the funding side, demand deposits surged 10.2%, ensuring sound liquidity. Combined with these trends, our CET1 ratio increased by 16 basis points to 11.3%, driven by a strong internal capital generation that leave us with a 226 basis point regulatory buffer. Moving on to our key initiatives, the corporate evolution to Bci Group is progressing according to plan.
Our international platform is delivering sound financial results across City National Bank, Bci Miami, Bci Securities, and celebrating its fourth year of operations, Bci Perú. The execution of our customer experience strategy is delivering top-tier metrics, with net promoter score reaching 77 points as of June. This is underpinned by investments we've made in the past years in robust digital channels, the integration of artificial intelligence, and the successful rollout of a new branch model. Let's take a closer look at the consolidated figures for the second quarter, specifically. During this period, our operating income expanded 19.7% year-over-year, reaching $985.6 million. This top-line growth is primarily explained by net interest income increased by 14.8% year-over-year, largely driven by higher indexation income, reflecting a UF variation of 2.5% in the second quarter of 2026 compared to the 1% in the same period last year.
Net fees amounted to $147 million, fueled by higher transactionality in credit cards, which expanded 6.8% year-over-year, and effective cross-selling in both corporate and retail segments. On the fee expenses side, they declined roughly by 0.4% due to a change in the recognition methodology of the loyalty program in 2026. Our financial results surged 110.4%. This performance was favored by the capture of market opportunities in available-for-sale instruments, as well as directional positions. Moving down the P&L, we continue to see a positive asset quality trend. Our loan loss expenses decreased 1.6%, reflecting a proactive risk management and origination policies in line with our strategy. Regarding operating expenses, the standalone quarter showed a 9.9% increase compared to the same period last year, mainly because of an asymmetric comparison in the other expenses line and specific initiatives. Despite that, on a year-to-date basis, our operating expenses have decreased 2.5%.
Our tax expenses increased by 34.1% year-over-year, driven by higher income before taxes and higher effects impacts on the tax valuation of our investments in the United States. All these factor led to a remarkable bottom line. We registered a quarterly all-time high net income of $386.8 million, representing a 37.5% surge compared to the second quarter of 2025. This allow us to growth our total equity base by 10.1% to $8.5 billion, further fortifying our solid capital position. Let's now dive into our operation and performance in Chile. During the second quarter, total loans grew by 5.5% year-over-year to $42.7 billion, while the banking system advanced by 4.2%. The anchor of this expansion remains our commercial portfolio, which grew 4.7% year-over-year and 5.9% excluding FX depreciation effect.
We are proud to note that we continue to lead the industry in this segment, having increased our market share by 45 basis points over the last 12 months to reach 17.6% as of June. We are successfully regaining volume in our consumer portfolio, which grew at 8.8% year-over-year. We highlight our value proposition to affluence segment based on a renewed and personalized loyalty program. We also registered significant progress in Lider Bci, which contributed about 1/3 of the volume. Rounding out the portfolio, mortgage loans delivered 6% growth, reaching $13.2 billion, mainly driven by inflation, as these loans are denominated in UF. The dynamics between our NIM and fee generation highlights the strength of our business model. Net interest margin reached 4.1%, a 13 basis point compression when compared to the same period last year.
Despite a higher indexation income this latest period, net interest income was impacted by accounting hedges due to the liquidity conditions stemming from the geopolitical environment. NIM level as of June remains above the 2025 year-end, supported by increasing consumer loans and solid expansion in non-interest-bearing deposits. Furthermore, net fees reached $120.3 million, a robust 7.6% year-over-year increase, driven by a strong performance in our insurance brokerage, higher credit card transaction volumes, and a significant contribution from Bci Asset Management, which expanded its AUMs by 14%. Let's now turn to our operating expenses. For the second quarter of 2026, the 10.7% year-over-year variation in local expenses was driven by our focus on accelerating key strategic initiatives, which primarily impacted the other expenses line.
Despite this non-recurring effect, we are pleased to report that our local efficiency ratio closed the quarter at 46.5%, representing a 400 basis point improvement compared to the second quarter of last year. On a year-to-date basis, our local operating expenses actually decreased by 4%. This trajectory reflects ongoing efforts across the bank and its subsidiaries to bring our efficiency levels into our target range. This has been driven by investment in technology, structural simplification, and the integration of artificial intelligence, which have optimized our business performance and transformed our customer service models. For us, efficiency is not just about cost reduction. It is about serving our clients better. Every process we simplify and every point of friction we remove translates into a faster, more seamless experience for our customers, keeping us firmly on track towards our target of 40% efficiency ratio for 2028.
We remain fully committed on this front as it represents our single most important driver of value creation. Our balance sheet remain a source of strength. Total local deposits reached $29.9 billion, up 2.9% year-over-year, anchored by a 10.1% surge in demand deposits. This provides a stable funding base, as reflected in our strong local Net Stable Funding Ratio of 113.5%, up 9 percentage points compared to the June 2025. In terms of capital, our consolidated CET1 ratio increased by 16 basis points year-over-year to 11.3%. This positive trend indicate that our internal capital generation from strong earnings is outpacing growth in risk-weighted assets. Even after absorbing higher regulatory deductions from the full phase-in of Basel III, our capital adequacy ratio, BIS, reached 15.3%, leaving us with a comfortable regulatory buffer to continue executing our growth strategy without constraints. Now, let's turn to our asset quality.
When we look into our portfolio indicators, we continue to evidence very healthy trends. Through proactive risk management and prudent origination appetite, our 90-day NPL ratio for the total loans in the local portfolio decreased to 1.8%. When we include our additional provisions, our non-performing loan coverage ratio stands at 130% in June. This translates into a 2.3% stock of provisions over loans that you see on the slide. This ensures we are prepared to absorb any potential future macro volatility. Looking at the commercial portfolio, our risk profile remains stable, with the NPL ratio standing at 1.5%. The recent decrease in commercial volume was driven by a single name charge-off. This isolated event reflects a proactive risk management framework and keeps our underlying asset quality sound. In addition, our provision for credit risk on total loans stands at 1.5%, rising to 2% when including additional provisions.
This asset quality reflects our focus on collateralized SMEs lending and long-term relationships with top-tier corporate clients. In the mortgage portfolio, the NPL ratio closed at 2.2%, consistently with broader industry trends. We remain comfortable with this exposure, maintaining a credit risk provision over loans ratio of 0.8%, which rises to 1% with additional buffers. Importantly, this is a fully collateralized portfolio backed by conservative loan-to-value ratio at origination. In this slide, you can see our consumer 90-day NPL ratio stood at 2.3%. Our commercial and risk strategies have driven across-the-board improvement in both growth and delinquency, backed by sound loan coverage levels with a total provision ratio of 7.6%, reaching 9.7% with additional buffers. We maintain a highly resilient foundation to support prudent and selective growth moving forward.
Regarding advancement in our international platform, starting with Bci Perú, total asset grew 43.7% year-over-year to $1.6 billion, while net income reached $11.4 million as of June 2026. This was driven by a strong commercial expansion, with total loans reaching $2.3 billion when we include bookings outside Peru. This allow us to expand our market share in corporate segment, reflecting our ability to capture demand through the high-value solution, such as treasury, cash management, and cross-border financing that our platform enables. Further strengthening this corridor, Bci Miami continued its positive trend, which translate into a net income of $37.3 million for the quarter, representing a 17% year-over-year increase, with total assets expanding to $6.7 billion. Meanwhile, Bci Securities continue to enhance our capital markets capabilities, managing $2.4 billion in AUM.
To summarize our local operations, despite navigating a period of high volatility, we closed the first half of 2026 with very sound results. Our net income reached roughly $510 million, up 15% year-over-year, translating into a strong return on average equity of 17.5%. We achieved this while growing our loan portfolio by 5.5%, keeping our cost of risk strictly controlled at only 0.66%, and improving our efficiency ratio by 400 basis points. These financial and operational disciplines goes hand-in-hand with our customer experience approach, which is reflected in our NPS reaching a remarkable 77 points by June. I will now hand the call over Jose Marina to discuss the performance of City National Bank in Florida.
Thank you, Roberto. Good morning, everyone. My name is Jose Marina, and I'm the CFO of City National Bank. I am pleased to be here in Santiago this morning with my Bci colleagues to share highlights of our strong performance during the first half of the year. As I will discuss in more detail, our earnings continue their upward trajectory, reflecting disciplined execution of our strategy, including solid loan growth, fully funded by robust deposit growth. In particular, I would like to point out the following highlights. Our loan balance has increased by $223 million, or 1.1% quarter-over-quarter, and $1.5 billion, or nearly 8% year-over-year. We continue to focus on high-quality loans with strong spreads and solid depository relationships. Our client deposits grew by $816 million, or 4% quarter-over-quarter, and $2 billion, or about 10.6% year-over-year.
DDAs decreased by $198 million, or 3.7% compared to the previous quarter, primarily driven by a $255 million temporary inflow in Q1. As we pointed out in our last call. Importantly, deposit growth outpaced loan growth this quarter, reinforcing our strategy to position City National Bank as the leading deposit gathering bank in the state of Florida. Our net interest income and margin continued to expand for the 10th consecutive quarter, and in Q2, our NIM reached a 3% mark. NIM increased by 41 basis points year-over-year, and by 3 basis points quarter-over-quarter. Our earnings continued their strong trend, growing $56 million, or 46% year-over-year, and by $9 million, or 11%, quarter-over-quarter. Our ROE, excluding goodwill amortization, improved to 12.66% in Q2.
These results demonstrate our market reputation built over the last 80 years, our relationship-centric model, strong culture, and continued success in executing our key strategic vision. Our client deposits increased by $1.5 billion, or 8%, in the first half of the year, including a $302 million, or 6% increase in DDA balances. It is important to highlight that deposit growth surpassed loan growth. Additionally, our client deposit growth outperformed the banking industry by nearly 2x. Our strong client deposit growth enabled us to reduce broker deposits by $783 million quarter-over-quarter, and by $1.4 billion year-over-year, reducing reliance on wholesale funding sources. Furthermore, our quarterly cost of client deposits increased by six basis points compared to the prior quarter, primarily as a result of increases in interest-bearing deposits. Non-interest-bearing deposits represent a healthy 24% of total deposits.
Our assets surpassed a $29 billion mark in the second quarter, with a strong loan-to-deposit ratio of 92%. We remain very well capitalized, as evidenced by our total risk capital ratio and Tier 1 leverage ratio, which were 15.6% and 11.4% as of June 30th, respectively. Additionally, the unrealized losses on our investment portfolio remained virtually flat the last three quarters, despite the approximate 50 basis points increase in the five-year U.S. Treasury rates year-to-date. Total loans increased by $745 million or 4% in the first half of the year, and by $223 million or 1% quarter-over-quarter. As shown on the right-hand side of the slide, we have been highly selective when it comes to lending, not only from a credit risk and spread perspective, but also prioritizing deals with full relationships, which enhances long-term client value and earning sustainability.
This quarter, our NPL ratio declined by 5 basis points to 0.81% of total loans. More importantly, our strong credit culture and low risk appetite are reflected in our minimal net charge-offs of only 9 basis points for the quarter, significantly lower than the 21 basis points average among peer banks. ACL coverage remained virtually flat, representing 1.09% of total loans. Overall, our already strong asset quality ratios continued to improve in the second quarter. Turning now to our profitability, I would like to emphasize a positive trend in our net income after taxes, which increased by $9.3 million or 11% quarter-over-quarter, and by $56.3 million or 46% year-over-year. This growth was driven primarily by an expansion in net interest margin, which we'll expand upon in the upcoming slides.
Fee income also increased by $8.3 million or 14% year-over-year, reflecting continued progress in our efforts to diversify and enhance our fee base. These factors contributed to operating income, increasing by $81.6 million or 21% year-over-year. This all resulted in an ROA, excluding goodwill amortization of 1.35% for the quarter, an improvement of 35 basis points year-over-year, and an ROE also excluding goodwill amortization of 12.66%, which is 247 basis points higher year-over-year. As we have shared with you over the past few calls, we have implemented several strategic actions through Project WIN to further strengthen our balance sheet and accelerate earnings growth. Additionally, we are focused on expanding our product offering to increase relationship expansion and augment our fee generation. Lastly, we continue to drive organic net interest income expansion through disciplined pricing across both loans and deposits.
On the left side of this slide, you can see our net income increased by $9 million, 11% quarter-over-quarter. This improvement was primarily driven by a $7 million increase in net interest income, reflecting a 3 basis points expansion in our margin as we continue to maintain discipline on both loan and deposit pricing. Fee income increased by $4 million quarter-over-quarter, reflecting continued progress in our fee strategy, which we'll discuss further shortly. On the right-hand side, we show how our net income improved by $56 million or 46% year-over-year. This increase was primarily driven by $73 million of additional net interest income as our margin expanded by 41 basis points. Fee income also contributed positively, increasing by $8 million. Loan loss provisions were $11 million lower, reflecting the continued strong performance of our loan portfolio.
This was partially offset by $13 million of additional expenses, particularly driven by investment in personnel as we continue to execute Project WIN. This slide illustrates the expansion of our net interest income and margin over the last 10 consecutive quarters. Our net interest income increased by $7 million or 4% quarter-over-quarter, with our NIM expanding by 3 basis points. This growth was driven by an increase in yield and earning assets of 4 basis points, while cost of funds remained stable. This NIM expansion is a result of several strategic strategies executed during the last couple of years, which includes obtaining strong spreads on new loan originations and renewals with the commercial spreads on new loans originating averaging close to 300 basis points the last two years.
It is also a result of our strong deposit growth, coupled with prudent deposit cost management in this uncertain rate environment. This strong core deposit growth enabled us to reduce our wholesale funding ratio to 16% as of June 30th, down from 19% at the beginning of the year. One of our key strategic priorities is the expansion and diversification of fee income. This slide demonstrates the strong results we have already delivered in this regard. Non-Treasury Management fees have grown meaningfully as a share of total fee income, increasing from 41% in 2022 to 56% in 2026, reducing reliance on any single category. Non-Treasury Management fees include services recently launched or currently being implemented, such as insurance commissions, our treasury distribution desk, capital markets capabilities, wealth management, and the sale of residential and SBA loans.
With non-TM fees, the largest contributors are our treasury distribution desk at 26%, as well as the sale of residential SBA loans at 13%, and wealth management fees at 11%. This improved mix is further evidenced by fees as a percentage of average assets rising from 0.3% to 0.48%. Overall, these trends demonstrate the successful execution of our strategy to build a larger and more diversified fee income base. As a reminder, Project WIN is our five-year strategic plan designed to deliver profitable, scalable, and diversified growth. As this slide highlights, we are now in year two of execution, and our results demonstrate strong progress across all five strategic objectives. Starting with moderate growth and diversification, we continue to make deposits the centerpiece of our relationship-based strategy. In the first half of the year, client deposits grew by 16% on an annualized basis, outpacing the industry growth rate of 8%.
This performance continues to position us as a leading deposit-gathering bank in the state of Florida. Loans are growing at an annualized rate of 8%, fully funded by client deposit growth with improved portfolio diversification as C&I loans now represent 31% of total loans, compared to 30% a year ago. Turning to enhanced profitability, our performance reflects meaningful progress. ROE reached 12% year to date, with NIM expanding 41 basis points year-over-year. Strong DDA growth, continued discipline on deposit pricing, and execution of new fee initiatives have further enhanced earnings diversification and overall profitability. From a scalability and digital experience standpoint, we are working on our enterprise-wide AI strategy. This includes credit delivery optimization, process automation, deployment of agent-enabled solutions to support pre- and post-client engagement meetings, and continued investment in data and analytics. Culture remains a strong strength as we execute Project WIN.
We are seeing high levels of engagement and disciplined execution across the bank, supported by strong leadership. Finally, as we grow, we continue to strengthen our regulatory and risk management framework. Our three lines of defense ensure robust internal controls that support sustainable growth. In summary, these results demonstrate the continued momentum and scalability of Project WIN in its second year of execution, with our first-half performance reinforcing confidence in our ability to deliver sustainable, profitable, and diversified growth in 2026 and beyond. With that, I will turn it back to the Bci team for closing remarks. Thank you for joining this morning.
Thank you, Jose. Moving on, I would like to recap the key takeaways from what has been a very strong first half of the year. First, our diversified model is delivering. Consolidated net income reached $700 million, up 21% year-over-year, supported by City National Bank's 47% bottom-line growth and our resilient operation in Chile and our subsidiaries. Second, we are improving our efficiency. While our margin expanded and fee income grew 10%, our disciplined cost initiatives led to a 452 basis point improvement in our efficiency ratio, reaching 45.6% as of June. Third, we are growing responsibly. We consolidated our position as Chile's number 1 bank in total loans with a 6.1% growth, all while keeping sound NPLs levels at 1.36% and maintaining a robust CET1 ratio of 11.3%. Finally, our corporate evolution into Bci Group remains fully on track.
Before we close this call, we are pleased to share our updated guidance. Looking ahead, the strong first half of the year allows us to raise our full-year 2026 outlook, naturally factoring in the macroeconomic variables as well as the political reforms being discussed. In Chile, we project the end of this year with loan growth between 6% and 7% and a lower double-digit growth in fee income. Underscoring our strict commitment to efficiency, we project a 1% decrease in core operating expenses while keeping net interest margin and cost of risk flat. For City National Bank, we anticipate loan growth of 8%-10% and maintain a 3% NIM target, which will drive a 35% increase in net income.
On a consolidated basis, our estimations are for net income to grow in the 17%-19% range, driven on an improvement on our return on average equity to 15%. Thank you all very much for joining us today. I will now pass it back to Andrés to open the floor for your questions.
Thank you, Roberto, Sergio, and Jose. Now we are ready for the Q&A session. The first question is coming from Ernesto Gabilondo from Bank of America. Hi, Ernesto.
Sorry. Hi. Thank you, Andrés. Hi, good morning, Roberto, Jose, Sergio, and good morning to all your team. Thanks for the opportunity to ask questions, and congrats on your results. My first question will be on the tax reform. Just wondering if we assume a normalized inflation of 3% over the next years, how should we think about the evolution of your effective tax rate, with the new tax reform? That's my first question. My second question is on your sustainable ROE. You are already expecting an ROE of around 15% on a consolidated basis. Just wondering how should we think about it in the next years, and how should we think about the evolution of the ROE for Bci in Chile and for the Bank of Florida.
For my last question is if you have any update on the approval and the implementation of the new holding. We saw the appointment of José Luis as the new CFO, so please congrats him. I don't know if there's anything else. What should we be following during the next quarters, in terms of this new structure? Thank you.
Thank you, Ernesto. Nice to see you, and thank you for your question. Regarding tax reform. For us, we are optimistic about the impacts that this tax reform will have in the growth and investments in the country. Also the impact that it will have in the tax rate, the effective tax rate that the bank will have for the next year. For this year, we expect a negative impact due to the deferred taxes that are estimated with a tax rate of 27%. Given that the tax rate are decreasing for next year, our deferred taxes will impact in a loss expense this year that we are estimating with our accounting and tax team to have the number that is not included in the guidance that we just gave you. For the future, we are optimistic, and we expect a positive impact in our P&L.
Regarding ROE, the main drivers of the improvement that we have seen in our ROE are, first, the increase in the NIM of City National Bank, that, as Jose mentioned, we expect that is structural given the discipline that they've put in along with the WIN project. Second one is our efficiency gains, as we highlight in the presentation, we have achieved a 452 basis point improvement in our consolidated efficiency ratio. As we said, we are fully committed to our long-term efficiency ratio of 40% to 2028. Yes, we expect that this also will be structural. We have our fee income growth that it's outpacing margin. We are improving our cross-selling effectiveness. With that, we have improved our ROE. This is the results of our strategy put in place in all the segments.
In retail, with our insurance brokerage, we are leading the market. In wealth management, as we said, we increase our assets under management by 14%, and in wholesale, with accessories and sales and trading. With all of that, yes, we think for the long term, this 15% is structural, and if we break it down, we will expect an 18% ROE for Chile and a 12% for City National Banks for the coming years. The last question was an update regarding the Bci Group project. The first half of this year, we have the legal incorporation of the Bci Group in April. As you mentioned, José Luis was appointed as the CFO of the holding, we are very pleased with that news.
On the ongoing step, we are securing required regulatory approvals, in Chile, in Peru, and the United States, in order to launch the invitation to minority shareholders and proceed with the corporate spin-off of Bci. We are progressing with these changes as scheduled.
Oh, thank you so much, Roberto. Just a follow-up in terms of the effective tax rate. As you were mentioning, because of deferred tax, your effective tax rate for this year could be, if I'm not mistaken, around 27%, right? For this year?
For this year, Ernesto, we are still estimating the impact of this reform, I can't give you a number right now.
Okay. For the next years, considering your historical effective tax rate, how should we think about as a base? I think the gradual implementation implies like 1.5% lower every year. How should we think about a starting point for the effective tax rate next year? I don't know if it was historically 20%, if we can expect next year to be around 19%, and then in 2028, 18%. Just a trend, we can kind of forecast already that in our models.
As you know, Ernesto, our effective tax rate is not only affected because of the legal tax rate, but also because of the investment in City National Bank, and the UF variation. If everything is the same, you should expect a reduce in the effective tax rate in the same level that the legal effect rate is changing. With that, you can estimate more or less how much the impact will be.
Perfect. Thank you. On your new holding structure, as you were saying, you are waiting for the approval of the authorities in the different geographies. Do you think that could be for this year, and then we can have the holding next year? Any color on that?
I can't give you any specific day, Ernesto, but we are on track according to our original schedule.
Okay, perfect. Fair enough. Thank you very much, Roberto, and congrats again on your results.
Thank you, Ernesto.
Thank you, Ernesto. Next one is coming from Juliana Ohara from Goldman Sachs. Hi, Juliana. How are you?
Hi, everyone. Thanks for taking my question, and congratulations on the results. I was just wondering if you could share some of your sensitivity to inflation, and given that it should normalize going forward. Also, if you could share more on your expectations for non-inflation linked NII, because it was a bit weaker in the quarter, but it was mostly from interest rate hedges. I was wondering how much of this pressure can continue going forward as well. Thank you.
Thank you, Juliana. Regarding inflation, our sensitivity is more or less every 10 basis point s of UF variation, the impact in our NIM is of $5 million. As you said, the NIM for the other interest this semester was a little bit lower than expected. The reason for that was some macro hedge in our balance sheet that impacted negatively because of the volatility of the rates. We expect, as Sergio said, that for the second semester, this will be a little bit less volatile, we expect the NIM will be flat for total year consolidated.
Thank you, Juliana. We missed you, but we think that we answered your questions. Next one, we have Neha Agarwala from HSBC, with the next question. Hi, Neha, how are you?
Hi. Thank you for taking my question. Could we talk a bit about loan growth in Chile specifically? This year seems to be a bit weaker than what we had expected. Do you see anything different, first, in your loan book? What is your expectation for loan growth across various segments for this year? Where do you see areas of improvement or pickup in any particular segments during early part of 2027 or during the full year of 2027? First is on loan growth, if you can break it down a bit by segments in Chile. My second question is on capital. We are seeing some regulatory changes come through. Any estimated impact that you see on your capital ratios with the upcoming regulatory changes? Thank you.
Thank you, Neha, for your questions. Regarding loan growth, it is important to remark that when we did our first estimation for loan growth for this year, our estimations on GDP was a little bit better than that we actually saw for the first half of the year. In Chile, as Sergio said, we expect a 1.2% growth in GDP for this year. Our loan growth is pretty correlated to the development and the growth of the country. Having said that, we still are growing faster than the industry. As I said in my presentation, we still are growing in our commercial portfolio. We still are the leaders of the commercial portfolio.
As I said, given that we just have the approval of the tax reform and the other changes that the government has put in place, we have better expectation for the next semester and for next year. We expect that companies will increase their investments. As we are the leading of that segment, we expect to also have a higher increase in our loan portfolio. Regarding consumer portfolio, we are growing 8%. We think that is a good number given that also the macroeconomic environment and the unemployment is a little bit higher for us. We have been very prudent in order to grow in the affluent segment and also with the good segments in Lider Bci and MACH. Regarding the capital structure, the CMF just put or sent modifications for the internal models for provision and capital.
We think that in the long term, this will be positive, because as the document said, in Chile, the density of the assets are a little bit higher than those of compared to industries or banks in other countries. In the long term, we expect that it will have a positive impact, but the times are long, and we expect that no sooner than 2028, we will have some of these internal models put in place, and it will have impacts in our capital ratios.
Neha, we're done?
Yeah. Thank you so much. That was very clear. Thank you.
No, thank you.
Thank you.
Thank you. Nice to hear you. We have Andres Soto from Santander Investment with the next question. Hi, Andres. How are you?
Hi, Andrés, and hi, everybody. Thank you for the opportunity to ask questions. I have three questions, but I'm going to go one by one. The first question is regarding the loan growth. You guys continue to outperform the market in Chile. You continue to gain market share. When you look ahead, do you expect that the growth is going to continue to be driven by these market share gains, and which segments are you guys targeting? Do you believe that the market is already showing signs of recovery, and you are just going to benefit from that performance?
Thank you, Andres. Yes. As I said to Neha, we are optimistic about the second semester and for next year for the commercial portfolio, but also for the consumer portfolio. In the commercial portfolio, as you said, we are leading the market. We think we still have opportunities in some industries and in some regions of Chile, and also in some segment, in order to capture more market and to benefit from the faster growth of the country. In the consumer segment, we have talked is that we are focusing on the affluent segment, and we are gaining market share in that segment, and we are growing at 8% for this year. In Lider Bci, we have also recovered some growth. Remember that in Lider Bci, a couple of years ago, we had a portfolio that had a level of risk that was a little bit high.
Over the last years, we've been focusing our growth in the better kind of that portfolio, and for now, we are growing also in a better segment in that portfolio. Yes, in both portfolios, consumer and commercial, we expect we will continue to gain market share for the next quarters.
Thank you, Roberto. My second and third question are related to capital.
Yeah.
First, on these regulatory changes for internal models, I understand for banks that have international operations, the banks will be able to use whatever they have abroad. Can you please explain us how the new methodology for Chile compares what you do currently at CNB, and if you expect any changes after these regulatory change, as you said, is going to take some time, but if that changes in any way the way in which you incorporate your U.S. operations into your Chile numbers?
Okay. Yes. Regarding our capital structure and regarding the minimum that the CMF put to the banks here in Chile, we have the systemic risk buffer that we have to put to all the asset that we have in our balance sheet, no? With these changes, we expect, but not for the changes on models, but for the changes of the subsidiary with Bci Group, we expect that this systemic risk adjustment will be a little bit lower. The main change from City National Bank, it will come from the Bci Group changes rather than from the internal models.
Perfect. That brings me to the third question, which is if you can provide us an idea of how the capital ratios will look like after the transaction is completed.
Our current estimation, after the transaction, we expect that our local consolidated figures in Chile will decrease in more or less 100 basis point, that's when it begins. We expect to recover, as I said in my presentation, our ability to generate capital from our net income is faster than the growth that we are having in our loans portfolio. Yes, we will have impact at the beginning, we expect to recover to the 11% CET1 ratio. That is our target.
Perfect. If I may follow up, when you look at the capital structure post-transaction, you will gain some flexibility from potential additional leverage at the holding company level. What will be the priority of that flexibility? Will be to capitalize the Chilean subsidiary, or will be to do M&A or distributing at the U.S. probably, or distributing excess capital to shareholders?
For now, Andres, we are focused on delivering the changes at Bci Group. We have all the options that you mentioned, all of them will be analyzed when we finish the process.
I don't remember if you mentioned this already, when are you guys expecting this to be completed?
We don't have a date, because as I said in my presentation, we are looking the authorization from Chile, United States, and Peru. We are sending them all the information that they are requiring, so we don't want to put a date because we want to do it in the best way it's possible in order to have these approvals.
Understood. Thank you so much, Roberto, for your time.
Thank you, Andres.
Yes. Thank you, Andres. I'm looking at the time. We have time for one more question, and it's coming from Daniel Mora from Credicorp. Hi, Daniel. How are you?
Hi. Good morning. Thank you for the presentation. Congratulations on the results. I have just one question, is regarding cost of risk. The cost of risk has averaged around 0.6% in the last two and a half years, had been very positive. You are mentioning that you expect it to remain flat, at least in 2026. I'm wondering if considering the loan growth in consumer loans and also the current level of unemployment, do you expect it to increase in the coming years, or could we expect the current cost of risk of 0.6 % on average to be the normalized figure also in the long term? Thank you so much.
Thank you, Daniel. Our structural cost of risk of our portfolio, for the last couple of years, we've been working in all our segment to build a portfolio that is more stable for macroeconomic environments. As I said, in the consumer portfolio, we have been focusing on the affluent segment, and in the SMEs, we are growing only with collateralized loans. In commercial, with corporates and big companies, we are focusing in the industries that have momentums and are more stable regarding the macroeconomic conditions. Yeah, the first part of the year has been very good. We are not immune to the macroeconomic conditions. As Sergio said, we expect that for the coming months, the macroeconomic conditions should be a little bit better than we have seen now on unemployment and on other macroeconomic conditions.
We expect, as we said in the guidance, that our cost of risk will continue flat or in the levels that we see it now, and we to continue to closely monitor the macroeconomic scenario in order to estimate any impact that we could have.
Okay. Perfect. Very clear. Thank you so much.
Thank you, Daniel. Okay. With that, we finish today conference call. Thank you very much for your attention and for your question, and see you, and Andrés will close today. Thank you very much.
Thank you all, guys, as always. As usual, the entire team is already ready to your next question in the coming days. Thank you very much, and have a good one. Bye-bye.