Q3 2019 Earnings Call
Ladies and gentlemen, thank you for your patience in holding please continue to remain holding down. The line. This conference will begin momentarily. Once again. Thank you for your patience in holding and please continue to remain holding on the mine. This conference will be getting momentarily.
Ladies and gentlemen, once again, thank you for your patience and holiday. Please continue to remain holding the line. This conference will begin momentarily.
Once again, thank you for your patience and holding and please continue to remain holding this conference will begin to momentarily.
[noise] good morning, everyone I would like to welcome all of you to the Credicorp Limited third quarter 2019 conference call. We now have our speakers in conference. Please be aware that each of your line is any listen only mode. At the conclusion of today's presentation, we live up and the floor.
For questions.
At that time instructions will be given as to the procedure to follow if he would like to ask a question.
With us today is Mr., Walter Bayly, Chief Executive Officer.
Mr., John Franco Ferrari Deputy Chief Executive Officer.
Mr Rinaldo Yosano Chief risk officer.
Mr seizure, Rias Chief Financial Officer.
And Mr., Daniel Grieder, LAIKA, CEO and health insurance I've health insurance in business now that it's my pleasure to turn the conference over to your credit cards, Chief Financial Officer Mr. sees every house mystery else you may begin.
Thank you.
Greetings and welcome to Great Gloves conference call for now what they'll need to sold so yes. It was 2019.
Before we review pretty poor performance I would like to highlight Sony important my thoughts regarding recent events in the local environment.
Got you weren't aware precedent be Scott Rusty sold the Congress on September 30.
Okay, I got mentality elections, which will because when January 20, 620 train. It is important to note Douglas who do not corpus studio we agreed on the books banality the de solution [noise].
As far the financial indicators have reduced sort of leases reactions to the shipping.
And I truly appreciate it and do you any softening bonds degrees.
Biodiesel then we believe that's doing well continue to report is shown on the economic fundamentals.
These fundamentals.
Economic policies trade openness and integration into growing market I know my friendly legal framework.
Although economic activity has this generated in 2018, it will always remain one of the fastest growing economies in the we have an inflation we suspected to be low [laughter], we expect <unk> GDP to grow 25% in 2019 and 3% in 20 training.
It wouldn't make on TV accelerated into soon after.
2019, as you can see chart.
Number two.
The 1.7% year over year to sanction during the first half of the Oh, what I see made Sujit GDP is funded a one 3.3% year over year into third quarter.
2019.
No I know you said gifts actually I see two rating on Green tree points, we are seeing year over year and their teams are loose expansion one of the most like I mean do we [noise].
Finally, [laughter] springtime reduce its monetary policies 25 basis points in November this seven to two point, 25%.
It's like three please [noise].
In recent weeks the government has no sooner than they should be like decreased for the government [laughter] timely size. They shouldn't read gene to Reinitiate War reconditioning works that have been paralyzed by arbitration disputes. Moreover, he has put together ACA.
Just to bolster our legal spending in the last quarter can tell so Nike regarding taxation income tax expense ratio for the reasons from the locally stock exchange we continue to.
In 2022.
Furthermore, the government approved emeritus enough, we see some slow which reduces the transaction amount that triggers a review process by regulators [laughter] like the Prime Minister has announced an increase in the minimum wage in the first quarter 2020, the minimum wage currently stands at 930 sold.
Somewhat less increase in 2018 snakes.
I would like to review recently veins in the economies in the region normal which has.
She is expected to happen material impact on Credicorp muscles in Bolivia, According to the national electrodes team who knows.
Even more Dallas warmed up because she they surely leaking into finished round the organisation with American States. We currently out I know the adult elections due to Bruce you don't control Betsy I know choices in Bolivia, how to state that they with respect to decision Prostacyclin Dean you in these countries due to their legacy electoral.
In Chile supposed to get embraced was just talking [laughter] by an increase in public transportation first despite announced especially the Buda well pay is going to [laughter] do something which is marked by both external and internal raised the central Banco de Chile has reduced its residents rate.
1.7% to 5% the rate has fallen 125 basis points. Since March 2019, this had been although really like economic political and social tons for malaria in Chile.
Likely to significantly impact really core whose main business have located in <unk>.
[laughter] light for [noise].
[noise] regarding our quarterly urea and UAN.
Year over year performance there are important that's exactly the governor elect to match [noise].
That's helpful discourse since the fourth declared a special dividend both eight so let's put it shares to be paid in dollar on November 20, Two Q2 018. This dividend represents a p. out of 16% wish to get that we the ordinary dividend paying me represents appeal or 56% of 2008.
Yes.
[laughter] indicates hopefully there's has been [laughter] into third quarter of 2019 average daily loan balances up BCP posted 7.5% growth year over year their retail banking portfolio grew 12.3% widely wholesale banking portfolio expanded 3.3 plus.
The long me and the currency mix they weren't they will lose some opening both quarter over quarter in a year to date hands. You September BCP are falling out a liability management operation, which is corporate bonds to optimize its maturity profile quite reducing the funding costs skewer, both local and forensic orange.
We will review later.
They also frees grew quarter over quarter that year over year, mainly due to an increase in this fixed as long as reported by his see me and consumer segment BCP, Bolivia reported I live in loan growth I never reducing installations.
With regard to micro finance they focus on retail deposits of a swing in an improvement in the funding costs. Our focus on fine tuning Reis. My name is has temporarily impacted long growth, regardless, we expect to see a recovery needs for.
[laughter] net interest margin was expected after we stopped originating loans you. Some visco segment. Finally, it's important to note that the newly hired sales force you Steve on the learning cool and such we expect prism TV to rise next year.
With regard to ensure that something some funds the insurance underwriting result, he believes this quarter. These was primary due to the evolution of the life insurance business, which posted on any Greece needs net earned premium level, the property and casualty business, where we're experiencing increased unions needs claims corporate.
Phil insurance on medical services, which we might Gnashing Association with United Health continues to improve.
The pension fund business reduce it in any broadening its whistles.
Well see every quoting overrating equal and efficiency on the other one quarter over quarter the profitability of the Beast They legal reserves degrees.
The investment banking and wealth management.
But first after receiving the approval from the Big later on in Colombia.
We completed we see show a 100%, though the coffee telescope surfing.
In the third quarter 2019, corporate I know TV do you recall were.
Every you sitting lower resource in previous quarter. These how people Q3 important loan transactions on M&A deal you will both be <unk>, Colombia, where to close the Simpsons trading business grew slower pace than in previous quarters, you know pumping smart like an increasing bullet TBD I think copied doesn't markedly.
Yes, It management business continued to focus on growing its international Bluffton.
40 institutional investors.
Latin America, I know that region.
Finally, [noise] wealth management business, we have expanded the portfolio roles available to clients in Chile, and Colombia, where assets under management have grown by 22% year to date you slide five please [noise].
[noise] now I will come into credit cost performance highlights into sort of warfare first regarding profitability measures Credicorp reported net income of one.
1000, 93 million solid, which was 2.5% lower than the second quarter missiles disfiguring liquidity course to report mid teen cool.
Well 3000, 292 million solace year to date.
8.8% higher than the Feagles posted last year, the salt year to date. The same did I read Tony I'm going to shake with you know that S classes of 16.6 person so in Salt Lake city deemed between 6% and 2.4% prospectively.
The loan portfolio celebrated this quarter was used to a year to the growth of 6.8%.
The coastal freezing Greece in this quarter, mainly at BCP stand alone will be paid back in this context. They call. So if we see traded up one point 15, I suppose saying, yes to the 16 basis points higher than the figures posted for the same viewed as last year.
The pace of pricing adjustments, but somewhat although they.
I wish list you suggested needs to fall.
4.3% year to date five basis points lower than if you posted for the same period last year.
In terms of operating efficiencies the cost income ratio fell 40 basis points. These was you last back to the fact that I see FICO walk a tender.
For.
Disability us was able to she's policies will face funds nonetheless that loss, if we sort of deep axles. They tend to net income you smoldering. Finally, according to one ratio CCP is another increase quarter over quarter than year over year on his sons.
7.9% to 5% [noise].
Slide 16 [noise].
[noise] September could tell sun, making our loan portfolio accounted for 66% Delphi working interest, earning assets because that into your two the evolution of loans measure Novitas daily balances you can see job number one.
Total loans grew by 7% year over year Liberal was mainly driven by retail banking a BCBS done along as you can see in chart number two.
The mortgage loan book, let expansion into retail portfolio accounting for 40% full cycle.
The majority of the remind you know flow websites. We were told to the credit card consumer I assume you segments. You just know warranties that the credit card loan book continues to grow at the hospital base under because you said on inspection or 21% year over year.
Growth in terms of currency mix long this bunch of west mainly driven by local.
This context loan growth was lead by tie your margin so.
Slide seven [noise].
[noise] tens of funding as you can see chart number one city quotas finding a structural grew 9.1, we're saying year over year, driven mainly by the proceeds from bomb some notes each.
Tony talked to our the policy they shows quarter over quarter rule was led by demand deposit on driven mainly by wholesale clients both through interest bearing on non interest bearing deposits year over year grow Leslie both demand and saving the policies, which grew 11.3% and 10.8.
I was saying perspective, it is important to note that growth in saving the policies is concentrated in the beat all accounts.
Oh, no issue, reflecting I still see CBC liability management is try to easily rupees maturity profile, while reducing the funding cost cure in both look I'm flooring <unk>, you've got did not denominated five year bond issues, what price up the lowest interest rate ever achieve by up there.
The unusual.
To a strong demand an attractive in two or three new money well see shoot in both currencies.
Such bonds have knows he should reduce the growth of approximately 2.1 billion sold this quarter over quarter.
It's important to note that there is a one off charge can do we want these on these changes difference related to the liability management transaction, which I think total non financial income this quarter. Nonetheless, new money. We've replaced more expensive did I know how much will pay view our funding cost income.
[noise], it's likely [noise].
[noise] you can see chart number one [noise].
I see improved 80 basis points a year.
To date due to the sale of loan portfolio on the legal collections yesterday. The portfolio sold totaled approximately 170 million solid waste generation and impact of 14 basis points in the NPL ratio.
Each of number two you can see yesterday evolution will close off raise which increased 16 basis points. This was primarily due to first the greasing provisions in BCBS retail segment.
We mentioned last quarter or what you see meet P. medium term loans due to reach its more than expected we have already taken pricing for the nation when collection measures that they food in cycle portfolio adjustments will eat it'd be the into next year.
We are penetrating risk is consuming segments would be that China is where the increasing the costs of leases compensated by higher much cycle.
They deterioration in the dip service capacity of any specific lying in wholesale banking into first half of the or if it's important to mention that these long is already provision and as such we usually you have no new provisions in coming quarters third did changing the rules growth prospects lift two adjustments in the parameters of our.
Every small those additionally.
[noise] Mibancos cultural freeze increase quarter over quarter, we continue to adjust 40, you nation on collections process. They fully but this measure will materialize in coming quarters [noise].
Slide nine please [laughter] [noise].
[laughter].
[noise] net interest income growth, but.
<unk> 0.9 per same quarter over quarter, and 6.5 pursing year over year used to the net interest income grew by 7.7%. This performance you silver sold off for.
The positive evolution loan interest income, which was mainly driven by growth loan volumes and more profitable beat me some decent assessments and pool is a nation yeah.
This was partially offset by a decrease you into this rate and higher Combi D.
Particularly in wholesale banking and micro fight.
Gross interest expense is each was driven primarily by any expansion into the proceeds will you be a time deposits needs due to rated by eight basis points quarter over quarter 13 basis points year over year to see tweet at the level of 5.4% into third quarter.
Nevertheless, yet to the mean rose 6.6 basis points, reaching a level of five point, 37%.
Recent adjusted named decreased 18 basis points quarter over quarter down year over year, you know conflicts mark.
Yes, I suspect this call so freeze stuff the market behavior somewhat differently than anticipated you know what pricing model adjustments are underway in the year to date evolution. We suggested mean decreased five basis points you treat.
4.3% measures taken which will improve besides just the mean the following quarters are.
Right tuning forward pricing is threat they used to compensate for higher salaries in the consumer segment.
Yes.
He will do you nation and portfolio management guidelines for is he me hemocyanin, an adjustment to a unique collection guidance nearby.
Slide 10, please [noise].
[noise] regarding non financial Inc.
Chuck number one you can see they used to the evolution will not financially. We just on this 11.5%. These was reading mainly by two factors first by an increasing the need game unsecured you seem to trading portfolio at BCP stand alone Halloween. These sales there will be on government bonds.
I would be to at least trusting, but any increasing fee income a core Eaton <unk> no I'm actually.
You talked to we can see a they used to the evolution will equal reduced sort of an expansion of 4.2, mainly BCBS stand alone. This was mainly a tree with a long ton and increasing the game drops can transfer payments on collections.
Slide 11, please [laughter] Indian today analyses, both operating efficiency because the incorporation degrees.
40 basis points, excluding the effect of increased net down in the mid due to these liabilities we Bible. She if I'm worried expenses policies for the private pension funds Houston Gracing efficiency ratio, that's really Clark increased 20 basis points.
How do we try to you can see the contribution of each excuse me to the variation in deficiency wage.
First it up a SIFI goalpost any roofing insufficiency. They should this was primarily attributable to growth net written premiums, which was mainly driven by the fact that I see if people want to out of six trenches seem to last in the process, how the diesel Bible She's somebody else expenses policies for the private pension fund system.
The surface Cincinnati, Brooklyn, 60 basis points in deficiency ratio wherever it's important to mention then he grew signet there and then being this was halted the net claims associated with which have not part of the efficiency ratio, but impacted netting indicates so BCP stand alone improvement in operating efficiency.
Less than three what's a little tiny Greece unique sort of seen in line with growth in retail banking loans, which both city racing salaries and employee benefits.
A new on.
The efficiency ratio deteriorated. These was driven by any recent personnel expenses in the first semester of the year. We mentioned here I mean, our newly I was just for dealing at Leerink your.
How much further DVT she will increase next year.
The impact of older subsidiaries was three we also looked into ratio in the pieces who ratio that's critical to copy though.
We reduced sit at throat.
He needs vary with Universal it's important to note that the Jerry will do for sold less offices I didn't endgame securities, which is not included in the efficiency ratio.
Slide 12, please [noise].
[noise] bigger imperfect WD, however, trim navina shake with the 17.6% year to date impacted likely so fun.
Realizing credicorp had every server fun.
Approximately 1.9 billion unfolded at the end of September .
2019 these filings.
However, the tone of I would I say, we'd be by 124 basis points. We have communicated we will pay a special dividend obese told us they're shipping November 2019, which we suddenly not pay out ratio fell 16% will increase so what are the total 2018 the out to.
To 56%.
Additionally, we acquired plus Hadnt seen cool and we expected to close if we see some local deals this year. The total amount on both conceptual will be around.
$120 million, while these payments will reduce the volume or what are we sort of pod future dividend payments <unk> will partially offset these movements by increasing the fund the bought it.
Another factor that impacts however, today I'm going to shake you'd be our unrealized gains.
Those far 2019, yeah, I realize gains so our fair value tool. It comprehensive income investments I spoke to posted an increase of 160% conflicts or lower interest rates.
I realize gains I Apocalypse Credicorp sick with you. This increase has impacted however in terms of other <unk> equity.
This effect is more really levels I see if it goes figures because these subsidy already has a long duration investment portfolio to page is long term liabilities, mainly related to the life insurance business, whereas it but not yet liabilities, our mark to market. According to Green accounting.
You can see below excluding increasing unrealized gains will make we'd be gritty corporate today I'm going to shake with the years to the increases by 40 basis points. If it's important to mention the indemnification of iron ore is 17 in 2021, we'd use these if they must make shooting that you have either.
Just a fair but [noise].
[noise], it's like 13 piece.
[laughter] on this page you can see our flooring guidance for full year 2019 first in terms of macroeconomic indycar.
Even the economic TV remains below its flipping shut out west list dynamic than expected at the beginning of the year our estimate for real GDP for 2019 is 2.5%, which marks the lower end of the range for beauty de indicated our previous guidance. Then lastly, additional for Guy that now we post.
This contemplated a series of potential uncertainties, we last relative to the political and macroeconomic outlook for 2019, such we will not 45, our guidance for 2019 at least <unk>.
It's like for PMT.
[noise] [noise] house, where escalation east to be the number one button or customer set these flashing in Peru, and the most efficient in the region.
Two of these we have being investing in customer experience differentiation in our fees he got it.
So certainly some detail chime in this process, we have optimized the most important customer journeys and develop a digital offering.
Provides agility simplicity on Saturdays anytime anywhere we currently lead the market what customer satisfaction segments in the consumer segment would have jumped in the southeast functional ranking for for the first placing just 15 months.
In the period from December 2018 to September 2017, we Greece, our D. today, I am base by 42% to reach the Green medium class.
This represents 38 their sense of our total universal fly is awesome surfing type.
Number two if you are important to note that these are clients are those that need any of the following criteria. They can do 50% from the monetary transaction to be China's couldn't do a lease grew 2% nonmonetary transocean to the use of China's approaches or at least any problem. The early in the last 12 months.
Growth did he does tie NBC Universal It took me Gration. Both Transocean says from traditional study you know Todd. This is trying to see how so really optimized the closest truck turning our distribution network.
Kinda see chart number three Vito transaction increased.
57% in September 2019.
From 41% in 2016 chart number four year to the sales increased to 12% assault September 2019 from 6% as of September 2018.
Referring to the Monkey FICO steatosis represent 15% of total units holes in September 2019 versus 8% in September last year. They sold level. The most important progress was the Italy is got bassam wages problem.
So sales for this program how facility racist I'm currently account for 43% off you have to the sales. This was 22% in the same fuse last year make sure to you.
Our efforts to differentiate our customer experience and either troubles offerings.
A person to first the safety you know what is trust they used to capture new client segments increased cross selling UBS subsequently boost growth.
Slide 15 please.
[noise] pretty close love for Yuppie has grown.
Number of use a significantly in 2000.
19 alone you up the has more than three good uses to reach 1.5 million clients idea in September we expect to reach 2 million uses study you into the year I know what aspiration is to reach thing you use those in 2021, yeah. The allows users to make pay me.
You know simplify a fast secure way solely by you didn't defying the name will stay at recipient from at least of contest or by reading. The usage you are cold.
Is this feature Yep got trucks.
130000, USIS monthly of which 40000 represent new clients for BCP <unk>, a new yuppie use or east twice as likely to acquire more BCP roles and to receive cells lead that I know you got the.
Yes, I prefer not to a new features so that you have become becomes the most used application in the room is good and social networks. There do you know school simply couldn't do 85 sandals that transexual seen cash our goal is to capture a significant share of these trends social [laughter] by building the largest platform for a small payments in the.
[noise] touch if these.
We are little rising critic courts distribution network, which includes branches young age and I encompasses more than saving.
It sounds like hundred points of service to fuel, our where to go do have 10 million yuppie uses by the end of 2021.
We are targeting four to 5 million among customers, who did either payments car that we will embedded yuppie into first quarter fiscal 2020.
This will be the floors the telecom in the market that will contribute significantly to financial inclusion in the country, allowing newly battalions, who received disbursements makes balance inquiries transports that'd be statements.
That said.
We will incorporate value added services truck truck middle market companies with yet before business I mean, just over a year, we will be able to make.
So these platforms, yes, it means a differential experienced with small feeling users and represents a new internet. These nitro section I go for being a critical [noise].
We are about to lunch up before me banquet claims squeaky, an online no fees because the minute solution provider to facilitate peer to peer micro business you have to pacings. Finally these transaction another trend that's probably a man crazy David car payment methods. Our goal is to create.
Integrating this will cease thing of companies they methods to offer customers the based solution for that needs anytime anywhere.
It's like 16.
[noise] regarding credit scores woolverton, that's how we like to these costs of leasing organization those changes.
Okay, Korea, whose shares that oil deputy CEO for any quarter when young Franco Friday, we no longer be this you'll see people say suddenly data will assume these role with this change out about a we'd be able to do rig fleet minus the consolidation with the insurance and spatial on businesses, where we are seeking to integrate joined <unk>.
Ration out of school nursing, a couple abilities and develop new ones inline with our transformation program. Additionally in this in the investment banking and wealth management line don't business I'll go to with focus capturing growth opportunities, what I said management into review I know integrating each of the floor.
Businesses I didn't lead you to live.
With these comments I will like to up into Q1 eight please [noise].
[noise]. Thank you sorry.
I would like to ask a question. Please signal by pressing star one on your telephone keypad now.
Like using a speaker phone. Please make sure your mute function, it's turned off to allow your signal to reach our equipment again, that's still our one to ask the question well pause for just phenomenal to allow everyone an opportunity for questions.
We also ask that you. Please only ask one question at a time. After each question has been addressed by our speakers you will then be allowed to ask as many follow ups as needed but again. Please only ask one question at a time. Thank you.
And again as a reminder that is star one.
I will ask a question.
I first question will come from Howard Friedman Citibank.
[noise]. Thank you have heard opportunity or to make questions. Good morning, everyone.
My question are you know that comes into the broad features a you know that you are expecting for R&D did become a near I know that you're still did not provide.
Guidance, but just wondering.
In terms of the macro lines, how you see the different forces a affecting a I know the banking system a into a deriving a I know a your resolved snacks tier you have a convoluted political scenario not choice. A you know you saw it does affect you are not business and.
You should see a room for acceleration and a long growth are you mentioned the actions that you are taking to no or six asset quality is just a hard this year cost suppressed he's already close to the upper limit off the guidance. So just wondering.
If you see their own part D Street stabilize next year and in terms of margins. A you have so I know I started unimportant monetary easing and intangible 50 basis points already you should see a you know a pressure Scott I mean from that interest margins next year on top of that thank you.
Oh.
Good morning, Franco Nevada.
Maybe actually you made three questions and what.
So.
I should be political noise I would take that as of today, there's much less well. This is almost done what we had maybe on the last conference call. A as you may know that Congress.
Well does are already or they would use January 26, I do this.
The four that shows up on your Congress.
But that's all I've already.
We said that there is so everything is on the underway.
What we see no is that actually the government is focusing on play too.
Speed up.
Work.
Hello.
<unk>.
Investment that will still be goal so.
Judiciously.
Or arbitration problems with basically mostly with the figure has gone well see that construction companies come through.
We see Doug Boessen Oh, we what we expect these are the remaining a couple of long haul this year and most importantly, the first and most of next year.
Spending should speed up.
Having said that.
As of today, we haven't seen any import or pick up.
Corporate private corporate investment on the retail site or we are.
Quite comfortable with the level of growth.
For the year.
And maybe they were that's not live here.
Got stuff is about.
We we love being mentioned over the last couple of quarters that we actually do see below the cost of risk at the levels as we reach basically because we're targeting.
Neil segments.
<unk>.
The cost of risk should be segment, what is important though he's out there.
Risk adjusted NIM.
It is I would use the way we mothers.
I was lower.
Say that measures being taken in order to solve the issue basically raising price where prices were up it.
Or.
Managing risk.
I don't know remember if you want us something else.
So I mean, you see the performance of our portfolio, except the doesn't mean market I would say quite stable, but one of the French door, especially when it's correct. I mean, yeah, we are underwriting claims.
For 11, we use.
Ooh underwriting before and that's a new but the impact in our provision levels because the data breaches I recognize that deal just person on the other than.
The monies that despite write downs overtime. So it doesn't mean back in the short and also don't forget about the I'm anticipating that natural I guess arsnine.
I mean as long as we get.
Well, what he now we're gonna humor portfolio that would also have any backing in India in the overall.
Promotional level and finally as long as we see I mean, I suspect that ER GDP growth level the blind.
How many bucking the games in the provision level. So yes, you are mentioning we haven't gotten their higher side.
Oh the range we suspect.
Oh, Oh final I mean level or beat your our own that number.
Yeah.
Thank you very much.
Our next question will come from Jason Mollin Scotiabank.
Everyone. Thank you.
My question is related to the overview of Credicorp business lines that you show on slide four of your presentation I think it's very helpful.
Understand the drivers for your main.
Businesses.
You show of course year to date BCP stand alone are increasing its return on equity from 20% <unk> in 2018 to 21 and a half mibanco err on the other hand showed up a material decline in return on equity you gave a good job of trying to give a snapshot and what's driving.
And let's see if we go we had a decline in New York.
Accounts, where the majority of.
If youre a of your earnings for the group. If we look forward I mean, what are the dynamics here for especially I think with the decline in profitability Mibanco. When you talked about the impact within your sales force and perhaps.
[noise] getting out of some of the riskier segment, how should we think about that.
Sure profitability for these three main subsidiaries of Credicorp going forward can we see the banks continue to increase or at least maintain the trend in the last year to increase and can we see mibanco turn it around these got going Pacific I'll turn the profitability levels around thank you.
Okay, probably in terms of universal banking.
The mainly BCB hey, the main drivers are going to be the significant they the increase in the retail banking segment.
Due to a bid trains, but also the inclusion of new segments. We have already mentioning we are positive. The DC is going to result in the whole see a need to adjusted names and we are managing was going to match the efficiency ratio balance.
Seen the efficiency in the current business I mean, buseman well just transformation that we are embarking Tom I saw an old. We are you know trans Pacific seem to trends in the cancels micro finance as we have been discussing previously.
I was a 19 year old adjustment that was mainly what do you need to bat.
<unk> is issues in which we go to show in such men with the appropriate accuracy in hourly nation policy.
That was supposed to have that we could play they played the girls portfolio on the same time, a increase a war in sales force. The never sold during these years that you have lower margins higher for the Sean.
Hi year cost.
Going forward, we expect that we are going to be able to manage that they need into it as a margin.
Reduce the reason refied and they're starting to gain efficiency, where we'd be significant amount of new equals the weakest incorporate in is starting to produce a full capacity.
Given say that is a competitive market and we are positive, but probably the final margins are not going to be as high a work two years before.
In the case, hoping shootings in.
In the case of the insurance business just doesn't properly you can spend.
Basically I think that we're working on different things and embassy if you go through the four for the insurance business as a whole Oh first of all I think something that has been more evident as the quarter by quarter goes by its increased profitability of the providers. As you know we bought a large number of providers some years ago and we've been working.
Diligently to to make them more profitable and I believe that today most of them are profitable levels. We do have some land banking there that you know kind of Ah gels pop is a busy but over the next few years, we will build on this led and will it make it a produce so that that will also contribute to the probably.
For the BT.
Additionally, we are especially if you go insurance group at the holding off all other companies. We're working very aggressively on the efficiency ratios are currently we've been reducing that significantly going down from levels of about 18% to 16%. It will continue to do that with a target being below 14%. So right. There we would generate.
Additional efficiencies that will also contribute to profitability and obviously to the or <unk> or <unk> E.
We're also working one of the things that we've been working diligently also over the past years is in reducing or commissions and ourselves and after that we are aggressively targeting E channels or E. Commerce, we are working that with a new a platform. This year, we've launched a insurance or.
There are four or e-commerce for for outdoor so a home insurance and next year will be rolled it out also for health insurance and that not only brings you know you knew sells it to us but it also reduces the cost of these sales are less commissions and also more efficient.
Sales were also working very close with the other companies of Credicorp to increase ourselves in different products.
Very good example, this is that we have worked closely with me Banco for example to so and then depository.
Okay logical product, which last year, we had none in the market and year to date or in the in it. We've we've we've reached the CIO of about 36 dosing ER and yeah, Yeah, probably products, where we are working to increase that and and I think that the other thing.
It's also a you know we're working on increased cells and also better better under under writing to reduce our loss ratios, which I think has been evident in the outdoor and into health insurance. This.
Thank you very much ladies and gentlemen, it's quite come on Jackie whereby task. The question you May Press Star one on your telephone keypad now. Our next question comes time, and I said that mandate.
They are time [noise].
Hi, Good morning walked in college, so certain thanks for your opportunity Oh. My first question is also to know your point of view on the recent political noise or you just want to know if disease affecting credit demand.
Do you think the daily delays on a infrastructure projects. His name is limiting wholesale homes road and I do you think just couldn't have anybody in consumer loans at some point as you mentioned, the new going when she's going to be place in doing Oh next year. So what is China still think about it personally.
Sure the elections.
During the middle of next year or do you think de she's already started.
Are you seeing the new Congress, she even play screen Blair man or potential changes reforms that are needed in the country or do you see these is likely to happen after there's a new government in place.
Happen next year when you're in the next couple of years.
And then my second question is a follow up on the provision charges. So as you mentioned, maybe that cause serious <unk> last quarter should be around 1.8%, but thinking about next year or do you think we should think about these a 1.8 Ozzy Neil.
Recusing level or what will be the elements to think you can return to that appears guidance for this year off around 1.41 0.6 person. Thank you.
Hi.
Let me talk about.
[laughter] political.
Environment.
Thoughtful says on [noise].
Numbers you mentioned.
The scenario that we see going forward, there's election for Congress and generally is that we'll have Congress, which will.
Not have.
R&D from one party, but rather.
Hey, Congress, which several political forces will balance itself out so.
Thanks, a lot I loved live belligerent or aggressive Congress, where there will be no majority so from that standpoint.
See you will be quiet periods, where really the political falls will be more potential election, what happens when Congress [noise].
We're not concerned because what I just mentioned that the income Congress will be able to articulate any dramatic changes schools are legislation or constitution or or or or anything that relates to that has but all.
On the model.
Walbridge.
That's elections.
Though.
We have a EUR estimate what are the different potential candidates.
And.
But there's nothing in the horizon that really.
Makes sense words tremendously at this stage I guess it is very Yardley Ooh Ooh Ooh, yeah, you're about what the future will bring regarding presidential elections will still you know almost two years ahead I'm back to use.
The specific questions or no.
Yes in terms of Arb officials for provisions for next year.
It will depend on portfolio mix I mean, you we see.
Our corporate loans growing again ill briefly review.
Reviews, or the cost of risk that we yesterday, but within or we don't or the original portfolio definitely the effect that we're underwriting as I mentioned before we got higher risk profile, how does that mean back into retail portfolio and you will sepsis.
In in underwriting those buttons.
Ah, yes, or <unk> in the retail portfolio was marginally but.
It should be more than compensated by the new friends neighbors and embracing and also by the fact that we underwrite those plans would you just don't try and just one does a lot more efficient the original jobs.
Definitely a number.
Do they but it will probably be around what we'd have to be our own 1.6. This program.
It was it.
This is our travel a reasonable just Mitchell to do Mars why do we.
We don't manage.
Great decisions.
So we managed by.
Risk adjusted.
So so.
Because of it may go up.
Got it isn't just a name well he's a good decision. So it's no go service by itself. That's one issue I would like to clarify.
Well right now the just measure.
If you go.
The other CLL.
Statement or what were seeing these that further we were able to distribute.
Charles the gossip distribution, we use reduces dramatically. So again, we may end up with.
With a higher costs.
A better bottom line because these mother these liver liver.
[laughter].
Thank you.
Next question will come from Gabriel Norbert Citibank.
Hi, everyone. Thank you for the opportunity to ask questions on another question here on our side HM We have seen that seems just trade has decreased from around 2.75, HM two to 225. So here I'm just trying to understand what is your sensitivity.
To this decrease maybe if you can give him sensitivity of of around 100 beeps decreased and also as we go into 2020 <unk> you have been saying that you were seeing increased loan them out.
Do you believe that the improvements in your I'm loan mix could offset the young pressures from the I'm coming down of the reference interest rate. Thank you.
Yes, I'm, probably with that with a these question.
With two different approaches the first is.
The underlying assumption that we have fees that we are going to change our meat in the portfolio from more wholesale to more retail on among retailers to higher merging how you have reached settlements and deal that change is from more dollars to more sold is a silver sold or if they previous change.
These wounds it was sold a another I see nothing Greece margins.
Counterforce, you have degenerative trends, both the interest rates in them and indices them in solace in Indonesia I.
A general rule you can see that the combination all the duration of the portfolio on the pass through it.
Means that moral is one third of the <unk>.
<unk> line.
The increase or decrease interest rate I translate it [noise].
In the bottom line to the to the theory if <unk>. What is the result of that combination will almost immediately last through in the wholesale short hand, we'll durations.
So very might be translate into how you're taking minutes of revolving credit lines.
I don't know you'd be sensor helps to understand the process. The combination of everything is that we've seen with day is going to be net positive.
Thank you very much.
Once again, ladies and gentlemen, as a quick reminder, I think wed like to ask a question you May press star one on your telephone keypad now.
[noise] [noise] [noise]. Thank him now I no additional questions at this time I would now like turn the conference back over to Mr., Walter Danny Chief Executive Officer for closing remarks.
Thank you.
We continue to navigate in a macro environment, both local and international with negative headwinds and increased uncertain.
Our 8.8% increase in accumulated net income is a very good result was the backdrop of this environment the tremendous investment we are.
Better serve our customers incorporated technological innovation is your our long term profitability.
Year over year boom in efficiency.
The.
The increase already mentioned in profitability.
It's a very good indicator that we continued to successfully bother us our short term and long term priorities.
It is on a void.
The slow dog in the Peruvian gone well, but short term results.
But this should not distract us from our medium term focus and view.
There continues to be very.
Oh.
Since the program's mark.
But it's also true the competition.
All of you will pressure margins and profitability.
And it is.
We have to continue investing and preparing our different subsidiaries to be very well position capture the growth this challenging competitive environment [noise].
I would like to address.
Pacific.
Microfibers units, which is over a couple of course.
Yes visibility is down we hadn't trestle bike with your almost 56% last year that is.
Sustainable in the long run.
This year.
Our closer to 20%, but we've seen there continues to be upside.
Do we get a thing the micro finance business should be at least at least equal to that did we updated the universal bank.
So yes.
We are continuously investing in micro financing continues to see potential for growth and increased profitability.
We thank you for your continued support and are an interest in our coffee. This is a positive for so well continues to be the liver biopsy overtime with this cycle goes up a substation and thank you very much again.
Good morning [noise].
Thank you ladies and gentlemen. This now concludes today's presentation you may now disconnect.
[noise].
[noise].