Q4 2019 Earnings Call
[music].
Please be aware that each of your line is any listen only know.
At the conclusion of today's presentation, we will up enough lots.
At that time and.
And actually the procedure to follow if he would like to ask the question.
With us today is Mr., Walter Bayly, Chief Executive Officer, Ms. job viral threats Deputy Chief Executive Officer.
Mr. Rinaldo, Yes, that's chief risk officer.
[laughter] Francescas also transformation officer, and Mr., Cesar, Yes, Chief Financial Officer.
Now it is my pleasure to turn the conference over to Credicorp, Chief Financial Officer, Mr., Steve areas mysterious you may begin.
<unk>.
Good morning, welcome Greg Scott Krinsky will now walk down into the same same before you can sort of 2019.
Before we review pretty poor performing.
I'd just highlight some important not there should be gotten into local environment Kurt.
How do we did he solution vendors like precedent.
To be sorry September affairs.
2018 congressional elections took place when January 26 to tell Sentry Bosingwa shows point water segment income risk, we nine political parties.
He seemed to my you already we quite 66 Boes why I'm not sure.
The majority requiring.
87 boards, which means that parties, we had before a consensus to pass legislation members of Congress, we assume they rose.
2020, and they're trying we and in July 2021.
The executives.
Branch seeking may shift to Boston public investment.
Among the liver you see decreased Sunday down to seemingly public investment the following Arnold working.
The reactivation will start realize project may choose to increase execution will gradually ties infrastructure project.
Hey, priority Tyson public investment region, and loosing deceased kinda DC should mean to achieve a 1% DCC GDP like 2024, you Staples 2021.
These measures are expected to have an effect on economic activity towards the second half.
Well 2020 next slide please [noise].
[noise] <unk> economy kind of TVT decelerated during the last quarter of 2019 as you can see chart, one Oh waste. He may switches GDP is funded a one 1.6.
We're seeing year over year in the last quarter of the year, we'd use whistles GDP is funded 2% into 2019 white known primarily GDP grew around 3%.
A lot cholesterol was sold for 2018 is primarily attributable to a decline in different salt reported by the primary.
It goes back to Collaterally fishing on mining for 2020, GDP suspected to accelerate an advanced 3% wherever nice recovery will mostly be attributable to a rebound in the primary sectors onto public investment.
I can see chart to according to analysts consensus.
[laughter] they will remain one of the most dynamic economy seem to really young 2020, lackey banking sector longs decelerated in 2019 as you can see chart three banking sector loans grew 6% in 2019, which falls below the expansion.
Mr. In 2018 represents the lowest feel producer since 2017.
We total loans Corporately loans reported because I used to deceleration boasting rose, 2.9% in 2019 compare no 9.7% into telephony.
Gee consumers loans, whether a failure rate to advance is 14.8%.
Nick it's like [noise].
[noise] regarding full year performance there are important aspects will follow what line sold business that we like to mention indicates Wilson.
That's held back in 2018, I wish daily loan balances have BCP stand alone posted 6.9% growth you know conflicts Ofone Boeing is strong pressure on pricing and a decrease in the overall demand for financing in wholesale banking.
Loan portfolio growth.
BCB, what's driven by retail banking segments in local currency. This evolution in the portfolio mix [laughter] TLCV impacting both name reset adjusted NIM.
In 2019, BCP begun warfare going to human launched a new sickness through the thought of China's.
Bcps know how did you see broader segments of the population and the specific needs such as very short term loans and these small immediately sportsmen proceeds as BCP grossing these forgot your organization has developed the capabilities to maintain adequate levels of lease adjusted me.
[noise].
We should be significantly increase explained due to some transformation, while maintaining a sharp focus on cost much silver sold east coast, we couldn't ratio improved 100 basis points.
In 2019, BCP, Bolivia celebrated its 20 seats, a newer sorry, you know.
<unk> political environment Nonetheless.
And reduce the good levels of loan growth I mean gauge not very disciplined cost management, which had positive feedback from the efficiency ratio.
With regard to micro finance in 2018, you back with Stephens downward pressure.
The margins due to a strong competition. Moreover, having taken we said justman measures. The banks has focused on targeting low at least for five six minutes for the year. These two factors combined lit ne to draw.
76 basis points.
In addition to focusing on.
Tim issues, such as fine tuning, Greece and collection models as well as pricing Mibanco has embarked on a multi pronged Reece management program, which they are developing additional capabilities with them be shoe schools. DCF was has already begun to reap benefits, which is evident in the fact that.
Cost of reasonable from Ivankoe decreased 47 basis points in 2019.
Regarding efficiency the cost to income ratio got me about cool deteriorated in 2019. The bank is funded its relationship management on sales force to build capabilities to sustain business world.
Yes.
It's on the lead pick on innovation kabaddi.
It is important to note that the bank, we speak reach into hybrid model liberace into usage data and analytics to be made loans based some more that is why gradually relying less on loans off he serves for long origination.
Finally in December really core.
Hi step, we see some have been competing for long.
So this will be working on preparing the marriage within cool breath to consolidate to spread things seem to countries Micrel financing.
With regard to ensure that some pension funds.
The shoot us on the right.
I seem to sold increased on a full year basis. This was primarily due to the positive evolution of the property and casualty business, which posted an increasing its near turning premium level offsetting growth in net claims. Additionally, net interest income increase including investment gains.
Indication of the light business that was an increase in net premiums I mean, it's clean [laughter] sequel wants to attend therefore disabilities food valuable sheep ambrielle expenses policies for the private there's Beijing fancies thing. Nonetheless, these problems reported higher claims done deal that broke into life business.
Additionally, operating expenses grew less than we'll pay reaching English, which lists that's equal to increase contribution to credicorp.
The bench on some decent is reduced their spending briefing its whistles due to an increasing fees through both flows I meant bus.
The profitability of the.
Nice legal reserves increased in line with more favorable market conditions.
In investment banking and wealth management in 2018, the proprietary portfolio supposed to deliver slows in comparison to tell US anything you know conflicts of favorite route favorable market conditions, both the trading books and there.
We look for says portfolio.
Reported how your revenues, which were driven mainly by the evolution as it used to be which realized gains while decreasing the size of its investment portfolio.
During the year assets under management increased particularly in Chile, and Colombia in local currency, which fuels.
6% growth.
Yes, it's under Nineish, making 2019, yes. It management business continues to focus on growing its international Bluffton funds 42, additional investors Latin America and all the regions corporate finance would you sort of degrees in 2019 versus 2018.
<unk>, which was at three with level, mainly to that but formats in Chile wherever total income in these segments with cologuard considerably in the Fort worth it mostly driven by TV too.
After receiving approval from the very late twinning, Colombia, Credicorp completed we see show.
Both 100% of the Copytele.
Oh, we trust that FICO band has begun that process to bridge or the merger.
Next slide please [noise].
[noise] now I will comment on the highlights for the quarter performance in the fourth working on full year 2019 floors or the profitability.
Credicorp reported net income of 973 million solace in the fourth quarter 2019.
[laughter], which was 11% lower than the third quarter's results. This was the result seasonality.
Operating expenses, mainly at BCP stand alone which were not.
Perhaps it's like growth in Greece, I, just didn't mean and such but Tony I wish it would be dropped to 14.9%.
For the full year 2019 critical reported net income.
4260, 5 million solid 7.1%, how you thought if you posted last year.
These results for the full year represented a return on average in shape with yet another notch house, it's up 17% and 2.3% prospectively.
Full year obvious daily loan balances grew 6.6% driven primarily by BCP stand Alones retail banking portfolio.
The coastal freeze increased 22 basis points in 2018.
<unk> up 1.6% decrease was reported at retail banking.
Cps and alone inline with the shoot the portfolio makes me pretty Corp increased 11 basis points to see tweet a fine.
Point, 39% in 2019, the improvement in BCP was partially offset by the deterioration.
The re suggested mean decreased four basis points in 2019 impacted by Mibanco for sold this was partially offset by growth in DC.
Yes, and along with adjusted NIM.
In terms of operating efficiency the full year cost income ratio improved 30 basis points improvements were driven by Bcps 10, along I see people, which contribute we definitely do come up 80 basis points on 100 basis points respectively.
These contribution was partially offset by the 70 basis points impact.
Finally.
Rick would you to one ratio at BCP increased by 74 basis points year over year to 12 point, 35%.
Next slide please.
[noise].
[noise] he's the analysis of the evolution of certain some profitability. The following you know it's worth noting as you can see chart won some additional expenses at the corporate level has led to a deceleration we have newsgroup it's critical for.
The group to spend more.
Withholding taxes, no Towson 19 up there more provisional whereas set aside for taxes for dividend distribution for fiscal year 2019, as you know the dividend per share paid in 2018, plus 28 sold its compared to 14 point 17, so listen to.
Thousand 90. It is important mentioned, that's withholding taxes [laughter] linked impact in 2018 or news because fewer deviants where upstream in from subsidiaries seeking additional cash was obtained from the sale BCP share from Credicorp due to book today. So.
There was an increase in Korea loss.
Business expenses and you know that asked me sort of these expenses are the closing live.
Regarding our or E. You can see chart too.
Yeah.
The early he was positively impacted by the evolution seen when it does have banking insurance inventions and investment banking and wealth.
But this effect was partially offset by do Brussels, or micro finance, Andy talked corporate expense.
Next is like [noise].
[noise], you know something spot market deceleration at the end to 2019 the loan portfolio Cheryl.
Tortoise everything I said he traded.
Seven.
67% in 2019 down from 68% in could tell from 19 regarding the full year evolution of long measuring average daily by that as you can see in charter one total loans grew 6.6% in 2019.
Gene long rule was mainly driven by retail banking at BCP stand alone.
You can see chart to the mortgage loan will let expansion within Devry paid banking portfolio accounting for 40% total growth. The majority of the reminder of robust attributable to the consumer.
Credit card I assume you stick.
It is no work that the credit card loan book continues to grow at a faster pace and reduced said expansion golf, 19% year over year.
On this financial was mainly driven by local currency higher margin segments, which led to an increase in the cost.
Stuff race.
Next slide please [noise].
[noise] in terms of fun you can see chart, one ready quotas funding a structural grew 4.2% year over year, driven mainly by that increasing their policies.
This completes the policy if he believes that share of total funding.
While wholesale funding reduce it shows if it's important to know that bcps ton along improve.
Wholesale funding maturity profile, reducing the funding cost cure, both local and foreign currency due to the liability management strategy that was made in the third quarter of 2018.
The new money issue allow BCP stand alone to replace during the fourth quarter more expensive that such a corporate bond that expired an up there they towards subordinated debt that was cold.
Each up too for the full seems like Todd year over year role was he created a 7.1 person which was.
Yes, we would blow to time saving deposits, which grew 8.7% and 7.9, but I'm, saying perspective.
The cost of funding increased by 12 basis points, we was mainly attributable to currency mix effect given the growth in local currency funding I counted.
For 90% of they function Register in Philadelphia.
Next slide please.
[noise] as you can see chart one.
They are you will ratio increased four basis points due to deterioration indeed.
Is he mi business, I mean them either market segments. It's important to note that these loans have been adequately provisioned. Additionally, corporate it was announced loans decreased clients from the construction sector, partially paid that picked in this context, the NPL ratio decreased 90 basis points.
You talked to you can see that the cost of freeze increased 22 basis points. These was attributable to an increasing probation seems retail banking on BCP stand alone.
The case of consumer segment will be shown school impacted by the core showing how you're always segments will detail China. Nonetheless the.
In the goal so freeze was offset by higher much.
In the credit card segment for the issue with all this increase after the probability of the four roles you know complex system wide increase include in that business.
Finally medium term loans, they see me Peter Misek me deteriorated.
As has been that trend in recent quarters, you to a misalignment in the release model for any specific settlement accordingly, rhodesians deteriorated more than expected pricing will be nation on collection measures has already been taking but due to the duration of these portfolios ever sold so the adjustments will materialize.
Later this year.
It is important to mention that increasing provisions on BCP stand alone. We did portfolio was partially offset by we there. So so for the shown in wholesale loans portfolio. Additionally, a new Banco de Air Force made late last year I mean, the first in man thereof.
This year, let Tony roofing, indeed quality for you nation I mean, the collections process.
Next is like [noise].
[noise] into Towson 19, creating foreseen increase 11 basis points. These was attributable to.
Positive evolution will need a BCP stand alone, which rose five basis points quarter over quarter 26 basis points. In 2019. This was driven mainly by loan growth and a buy more profit of old meat by business segment Unquote for me.
<unk> was partially offset by different do shomi banquets name, which failed five basis points quarter over quarter, and 76 basis points in 2019, Mibancos portfolio has being affected by the economy Dun <unk> by higher competition, which ratios margins dot work a.
Additionally, mibanco decided to focus and segments with better leverage profile, which negatively impacted mean finally, we suggested Nina credicorp increase six basis points quarter over quarter and degrees four basis points, you full year to tell us and making a steady improvement at BCP stand alone.
Yes, offset by deterioration of me Bob.
Next slide please [noise].
[noise] regarding nonfinancial scheme.
Each other one you can see devolution with no financially, which is funded 11.1% in 2019.
This was driven mainly by two factors first but any leasing needs getting them securities, which was a three we'll talk to growing gains in the proprietary investment portfolio Atlantic security button, and BCP stand alone cycle as beach too and it sort of sense, It's punch, who was new training rescinded fee income combined these two.
Right and its represent 82% of inquiries enough and actually in 2019.
[noise] each are too we can see that defeating going could you sort of growth of 3.4% in 2019.
Mainly at BCP stand alone this was primarily attributable to an increasing.
English drops on transfer some payments on collection and secondarily, but increasingly seen call me bunker due to a change in the accounting recognition of the fuel related to ensure on some loans, which were previously accrued over 12 months, but no way of reduced that when the policies sold.
Next slide please.
[noise], India Halloween chart, you can see the contribution of each subsidiary to the variation in deficiency ratio BCP stand alone improve operating efficiency with an increasing interesting.
This was attributable to growth in retail banking loans.
Which offset the increasing administrative general and stock suspense, it's a new dunkel deficiency ratio deteriorated due west frieden, but an increase in personnel expenses in the first semester of the year US nationally our newly hired sales force you stealing their learning Q such productivity should increase.
Yes.
[noise] group I see people posted an improvement its efficiency ratio. This was primarily attributable to growth net earned premiums mainly driven by decide a SIFI for one to six trenches seen the last in the process for disabilities, who died where she from real expenses policies.
For the private pension funds system.
This represents an improvement on 70 basis points in deficiency ratio wherever it is important to mention that increasing net written premiums was offset by net claims which are not part of the efficiency ratio, but impacted knitting.
The investment banking business the.
<unk> ratio deteriorated good trend, increasing salaries and employee even if it's mainly at the holdco debt.
In the full year analysis of operating efficiency at the close things don't ratio decreased 30 basis points. If the effect of increased net earnings premiums due to these liabilities food Bible she's on.
The other expenses policies for the private pension funds ceasing is excluded the operating efficiency ratio activity Corp, increased 40 basis points and it's a slight [noise].
[noise] destination in the Pos.
[noise] BCP.
Aspirational used to become the number one button for customer satisfaction and the most efficient in the region fluctuates. These BCP has been investing in customer experience, but differentiating a physical.
Self service and the thought of China's level [noise].
He CP.
The leads the market for customer satisfaction emotive retail wholesale segments.
In 2018, BC being squeeze the D. Dugan human client base by 57% to achieve a total of 3.3 million clients. These sleeper since 41% of course.
Schumer banking clients, a subsurface char one they faster growing digital China southeast subsequent increase in diesel users has reduced the mussina fees normally obtained through traditional Chuck.
It's important to note that these are flat use of those that need any of the following.
Criteria. They can do 50% of the monetary trying to succeed to the thought of China's couldn't do that at least 50% of nonmonetary transaction through the use of China's or purchase any pro the digitally in the last 12 months.
In line with this strategy to increase banking penetration BCBS now.
Well to be approved grades to 36% of the full time equal no monthly active population the aspirational used to be able to do these.
For 50% of the total economic activity population, but 2021 wells you can see trust three in 2019.
In digital sales May show unions have increased 2.4 times with regard to last year's few years in this context.
The total sales represent 13% of top outsells. The most important product full D. Kelly you suboxone wages, where these does.
Sales accounted for 46% of the total sales in 2019, there so 25% in 2018.
Indicates a VIP you can see charter for done the number of users continue to grow significantly.
It's not sessions to yup.
In 2019 totaled more than 18 million, increasing five times compared to 2018.
Finally in January 20 training Yep totaled 2 million users and expect to reach.
The 10 million EUSA remark about 2021.
[noise] mixes like [noise].
[noise] in terms of the long term evolution of key financial indicators in the past 10 years critical huh.
It's consistently grow its net income.
Compound annual growth rate to 10% because being achieved despite the economic slowdown you blame seems to tell some 14 in 2019 19 call not really core rose, 7% despite headwinds have steaming from a high.
Highly uncertain political conflicts lower mark as rates and higher competition. Moreover, profitability levels have being a strong and consistent 12 years, despite variations economic cycles.
[noise] [noise].
[noise] us we huh.
Recently communicated to.
Credicorp is working to bolster its school remnants framework.
We two main objectives to drive long term stakeholder value and to demonstrate leadership incorporated governess within.
Our operating region as such the board has agreed on the file.
First to simply five Dick will meet these trucks by me great from saving committees to four.
Which are the recycling meeting the compensation line nominations committee the corporate.
No its committee and the audit Committee, we believe.
Do you mean communities will allow us to populate who meet these more effective.
Increasing the diversity of abuse, we presented by increasing committee members size I mean dependence second.
Regarding the chairperson.
So the committees after the election will board members at the annual General meeting the chairman of the Board will no longer chair any is standing committees. So.
So he will continue to be a member of the risk committee and be a member of the newly formed compensation nominations Committee.
Good.
The board has designated the corporate governance Committee the task to you define big criteria for independent directors to ensure the we meet the high you seem to have national standards for good practice.
For the more we should meet a proposal to spend the size of the board.
Direct doors.
<unk> eight to nine directors as part of critical Vitals. These proposed has to be a roof. The unwise ginetta meeting of shareholders by the a feeling that the boat two thirds of standing shows Credicorp proposes the suspension in order to enhance the independent Sunday.
Diversity of these direct doors as well as to expand this keasling experiences with the centered on the awards.
Finally divorce hardly see maybe this year for the past both instituted more string and fully see some proceeds use out of the holding company.
[noise].
Next is likely going to guidance.
[noise], great equals key indicators for the full year 2020 is based on the following.
Despite some it'd be social political uncertainty.
Growth in there.
Hi, multi sector in 2019, the macroeconomic and political conflicts, we suspected to a slightly improved in 2020.
This will have a positive effect on the economic undo on the banking sector. They following contains grady codes guy, though for key indicators.
Loan growth for 2020.
To see trade between 8% and 10% these will be driven mainly by the retail banking segment and Bcps 10 alone by Ivankoe, where air Force, we've continued to fine tune the business small it.
In terms of cost ovaries defeat yours how to.
The to range between 1.6% to 1.8% in 2020 [noise].
The group focused on growing riskier segments. This riskier segments are respected to bring higher margin. We will help reduce the effects of thing environment characterized by lower interest rate on higher.
Our competition.
Such guidance for mean will increase to a level between.
5.45, 0.7% guidance for risk adjusting remains flat level between 4.34, 0.6%.
[noise] efforts we.
Continue to implement our transformation programs for BCP Pacific only bicycle.
In this context the efficiency ratio is expected to remain stable in comparison 2019 speakers higher costs are expected to be offset by their England generation.
Regarding copy Doug.
BCP with remain its internal limited for a minimum common equity tier one of 11% in the first quarter every year.
This quarter is weighing ordinary dividends declared.
Oh Gosh return on equity is expected to range between 16, and 18% hotels anyway.
Great.
The core how suspended the range for these indicate door was assessing how to optimize do we serve fun.
That has to be accumulated over the past few years considering potential application finally.
Credicorp is confident that when the full effect of transformation initiative much.
We realized on the capital optimization process is fully implemented that targeted level of returnable arbitrage equity of 19% is achievable.
With these comments I would like growth into Q unaided.
Thank you Sam.
Sorry to ask a question please signaled by pressing.
Star one on your telephone keypad.
[noise] you are using a speaker phone. Please make sure. Your mute function is turned off to allow your said no to reach our equipment.
Again that is star one to ask a question well pause for just a moment to allow everyone the opportunity.
For questions.
We also ask that you. Please only one question at a time after each question has been addressed by our speakers. He will then be allowed to ask if money follow ups as needed but again. Please only ask one question at a time. Thank you Jim.
I.
First question welcome.
Like Friedman Citibank.
Thank you are part of your opportunity no one point on the on the guidance. Please and a one point that is implicit in the guidance, but so I know you did not come in so [noise].
On the Oh asset quality that we have seen that cost so for us as guy that for 2020.
He's on the range of 1.6 to 1.8, so the floor would be the level posted in 2019 and do you mentioned that this is due to.
I know the origination in riskier segments. However, you know over the past two years you have already been focusing a is strongly in riskier segments, but.
I know in 2018 for instance, a your cost suffering a decline so.
My question is why these different now because the activity seems to be picking up.
And the yarn npls are already coming down so why to keep a I know high year a guidance of cost of for his car you a you know wheeling too.
Viewed up coverage, which is you know below historical average. This is the first point and the second point just for me to understand.
What I know drove a deep seen come compression are you slowed down a in 2019 you grew 3.5%.
Which is a you know below even at the level off a credit growth and that was at the 6.6% and what do you have a you know for 2020 in terms of expectations for fee income. Thank you very much.
Hi.
We.
If you initial comments I'm, probably right now to aren't going to complementing indicates to us its quality. We have came down for the last four years from around 2% to 1.6.
What we thought being improving several body will see now where risk on the mining models.
Going forward, what do we have.
Two factors to go see that when the inclusion of higher risk assessments and a moving target fake both the deterioration will they be mean portfolio BCB.
During 2020, we are going to fine tune and there was also for these pima portfolio and on the same time, we aren't going to.
To work closely take more risk.
New segments as we have being mentioned previously in relation to fee income.
We also stated previously all so that they expect it is that the fee income he's going to rule less rapidly done the margins because a us wincor.
The new modules, we are going to go for example in consumer loans do you get along that age to house healthier margins, but usually no fee income related.
And there is a strong competition in the payment systems holes. So it's truly we are going to spike.
Lower fee.
And roll down the road.
[noise] isn't very good.
Their coverage of our our and Gill.
It is our on ours is 13% because it's been stable our own doesn't numbers, because even picked up a little bit HM.
As you.
And I would say that happens because I mean, that's.
Let alone is basically the loans backed up by real estate collaterals. So I mean that doesn't reflect the fact that doesn't that there is a you put them recovery value.
This is it had no no we've gotten level.
Rich I would say, we're really healthy.
Okay. Thank you.
Thank you I next question will come from Jason Mollin Scotiabank.
Yes, Hello, Hi, everyone. Good morning.
Critical showed a quarter on.
Quarter in year on year increase in noninterest expenses and in your release you stated.
An important part of the increase is due to consulting in market expenses can you help quantify that we understand the fees will be ongoing expenses or not and in relation to that looking at your return on.
Equity outlook and the sustainable return on equity outlook.
You mentioned that the sustainable or are we at 19% will be once you've optimized I guess the capital and the transformation program. If you can talk about particularly on the capital side is this more on earnings.
Improvement, perhaps some efficiency unsustainable early is it or is it more about optimizing.
Capital.
Okay.
And probably first related to expenses.
Particularly at BCP stand alone level, we have a strong seasonality in the fourth quarter.
I wouldn't say that is any particular effect in advisory fees for these year, what's happening is that in many cases you reduce their they finally invoices in the last two months of the year and de sees a seasonal effect.
And I I think is it mainly due.
The reason when you have extraordinary gains that coincide with these a period you all sit by being in this case, we have only we'll see the trend in the case of return on equity.
What we are having now I will say a three main effects first.
We.
The impact of that we sell fund that in general terms calls us north of 100 basis points. If we put these funds to war or make on another decision you I will say automatically increase 100 basis points or return on equity we're talking about around 600 mediums.
At this point.
They all that factor is the transformation now we are in the face both investment investing a lot is spending a lot into transformation, we expect to istar gradually gaining more and going a tangible not only operational but financially.
Awards for these investments and be sure paid off down the road on third not a less important than they've sector that we hold in dogs, we have increased significantly they would holding in the dividends from 2018 to 19, we expect to continue paying him.
Increasing dividends over time, so what if somebody from 2018 2019.
Hey, almost 2% of their learning decreasing earnings grow was attributable to marginally more withholding taxes the money that we.
She is upwards from Peru to Bermuda.
Paid dividends based on with holding types of 5% you we pay more dividend, we pay more withholding taxes and.
The rate of withholding taxes can increase also when we start to operate in a more sustainable levels of dividends the multi factor all these increases going.
To diminish.
I change from 14 to 28 is very significant down the road. It is the change it shouldn't be us or meticulous these on a continuous basis.
Thank you.
Factors together.
Hi, I.
Not as big station of.
Hi, there are always.
Thank you said.
Thank you please.
Next question will come from unnecessary Londo Bank of America.
Hi, good morning, So sorry, good morning, guys. Thanks for your opportunity [noise].
So you would be grow that you suspect that dream.
Bruce this year bipolar can best man I'm, not rebounding primaries economic sectors.
However, we continue to see tough competition, especially in wholesale loans from international players and into micro finance sector. So how do you see the challenges for your loan growth of 8% to 10%.
Especially in a year without the Biden Congress and almost one year ahead of the presidential elections.
And then I want to make that my next question.
Okay.
I would say that we are going to face prodi to two different in reality is the they retain the BCP retail.
Portfolio I'm, you bunker portfolio growing on a hostile pace not only competing trying to capture the seeing in specific markets that we have been dealing but probably a tracing we knew pro those deferring market. So we are not only a competing in just seeing a specific as field, but this funding to put their churn markets though.
Going downward or create in different problems. So we are both cities I love that the counterpart you saw US you rightly mentioned in the wholesale segment that we expect tougher competition. Both in terms of volume and margins. They combine effect produce osten, it's big data showing off between eight.
Oh temple send us we have provided in the guidance.
Perfect. Thank you so and then my and my second question is how do you see the net income grows. These year are you expecting double do you.
Gross margin should be more into high single digit growth and I know what will be a euros.
Solutions for their dividend payout ratio to achieve this 16, 18% our OE guidance and then my last question is on your M&A activity are you continued to see opportunities in the region and he said door or country, where you are more interested to thank you.
Okay.
And that's still face they okay I think they're probably three questions is if I kind of Islam. One by one I think in terms of mean a war imply you rural I mean, I I'm going to give you the answer combining day the loan growth we the is spinning.
If you the onset I'm, probably is going to be in to be seen if he does youre ready you already mentioned this is there.
He joined the net income grows.
In in India net income a if you combine don't this figure for alone.
We are going to be in into single digits.
The single digits.
Your payout ratios you think you could be the CMS in 2019, because I I believe you consider a special dividend in 19.
Indicates that the payout we are I would say, it's kind of split.
Certain decisions that we expect to continue paying a higher dividends, but in addition, we are now analyzing our we have not reach a conclusion about these point.
How do what to do with their reserve funds that let's say to assign mainly for M&A in.
Purposes.
Based on these decisions Apple Danish.
Additionally, a especially maybe they will be declare.
Perfect and then a in my last question of the M.I. M&A activity. As you were mentioned you can use he's a restart funds so any sector, our country, where you're seeing.
One more interest.
Hi, This is Walter has to higher doing.
Regarding M&A, we continue to.
Regularly.
We view.
Both domestically and in the countries that we have targeted.
Which we have well comment that with all our shareholder.
Frankly.
They are a lot of potential assets that are interesting for us so probably the first half of this year.
We will have to review.
Got it says.
So the size.
So so far this is all working progress.
I want to create expectations, but.
There's a aggressively beside the opportunities in the market and value for shareholders.
Perfect. Thank you very much scissor Walter.
Thank you.
Thank you next question will come from Alonso Garcia Credit Suisse.
Good morning, everyone I'm thinking for taking my question. My My first question is on the C. One little.
Just.
During Q.
Excuse me.
Thank you very clearly.
Okay, sorry, I will start a again sorry.
My question do some copy, though I mean, you are targeting a sustainable or would you up 19% on my question is and what kind of beat Q1 ratio is embedded in the 90% target.
My second question as well.
<unk>.
That's my second question afterwards.
Okay.
Oh, I would say that.
Yes, Hi, we see we these expected it we can be an appeal. They showed north of 50% if you assume that they business.
Lets say, a 10% and you have an oh.
Around 18, 19%.
A very simple mathematics gifts to that.
Always going to be a little bit north of 50%.
Okay, but just to clarify this month in person.
ER implies a couple of those trips for we have a 51 close to your target or your internal minimum walking around percent does that.
Yeah. The basic foundation used to have each company appropriately capitalized the is the foundation that's the basic assumptions after das requiring these.
Field, we have a extra fun.
To to pay dividends and at this point, we they they the the analysis we've come to fit in the case obesity the core equity tier one in the minimum point is live in person.
Okay. Thank you.
Second question.
On the topic I.
I mean based on your or your guidance you prefer to correct to assume that youre, depending on an acceleration in expense growth from.
Barring some person royalties, but didn't seem to high single digits. These years I'm.
What is it time frame for your it doesn't blunt I mean.
I got.
Mm three years, though in terms in Batman to four years or when should we expect.
Let's move to normalize out there.
We are what we are targeting a novel rush is maintaining the efficiency.
We feel we then internet transformation or somebody levels. If we what we expect these asset for looked after transformation, we it became much more efficient.
[noise] down the road, but the spends more on technology, a new digital capabilities and less on.
On the traditional expenses actually embedded in our numbers I not significant she is spending more and I T in new capabilities and lists.
In traditional expenses.
In the short town they affect is going to be neutralized.
Down the road, we what we expect these.
And better efficiency, but continuous being investing aggressively in new capabilities is not going to be a tree. Your planned that there's going to end.
Well, we expect that leases had time frame work to reap the benefits that we are continuing to transform the capabilities to be a more the more that.
I had breathing institution.
Yes, thank you very much.
[noise]. They Kim next question will come from Andreas Soto Santander.
Good morning, Thank you for that for somebody from Mike a question is related to Bolivia.
Traditional represents almost 7% off your loan book you highlighted some my crumbling galasso Danny de in this country.
And when I look at your coverage I see that only 3% off your loan book in Bolivia is currently covered so my question a in relation to them.
<unk> costs have raised guidance is what level of corporate <unk>.
Yes, Truman in these guidance on to what extent, you'll see some downside race <unk> in your Guy that's based on your body exposure. Thank you.
Probably nobody's going to do to compliment me that a general.
<unk> or a war past due loans <unk> appropriately covert.
In the case will go live is no exception, what do you have seen Bolivia structurally lower past due loans.
ER that implies on a relative to its moly.
Well, if a month, but the past due loans had broken <unk>.
Good.
And just to up I've mentioned was when that's right gradually the started what do you know we're waiting for sure.
There's really been regarding the portfolio. Our we have been positive is still present, the only some of the portfolio, we haven't given any significant impact in the magic wallaby malaria.
Hi, good take a closer look or what happens in not only.
One of them often comes over the elections, but oh. So today, we don't have any major concern in terms of that well, there's nothing no guidance.
The reason who <unk>.
On the this is Walter.
Yes.
Bolivia.
You bet. Furthermore, the political volatility is the need and the taxes to do some financial adjustments that will have an impact on the macroeconomic Ah stability of a gun.
We're hoping that those.
Adjustments ours gradual and stuff so otherwise more volatile situation quote could come down the road.
Nothing about the portfolio.
Okay.
And our portfolio and back in Bulgaria is more than adequately capitalized.
And we feel that we have they can be appropriate measures the birth.
Such hopefully unlikely scenario of a more disruptive because I know that conditions are up year doing this year.
Perfect. Thank you guys for dating sites.
Thank you very much ladies and gentlemen, that's a quick reminder to ask a question you can press star one on your Touchtone phone now.
Our next question will come from Carlos Gomez, you'll be yes.
[noise] hi.
It's good.
<unk>.
[noise] Kinda, let's go ahead.
Hi, this is kind of coming from HSBC two questions one.
On them and it could potentially going to increase decisively quote could you come in and it could be the as to why it's because people need to nine or what.
'cause internationally could be having nine for the potential.
Secondly, technical question on that page four of your press release, you show the profitability by company a this is growing.
Hi, Tim Booties, so others, a which is now minus 175 million.
It's not just pretty much.
Could you explain exactly what they think that particularly thinking.
Hello.
I've got a breath.
With regard to decide to war that said the outcome of 80.
An assessment that has been through form.
And has.
To do with the diversity.
And the a more balanced distribution of board members in the meeting [noise].
And on top of that the need to increase the number of independent directors. So conclusion.
Yes, basically do have one board member and and that will help a lot this governance improvement process.
Okay. Second question is probably the last question isn't in relation to the already mentioned withholding taxes.
Yeah.
Company be there do you need a great alone and some in corporate expenses by the main factors withholding taxes as I mentioned before when you increase dividends you need to reserve more money for withholding taxes that everything from one year to another whats increased unfold.
[noise].
Certainly as pull up there isn't anything that you can do.
About the who Colin patches, having good three doesn't tell you the company save you some money in anyway.
It's Gotta look this is Walter yes.
We evaluate in and obviously because of the Greys.
Oh, Yeah, most of this withholding tax.
We are bringing visual back so that they will it is extremely complicated because it involves.
Selling assets and moving assets from one comes into the other which have huge consequences from a tax perspective. So yes, we're looking at it.
But so far we have not being able to find oh startup that wouldn't seems to be a better structure than what we are today because of the because of the cost moving from one place to the other I didn't know if I explain myself.
Can you explain yourself and always are there there's no.
No no simple answer.
No simple answer today, so it's I guess, we need to it used to believe that could be at high Oh, that's right going forward.
That that is that it's unfortunately tool.
Yes.
Thank you very much.
[noise] thank him.
Question, what I'm hearing Fernandez JP Morgan.
Thank you gentlemen, I had no question regarding guidance Mark.
Just as the <unk> <unk> once twice.
Inquiries, they see what's your margins, but you'll see.
The from zero to any higher.
Oh, So my point is like what's your confidence level that there was good.
Because.
About mix shift towards consumer and local councils.
Trends is not totally new like we saw it isn't the less once two years. So my point is like how like how should we think about the restart just the need for 2020 <unk>.
The low angels expansion or or or are you confident we can see a surprise here.
[noise], we have let's say, we have different ranges and India ranges are they expected outcomes or something that we need to going to seize or is that the basic of calculation.
Unless Notre Dame to cut cost of risk is based on the loan book and the name you've seen the entire portfolio including investments.
So it's not absolutely linear.
Got it but thinking but I will address I mean that ER.
Yeah, the underwriting processing, the new segments or or the.
And just thinking.
Every every year a larger share of our our total or portfolio. So we expect I mean do have.
But also rig.
A little bit, but net net interest margin.
Adjusted the reserve.
It's more of them of wells.
The impact there between back when they're going to risk [noise].
No I mean I'd just like it did you have a lighter <unk> increasing like Duncan then of course, roughly the same direction like.
It was good just and you can be can be flattish right. So that was my my concern when they try to put together then I am I correct.
Okay.
There's really no one can certainly more rejections I know, we see we're very optimistic on on their level of roll them using the settlements. So that's why we projected a higher higher or go to report or whether you're.
No go guys. Thank you very much.
Sure.
Thank you ma'am.
Our next question will come from our Bendel TRG management.
Hi, Thanks for taking my question had a question on caused it seems you're guiding for your cost income ratio et cetera to be flat.
Yeah, and 2020 versus 29 cool I know youve.
<unk> to dramatically improve your efficiency ratio, so is that going to be harder to do now and.
You know you've spoken about the the cost for the technology transformation program. So I was wondering what those costs were and then finally had a had a question on loan growth.
HM.
Got into a big pickup and loan growth have you actually started either.
Many 20, where is this more of a whole been aspiration that once the political environment.
I'm clues spending starts coming through you'll eventually see or has it been something you've already started seeing in 2020 is evidence of that.
Okay. Our our guidance is related to efficiency not costs, so like numerate to an addendum generated both growing in terms of the impact of their transformation. That's already mentioned is a medium term airport and we artist testing.
To see the benefits I mean, the particularly okay. So BCP that explains almost 70% of the results of the group during 2018, despite a ruling investments into transformation that almost doubled during the year, we have seen proof.
Cost income ratio 100 basis points.
So our.
Right.
A little how much equity investments, you're making in the transformation that way.
Excuse me.
How much is the quantity and investment in the transformation.
BCP level, we have.
But it is directly us and expenses notice on investments in terms of expenses.
We are indeed be seaney tool, HM 200 million 200 million solace, but the investment is significantly higher than does for you are and we are going to.
See through depreciation and amortization the impact of that down the road.
[noise] and the benefits or <unk>.
[noise], Yeah, and then on longer I was just wondering have you actually started to see a an improvement in loan growth in 22.
20 or is this something that you're hoping will come through as the year at your progressive and so I just had one more thing I was curious like you said something about 600 million in reserve funds that you can get more interest on and we talked about that it's something you can deploy these funds to include your sustainable ROI.
In the long term, but I wasn't thinking series about about what you meant by that.
Wonderful okay.
Indicates indicates our plans.
Our expectation is a nation it to you between eight tenths nvcs, a little bit higher than the 6.6% obvious daily balances that we grew.
During this year, we expect some pickup in specific segments, but especially we have a significant expectations to grow market share is bisha niches. It through new products, new trying to assess we have stated before so it's a combination of both.
Yeah.
[noise], the if that was up.
I was mainly to be able to have the liquidity available to capture opportunities that are we seeing a scoping fall in the markets.
<unk>.
This is what do you have some focus are fairly Corp [noise].
No well have that liquidity, obviously, it is very low yielding very liquid assets.
Sure thing for that excess capital has obviously.
No.
If we weren't to assume that.
Totally disappears, which is not something that is quite on the table right. Now this will mean disposition of the funds.
The chart it wouldn't be by about 100 baseball's dose.
The prior question go.
Going forward as I've mentioned in the prior question as well.
We are starts.
That no significant opportunities that.
Seemed to be available and during the first half.
Reassess.
The size and whether or not we want to keep that so.
At this stage, we have not make that decision.
On a government that we will reassess the so in the first half a year and take the decision that obviously generates more value for shareholders. If we're going to.
Oh gosh funds for that size doesn't make any sense.
Well get redeployed.
Well the profitability and by the generation for shareholders. It does make sense a those were the comments I don't know its if I explain myself.
No it's perfect. Thank you.
[noise] [noise]. Thank him at this time, but I know.
No questions.
I'd now like attend the conference back to Mr., Walter Bayly, Chief Executive Officer for closing remarks.
Thank you very much.
A quick comment on each of our four business lines regarding the last year's performance at BCP would have seen strong.
Results.
Girls, all driven mainly by the retail banking same store boom and the value proposition and the fact targeting broader segments of the population while implementing your risk data analytics model.
Ah that's competition and the whole.
Sorry, Fortunately the margins are not on that side of the business.
Michael Fine as well, it's a challenging year for me if I go through a combination of increased competition for California that duration, which led to pressure margins.
As a result.
When you bought.
That's correct I mean, its risk model and is in process development hybrid business model, leveraging data and analytics to be able to originate better and distribute more efficiently.
[music].
Our loans.
This is an ongoing process.
And I will.
Talk a little bit more about it.
On Pacific go, we having both profitability and the group in a pretty much but I seem to go all the time, therefore tranches of the contract to cover the cost of this ability survival than borough for the <unk> bees and bring about how to very strong performance.
Like Costco.
Total portfolio gains.
He called governmental.
Profitability of investment banking investment management business due to favorable financial market conditions, which allow.
Okay.
<unk>.
Going forward.
BCP will continue its strategic focus.
Listing customer experience and efficiency in all segments.
Investments in digital transformation are already held.
That that attrition.
We are starting to see the results, they're still not absolutely meaningful within the size.
This is the way to go it will pursue this path going forward.
In micro finance as I mentioned, a we are the airports are focused on consolidating this hybrid model and created business alliances to be able to originate goals with the help partners such as yup over to scale the business without <unk> cost.
Additionally, this year, we have the effort to consolidate the investment we have made in Colombia emergent would go with our operation there and be able to create and I haven't you grow above four girls looked at the core that country.
And then sure as a bunch of business efforts will continue focused on Brexit.
I mean, the banking for instructed to the vote.
Energies.
And investment banking and wealth business, we will focus on scrapping original offerings.
The new gaining market share in Colombia and Chile.
Additionally, we are consolidating our back office I think our cost structure.
Oh to have a more scalable business at a more solid platform and focusing on the recently acquired business in Colombia.
Just a quick work we have to set the preliminary measures to bolster our governance framework with the aim to be aligned with a high.
International standards.
And finally, we are.
<unk> <unk>.
Focus long term from formation is the path we need they.
Outpaced market growth, while sustaining short term profitability again, this will conclude our coal and as usual I really want to.
Like all of you for your continued interest and and our company. Thank you very much for I mean, it continues dialogue with all the good bye.
Thank you ladies and gentlemen. This concludes today's presentation you may now disconnect.
[music].