Q4 2020 Intercorp Financial Services Inc Earnings Call
Okay.
[music].
Good morning, and welcome to Intercorp financial services fourth quarter 2020 conference call. All parties all lines have been placed on mute to prevent any background noise.
For the presentation, we will open the floor for questions at that time instructions will be given as the procedure to follow if you would like to ask for your question also you can submit online questions at any time today using the window on the webcast and they will be answered after the presentation. During the Q&A session simply type your question in the box and click submit question.
It is now my pleasure to turn the call over to Rafael Borja of I advise to corporate communications, Sir you may begin.
Thank you for later and good morning, everyone on today's call Intercorp financial services will discuss its fourth quarter 2020.
We are very pleased to have with us for at least for leap day.
For yellow Chief Executive Officer, Oh from Telco financial services.
Okay.
Chief Financial Officer, Hokey Day financial services, we stood at one silo about Saturday Chief Executive coffee sales.
Yeah.
Sales grew north of a true chief executive is holding true.
It wouldn't be discussing that we sold somewhat distributed by the company yesterday. There is also a webcast presentation for the company's cash from getting this call.
If you didn't receive a copy of the presentation or the other.
And as reported.
No other animal on the company's web site <unk> dot com to.
So we don't know the coffee otherwise for the new leasing is unique.
We've called out and buy New York too.
212 for the seats.
Great.
I would like to buy your debt to baseball for investors only therefore question for Neil taken.
Please be advised that forward looking statements made during this conference call between lifestyle for future economic circumstances industry conditions, the company's future performance or financial results as such is seeming to me are based on several other assumptions from telcos.
Change, causing actual results to materially differ from the current expectation for that.
We know it's off a really good thing.
Please refer to GAAP earnings presentation and report issued yesterday. It is now my Fisher to turn the call over to establish a debate for us again.
Yeah sure.
Okay.
Financial services Cookie spoken remarks.
Please go ahead Sir.
Okay. Thank you good morning, first I went.
To thank everyone for making the time to attend our call I Hope all of you and your families remain healthy and safe during these challenging times.
As you are aware.
<unk> continues to struggle.
<unk> from the effects of the pandemic.
The improvement in the number of cases by the end of the year, we now face a second waste that has overloaded our coast Houston and the number of cases for diabetes continues to rise.
So by late last month, the government announced new lockdown measures being more strength in certain regions.
Regions, including Lee.
So now we know those measures would be in place at least until the end of February our expectation is that they will continue for some more days after that.
However, unlike the past you've done the new restrictions will likely have a more moderate impact in the current.
Most businesses are allowed to operate at least partial.
Good news were announced recently the vaccination program has already started and the country has finally secured an important number of vaccines from different companies that should reduce the effects of the pandemic on the months.
Moving on despite the whole situation.
Economic activity is gradually recovering.
The recovery is mainly driven by more at pvt, and domestic demand for oriented sectors.
She has a strong recovery in 2021, mainly due to better terms of trade hire private consumption and the base effect when compared with 2020.
Obviously, the effective control of the pandemic will be directly related to the economic performance of the country.
An element of uncertainty continues to be the political landscape presidential and congressional elections will take place in April a day.
This point index cards to Joe.
Higher probability of being elected.
The congressional shrunk certain populists measures continued to be proposals debated some of them such as the interest rate cut proposal for the integrated Universal patient system Bill May impact our financial system for institutions have made public statements against these initiatives and the executive branch has found relief.
In certain rulings by the constitutional Court, we will continue to closely monitor the evolution of political news in the coming months.
In this environment Bank has continued to help peruvians to overcome the crisis by offering payment reliefs to individual income right.
But the Houston level gross loans grew 12% year on year as of December driven by a 23% increase in commercial loans, mainly boosted by the reactor you updated program. However, retail launch for the Houston Nederland decreased 3% on a yearly basis.
It continued to grow strongly.
And I asked for it.
Our platform continues to show a strong resilient and has recovered nicely from a very low second quarter 2000 and strength.
The trend we saw in the third quarter has continued with strong activity at <unk>.
Interbank continues to see an improvement in all of its main operating and financial indicators. We expect this strength to continue with a very strong capital base.
Cash level efficiency.
<unk> and a levels and Ddos solutions from services that continue to gain preference of our customers we continue.
We need to be focused on helping our customers during these times and to deploy our resources in an efficient way to maintain deposits for.
For profitable growth.
Now, let me pass it onto Michela for a detailed review of our results. Thank you again and please remain safe.
Thank you rich and good morning, and welcome everyone to Intercorp financial fabrication fault block debt in full year 2020 earnings call.
We have divided the presentation and for Quad, which include financial highlights key messages results by segment and trends and takeaway should be and I will start with a brief summary of financial highlights on slide three.
Main highlights.
If you recall version before for tests with average per adjusted equity at $18. One question for yearly shops have been impacted mainly by higher provision.
Please feel free to second and growth in the first quarter due to lower provision solid results from the investment and recovery of fee income.
Cost containment maintenance from 2020 effect negative impact from COVID-19 on revenue, we have strong capitalization in all business segments and the digital trends continue to support our strategy.
Okay ability recovered from the fourth quarter with the full year profit in their mind by high provision and tough top line due to COVID-19.
24 from 6%, earning growth in the fourth quarter due to lower provision and fee income recovery.
Had a 12, 8% market share in loans.
And for now.
Nine market share in retail deposits by year end.
We gained 20 basis points in lung and 40 basis points on a yearly basis and we can deposits.
NIM continues to have pressure, Ronnie decreasing 40 basis points in the quarter still impacted by direct feedback and about volume.
We have operating 50 basis points yearly reduction in cost of funds down to one six for champion.
The full year cost of risk.
$6 one per cent.
The only improving in the fourth quarter to three 1%.
We had a 60 basis point quarterly improvement as cash.
Provision due to day decrease in our country.
Laurel.
Yearly decreasing expansion from goodbye.
An extraordinary low efficiency ratio at 31.
I didn't catch it.
Full year 2008.
Eight 2%.
Adjusted equity at high levels from 18, 9% private annuities, leaving a $19 one question yearly growth in premium.
Results from the investment so.
And increased 13, 1% on a quarterly basis from 28% on a yearly basis with the return on the investment portfolio, reaching six 8% in the fourth quarter.
The cost containment measures I think that they would only show net income 3% yearly reduction expansion.
We need to be a market leader in annuities, we got plenty standard 3% Chan from 'twenty two.
I mean table if full year profit grew 21, 4% with a return on adjusted equity at 28% record quarterly net earnings 40% quarterly growth in more than two but on a yearly basis total revenue for the fourth quarter driven by net interest income and positive mark to market on.
<unk> growth in assets under management of $5 six per champion and.
And 14, 7%.
And at all time highs in the for profit.
One of the good news this quarter is that the top line has continued to recover.
Total revenue for <unk> fast growing 5% in the quarter and $6 four per se, but yes, the yearly growth two 5%.
It's mainly thanks to a recovery in March.
Revenue lines, including net interest income fees and other.
This recovery has taken place in all three operating companies with free income growing six 5% in the quarter for interbank and a solid result of not more than 500 million solid in other income.
Now I will focus on the key messages, we will likely to day Thomson East zone on slide eight.
Yes.
Which will be covered in detail in the following day.
Cash activity cash flow continued to recover in those three operating companies, despite macro and political uncertainty.
Cash flow balance sheet with liquidity and capital levels substantially better when compared to pre COVID-19 levels.
Digital sales continued to support our UK strategy, which translates into growth for clients and business for.
Lower provisions continued to reflect better payment behavior of clients.
Our continued focus on efficiency in each of the three operating company has allowed us to decrease our cost base and improve our efficiency ratio in cash ambition from here.
The first commercial from slide nine to 11, you said about day recovery.
Economic activity in Peru has continued to increase from the low levels by Easter in April during the second quarter. We have seen one of the strongest made after the impact of GDP in the region declined 40% in April to May and 18% in.
The positive news is that these national accounts, we have continued to see a recovery already started in the third quarter in a number of indicators for us.
As the mining and <unk> as well as sending from cash consumption. Some of week show strong level of growth year over year, where all day.
Electricity consumption of January has just been published showing a positive one question per year and 5% for daily margin expectation on economic activity are still on budget.
Total loans to the private sector information diluted EPS grew 12% as of year end, mainly driven by rock debello.
Doing such effect total loans decreased four 6% with retail decreased from 3% and commercial loans, excluding ramping that decreasing five 5%.
On slide 10 monthly operating trends.
<unk> continued to show positive development activity for <unk> as well as for January 2021.
At interbank debit and credit cash turnover has recovered to pre COVID-19 levels, we cannot speak in December at 113%.
Newness fashion, a favorite did actual loss for the public sector employees and growing net interest free.
Pre COVID-19 level, while mortgages growing 9% after a peak in December of last 22% to speak of it managed.
So no fees for interbank at 83% of pre Covid lately with commercial banking fees recovering faster than we can fees after a low 48% level.
In the day, something definitely wouldn't daily volume.
<unk> has been much faster with growth being used in January this year at 121% debt to speak of Atlanta, and after non their management plus 12% in January.
Yeah.
Cash and recovery, what's reflected in the yearly are initial post combination of growing eight 2% and 21, 4% which day.
Moving to slide 11.
Free news the nation by Philippe New book of life Lockdown measures have been implemented from January 31st two February 28th get non actually strength in 2020.
Yeah. Thank you for now.
He has been extended until February 28 few other TV have been restricted and we have mobility restrictions at Ross accounts.
The government has put in place from additional nations to phase. The second wave total is already around 20% of GDP one of the most important support programs in the region, which includes additional cash transfer or for two two for 2 million households, cash cash has.
To work under.
And then the FX from pension scheme.
Additional $2 billion for Smes and additional grace periods and duration of reactive.
On the political and regulatory again that organic initiatives continued to elevated income, including interest rate caps propulsion integrated universal patient chieftain Bill among other the constitutional court cash already stopped free of these potential loan.
In the past month for us.
2021 presidential and congressional elections shows little clarity as to which candidate could be the niche.
On page 12 during the fourth quarter, we have continued to see an increase in our total deposit base at about a four 8% driving the yearly growth to reach 25% with cash cow, our loan to deposit ratio to stand at 93% below.
Moreover, the loan to deposits ratio in both currency is at healthy levels with a lot of the efficiency ratio and solid at 106%, whereas you know.
17% of the system.
There has been any improvement in the creating the financial system due to the for.
Thanks for coming from private patient funnel as well as the <unk>.
Fortunately a bunch coming from that but you know we have been able to benefit from the situation and to have gained 40 basis points market share in retail loans during the year.
Moreover, we have I'll call it liquid financial assets with $26 7 billion shortly at interbank out of which $17 7 billion solid net cash and equivalents and half by around 950 million solid.
Standalone laminate out of fleet more than 380 million solid our cash and equivalents, which could call them ISS carries obligations for more than three years.
On slide 13, we had a solid cash.
His position on all three operating companies.
Since the beginning of Covid, we have taken important measures to strengthen our cash.
Total capital ratio as of the industry standard that was 17% at interbank compared to $15 four per cent of the Houston and then minimal Samsung channel.
And with these.
These new debt, we have over 600 basis points buffer in our total capital ratio our core equity tier one ratio was 11 five percentage for them, which is 10 basis points.
Points above the standard work in a range I think definitely our solvency ratio stands at 165% well above the 100%, but instead.
Penetration ratio is 28% again, well above the 8% required.
Moving onto the sales message on slide 14, our digital Kpis continue to show positive trends supporting Iff's shopping.
A result of the lockdown in our efforts to boost the user for digital solutions, we have seen an acceleration of our digital.
These are new debt as of December at 75% of her passion for me.
So F point from one channel.
100% digital customers, which are clients that do not use branches for contact center any longer.
You don't get that channel.
Cash ATM from correspondent agents only for cash and cash out has reached 58 per cent.
26 points from one year ago.
This has helped us accelerate our branch rationalization efforts, allowing us to close 40 branches during 2020 and reducing our total branch network.
More than 25% since our peak in 2016 and more than 15% during 2020 down to 215 branch.
Digital sales have also seen a rapid increase in intermodal retail digital sales reached 51% and I think that they would also on digital sales reached 81%, both increasing sharply from one year ago.
We have continued to see an important number of new digital accounts being opened for indeed, each one I hope.
The end of December 55% of New research maybe on average.
Opened digitally new digital client acquisition of retail cash solutions reached 44.
This compares to 22% when GAAP before after a peak of 65% in June this year.
Our investments to build our digital capability during the last year has definitely played for an advantage for our customers and our operations under the current infrastructure.
On slide 15, we have three 4 million retail customers and more than 100000 businesses in total.
Our retail client base has increased almost 15% on a yearly basis, while our commercial client base has increased 46% year over year.
Clearly the P to P payment feature among multiple banks operating with telephone numbers, it's a range at least in more than two 9 million client first of January.
One year, 39% of which use interbank yeah.
<unk> are 100% digital solutions for famous relaunched on February EPS.
<unk> has reached almost 800000 ourself today.
On slide 15 to 17 the force key message refers to the lower provision registered during this quarter. Thanks to the continued improving payment behavior. Among our customers. There are three positive strength that we have seen during the quarter in line with what we saw in the third quarter.
Nice to see the first positive strength is debt outstanding rescheduled loans cash slightly decreased.
Outstanding debt rescheduled loans were $10 5 billion.
Or 25% of net.
Total loan book in line with the system. This number represents.
11% decrease versus September and 17% versus June.
It's true for both retail and commercial portfolios.
The number of total clients rescheduled have also decreased from new inflow cash being margin during this last month, including Gander.
Slide 17.
Positive strength, we are seeing an improving payment behavior among interbank clients actually January 99% of our retail portfolio cash flow already have Amy.
This means only 1% is feeling great feel it.
63 per cent of the retail portfolio has not been rescheduled and registering a very good payment behavior 98, 5% of clients obtained an extraordinary only beautiful, 1% cash equation and additional relief and only one 4% has an update.
New request of relief and non basis. This represents a one five per se as of January which compares to two 1% zone.
<unk> 37 per cent of the retail portfolio, which has been rescheduled as January 96, 2% of clients have aimed at Sonic only 0.5% has requested an additional relief and only three 3% cash not state I gave xiaomi net New Orleans request a non base these with.
And at three 8% of January which compares spanning from 874% as of October.
A similar payment behavior has been a SaaS for credit cash flow scanner with the percentage of payments at almost 98% for day, 49% of the portfolio that have not been rescheduled why almost 98 per cent for the reactive rescheduling 95 per cent for unilaterally that interest.
Scheduling and around 92% for <unk>, which day.
Exploration is concern.
Moving to reschedule portfolio.
At around 750 million solid out of week 93, 8% of client has been paying their installed units out of the 94% debt.
Payments already as of the end of January.
On slide 18, the stars positive strength is the quarterly reduction of provision.
Cost of risk for the quarter was three 1%, which compares to the 13, 4% up for second quarter and the four 5% of the first quarter 2020.
Looking at the yearly cost of risk total.
Cost of risk was $6 one per cent compared to two 6% in 2019 as for refinish concern, what's the cost of risk for six 2% down from 23, 6% in the second quarter and eight 5% in the first for them and still above.
8% of <unk> driving.
The yearly cost of risk to 11% commercial banking continues to have low leverage from cost of risk. Thanks to our small participation in the SME segment, and west Vela, 0.5% in the quarter and one 2% in the year.
MPL coverage for the bank debt is it more in our hands.
And 80% and for retail loans, you've had more than 200 per cent.
Our stock of provisions as of year end represents eight 6% of our total loans, excluding reactive and guaranteed portion flow.
Finally, the last of the key messages on slide 19 refers to the disciplined and proactive management of costs, we have pursued before and after COVID-19.
Which has allowed us to achieve an important reduction in cost of 5% when compared to the previous year and to improve our efficiency ratio or your faith and in each of net operating company.
Efficiency ratio.
It is extraordinary low at 31% with interest of $36.
Perfect.
He's got an improving efficiency ratio and net result of a disciplined approach to expenses through the contract.
As an example, we have continued to implement our branch optimization program started in 2016, which I previously mentioned.
Moreover, we have shown variable costs related to credit cash activities into incentive debt has decreased substantially during this year in line with a lower net.
And one of these financing and we did right after the Covid outbreak and the beginning of the Lockdown in Peru, what's for lunch are very important cost containment program in all operating income in order to decrease the cost base to partially offset in net impact on top line coming from the lung.
Now the capital can look at from additional indicators by segment in slide 22.
On slide 21, we are showing our key banking indicators NIM decreased 40 basis points from the quarter down to four 4%.
This increasing NIM was related one side to the portfolio mix with retail loans decreasing in the quarter and on the other side to receive a loan at no impact.
The impact from vaccine alone.
Around 50 basis points in the park.
Total other income continued to grow in the quarter, mainly driven by an increase of six 7% in net fee income due to a recovery in transactional volume, especially in credit cash.
Other expenses Q3, 2% in the quarter when excluding the $35 million impact for additional profit sharing expenses, which correspond to voluntary loan losses for leases for local accounting standard, which has not yet turned into regulatory Felicia that are not tax deductible.
Expenses will be recovered during 2021 at voluntary provision from local that turn into regulatory for at least for.
<unk> expenses were still below the fourth COVID-19, when excluding this effect and cost containment measures remain in place.
On slide 22, our year over year loan growth was 12%, mainly thanks to our active along especially the positive news here is that both mortgage and payroll deductible loans for the public sector ended up the year in positive territory growing six 6% and heat up for 4% respectively.
Banking grew 34% in the year and decreased one 6% in the quarter.
Retail loans decreased two 4% in the quarter and six 9% in the year driven by an 11 and 26% contractions, respectively. In the credit card volume during this quarter, we continue with a conservative approach to watch growth in this portfolio, even the shop experience in the income of Birmingham families.
Yeah.
The strong growth in commercial loans together with a softer reduction in the retail portfolio and the system has led to an increase you know total loan market channel 20 basis points from the year, reaching 12, 8%.
Slide 23.
We have started to see from prepayments of reactive alone in the corporate segment.
The end of December we had outstanding $6 6 billion solid interest even though we.
Our commercial loan book by over 40% since the first quarter of 2020. Most of these loans have been granted to the midsized and SME eastern share, increasing our portfolio, 68% and 200% respectively between March and December.
Well, it's nice to any for total deposits grew four 8% in the quarter and 25, 3% in the year with retail deposits growing six 4% in the quarter in Saudi and strength.
Year over year.
Gaining 40 basis points market share to a record 13 for nine months of December due to batch which include the central Bank funding for the racking up the new program has decreased $8 for now stands.
<unk> quarter over quarter cash increased three four on a yearly basis in line with the funds we have led to a flight.
Cost of funds of <unk>.
<unk> has continued to improve reaching one 2% in the quarter a reduction of 10 basis points in the quarter and 150 basis points year over year.
It is.
These positive developments gained from Kevin is factors like.
Decreases in market rates, a better funding mix and the higher funding from the Central Bank. Additionally, the yield contraction was also new to the redemption of an event expenses.
<unk>.
On slide 26, we wanted to share with you from seeing that in this very challenging gear cash book, a sense of pride to IFA simply which is the fact that for the first time ever.
In the back.
Has been awarded the three most renowned rashes baseband for the year 2020 by day banker Euromoney electrified. This this is just a confirmation that we are on the right track and put the cash to continue to focus on our purpose of helping more cash flow much to accomplish that range today.
Now turning to interest they would on slides 27, and 28 quarterly premium showed a strong growth in there for 32% driving the yearly growth to 19% in the fourth quarter all business lines grew with Mandatorily and private annuities, leading the growth in free interest.
We don't remain market leader with a 27, 6% market share in this quarter.
On slide 28.
<unk> investment portfolio reached almost 14.
A 6% increase on a quarterly basis and 12% on a yearly basis.
It helps from investments had a strong performance increasing 13% on a quarterly basis, reaching a six 8% with total income investment portfolio management and basically above the for Walker 19 net.
Moving onto our wealth management segment on slide 29 in table posted record revenue in the fourth quarter explained by a positive mark to market of more than hazard medium volume accounted in other income, which grew 42% on a quarterly basis.
This improvement in other income has led to an increase in total revenue selling video from 100 and to be neutral ish in the fourth quarter and 19 and 140 million in the third quarter 20 to 188 million solid in the fourth quarter of 2020.
On slide 28 in terms of asset under management reached 21 billion solid from the fourth quarter, a five 6% quarterly increase and 14, 7% increase on a yearly basis.
Thanks for the strong growth in the top line in terms of net profit of 155 million solid wash more than two times those from the fourth quarter 2019, which allowed the company.
Our growth in areas of more than 20% on a yearly basis.
Now, let's move to the final message related to trends and takeaway.
Yeah.
On slide 32, we are providing some operating trends expected for 2021.
After taking into accounts that some new restrictions have been implemented in two phases. The second wave of Covid as previously.
Previously mentioned, but we are not true today about the length and the impact of these measures. We have I think will depend from the provision of second wave and the speed at which people would be back from it.
'twenty 'twenty, one will be a year of rebuilding the portfolio in their bags to foster growth in the coming year.
And you should continue to grow despite an extraordinary year for both companies in 2020.
Paul.
Cash capital, we expect interbank capital to remain at sound levels, well above EBITDA.
For the fibers with total capital ratio above 15% as of yearend and core equity tier one ratio above 11%.
In terms of E fast return on adjusted EBIT, It should recover and <unk> 14 per cent for 'twenty 'twenty, one and should continue to recover in 2022. Once we are able to rebuild the retail consumer portfolio and replace a bigger portion of RFP volume.
Net loan growth at the bank for 'twenty 'twenty, one will be mild with a slow recovery in retail, especially in the consumer portfolio and decreasing volume simple mesh when excluding the impact of Reg D. Let alone. The total loan book for the bank should increase mid single digits.
Revenues will also have a shelf recovery due to pressure from net interest income a knee despite lower cost of funds and a strong recovery of fee income.
Naeem will most likely continue to decrease from 2021, mbd too far and for 3% the.
They basically net interest income and NIM is mainly coming from three factors.
The full year effect of almost 7 billion solid affect veeva long at very low rates.
Second the impact of mix on average deals due to the decrease in the credit card portfolio and the increase in market share.
The decrease in rates.
Cost of risk will be at a low level of around 2% even below pre COVID-19 levels of two five to two 8% as most COVID-19 related provision have already been accounted for in 2020, and non still due to the lower share of the credit cost for the <unk>.
For Europe, we keep the problems with the highest cost of free.
These non there will most likely increase during 2022 at the credit card portfolio free Colbert and gained share within the total loan.
<unk> efficiency ratio will be between 35 and 37 per cent.
After a 5% reduction in the total postpaid for fire safety, yet we expect a high single digit increase in expenses may have you for two reasons.
The recovery the recovery of activity, which drive variable cost in.
And second further acceleration of our digital investments, including building our venture with revenue.
On slide 33.
We wanted to share with you from developed mentioned from sustainability you can see how we have strengthened our ESG practices any initiatives in recent years, we have noticed that our stakeholders are increasingly evaluating ESG factors when a fishing company, hence we're adopting from there and widespread ESG practices.
As a predominant driver of value creation, not only for shareholders, but for all stakeholders.
10, some of them, yes. He has mentioned the environmental cleanup include recycling and waste management.
In the scope of total impact we encourage diversity equity and income from when we have developed a number of strategic alliances and programs for what's useful.
Cash flow corporate governance, the governance practices, we highlight the longstanding majority of independent directors. She never for the highest supervisory related party exposure in strict compliance volume.
Furthermore, I advance is one nine Peruvian companies included in the Lima stock exchange good corporate governance index. Additionally, I felt was recently included in the MSCI and moving basketball market.
Finally on slide 34, I want to close the presentation with a brief summary of the five key messages.
Current activity has continued to recover in all three operating companies, despite macro and political uncertainty.
Second we had a strong balance sheet with liquidity and capital levels substantially better when compared to pre COVID-19 levels.
Per the digital strength continued to support our U S strategy, which translates into growth of clients from isn't it.
For lower provisions continued to reflect better payment behavior.
And the final one our continued focus on efficiency in each of the three operating companies has allowed us to decrease our cost base and improve our efficiency ratio in fact difficult year.
Thank you very much now we welcome any questions you might have.
Thank you we will now begin the question and answer session.
First for you we'll take questions from the conference call then the webcast question for you.
I would like to ask a question. Please press Star then one on your Touchtone phone now.
<unk> will be taken in the order that they are received.
Anytime you would like to remove yourself from the queue by pressing Star then two again to ask a question. Please press Star then one.
For the webcast viewers simply type your question in the box and click submit question.
If you ask your question via the phone we kindly ask for your mute the webcast to prevent any feedback from <unk>.
Does that materially to compile a list of questions.
And our first question will come from Jason moving with Scotiabank. Please go ahead.
Hi, good morning, everyone.
My question is on the retail segment portfolio and.
We appreciated the disclosure of that payroll deduction loans to public sector employees.
That looks to be a lower risk.
Part of the retail portfolio can you talk about this business in terms of how the dynamics how it works is there turnover and deploy use the duration of the loans in.
Of course.
How you see the risks there and in fact, if it is much lower than the other parts of the retail book. Thank you.
Yes, hi, Jason on niche neutral EPS year. Thanks for your for your question.
Sure.
As you are aware of it's basically payroll financing okay. The other thing that is instead of as.
As you know we are not that big in payroll deposits and private sector.
It's very interest in bed.
But we don't have a beach beautiful.
The acquisition debt.
So we do have a strong presence in the public sector employees on and that business has been evolving and any payroll deductible loan it has lower risk done.
I know from normal cash flow.
The turnover in the public sector is slow so specifically during the pandemic and hasn't been affected as we've seen in the other types of business.
And the duration of the long is a typical for GP go.
Yeah.
Loans in retail consumer you don't know that day.
Around three to four years at Genco for.
And I mean, it looks that it's representing almost a quarter of the retail loans and even a higher percentage of consumer loans we.
We saw the decline in credit cards, I mean should this for this.
Percentage I guess it is credit card loans return this would go down but or is this a business it's been relatively stable.
Do you see potential growth in this segment.
Hey, Ross.
Yeah again.
The.
The.
The dynamics of the way.
The debt.
Payroll for the public sector increases is not effective.
Private sector, obviously in terms of win win with electric prices, we had last year or at least more stable, but also the growth is not that important for what we see is that great credit card recover this portfolio will return on a weighted average if you want.
Base to return more to previous levels no you have to remember that our credit card portfolio.
For <unk> based goes to 25 per cent came back to to what has happened in the system. So obviously does buy that these wait a bit more but then we should.
We tend to more normal.
Normal levels once.
The other parts of the business start recovery.
And are these loans that are they at much lower rates than your traditional book and and I'm imagining the losses, what would the expected losses in this segment.
Yes, I wouldn't say, they're at a much lower rate at an average rate, but they do have because of the payroll deductible portion nowhere risks similar to what you see in.
Private.
Payroll deductible loans.
Thank you very much.
Youre welcome.
And our next question will come from Ernesto Gary Lando with Bank of America. Please go ahead.
Hi, good morning Felipe.
Carolina, I'm, sorry, Bruno thanks.
Thanks for the presentation and for the opportunity.
My first question is one on one growth.
In your presentation that you.
We're expecting a slow recovery in retail and decreasing volumes in commercial loans.
What we'll deploy in terms of total loan growth do you see me two.
High single digit growth.
And then for my second question.
To elaborate a little bit more.
How are you getting another way above 14% in 2021.
Clearly these will come by reducing provision, we like Costa Rica for around 2% and this could be offsetting pressure in a week or efficiency.
However, what other lines you expect to be supporting the earnings growth.
Are we above 14%. Thank you.
Okay. So for both questions, let me pass it onto them because that's what she can help you with that.
Good morning.
Thanks for the question.
I mean loan growth okay. What we are seeing aesop slow recovery of retail okay. When excluding that fee that we're seeing growth for a slow recovery of commercial loans for basically putting everything together at only excluding rack D that we are guiding for a bit.
Mid single digit from mid to high single digit net and you were asking okay. Because we are talking about around a mid single digit for free.
Retail and something close to that is when excluding bassi.
And our first profitability is concerned I would say that I mean, the stronger continue to.
True ease.
Cost of risk no debt increasing cost of risk is.
So for 2021.
As net revenue.
The net revenue recovery will be slow here. If we think revenue. What we are seeing is a recovery of fee income not in D. C.
Cash flow itself, because the base effect and also we haven't seen fee income intermec, that's always fun and then go up really nicely for for next year and that should also help a profit.
I mean so.
I would say no first place in and most importantly, Felicia second a I would say fee income.
Yeah.
That's it thank you very much.
And our next question will come from Sebastian Gallego with Credit Corp. Please go ahead.
Yes, hi, good morning, everyone. Thanks for the presentation.
Have some questions today three questions today, the first one probably a follow up on previous questions on the consumer portfolio.
You mentioned that there will be a slow recovery on consumer portfolio, but can you can you go a little bit deeper on day on the timing as we move through the year and when do you expect a ramp up or or a material increase or recovery within the consumer and particularly.
Credit cards.
The second question will be related to the SME portfolio you mentioned some.
You provided some data.
On the recovery and the payment behavior, but could you clarify once again.
Does that payment behavior going for for it.
And finally, the third question would be on in the legal and inter Sogou, though.
Particularly taking into account how how sustainable are these type of results that we're seeing.
And in those companies. Thank you.
Okay. Thanks. Thanks for your question, let me take a break on the first one.
Comment on the third one and I'll pass it on.
For the two micaela for the second one.
The consumer portfolio, let's see it's always lease related to the recovery of the economy.
We've been actually on the conservative side, especially last quarter.
The industry is already.
Getting some traction there.
Being.
Very conservative.
Our underwriting standards.
Cause we.
Basically because.
Happening in all over the World. When you are in the second wave was coming so we have not returned to growth and we keep.
Observing.
Consumer behavior, what we're seeing which I would use is a recovery of activity people are using more like debit and credit card for.
Payments however, they're also paying more.
And theyre paid in time and debt.
From coming better than expect not so.
Economic growth in <unk>.
General demand materializes, as we expect and we ourselves feel more comfortable we will drive growth.
Returning to growth however.
We were still on wait and see attitude, obviously, serving our existing customers, but we're on the right underwriting.
Underwriting standards continue to be.
Stringent if you want obviously not at the same level from what we had before.
<unk>.
But we are taking it carefully.
Got it.
So thats.
That's from the.
On the first question on the third question.
Maybe after micaela.
Bruno.
In total we like to compliment.
Again in Delaware and disorder with doing these like.
You're out in August the nature of the business as a business, we feel very comfortable with.
We are lean.
<unk> market share in terms of football.
Total Intel has been growing steadily for the provision years.
Lee.
We are part of like the financial group that is very focused on business investments.
Alright.
No one has a different evolution.
Hi.
A tough first quarter last year. However, if you are consistent and you are disciplined.
All in all the results will come from that's what we've shown for many years. So far already we cannot predict the future by obviously the team is there and we have all the capabilities to continue that and let me jump in.
Let me pass it onto Micaela for question number two about SME portfolio on where were treated for recovery.
Yeah.
Yes.
As for Smes from Chen at what I mentioned previously is that I mean, we have a small portfolio case, it's around channel kind of 50 million less now than it has been a decreasing out of this portfolio. A 93, 8% of clients have been paying down Scott Solomon from January.
And 94 per cent have already had a payment due until January so only 6% of our SME portfolio as of January was still a great day, okay. So the behavior.
It's like well and actually has been improving over the past month, what is true and I think it's worth mentioning is that most of these clients also received last year, our active I know that cash.
Oh, Oh, sorry, leap day shortage of working capital debt that they could not so.
As months go for that with the new registry shows some sectors of DFAST for me portfolio number related to duration transport it may be.
Now could have a further key and we have estimated at least a small portion of this.
This portfolio, which already.
Have a small interest as you know.
Hello.
Okay. Thank you and if I may maybe one last question I wish for getting to ask about.
This EPS.
The decision of the Labor Commission at the Congress.
To approve the availability of 100% of C. P. S. Do you guys expect any material effect. If this is approved in the deposit market for this shouldn't be us rather than us other regulatory risk or initiatives.
Yeah, Hi, John it's hard to tell them no interest.
The project is in early stages.
Through all this time that day.
Long way to go usually.
We've heard debt.
Again, the executive does not seeing this issue back.
Good decision so cash some by the growth there in terms of the debt is that it.
Right.
For it materializes, but obviously it will have an impact.
If people decide to retire we've been under these before because you remember there's been many times went first.
Like free are part of the year should get then from six.
Months' salary if I don't recall within two to four months salary and we've seen that at the beginning there was an impact.
Tabulations pretty quick dose.
Or kind of not there.
The range for Cps arbitrage.
Offsetting this growth, but obviously given the situation if <unk> decides to who to be liberated probably.
Many people with actions that however at least for the Interbody guidance funding it.
A very small portion we only have like.
Around 10% market share there so it is not.
It will have an impact, but it's not that relative I know again, it's early to tell.
I think debt and with the liquidity that we have in the system and the available sources of financing for for the industry as a whole and for interbank on Fitch in particular, it shouldnt be an issue from that from a liquidity perspective.
Thank you very much very clear.
I wanted to get back on the question about the sustainability of the flow orders and telling us.
Results for the.
Ro.
Industrial orders high ROI for the fourth quarter I believe I believe its totally sustainable going forward we.
We are seeing.
Very high interest in our products for from our customers. So we don't we don't see any we don't have any worry about our topline growth.
Our only worry would be financial markets per se.
E Turbo and for their then surely that will affect for our portfolio.
But that should be a temporary.
Temporary right.
Long term.
I think that our roe's levels.
For the fourth quarter for our <unk>.
Good proxy for for.
For our company going forward.
Great Congratulation for you. Thank you.
And maybe and maybe a couple of words from Bruno.
Yep.
It's similar to what consolidates thing are the business was very stable last year, even though it was a very hard year.
We saw nice growth on wealth management. So we think those strength, we're going to continue.
On the on the market side is very similar to in terms of auto there was going to be from volatility, but we have a moving to long term view on our portfolio.
And so we look at there's a rolling basis for Rolling 12 month basis, if you could you could.
So you say it that way not on a quarterly quarterly basis. There is some volatility there we look for.
And as I mentioned for.
First quarter was tough third and fourth quarter were very good but on on a 12 month rolling basis. It was a it was a very nice performance and that's what we look for in the long term to have a balanced portfolio and returns overtime.
Hopefully you are going to continue the same way that we've seen them.
To this day so until are always for the year, we think we can maintain our targets.
In the previous years.
Thank you very much.
Yeah.
And our next question will come from Carlos Gomez with HSBC. Please go ahead.
Hello, Good morning, and thank you as always for your Pizza presentation.
Two questions first.
That's all for you or at least from an effort I mean do you mentioned you already have more than 8%.
Of nonproductive alone covered.
Do you have the chance that you might have.
Provision for them too.
Much.
Or two or just about right.
You expect to already.
Normal probably shouldn't probably fear bogie, you say that you know given.
Given the experience of payment that you have that you may actually be below normal for the next couple of years.
This amount refers to the reactive alone for the patchwork I've mentioned that day.
The actual life of the losses not the three years from maximum.
But the shorter period could you give us an update about.
The life of the loan portfolio and whether you expect to be able to even for the transfer that two loans with no more rate. Thank you.
Okay, Let me give it a crack and then ill budgets from retailer to complement.
Your first.
On your first question about the provision levels actually again remember that this is all very new for everybody liked what we've seen with the pandemic historically under the older model that everybody has.
Are you finished but also we've seen that throughout the world in the region. So we all went under conservative growth and actually we have not returned to normality with Dean.
That's.
Improved behaviour to what our expectations were however.
We are as mentioned facing the second wave, which we see not having debt.
Strong impact.
The first wave and the Lockdowns that we shot but it's too early to tell we don't know how many more.
Months or how will the pandemic E books, so that will be very dependent.
So, although we're seeing a better payment behavior ex Makena will mentioned in her presentation, we still see levels of uncertainty so I wouldn't feel comfortable maybe.
Good luck and complement in saying that.
We're completely done.
I think we have.
Based on the first wave, we feel comfortable that very.
Very well covered but the stent or what is there to come true.
No.
The numbers we have upfront.
We have given our guidance for what we think is going to happen in the portfolio and we're very confident that we will reach those levels. However.
<unk>.
And any excess will be color, but we have quite a bit.
Already done.
And then for for their Rep Kiva question.
For busing and took on Tuesday.
In general.
Tenure continues to be the same there are some efforts from the government to see if there is going to be changes continue specific industry friendly, it's not going to be for the.
Hello program, but for other toward that sectors that are the most impacted.
May have an extension of the of the three year tenure.
And what we're seeing is that some companies are already repaid the loans that we should that's why that original general steel broadridge upward for Europe is coming down because we're seeing prepayments because as you know, it's a very restricted program where companies cannot invest net capex or in.
Distribute dividend so wherever whenever the company feels that the worst is behind on data and.
On other sources of liquidity.
We paid.
But let me pass it onto michela for chicken complement how do we expect this can be repriced on maybe any comment on the first part.
Yeah.
Thank you and maybe just to add.
On the other point of provisions debt.
Yes, we took a conservative approach, especially not when we implemented the provision.
From the second quarter with the expert criteria now and basically what we have seen.
Slightly better payment behavior in the third and fourth quarter versus what we expected would happen knowing what we based our level of provision.
Now.
And in theory no.
Our forward looking variables before we knew about the second wave the forward looking variables throughout the day.
But it would have resulted in maybe lower provision now because the forward looking variables a macro variables, we're improving now before the second wave and basically we.
We have not updated them.
Jesse Gosh, they took away from starting show the second wave already what's going to keep those volume not so if you want we have kind of a slightly conservative approach for deep water. Because there are some provision that east every cent impact coming from the second way, we could be covering with with what we have been doing during this year.
So of course, it will depend on the length and the severity of day of the second waves at the beach.
Hey, Bill payment behavior of clients, that's not changing dramatically I guess, we should be okay with the guidance range we gave.
Yes.
That's about duration debt just to add that the repayments that we have seen so far are only for Qs are mainly focused on the corporate segment. Okay. When you see the Smes in day in the mid size companies.
Little repayments, there, mostly the large corporate segment and the duration of that fitness typically will most likely.
He called me back for a new loan to the mid corporates and Smes.
I mean, the level of ratio for those loans that are non <unk>.
Related are similar.
To what we have pre COVID-19.
Based on bad debt risk adjusted profit.
Now of course, the last corporate segment for a little bit more difficult.
Corporate clients tend to request a more a low rate.
If the case from what we're seeing in the midsize companies and if any.
And the average duration at this point is how much.
Okay.
I mean is the same debt that we have around $2 five for eight years.
But the ones that for years to them. Okay. Thank you very much focused in Colombia.
You know what.
Our next question will come from her alone Medina with J P. Morgan. Please go ahead.
Okay.
Good morning team. Thanks for the opportunities for App plus questions. The first one is related to the race Cup deal in particular, what are your expectations for the next steps from for thinking we know it was returned to Congress last week, but.
What's going to happen next.
And also do you have any expected impact from from New Zealand, it's approved and.
And my second question is just your outlook for dividend payments in 2021 and 2019. Thanks.
Okay.
Thank you.
On the Bill.
Well the process that follows the executive branch has observed it and they came back to Congress with a very detailed explanation holds Lord.
Whereas the observations to summarize it it most of them were around that goes to tissue nally D or non Ikea.
Net crossroads institution, Jim for so.
The way it job prepared.
So now Congress.
So it's looking at the observations.
It's probably going to be addressed by the economy Commission.
Okay.
For mission that did not look at the low before so basically it was waived from net commission towards that for Brexit for everyone.
For leads going back there or quite know day nickel institutional Commission.
To review it.
Because I guess Congress is.
Being more careful in terms of digital institutional crashes because as I.
I mentioned already very few time.
Eight of those proposed.
No set by Congress have been declined.
Is approved by the constitutional courts are going to be really careful.
For our expectation is that it might.
Change based on diesel observations, we don't know the extent of the changes maybe lift.
Good day.
But if it goes proof by insistence, which is something that Congress can do.
What we feel.
We based on from.
The track record, we think that the executive branch will go to the constitutional court in order to.
Okay.
Allow this to happen not total so basically that's what we stand for that that's where we are expecting.
So still early to tell if you want based on the very recent event.
Around that.
And then in terms of the deck.
Again.
The manufacture of the GAAP.
The wage region is that it will give the central bank debt.
It's very technical and professional institution brew for various Meriden, along the way.
For the World, which is the one that will be required to put a cap rate cash flow limits.
So understanding the way.
Good day think probably should not have a strong.
However.
We are going through congressional elections on GAAP Central Bank.
And.
Should should remain very stable.
That is debt.
Some time in the future.
That discipline get lost.
The changes.
So we don't we don't really expect in the short term given if it's approved to have a material.
In fact on the right it shows their other like commissions debt, whereas I've drawn upon.
In the project, but that debt.
Might have an effect, but those are still being observed under under big jumps in soles. So again, we have some.
Some time.
<unk> here in order to see what will be the unaffected there'll be other effects.
But for this but we're confident that as we've seen in the other cases this will be.
Hey.
Managed in a very responsible way.
In total basically index that's from my side.
Yes, maybe I'll just.
I just wanted to compliment that a couple of non personal even if many people already mentioned, we still don't know what it's going to happen.
Based on some.
First analysis on how much of our.
Retail.
Bank portfolio could be impacted by Easter.
No I mean, we do not have a large portion of the portfolio.
High yield from each other once I want to be resonating well actually we are talking.
I mean, it's like less than 3% of the total losses.
If I could be impacted less than 5% total return for quite some.
So basically let's see how each day.
Okay.
But it.
It shouldn't be such a big impact on Amtrust.
Interest income.
Alright.
Clear.
What's your outlook for sales in the next years.
Dividends growth.
Well again, we will.
Like this year and we need to achieve it will again it will try to.
A return to our normal policies that we had except interbank.
So we do expect easier to be a very low.
So the dividend based on debt interbank cash.
Sure.
She'd heart, we did not have <unk>.
Earnings on whenever we did the logo logo.
The local books, which are the ones that are defined.
Define the dividend payout with capitalize for 100% already of those earnings.
For 2020.
But then for next year and the following years, we expect it to return to the previous levels and continue with our.
Pre COVID-19 dividend payout.
Very clear thank you very much.
And our next question will come from Andres Soto with Santander. Please go ahead.
For modeling and thank you for the presentation. My first question range with regarding your auto guidance. When you say above 14% can you. Please break them down for your different businesses and they are buying because they may go on into for.
Micaela, Yes, yes I'm here.
And then thanks for your question and I mean, basically what we are expecting is the level of starting foreign cash and we don't intend to.
In interest rate not to be ex China nation at levels above 15% in <unk> and <unk> should be levels above 20%.
The one that he will still be in each day.
Very phase.
And also so basically interbank is the one that that he's still in.
They need.
The double digit area for this year and that should improve as long as the top line continues to improve because the cost of risky for radio.
At better levels than.
And before so I guess that that would be more or less debt. The composition of each segments driving total once a day.
<unk> 14 per head.
Yeah.
Perfect. Thank you for color on when you think about it.
For a recovery path.
You mean that the bike for bolt on in 'twenty two it true returned to their previews recalled we'd love a little far away or have you seen any structural change on the profitability level not only for interbank, but wondering are your businesses.
I mean I try to we can see we are not true yet within 2022 is going to be handled per cent recovered. Okay. Because one of the things that is impacting.
The return on equity of interbank ease of portfolio mix. Okay. So basically it today, we have a mixing which commercial uptake and no more weight and one of them could have taken them away because the credit card portfolio. The one that has been.
So we'll keep at it.
So we are seeing we are expecting a recovery this year still share of free cash will be low when compared to the pre COVID-19 levels ending this year and during 2022 with political that he will continue to recover but we're not sure yet whether.
Before Harvey and also I guess somebody actually of the speed of net recovery of the mix of the portfolio net that will drive that.
Recovery narrow it for them.
So for that changes.
I mean, we are in the context of low interest rates and also basically that is socially impacting NIM sure now we have been able million indicators have shown to be true if you can.
She range from et cetera.
Our current working time note rates.
Should we start two for me programs, whether that's gonna be 'twenty free.
Free.
But also all the things that we are doing the digital no are helping the if you're one day.
I mean the day.
Q2 for recovery of earnings because of the client base and also everything put together now where we should be able to.
To reach I mean, I'm not sure.
Close to pre Covid profitability at I day.
Yeah.
Sure that's very clear thank you.
My second question is regarding the new round of reprogramming that the government is promoting our we'd like to understand if you guys tend to work for the facility or are you planning to you'll see that either in your portfolio for clients to have these type of benefit or you believe that is going to be a relevant become alone.
Sure.
There is a bit confusing here.
Because of.
Headlined by his joined today.
What what Superintendency has issued recently is nothing note that ex.
Expanding what they had already issued at the beginning of the pandemic basically granting granting the the financial institutions.
<unk> to provide relief basically so I think that.
Okay.
It will be misleading in terms of.
The way it's written.
So that's good news because.
Superintendency is extending the flexibility I understood.
Certain changes.
Hi, Chad for for months to come.
Right.
Got it.
What day.
If you remember there was a low passed by Congress.
I allowed.
In the government to grant some guarantees target debt to loans consumer loans below below 10, Belgium shortage and Thats a program that is active actually interbank is participating under that program.
So you can reduce interest rates for a certain amount and you will get.
Guarantee by profit basically.
In order to do that.
<unk> of people that can get to that level is not.
Really we sold it in in yards.
Customers coming to seek for that it's really a cash had no impact yet.
And I guess, when we were talking to other team and looking at the numbers, we've done math sheets.
I mean already northern what we've done at least from the interest bank perspective is more than 450000 of our retail customers and a big number and we've extended.
They are obligations up to 18 months in some cases.
Zero.
Are you seeing rates.
Given.
Grace periods. So we did that actually hit us really hard left from here in terms of.
Results, but what we needed to do in order to help brilliance.
That has been message for what we're seeing now is that the volume of people coming back to ask for a new.
Clearly these tools to reprogram their loans.
Very very small so.
That's what we were looking at it again it will depend on the extent of that note down on how extra.
Extra recovery.
In order for us to come to bear conclusions. However, also has been mentioned during the call from <unk>.
Read that the economic activity has been cheap debt compared to what happened last year. So we're still.
<unk>.
Okay.
Optimistic in terms debt this economic activity no bean chips.
Hart will not result in massive share program.
As Russ highlighted today that new state.
Perfect. Thank you for listening.
And we're getting the right the loan guarantees that you also mentioned in your response how much of your portfolio is currently represented by those so called refinance loans.
Given that the program was extended through March 31st how much of each and all.
Of this program can you have in your book.
Is this going to be analytics, social pressure in your means for he will be interesting to see how much of this NIM pressure to produce here is related to this program. Thank you.
Yes.
And that program I would say non material so far.
And unless something changes, we don't see that day.
Increasing significantly so.
Specific portion would not have an effect in our results.
Perfect. Thank you so much.
Youre welcome.
And our next question will come from Maria Cruz with some minority of them. Please go ahead.
And I would thank you for a day, but can you just quickly.
I don't know if you have talked to you before.
I I want to know because I just read the news about that is setting.
For the new condition for you must be feeling from them.
So I think you just talk about that right.
Exactly.
Okay. So that's not going to see any impact because you mentioned that already many people.
Slide on this.
And this program right.
Yes.
Good day, what the news really says is that debt.
Superintendency has extended debt relief that.
Institutions in order to provide this reprogramming or this relief to customers know that the conditions.
So it's basically extending debt for more time again with certain tweaks, but it's not that they have launched any type of new program is basically given the flexibility for institutions in order to have.
Our financing program in order to face the situation last time.
They were nicotine March 2020, Gigawatts actually massive but again, we've been working with our customer throughout the year for <unk>.
<unk> there.
New situation and have mentioned no more than 450000 customers have already access throughout we've seen debt payments are coming in according to the schedule.
So we expect with information we have now debt to continue in the near term.
Maybe just to kick.
Get to lap now some number that debt, we have shown a range, but putting in perspective. The total reprogramming debt, we have done already under the different.
For lash not as of today. They represent 25 per cent of total loan portfolio on day, 31% from June and when we look at.
In fact, just recently in Smes.
In retail at some point, we reached 43 per cent and naturally the percent touching the consumer loan book, So great cash left I mean above 70%.
Came from SME and we're talking about is that I don't know more than three out of four of our SME clients, saying theres more deemed an essential glare free program. So I guess like a massive portion of clients not related to mellow and.
As for DFAST losses have already been rescheduled now under one of the defense <unk> Kepler.
Moreover, just to close on this topic, we do have our landing page for reprogramming open on any customer of interbank can go in and look for different type of alternative solution.
The thing is that the volume of people coming in to look for that.
It's very small so far and we hope that it will continue that way by the.
Customer of inter bank requires assistance, we have been known for for for them in order to help them go throughout this period.
Yeah.
Okay. Thank you. Thank you very much.
Youre welcome.
And our next question will be a follow up from Jason <unk> with Scotiabank. Please go ahead.
Thank you.
To wrap a lot of the topics commented on.
One one thing I wanted to hear from you is with the potential pension reform.
The linkage and how do you view that for the impact for your annuities business.
And then you were mentioning them.
The fact that interest rates are low and there there are implications in this environment for nims.
There seems to be some headwinds and challenges for for the banking system, a financial system in Peru in the current context and I'm just thinking about looking longer term beyond 'twenty definitely beyond 2021, but maybe 'twenty two 'twenty three 'twenty for but when we think about returns.
How can we how can we conservatively try to to address these issues of caps and.
Pension reform and low interest rates.
And in bank's abilities to manage this at what what do you think are the key drivers for a bank like Iff's to go back to pre pandemic.
For the ability thanks.
Good day. Thank you Jason first let me pass it onto entitled for you can address the question about the pension fund reform and the impact in the annuity business and secondly.
Hey, Ghansham.
Sorry about that.
Our two kinds of.
I know it is.
Disability survival benefits annuities, which we call the regulated annuities and the private annuities.
The 70 day survivor.
I know it is our.
Fund it through the BCBS disability survivor insurance debt.
All workers or legal workers for formal worker, Spain, Peru or deducted from from their from their salary every month.
<unk>.
It goes to its insured.
Our syndicate of insurance companies, which we currently don't operate.
And if.
If you.
If the worker types of returns.
The sales then that insurance space for a lump sum and with this lump sum.
The personal or the beneficiaries bye.
And the only deal with.
An insurance company like us.
That's part of the business.
The new plan, that's being the stuff will be taken by the government.
So so that's part of the business would no longer be.
Available for private insurance companies.
The other part of it.
The annuities business as the other he called the private annuities, which is.
People with their own savings that come to us and they buy in annuities for a fix for the time or for life.
That part of the business.
It's part of that comes from what people retire from there.
Yes.
And part with their own savings.
Right now.
E project.
It's not mandatory.
It's <unk>.
People will decide that they want to join the state the state sponsored.
Savings plan for.
For for.
For retirement.
So we see on the second part we see a much less effect.
On the new regulation.
Phil.
We.
I think that the most probable outcome is that this new law won't be in touch.
A lot of our position from.
Workers will.
We don't want to lose their money or or give their money to a state for the state.
So.
In summary of the two annuities business.
The stability of survivor benefits would be affected.
The private annuities will be much less affected but.
But in general we think that the most probable outcome is that the low touch.
That's very helpful.
In terms of defining the size of that government sector or government segment.
That's at risk.
Does that represent.
The earnings today.
Yeah.
Uh huh.
Remember that this this will only this will only apply for you I believe it is right now.
The annuities, we sell don't generate any earnings to US right now they will generate throughout the years. So the earned himself in the total are the result of all the annuities we sold before.
Just hold too vague right from what I can tell you is that as that is debt.
This represents around half of what we sell on the annuities part of the vertical for our business.
And that would mean that our business.
<unk>.
The growth of our business will be reduced.
A significant part right.
Understood.
I understand thank you very much.
Okay. Thank you Marcelo Jason going through your second question well we.
We're going to talk about this but let me let me summarize a couple of points.
Obviously, there's some pressure on regulation, but we don't we really don't know the outcome. So grateful.
We don't know what's going to really happen in terms of regulation. Obviously, we we believe we still operate in a country that.
The macro environment is one of them.
Strength, we expect that to continue.
The regulatory framework overall continues to be strong big SBS is a very good spot regulator in Central Bank has proven again mentioned that has the right policy. So that's the overall environment.
Obviously, there are some pressures there, but the actual outcome.
It's very hard to say, but one of the big trends here not Peru continues to be.
Underpenetrated in terms of financial services.
Cash accelerated a bit.
With the pandemic, but we see that overall investment thesis of a country that requires the current financial services.
Alright.
It remains there with again, a stable macro framework very well regulated.
Industry. So those fundamentals continued to flow.
We expect that it will continue in the future.
With a debt.
GAAP pressures probably.
Being offset or will have to be offset from that depends on the study.
Organization with.
Drastic.
<unk> two <unk>.
Indeed, no which is.
We are addressing this this day.
These pressures.
Nickel has mentioned we have been gaining.
Reference for our digital solutions and we expect that to continue we're investing heavily in transforming the bank and also in building new ventures in order to be able to address those.
Opportunities that we've seen the future not so so the profitability of the system.
Should continue to be strong given dot requirement of investments being physical or digital that has to be done, especially in EBITDA.
Bringing more people into the system. So I don't know if I.
Address your question appropriately, but those are the thoughts that come to mind when talking about.
Medium long term prospects for financial services to improve.
And I'd like to turn the conference over to advise for any webcast questions now.
Thank you operator, we have for a couple of questions from the webcast. The first question comes from.
From Onyx, we think so.
Arthur he with COPD.
Is appealing.
It provides for you on a 426 winner of all day, if a neat segment, assuming a low credit risk.
Have you learned so far about the behavior of the segment how much are these clients demanding other folks.
Off the bat.
If any credit still has a lot of human touch, especially for.
Assessment.
How do you see your sales platform for the segment evolving after the effects of ramping up at all for fate.
Okay. Thanks, very much for the question yes.
Yes, you are right that was the rationale again, we've been always let's say very shy interest.
And we saw that gave us an opportunity not only to <unk>, but also non because that's the real.
A real view, we have from this as an opportunity to help many.
For some programs are suffering.
And so we went to get a lion's share compared to what we arena in cash.
But also an opportunity to learn more from this segment.
A low risk.
Wes mentioned.
We're in the profit August we've expanded significantly our number of customers that show production to improve our both commercial and risk models.
I agree that this has a human touch.
We'll try not to lose it but.
The way, we see the opportunity here is again more of a digital approach towards so customers and.
Retail lysine D.
Evaluation, we've proven that we have a strong skills in.
Risk management for them for consumer and retail. So we are building models in order to translate.
Some of that Knowhow into the SME business with.
And large customer base and buy.
A learning more from a more diverse base now so that's the opportunity.
It's still in the process of Tc saw.
Okay.
But that initial.
Initial indicators proof that we have.
Our thesis it could be right in the future.
In terms of.
One other thing we have learned yes.
People see Smb's, maybe us opportunity just to grow loans, but we're seeing that.
Savings for those are.
Customers where clients are growing.
Cross selling of certain projects related to cash management for collections.
Coming in so so.
Not only a credit type of business for us.
But we are.
Assuming a more holistic a complete.
View towards the level of service that we can provide to them.
I don't know Michela, if you want to add something else around debt.
Thank you.
Thank you for your question.
We have one more question from Piedad Alessandri from credit Corp, Capital, Hi, I wanted to ask regarding the charge offs.
For Q.
Total loans related to this year, and then or are those related to earlier loans.
Yes, let me pass it on to Magellan.
Gary.
<unk>.
Actually the fourth quarter catch up is like that Kathleen ex <unk>.
Prior to the previous quarter, but actually that is like a GAAP cap now because as the loans, we're thrilled share due to the nation from interest bearing and then see if there were not many charge offs in the headlines and sales quarter of the year. So basically when you look at the total number of charge offs that we have due in 2020.
You've seen it up to the 2019, now which is no even day.
Covid impact.
So most of those are related.
Well, we did a big portion of them and the biggest portion of the charge offs.
Materialize during 2021.
Basically we have already done the provision, but the charge offs will start to see not only began we have seen already is for.
We continue to see high levels of charge offs in day in the quarters to come.
At this time.
Showing no further questions I would like to turn the call over to be opened later.
And then this actually will conclude our question and answer session I would like to turn the conference back over to MS. Casassa for any closing remarks.
Okay. Thank you very much thanks again for everybody for the time in this call and we'll see each other again to standard only iteration in the first quarter results for 2021, hi, everybody.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.
Yes.
[music].
Okay.
[music].