Q1 2022 Banco Santander-Chile Earnings Call
Thank you Emmanuel.
Our last call the pandemic in Chile has receded substantially <unk>.
You continue at chop and sanitary restrictions have been lifted.
After finishing 2000 22021 significantly above trend.
The economy has begun its slowdown a little earlier than expected.
Monetary tightening by the Central Bank in the second part of last year, our physical construction this year.
Uncertainty has led to a moderation in domestic demand.
These factors will continue pushing down the economy during the rest of 2022.
Negative impact on global growth of the award and Crane will also affect local activity.
All in all we expect GDP will grow by one 5% this year a similar slide five.
Deflation has continued increasing.
The consumer price index, CPI rose nine 4% year on year in March.
Its highest rate more than 10 years.
Behind this phenomenon where global pressures.
Revenue relatively weak currency and second round effects from price hikes in a context of spill abundant domestic liquidity.
March figures also reflected the impact of the war in Ukraine.
Pushed up local food prices.
We estimate inflation will keep rising until the end of the second quarter, reaching 11%.
After that it should begin slowing down as global prices softened and local activity moderates.
The Central Bank has continued tightening its monetary policy by raising the monetary policy rate 150 basis points March reaching 7%.
We expect the monetary authority will increase its policy rate by 100 basis points in the meeting next week and eventually by another 50 basis.
At this point in June .
This implies finishing the hiking cycle with a monetary policy rate at eight 5%.
After that they should keep the rate on hold during the third quarter and begin cutting by the end of the year as inflation and activity slowed down.
After the bullish tone in the monetary policy report published at the end of March.
Short and medium term market rates adjust downward.
However.
So the high CPI in March which significantly so price on the upside the increase again.
The new government has ratified it's compromised fulfill the current budget, which implies a substantial contraction in public expenditure this year.
While it might be detrimental to grow that will help contain inflationary pressures and a further increase in public debt.
Recently, the Ministry of Finance announced an agreement with the Central Bank.
With a central work Athene to increase the minimum wage by 14% and a bucket of cash transfer to low income families for about 350 million U S dollars to compensate for the loss of value of the currency.
We expect it would be financed through adjustments in the budget without increasing total expenditure.
Also through legal initiatives, allowing for new pension fund resource were rejected in Congress.
Similar proposals should not be discussed anytime soon reducing the risk of new liquidity injections.
Slide six the constitutional process is in its latest stages.
Still a key element to be defined and adjustments to the drop in the soco and monetization Commission.
The exit referendum, which will take place on September 4th of this year will reduce uncertainty.
However in case that the approved option wins that will still be a large transition period to implement the new constitution.
In case that the riddick option wins.
It is likely that important amendments to the current constitution will take place.
Thank you Claudio.
We will now move on to slide seven to focus on the evolution.
All of our various digital initiatives this year.
On slide eight we summarize our main initiatives, which have been key elements for our recent success and client growth and satisfaction.
In the next few slides I will update the evolution of the main initiatives outlined here.
On slide nine we begin with our most successful initiative, which is Santander life client growth continued strong with Santander life, reaching over 970000 clients an increase of 60% year over year life's active clients defined as those in which Santander as their main bank in.
Increased 52% year on year and loyal clients, which are those that are active and are also profit and are using a majority of life products rose 49% year over year.
And in their lives clients are also rapidly monetizing with gross income around $30 million in the first quarter, a 62% increase compared to the same quarter of last year.
Demand deposits remained high at $1 1 billion, a 53% increase so process, surpassing by many times the amount of client the Mount clients have deposited and similar competing platforms.
On the loan side life clients had a total of $310 million and consumer loans, increasing 38% in consumer credit and 98% and credit card loans. These clients are also beginning to purchase other products such as mutual funds and time deposits.
<unk>, which have grown 77% year on year and 161% respectively.
On slide 10, we show the high growth <unk> digital is obtaining super digital as a prepaid digital debit digital product aimed at the Unbanked, who seek a low cost bank account Super digital clients have grown 95% year over year, reaching over 292000 clients. This.
Growth has been helped by alliances with companies such as coronary shop and Uber. Furthermore, in January $2022 connectors that we told US connect dollars initiatives by the U N with Mastercard and Microsoft are looks to offer tools for women entrepreneurs chose silver digital as our financial platform for Chile.
Net net our acquiring business to continue to grow successfully as shown on slide 11.
Get net was efficiently launched in February last year and has sold over 88000, Pos and over 500 mobile Pos is which were recently launched 91% of getting that clients are Smes our target clients today.
Today getting that already has a market share greater than 20% in Pos is with around.
$300 billion in monthly sales through these machines.
This product has been quick to monetize generating 3 billion fees in the first quarter alone, we expect get net to breakeven by the end of this year.
On slide 12, we showcase our two most recent digital initiatives to help support micro Intrapreneur Prospera and <unk> analyzed. These two projects are in the incubation stage as we test different platforms and customer segments.
Prospera is for non incorporated individuals that need a current account for their business, mainly focused on transaction already with a small monthly fee and a one time payment for the mobile Pos. These clients are rapidly using multiple products from the get go with access to a current account with unlimited free transfers and.
No limits to their monthly balance.
<unk> life has a slightly different focus targeting incorporated companies.
That need a current account the government has a program called two empresa in India with around 365 companies created each day fully online. These same companies then seek a product that can be also opened online and will not require a history with a bank or nor minimum sales.
<unk> builds on the same successful platform. We have created for individuals and also focuses mainly on transaction annually as well as responsible lending opportunities in the future.
As can be seen on slide 13, we continue to lead our main competitors in NPS in the first quarter, our NPS dipped slightly.
Mainly our our app as we rolled out a new version, which caused some kind of restructuring, but will allow us to give a better service with heightened cyber security.
On slide 14, we show how these different efforts are translating into record client growth, we surpassed the $4 1 million client Mark in the first quarter with a bright outlook for the rest of the year.
Since mid 2020 total clients have increased 20% in the same period total digital clients have grown 51, 7%.
The main driver of client growth has been checking account openings through Santander life as a result, our market share and number of current accounts has increased to 28, 9% or 234 basis points higher than 12 months ago.
On slide 15.
See how the bank continues its process of transforming the branch network focusing on the work of our motto and closing less productive branches as the pandemic has eased we have begin to reopen the cafe and co working areas Walgreens welcoming and again, both customers and non customers to these unique branches.
Overall, our branch strategy, coupled with our digital initiative is driving an important rise in productivity with volumes per point of sale, increasing 12, 2% year over year and volumes per employee increasing 10, 8% year over year. The work affair community already has 150.
5000 members and 5500 shops in the last year. This platform helped over 25000 shops, our businesses create their website and shopping cart to sell online.
Moving forward to slide 16, we show our 10 responsible banking.
<unk>, which we spoke about in our sand from that ESG talked last year and the progress we continue to make significant progress in all of our commitments increasing the amount of women in leadership positions and lowering the gender gap.
Pay gaps in the social front, we have financially empowered 1.1 dollars 8 million people as of March and supported 281000 through our community programs on the environmental front, we already eliminated.
All of our single use plastics and as of March 2022, we are close to $470 million in sustainable financing on our loan book. We are also really began construction of our solar power plants.
On slide 17, we can see how our efforts are being recognized by the various ESG indexes.
In the fourth quarter, the Dow Jones sustainability index confirmed us as the only bank in Chile to qualify for the emerging markets Index and also this quarter MSCI affirmed its AA rating for the bank.
Moving ahead to slide 19, we will now take a look at our financial results.
As a reminder, as of January Chilean banks have now incorporated IRS nine except for the expected loss models for provisions Chilean banks also adopted a new format for the balance sheet and income statements. The financial information for 2021 has been adjusted to include these changes for compare.
Alison purposes.
In the first quarter of 2022 net income attributable to shareholders increased 29, 5% compared to the same quarter of 2021 and totaled $235 7 billion peso our ROE in the quarter reached 25, 6%.
These strong results were mainly driven by our client activities as reflected in the increase of 21, 5% and the net income from our business segments, which excludes taxes voluntary provisions and the impact of inflation on results all business segments saw better results with retail banking.
Net contribution increasing 10, 7% middle market results up 23, 5%.
And cib's profits rising 54%.
On Slide 20, we review our loan book, which grew 0.6% Q on Q and six eight year over year loans to individuals increased nine 7% year over year, and one 9% Q over Q was loan growth in this segment being driven by high yielding auto loans, which grew 57, 5%.
Year over year mortgage loans grew 11, seven year over year, and 2.0% Q over Q.
Growth in this product was mainly driven by the higher U S inflation rates that resulted in a positive translation impact on mortgage loans, new mortgage loan originations fell as inflation and rates increased in the quarter.
During the quarter, our CIB segment continued to experience strong growth of six 5% Q over Q as the economy reopens and large corporate sought funding in the form of corporate loans as the bond market remained illiquid.
On slide 21.
We show the evolution of our funding mix total deposits increased $2 eight year over year and decreased three five Q over Q. After a strong strong increase in noninterest bearing deposits in previous quarters due to the success of our digital platforms and the excess liquidity from state aid and pension fund withdrawals we.
We've started to see our clients either spend their liquidity are shifted to time deposits as rates rise the decrease in retail demand deposits.
It was partially offset by the 30% Q on Q increase in corporate demand deposits.
As a result time deposits only increased <unk>, 3% Q over Q.
Despite this proactive stance regarding funding costs, we still expect average funding costs to continue to rise as the monetary policy rate continues to go up these higher rates will be eventually transferred to our loan book, but given that our interest bearing liabilities have a shorter duration than our interest earning assets.
<unk> costs will go up first.
Moving on to slide 24, we can see how the movements of volumes rates and inflation resulted in flat NII year on year growth. The bank's net interest margin reached three 7% Q1 22 compared to $4 four in the fourth quarter and $4. One in the same quarter of last year during the quarter.
<unk> remained strong with a UF variation of two 4%. This high inflation was offset by the aggressive hike in the monetary policy rate by the central bank in the quarter, which deteriorated our funding cost and mix.
Moving on to asset quality on slide 23, we show how the evolution of asset quality remained solid in the quarter, the NPL and impaired loan ratio decreased to $4 five and one 2% respectively. The coverage ratio of Npls also remained high at 279%.
These positive trends were seeing equally across the different products.
As we can see on slide 24, these positive asset quality indicators led to a cost of credit of <unk> eight for the first quarter of 2022 during the quarter. The board did not recognize reverse any additional or voluntary provisions.
Non net interest income trends were also very positive in the quarter as we show on slide 25 <unk>.
Fee income increased 17, 1% year over year, driven by higher client activity and the growth of our client base, which led to growth across most products. Thanks to our digital strategy with our key products such as life get net and our insured tech platforms.
<unk> to the fourth quarter of 'twenty, one fee showed some seasonality with less car transactions due to the vacation season in Chile.
Financial transactions also continued to show strong client demand with high appetite for our treasury products accompanied with positive results from our <unk> Division with this our noninterest income increased 37% year over year and 29% Q over Q.
As shown on slide 26 operating expensive growth remained control during the quarter, despite the higher inflation rates and our efficiency ratio reached 37, 8% in the quarter.
Personal expenses remained stable year over year in administrative expenses only grew three 6% year over year. Despite the record high inflation levels. This exemplary cost control has mainly been driven by our digital strategy digital investments, which is leading to higher productivity and efficiency levels.
Bank is currently carrying out its 260 digital.
<unk> digital investment plan for the years 2022, 2024, mainly focused on digital initiatives, both at the front and back end of operations.
Other operating expenses decreased 11%.
During the pandemic the bank had established greater provisions for contingencies, and operating risks, which have not been repeated in the first quarter, leading to a fall in this item.
Okay moving on to slide 27, we now analyze our capital as a reminder, since year end 2021, we are now reporting under.
These three at the end of the first quarter. The bank reported a core equity ratio of 10, four and a total <unk> ratio of 16, eight our fully loaded ratios were 10, 7% and 17, 1% respectively.
During the quarter the CMS.
Set our pillar two requirement at zero percent.
All in and considering all the different buffers.
Minimum CET one ratio we much achieve by 2025 is nine nine.
Nine 5% and we are currently above this level in the slide it has been but thats a typo, it's nine five.
As a result of the strong capital levels and as we show on Slide 28, we paid in April of this year, our highest dividend ever of $2 47 vessels per share, 50% higher than last year's dividend with an attractive yield of five five.
Finally on slide 29, we are updating our guidance for 2022.
Strong results in one of the first quarter and the evolving macroeconomic situation has led us to update our guidance for this year. Our base scenario now assumes a GDP growth of around one five with an inflation rate of around 9%. This should lead to loan growth of 8% to 10% we have lowered our outlook for NIM to three.
<unk>, 5% to $3 <unk>.
<unk> on the back of short term interest rates rising more quickly than previously estimated on the other hand, our non NII revenue should rise, 10% to 15% and our outlook for the cost of risk remains unchanged at <unk>, 9% to 1%.
Given our efforts with our digital strategy, we expect cost to grow below inflation. All in we expect an ROE of 21% to 22% for 2022.
With this I finish my presentation, and we will now gladly answer any questions you may have.
Thank you very much we will now move to the Q&A part.
If you have any questions. Please press star two on your keypad Thats start to when Youll keep pad and wheatstone aimed to be called if you 1000 via the web you May also ask a voice or text question.
We will now give a moment or so for the questions to come in.
Thank you. Your first question comes from Mr. Tito Lambada from Goldman Sachs. Please go ahead, Sir your line is open.
Hi, Good morning, Robert Thanks for the call.
Taking my question I guess my question is on your margins a little bit.
You lowered the guidance a bit because at a higher.
Interest rate.
But just to think maybe on how that's going to evolve. So do you think you kind of see that immediate impact next quarter from the higher rates and maybe some more margin pressure in the short term, but let's say if inflation remains high.
Is there maybe some upside to that margin outlook, and particularly maybe thinking going into 2023 naturally your inflation expectations for them, but.
But how do you think that can continue to evolve just given the dynamics between <unk> and <unk>.
Inflation in policy rates.
If you can give some more color on that would be helpful.
Hello. This is emiliano. Thank you for your questions.
<unk>.
The future for Nims in the second quarter.
Shouldn't be let's say significantly.
It could be around the first quarter, because we already know the March inflation, which was.
Hi was like $1 million for the months, so thats going to be a significant part of the U S valuation for the second quarter, We'll know next week the CBI for April and so.
So the second quarter shouldnt be in lets say button that says the second half could be the one bring in the headwinds.
How hard the headwinds will be will depend on the combination of where the inflation stays on how does the central bank.
To that so.
The trim.
Trending down of NIM should come in the second half momentum, maybe with the third quarter of being dependent on the timing of the central bank decisions on most of the inflation figures that maybe the fourth quarter the third quarter could be the bottom and then in the fourth.
In the fourth quarter, when the central line <unk> start cutting rates, depending on the evolution of.
Inflation and activity.
It started to see a rebound in that for 2023.
The big question will be the combination of interest rates.
And in places so its inflation stay high it will be positive for us I mean, maybe the central bank will be more modest in cutting rates in that environment.
The overall effect will depend on the reaction of the central bank to the to the inflation.
Great. Thank you.
That's helpful and then looking here.
<unk> forecast for 2023, and a four four with the month policy rate coming down to $4 75 in that scenario.
How do you think about your margin should that.
Canada remains stable with the same.
The second half of 2022.
This new area.
The western markets, where there is where we end up this year, but let's say that combination could be stable around where we are going to be this year.
And it would be more stable would say the second half of the year when you see the pressure or.
There can be all of it are available.
Yes.
Full year, Okay, alright, perfect. That's helpful. Thank you Mariano.
Thank you very much we will now be moving to the next question from Mr. Alonso Garcia from Credit Suisse. Please go ahead, Sir your line is open.
Hi, Good morning, everyone. Thank you for taking my question My question is asset quality.
Continue to.
Two two reports guilty.
<unk> metrics across the different segments.
Your guidance reinforces the positive outlook for credit quality. This year, but just wanted to ask I mean, how I mean.
The fact of the timing, you're feeling comfortable with asset quality remaining well under control this year and in an environment of lower GDP growth right.
A rising inflation, so just wanted to understand your.
What you are seeing in terms of asset quality in this in this environment. Thank you.
Okay. So.
With rising rates and higher inflation.
And lower growth obviously there.
Could be some pressures on asset quality. So we.
Basically what we did in the first quarter and.
If you look at the coverage ratios I think it's more clear basically there was some a little bit of increase in npls in consumer, but we basically used.
Coverage, so the coverage came down but from like 600% to 500% so.
We didn't touch first of all we didn't touch any of the voluntary additional provisions basically and in consumer lending.
<unk>.
As people have less liquidity and there might be some weakness or more more than weakness I think consumer npls will slowly go back to where they were before the pandemic and the social outburst okay.
But we really have that very well covered and basically we've used coverage.
And that portfolio, so really shouldn't affect too much the cost of risk now in Chile.
As you know a lot of our mortgages, our all of our mortgage are index to inflation.
For the back book.
The increase in rates for the back book doesn't affect because the real rate is is fixed over the life of the mortgage but obviously the variable part of our People's mortgage installments comes from an increase in inflation. So.
I think there could be some risk there now and look at the figures in the first quarter asset quality and mortgage did very well, but to be prudent in what we did is we did increase the coverage and mortgage okay. So the increase in provisions in the quarter were mainly.
Through mortgages, even though mortgages asset quality remain very good.
We increased mortgage I think to the highest coverage we've had in many years to 130% that's out that's excluding the value of collateral. So basically we've covered around two years of future potential charge offs. So.
I think thats the benefit of having high coverage that we may see we tweaked a bit the coverage ratios among the different products. So that's why we were able to remain tranquil with our cost of risk outlook for the rest of the year given the current.
Our outlook for the economy Okay.
That's very clear thank you very much.
Thank you very much. Our next question comes from Mr. Ernesto <unk> from Bank of America. Please go ahead, Sir your line is open.
Good morning, everyone. Thanks for taking my call.
My first question on ESI.
So in terms of a long road and in terms of macro expectations.
So.
I agree with you on your expectation, so one 5% GDP growth for this year.
However, if we go beyond that and start looking to 2023.
Will you still need.
Need to have a pension reform did you need to have a tax reform, we'll finance it and then you're having tighter fiscal and monetary policies.
Just wondering how do you see.
The GDP growth expectation for 2023, and how can that translated into loan growth.
Yes.
<unk> will take the first part of the question on growth expectation.
We expect.
<unk>.
Between growing between zero and 1% next year, there is a little bit above.
To what the Central Bank has.
Later.
As we report.
What is behind that growth the year, well and we expect the monetary policy.
Begin losing monetary policy by the end of this year as long as inflation.
Slow down.
So this year the fiscal adjustment the strong fiscal adjustment is occurring this year. This year, we have a very tight fiscal policy, but we expect this.
The government would be able to start increasing but the budgeted expenditure.
It's a next year and that will help supporting the economy.
That is basically what we have.
Behind our estimate of new logo growth GDP and in term of the loan growth.
Yes.
With what <unk> mentioned, and therefore nominal GDP, even like in the in the mid single digits and I think that the multiplier of loan growth to that.
It's not so easy to predict timing, considering where we're coming from the pandemic. The deleverage from the families that pension fund withdrawals. So I would say that we can be around also up mid single digits.
From 5% to 7% nominal growth too.
Loans are coming from that.
Zero to 1% real GDP growth and inflation being in the 4% to 5% range.
Perfect. Thank you and then my second question is on your ROE.
We have seen you have increased the target.
21, 22% for this year.
However, at some point, we should expect lower inflation.
So where do you see the sustainable or long term Roe.
No I mean, we gave our 18th the 19% range for long term ROE with having changed Adam in the first half of the first quarter on first half considering the.
The inflation levels on that show in above 20% Roe.
That was.
We haven't changed our long term expectations in peso far away because at the end after this high inflation.
The inflation will converge have been the central bank will take rates down again, and we can go back to let's say a more normalized scenario of this 18% to 90% range.
Okay perfect. Thank you very much.
Okay.
Thank you very much we will be moving to the next caller and the next question comes from Mr. Carlos Gomez from HSBC.
Please go ahead, Sir your line is open.
Yes, Hello, good morning.
I wanted to ask you about the impact.
We took works on the pension fund.
Your business now.
Future from what we read.
<unk> already been an increase in la.
Long term mortgage rates.
The reduction in the terms in which the banks.
Lynn.
How do you see that the Goldman and how do you see that impacting loan growth.
In the long run.
I wanted to ask about the decline in the partners that we have seen in the last two quarters again I think it is related to.
The withdraw from the pension fund do you see that continuing and expanding our concern for the next two or three thank you.
Yes.
Hello, Hello. Thank you for your question regarding the impact of the bedroom found withdraws.
I think we are still seeing the effects of the withdrawals in the sense that there is still there.
Significant amounts of liquidity around the system in terms of demand deposits.
That and also as you said the fact that the pension funds are needed to sell long term assets in the market pushed long term interest rates app that that made mortgages, new mortgages more expensive, though so that reduced the demand for mortgages.
I would think that that's going to be the case for a while I mean, we don't see long term rates are falling sharply so the than the <unk>.
Level of new origination in mortgages for the next 12.
<unk> to 24 months definitely will be lower than the ones.
We had.
In the past, it's also true that in nominal terms the mortgage portfolio will be growing with with inflation. So in terms of.
The nominal size of the portfolio you can still have growth to the high single digit numbers, let's say supported by supported by inflation and also the effect of the withdrawals I'll also like a reduction in consumer loans demand I mean people have liquidity, so their demand and less credit.
That's why you see the numbers for us and for the system and consumer loans are modest or even falling but that will change after that we will use the money they have and we see that happening more towards the end of this year, maybe maybe next.
Next year, what we are where we are seeing in terms of deposit behavior is that we are seeing people.
First the spending part of the money they have in their checking accounts and also let's say considering the higher opportunity cost that the level of rates.
Is creating people are shifting from demand deposits time deposits basically because now that the deals are the rates are more attractive to them. So that's that part that's part of our pressure on nims, but it is not a concern in terms of the funding of the business because we keep the deposits.
More expensive on the time deposit format that.
Then on the checking account, but we still have the funding for our business and go into the first part with the demand on the mortgage business being slower than in the past, we don't foresee significant pressure in the long term funding needs for us we still have access to the domestic market which is.
Let's say still there in the circumstance and also the international markets have proven to be very accessible for us.
It's not a it's.
This is not a concern for the for the near future.
Okay. That's great. Thank you.
Thank you very much our next question.
Comes from Mr. Fernandez from Jpmorgan. Please go ahead, Sir your line is open.
Thank you all and thank you for the questions and congrats on the very strong ROIC.
I had a quick one regarding the number of clients, we saw stabilization regarding loyal clients and digital clients. So just would love to know your view of the year for this year the things like the growth, where we slow down where you see more competition for our clients or is it just seasonal like a <unk>. So that's the first one and a follow up.
Funding I totally understand that like funding is not an issue regarding the malls, but how do you see them in deposits evolving right because they are still at a very high level. Although the decrease this quarter. They are still I don't know, 62% of our total deposits and when we go back to the historical demand deposits they were around 40.
Since then the total deposit so how quickly do believe demand deposits will shrink the feed is like a one two years again, assuming no new patient withdrawing Sheila right like how long do you think like pension sorry deposits may kind of normalize because this has been a very good day.
Tailwind for banks and I don't know like Cooper right at seven and more we could see a quick shift here on the main deposit. So just wanted to hear your thoughts on this thank you.
Okay. So regarding clients and I think there's various factors one is seasonality.
The summer months or is in slow down of it the second factor is.
We did do some changes as we always upgrading our site or App and there was a little bit of disruption. There, we're always trying to boost cyber security.
And I think that affected in the very short term, our NPS, which we which we saw in and the growth of digital clients.
But I think it was momentary and and now I think things are back on track in the third it is true that there is definitely more competition. There is a lot of good platforms I think we're still leading.
In any case, we should see a client growth, especially digital client growth start to recover.
As you know as people adjust to the new formats and the new cyber security features so.
So we're already seeing in March and April that recovering and.
With the new products through life, especially like quite the life I think thats going to be another game changer, thats going to slowly gain momentum.
And getting that continues to do well. So overall I think there's going to be more competition.
We're going to start launching some new.
New things in the next few quarters and all of that should give the boost again declined growth. So so we still think that's going to.
Move forward after a slight dip, especially on the digital side. It was basically in the month of January and February March are those already a pickup.
And.
Regarding.
<unk>.
The mix of deposits, although the trends are there.
<unk>.
Going forward I think.
The board of dimension that.
Apart from the Federal fund withdraw some let's say all the fiscal hubs also we did a significant improvement in all of their transactional business with companies. So if it goes to slide 21, you can see there that the evolution of the retail part <unk> Corp.
Core price part middle market.
CIB is quite different so we are still keeping a significant part of the demand deposits coming from corporates basically because apart from that.
Let's say reasonable optimization of their margins on their under financial business that one is more related to the kind of.
Let's say loyalty and the transaction value that transactional relationship with the back that is still strong we are positive going forward. It is also important dimension go into your mix.
Mix between time deposits.
And deposits go in some years.
Before now that also they are the system and also we had a significant pool of time deposits coming from institutional investors and pension funds I mean, that's not going to come to come back. So I think that it's a long term effect, where the share of.
Demand deposits for the for us.
Total deposits will stay higher than the wildly it was in the past so going to your question. We don't see we don't see that.
Especially in the recent Barclay opportunity costs and also the usage of the liquidity from households will put a headwind in demand deposit growth going forward and maybe some shift.
But then when you see the overall, including the corporate segments without CF past our significant shift.
Rates are already at 7% so.
Let's say, a big part of that opportunity cost shift.
Ready passed and.
And so we are not concerned of having a rabid are sharp mix shift from.
Demand too.
To time deposits.
Overall deposit base.
In the next months.
None of those particular concern about inflation coming down and demand deposits coming down that would be that would be painful.
And also guys congrats on their new release.
My final comments here it was very good like the new information as we're bringing should they release. Thank you very much.
Okay. Thank you very <unk>.
Thank you very much. Our next question comes from Mr. <unk> <unk> from Scotiabank. Please go ahead Sir.
Hi, Thank you for taking my question.
Regarding fee income growth, we saw very strong growth of around 17% year on year in the quarter.
Wondering how sustainable is this.
What is your expectation for fee income growth for 2022 and 2023.
Okay, Yes, so we've had I think in.
I'll, probably one of the more better parts, how our results have been the the positive effects of all the growth in clients and transaction holiday on fee growth and we've seen fees grow across the board.
And that's good news for the rest of the year is assigned now remember that and as we mentioned in the management commentary in the script.
We have to begin to absorb beginning in April the new interchange fees.
That's going to cost us this year $29 billion vessels, so basically April through through through December .
So that will probably lower a bit.
The ongoing growth of fees, especially through cards, even though should have a slight benefit for getting it.
So overall.
<unk> growth will probably not continue the trends we saw in the first quarter because of this even though the other the non credit card related products, which should continue to have a very good year because the increase in transaction analogy. Okay. So the 17% growth in fees will probably come down by the end of the year as we absorb these 29 billion.
<unk> to levels, probably around the <unk>.
The 8%, 9%, Okay, and then next year.
Once we have this absorbed we should go back to growth in the teens, because the client growth transaction Ality should should should we.
Should continue to push fees. So this is kind of like a one off that we absorbed this year and then we should continue growing so we have even though there are some pressure on margins as we mentioned I think the fee part is quite clear and the other thing is that the.
The Treasury income Treasury and the FERC in the first quarter was like $57 billion. We have very good a client treasury non client, which was a loss last year non client treasury should be more or less positive or not repeating the loss. So when you add them.
<unk> and treasury.
That's basically non net interest income that should grow.
Around 15% this year, okay. So I think that's one of the positives we have this year. So even though we have to adopt the interchange fee. The rest of the fee products should grow well and our treasury should also have a good year and that should continue through next year as well.
That's very clear thank you for the comment.
Thank you very much we have received three text questions ill.
I will read them out.
Individually. So the first one is any potential regulatory risk for the bank to flag pertaining to constitutional convention.
Well.
And some of the constitutional convention.
Hard to foresee right now waqar.
The specific implications for the financial industry in general.
We need to find them.
Political rules.
Defining our risk profile.
Right.
And then the working of the political system.
That is.
Judiciary system. So it's hard to think right now.
Specific.
Impact on their financial industry.
Regarding the type of regulations.
One of the things that is going on right now.
Evolution that is being discussed in Congress.
And in oil regulation to have a consulate consolidated.
That repository.
That is something that has been discussed for many years, so really tailor, but now its advancement in Congress.
Hey, Thank you very much for that.
The next question.
Considering the current economic slowdown how do you see loan growth evolving in 2022, especially in the retail segment do you think loan growth of 8% to 10% is feasible in this context.
Sure.
Yes, hi.
So in part because inflation went up <unk>.
The nominated in U S. So really we didn't really change our nominal loan growth forecast too much versus the previous guidance, what really changed was.
The inflation went up so the real loan growth is actually around almost zero. So basically loans will still we're not seeing.
Terrific numbers in loan originations, except for auto loans. The rest of the consumer loans are still kind of stalled new mortgage originations have fallen and there is some interesting activity in the market.
Okay.
Hi.
Okay.
It is really the most recent pushes translation gain through the U S. Okay to higher inflation.
Okay. Thank you very much.
The next question is about inflation against how much inflation is too much in the sense that even higher inflation is good for market margins, there must be a point, where it begins to affect customers lower consumption higher delinquency et cetera. Thank you.
Yes.
Difficult question.
So ask.
Saying that we are still at.
Levels of inflation, where those pressures exist virus still manageable by by our clients an hour by hour South.
And we also have.
And the state dressed in the Central Bank is doing there.
<unk> and helping them in place and the converse I'll also.
The GDP forecast for the economy should help to have inflation converging and the one coming from a broad imported inflation coming from all the situation in Ukraine, and all of the supply change disruptions.
<unk>.
That also should fade away in the future maybe.
No so soon but yes.
Bids are.
Away from from now.
Okay. Thank you very much we have a final voice question from an individual analyst.
As Mike George will open the microphone. Please go ahead Sir.
Okay I believe.
I believe we have no further questions at this point I will pass the line back to the management team for the concluding remarks.
Okay. Thank you Michael.
Thank you all very much for taking the time to participate in today's conference call. We look forward to speaking with you soon again.
Goodbye.
Thank you very much. This concludes our call for today, we will now be closing all the lines. Thank you and have a great weekend bye.
Bye bye.
Okay.