Q3 2024 Banco Santander-Chile Earnings Call
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Speaker Change: Good morning ladies and gentlemen and thank you for standing by, I would like to welcome you to Banco Santante Retire, in the third or third 2024 earnings conference call.
Speaker Change: On the 30th of October 2024, please note at a this point or participants' lives are new to only mode. After the call, there will be an opportunity to ask questions. So with this, I would now like to pass the lines to Mr. Cristian Vicuna, the head of Investualations. Please go ahead sir.
Cristian Vicuña: Thank you. Good morning everyone. Welcome to Banco Santander, T-3rd Quarter 2020, 4 results, Webcast and conference call.
Cristian Vicuña: Dennis Cristian Vicuña, Chief of Strategic Flying and Investor Relations.
Cristian Vicuña: As many of you know, Emiliano Arpassio Folilets de Banque last month.
Cristian Vicuña: We thank him for his contribution and wish him well in his future endeavors.
Cristian Vicuña: In the interim, I'm glad to introduce Patricia Pérez, who leads the ALM and financial team, ensuring continuity and a focus on our strategic goals.
Cristian Vicuña: So, without further ado, let me pass the microphone to Patricia, Interim CFO.
Patricia Pérez: Thanks, Cristian, and welcome everyone to our quarterly review results. First, let me give you some insight about myself. I've been with Sntndr for over 17 years, and in my past responsibilities, I've been head of capital management, funding and debt agencies, and most recently, head of assets and
Patricia Pérez: I am delighted to share with you a strong third quarter and our outlook for the rest of 2024 and some insights into 2025.
Patricia Pérez: Also, I just wanted to highlight our impressive results in the Dow Jones Sustainability Index where we obtained 80 points and 6 point increase compared to last year, placing us as the best Chilean bank and in the top 3% of all banks worldwide for sustainability.
Patricia Pérez: From the economic team, Carmen Gloria Silva is here with us, and we are pleased to announce that from November, Andres Sansone will be joining us as the Bank's Chief Economist. And Carmen Gloria will take the role of Head of Public Policy.
Patricia Pérez: The agenda for today is first Carmen Gloria will discuss the macro scenario, then Cristian will review the strategy and results of the third quarter and guidance, and finally we will have a Q&A session. Thank you very much.
Speaker Change: Thank you, Patricia.
Speaker Change: The Chilean economy has continued to recover. The preliminary estimate of GDP growth for the third quarter is 2.6% year-on-year, compared to 1.6% previously.
Speaker Change: This implies an increase of 0.9% quarter-to-quarter seasonally adjusted.
Speaker Change: which can be seen across all economic sectors reflecting activity that beyond short-term fluctuations associated with weather events and calendar effects continues to improve.
Speaker Change: Thus, for this year, we maintain our forecast of 2.4% GDP growth, supported by more comfortable financial conditions and a consistently growing wage bill.
Speaker Change: In fact, the labor market, which exhibited a significant improvement in the first half of the year, slowed down during the third quarter, affected by seasonal factors.
Speaker Change: Going forward, we estimate that the labor market will resume its recovery due to a more dynamic economy with unemployment rate closing the year at around 8% and continuing the trend in 2025 ending in 7.8%.
Speaker Change: Both locally and externally, various central banks are expected to continue with monetary normalization next year, which will boost the economy.
Speaker Change: Added to this is the lower inflationary environment and greater dynamism in the labor market, which will allow the recovery of banking credit and the consolidation of consumption.
Speaker Change: Thank you for watching!
Speaker Change: Investment, after closing this year with an estimated annual drop of 1%, will return to positive growth rates in 2025.
Speaker Change: thanks to less stringent financial conditions, greater mining production, and the consolidation of non-mining projects.
Speaker Change: Therefore, we estimate GDP growth of around 2.1% to 2.3% in 2025, placing it around its trend levels.
Speaker Change: In the third quarter, inflation has been impacted by volatile components.
Speaker Change: On the one hand, food prices have pushed downwards while energy prices have risen.
Speaker Change: in October and January, which will lead inflation to close 2024 at 4.3%, implying a U.S. variation of 4.1%.
Speaker Change: We estimate that inflation will remain around that level during the first half of 2025, then decline rapidly in the second part of the year to end at 3.4% and reach the target of 3% in the first part of 2026.
Speaker Change: The exchange rate has tended to depreciate recently as a result of the strengthening of the dollar globally, greater risk aversion, the intensification of geopolitical risks, and the moderation in the pace of rate cuts in the United States.
Speaker Change: In the baseline scenario, we continue to anticipate a downward correction at the end of the year ending around 900 pesos per dollar.
Speaker Change: In this context of inflationary normalization, the Central Bank has continued with the process of rate cuts, although at a more moderate pace than in the first part of the year.
Speaker Change: In the recent October meeting, it lowered the rate by 25 basis points at 5.25%.
Speaker Change: In the baseline scenario we project another reduction in December, closing at 5%.
Speaker Change: By 2025 macroeconomic conditions will allow the monetary normalization process to continue, where we estimate that the monetary policy rate will close the year at its neutral level of 4%.
Speaker Change: Thank you for watching!
Speaker Change: On slide 5, we present the advances in the relevant regulatory framework.
Speaker Change: Recently, the Tax Compliance Law was published and it implies increasing tax revenue by 1.5% of GDP over the next three years by reducing tax evasion and avoidance.
Speaker Change: Meanwhile, the pension system reform is still under discussion in the Senate.
Speaker Change: The government agreed with the position on a protocol on the discussion schedule for the bill, which must be voted in January 2025.
Speaker Change: The CMS is elaborating the technical advance for implementing the Open Finance System.
Speaker Change: The rule will become effective in July 2026 and will consider the progressive submission of information to be shared by banks and payment card issuers within the following 18 months.
Speaker Change: Thank you for watching!
Speaker Change: Finally, the next slide.
Speaker Change: Chile has established itself as the lowest-risk country in the region, boasting high ratings on sovereign debt and a stable outlook from all agencies.
Speaker Change: Recently upgraded from negative
Speaker Change: The political landscape is positive. Last weekend the country conducted regional and municipal elections with high voter turnout, revealing a more balanced distribution of political forces.
Speaker Change: Macroeconomic imbalances have been resolved and the external environment has become more favorable.
Speaker Change: All of this could strengthen the fundamentals for higher investment and economic growth in the coming years.
Speaker Change: Thank you, Carmen Gloria.
Speaker Change: Turning our attention to slide 8, let me walk you through our Chile First Strategy latest advances.
Speaker Change: We aspire to lead the Chilean banking industry in terms of contribution to its various stakeholders. This strategy, we have named Chile First, with four pillars.
Speaker Change: The first two pillars focus on what we want to become and the second two pillars on how we want to do it. So first and foremost, we are engaged in a transformative journey towards becoming a digital bank with branches.
Speaker Change: Our transformation into a digital bank is not only about adopting the cutting-edge chipping technology but also about having a friendly physical presence through our innovative work cafes. These spaces are more than just places to interact with retail customers, they are dynamic hubs.
Speaker Change: that promote connectivity for both customers and potential customers.
Speaker Change: With advanced technology and a commitment to excellent service, our work cafes are designed to redefine the banking experience.
Speaker Change: The medium-term objective is to reach 5 million customers and 450,000 SME clients.
Speaker Change: Our second pillar is centered on providing specialized value-added services tailored to some business segments.
Speaker Change: Our commitment is to deliver premium transactional trade, foreign exchange, sustainable finance and advisory products and services
Speaker Change: ensuring our clients receive a top-notch experience. Examples of this include our corporate investment bank, our specialized attention model for commercial banking, our Santander consumer business that offers car financing, and GetNet, our acquiring business.
Speaker Change: In our third pillar, we are committed to fostering innovation and propelling growth by challenging status quo and creating new business opportunities.
Speaker Change: A good example of this is the disruption we incur in Chile with the four-part model when we introduced our acquiring business GetNet to the market. So, we aim to lead the change in redefining the banking landscape.
Speaker Change: We actively seek out new business opportunities, pioneering the sustainable transformation of our customers.
Speaker Change: By challenging conventions, we aim to drive growth and cultivate success.
Speaker Change: Lastly, we place great importance on the role of our organization.
Speaker Change: To realize our objectives, we need the best talent.
Speaker Change: We are dedicated to building an agile, collaborative, and high-performing culture. We recognize that diversity is our strength and individuals will flourish based on merit. We are constructing a thriving community where talents are nurtured and innovative ideas are highly valued.
Speaker Change: On slide 9, we can see some of the key indicators related to our first study, Pillar of Digital Bank with Work Access.
Speaker Change: We can see how we continue to optimize our branch network, converting more branches into a work-after format with 38% of our branches without human tailors.
Speaker Change: We have also reduced the number of products by 35% year-on-year, streamlining similar products to offer a simpler value proposition to our clients.
Speaker Change: Our total clients and digital clients continue to grow, and we now serve some 4.2 million clients of which 2.1 million are considered digital, growing 7% year-on-year, while our active clients have grown 12%.
Speaker Change: This expansion of the client base is driven by two main products, our Santander Life account, that has grown over 7% in the last year, and our, more recently, Max Lucas account, that was launched in 2023 and has now reached 244,000 clients.
Speaker Change: The success of our SPDIC efforts are reflected in our client satisfaction. We are proud to be number one in the Net Promoter Score, leading the industry for the last five years, and with our Account Executives and Contact Center number one among our peers.
Speaker Change: On slide 10, we can see how GetNet is ramping up its operation and reaching larger clients and retailers. We launched GetNet in late 2021 and our initial expansion was successful with relevant solutions for SME customers initially and now also for corporates.
Speaker Change: This has contributed to a strong increase in business current accounts, which grew 27% year-on-year, and where we now have a market share of 41%.
Speaker Change: GetNet is now gaining traction with larger clients that require more complex solutions and host-to-host and integrated payer POSs.
Speaker Change: Year-to-date, GetNet has generated 55 billion pesos in fees for the bank and a bottom-line income of 19 billion so far this year.
Speaker Change: GetNet has a total client base of 277,000 merchants and continues to gain market share with over 10% market share in volumes and 17% in number of transactions. GetNet is quickly becoming the second largest source of fee income for Santander Chile.
Speaker Change: The expansion of the client base and the development of our digital platforms
Speaker Change: and products has led to an impressive growth in the usage of our products. Credit card transactions have increased 13% year-on-year while assets under management of Santander Asset Management, our exclusive broker, have increased 37% and insurance policies brokered have increased 27%.
Speaker Change: Yes.
Speaker Change: has resulted in an impressive growth.
Speaker Change: which, if we adjust to exclude the impact of the interchange fee in the car business, will have been 10% year-on-year.
Speaker Change: Our fees cover nearly 60% of our core operating costs, while our efficiency is the best among peers, reaching 36.3% in the last three months.
Speaker Change: On slide 13, we show the rebound of profitability and return on equity on the third quarter of the year. As we can see, we reach a ROE of 23.1 in the quarter and 18.2% year-to-date, surpassing our guidance for ROE for the full year.
Speaker Change: This was driven by an 11.7% increase in net income in the quarter and an 82% increase year-on-year. These notable results are mainly due to an improvement in our main income lines as we will see in the coming slides.
Speaker Change: On slide 14
Speaker Change: We can see the trends in our loan book. Our retail loans continue to grow steadily, with loans driven by consumer and mortgage, while commercial loans have been contracting. This reduction in the commercial loan book is in part due to a change in our consolidation perimeter. Danza.
Speaker Change: a company dedicated to financing automotive dealers is now excluded from the consolidation of the bank.
Speaker Change: Also, our corporate and investment banking has sold some portfolios part of their generate-to-distribute model. Furthermore, the commercial loan book has been impacted by slower economic activity during the last few months.
Speaker Change: Mortgage loans grew 0.5% with the new production slightly lower in line with the demand considering the rate and macro environment. Consumer lending showed positive trends in general with higher installment loans and auto loans showing signs of a better consumer environment in the country.
Speaker Change: Overall, our loan book is following the economic cycle, and if you adjust the year-on-year growth for the deconsolidation of the subsidiary and the CIB model, our loan book will have grown around 2% in the last 12 months.
Speaker Change: Regarding our funding.
Speaker Change: Our total deposits increased 1.1% in the quarter and 3.7% year-on-year.
Speaker Change: Our demand deposits were more or less stable in the quarter and grew 1.7% in year-on-year while our time deposits grew 2.7% in the quarter, driven by the corporate and investment banking segment.
Speaker Change: In general, we have seen a shift of customer funds to mutual funds, where we are now the exclusive broker of Santander Asset Management, which grew 6.7% in the quarter and over 36% in 12 months.
Speaker Change: on slide 16.
Speaker Change: For the third quarter of 2024, we achieved a net interest margin of 3.9% and 3.4% year-to-date, continuing our recovery as planned. Our net interest income grew 74.8% year-on-year and 4.2% in the quarter.
Speaker Change: The NII in the third quarter benefited from higher interest income as the lower monetary policy rate reduced our funding costs.
Speaker Change: to 4.8%, down 2% in the same period last year.
Speaker Change: This improvement in cost of funds is explained by the fall in short-term rates
Speaker Change: from an average rate of 11% in the first nine months of last year to 6.5% in the same period this year. Our liabilities tend to have a lower duration than our assets and therefore, when rates fall, the cost of our funding falls faster than the asset yield.
Speaker Change: This was compensated in part by a reduction in net readjustment income as the U.S. variation decreased.
Speaker Change: We expect our net interest margin to remain around these levels, to reach a net interest margin for the full year 2024 of between 3.4 and 3.5%.
Speaker Change: This considers a U.S. variation of around 4.2% for the full year, with an average monetary policy rate of around 6.1.
Speaker Change: Regarding asset quality, on slide 17 we see that our NPL and IMPER ratio is rising. The deterioration in the asset quality ratios is mainly explained by the effect of the economic cycle in both the numerator, our client's payment behavior, and the denominator, the slower growth of our loan book. So our asset quality is following the dynamics of these parts of the economic cycle.
Speaker Change: This is leading to a cost of risk of around 1.3%, including the one-time provision we made in July of 18 billion pesos for the commercial portfolio, due to an adjustment in the evaluation of the guarantees.
Speaker Change: Furthermore, the high level of collaterals in our mortgage and commercial loan books should help to contain the cost of risks in these collaterals.
Speaker Change: On slide 18, we show...
Speaker Change: As we can see, MPLs and impairment of mortgage loans continue to increase explained by the rate environment and labor market conditions.
Speaker Change: On the other hand, commercial loans are starting to see a stabilization of the impairments and NPLs with the ratios affected by the contraction of this loan loop in terms of volume.
Speaker Change: Consumer loans continue to perform well, with NPLs stabilizing and the impoverishment indicating more clients renegotiating debt and becoming up-to-date on payment.
Speaker Change: As a reminder, from the beginning of 2025, our regulator is requiring a new provisioning model for consumer loans.
Speaker Change: Our initial impact is an increase in provisions of 100 billion pesos, for which we can use our voluntary provisions, and therefore we do not estimate an impact from this implementation in our cost of risk.
Speaker Change: Next.
Speaker Change: We look at the non-NII revenue sources. Fee income increased 8.3% quarter on quarter thanks to our strategy that is leading to client acquisition and a greater use of our financial products.
Speaker Change: The year-on-year growth of 5.4% includes the negative impact from CAP on interchange fees in 2024 of approximately 25 billion pesos.
Speaker Change: Without this impact, our fees would have grown around 10% year-over-year. As a reminder, the second part of the reduction on the cap on interchange fees was suspended. Currently, we are waiting for the Commission to make their decision on the implementation of the second rate cap.
Speaker Change: As we can see, the rest of our products are growing strongly, with Asset Management, Cards and Checking Accounts demonstrating the increase in our client base and cross-selling. Also, as we saw previously, GetNets contributing strongly to results as now one of the main fee-generating products in the bank.
Speaker Change: Abreu,
Speaker Change: Income from financial transactions went down year over year mainly because of non-client income due to ALM exercises. Meanwhile, our client business continues to generate solid results reflecting client demand for market making and treasury products.
Speaker Change: Our core expenses increased 4.4% year-on-year and 0.3% in the quarter below inflation.
Speaker Change: As we can see, this line decreases 8.5% year-on-year mainly due to the advances of the bank that allows us to capture efficiencies.
Speaker Change: Overall, our personal expenses are reducing year-on-year, while our administrative expenses increase as our spending shifts from personal intensive branches to digital platforms.
Speaker Change: as a result of our controlled expenses and improving financial income.
Speaker Change: Our efficiency ratio was 36.3% in the quarter and 40% year-to-date.
Speaker Change: During 2024, the bank is continuing to concentrate on the implementation of its $450 million investment plan for the three years 2023-2026 for technology projects and branch renovation.
Speaker Change: Moving on to Capital.
Speaker Change: At the end of September, the bank reported a BIS ratio of 17.2% and a core equity ratio of 10.7% under Chilean regulation.
Speaker Change: We calculate our CED-1 for our parent group under ECB regulation, where the CED-1 increases significantly by 500 to 600 basis points, demonstrating ample capital.
Speaker Change: It is important to note that we have five international rating agencies, all of us, all classifying us as a low-risk bank with a stable output.
Speaker Change: In the last shareholder meeting, the board was granted the authority to raise the dividend payout provision above the legal minimum of 30% for 2024. So, as of September 2024, the bank increased the dividend provision to 70% of our 2024 income.
Speaker Change: This 70% is in line with our historical dividend payout, and if we had maintained a provisioning of 30% of our capital ratio, would be approximately 60 basis points higher.
Speaker Change: As a reminder, we currently do not have a Pillar 2 requirement, however it is important to mention that the measurement of market risk on the banking book is under review by the regulator and capital charges may be established in the coming years.
Speaker Change: Finally, on slide 23, we conclude with a review of our 2024 guidance.
Speaker Change: Based on our current macro-expectations for 2024 and the high performance of the bank, we have updated our guidance for several line items. Loan loans remain dependent on the economic cycle and we continue to expect mid-single-digit growth for the full year.
Speaker Change: Given the estimates of U.S. variation and our net interest margin year-to-date reaching 3.4%, we can now reduce range for the full year to 3.4% up to 3.5%, with the fourth quarter showing similar dynamics to the third one.
Speaker Change: Our fees should reach a growth of high single digits, excluding the impact we had on the interchange fee cap in 2024.
Speaker Change: With financial income back on track, our efficiency ratios will return to normalized levels of high 30s.
Speaker Change: As discussed, we expect our cost of risk to remain around 1.3 for the full year.
Speaker Change: With the ROE year-to-date already at 18.2%, on our expectations for the last quarter of the year, we are upgrading our guidance for the 2024 ROE to a range of 18 to 19%.
Speaker Change: Finally, on slide 24, we want to introduce a soft guidance for next year.
Speaker Change: With our current micro-expectations, we estimate that our loan book should continue to grow mid-single digits, excluding the effect of the CIB-generated two-distribute model.
Speaker Change: Our NIM should remain in the high 3's and our cost of risk should stabilize around 1.3 for the year. Our efficiency should remain around mid 30's and with all this we should be delivering an ROE of 18 to 20% in 2025.
Speaker Change: Furthermore, given our strategy execution and the performance of the bank, we are improving our medium term ROE to a range of 18-20% for the medium term.
Speaker Change: With this, I finish the presentation and we can now start the Q&A session.
Speaker Change: Thank you for watching!
Speaker Change: Thank you very much for the presentation. We will now be moving to the Q&A part of the call. If you are dialed in via the telephone, please press star 2, that is star 2 on your keypad, and wait for your name to be called.
Speaker Change: If you're dialing via the web, you may also ask a voice or a text question.
Speaker Change: Our first question comes from Mr. Yuri Fernandez from J.P. Morgan. Please go ahead, sir. Your line is open.
Yuri Fernandez: Thank you and good morning Cristian and everybody and congrats on improving margins in ROE.
Yuri Fernandez: I have a quick one regarding your payout and your capital base. You know, when we look to the core capital, you have like 10.7. That is comfortable. I know Chilean regulators, they are very conservative.
Yuri Fernandez: This number in other countries could be even higher.
Yuri Fernandez: But my question is, you should have like 18 to 20 ROEs, right? And you mentioned the guidance for next year of a mid-single-digit loan growth.
Yuri Fernandez: with 70% payout, that's fine, you know, but in the case we see...
Yuri Fernandez: A faster long growth in Chile
Speaker Change: How do you see your payout? Do you believe you can keep the 70% payout or eventually we could see a lower payout? I'm just trying to understand, you know, like the moving parts between growth.
Speaker Change: Are we in your payout position? That would be my first question.
Speaker Change: And the second one is regarding asset quality on your presentation, Cristian, you mentioned that you are seeing some stabilization in commercial loans.
Speaker Change: So, just trying to understand where are we in the credit cycle in Chile, if you are forecasting NPLs to move down, and related to this is your coverage. I understand that mortgages and other loans, as you said, they matter, right, for the mix.
Speaker Change: but just trying to understand what level of coverage should we work with Santander Chile today because
Speaker Change: I think it's 120% today, in the past it was 130%, so just trying to understand if the 120% level is the level that we should work with or if eventually we could see the coverage moving up as your NDPLs go down. Thank you.
Speaker Change: Thank you, Yuri, for the question. I'll take the asset quality question, so I'll now pass the word to Patricia.
Patricia Pérez: So, we are already well above the minimum, and on top of that, we maintain a 1% buffer that allows us to be comfortable with our normal growth and the usual annual dividend payment of 60 to 70% of earnings.
Patricia Pérez: This change that we made during this year allow us
Patricia Pérez: to maintain a more stable core capital ratio reflecting a dividend provision in line with what's been paid historically.
Speaker Change: Thank you for watching!
Speaker Change: Cristian Vicuna, Emiliano Muratore, Emiliano Muratore, Emiliano Muratore, Emiliano Muratore,
Speaker Change: for next year, even if...
Speaker Change: industry loan growth is slightly higher.
Speaker Change: And regarding acid quality, so yeah, we're still at levels of NPLs around 3.
Speaker Change: and we are going to probably remain at this stage for one or two quarters.
Speaker Change: We're seeing some improving early signs in the asset quality of the commercial portfolio, but it's still too soon to tell.
Speaker Change: I assess that we're going to remain at this sort of level for the upcoming two quarters.
Speaker Change: And regarding your coverage question...
Speaker Change: Let's look at the specific parts of the coverage. So in consumer lending, we have around 350 plus percent coverage.
Speaker Change: so that we're very comfortable there.
Speaker Change: commercial book we have around above of a hundred percent coverage
Speaker Change: and about 60% of the lending in that portfolio has collateral.
Speaker Change: and 100% of the mortgages are carried collateral, so the coverage that we have now is around 40%.
Speaker Change: We are comfortable with the current levels of coverage that we have in every specific part of the portfolio.
Speaker Change: No super super clear Cristian and Patricia and just asking this on coverage because we always go back to historical it was like 130 but as you said right mortgages used to be 30% of your loans now are some 40% and it plays plays a role on this. Thank you very much
Yuri Fernandez: Thank you, Yuri.
Speaker Change: Thank you very much. The next question comes from the line of Mr. Beatrice Abrao from Goldman Sachs. Please go ahead ma'am, your line is open.
to happen for loan growth to pick up next year. And also, if you maybe could provide a high level of growth expectations that you're seeing in between the loan segments, that would be super helpful. Thank you.
Speaker Change: So I'll take a part of this question and maybe then Carmen or Patricia can complement.
Speaker Change: So, regarding what we are seeing, this year the industry is going 2% nominal as of September, so today's figures are reasonably out. So that implies a negative real growth for the industry.
Speaker Change: So what we are expecting is to move back to levels of one-time GDP plus inflation, but that is a relevant change from the level of speed that we are seeing now and the dynamic that we are looking at the industry.
Speaker Change: So that's what makes us believe that we're going to be close to one-time GDP plus inflation and around that area.
Speaker Change: the presidential election of next year and that might create some space for more loan growth, especially in the second half.
but we are not seeing those signs at present yet.
and regarding the perspective inside our portfolio.
What we are seeing is that, actually, consumer is starting to recover in the country. So, micro-figures are out today, too, and actually consumption is part of the improvement.
And also we are seeing
Okay, good to okay, demand in the retail part of the SMEs. So those two parts, we are very comfortable, we will be delivering on the mid-single digits, maybe slightly higher.
Speaker Change: What we're not seeing there yet is the large corporate demand.
Speaker Change: Thank you.
Thank you very much. Just once again a reminder, star two, for any additional questions. Next question comes from Ms. Neha Argoala from HSBC Global Research. Please go ahead, ma'am, your line is open.
Hi, thank you for taking my question.
Speaker Change: It's good to see the ROE and that the guidance has been improved. What are the headwinds that could jeopardize the ROE outlook that we have? What are the expectations from next year? We have elections.
Speaker Change: So, what are the things that you are cautious about which could lead to fluctuation in the ROE guidance? I'll start with that one.
Speaker Change: Thank you for watching!
Speaker Change: Yes, well, looking ahead to 2025, we see our net interest margin stabilizing in the high three, considering the downward pressure on inflation.
Speaker Change: while our faith should remain strong with better efficiency.
Also, our cost of risk should stabilize around the current level.
So, in terms of headwinds, I would say...
We can have less inflation that we are projecting as of now, and also the cost of risk. I would say the risk for next year. I don't know if you, Cristian, can add.
Speaker Change: Regarding the macro scenario, what we are seeing as potential headwinds are
Speaker Change: Mostly external
Speaker Change: moving parts that might affect the macro scenario in general for the economy and that could impact on the performance. But operationally the band is pretty solid.
Speaker Change: Any sort of investments that you have planned in terms of branch network expansion or hiring that you have planned for next year that could have an impact on the cost-to-income ratio?
Speaker Change: What we are doing, and we have discussed this, is that we are deploying
Relevant technological updates.
for the platform of the bank. So currently we are now in the final stages of updating our core banking system. So the gravity is on their group solution. This is going to be very relevant for us in terms of
So the sort of investments that we're doing is that it's a normal update on our branch network to implement more of a work of flavor on the part that is not updated yet, so we are still doing that part gradually and most of the investment is focused on updating the technological platform of the bank.
Speaker Change: But you should not expect any one-off large expenses that could put pressure on earnings.
Not on the core expenses, we might have some...
one-time restructuring charges, similar to the ones that we had this year, that we use them to control the cost expansion of the other lines. So net.
We should be something very similar. We are guiding mid-30s efficiency.
The last question is on digital.
Speaker Change: Life is doing well. You have many other initiatives on the digital side. GetNet is doing well. But your competitors are also being more aggressive.
Speaker Change: giving out more aggressive targets in terms of what they want to do on the digital side. How do you see the competition with your peers in terms of digital? Do you think that has intensified? Do you see Syntandit to have an advantage? What are these advantages that make you ahead of the curve?
Speaker Change: Thank you so much.
Speaker Change: are very, very aggressive, if I say so.
Mover, first mover in terms of...
These are on boardings and customer acquisition strategies, so we started this
Speaker Change: back in late 2016 with the first Digital Life account. Then we moved into our current digital account back in 2020 during the pandemic. And now we have deployed the Master Lucas account, and we are also reducing strategically our cost to serve every one of those single accounts to make them profitable. So...
Speaker Change: Competition is catching up, it's true. We're seeing some interesting moves from other players that are asking for banking licenses.
Speaker Change: on a pure digital movement.
but I think we are well prepared in our experience.
We can leverage the cross-selling capabilities of the different product offerings that we have on the bank and the high levels of experience to achieve a very good recurrence ratio and a high increase on our net fees figures.
So, I think that the strategy of de-dialysing ourselves and forcing us to transform faster is giving good results.
Thank you for watching!
Speaker Change: Thank you so much.
Speaker Change: Thank you.
Speaker Change: Okay, thank you. Thank you very much for the question. Just once again, we'll have a short reminder, star two, for any additional questions. We'll give another moment or so for any additional questions to come through.
Okay, it looks like there are no further questions at this point. I'll be passing the line back to the team for the concluding remarks.
Thank you everybody for joining us today on our call and we look forward to meeting you on our end-of-year 2024 call in the first days of February.
Speaker Change: Thank you very much.