Operator: Good morning, and welcome to the Q3 2026 Gentera conference call. Now, I would like to turn the call to Mr. Enrique Barrera, Investor Relations Officer of the company. Sir, you may begin.
Enrique Barrera: Good morning. Thank you all for joining us and for your continuous interest in Gentera. I am Enrique Barrera, the company's Investor Relations Officer. I am very pleased to introduce our management team. With us today are Mr. Enrique Majós, Gentera's Chief Executive Officer, Mario Langarica, Gentera's Chief Financial Officer. Enrique and Mario will present Gentera's results for the Q3 period as per the report that was issued yesterday, and will actively participate in the Q&A session of this conference call. As a reminder, now that we are holding our conference call via Zoom, it is important to highlight that if you want to ask questions during the Q&A session, these will only be taken if you are connected via Zoom. Now, please note that during this presentation, Gentera may make forward-looking statements. These do not account for future economic circumstances, industry conditions, company performance, or financial results.
Enrique Barrera: Additional information on forward-looking statements can be found in the disclaimer located in our earnings release. If you did not receive a copy of the release or you have any questions, please do not hesitate to contact our Investor Relations Department in Mexico City. If you are a member of the media, we ask you to contact us directly. I would now like to turn the call over to Mr. Enrique Majós for his presentation. Enrique, please go ahead.
Enrique Majós: Good morning, and thank you for attending our Q3 report. In previous earning reports, we have highlighted the growth that Gentera results have had following the implementation of the first initiative to transform our business models some years ago. As we noted before, we have doubled our growth rate compared with the previous decade, moving from an average annual growth of 6.5% to 17% since we began implementing our transformation initiative in 2019. Looking at the past five years, we can also see significant growth across all our subsidiaries and business lines. Using December 2021 as our baseline, we can highlight the following results. On one hand, our customer and end-user base has grown 66% from 4.1 million to 6.8 million people.
Enrique Majós: Gentera's loan portfolio has doubled from MXN 46 billion to MXN 95 billion, and our net income has more than tripled. Meanwhile, our efficiency ratio improved from 79% to 65%. Gentera's ROE increased from 11% to 24% as of the end of Q3 of the present year. Also, as we anticipated, responding to the change in our product mix and the gradual increase in the risk across the financial system, our cost of risk has also increased from 9.5% to 14.5%, the level at which we expect to close this year. As you know, 2026 has brought a more uncertain environment, prompting us to take a more prudent approach to execution, which is why we have recently seen a slowdown in our growth. We are facing challenges both in the macroeconomic environment and in the competitive landscape. We know these challenges will continue into 2027.
Enrique Majós: This will certainly motivate us to keep strengthening our position in the financial industry. In fact, this is a movie that we have seen before on several occasions. Specifically, we faced a similar environment in 2018. Our playbook was the same: focus on strategic, solid, moderate growth before returning to a more accelerated growth. Coming back to some of the most important challenges we are facing, let me elaborate on the following four specific points. The first one, maintaining a strong portfolio quality in an increasing cost of risk environment. We know we must continue developing tools to improve portfolio management, especially for high-growth products such as individual loans in Mexico and group loans in Peru. Second, a more constrained macroeconomic context. We are facing an economic slowdown and an increase in the credit risk, particularly in Mexico.
Enrique Majós: Consumer loan portfolio growth in the Mexican financial system declined from 13.7% in 2024 to 7.9% in 2025 and 7.1% in July 2026. Meanwhile, the cost of risk for consumer lending in Mexico rose from 9.8% in 2024 to 10.8% in 2026. The third challenge is the competitive landscape challenge. As we all know, credit offerings in Mexico and Peru are becoming increasingly diverse. In Mexico in particular, the arrival of numerous fintech and traditional players has expanded the supply of credit, especially in consumer lending. This stresses our clients' repayment capacity and creates the potential risk of become over-indebted. At the same time, we must continue offering credit solutions to meet their needs. We must be very careful not to overextend their credit capacity. The fourth challenge, continuing to pursue efficiency.
Enrique Majós: Our transformation initiatives have given us multiple benefits, and at the same time have required significant investments that have not yet reached full maturity. This requires us to continue pursuing efficiency and maintaining a strong discipline regarding expense management. With these challenges in mind, we know that 2027 will be a year of moderate growth in which we will prioritize the quality of our portfolio. It will also be a year in which we must strengthen our strategic capabilities to offer customers better products and more convenient services. It will be a year of moderate growth and the consolidation of the quality of our portfolio. That is why, beginning this quarter, our efforts will focus on the following priorities. First, continue growing our working capital loan portfolio, always safeguarding its quality to keep the cost of risk within healthy limits.
Enrique Majós: Second, continue growing our consumer loan portfolio through ConCrédito's products while expanding Compartamos offerings in this category. Third, continue expanding the range and penetration of the insurance products, which have become an increasing source of revenue for Gentera. Fourth, complete the rollout and consolidation of our digital platform for managing individual and group lending products both in Mexico and Peru. To date, we have completed the rollout of both platforms in Peru. In Mexico, we completed the platform for individual loans while beginning the rollout of the group loan platform, which will be completed over the course of the next year. Finally, as a fundamental part of the far-reaching evolution of our business models, we will develop three capabilities that are essential to the future of Gentera and its customers.
Enrique Majós: These capabilities are our data and analytics capability to make more intelligent the use of data across our business processes and support processes. Second, our digital payments capabilities to offer customers more convenient ways to operate, and we will also be able to get better insights into their needs so we can offer them more and better products. Finally, our artificial intelligence capabilities, recognizing that AI is currently the most powerful tool for exponentially increasing value for our customers and our organization. In summary, in recent years, growth in our loan portfolio and market share. 2026 is beginning presenting a significant challenge in the macroeconomic conditions and market dynamics. Even so, we will close the year within the guidance communicated last quarter in portfolio growth and net income. At this point, we see a similar environment to the one we faced in 2018.
Enrique Majós: Back then, our approach was successful, and we will follow the same playbook. Focus our strategy on solid, moderate growth before returning to a faster pace of growth. As management, our objective is to achieve single-digit growth in the average loan portfolio in 2027, while keeping solid levels of profitability with an ROE around 23%. In 2028, our goal will be to return to double-digit growth, assuming a more stable cost of risk in the market and the industry, and also knowing that our transformation initiatives will be, at that point, in a more mature stage. We believe that by achieving this objective, Gentera will maintain a strong market position and the close relationship with customers that we have always had. This will allow us to continue growing consistently and solid in the future years. Thank you for your commitment and confidence in Gentera and its management team.
Enrique Majós: I will now hand the call over to Mario Langarica, our CFO, who will walk you through the details on our Q3 results and our outlook for the following months. Thank you.
Mario Langarica: Thank you, Enrique, and good day to everyone. As always, we appreciate your interest in Gentera. As Enrique just mentioned in his remarks, we recognize a more challenging year in 2026 compared to the past five years, but we are satisfied with the financial results that Gentera is presenting for this Q3 and the cumulative results as of September. The results that we are presenting result from the diversification of our revenues, the actions to address asset quality, and our disciplined expense controls. These actions have allowed us to bring financial services to more people. In Q3 2026, we reached a new record of 6.8 million clients actively using our financial services, adding 510,000 people and growing 8% compared to Q3 2025. Our loan portfolio amounted to MXN 95.2 billion, representing an 8.5% growth compared to Q3 2025.
Mario Langarica: Banco Compartamos Perú and ConCrédito credit portfolios both delivered double-digit growth compared to Q3 2025, growing 11.9% and 14.4%, respectively. As you have seen, Banco Compartamos México grew 6.5%, following a prudent growth approach to address incremental risk observed during the year. We will keep gathering evidence for solid and permanent stabilization levels in its asset quality in the following quarters to be ready to restore growth in the Mexican bank as soon as we are ready. For the end of the year, we aim Gentera's portfolio to reach an end-to-end growth of 6%, with an average performing loan portfolio growing around 9%.
Mario Langarica: It is also important to recall that our decision to slow down the growth in the portfolio of Banco Compartamos México is a consequence of the adjustments that our credit business requires after strong levels of growth experienced in the past five years and following natural cycles and dynamics. Regarding the evolution of the different lines of our income statement, Gentera's accumulated interest income for the year amounted to MXN 38.9 billion, with a 9.8% growth compared with the same period of 2025. For the same period, financing expenses decreased by 11.7%, mainly driven by the reduction of reference interest rates both in Mexico and Peru. This reduction was generated even after considering the growth in the funding base of our credit portfolios.
Mario Langarica: Net interest income grew 13.7%, and an accumulated NIM as of September amounted to 41%, which is slightly better than the 40.8% achieved in the same period of 2025. We expect to show similar levels at year-end. As of Q3 2026, Gentera's NPLs amounted to 4.57% compared to 3.43% in Q3 2025, and cost of risk for the nine-month period amounted to 14.4%. For year-end, we expect consolidated NPLs to be around 4.5% and consolidated cost of risk around 14.5%. It is important to note that Banco Compartamos Perú and ConCrédito have shown stable and healthy risk levels while growing their loan portfolio at double digits, as mentioned before.
Mario Langarica: At Banco Compartamos México, we have been observing stabilization trends in the new vintages following the different actions that we have implemented to control asset quality, such as reinforcing origination processes, monitoring and collection processes, and adjusting the incentive programs, among others. As mentioned before, we still need to gather additional evidence for solid and permanent asset quality behavior before we restore faster growth. Our main priority today is to maintain solid asset quality. Gentera's accumulated provision for loan losses amounted to MXN 10.23 billion, a 29% growth compared to the same period in 2025. After these effects, accumulated NIM after provisions amounted to 28.5%. For the full year, we are expecting NIM after provisions to move around 29%. Accumulated net fees amounted to MXN 4.86 billion, growing 13.9%, mostly driven by our insurance business and the use of our proprietary channels with more electronic and banking transactions.
Mario Langarica: As of September 2026, accumulated operational expenses amounted to MXN 18.5 billion, a 7.5% growth compared to 2025. As mentioned before, we have adequate expense growth to our slower loan portfolio growth. It is important to highlight that the strategic initiatives and investments that we have made in the past years have allowed us to become more productive and efficient. Our year-end expenses growth will be around 7%. Even after considering the asset quality challenges in Banco Compartamos México that we have discussed before, Q3 2026 net income for Gentera was the third-best quarter ever, amounting to MXN 2.34 billion and growing 8.6% compared to Q3 2025. Gentera's controlling participation of net income in Q3 2026 amounted to MXN 2.26 billion, growing 7.7%, implying an EPS for the quarter of MXN 1.43.
Mario Langarica: The accumulated net income of Gentera in 2026 amounted to MXN 7.2 billion, showing a 10.9% growth compared to the same period of 2025. Our objective for year-end is to deliver the EPS guidance that we have commented before, at least at MXN 5.88 per share. Gentera's controlling ROE stood at 23.8% for Q3 2026 and to 24.9% for the accumulated number, in line with our full year 2026 ROE expectation to be between 24% and 25%. As always, these results have been achieved by preserving solid and healthy liquidity, strong and diverse access to funding, and robust capitalization at Gentera and its subsidiaries. To conclude my remarks, as you can see from the results that we are presenting, we are delivering net income and profitability as promised.
Mario Langarica: Our objectives for the coming quarters will be to monitor asset quality and to gather additional information to achieve the asset quality levels that will enable us to resume growth. We feel confident that we are taking the necessary steps to build stronger Gentera for the future. Finally, we are very motivated by the fact that we are concluding this quarter servicing millions of clients in Mexico and Peru, supporting them in their different financial needs so they can reach their dreams, and at the same time, keep generating total value for our different stakeholders. That is all for my remarks. Thank you all for your attention, and now we can move to the Q&A session. Thank you very much.
Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please use the raise your hand button of your Zoom tool.
Operator: Our first question comes from Pablo Ordóñez of GBM. Please go ahead.
Pablo Ordóñez: Yes. Hi. Good morning, Enrique, Mario, and Enrique. Thank you for taking my question. Enrique, thank you for the summary of how the model has evolved in the past five years. Agree with you, but also the economy has changed a lot. Now we have seen these government transfers. We have seen now fiscal consolidation process, the fintechs. My question is, and it is more strategic, how are you thinking on changing your origination process in this new context? How much time will it take you to evaluate the impact of new vintages? When you mention the impact of moderate growth for 2027, what levels of growth are you considering for Mexico and Peru? If you can give us some color by geography. Thank you.
Enrique Majós: Yeah. Thank you, Pablo. Yeah, you are right. When we see the last five years, we have having very good results. The market opportunity has been very big, and we have been able to get that opportunity, to take that opportunity. However, as you said, what has made us successful in the past is not necessarily what is going to make us successful in the future because the context is changing. Yes, one of the things that is changing and is improving is the origination process and the risk assessment process. So I believe that developing capabilities that have to do with data and analytics, business intelligence, risk algorithms, and of course, artificial intelligence, is going to give us the advantage to keep on growing with a healthy portfolio quality in the future.
Enrique Majós: As a matter of fact, I can tell you that we have been working on this specifically for the last years in ConCrédito. As you can see, ConCrédito has a very, very healthy cost of risk and NPLs. This is because in ConCrédito, we have developing a lot of tools that are enabling us to manage much better the origination of new customers, regardless where these customers are, because that data that we are taking and putting in these algorithms take in account the different realities in different places all over Mexico. So yes, that is how we see the continuous improvement that we have to do in terms of origination for the future. We are working on that, and maybe Mario can give you more color on the expectations on 2027.
Mario Langarica: Yes, as we have said in the past, we will provide the guidance growth in February. What is important to say is that we are going to be very prudent, and we need more information on asset quality. But we are now seeing that we expect to grow the average portfolio for next year single digit, as Enrique mentioned. We will be very focused on when we reach the levels that we want to have to restore growth. What I can tell you now is that we expect to have single-digit average loan portfolio growth, and we will provide the exact guidance in February.
Pablo Ordóñez: Thank you, Enrique. Thank you, Mario. A quick follow-up on specific for the quarter. One of the numbers that surprised us was the growth in the interest income in Mexico, higher margins, higher active rate. What is driving this expansion in the context of a contraction in the loan portfolio, and what levels of margins should we expect ahead?
Enrique Majós: Well, as you can see, the growth in the interest income line was more or less following the growth of the average portfolio. Then we had a very good liability management that together with the reduction in rates, gave us a decrease in interest expenses, and that is basically what has allowed us to have a very strong financial margin. That financial margin will probably remain the same levels for 2027, and then we would expect that provisions will be growing less. So for next year, what we can also tell you is that we would expect to have an ROE above 23%. So even though we will have a little lower growth, the profitability levels will be very strong.
Pablo Ordóñez: Perfect. Thank you for the call, Enrique and Mario.
Mario Langarica: Thank you.
Operator: Our next question comes from Eric Ito of Bradesco. Please go ahead.
Eric Ito: Hi, Enrique, Mario. Enrique, thank you for the opportunity. I have two questions here. The first one is just a follow-up on what you just mentioned about ROE above 23% with this single-digit portfolio. What should we consider as the capital distribution or maybe the sustainable CET1 level for the bank? You are currently sitting at one of the highest levels since 2023. I think it is the highest at 34%. I just want you to help us here conclude how the capital distribution will be for 2027 to reach this 23% ROE. My second question is just a follow-up on the NPL ratios. I think you guys mentioned that you expect this year to end at 4.5%. You are already at 4.6%. I am just confirming if you are already seeing improvement at the margin.
Eric Ito: Also, in order to resume growth, I think you mentioned you need to see more comfortable levels of asset quality. I am just wondering if you could share what would be the main variable that we should follow, or maybe what is the comfortable level for NPL ratio to allow this growth to go back. Thank you.
Mario Langarica: Thank you very much. Well, regarding capital distribution, what you have been seeing is very clearly that we have had capital accumulation. Probably, you remember that we proposed to our shareholders meeting to have an increase in the payout ratio to 45%, but that was not approved this year. That has made, with these very strong earnings generation, have an increase on the capital levels. As Gentera, I am talking about tangible equity. We are reviewing the 2027 plan, and probably we will propose to our board and then to the shareholders meeting a new proposal on payout. That is under construction. But you are right, we have been accumulating capital at the holding level. At the bank level, we will maintain high capitalization levels because that is very important for our funding strategy. Now, regarding NPL ratio, well, we already said what we expect for the year.
Mario Langarica: I think that something prudent would be that for 2027, those same levels should remain. We will be doing our efforts to improve them, but I think that it is a good assumption to maintain them. What is more important is to have stable. It is not that they are going to decrease. At the bank, they will, but the important thing is that we maintain them stable. What we are going to be looking and, we are looking and following every week is the vintages, the new vintages. So far, the new vintages since April have been behaving according to our curves. So that we will continue monitoring, and we will be providing you information quarterly.
Eric Ito: Okay. Just to be clear, to see, for example, an acceleration from this, let us say, single-digit growth to, I do not know, maybe double digit by the year-end. That would be mainly on its improving from this 4.5, right, for next year?
Mario Langarica: Yeah. We need to wait until probably the H2 of 2027 to be ready to start accelerating, no?
Eric Ito: Yes. Clear. Thank you.
Mario Langarica: You are welcome.
Operator: Our next question comes from Julian O'Hara of Goldman Sachs. Please go ahead.
Julian O'Hara: Hi, Enrique, Mario, and Enrique. Thank you so much for taking my question. Changing a bit the subject, I believe Mexico's 2027 economic package includes some new caps on deductions and some changes to payment deductibility. Have you done a preliminary assessment on how these tax changes could impact your effective tax rate or your ability to use some tax benefits in the upcoming years? If I can, a quick follow-up on a second question. I want to know if you could share a bit more on your strategy for Peru. I believe that next year you could see some headwinds from El Niño. I am not sure if you are seeing that and if you plan on deploying capital there to maintain a strong growth and possibly gaining further mix in the portfolio. Thank you very much.
Mario Langarica: Yes. Thank you very much. The first one, yes. With these new changes, again, we will give you an exact assessment on February, but the effect of the new tax rules will increase effective tax rate. We now think that something around 31% to 32% should be a good assumption for next year. But we will provide you the exact impact when we provide the 2027 plan. So that will be the effect on the caps on deductions. For Peru, well, number one, we have a strong capitalization in Peru also. As we have mentioned in the past, all of our subsidiaries have strong levels of capital. In Peru, we use the solvency index, and today it stands around 24%, which is very strong. So at this point, we do not think we need additional capital there. In fact, we may distribute dividends from Peru to the holding.
Mario Langarica: Second, for El Niño, well, we are obviously very cautious about what can happen, but we have additional reserves in Peru covering the local regulation and the IFRS requirements that we present at the consolidated level. Still, we have additional reserves that at this point we feel are sufficient to cover for potential weather effects.
Enrique Majós: Just to add an additional idea on those additional provisions that we have in Peru. From the provisions that the regulator ask in Peru, we have additionally 50% more in prudential provisions, more or less, of what is required by the SBS for the regulation.
Julian O'Hara: Super clear. Thank you very much.
Mario Langarica: You are welcome, Julian.
Enrique Majós: Thank you, Julian.
Operator: Once again, if you would like to ask a question, please use the raise your hand button of your Zoom tool.
Operator: Our next question comes from Carlos Gomez-Lopez of HSBC. Please go ahead.
Carlos Gomez-Lopez: Hello, and thank you for taking my questions. In terms of the loan growth that you expect in the middle digit for next year, presumably, Peru and ConCrédito will still be growing in double digits or that will also be under review? In terms of the distribution, just to clarify, you say that you are going to review the dividend policy and may propose another thing. That is already for 2027, or would you consider doing an extraordinary dividend in 2026? Thank you.
Mario Langarica: Thank you. Thank you very much. Yes, the first one is fast. Yes, we expect double-digit growth in Peru and ConCrédito for next year. The idea is that, again, we are still discussing what we will present in terms of payout for next year. But assuming that we present the same 45% payout that we have already presented, the idea is that would apply for the 2026 net income going forward.
Carlos Gomez-Lopez: Right. But it will be the normal dividend. You will still do one dividend per year. It will be the normal dividend, in this case, on the 2026 earnings. You would not go back to 2025 and try to pay the extra 5% you wanted to pay initially.
Mario Langarica: Not necessarily. We are going to be discussing that because as you have seen, not keeping that 5% will have increased tangible equity. That is something that we are going to be discussing.
Carlos Gomez-Lopez: Yeah.
Mario Langarica: We seem to not have a proposal to the board on the shareholder meeting. We will present that in February.
Carlos Gomez-Lopez: Thank you very much.
Operator: Thank you. There are no further questions at this time. I would like to hand the floor back over to management for closing comments.
Mario Langarica: Thank you for attending this call. As you could see, if we want to give you a fast overview about what we talked today, margins are looking good, expense management is looking good, fees income are looking good, and our focus will be on the market, the customer needs. We are going to take care very closely of the quality of the portfolio and the repayment capacity of our customers, specifically in Mexico and in Compartamos Banco, Mexico, but also in the other of our subsidiaries. That is what we are looking ahead, and we are very enthusiastic about not only the end of this year, but the next year in terms of the evolution of the company, the evolution of the way that we are serving our clients, the new technologies that we are using as tools. Future looks good.
Mario Langarica: Thank you for your trust in Gentera and its management team, and see you soon.
Operator: With this, the conference of today concludes. You may now disconnect.
Julian O'Hara: Goodbye
