Operator: Good morning, everyone, and welcome to Financiera Independencia's Q3 2026 results conference call. My name is Paulina, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. Findep released its earnings report yesterday after market close. If you have not received it, please contact Findep's investor relations department directly and they will email it to you. As a reminder, this video conference is being recorded. Joining us today from Financiera Independencia is Mr. Eduardo Messmacher, Chief Executive Officer, and Mr. José María Cid, Chief Financial Officer. I would now like to turn the call over to Mr. José María Cid. Mr. Cid, you may begin.
José María Cid Michavila: Good morning. Thank you for joining Findep's Q3 2026 results conference call. Our earnings report was published yesterday and is available on our investors relations website at findep.mx. Before we begin, I would like to remind you that the information shared during this call may include forward-looking statements. These statements are based on management's expectations and are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those described. Now, I will turn the call over to Eduardo Messmacher.
Eduardo Messmacher: Thank you, José María. Good morning, everyone. Financiera Independencia reported Q3 2026 results that demonstrate the consistent operational progress, disciplined risk management, and the ongoing benefits of our AI tools. During the quarter, we maintained a selective approach to credit origination in Mexico while capitalizing on a resilient demand in our US operations, all while preserving balance sheet strength and solid liquidity. I will share performance highlights from our Q3 2026 operations. Reported net profit for the quarter reached MXN 144.8 million, representing a 1.5% increase compared to the MXN 142.7 million reported in Q3 2025, and a 0.9% sequential increase from Q2 2026. While non-operational FX variations of our dollar-denominated liabilities continued to impact bottom-line comparisons, underlying operational performance remained stable quarter-over-quarter.
Eduardo Messmacher: Specifically, Q3 2026 recorded a pre-tax FX gain of MXN 4.8 million compared to a MXN 0.6 million gain in Q3 2025 and a MXN 3.5 million loss in Q2 2026, underscoring that these movements reflect currency fluctuations on debt rather than operations. Interest income reached MXN 1.1 billion, down 10.7% year-on-year due to our strategic stance of prioritizing asset quality, but up 0.7% sequentially compared to Q2 2026. Non-interest expenses remained flat year-over-year at MXN 642 million, reflecting strict cost discipline and operational efficiency. The average loan portfolio stood at MXN 7.7 billion, decreasing 4% versus Q3 2025, or 2.8% under constant FX, but recovering 0.7% sequentially from Q2 2026. Liquidity remains strong with cash and cash equivalents at MXN 1.6 billion, accounting for 13.5% of total assets.
Eduardo Messmacher: Earlier this week, on 19 October, we announced our intention to fully redeem the remaining 100% principal of our senior step-up notes with a 12% rate due 2028. This transaction covers a total principal amount of $35 million, with a payment date set for 29 October, effectively settling the entire outstanding balance of these notes. Our equity-to-asset ratio closed at 48% at quarter end, an increase of 220 basis points compared to the 45.8% in Q3 2025, maintaining an exceptionally strong capital buffer. Navigating a cautious domestic environment and a steady reference rate from Banco de México, we maintain a strict risk stance across our Mexican operations. Total originations in Mexico reached MXN 627.3 million in Q3 2026. This represents a 14.1% annual contraction driven by disciplined underwriting. Sequentially, it shows recovery in our originations as our scoring models continue to support credit performance.
Eduardo Messmacher: In the United States, despite ongoing macroeconomic volatility and a higher rate environment, solid private domestic demand continued to derive positive momentum for AFI. Our portfolio closed at $182 million, up 2.8% sequentially and 11.1% year-over-year, reflecting the strong underlying fundamentals of our business. Total loan originations for the quarter reached MXN 1.1 billion, representing a 3.8% sequential increase from Q2 2026 or a 4% increase on a constant FX basis. Originations decreased 10.6% year-on-year, or 8.7% on a constant FX basis. Asset quality metrics improved substantially across the board. Our consolidated NPL ratio, measured as Stage 3 loans over total portfolio, dropped to 4.7% in Q3 2026, representing a 150 basis points improvement from 6.2% in Q3 2025, and a 50 basis points improvement from 5.2% in the previous quarter.
Eduardo Messmacher: Write-offs for the quarter decreased 26.2% year-on-year and 5.5% sequentially to MXN 328.7 million. On a trailing 12 months basis, write-offs over average portfolio reached 19.2%. NPLs, plus trailing 12 months write-offs over the total loan portfolio stood at 20.2%, an improvement of 200 basis points year-on-year and 170 basis points quarter-on-quarter. Now, I would like to share some performance highlights from each of our businesses during the quarter. Independencia represents 32.2% of the total portfolio, standing at MXN 2.49 billion. Its portfolio held flat sequentially and its Stage 3 ratio improved to 5.4%, down 50 basis points sequentially from 5.9% in Q2 2026, and 120 basis points year-on-year from 6.6% in Q3 2025. Apoyo Económico Familiar represents 25.3% of the total portfolio, reaching MXN 1.96 billion.
Eduardo Messmacher: AEF's Stage 3 ratio showed a solid improvement to 5.3%, down 130 basis points sequentially from 6.6% in Q2 2026, and 220 basis points year-over-year from 7.5% in Q3 2025. Apoyo Financiero represents our largest business line at 42.5% of the total portfolio. AFI's portfolio reached MXN 3.3 billion or a 9.7% year-on-year growth in pesos. Its Stage 3 ratio remained sound at 3.8%, sequentially increasing 10 basis points, but improving 90 basis points when compared to the 4.7% in Q3 2025. In summary, our Q3 performance reflects the strength of our core operational discipline, supported by our advanced analytics and technological capabilities. This combination has allowed us to deliver solid risk-adjusted yields, improved asset quality, stable margins, and a robust capital position that keeps our businesses resilient and well protected.
Eduardo Messmacher: I will now hand the call back to José María for the financial review.
José María Cid Michavila: Thank you, Eduardo. I will now provide a more detailed review on our financial performance for Q3 2026. Interest income stood at MXN 1.1 billion in Q3 2026. While down 10.7% year-over-year due to a stricter credit discipline, sequential performance was practically flat compared to Q2 2026, underscoring top-line stability and a steady yield management. Reflecting our ongoing efforts in proactive liability management and funding cost optimization, interest expenses decreased 9.5% year over year to MXN 133.3 million, supported by a 2.1% annual contraction in interest-bearing liabilities to MXN 4.6 billion. As a result, net interest income reached MXN 993.2 million. While down 10.9% annually, it delivered a 0.3% sequential expansion over Q2 2026.
José María Cid Michavila: The provision for loan losses, PLL, for Q3 2026 decreased 36.1% year over year to MXN 268.6 million, compared to MXN 420.4 million in Q3 2025, and declined 1.3% sequentially from Q2 2026. Consequently, PLL to average loans ratio dropped to 14% at 710 basis points improvement from 21.1% in Q3 2025, and 30 basis points better than 14.3% in Q2 2026. Quarterly write-offs totaled MXN 328.7 million, down 26.2% year over year and 5.5% sequentially. On a trailing 12 months basis, write-offs over average portfolio stood at 19.2%, maintaining a healthy trend aligned with our risk parameters. Our NPLs plus trailing 12 months write-offs over the total loan portfolio ratio stood at 20.2%, representing a 170 basis points improvement compared to the previous quarter and 200 basis points improvement versus the 22.2% reported in Q3 2025.
José María Cid Michavila: Our coverage ratio strengthened to 241.2%, representing 22.4 percentage points increase from the 218.8% in Q3 2025, and an 810 basis points improvement from 233.1% in Q2 2026. On operational efficiency, non-interest expenses were MXN 642 million, flat compared to the Q3 2025 and up 3.7% sequentially. Non-interest expenses as percentage of average portfolio stood at 33.5% in Q3 2026. Our efficiency ratio reached 75.8%, including provisions, an improvement from the 76.4% in Q3 2025, demonstrating effective cost controls and technological leverage. Turning to the balance sheet strength, solvency and cash generation, we closed Q3 2026 with MXN 1.6 billion, representing 13.5% of total assets. Net debt closed at MXN 3.1 billion, representing an 11.4% year-over-year reduction, or MXN 396 million lower, and flat compared to the previous quarter. Operating cash flow during the third quarter was MXN 514 million, continuing our strong organic cash generation.
José María Cid Michavila: Our solvency ratio, equity to total assets, closed at 48%, up 220 basis points compared to the 45.8% in Q3 2025. Finally, our return and profitability indicators for the quarter remain strong. Return on equity reached 10.5% in Q3 2026 compared to 10.9% in Q3 2025. Return on assets reached 5.1% in Q3 2026, up from 4.9% in Q3 2025, and our return on tangible equity stood at 12.8% in Q3 2026. In summary, third quarter performance highlights are our operational discipline and strong financial position. The combination of balanced sequential margins, lower credit costs, and efficient liability management underscores our improved risk profile. Supported by our technological capabilities and high solvency levels, we enter the final quarter with a resilient balance sheet and a clear strategy centered on asset quality. Operator, we are now ready to open the call for questions.
Operator: Thank you. We will now conduct a Q&A session. If you would like to ask a question, please press the Raise Your Hand button located at the bottom of your screen. If you are connected via telephone, please dial star nine. We remind you that all lines have been placed on mute. When it is your turn to ask a question, you will be given permission to speak. You will then be able to unmute yourself and ask your question. We will now pause for some questions. Our first question comes from Ivan Komenko. Please state your company name and then ask your question.
Ivan Khomenko: Hi. Ivan from S3 here. A pleasure to see such great results. Thank you very much. Given that you called the bonds, could you please reveal us your further plans for capital markets. Do you plan to issue something. If yes, could you please share some details.
José María Cid Michavila: Yes. Hi. Hi, Ivan. This is Jose María.
Ivan Khomenko: Hi.
José María Cid Michavila: Yes. We are planning to do a retap for the step-up notes that we issued last year, ending in 2028. We don't have the exact amount yet, but we will shortly let you know how much we're going to issue. Most likely it's going to be in the next, I would say, few weeks.
Ivan Khomenko: So it's next few weeks, maybe potentially November. Not right now, right? Maybe next month, maybe-
José María Cid Michavila: Yeah. We are basically redeeming the bond on the 29th. And the retap from the notes should be just following that. So the next following days after that.
Ivan Khomenko: All right. Thank you very much. It is clear.
Operator: Thank you. Our next question comes from Frank Lemon. Please state your company name and ask your question.
[Analyst]: Yes. Hi, Jose Maria and Eduardo. It is Frank Oliver here from Berlin, Germany. A question, it is not so much about numbers, it is not so much about the upcoming issue you might want to execute. You do serve a particular market, that is in the US, the Hispanic clients. Can you tell us, because I read your comments, it is a rather positive one. You say, well, it is holding up. Employment is good. What are you seeing in terms of the midterms? What are you seeing in terms of the harsher policy against immigration? Is that anything that has affected you? Is that anything that is a reason for you to be more careful in the US? I remember we spoke about a year ago about the US consumer, Eduardo, you were kind of saying, well, yeah, the households are getting squeezed by inflation, et cetera.
[Analyst]: Has that changed? I would really appreciate an insight on that. Thank you very much.
Eduardo Messmacher: Thank you for your question. Our biggest concern is still inflation, and I think the most relevant metric is the price of gas at the pump. Especially in California that has risen significantly lately due to the geopolitical situation.
Eduardo Messmacher: At the end of the day, we are very small, so we tend not to have any opinion on the midterms or anything. We will work with any government. We are invited in the US, and we are there to comply with whatever is required. Really, we do not have any stance. At the end of the day, the US economy on the long run always thrives. There are bumps in the short term. I think the increase in the reference rate, while minimal, it does show that there is concern about inflation and there is concern about the consumer. Now, we are seeing a couple of trends that we believe may be at least a yellow light. We do see that our loans have been granted to a segment that maybe in the past was not the target of auto loans.
Eduardo Messmacher: To make the auto loan affordable for that segment, we have seen very long tenors. Sometimes we see 60, 70, up to 80 and 90 months in our loan tenure in the credit bureau for a customer. That does give us a source of concern. When we see the presentations from our credit bureau, we start to see some delinquencies in auto loans. That gives us a more prudent stance for Q4 and the beginning of 2027. We also are seeing that the buy now, pay later starts to be something that is significant, and it is just now starting to be reported by the credit bureaus.
Eduardo Messmacher: We are in a wait and see stance, but we do believe that that has been a significant trend that is not yet properly represented in the credit bureaus, and in the scores of the customers. Overall, I would say that while on the long term, we are confident on the economy of the US and its ability to be resilient and to be the most vibrant economy in the world. On the short term, we do see some call them speed bumps.
[Analyst]: Mm-hmm. Can I just ask you, Eduardo, do you guys work with FICO scores? Or there was some change in regulation you might can be able to use different suppliers now, et cetera. Is that good? Is that bad for you? Does that give you more options? How do I have to think about that?
Eduardo Messmacher: We do use
[Analyst]: Talking about the US, right.
Eduardo Messmacher: Both in the US and in Mexico, we use the market scores. We also have internal scores. Coincidentally, our internal score in the US was developed by FICO, but it is different than the market FICO score.
[Analyst]: Okay.
Eduardo Messmacher: We do use the market-wide FICO score and our own internal score. We are starting to use another alternative score called the VantageScore. As always know in risk, we have to be very slow in making a change until we actually understand the profile of the customers under each one of the scoring methodologies. But we are testing the VantageScores. I would say disadvantage, if we want to call it that way, with the current bureau information or any of the scores available, is that they still do not reflect the information on the buy now, pay later type of credits as it is being slowly integrated into the credit reporting of the customers in the US.
Eduardo Messmacher: That part, we do not have information to consider it. It is not considered in the credit scores, and it is starting to be something significant in the market. While we look forward for the credit bureaus and the scoring companies to integrate them into their operations.
[Analyst]: Mm-hmm. Thank you very much for that. That is quite insightful. Best of luck for Q4, and speak soon. Bye.
Eduardo Messmacher: Thank you very much.
Operator: Thank you. We have not received any further questions at this point, so that concludes our question and answer session. I would now like to hand over the call to José María for some closing remarks.
José María Cid Michavila: Thank you very much for your time and interest in Financiera Independencia. As always, my contact information and full report and suite are available on our website, findep.mx. Have a great day.
Ivan Khomenko: Goodbye
