Good morning, everyone, and welcome to Banco del Bajío's fourth quarter 2022 results conference call. My name is Daniela, and I will be your coordinator today. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question-and-answer session. Before we begin the call today, I would like to remind you that forward-looking statements made during today's conference call do not account for future economic circumstances, industry conditions, company performance, and financial results. These statements are subject to a number of risks and uncertainties. Joining us today from BanBajío is Mr. Carlos de la Cerda, Executive Vice Chairman of the Board of Directors, Mr. Edgardo del Rincón, Chief Executive Officer, Mr. Joaquín Domínguez, Chief Financial Officer, and Mr. Luis Quiroz, Investor Relations Officer. As a reminder, this video conference is being recorded. For opening remarks and introductions, I would now like to turn the call over to Mr. Luis Quiroz. Mr. Quiroz, you may begin. Good morning to everyone, welcome to Banco del Bajío's conference call for the fourth quarter of 2022. As most of you already know, the industry adopted IFRS 9 in 2022. As such, we have incorporated those effects and their impact to improve the comparability with 2021. All the information of the industry used on the presentation is from CNBV data as of November, which is the most recent publicly available information. Without any further ado, let us start the presentation. On slide 3, we would like to describe some key ratios recorded in the quarter and their trends. First off, the quarterly net income was MXN 2.6 billion, an increase of 67.5% year-over-year. The ROE for the quarter stood at 29.2%. Revenues accounted for MXN 5.8 billion, an increase of 60% year-over-year. The NIM reached 6.8%, increasing by 214 basis points against the fourth quarter of 2021. The efficiency ratio stood at 32.4%, improving by 18 percentage points against last year as reported. The loan portfolio expanded by 12.6%, with company loans expanded by 14.1%. Total deposits grew by 12.7%, with demand deposits continue outperforming other sources of funding. The asset quality remains at very sound levels, with the NPL ratio at 1.2% and the coverage ratio at almost 1.9 x. The preliminary capitalization ratio stood at 14.7% by December end, decreasing quarter-over-quarter as a consequence of the accelerated loan growth. In slide 4, we can observe the 2000 results against the guidance. As shown in the table, BanBajío met and even surpassed most of its targets. The ROE stood at 21.5% as net income was MXN 8 billion, representing an increase of 67% against 2021. On the same note, revenues expanded by 41% while expenses grew less than expected, resulting in an efficiency of 37.6%. On the asset quality side, all metrics remained very strong, as shown in the cost of risk, NPL, and coverage ratio. We surpassed the expectation for loans and deposits growth despite the excess prepayments throughout 2022, with a very sound expansion in the second half of the year. The capitalization ended the year a little below the guidance, given the accelerated growth in the loan portfolio. We are very proud of the track record of BanBajío since the IPO of delivering on most of the guidance it provides to the market, contributing to both the credibility and the transparency of the management team with its current and potential shareholders. Moving on to slide 5, we would like to emphasize some key indicators from our digital transformation strategy. Monthly active users of our digital platforms are growing by 26.5% year-over-year, with individuals growing by 36%. In terms of transactions, our clients are growing the total number of transactions by 34%, with the mobile channel being the most dynamic, growing by 61%. As of now, 73% of the transactions at BanBajío are done through self-service channels. We expect investments in digital to continue attracting new clients and increasing the engagement with existing ones. During this start of the year, we will roll out to the general public the end-to-end digital account opening journey on the mobile app, which will be a Level 4 account, allowing our clients to have higher transactional amounts compared to the other digital accounts we see available in the market today. On slide 6, our total loan portfolio reached MXN 225 billion, an increase of 12.6% compared to the fourth quarter of 2021. We have seen a sustained recovery in loan demand throughout most of the second half of 2022, coming from a broad base of clients in diverse industries. While geographically, the Bajío region, Mexico City, and the North are the largest contributors. The company loans portfolio is growing at 14.1%, which is now faster than the industry most recent data point of 11.9%. Also, the agribusiness portfolio continues to show a sound expansion at 12.7%. The chart on the bottom left shows the composition of BanBajío's portfolio as of December. As you can see, companies represent 82% of the portfolio, with corporates being 55% and SMEs being 27%. Government represents 10%, financial institutions represent 4%, and both mortgages and consumer loans represent 2% each. For this year, we maintain the expectation of continued growing in our core segments, although we could see a deceleration in the industry given the prospects for modest economic growth in 2023. On slide 7, we can observe the evolution of the consumer loan portfolio, which is growing by 38.2% against the fourth quarter of 2021. As we mentioned in previous quarters, the bank invested in the talent and the right tools to accelerate the expansion of these portfolios. As of now, we hold a robust platform with underwriting capabilities in non-assisted channels, risk analysis on parametric engines, and always-on cross-sell campaigns. We continue to tap at our existing client base. Around 70% of the origination of consumer loans at BanBajío comes from existing clients. We expect to continue with this important rate of expansion in coming years. First, we concentrated the cross-sell efforts in credit cards and payroll loans, and in 2023, we included personal loans. It is important to mention that we have managed to accelerate the growth of these portfolios with a remarkable asset quality better than the industry standards, as shown in the charts with the NPL ratios of credit card, payroll, and personal loans portfolio at 1.6%, 2.5%, and 0.8% respectively. In slide 8, we would like to highlight BanBajío's outstanding asset quality. As you can see on the upper left chart, NPLs has stood on a very sound level of 1.19%, which compares lower to the industry most recent data point of 2.11%. In the upper right chart, we can see the NPL ratio adjusted by write-offs, which has been maintained at very sound levels. The chart on the bottom right shows the evolution of the cost of risk, which has stood at 91 basis points for the quarter. The coverage ratio remains elevated at 1.9 x, which remains higher than the industry's ratio of 1.5 x. For 2023, we could see some normalization on the cost of risk as last year was an outstandingly low level for the industry. We maintain our conservative stance with additional reserves in the balance sheet given that we could see a deceleration in the U.S. economy later this year. Moving on to slide 9, total deposits stood at MXN 208 billion, an increase of 12.7% compared to the fourth quarter of 2021. We would like to highlight how demand deposits continued to show strong growth. As the portfolio expanded rapidly, we have also increased other sources of funding, as demonstrated by the expansion of repos and interbank loans of 23% and 15% respectively. Going forward, we intend to grow the deposit franchise of Banco del Bajío as much as possible. The share of deposits against the total funding will also depend on the prospects for loan demand. In slide 10, we can observe the evolution of our funding structure, which has been a key driver in the improved profitability profile of the bank. We have been successful on continuing to attract demand deposits to the bank, especially those at zero cost, which are provided mainly by individuals and SMEs. Our DDA account, Cuenta Conecta, continues to grow double-digit at 20.4% against December of 2021. On the chart above, we can see how we have been able to increase consistently the share of demand deposits in the mix of our funding, particularly those at zero cost, increasing their share in four percentage points in the last two years. Moreover, we have been successful in improving the cost relative to TIIE for our most sensible sources of funding, as shown in both the cost for interbank loans and time deposits. The total cost of funds as a percentage of TIIE continues to improve at 53% of TIIE. We continue to close the gap in the cost of funds for larger peers in the industry. On slide 11, we can observe the evolution of our margins, which stood in the fourth quarter at 6.82%, representing an increase of 214 basis points year-over-year. The expansion comes from the improvement in the mix of assets and liabilities, which accounted for 54 basis points of the improvement, as well as the repricing of rate hikes that accounted for 160 basis points of the improvement. Going forward, we expect no additional hikes from the central bank and cuts in the second half of the year, resulting in an average BanBajío rate of 9.55% for 2023. We estimate our ex ante sensibility to rates considering the current mix of assets and liabilities to be around 34 basis points of NIM per every 100 basis point change in the benchmark rate, which will represent an increase in inflow of around MXN 960 million of revenues and MXN 604 million of net income for a full year. In slide 12, you will see the performance of BanBajío's revenues, which grew 60.4% compared to the fourth quarter of last year, adjusted by the IPAB fee reclassification. Net interest income expanded by 61% and non-interest income increased by 57%, as we saw a non-recurring income from the sale of foreclosed assets that more than offset the IPAB fee expense in other operating income. If we normalize for the non-recurring asset sale, the fees deferral, and the reclassification of the IPAB fee, the pro forma non-interest income would have been MXN 831 million pesos. A growth of 50% against 2021. We are seeing good trends in non-interest income, as you can see on the chart on the bottom right. Net fees posted positive growth year-over-year as reported for the first time in four quarters. Looking at the performance of non-interest income, the pro forma credit commissions posted an expansion of 140% as credit demand improved. Also, revenues not related to the portfolio continued to grow as part of the cash management initiatives, as shown in the growth of POS interchange, transfer, electronic banking, and FX trading, growing by 26, 24, 20, and 14% respectively. Going forward into 2023, we expect revenues to continue expanding double-digit as NII will be boosted by growing productive assets as well as margin expansion, while non-interest income accelerates against last year as the effect on fees deferred dissipate and the cash management initiatives continue to boost fees and trading revenues not directly related to the loan portfolio. Moving on to slide 13, we can see the performance of our efficiency ratio. It came in at 32.4% for the fourth quarter of 2022, improving 18 percentage points year-over-year as reported, and by 14 percentage points when adjusted by the IPAB fee reclassification. Our current ratio stands as best in class in both the Mexican system and among international standards. In the fourth quarter, expenses grew by 10.6% with the comparable base of the fourth quarter of 2021. For 2022, total expenses grew by 14.4% against 2021 without the IPAB fee. Recurring operating expenses grew by 7%, while expenses related to revenues increased by 21%. For 2023, we expect expenses to continue growing double digit as we continue to invest in digital and expand our footprint with people and branches. We maintain the expectation that revenues will outgrow expenses, and therefore will have an improving efficiency ratio below 35%. In slide 14, we can observe the evolution of net income for the past three years, from 2020, when the COVID crisis started, and up to 2022. We are proud to announce that both the fourth quarter result of MXN 2.6 billion, as well as the 2022 result of MXN 8 billion, are respectively record profits for BanBajío, with growth of 67.5 and 67% respectively. We expect that in 2023, net income will continue to post a sound expansion. On to slide 15, you will see the evolution of the profitability metrics of BanBajío. As shown in the charts, the quarterly ROA stood at 3.4%, and the quarterly ROE at 29.2%. Both metrics reached their highest levels in the IPO as a consequence of the strong results, and in the case of the ROE, a more adequate capital position after their dividend payment made during 2022. On a per share basis, the fourth quarter EPS stood at MXN 2.18, which represents an annualized earnings yield of 15%, computed with the average stock price for the fourth quarter. Moving on to slide 16, we can see the preliminary capitalization ratio as of December of 2022 of 14.7%, of which almost all is Tier 1 capital. The capitalization level decreased against past years as a result of the dividend payments of MXN 9.3 billion, or MXN 7.79 per share, that were distributed in May and in August, and because of the strong portfolio expansion in the second half of 2022. Lastly, in slide 17, we introduce the guidance for 2023. The macroeconomic assumptions used are the following: average BanBajio rate of 9.55%, GDP growth of 0.5%-1.5%, and the inflation rate around 5%. We are forecasting loan growth to be from 6%-8%, deposits growth from 8%-10%, net interest margin from 7%-7.4%, with the NII expanding by 32%-35%, and the fees plus trading income growing from 16%-20%. Expenses growing from 17%-18%, Efficiency ratio below 35%. Cost of risk from 60-80 basis points, while maintaining a coverage ratio above 1.5 x, and the NPLs below 1.50%. Net income from MXN 10.4 billion-MXN 10.6 billion, an increase of 29%-32% against 2022, and an ROE from 24%-26%, with a capitalization between 14% and 15%. In summary, the fourth quarter and full year results reinstate the sound fundamentals of the bank and the solid balance sheet. We will continue with the strategy of BanBajío towards 2025. We focus on creating value for all stakeholders. We are pleased to announce that we have met and even surpassed most of our targets for last year. We maintain our compromise to deliver on the guidance that we provide for 2023. With this, I conclude my presentation. We can open the call to the Q&A session. 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 the 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 questions. Our first question comes from Ernesto Gabilondo. Please state your company name and then ask your question. Thank you. Ernesto Gabilondo from Bank of America. Hi, good morning Carlos, Edgardo del Rincón, Joaquín Domínguez, and Luis. Congrats on your results and in your 2023 guidance. My first question will be on NIMs for 2023 and for 2024. We have seen the BanBajío has been significantly benefiting from higher rates. When do you see a missing cycle, and when do you think you can start reducing the NIM sensitivity? Also related to the same topic, in the scenario that interest rates go up to 11% this year, that is what some analysts are expecting, but then falling to 7.5% in 2024, that will imply an important reduction of around 400 basis points. If I put that into your sensitivity, that will be around 140 basis points NIM pressure in 2024. Under this scenario, what again will be the measures that you can be implementing to mitigate a potential impact of 140 basis points? What level do you think it can be reduced? I don't know if by one third, half of it. Any color on to what extent the NIM sensitivity can be reduced, I think will be very, very helpful. My second question is on your sustainable ROE. Again, once we start to see a normalization in the interest rate, is a probability that the earnings could be contracting in 2024. Where do you see the sustainable ROE of the bank? Thank you. Thank you, Ernesto, and good morning to everyone. We have been working on that, and that is the main reason of the different investments we have been doing in the digital transformation, in data, in building all the different organizations. Let me give you some aspects of this, no? The idea, Ernesto, is continue improving, of course, the mix of deposits. That is bringing a lot of value to the bank. We are coming from cost of funds of 75% of TIIE, we are now in 52%-53%, and the idea is to continue improving that. That is bringing not only more connect accounts, but also is bringing an important growth in active customers. We are growing at this moment 9% in customers. That is bringing a growth in transactions of 17%. The amount of those transactions, we are growing in 21%. More important than that is bringing also more fees and is providing us more opportunity to cross-sell. Also, we have been working in improving the mix of loans. You saw already in the results that we are growing 38% the consumer portfolio, and we are planning to continue with important growth in that portfolio. During 2021 we made several pilots of parametric loan offers to SMEs with very good results. Those pilots, I mean, we roll out that new credit policy, let's say, in 2022. At the end of December, we already had a portfolio of MXN 1.2 billion. That is important of course because not only bring more profitability of that relationship with that SME, but also the margin are largers, larger than the regular loan in SMEs. In non-interest income, as you know, we have been working and investing heavily in BajíoNet, our electronic banking platform, and actually with very good results. Our cash management strategy is bringing also very good results. Our goal is to grow non-interest income at least twice the growth in the loan portfolio. Actually, in 2023, with the Libertad, actually it was close to 3 x, no? Over time, with all different structural changes in the revenue mix, that will reduce the sensitivity and also is bringing new sources of revenue that are important. In non-interest income, for example, everything that is related to the acquiring business. Interchange as feature of debit and credit cards. Those sources of revenue are growing above 30%, and actually with very good efficiency ratios. About your second question, the ROE, the sustainable ROE. We think that with a normal inflation, let's say between 4% and 5%, the Banxico rate should be between 6%-7% and a capitalization ratio around 14%. The ROE for the bank should be, between 20%-21%, no? I think with that I covered several of your questions. I don't know if you want to mention, Joaquín, about the asset liability. Thank you. In terms of asset liability, we have already designed several hedge structures in order to reduce the sensitivity to interest rate changes. Right now, we consider it is not the appropriate timing to implement them. We are ready to execute them as soon as we consider it convenient. With this strategy, we are expecting to reduce in 10 basis points the sensitivity. This is very, very helpful. Thank you very much. Just one last question on the dividend policy. The bank continues, as you pointed out, well capitalized, so where do you see the dividend policy this year? Hi, Ernesto. This is Carlos de la Cerda. As we mentioned in the last year, we feel very comfortable as long as we are within a range between 14% and 15% ICAP rate, capitalization rate. Right now we are at a 14.7%, and it will grow from today to the beginning of May. That's when we expect to be paying out the dividend from the last year profits. It will be probably over 15 point something. We believe we will put under the shareholders meeting consideration a dividend of 60% of last year profits, and our capitalization rate will remain above 14% after we pay the dividend. That's the... That's where we are standing now. Would that be all, Ernesto? I think so. Thank you. We're gonna move on to the next question from Ricardo Buchpiguel. Please state your company name and then ask your question. Ricardo, I believe you are on mute. Ready. You should be able to unmute yourself. Thank you. Hi. Thank you. This is Ricardo Buchpiguel from BTG Pactual. Good morning, and congrats on the solid results. I have a few questions here. First, can you please comment how do you see the outlook for loan growth in the coming years, looking beyond this year, especially with this thematic of the nearshoring? What do you believe would be key to happen for this scenario that you're believing for loan growth to take shape? For my second question, could you also talk a little bit more about the investment that you're doing on the bank's digitalization that would increase the OpEx this year but also could yield some results for the strategy that you had just mentioned the previous question? Thank you. Thank you, Ricardo. This is Edgardo del Rincón. Maybe to talk about the scenario we are seeing for the following years, let me start back by saying how we delivered the result of 12%, 12.6% growth in loans during 2022. The main activities in which our customers are working that represent the loan growth, no? The bank have an important role, but in companies, including SMEs, we grew MXN 23 billion during 2022, no? In the agro business, we grew a little bit more than MXN 3 billion, MXN 3.1 billion. In retail companies, we grew MXN 6.5 billion. Of course, companies of different sizes, no? In manufacturer companies, we grew MXN 5 billion. In real estate, mainly, industrial real estate that is related to nearshoring, MXN 5.3 billion. That growth was mainly in the Bajío region, in the metropolitan area, and in the north of the country. From this growth in companies of MXN 23 billion, 15.5 were with companies that didn't have a loan with us at the beginning of the year. That for us is a great news, no? From that, from those new customers, in loans of course, many of them did have a relationship with the bank, a passive relationship. They did the account investments, different line of products, no? From that growth, MXN 9 billion came from corporates, we are talking about 166 customers with an average loan of 54 million MXN. 5.7 came from SMEs, 580 customers with an average loan size of 10 million MXN. As you can see, the growth that we have in companies is very well diversified, no? So we are very happy with this because that means we are having the ability to bring new customers, but also to grant a loan to them, both in SMEs and the corporate segment. And of course, the consumer lending that is still a small portion. It's 2% of the total portfolio that is growing at a very fast pace, no? Going forward for in the guidance for 2023, we are putting our range between 6% and 8%. The reason behind is because we are considering GDP growth between 0.5% and 1.5%. Normally, the loan growth is a multiple of that GDP growth. Of course, we will try, as always, to grow faster than the market and to gain market share. We will try of course to over-deliver. Let's see the conditions of the economy and investment. 2024 will be a unique year because of the election. That brings normally uncertainty in the market. Let's see how the market develop, but we will try always to to over-deliver and always to grow faster than the system, no? This is Carlos de la Cerda. I would add to the data that Edgardo just provided us, that in that 6%-8% loan growth that we are forecasting, we are taking into consideration a few prepayments, important prepayments from the government sector that we already know that they are trying to restructure their total debts and so on. The margin, even though those loans are of extremely high risk quality, they are also of extremely low margin. What we decided to not participate in those processes, and we have to substitute those loans with new, smaller loans with a much higher margin rate and much higher potential for cross-sale. Even though we are getting those payments, we're still considering that we will grow close to 8%, with a much better mix of loans, with much better margins, and in my opinion, creating more value for the franchise. Regarding, Ricardo, your second question about the investment in digital, we will continue investing in the following years. I think that is something that we continue always, no? Not only in the digital transformation, I mean, in electronic banking, let's say, BajioNet Web and the app, no? But also, we have opportunity to bring technology, for example, to different internal processes that could impact customer experience, operational losses that we can operate in a better way, et cetera. Actually, we are very happy with the investment we are doing because we are already seeing very good results with several business line, like fees, for example, that we are growing more than 20%. The total non-interest income that is growing during 2022, I mean, the collected, not the one that we recognize, because the new accounting criteria accounting rules. The actual non-interest income collected, we are growing about 35%. Which is great. Without the investment that we started doing several years ago, it would, I mean, it would be very, very difficult. We need to continue improving customer experience and the digital transformation. All the investment we are doing is very important with that, I mean, for that goal, no? Oh, very clear. Just a quick follow-up. Are you seeing also some increase in competition for this loan demand after the end of last year and beginning of this year? Have been hearing other banks also commenting about increasing headcount for loan officers. I imagine it's the same situation with you by your speech in the presentation. Just want to hear your thoughts on that matter. Thank you. Yes. I mean, that is very clear, and it's, and it's happening. I believe the business model we have, the way we treat our customers, with a banker that is really close to them, understanding very well their needs and, I mean, a sense of that is all the new customers that we grant a loan during 2022, more than 750 new customers in loans, is a very good indicator that we are doing well in the arena, competing very well. No? We are not competing with price. We are competing with very good service, with, I mean, being really fast in defining the loan structure for a customer. And we are having opportunities even in improving that. I believe we have been able to compete very well and attract new customers, and we will continue doing that. Thank you. I would like to add to Edgardo's comment that we are very strong in the regions of the country that we consider are showing the higher growth potential, both for the nearshoring opportunities. Also, it's traditional that the central and northern part of Mexico grow faster than the rest of the country. We feel very confident with our position, our positioning in that area. Also in the specific sectors that are growing. As you know, the agribusiness sector shows a great potential. The sector is exporting most of their production, and we are very strong in that sector. We feel confident that we have every opportunity to outgrow our competition. Very clear. Thank you. Thank you. Our next question comes from Luis Laviada from Compass Group. Please state your question. Hi, guys. Happy New Year. Congratulations on the good results. It looks like, you know, you're getting us used to very amazing results quarter after quarter. Based on your comments, it looks like that will continue, congrats on that. A few questions, I guess follow-ups on that. The first one, you know, on the loan growth potential going forward, perhaps if you guys could elaborate a little bit further on this nearshoring potential. What are your clients sort of telling you? In your view, when do you, as a bank, should start seeing accelerated demand coming from that? If you could share with us, perhaps, you know, I don't know, certain numbers, you know, percentage of, you know, loans that could be related or could be, you know, positively impacted by that. Anything you can share on that, on that front would be great. Thank you, Luis. Yes, we are seeing already loan demand for nearshoring, for industrial real estate. As I mentioned previously, we grew during 2022 MXN 5.3 billion. That portfolio should be today between MXN 12 billion and MXN 13 billion. We are continuing to see loan demand with several players, both in the Bajío, in the North, but also in the places close to the metropolitan area, Hidalgo and the Mexican state, et cetera. That trend will continue. We have very good customers that are trying to grow with this opportunity. We are ready, I mean, to serve them. No? Yes, in the loan growth that we are planning for 2023, we're including this opportunity. As we said, no? We will try to outgrow the guidance, but we already have several prepayments that we know will happen in the coming months. Nevertheless, we will replace those prepayments with the opportunity we have mainly with the small and large companies. Great. That's good data to have. I guess my second question goes into NIM. Again, taking your guidance into account, looks like 120-160 basis point expansion, but you also have a conservative view, in my mind, in terms of what the average tier would be for this year. Even if I take your guidance, it looks like, I don't know, based on your sensitivity, about 60 basis points coming from of the margin expansion coming from just rates and perhaps another 60 basis points from mix, which is quite impressive given that you already did kind of similar last year. On the mix portion, could you talk a little bit about... I know you've mentioned a few things, but, you know, how much of that is actually coming from improving even further, your funding costs? How much is kind of the mix within loans that you mentioned? And whether this kind of 50 basis point improvement in NIMs from mix that we saw last year and that we might see this year, how much longer can you continue? Like for example, the Tier, your customer relative to Tier has been coming down, but you mentioned 53%. How much further can it go down, and what other things could you do? I mean, you are right, Luis. The average reference rate from Banxico that we are considering in our guidance for 2023 is 9.6%. That could bring a tier of 9.85%, something like that, no? We know that the consensus today is a little bit higher than that, no? Yesterday knew about the first data about inflation was not as expected. What we consider is that the inflection point for inflation globally in Mexico should be in the following months. We consider that that could happen in the middle of this year, and that could bring opportunity to the central bank to start lowering rates during the second semester, and to end 2023 in levels of 9.25%. We know that the consensus today is higher than that. Of course, with the sensitivity we have today, if the rate is higher than this, we have an opportunity, an upside risk, let's say, in, in our plan for 2023. What we are doing also, as I explained previously, we are working and is delivering very good results in improving both the mix of deposits, but also the mix in loans. That will continue. Also together with this, we are trying to grow in new customers as fast as possible. That is happening, it has have been happening for many years. Considering that maybe in, in, in your model, we should. I mean, we are considering that improvement, in the mix of deposits and loans, and that will bring additional opportunities of revenues for the bank in the coming years. Great. And in terms of the hedges, you know, you're planning to put, you know, on your mind, what's the potential timing for you to do that? Perhaps second half of this year as you see that inflection point you mentioned, or you could actually postpone it if you see data that suggests that it's an environment of rates higher for longer. We do not have right now an answer specifically talking about the correct timing, but we are ready to execute and we will see how is the evolution of the main economic indicators. There is a chance to start in the first half of the year, probably. Okay, thanks. My last question on asset quality, we haven't talked much about that. Perhaps if you could comment a little bit, you know, what drove that spike in cost of risk in the fourth quarter. As I look at your guidance, does that assume you released some reserves in case you were to see a spike in delinquency? If you could share with us, you know, how much additional reserves you still have there, you know, as a potential offset, and whether we should assume that gets released gradually throughout the year. Yes, Luis. The cost of raising the fourth quarter was related totally to the loan growth. Important also the growth in the consumer portfolio that, you know, the reserves that are required are higher than in the case of companies, no? It's completely related to the loan growth. Important to say that we don't see today any deterioration, even the early indicators that we are seeing in all the different portfolios, not only companies, but also credit cards, personal loans, et cetera. Everything is in very good shape. Actually, we are very happy with the asset quality that we are delivering. We don't see any alteration in any portfolio. It's totally related to loan growth. Okay. The additional reserves you still have there, could you share with us how much they are at the moment? Today, Luis, we're talking about 1.7, a little bit more, 1.7 billion MXN. No? In the plan for this year, we are not considering releasing additional reserves. Of course, if we, if we have a case above the, let's say the plan of cost of risk, we could use some of those reserves in case of any deterioration of any portfolio. That opportunity is not included in the plan. Great. That's great to hear. Thanks a lot, guys, for the answers and congrats. Thank you, Luis. Thank you. Thank you. Our next question comes from Jason Mollin. Please state your company name and then ask your question. Hello. This is Juan Recalde from Deutsche Bank. Good morning, thank you for taking my question. I have two questions. Two questions on deposits. The first one is related to the expected growth. The second one related to expected cost. In terms of growth, we have seen strong total deposit growth in 2022 and even stronger in demand deposit growth. How do you see demand and time deposits growing next year? Do you think that demand deposits can continue outgrowing time deposits in 2023? That's the first question. The second one would be related to the deposit cost. When we compare the deposit cost versus the change in the tier, the deposit cost grew around 200 basis points year-on-year in the fourth quarter, and the average tier was close to 500 basis points high. In 2023, how do you see the deposit cost rising versus rates? Yes, Juan. What we are doing is grow as fast as possible in demand deposits with zero cost. Let me give you some data. During the fourth quarter, we opened 19,000 new Cuenta Conecta. That number of accounts is similar to the number of new accounts that we opened, for example, in 2019, that we opened a total of 20,000 new accounts. Today, we are opening in a quarter the accounts that brings, for example, of course, new customers, the accounts that we were opening in a whole year three years ago. That's the reason behind the growth in demand deposits with zero cost. We will continue with that strategy of course. Last year, we opened a total of 78,000 new Connect accounts, we are planning to grow that double-digit during this year. The improvement in the mix of deposits will continue, no? I mean, we are considering improving also the cost that today we are in 53% of tier, continue improving that going forward, no? Very difficult to tell you the cost because that will depend in the loan growth. For example, in the fourth quarter, we needed to grow a little bit more in repos and other sources of revenue to have the right liquidity to grant those loans, that loan growth during the fourth quarter. That it was really important. That strategy will continue because it's the base to bring new customers and to grow in transactions and fees, et cetera, as I explained earlier. Very happy with the results we're having with Cuenta Conecta, and that strategy will continue. During the following months, we are going to release the new digital platform that is a journey to open an account that is a journey that is 100% end-to-end digital, no? That could bring an additional opportunity, and we are planning to release that technology to the public in the following months. That's very helpful. Thank you for the color, and congrats on the results. Thank you. Our next question comes from Carlos Gomez-Lopez. Please state your company name and then ask your question. Hello. Good morning. Carlos Gomez, from HSBC. Thank you for taking my question, and congratulations, like everybody else for the excellent year and the excellent results. I'm going back to the rates. I want to verify that I understood correctly. In your assumption, you are assuming that there are no further hikes and that we have rate cuts in the second half of the year. I think that is correct. I should say that is certainly lower than what the market is expecting. I want to understand, is that something that you really expect or this is really conservatism on the part of the bank? Well, let's, you know, undershoot the rates if they end up being higher, well, that is better for us. Again, I want to understand the reason why you project such low rates. The second is given how extremely profitable the SME segment has become, with this higher level of rates, and assuming that it is somewhat permanent, have you seen more activity? Have you seen either the large banks or new players coming into your segment and start to compete here, or is it too early for that? Thank you. Thank you, Carlos. Regarding your first question, yes, we are not considering any additional hike, and we are put, and our assumption is that the Banxico rate should be start a cycle and a declining cycle in the middle of the year, starting in July, to end at the end of the year in 9.25. We know put sound today and more with the inflation rate that was announced yesterday, a little bit conservative, yes, no? It's what we are planning to do with... We don't want to consider a high rate environment because we think that in any moment, maybe May, June, et cetera, we could start seeing lower inflation and that will give the Banxico, the central bank, the opportunity to lower rates. Today, the real rate is high, no? If we see an inflation rate that start lowering to 7%, 6.5%, et cetera, that will bring the space to the central bank to start lowering rates, no? About competition in SMEs, that is, I mean, every bank is trying to capture that opportunity. We are competing very well, and we are attracting new customers. From all the new accounts that we are opening, that is in 2022, as I said, 78,000, 50% of those are SMEs, no? We are growing in the number of SMEs that we are attending in the bank importantly. Yes, we are seeing important competition, but we are having very good results. Martin would like to complement. Just to complement, something that we want to give you as a message with this guidance, is that we do not only depend on the interest rates. As well as we do not expect that height of interest rate, what we want to show you is that we are able to increase the profitability with the non-interest income strategies that we have already talked about. Okay, that is very clear. Again, I'm going back to my initial statement. If rates end up following the path that is focused in the market, which as you say, is higher than yours, if that were to happen, then your actual result will be higher than your current guidance. Is that the correct interpretation of what you are saying? That is correctly. Same. That is correct. Okay. If, if rates are higher, the sensitivity that we show in the presentation, I mean, will impact positively the results of the bank. Okay. We should take this as a, kind of, as a floor if indeed the path, of rates is the one that the market is pricing instead of the one that you are using. Very good. Thank you so much. Thank you. Our next question comes from José Cuenca. Please state your company name and then ask your question. Hi, good morning, guys. Thank you for taking my question. Joaquín Domínguez Cuenca from Citigroup. Have two quick follow-ups. Just wanted to confirm, I think you were saying earlier that, you know, all the initiatives that could contribute to a solid result as the rates go down, one of them contemplates, of course, focusing on fees, continuing to be strong. If I've heard correctly, Sorry, non-interest income growth at least twice that, twice as high as that, as the growth of the portfolio. Just wanted to confirm if that is correct, and when do you see that happening? Do you see this happening already, or is this something that could bear fruit a little bit further down the road? If you could clarify on that, would be very helpful. My second question, just wanted to piggyback a little bit on the SME competition. Obviously, quite impressive what you're doing in order to increase the number of customers and so on and so forth. Even though you touch a little bit on these aspects, would like just to hear a little bit more. For example, if a new SME customer comes in, why would they choose Banxico over what certainly seems to me a very, very good competition from both smaller and larger peers in the SME segment? If you could elaborate on that, would be really, really helpful. Thank you. Yes, thank you, Carlos. That's right. In terms of non-interest income, the idea is to grow twice, at least, the loan portfolio growth. The results you saw are impacted with the new accounting policy that we released in January last year. Fees that before we were recognizing at the moment that they were collected, today we're recognizing them in the, in the, let's say, the cycle of the, of the loan, no? That is impacting the non-interest income as reported during 2022. The non-interest income, the total that is collected, no, during last year, we grew 35%, no? We are already at that level, at least twice. If actually it's almost 3x the growth in non-interest income with the level of growth in the portfolio that was 12%. That is the idea, and I think we can deliver that in the following years. That will bring a new structure in revenues, no? That is important, no? Yes, the idea. I mean, today, we have a relationship with close to 140,000 SMEs today. From those, about 8,500 have a loan with us today. We grew importantly during 2022 in number of customers, SMEs with a loan because of a new parametric offer that we had been doing, that I talk about, that have today an average ticket of MXN 1.1 million. It 100% of those loans are cross-sell. Are customers that we know, that we know their flows, their activity in the account, in investments, et cetera, that we are granting a loan. Many of them is one of the, I believe, the competitive advantage of BanBajío, comes from agro, the agro business, no? That is bringing very good quality of customers to the bank, but also other activities, of course. I believe the perception in the marketplace for BanBajío that is a very good bank for SMEs, no? Not only because of the loan offer that we have, but also the cash management products and the treatment, the personal treatment that we have with all the customers, no? That's why we're growing the number of bankers, because it's important for us to have the capacity to really know very well our customers and our people can have the time to understand very well their needs. And I think that is also something that is unique for BanBajío and is working very well. That's why so many new customers that we are granting a loan in SMEs, no? Actually, that is the main reason why we are growing in new branches. Many of those new branches, in the places that we are opening, those branches are cities in which we didn't have a presence before. Because we have already a loan portfolio in those places, mainly related to the agro business as well, no? We are taking advantage of those opportunities and the break-even point in those new branches it is going to happen really soon because we already have customers there, no? I don't know if that gives you some color about your question about SMEs. No, super helpful. Thank you for the detail and congrats on the quarter and the guidance. Thanks to you. Thank you. Our next question comes from Andrés Soto. Please state your company name and then ask your question. Good morning to all. This is Andrés Soto from Santander. I have a question regarding dividends vis-a-vis the outlook for ROE and loan growth. I agree that loan growth seems outlook seems conservative to me, your outlook for dividends, because if you will be running at an ROE of 30% over the next couple of quarters and will be growing your loan portfolio just by 7%, what will be the reason for you to keep on accumulating capital? My question is this guidance assuming that there is an upside risk for loan growth and you will be using that capital for growth? If in the end we see loan growth at this high single digit level, you will end up considering distributing extraordinary dividends. Thank you. Hi Andrés, this is Carlos de la Cerda. In the 60% dividend payout that we are planning for this year, we are considering that the rate at which the bank will be generating profits allow for a loan growth of well over MXN 6 billion a month. That just won't happen. I mean, the loan growth would need to be, I don't know, 20% or 30%. 20% a year or something like that. That won't happen. Actually, what we think is that the capitalization rate, even with the considering the dividend, will keep growing, and we will finish the end of the year close to 16%. If for any reason and in any future year, we believe that the loan growth would be so strong that we should consider to decrease the percentage of the dividend payout, we would do it because that's our business, to make our bank bigger and stronger. For this year, we think that it's a pretty safe assumption that even with a 60% dividend payout, the capitalization rate will remain growing up at any loan growth that we can foresee in the near future. Perfect. My question was exactly that. You know, in the end, you will have some room for extraordinary dividends. It is what you also have in mind, that there is a space for extraordinary dividends in 2023? In this moment, we're not considering an additional dividend to the 60% dividend that we're planning to. In case that the capitalization rate could be much higher than 15%, we would discuss the possibility to pay out an additional dividend because I mean, we don't think that an excessive amount of capital would be necessary. That's very clear. Thank you so much, Carlos. Congratulations on the results. Thank you. Thank you. Our next question comes from Pablo Ordóñez from GBM. Please state your question. Hi, good morning. This is Pablo Ordóñez from GBM. Can you listen to me? Hello? Can you listen to me? Pablo, could you? Pablo, could you speak up? Yes. Can you listen to me? Hello? Yes. Yes, go ahead. Okay. Hi, good morning. Congratulations on your excellent results. I have a follow-up question on your funding cost and your funding mix. As you mentioned, your Connect accounts have been very successful in growing the zero cost demand deposits. However, in the fourth quarter, we also saw that time deposits are growing faster than demand deposits. I have a couple of questions here. Are you seeing that your other corporate clients are becoming more sensitive to the interest rate they receive? And in this context, how much room for improvements do you see on your funding costs as a percentage of here, particularly in your medium term, and what is your assumption on the funding costs on your long-term or medium-term ROE target of 20%-21%? Any color on this would be very helpful. Thank you. Hi, this is Joaquín Domínguez. What we saw in the last quarter in growing faster in time deposits is due to the faster expansion of loan growth that we saw. What is important to understand is that the behavior of the loan growth determines the behavior of the time deposits. As well as we need to fund the loans, we execute some treasury strategies in order to cap the time deposits to be able to fund the loan growth. It's not for a structural trend. You know, it depends of how is the behavior of the loan, and if we saw a reduction of the loan growth, we will continue as we are expecting as is our strategy to grow faster in demand deposits. It's just the way as we manage the treasury. Okay. Thanks, Joaquín. Very helpful. Regarding my second question on what is your funding cost as a percentage of the interest rate. What is your assumption on your long-term target of 20%-21%? Can you give us some color on it? Well, the way as we project this is maintaining the last funding structure. At the end of the last quarter, we had 40, almost 55, 53% of cost of funding as percentage of the TN. We maintain that structure for the 2023. Okay, thank you very much. Thank you. Our next question comes from Gilberto Garcia. Please state your company name and then ask your question. Hello, good morning. This is Gil Garcia from Barclays. Thank you for the call. I had a question on long growth in the quarter, and then a couple of quick follow-ups, if I may. You obviously had very strong growth across the board, including your core segment. I was a little surprised to see such strong growth in financial institutions. It seems MXN 2 billion compared to the previous quarter. Could you comment on what drove this strong growth? Yes, Gilberto, thank you. We have several financial institutions that are related to the agro business, and also some important leasing companies that have a very good presence country-wide. I think the growth that we saw, and you know, in the agro business, we have an important seasonality in the fourth quarter. That is the main reason of the growing financial institutions. Okay. That's clear. Thank you. On a follow-up on your NIM sensitivity, your expectation for this year is a little bit lower than the average that we saw in the fourth quarter. You're still projecting a rather sizable improvement in the NIM. You talk about the measures you're taking to reduce your sensitivity and the improving mix. I just wanted to confirm, in addition to those two, there is an element of a lag, right? When the rate goes up and when your customers start paying a higher total rate. Is that correct? If so, can you comment on what that lag is? Hi, Gil, this is Luis Quiroz speaking. The lag is very quick, as you see, as the portfolio is in variable rate. The repricing is in less than a month. Also the deposits, it's very similar. In a quarter, the lag that you will see is by the time the interest rate is hike or is lower, by the time the quarter ends. The lag it takes for the customers or for us to start paying to the deposits and to the loan is very quickly. There is no lag in the 2023. There is no sizable effect from the lag of the repricing in both the portfolio and the deposits. Okay. It's fair to say that the bulk of the improvement you're guiding for is from the improving mix and from the measures to reduce the sensitivity, right? As of now, the guidance that we released to the market has this improvement in the mix, as you mentioned correctly, but there is also an improvement due to the sensibility, which is positive. It's still positive. It's considering this current sensitivity that we have right now of 34 basis points. Okay. My last one, if I may, on competitive dynamics. You talk about how you are not going to fight on prices. I was wondering if you had any thoughts on the announcement last week by Banorte about adding about 1,000 new bankers and whether that, you know, has some impact on your loan growth guidance for the year, which seems a little bit modest, I guess, compared to what other banks have said so far. Yes. Thank you. We have been doing that already. We have been reinforcing, for example, the organization in the metropolitan area that I think we talked about in the latest call. We made an important investment with a larger organization with a new regional director in the Mexican state, reinforcing both the organization at the senior level, but also the commercial organization and the number of bankers. Also, during 2022, we reinforce also the consumer organization in all the different regions in which we operate. That we are talking about 14 different regional directors. We reinforce that, and that is bringing the right number of bankers, and in many cases, we are growing in that regard during 2022. Also of course, because of the level of growth that we're having in consumer lending, we have been reinforcing different areas like customer service and collections and the origination area in the corporate facilities. In general, growing the number of bankers in different regions. The total growth in headcount for BanBajío last year, it was about 370 colleagues, new colleagues in the bank. I mean, we hear about the announcement of Banorte, and I think we have the right size and capability to compete very well. Thank you very much. Appreciate the call. Thank you. Our last question today comes from Juan Patiño. Please state your company name and then ask your question. Hi. Thank you for taking my question. I want to ask you about some few questions. The first one is related to, I want to know what initiatives or projects you have developed or what measures you have taken in terms of diversification of the credit segments of the company and maybe geography. For example, what% do you expect that consumer credits represent in your loan portfolio in the near future? The second one is, how do you evaluate the health of the consumer in Mexico? Thank you. Thank you, Juan. Yes, I talk about the all the different strategies that we are, I mean, executing for the past few years to change the structure of loan, of the loan portfolio, not only with consumer, but also growing faster in SMEs and the new parametric loans that we have been executing in the last couple of years. I don't want to repeat that, but the idea is to continue growing a very fast pace, the consumer portfolio. Today, that portfolio is 2%, and we will try to grow up to 5% of the total portfolio in 2025. We are including in that not only the consumer portfolio, but also the parametric loans for SMEs in that 5% because it's activity we didn't have before, no? It's something really new for BanBajío. I think we can grow in those portfolios at least 25%, no? Annually, without any problem. Regarding geography, our main growth is coming from the Bajío region, in which we have, of course, a very good presence, but also in the north of the country in general, no? Both the Northeast and the Northwest, but also in the metropolitan area. We are growing very well in the metropolitan area, including not only Mexico City, but also the state of Mexico, Hidalgo and Morelos. We're growing very well in that sense and in that geography. We will continue with this strategy, bringing, improving, let's say, the loan portfolio and having different sources of revenue. The idea, of course, is not only growing in loans, but really building a stronger relationship with those customers, with cash management products, et cetera. Also that is the idea. Okay, thank you. The health of the consumer in Mexico? Yes, thank you. In our case, more than 60% of all the new accounts, for example in cars, personal loans and payroll loan, is cross-sell. Those are customers that first they open a DDA account, a Cuenta Conecta account, and then when we know very well their behavior in the account, but also the credit history of those customers, now we have all that information, we cross-sell, no? A product. That's why the NPL you are seeing today in all the consumer portfolios of BanBajío are much better than the average NPL that we are seeing in the system. That is the main reason. We are planning to continue with that because we are growing very well in new customers, the capacity to cross-sell will continue growing, no? Until today in the system, we don't see any important deterioration in the system as a whole, no? That would be different player by player. In our case, our one of the main pillars in our strategy is to continue having very good asset quality in all the different loan portfolios that we are working on. That includes, of course, companies and what we call Banca Empresarial and SMEs, but of course, is the same strategy for the consumer portfolio. Okay, thank you very much. 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 the call back over for some closing remarks to Luis Quiroz. Thank you everyone for connecting. Happy start of the year. We will see you when we report the first quarter results. You may now disconnect.