Good morning, everyone, and welcome to Banco del Bajío's third quarter 2023 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, and welcome to Banco del Bajío's conference call for the third quarter of 2023. The information used throughout the presentation about the industry is from CNBV data as of August, which is the most recent publicly available information. Without any further ado, let us start the presentation. On slide three, we would like to briefly describe some key ratios recorded in the quarter and their trends. First off, the quarterly net income was MXN 2.75 billion, an increase of 30.6% year-on-year. The ROE for the quarter was 28.3%. Revenues accounted for MXN 6.2 billion, an increase of 29.6% year-on-year. The NIM stood at 7.2%, increasing by 106 basis points against the third quarter of 2022. The efficiency ratio stood at 31.6%, improving by 5.6 percentage points against last year and standing in an all-time low in the history of the bank. On the year-over-year comparison, the loan portfolio expanded by 8.6% and by 10.4% when excluding government loans. Total deposits grew by 11.8%. The asset quality remains stable, with the NPL ratio at 1.3% and the coverage ratio at 1.7 times. The preliminary capitalization ratio stood at 16.9% by September end. Moving on to slide four, we would like to emphasize some key indicators from our digital transformation strategy. Monthly active users of our digital platforms are growing by 26% year over year, with individuals growing by 35%. In terms of transactions, our clients are growing the total number of transactions by 25%, with the mobile channel being the most dynamic, growing by 48%. As of now, 79% of the transactions at BanBajío are run through self-service channels, improving from 69% in only two years. We expect the investments in digital to continue attracting new clients and increasing the engagement with existing ones. On slide five, our total loan portfolio reached MXN 230 billion, an increase of 8.6% compared to the third quarter of 2022. This quarter, we saw an expansion of the portfolio coming primarily from SMEs and commercial loans, while mortgages contracted. Company loans continued to grow faster than the industry at 10.8% year-over-year, compared to the industry's most recent data point of 7.1%. Total deposits stood at MXN 225 billion, an increase of 11.8% compared to the third quarter of 2022. During this quarter, we saw good growth in customer deposits. However, interest-bearing demand deposits were the fastest growing. We are going to provide more detail about the funding structure and its trends in slide eight. On slide six, we can observe the evolution of our consumer loan portfolio, which is growing by 43% against the third quarter of 2022. 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 underwriting platform with risk analysis on parametric engines and always-on cross-sell campaigns in both physical and digital channels. We continue to tap at our existing client base. As of now, almost 75% 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 then we started with personal loans in the second half of 2022. It is important to mention that we have managed to accelerate the growth of these portfolios with a remarkable asset quality, better than industry standards, as shown in the charts of NPL ratios, with credit cards at 2.2%, payroll loans at 2.3%, and personal loans at 1%. In slide seven, we would like to highlight BanBajío's sound asset quality. Over the past months, we have observed a few worsening cases in the portfolio. However, we do not see a broad-based problem for a specific sector or geography in the country. As you can see on the upper charts, the NPL adjusted was 1.77%, and the NPL ratio was 1.35%, remaining stable quarter-over-quarter. Both ratios compare better than the industry standard. The chart on the bottom right shows the evolution of the cost of risk, which stood at 86 basis points for the quarter. The coverage ratio remains strong at 1.66 times, which remains higher than the industry's ratio of 1.55 times. Bear in mind that we continue to hold MXN 1.6 billion of additional reserves in the balance sheet, which were created for specific cases as well as unforeseen circumstances, and that we have barely used them thus far.... The amount of additional reserves account for more than 50% of NPLs, reflecting the management's cautious stance. In slide eight, we can observe the evolution of our funding structure. Since the end of the first quarter of this year, we have seen a tougher competitive environment for funding in the local banking system, with banks being more willing to pay higher on corporate deposits. We attribute this behavior to companies' treasuries being more sensitive to pricing now that their cost of opportunity has risen along with interest rates. We have been successful on continuing to attract customer deposits to the bank, which continue to gain share from interbank loans, standing now at 15% of total funding, while both time and demand deposits account for 82% of total funding. During this quarter, we saw better performance of demand deposits compared to time deposits. However, within demand deposits, interest-bearing deposits have outgrown zero cost deposits. The cost of funds as a percentage of TIIE stood at 59% of TA. As we can see on the bottom left chart, our cost of funds stood better than the system's average for the third quarter, as both ours and the industry cost of funds have increased. On slide nine, we can observe the evolution of our margins, which stood in the third quarter at 7.17%, representing an increase of 106 basis points year-over-year. The expansion comes from the improvement in the mix of assets, which accounted for 9 basis points of the improvement, as well as the reprice of rate hikes that accounted for 97 basis points of the improvement. We estimate our ex ante sensitivity to rates, considering the current mix of assets and liabilities, to be around 26 basis points of NIM per every 100 basis point change in the benchmark rate, which will represent an impact of around MXN 810 million of revenues and MXN 510 million of net income for a full year. In slide 10, you will see the performance of BanBajío's revenues, which grew 30% compared to the third quarter of last year. Net interest income expanded by 29%, while non-interest income increased by 39%. We are seeing good trends in non-interest income, as fees plus trading income has grown above the high end of the guidance for the first nine months of the year. We have been focused on growing business lines not directly related to the loan portfolio, because it diversifies our income streams, and will help us to partially mitigate the impact of lower rates in the future. In that sense, we would like to highlight the performance of electronic banking fees, growing by 39%, interchange fees growing 24%, trading income expanding by 22%, and POS fees growing by 17% year-over-year. Moving on to slide 11, we can see the performance of our efficiency ratio. It came in at 31.6% for the third quarter of 2023, improving by almost six percentage points year-on-year. Our current ratio stands at a record low in the history of BanBajío, positioning as best in class in the Mexican banking system. In the third quarter, expenses grew by 9.9% year-on-year. We continue to invest importantly in the expansion of some departments, as the call center and credit solutions, new branches, especially in the nearshoring regions, and the digital transformation of the bank. On to slide 12, 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 28.3%. On a per share basis, the third quarter EPS stood at 2.32 MXN, which represents an annualized earnings yield of 17.2%, computed with the average stock price for the third quarter. In slide 13, we can see the preliminary capitalization ratio as of September of 2023, of 16.86%, of which all is Tier 1 capital. The capitalization level increased against past quarters as a consequence of the capital accumulation due to strong results. Lastly, on slide 14, we can observe the dividend distributions that took place this year. Yesterday, the extraordinary dividend proposal for the second half of 2023 was approved. The dividend will be paid out on November 6 for MXN 1.35 per share, equivalent to MXN 1.6 billion. When adding up the two distributions, the payout was 80% of the 2022 earnings, equivalent to MXN 5.41 per share, and the dividend yield computed with the average stock price year to date of 9%. We estimate our capitalization will be around 16.4% right after the distribution. To conclude, we are pleased to share the results for the third quarter, and we feel comfortable to deliver on the guidance we provided to the market. With this, we conclude the presentation, and 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 from Bank of America. Hi, thank you. Good morning, Carlos, Edgardo, Joaquín, and Luis. Thanks for the opportunity, and congrats on your results. My first question is on this impact and was totally unexpected. So can you provide us some color on your exposure to Guerrero and Acapulco? I mean, it seems not to be material, as you only have one branch there, but are you planning to restructure some loans? And then my second question is on cost of risk. We noticed it went up to 0.9% this year, even though we saw stable NPL, so largely explained by higher write-offs. So can you elaborate on those write-offs? In which sectors are you seeing impacts, and if you have already cleaned up those portfolios? Also related to this, would it be reasonable to expect again, a cost of risk between 0.6%-0.8% next year? And what should be the level of the reserve coverage ratio that you will be feeling comfortable? And just, just a last question in terms of your earnings expectations for next year. If we continue to see rates holding higher for longer, I mean, the first cut happening in June next year, how should we think about the earnings next year? And also, well, what will be the drivers behind that earnings growth? Thank you. Good morning, everyone, and thank you, Ernesto, for your questions. Regarding the first one in Guerrero, our exposure is very, very small. So for the size of the portfolio, it's really irrelevant. We hope that the conditions in Guerrero and mainly in Acapulco will recover soon. But in terms of exposure, is really a very small amount. In terms of cost of risk, during that third quarter, what we saw, starting with NPLs, is some deterioration in really few customers, mainly home developers and some agro players. In all cases, we have important collaterals and guarantees, and at the portfolio level, we don't see really any negative trend. During the third quarter, and maybe you remember, in the following July, we spoke about a write-off, and that we have been very conservative in write-off during 2023. So a new methodology was considered in the risk committee during this third quarter, and it was approved. This write-off, a new policy, is mainly for commercial loans. So, considering that, we write off during August and in September, MXN 750 million. That is really a catch up for all 2023, as we didn't have any write-off in commercial loans in the first seven months of the year. So, with this, you should expect a regular, normalized level of write-offs for the following quarters going forward. In terms of cost of risk, for 2024, we consider that the level that we have been saying about the normalized level of cost of risk for BanBajío is really between 0.6% and 0.8%, no? So this level of write-off and cost of risk during that third quarter is really extraordinary because of this write-off that we did in the third quarter. For the whole year 2023, we will be within that range, no? Also the coverage ratio, we will comply with the guidance of being above 1.5 times during the whole year. And we will keep a conservative stance in additional reserves and coverage ratio for 2024, no? Earnings for 2024, your last questions. Of course, will depend on the drivers and when the central bank start the easy cycle, and of course, drivers and GDP performance, no, for the economy. In any case, we're planning to grow our portfolios above the market speed. And we will talk about our guidance for 2024 when we report the fourth quarter in January. Thank you, Ernesto. Thank you very much, Edgardo. And just the last question, we have been hearing from some investors if there could be like a potential tax or a regulatory risk on the Mexican banks after what happened to the Mexican airport. So, just wondering if you are hearing anything, for example, the Ministry of Finance asking for having lower deductions on fiscal losses or anything that applies to you will be very helpful. Not really, Ernesto. We don't see any potential risk in the conversations that we're having with the regulators. As ABM, we don't see a risk like that really coming soon. No, not really. Thank you. Excellent. Thank you very much. Thank you. Our next question comes from Tito Labarta from Goldman Sachs. Hi, good morning, everyone. Thank you for the call, taking my question. I guess two questions. One, on your loan growth, like double digits, I think you mentioned you can grow above the market, next year. If you can give some color on how much you can grow. Also, are you seeing benefits already from the nearshoring? Could that increase your growth further, and for how long? And then second question, on your capitalization ratio, you know, very strong even after the dividend payment, still above 16%. Just, how do you—what do you think is a normalized core Tier 1 ratio for you? And, you know, factoring in, you know, what type of loan growth you might expect. But given your strong profitability, you seem to have room to pay for the dividends. I know you announced one, but is there room to pay more or what's the right core Tier 1 ratio that you would like to run the bank with? Thank you. Thank you, Tito. I will start with loan growth, and then, Carlos will take your questions on capitalization ratio and dividends. What we are seeing in loan growth is that it's really concentrated in few segments. As you saw in the presentation, financial institutions, mainly leasing companies, retail, industrial real estate, manufacturing and agribusiness. This loan growth is including important prepayments, about MXN 6 billion in the government segment, another MXN 6 billion foreign corporations. The good news is that we were able to replace those prepayments with lower ticket loans, with better margins. Also, our strategy in Mexico City is working very well, and we are growing more than 20% in the metropolitan area. The SMEs portfolio and the consumer portfolio are growing very well. High teens in the SMEs portfolio and more than 40% in the consumer portfolio. So for the end of this year, within that we will end in level of growth similar to the one we are seeing at this moment. For 2024, the loan growth will depend, of course, in interest rates, GDP performance. Our expectation for 2024 is that we could be growing between a range between 8% and 12%, depending on the market conditions. Hi, Tito, this is Carlos. Basically, as in the board of directors, we have been talking for quite a while, which could be a capitalization rate that we feel comfortable with. The answer is above 14%, especially considering that our equity is basically Tier 1. Tier 1 equity is basically sound capital. For next year, we think that with the rate of loan growth that Edgardo just mentioned, this is preliminary, of course, and that would have to be discussed and approved by the general stockholders assembly. We believe that we could pay out the same percentage of dividends next year than we already paid this year. I mean, with the second part that we will be paying at the beginning of November. We also think that we will do it in two installments, like we did this year. Okay, great. Thanks, Carlos and Edgardo. That, that's pretty clear. Just maybe one follow-up, Carlos, on that point. Just in terms of, do you have a timeframe for when you would want to get to that 14% core Tier 1? I haven't run the numbers, so I don't know if you'd get there after the payment next year, but just a general guide would be helpful. We believe that next year, if we pay out 80% of the 2023 net profits out in dividends, we won't reach the 14%. We will be closer to 15% capitalization rate. But we also think that we have to be prudent, because next year is special. It's a year that will have different risks associated with the banking business, besides the usual risk. It's a political year. Several things can happen, and we feel more comfortable with close to 15% for next year. The 14% is a general guide, guideline. Okay. No, that's very clear. Thank you, Carlos. You're welcome, Tito. Our next question comes from Neha Agarwala, from HSBC. Hi, congratulations on the results, and thank you for taking my question. We see that the government loans and mortgages are still a drag on the overall loan growth. When do you expect that to revert, probably in the coming quarters? Any color on that. Are you seeing any differentiated growth trends in any particular part of Mexico, which might be going faster or slower than the others? If you can talk about that, it would be helpful. Thank you so much, and I'll ask my next question later. Thank you, Neha. What is impacting our decisions regarding government loans is really the margins we are seeing. No? We are seeing very small margins, so we really feel that growing in that segment is not adding value to the whole portfolio. So basing in our view, in terms of profitability and margins and the use of capital, we feel more confident growing the other segments, no companies, the SME portfolio, the consumer portfolio, et cetera, and not growing really at this moment in the government portfolio. So that is why we are seeing repayments in the government sector as our participation really is based in having the right profitability. So the margins in the market are very small in this moment, no? Regarding growing by geography, we are growing very well, as I said, in the metropolitan area, but also in the Bajío region, in which we have an important market share in all the states of the Bajío region and also of course in the north. Both because of manufacturing, industrial real estate, and the agro business. We are growing very well, both in the Bajío region and in the north region. So basically, those are the geographies in which we are seeing good loan demand with the right target market based on having better margins and good asset quality. Perfect. A quick follow-on on the revenue side. We understand the NIM sensitivity and higher rates are benefiting you. So what is the internal expectation regarding rate cuts? When do you expect rate cuts to happen in Mexico? And my second question is on the trading results. The trading results have also been quite strong last year and this year. Is part of that related to the high rate environment, and could we see that softening next year with rates going down? Thank you so much. Based on what we are hearing from different analysts and economists, it seems that we will have high rates for longer, no? So of course, that will impact our revenue behavior. Our main scenario is still that rates will start coming down at the end of the first quarter, but we will talk about it in January, when we provide our guidance, no? For 2024. Regarding non-financial income, we're very happy with the results. We are growing very well non-financial income. That is reflecting our customers are using more our platforms and services, mainly payments and collection services in BajioNet, our electronic banking, FX, acquiring business, pro services, et cetera. Our transactions are growing 18% year-over-year. So that is important. More transactions comes normally with more fees, no? So, our digital transactions are growing more than 30%, and total transactions growing 18%. So we are very happy with that, and we feel that we can continue going forward in the following quarters growing high teens, hopefully close to 20% year-over-year, every quarter. All right. Thank you. We will pause once more just to make sure we get to any final questions, if anybody has some. All right. That concludes today's question and answer session. Thank you. I would now like to hand the call back over for some closing remarks. Thank you, everyone. We will be available for further questions via email or phone calls. Take care, and we will see you next quarter. Thank you very much. You may now disconnect. This concludes today's call.