Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Regional's first quarter 2022 earnings conference call. We're joined today by Manuel Rivero Zambrano, Chief Executive Officer of Regional, Enrique Navarro Ramírez, Chief Financial Officer, and Alejandro Lobeira, Head of Investor Relations. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the Raise Hand button. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Manuel Rivero Zambrano. Thank you, and please go ahead. Good morning, everyone. I hope you and your families are healthy and well. We appreciate everyone's participation today. We're very satisfied with the performance of Regional this quarter. We achieved great results, mainly driven by a better credit demand, strong growth across all of our revenue sources, and our successful strategy to continue expanding our core deposits. During the first quarter, Regional reported a net income of MXN 1,150 million. This represents a growth of 20% quarter-over-quarter and 43% year-on-year, resulting in a quarterly ROE of 20% and an ROA of 2.4%. We reach a financial margin of MXN 2,090 million, a 15% year-on-year increase, mainly due to a better demand in higher margin loans, a higher policy rate, and an increase in demand deposits. The NIM was 5.3, and the NIM of total loans was 6.5%. Regional's asset quality keeps showing a great evolution with the NPL ratio at 1.5% and reflecting a better cost of risk, resulting in a -0.16%. During the first quarter, MXN 49 million of provisions were released. Our non-financial income keeps expanding at a fast pace, totaling MXN 850 million, a 20% growth year-on-year, mainly due to a strong performance of merchant foreign fees and FX fees, which expanded 43% and 15% respectively. All of these factors generated a total net income of MXN 2,819 million, which is 24% higher than the first quarter of 2021. Operating expenses amounted to MXN 1,261, and the efficiency ratio decreased 226 basis points and stood at 46.1% as a result of our cost control initiatives. Capitalization ratio remains solid, showing an excellent figures, reaching 16.5% as of February 2022, which generates an excess of capital of 446 basis points compared to our internal limit of 12%. During the quarter, Regional expanded its total loan portfolio by 6%, mainly due to our growth of the wholesale segment, auto, and consumer portfolios, which these last two keep growing at double-digit growth rates. Regarding the performance of Banregio, the wholesale portfolio had loan growth of 7%. Their demand is mainly originated from the North region in Mexico and Jalisco. Moreover, we see greater dynamism in industries like home builders, industrial warehouses, and agro business and manufacturing. We expect credit growth to continue to recover in a gradual way and more focused on the northern regions. Deposits continue to exceed our budgets and will continue helping improving our margins. As of Hey, we continue to grow the number of clients in an accelerated manner, although this quarter, our main focus was to relaunch our app and our complement to offer to include sole proprietors and small businesses as well as children's accounts. Commercial strategies are underway to further our reach and accelerate our client growth. We reached 430,000 active clients with 1.7 products per client and an NPS of 71, a cost of acquisition of MXN 232, and a lifetime value of MXN 3,860, and a lifetime value over cost of acquisition of 16.7. We remain developing our capabilities to increase our value and differentiator offer into different segments based on size, sectors, and special needs, always taking into consideration an increase in our customer lifetime value through cross-selling. In conclusion, our efforts have been reflected in a better consistency in our asset quality, an extensive customer loyalty which translates into higher deposits and a better asset quality, a continuous growth in non-financial income, and the excellent results of our digital solutions. We're confident to achieve our guidance, and we expect the economy to recover to pre-pandemic levels in the following quarters. Thank you very much. We appreciate any questions. Ladies and gentlemen, to ask a question, you will need to press the Raise Hand button. To withdraw your question, press the Lower Hand button. Please stand by while we compile our Q&A roster. Our first question comes from Ricardo Buchpiguel. Please go ahead. Good morning, everyone, and congrats on the good results. I have two questions. First, after the provisions release we saw during Q1, what we should expect in terms of cost of risk and NPLs for the following quarters? Second, we saw a relevant improvement in Hey Banco unit economics, especially with a better income per client and a lower CAC. Can you also please give more color on what drove those improvements? Thank you. Thank you, Ricardo. I will answer the first question about the cost of risk. As we explained in the document, in the quarterly report, in the annexes, we created MXN 397 million of provisions directly to the balance due to the change of methodology for greater scoring for the commercial loans, for business loans. As part of that, we managed advance some of the provisions. We had a very good quarter in terms of improvement on the quality of the customers. If you remember, in the last quarter, we talk about a very large customer for us that went to Past Due. This customer was restructured and has made three payments and is totally current right now. He's not in Past Due. He's in stage one. As this customer, we have many other customers that have paid. It's a mix of both a lot of recoveries, that you can also see the amount, around MXN 698 million of recoveries from a stage three to a stage two or stage one, and also the new methodology of provisions. What could we expect for the following quarters? We continue our collections efforts and negotiation with some customers that are still in stage three. Should be more normalized, going back to 0.7%-0.8% cost of risk. That's what we expect in the following quarters. That's it. Yeah. In terms of regarding the cost of acquisition and the increments in the lifetime value, it was mainly due to our cross-selling strategies for with higher volume growth loans, auto and mortgages mainly. In terms of cost of acquisition, we definitely lower our spending compared to the last quarter of last year, mainly due to, as I said, that we were mainly focused on relaunching our app and adding the segments of small business and sole proprietors and children. We will continue to further develop our growth this following quarters. Although we want to maintain our cost of acquisition in the ranges that we've already talked about, so we shouldn't have a larger cost of acquisition. We are just having a change on our onboarding processes to do it more mono product, and that we think will continue to further our reach in doing it in a more productive manner. In a sense, we think the evolution will continue, as well as having a more accelerated growth of clients and volume going on further. Thank you. Very clear. Thank you, Ricardo. Our next question comes from Olavo Arthuzo. Please go ahead. Hi, everybody. Can you hear me well? Yes. Yes. Okay. Thank you. Thank you for this opportunity to make some questions. I actually have two quick questions related to Hey Banco, and the first one is about this cross-sell index, because in this quarter, it increased to 1.7 when comparing to the 4Q at 1.6 times. I just wanted to know which products these clients from the digital bank are demanding. Sorry, in other words, what products are being considering in this index? My second question on this topic as well is about the targets for the number of clients of Hey Banco. Because with this ongoing gradual increase in competition in Mexico within the individuals profit pool, what is the short-term target for the number of clients of Hey Banco? Thinking about this year, or if you could provide us some targets for the next year as well, I would be very, very appreciative. Thank you. Yes. Thank you, Olavo. Thank you for your question. The products that we are considering is the debit account, the savings account, then we have an immediate savings account, then we have a investment, which is a time deposit, then we have stocks trading, credit card, guaranteed credit card, auto loan, personal credit, a credit line, mortgage and insurance products. Those are all the products that we're offering. There's an ample growth in many lines. I mean, we can give it to you. Okay. If I just may do a little follow-up on this. This calculation. Yes. -of 1.7, which is basically two products. I believe that it's the current account. Which is the other one? Just for me to understand. that would be the savings and then the time deposit. That would be credit card as a fourth. There's a lot of menu with. Yeah, those are the four main ones. Except to change, definitely had a boost. I mean, we sold 26. Now how many went? We sold 23,000. Stock trading accounts. Yeah, stock trading accounts in the first quarter, so that was huge. We definitely have a lot of response for our clients. There's a lot of engagement. The data that we have is that our clients have loans outstanding with other banks of MXN 10,000 million. Those are clients that are very high value. We do consider them to be very productive, so we're pretty encouraged to continue our cross-selling strategies because we know for sure that these types of these type of clients have a lot of opportunity to continue developing and increasing our lifetime value. These are not clients that are incoming to the financial system. I mean, we do cater them, but just with a debit account or an insured credit card. Our main segment that we're catering is the already banked that are looking for better service, better products, better pricing, better technology, better service, more engagement, et cetera, right? It is pretty different from what others, I think, are doing. We are very positive that the type of clients that we are engaging with are of higher value than anything that we have seen in other fintechs or here in Mexico for sure. Okay. It's the underserved client. Thank you for this. The second question, I just wanted to have- Oh, yeah, definitely. a little more color about the target. Our Okay. Yeah, our target is 1 million. At the pace that we're right now, we should be at 600,000 at the end of the year. We do think that our strategies are underway already. We'll continue to further our growth, and it should accelerate in the next following quarters for sure. We changed our onboarding, as I said, to a more monoline, which will be more productive than we've done so in the past. We're doing a monoline for credit card and for a credit line for a business. It would be much more productive, and we'll then add more efficiency to our cost of acquisition. We're very encouraged. I think it will continue our growth, and we will definitely see better growth in the next quarters. For next year, we don't have a public guidance as of right now, so we all have to do it for the next quarter. We will give you more information, but for right now, our objective for this year is the 1 million mark, and we will definitely try to do so. Okay. That's great. Much appreciated. Thank you very much. Our next question comes from Yuri Fernandes. Please go ahead. Hello. Hi, Manuel, Enrique, Alejandro. Thank you for the opportunity of asking questions. I had a first one regarding the guidance. I guess there are two lines that call my attention here. The first one is margins. I guess when you released the guidance in the previous quarter, expectations were for rates to be around 7%. I guess your, like, Banregio's expectations was for 6.75%. And I guess we have, like, a more, I would say, material hiking cycle ahead, right? We are already at 6.5%. My question is regarding the guidance. Do you see upside risk here for your margin guidance? Also regarding the cost of risk, just to follow up, because you said that you expect the coming quarters to continue running around the 0.8% cost of risk. But if we keep 0.8% in the coming quarters, I guess your cost of risk guidance will also be below your initial expectations for cost of risk. That, I guess, was 0.7%-0.9%. My question is, like, how to think about those things, right? Like, the moving pieces, we are already almost in May. What should we see regarding the guidance on the upside or even downside risk here? I can ask another question later. Thank you. Thank you, Yuri. About the cost of risk, you are right. When we did our guidance, we didn't consider the impact of the change of methodology. If we have three quarters of 0.8% or 0.7%, that will be more close to 0.7%, as we see right now improving the quality of the loan portfolio. The average will be 0.5, 0.6. We are not going to change the guidance as we prefer to recognize that we didn't consider the changes on the accounting and IFRS, also as CNBV new methodology for businesses. You are right, the annual one should be lower than we guided. In terms of margin expansion, we did our budget and our guidance considering a range between 6.5% and 7%. We're already above 6.5% right now in TIIE. We expect new rate increases in the following quarters. We are not changing right now the guidance. As you can see, we have a double effect. Also, we are increasing our reportos business and, in contrast, the securities investment. The total NIM, not the one only for loans, will be in range, and is the one that we guided. The one that should improve more is the NIM of total loans. We don't have an exact calculation as we are moving all the excess of equity to reportos, to repurchase agreements. That will impact. The NIM will increase the margin. The margin in pesos will be higher, but the NIM of reportos is smaller than the NIM of loans. No, super clear, Enrique. It's a mix like of your increasing your repo business because of, I guess, maybe the new accounting, right? If I may, also on accounting, what is the criteria for stage two and stage three? This is new and we are not totally aware, like if you consider GDP, unemployment, or if you are using a past due methodology. If you can help us here to understand what is the overall criteria. I know this is an expected loss, but just like some high-level view on what should we see in each of those buckets. Thank you. Yes. A very high level because there are some details. The stage three is very similar, what used to be past due loans. It's 90 days past due. That's better for some customers, especially in credit cards on some revolving lines that used to be 60 days past due. That's where you see some improvement. We have less improvement than other banks, obviously, by the proportion of our credit card business. Credit card for companies, that is very small for us, not credit card for individuals. You could see, and is the way we are explaining to internally, basically stage two is from day 31 days past due to 89, or 30, because it's including 30 to 89. Stage three is above 90, including 90. The other difference is forcing us to be more strict and more disciplined with better discipline to collect, is that if a customer changes stage during the month, you cannot change the stage status at the end of the month if the customer pays. Let's say the customer is due, the payment is due day 15, but the customer pays day 21. In the previous methodology, we changed the status because at the end of the month it was correct. Right now we are being very strict, that if the customer pays later, even though at the end of the month it has already paid, it's in stage two for that case. No, super clear, Enrique. Thank you very much. Thank you to you, Yuri. Our next question comes from Jorge Henderson. Please go ahead. Hi. Hi, Manuel. Hi, Enrique and Alejandro, and congratulations for the results. I have a question on Hey Banco. I mean, congratulations on the results. The loan portfolio grew almost 50% quarter-on-quarter. You already mentioned you grew on auto and mortgage loans mainly, but how was Hey Banco loan growth by segment in more detail? Did you also grow on credit card and business loans? Thanks. Well, I mean, in credit cards, we did grow to around MXN 400 million in outstanding loans. In terms of business loans, we are just launching it, so in a sense, we're gonna have more volume in the next quarters. In terms of the consumer, credit cards, as I said, has MXN 463 million. Autos are MXN 1,730 million, and mortgages are MXN 746 million. Okay, thank you. I have another question. It's on the bank's NIM on loans. We noticed that your cost of funding increased a little bit. I don't know if you can give us a little bit color on what drove this increase in cost of funds. I will appreciate any detail on that. Thank you. Yes. As I mentioned in the answer to Yuri, as we are increasing the repo business, the repo business has two sides, the liability, that is the repurchase agreement, and the asset, that is securities investment. In the liabilities, are very expensive liability because it's, we are repoing, bonds from government bonds, and paying the customer an average of 90% of TIIE. As we increase the repo business, we increase the cost. Obviously, we increase also the income. Okay, that's very clear. Thanks a lot. We increase the cost, the expense, and the income. Thank you. Next question comes from Brian Flores. Please go ahead. Hi, team. Can you hear me okay? Yes. Yes. Perfect. Thank you for the opportunity. Just wanted to ask if you could elaborate a bit on your strategy in social media presence. I have seen this segment called Hey Banco. So I would just like to ask, what are the objectives there, and how do they tie to Hey Banco in terms of monetization? And if we should expect this to become a priority, also in terms of the strategy going forward. Thank you. Thank you, Brian. Well, definitely we're working on the long term in terms of our strategy of our brand being known. We are seeing that the cost of ad words for the main social networks will definitely have an increase in the following 5 years for sure. We're gonna see more spending on those platforms with those search words. Hey Banco will allow us to have a client base, if you will, of a product which is content, which is cheaper to produce and definitely will allow us to have a recognition of our brand in a more viral way. It is easier to sell a piece of content, a 15- or 30-second segment video on TikTok, than it is to sell an account. Definitely this will allow us to have much reach and recognition in our brand. In the future will allow us to have a cost of acquisition in the objectives that we are looking for. It is something for the long term. We are not expect to invest a lot of OPEX. It is very organic, so it is cheaper to produce. But definitely is working pretty well. It is producing good results in terms of number of followers and engagement, which is pretty good and different from what we've seen with other banks. I mean, even we have. I mean, it is nothing that we are proud of, but definitely something good, and even we have, I don't know, much better engagement than the big banks. Definitely, social media, definitely something that we are looking for as a strategy to have a brand awareness in a more positive way than just spending ads on Google and Facebook, which is good and effective. It will be part of our strategy. Perfect. That is very clear. If I may, just a quick follow-up. Is it just limited to social media, as you said, some videos, tweets, something like this? Or are you also planning to, you know, elaborate at some point, maybe your own programs? I'm talking about maybe digital channels, TV content, something like this in the long run, as you said. Well, we're producing our content, so it is. We're producing for all the platforms. We do have a website we're launching this month. We do have a newsletter that already has 200,000 active subscribers to the Hey Banco newsletter, so it is working pretty well. I think it will continue to add. As I said, we're not producing. I mean, you would it. As I said, the content we're producing, it's much more organic. It is nothing more scripted. It's nothing. It's not news related, so it is very soft content. In a sense, that's what we're aiming for, to have a presence and have a reach in customers and segments that normally are not first buyers of financial products, you know. In a sense, broadening the segments that we're reaching to. Very clear. Thank you very much. An example would be women. Also, and sadly, we have only 30% of our customers are women in the sense that, I mean, that something that we're trying to figure out and content it is a way to reach in a more concerted way. Having conversations with our clients and being able to give them more confidence into buying the products in a more well in a more peaceful manner for them, right? They need to have more confidence on what they're buying. In a sense, that's one of our ways to reach these clients or this segment of clients and being able to have conversations and being able to create a community, and then obviously, reaching out to sell more products in the long term, right? Super useful. Thank you. Thanks. Bye. Our next question comes from Gilberto Garcia. Please go ahead. Hi, good morning. Thank you for the call. I had a couple of follow-ups on different subjects. First, on provisions. You mentioned in the press release that there was a very significant transfer from NPLs to performing in business loans. Is this exclusively related to the client you mentioned that restructured, or did it have anything to do with the change in methodology? It's both, but it's mainly customers that are being restructured, or they are paying, or we are foreclosing the collateral and then reducing the NPLs. It is more improvement in any of the three ways than to do with the methodology. No. Okay. Thank you. Understood. My second follow-up, just to double-check, you mentioned that the increase in the cost of funds has to do with the growth in the repo business. Was there any impact from the greater growth in Hey Banco, given that it has higher rates for deposits? Not in the aggregate. Obviously, there should be some basis points i n Hey Banco time savings cost is like 6.2% in average, because we have 5% and 7% as rates. It's below TIIE. Even it's improving if you compare to TIIE, the cost of the funding of Hey Banco versus TIIE. Obviously it affects, but the size is five million pesos in Hey Banco with cost. In the whole 120 billion pesos of funding is not relevant. It's more relevant the reporto that is MXN 25 billion at the end of March. It started in the last March at 15, then it's almost 50% of increase. The repo business is very close to the TIIE in cost, then it's still more costly than the TIIE saving from Hey. Well, understood. Thank you very much. Thank you to you, Gilberto. Our next question comes from Carlos Gomez-Lopez. Please go ahead. Hello, good morning. Thank you for taking the call, taking the questions. I'm actually going to go back to two things that you already commented about. The first one is your guidance. You are telling us that your NII will actually increase in pesos. The NIM will not, but the NII will be higher. Your provisions will also be lower because the guidance did not incorporate IFRS 9. Why, you know, why would the bottom line not be higher? Why should the guidance not increase? It may simply be that you don't want to do that in the first quarter. You don't want to revise it every time, which we understand. Is there another reason why you would not like to increase the guidance at this point, given that two of the four main lines are going to move in the right direction? The second one refers to the number of clients at Hey Banco. We calculated the increase this quarter was only 33,000. That's, you know, that's low compared to the 1 million target that you have this year. Is this a particularly low quarter, and you will accelerate later? Thank you. In terms of not changing the guidance, it's too soon for us to change the guidance, especially on the net income. Obviously, we believe with the increase in the rate, increase in the margin, and lower provisions for the full year, we will be at least in the higher range of 17, but still in guidance. We would prefer to wait and see the second quarter, and maybe at the end of the second quarter, we can change these three lines that you're mentioning, both provisions or cost of risk, because we don't guide provision. We guide cost of risk, and NIM, if we absorb, and we see new increases on the rate, and obviously net income, if we believe that we are going to exceed the 17%. Right now, as we are on the top side of, still of the guidance, and we believe it's too soon to change it. Okay. Thank you. In terms of client growth, we did some extraordinary promotions at the end of last year, and we hiked the ad spending in the last quarter. We definitely had a boost from that. This quarter, our main focus was to relaunch our app and add to be able to be adding sole proprietors, small businesses, and the children's account. It was a big relaunch, we lowered the ad spending this quarter. We have, as I said, we are changing our onboarding processes to be more monoline. The risk assessment will happen pretty fast for the clients. If the client wishes to continue the onboarding process, it will continue in the app. That, in a sense, will allow us to be more efficient and to continue incrementing our ad spending, but not necessarily incrementing our cost of acquisition. That's our main objective. The other thing would be that, obviously, our main, I mean, as I said, 1 million objective continues to be there, but the main focus right now is to have the best experience for our customers and have the best service and have a business that generates profitability in the short term because of the cross-selling of the products that we're doing and because of the customers we are targeting. As we are doing this for the long term, we're not adding clients just for the number. We're adding clients because we think that will produce a lot of profitability in the medium term and being able to do so with quality customers, and as we've done so with Banregio brand, and that's something that we wanna generate too in Hey Banco. Definitely, the 1 million mark is something that we're looking for. We already have strategies underway to further their increase. For example, we are selling the card in 7-Eleven, so that will be something much easier for clients to go to a 7-Eleven just buy the debit card, so it's very easy to do those type of things and being able to generate more volume, but always focusing on customers that are of quality for sure. Not just adding volume because of volume, because that obviously, in the long term, will not produce the results that we're looking for. That's very clear. Thank you so much. Thank you, Carlos. Our next question comes from Eric Ito. Please go ahead. Hi, guys. Thanks for taking my question. I have two quick ones. The first one regarding NPLs. Just want to get your sense on what do you think is a new sustainable level for the NPL ratio? The second one regarding going back to your guidance. Just want to get if you could give us a position regarding your loan growth. Do you think it could beat expectations or maybe if it's closer to the lower range of the guidance? Thank you. Okay. In terms of NPLs, the- w e expect to continue the variability as we always guide below 2%. Honestly, we expect below 1.8%. Just as I mentioned, with this customer that went to past due or to a stage three in November, and it was MXN 300 million customer or line of credit. Then one single customers can move 200 basis points or twenty basis points from 1.5% to 1.7%. In general, we expect to maintain between 1.5% and 1.8%. That would be the short answer. In terms of loan growth, we think it would be 10%, 8%-10%. As I said, we see a gradual economy recovery in the next following quarters. We do see a lot of positive trends in terms of more investment in the North. We see the consumer spending and confidence pretty good. We see the tourism industries gathering much more speed. In a sense, we definitely see that the recovery will definitely produce more loan growth going on further, but still we think not to a sense to say with a very confident way that we're gonna be able to achieve more than 12% growth at the moment. Okay, great. Thank you. Our next question comes from José Cuenca. Please go ahead. Hi. Good morning, everyone, and thank you for taking my call. Just two very quick follow-ups. With regards to this client that went past due and then was restructured and then recovered, can you just quickly remind me, please, what's the industry that this client belongs to? Just a reminder. My second question is if it would be fair to say that, with regards to Hey strategy, could we expect like growth in the same products that you just alluded to, namely, savings, time deposits, credit card? Just wanted to confirm if those would be like the main drivers of growth in the short term. Thank you. The client was in the travel business segment, the prolonged stay business segment. It was a conjoined loan that we did with Scotiabank, and the owner was a private equity fund. Things got, the paperwork were somewhat more tougher for those two reasons. Working with a global bank and with a fund, it is much more difficult than working with private clients. In a sense, the recovery has already begun. The sales are incrementing in a very positive manner, so we are confident that they are recovering in a very good manner. The assets are pretty good quality. We think as the economy continues to recover and things continue to normalize, those clients will continue to have positive cash flows and a way to repay in a more convenient manner. The second was in terms of the drivers. Yes. Yes. The main driver for the client growth in terms of quality customers has been for the time deposits and for the investment part of our solution. The most attraction has been for those. Although the ad spending continues to be much more prone to be credit cards and credit related than debit accounts. In a sense, we've organically grown a lot of good deposit clients. In terms of the ad spending, that has more traction. The pieces that are related to credit are the ones that are more attractive. Perfect. Thank you. Our next question comes from Andrés Jiménez. Please go ahead. Hi. Good morning. Can you hear me? Yeah. Yeah. Thank you. Well, my question is regarding dividends. We see that in the cash flow statement, you say you pay around MXN 3.9 billion. Can you elaborate more about this? What are the status with the talks with the regulators? Thank you. Yes. Well, the dividends has been already paid the April eleventh, April twelfth. That's it. We had our general assembly on March, the last day of March. There is nothing more to say. They are already being paid. Great. Thank you. Thank you. Our next question comes from Barry Cohen. Please go ahead. Barry Cohen, please go ahead. Since there are no more questions, on behalf of our senior management, I would like to thank everyone for joining the call. We look forward to speaking with many of you in the coming weeks, and if additional questions arise, please don't hesitate to reach out to Alejandro and our investor relations team. Thank you for your interest in Regional, and have a good day. Thank you, everyone. Good day.