Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Regional's second 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, Planning and Investor Relations Officer. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during this 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. We appreciate everyone's participation today. We're proud of Regional results for the second quarter as we continue to see improvement of our asset quality and loan growth. We continue to increase both non-financial income as well as financial margin. The latter mainly driven by our growth in demand deposits and an increase in the policy rate. Regional generated MXN 1,155 million of net income during the second quarter. This represents a 21% improvement year-on-year, achieving a quarterly ROE of 20.9 and an ROA of 2.6%. The financial margin for the second quarter was MXN 2,251 million and expanded for the fourth consecutive quarter with a 28% year-on-year variation. The strong upside trend in the financial margin is a result of higher policy rate, higher margin loans, and our successful strategies to maintain double-digit growth in demand deposits. The NIM was 5.4%, and the NIM of total loans was 6.5%. The loan NIM expansion is explained by our growth in the repo business, which grew 32% year-on-year and has lower margins than our loans. Our loan to deposit ratio continued to improve, crossing the 100 threshold for the first time. As well, our CASA ratio improved to all-time high of 61%. During the quarter, our asset quality showed further improvements, with the NPL contracting 21 basis points to reach 1.3%. On the other hand, the cost of risk improved to 0.22% from 0.42% in the second quarter of 2021. During the second quarter, MXN 66 million of provisions were created, and the coverage ratio stood at 171%. As a result of our non-financial income, we keeps increasing a double-digit pace, presenting an increase of 13% year-on-year. Hey Pago, our merchant acquiring business led the expansion in non-financial income, with merchant acquiring fees growing at 78% year-on-year and our card fees 48%. Likewise, FX fees increased 19%. All of these factors generated a total net income of MXN 2,854,000 million, which is 16% higher than the second quarter of 2021. On the other hand, operating expenses amounted to MXN 1,316,000 million, a 16% year-on-year growth. In general expenses, the growth is explained by an increase in marketing expenses that has helped us grow and attract new customers at a very competitive cost of acquisition at MXN 106. Additionally, expenses related to our higher-end [guess] in credit card business as well as in the payment business that both have an income associated with. As we continue to grow our active customers in a productive and a profitable manner, we will continue to see this expense line to grow as well. The salaries and benefits expense growth is mainly explained by our technology expenses related to hiring of more developers, a higher headcount in services areas, and the current inflationary environment. We are confident that we have already the correct size and the capabilities of our tech and design teams, so we expect this line of expenses to flatten over the next quarters. The expansion for our technology team is part of our plan to improve Hey Technology, not only in the customer experience, but in the six different dimensions as we are working simultaneously, onboarding, new products and features and services, analytic capabilities, and automation of our post-sale. Hey Banco, Hey Pago, excuse me, and Banking as a Service. Finally, in this, all of the separation processes for Hey Banco to be able to operate soon. Despite the dividend payment we did this year, Regional capitalization ratio remained solid, standing at 14.7% as of May 2022, which generates an excess of capital 271 basis points compared to our internal limit of 12%. During the quarter, the total loan portfolio of Regional delivered 8% growth, which was led by the wholesale and consumer portfolios, which keep growing at a double-digit rate. Even though we expect a relative soft credit demand in the next 18 months, we see industries like home developers, industrial warehouse builders, commerce, agribusiness, and manufacturing that are expanding at a very fast pace and demanding more loan growth. Moreover, foreign direct investment in Mexico still is presenting a very positive trend, focusing on industries and manufacturing and commerce, which have led the economic recovery since COVID crisis, especially on the north and the center north regions of the country. Furthermore, the total exposure to export activities represents less than 10% of our portfolio. We are continuously assessing the behavior of our portfolio and regions that we are locating, aiming to serve industries with better dynamics, improving the profitability and the quality of our loan portfolio. For Banregio, the wholesale portfolio had a loan growth of 6%. Deposits continued to outpace our expectations, and we can anticipate this trend will continue, which will allow Regional to further improve its margins. Regarding Hey, it keeps attracting new clients at a very fast pace, as our commercial strategies are delivering high quality growth. This quarter, as we successfully integrate our payment link solution and an improved yield for our promissory notes, a better offering of our insurance products in our new client referral program. As of the second quarter of 2022, Hey surpassed 480,000 active customers with 1.7 products per customer and an NPS of 61, a cost of acquisition of MXN 191, and a lifetime value of MXN 2,831, and a lifetime value over cost of acquisition of 14.8%. Continuous innovation and data intelligence keeps strengthening our capabilities and user engagement. Our product offering is constantly enhanced to deliver tailored and attractive products for customers of any size and sectors, targeting a better cross-selling index that will lead to a higher customer lifetime value. Our extensive investments in technology and development to build our digital bank have led us to innovate and redefine traditional banking methodologies with exceptional results for Hey Banco. Consequently, as we seek to improve and simplify our financial services, we launched Hey Tech, a technology service company that will commercialize our digital banking platform. This platform will enable other businesses to integrate digital solutions such as digital onboarding, one-click buy offers, outsourcing for risk, commercial collections, and fraud preventing intelligence, among others. In the following year, this company will start providing Banregio an integral solution to digitalize customers onboarding, aiming to expand its use and transactional, and transactionality with a new tool that will reinforce the customer engagement, increase the wallet share, penetration, and improve customer satisfaction. We aim to unleash a great potential in Banregio's customer service and customer base. Our objective will be able to achieve better KPIs as we have been able to see in key, but with larger volume customers. As the digital environment keeps gaining relevance on digital transactions, we see an improvement in the monetization of our proprietary technology that will make banking processes more efficient while accelerating Regional revenue generation. To sum up, our efforts have been reflecting into a higher financial margin, solid deposit growth and even better asset quality, consistent growth in non-financial income, and the accelerated expansion of our digital solutions. We are confident to achieve this objective stated in our guidance as our business and risk management initiatives keep delivering satisfying results. A higher customer satisfaction and an ample and personalized offering that will allow us to keep redefining financial services and continue to be one of the leading financial institutions in Mexico. Thank you very much. We appreciate any questions. Ladies and gentlemen, we will now start our Q&A session. 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 Ernesto Gabilondo. Please go ahead. Hi, good morning, Manuel, Enrique, and Alex. Congrats on your results and especially in your annualized ROE for the quarter, which is again at 21%. I have a couple of questions from my side. The first one is, on your expectations for loan growth, for the second half, and maybe some insight for the next year. We are hearing, of a potential GDP contraction next year. Considering that scenario, how do you see loan growth next year? I don't know if you will be able to maintain the same levels we have seen this year, or do you think it could be lower? Also related to this one, I will appreciate, how much do you expect Hey Banco to contribute for the loan growth this and next year? Also related to this, how much of your portfolio has direct and indirect exposure to the U.S.? My second question is on asset quality. We continue to see sound asset quality trends. However, considering again, in the scenario of a potential GDP contraction in Mexico next year, where do you see the cost of risk? Thank you. Thank you, Ernesto. Thank you for your question. Well, yes, definitely. If we experience a slowdown in the U.S., mainly in the manufacturing business, we are gonna see that slowdown in Mexico for sure. We don't expect it to be obviously as hard as the pandemic. We don't expect it to be very directly to, for example, internal secular trends, for example, consumer dynamics. In a sense, it will impact some industries. For example, that will depend on the demand in the U.S. of the products in the U.S. You're gonna be able to see, for example, in the auto business, still strong demand and a very good labor force and still attracting new customers. For example, in Nuevo León, that we are delivering to the new Tesla plant in Austin, Texas, and we are having we've received already good investment from the providers of Tesla. You're continue to see this trend on the north region, and you're definitely going to continue the trend on the Bajío region. I think that trend will continue. That will obviously will allow us to continue the secular trend of homebuilders and continue to. You can see the mortgages businesses growing at very good rates. Even in the pandemic, it grew at a very fast pace, and we will see that trend continue. We expect it to continue. In a sense, we... Tourism, I think it will continue as well. Demand in housing for those segments will continue. Definitely the slowdown will impact for sure. We don't see a huge impact in terms of a shock. We don't see it in terms of liquidity, as we see that both our segments in terms of individuals and businesses are with a very high liquidity levels. In a sense, we're very prepared as we, as you've seen our capitalization ratio is recovering at a very fast pace. Both dividends, we have an ample growth in our non-financial income. Definitely very good to generate more income in an environment that may slow down in the very next year, right? I think we're still lagging for sure as we normally do in Mexico. Economic activity will lag a bit. We're not seeing that trend right now. The demand for loans to date has been much larger than it was six months ago, than it was 12 months ago. I think in the near term, this loan growth will continue. Definitely as we are gonna see the presidential elections coming up soon and with everything heating up, I think investment-prone policies will come in more states. I think that's gonna be able to show more growth in local communities. In a sense, I think we're gonna be able to see mixed things in types of industries and localities. Our home state continues to grow at a very good, fast pace, and the last quarter was one of the biggest in terms of foreign direct investment. In a sense, I think we have very positive things going on and very secular things in terms of consumer trends, right? Obviously, we think that our cost of risk right now is very low. We think that we are at a normal rate of 0.8%, right? That's what we normally have, and I think that's where we're gonna be able to see in the next year. We right now have this good cost of risk because of our good quality and I think in a sense you could see that a good coverage ratio and in terms of loans to reserves at a very good rate. You right now are seeing the healthiest portfolio that we have had in probably the last five years. You're seeing a very good trend in the short term in terms of loan growth. You are seeing a growth in loans that have larger margins, like small businesses, individuals, and we're doing so with a very productive manner. In a sense, I think that we're gonna be able to continue growing at a very good rate. Obviously, we're normally we don't push credit. We're long-term investment, so we don't push credit. If we don't grow in a quarter for us, it's irrelevant, right? In a sense, the growth you're seeing is pretty much the demand of the market and us being as prudent as always. In a sense, I think if that continues, you're gonna be able to see good trends still. Yeah. No, perfect. Perfect. Thank you very much. Very helpful. Just a follow-up and the last question. When are you seeing the nearshoring opportunities could start to take place? And then the other one is on your net income guidance. When we annualize the net income for the first half of the year, it implies earnings growth close to 30% year-over-year. I think that's well above your 17%-20% earnings guidance. How should we think about your earnings guidance, and where do you see the upside risks? We're not changing our guidance yet, but definitely we think we're gonna be able to have and deliver what you're expecting. I mean, we're not seeing a shock in terms of the economy as we see a slowdown more than a shock, and we see ample liquidity and we're not in terms of leverage, you can see that we have a very low leverage in Banregio. I don't expect it to be as hard to be able to get to those numbers that you already said. Still we're not changing our guidance yet. You see, upside risk could be in terms of NIMs or fees or customer risk. Also wanted to hear your thoughts on this nearshoring opportunities, when you think it could start to take place. The nearshoring opportunities, you said? Yes. The nearshoring opportunities. Well, I think the nearshoring already happened. I mean, yeah, the Nuevo León or Chihuahua, for example, are the second and the fourth most important states in terms of foreign direct investment. We're still seeing that trend. I think each year continues to be one that we're seeing more and more companies arriving to Mexico. Obviously, I mean, we're not very good at designing, but definitely we're very good at manufacturing, so I think that will obviously continue. Yeah, I don't think it's stopped in a sense. I mean, we've talked with our clients in terms of our the wholesale. Well, in terms of logistics, they're already seeing a lot of good demand in terms of more warehouses being built and more and more demand on those fronts. I think that we'll continue to be able to see that even if a slowdown in the U.S. manufacturing business continues. We see that the exports of U.S. to Mexico are at all-time high, and we see that the exports to U.S. from Mexico are at an all-time high. I think we're very confident that that trend will continue as things have already been able to set more certainty for investment. Yeah. Okay. Perfect. Thank you very much. The next question comes from Ricardo Buchpiguel. Please go ahead. Good morning, everyone, and congrats on the good results. I have three questions on my side. First, we have been seeing NPL staying at historical low levels, so I wonder if you believe this is a structure change or if we should see a normalization eventually. If so, when this normalization should happen? For my second question, I should expect sequential improvements on NIM similarly as we saw in Q2, given the high interest rate in Mexico. For my final questions, which are the main products that Hey actually perform in terms of growth for Banregio, and when it should be more clear on numbers and in the P&L for the group? Also, should I expect any pressure on OpEx for the entire group because of these and other initiatives that Hey has been working on? Thank you. Thank you, Ricardo, for your questions. Just to recapitulate, the first question was on what? Sorry, we lost you in just the first part. Okay. Is the first question I wanted to check with you if you do believe there would be a normalization in terms of NPLs because NPLs are at historical low levels? Yeah. As we said, I think the cost of risk will remain at 0.8% that we normally have. When do you believe this the normalization in terms of NPLs should happen? Within the next 12 months, definitely. I mean, we're not seeing right now anything that's pressing in terms of. We have nothing in terms of. All of our portfolios are very healthy in terms of. We don't see any huge problems in the short term in our wholesale business, in the small business loans, in. I mean, you can see Hey Banco's NPL ratio, it's at the lowest. We don't see it incrementing abruptly soon, right? That's why I'm pretty sure 12 months to get to our normal level would be expected. Mm-hmm. Right here. In terms of the second quarter, I don't remember. The second quarter was NIM, right? Yeah, the second question was in terms of NIM. Why did it- Yeah. If you believe there should be a sequential expansion on NIM, and if it should be similar as you saw in Q2. Well, in terms of the financial margin, you see a 28% year-on-year growth, which is pretty awesome. We think that we will continue to increase, not at the same pace obviously, but definitely on a very fast rate. In terms of the NIM, as we said, you're not seeing the full effect on the NIM, the full effect of the financial margin increase because of our assets that are bearing very low margins, which are our repo business. We're incrementing our repo business, and those assets are producing low margins. Obviously, they have very low risk, I mean, Mexico risk. That's why you're seeing a NIM that's not growing as well as the financial margin, right? That makes sense. Not only the policy rate, but obviously, we're growing demand deposits at a very huge rate, so this is creating a very good cushion in terms of the increment on the policy rate. So that's allowing us to increase our margin substantially, right? So very good trends, and we're very happy with the creation of the increase of the financial margin. In terms of OpEx, as we said, we already have 800 developers and designers that are working fully on the full scope of creating a modern bank, right? From end to end. That will allow us to be very efficient and very able to continue building all the solutions that we need. We don't expect those 800 developers to increase in terms of size, in terms of the number. We think that the capabilities that we need are already here. We've built all the analytic capabilities needed, for example, right? We've been very able to have all those capabilities, for example, in designing all the UX and the UI needed. All those teams are already set in, and we're not expecting it to be a further increase, right? We're pretty confident that those levels and that line of expense will flatten over the next quarters. In terms of that service that we're aiming to give to Banregio will be able to have a completely paperless system in which we're gonna be able to give Banregio the most, in a sense, modern and sophisticated way of attracting and serving our customers and, in a sense, being able to cross-sell the customer base at a very fast pace. If you see the customer base of Banregio, we have huge potential in terms of being able to cross-sell clients through the same technology that we're using in Hey Banco. That is gonna be much more efficient and is gonna create, in the short term, very positive trends in fees, in loan growth, and with very low risk because it's mainly cross-selling, right? Not only cross-selling, but cross-selling to a very high volume type of customers, right? Hey Banco's customers are one-third in size in their demand deposits at Banregio's lowest customer segment. You can see that we have still a huge gap there and, in a sense, Banregio's gonna be pretty able to reach all the 500,000 customers that have, and being pretty able to give all of them, I mean, to give you an idea, we do have 70,000 customers, SME customers in Banregio. We only have 200 RMs for those customers. It is pretty difficult to be able to achieve a cross-selling for those 70,000, only thinking about those 200 RMs. Being able to have an app that has a communication 24/7 with customers has allowed Hey Banco to cross-sell very fast pace, as you can see. Banregio is gonna be able to do that next year. From then on further, we will continue to develop our app so others can use it. Right now the app still is in line with our core, so only our core can use our app. In the future, in the next year, we are expecting to be able to sell this solution to others. Not only banks, but non-financial companies like car rental companies or others that already have knocked on our doors and looking for services for their customers. We're not still there yet in terms of regulation, but next year regulation for Banking as a Service will happen, and we are the only ones in Mexico probably that will have the full scope of solution. We are gonna be able to be in a position to cherry-pick our customers and to be able to have the best customers in the region for sure. Those are our aims in terms of our technological investments. We already, as I said, have all the team needed to be able to achieve this. The plans are already made. Everything is well budgeted for this year and next year, so we're pretty happy with those plans. As well as our separation plan for Hey Banco that we are working on right now. We're aiming to separate it pre-authorization, so we're gonna be pretty much able to just when the authorization will happen, we're gonna be very swift on the transition. Right now you're seeing the scope of those expenses related to separation and to the creation of Hey Banco. What I'm trying to say is you're gonna be able to see a hump in that line of expenses, and a more flattened for the next following quarters. Thank you. Very clear. Thank you. Our next question comes from Olavo Artuso. Please go ahead. Hi, good morning, everybody. Thank you for this opportunity to make some questions. I have two questions, and they are basically focused on Hey Banco. The first one, actually, I wanted to understand the NPL ratio for the credit card loans within Hey Banco's balance sheet. We just saw, we had the opportunity to see that the credit card loans at Hey Banco surpassed MXN 30 billion this quarter. Being very straight to the point, could you share with us the current delinquency ratio? And if not, at what levels you believe it should be as a sustainable measure to gauge this delinquency, specifically talking about the credit card loans of Hey Banco. If you please could add, on this answer, the profile of the customers by age, just for us to compare to one of your competitors in Mexico. Thank you. Then I'll make the second question. Yes. Thank you. Well, in terms of risk, as we stated in the past, we are not aiming for high-risk customers. We are very motivated to have the best prices for our customers. We've developed our products to be directed into high-quality customers. For example, in our credit card business, we have the guaranteed credit card and the unguaranteed credit card. For those customers that we think that we don't have enough information to be able to assess the risk that we're taking, we give them a guaranteed credit card. Or if we assess them, if they have a pretty bad credit bureau, we're gonna give them the guaranteed credit card. For those customers that have a very good and well-stated credit bureau and payments with other banks, we're giving them a very good and very attractive line of credit with a much higher quality product in terms of. Rewards. Rewards, in terms of many other features that we've designed and we are developing. Those customers are very. I mean, they have around six transactions per customer. They're very high quality. I'll say that the average volume. So for those, unguaranteed are MXN 33,000 per card, and for the guaranteed is MXN 5,000. So different spectrums, different segments, all of them pretty productive. Obviously, when you behave well in the guaranteed, we graduate them then into a unguaranteed credit card. In a sense, I wouldn't say that this is similar to others in terms of how we are approaching, because what we're aiming for is to care for our brand in terms of being able to be perceived as having very good rates for both deposits and credits and fees. That's why we're not aiming for those customers that I think you're talking about one of our main competitors, and the average rate that they have is 70%, and that's not our aim, for sure. Different aim. In terms of the age that we have in Hey Banco, for sure is around 35. And most of our clients are in Mexico City and in State of Mexico. We have Monterrey and Guadalajara, to give you an example in the geographic footprint. Okay. We do have, ZIP codes that we're not working with. We have many ZIP codes that we aim to work with, so we do have a very well set up in terms of geographic footprint that we have. It's funny because even if you don't have a branch network, you can still be very selective on the geographies that you cover. No. Okay. Thank you for this. Thank you very much for this. I don't wanna really. Okay. In terms of. Yeah, go ahead. Sorry. In terms of NPLs, I think we're gonna be, in terms of NPLs, the credit card business will expand to a normalized level, I think. I think right now, I mean, the portfolio is still new and it's still creating, and I think you're gonna be, I mean, still not revolving. I mean, it's amazing how most of our clients are non-revolving. We're still working on revolving. I think you're gonna be able to see higher NPLs on our credit cards in the next following quarters, but nothing that will be shocking and nothing that will be quite expensive because we are not aiming for customers that have bad experience with other banks. We're being very prudent and very, very careful in terms of what we're aiming for. Because I mean, we could be very able to cherry-pick in that sense. In other- In terms of auto loans and mortgages right now, they have 0% NPL ratio. I think you're gonna be, I mean, we don't expect that to be the level that we're gonna be able to run for the next. Okay. Yeah. I mean, obviously right now it's 0%. It's amazing and we're happy, but that doesn't tell you much because obviously in the next 12-24 months, obviously you're gonna see a normalized level. You're gonna be able to see the same levels that you've seen right now in Banregio because we've not changed the threshold and the risk that we're taking. If not so, we've been more careful on being able to detect fraud more rapidly. I think in a sense, we've been more keen on trying to be able to control our assets better. I think you're gonna be able to see the same levels, if not better, than what we have in Banregio in terms of mortgages and auto loans. You're gonna be seeing a higher NPL than the 0% that we are because of obvious reasons. Okay. Thank you very much for this. Just another very quick question about Hey Banco. I just wanted to hear from you that the demand deposits over the total increased this year in comparison to the last year. If I'm not wrong, according to my calculations, it reached more than 60% of the total deposits. I just wanted to understand if there is more room for this ratio to increase, or do you believe that it should stabilize at this current level? Yeah. The rate that we have for our customers is for the Hey Pro customers that do, say, six transactions in their debit or credit card. You do have to do your six transactions in your debit and credit card for us to give you the 8%. If not, you're gonna be receiving only 5% rate. I mean, it's a good rate, but it's still much lower. What I'm trying to say is, for the 8%, we're not giving it to the 100% full customers, so that's why we're pretty able to withstand that attractive rate for those customers. I mean, we're very comfortable at this level and we think we don't have to hike it anymore. Yeah. No. Okay. Appreciate the answers. Thank you very much. Thank you. Our next question comes from Neha Agarwala. Please go ahead. Hi. Congratulations on the results, and thank you for taking my question. Just very quickly, again on the credit card with Hey Banco, could you give us a sense of what percentage of your Hey Banco users do have a credit card with you? A bit more on the auto loans that you show in the Hey Banco portfolio. What is Hey Banco doing differently in auto loans versus what a universal bank would do while providing auto loans? Just to get a sense of what is different with the Hey Banco product. Yeah. 21% of our customers in Hey Banco have a credit card. Sorry, Neha. Is that. Hi, Neha. Sorry, I didn't say hi. Sorry, Neha. Sorry. Hi. Sorry. So sorry, you were saying? On the credit cards, you mentioned 21% have a credit card with you. Do you find that low, or is it a good level? Where do you aim to be? Do you want to be more aggressive providing credit cards so that you can get more transactionality? What are your thoughts there? Then we can move to the auto loans question. Yeah. I mean, it's pretty high, in a sense, because we're growing clients at a very fast rate. We've seen the information, in seven months, after a client opens an account, around 30% of customers have a credit card in Hey Banco. That number for Banregio is 5%. Only 5% of clients in Banregio have a credit card seven months after opening an account, compared to 30% of those of Hey Banco. That's why we're pretty enthusiastic about being able to cross-sell to those customers of Banregio much more products in a very fast manner. We obviously think that the 21% will increase to 30%, for sure. We don't think. I mean, the best of the best in terms of cross-selling credit cards in Mexico is BBVA. I mean, they have 60% of their customer base has a gold credit card. I mean, it is a good aim. Definitely, I don't think that we're gonna be able to reach that level in a sense that we are not very keen on generating more information or new information for the credit bureau other than our guaranteed credit card, which is attractive, but not so much than a unguaranteed one. In a sense, that's why we don't think we're gonna be able to cross-sell to that amount of 60% like BBVA has been able to do so. With all those years of trying to do so. Definitely, I think, being able to do 30% will be a walk in the park, and from then on, it will continue. It will depend on how much we can better the information that we have from our customers. That leads to the second inquiry about what's the main difference from our auto business that the other has. This has to be with the information that we have from our customers and the amount of interaction that we have with our customers. Most of our other solutions that they're in the street, most of them are pretty good and pretty automated. I mean, they're pretty fast and they give good rates, and in a sense, they are pretty profitable. They leave a lot of business behind, and mainly do so because they don't have a process that takes more information in from the customers, and they don't allow any conversations to happen between the credit assessment team and the customer. That definitely has been pretty good at delivering pretty good results in a very productive manner. Obviously, you can see it in the NPL ratio. You can see it in the increase in the auto loan portfolio. I mean, definitely you're seeing a huge shortage of new cars, so that is a challenge to continue to grow. As you can see that we've been pretty good at doing so. In the last 12 months, we've been pretty able to create a completely robust system for all our credits. Not only auto, but mortgages and SME loans. We're pretty confident that that will allow us to be able to continue growing at a very fast pace, and not because of our risk appetite, but because we're pretty productive and pretty good at picking the risks that we're taking. That's been the case for many years, and that's what we are reinforcing with technology, to be able to do it in a more massive manner. Okay, understood. If I can ask one more question. You currently have about 500,000 customers at Hey Banco, and you mentioned your target is about 1 million by the end of the year. Does that look a bit ambitious, or do you plan to accelerate this in some manner to reach the 1 million target? Alongside, we talked previously about maybe having a strategic partner for Hey Banco. Is there any update on that side that would be helpful for us to know? Thank you so much. Thank you, Neha. Yeah. Well, in terms of the strategic partner, no news yet. We're pretty happy growing right now at the plans that we have right now. Still, I mean, we talked with the board for this respect yesterday, and we're still open, and we're still pretty open on receiving any offer that really gives us something rather than just money. 'Cause money we do still have to continue to grow, and dilute ourselves, right? We're pretty happy right now. If the opportunity comes, we will definitely consider it. Oh, the 1 million customers. Yeah, definitely, we don't think we're gonna be able to get there. Yeah. I mean, we think we're gonna be able to have 650,000 at this pace that we're going at right now. I mean, we're pretty happy with in terms of the customer acquisition, the lifetime value, the cross-selling. But still, we are tweaking the onboarding and tweaking the service so much so that we are not confident to increment our expense in marketing. So I mean, we could definitely double our expense in marketing. I mean, we do have the unit economics. We do have a 14.3% in terms of lifetime value over customer acquisition, which is pretty awesome, pretty healthy, pretty amazing. It tells you that we could expand much more of our marketing expense, but we're not doing so because we want to make sure that the experience is as we want it to be. As you see right now, the NPS is at 61, and we did have a problem in terms of customer service for an abrupt change that we made for to be very prudent in terms of security measures that we wanted to cover in a very swift manner. That resulted sadly in terms of NPS, in terms of bad service. We still want to make sure that we have the best experience for our customers. I mean, the sad thing about digital banks that is that we don't have any room for RMs to do their job and soothe any bad customer experience that they had with our digital channels. Customers are very. Overreacting. No, no. Don't overreact, but they're pretty. I'm gonna say aggressive, but very. No, I wouldn't say intense, but they will give service or the app a very bad review if they see, for example, a decline in their credit card process. That gives you a sense of how customers understand services and how things, how customers react to the things you do commercially. We're pretty happy on how the cross-selling for our Hey Pro customers is going. We have a very rapid growth in our Hey Pro customers, which are the ones that are transacting six or more transactions in a debit or credit account. Those have a much bigger NPS cross-selling index than those that are not Hey Pro. Those customers of Hey Pro have a more outstanding in their loans and in their deposits. You are seeing, I think, the thesis of a digital bank in terms of being able to give a large volume of clients a very aggressive product in terms of pricing, in terms of low fees, in terms of service, is already there. I think Hey Banco has already proven that the digital banking model has worked. In a sense, for that reason, we're pretty happy. Obviously, the 1 million customers is still our goal, and we're aiming for that, and we're gonna be very happy when that number and when that threshold is reached. Our main goal is to continue to be able to give value to our customers and being able to do so with the smallest volume segment. Not the smallest, because it's one above Compartamos. No, no. Azteca and the- Coppel. Yeah, Coppel. Definitely being pretty able to give those customers a service as good as our preferred banking customers. I mean, you see that our preferred banking customers in Banregio have a very high cross-selling index. This is because we have an RM assigned for those customers, but we don't. But we can't do that for every customer, right? I mean, we could, but it wouldn't be profitable. I mean, to give you an example, we do have in Banregio 120,000 customers of nominal payroll that we are only serving them with a debit account. We can't cross-sell a credit product to those customers because we don't have all the information needed for them to receive a credit. They have to come to a branch in Banregio to be able to process that, and obviously doing it massively, and we don't want our branches to be overwhelmed with payroll clients. Having a platform like Hey Banco will be able to do it in a very easy manner. That's what we're focusing on, and that's where we're aiming to. Creating value for those customers and being able to achieve that. I think, as a result, when we achieve the 1 million mark, the 1 million mark will be very profitable. Not just customers that are brought here with commercial or marketing schemes that not provide any value over time, right? I mean, we are building it. We're building this technology for the future. We're building it for the long term. I see. I think you're already accustomed to this way of ours to continue and invest even in the bad times, like in the pandemic. Right now, when margins are good, I think, we're still going to continue in our efforts. I think it will continue to do pretty good results. Sooner than later, we're gonna see those million customers. For sure. We still don't have a guidance, a new guidance for those 1 million customers. We still need a little bit more. I think the next quarter we're gonna be more able to have more color. I mean, we just finished most of our onboarding processes. Most of our onboarding is already monoline, so you can access a credit card from Google, for example, a credit card application from Google or from Facebook or from TikTok. We've been pretty able to do a monoline attractive for most products. That will, I think, allow us to continue growing in a very productive manner. Yeah. Great. Thank you so much, Manuel. That was very comprehensive. Thank you. Our next question comes from Jorge Henderson. Please go ahead. Hi, thanks. Manuel, thanks for the space for the Q&A, and congratulations for the results. Let me ask the asset quality question in a different manner. You know, as already commented, there's a big chance of a recession in the U.S., and there's a chance, which signals a possible recession in Mexico as well. My question is, if you perform any stress scenario tests, and what GDP growth levels have you considered these stress scenarios, and what cost of risk levels does your model return to your different GDP scenarios? Thanks. I have another question, but I'll ask it after this one. Yes. We currently run the stress test that we do with the regulator every year. Not specifically for the recession. We do a stress regularly every year. Basically, we have modeled even 3% NPL that we have never seen ever. Not that we are expecting that level and a zero growth. That is our worst case scenario up to now, and we are still very profitable in that stress test. Sorry, this represent- That's basically. -level, what GDP growth implies? I'm sorry, I didn't catch it. Implies zero GDP growth. Okay. Okay. Yes. It's a model, obviously, to stress the balance, and to have the results for the authorities. Of course. I understand. No, it's not directly related. It is not a linear correlation. As you saw during the pandemic, the growth of the GDP was -8%, and we didn't have NPLs above 2% based on the stress test as that. Yes, of course. I understand. Thanks for the detail. In the 2008 crisis, we did experience more in the North, and the NPL ratio reached a 2.3%. 2.8%, sorry. 2.8%. Yeah, yeah. In 2008. Oh. Thanks. That That used to be our previous stress test, the 2008, 2009 crisis, where we reached the 2.8% as our maximum ever NPL ratio for Regional. Of course. Thanks a lot for the color. My second question is on NIMs and changing the subject a little bit. We noticed that while your quarterly net interest margin expanded 24 basis points sequentially, your NIM on loans contracted 2 basis points in the quarter. Could you please expand on what drove this evolution? Thank you. As we mentioned in the call, the NIM is affected by, impacted by the repo business. There are assets that are paying less than the loans. Well, the proportion of the securities investment, that is the repo business, the counterpart of the repo business, has grown from 8% in the share of the productive assets to 16%. That is not helping to grow the NIM as fast as we would like. Also, there is also an effect on the repricing. The repricing of the loans takes sometimes longer than some of the deposits. Most of the time, the deposits are repricing very fast. Of course. Just a clarification. I mean, my question was on NIM loans, but you mentioned the repo business. Yes. You include repos on the NIM loans, or are you referring to the consolidated net interest margin? We don't include the repos on the name of total loans. I'm sorry. I'm like just expanding the question a little bit. This would imply that your sensitivities is not positive to the rate hikes? No. It's just lower. As I mentioned, the cost of, and you can see in the income statement, the interest expense increase. Basically we are growing in all the segments, but in part, we are growing in the government segment, where we pay higher rates than that. That's part of the explanation. As I mentioned, the repricing of the loans is not automatically. It could take even two months because it's on the average balance, on the average tier of the last month. It could take up to two months to reprice. We will make an analysis with the CNBV data that is public, and send you the- Also important to remember, that NIM that you're looking at is last 12 months. Yes. It takes one year to reprice with a new rate. Yes. Let's do the calculation with the monthly one and the quarterly one, and put in the presentation. We can update the presentation, please. We will do it with the quarterly one, because the last 12 months is not always capturing the reality at this moment. Sure. Okay. Thanks. Thanks for the clarification. I'm sorry to expand that much, but I have a last question, very quick, and it's very No. It's very precise. I mean, it's very punctual. It's on Hey Banco. Yeah, in your presentation, you mentioned that the net commission income coming from Hey Pago already amounted MXN 299 million on a year-to-date basis. If we compare this to the cards and merchant fees line in the P&L for the group, you only reported MXN 282 million year-to-date as of June. My question is, in which line do you consider this net commission income of Hey payments, and why is it lower than what you reported from the P&L? Thank you. Yes. It's in commissions and fees on page four, under the 373, if I understood the question right. Or in the quarterly report is on the page. Give me a second. I think it's on page eight now. In page eight. Yes. In page eight, sum of cards and merchant acquiring business, that is basically Hey Pago. I couldn't really understand where is the difference. Can you repeat before? Yeah. No, no, it's just that in the presentation. The short answer is in page eight. Yes, just that in the presentation. Yes. You have MXN 299 million. You say that the income from, like, Hey Pago is MXN 299 million. I was wondering if we should find that in the cards and merchant fees, and in that fees, almost all of it of that line would be Hey Pago, right? Yes. Yes, that's correct. Okay. Thanks a lot for the call, and I'm sorry for the long questions. Don't worry. Thank you. Our next question comes from José Cuenca. Please go ahead. Yes, thank you. Good morning, and thank you for taking my question. Just wanted to follow up on asset quality. I didn't understand really well the write-offs figure that was reported. We were looking at write-offs during the last five years. They have represented something around 0.12, more or less, of gross loans. This quarter, write-offs as percentage of gross loans were something around 0.26%, a little bit higher than the average, historical average. We just wanted to understand what led to higher write-offs, and if possible, get some sense of what segments of your loan book these higher write-offs are coming from. Thank you. No, thank you to you, José. If you see on page 11, basically the highest amount, it comes, well, in the average, from commercial. Basically, it's a single loan that reached MXN 120 million that we wrote off. It has been in the NPLs for the last 18 months, and finally it reached the 540 days that we have as a policy to write off, after complying with all the regulation of demonstrating the non-viability to collect. That's the main explanation. It's not that the whole segment of wholesale is impacted. It was just one single loan. By the size, it impacted on the quarter results. Okay. Just couldn't hear. What is your policy for write-offs? 130 days, sorry, if I heard correctly? No. 18 months. Okay. 540 days. Thank you. Okay. Thanks. You're welcome. Our next question comes from Marlon Medina. Please go ahead. Thank you. Hi, Manuel, Enrique. A couple of follow-ups here on my side, and the first one on consolidated loan growth. Here you have mentioned, I think that not a material impact in the short term, but some deceleration coming from the U.S. slowdown in the future. At the same time, you also mentioned other opportunities that you could tap, you know, like nearshoring, growing more in Mexico City. Just wanted to get a sense on what would be a reasonable assumption for 2023 and the coming years, considering everything. Like, should loan growth decelerate, accelerate? Could we see double digits in 2023? Or what are your thoughts here for the coming years? The second follow-up is on expenses. I know you mentioned your developers should stay around the current levels or the current size, and this should help. I also wanted to get a sense of other lines, like what portion of your expense are linked to inflation? In general, what do you expect for total D&A going forward? Thank you. I will start with the second question in terms of expenses. We, as Manuel mentioned in the beginning, in terms of general expenses, the growth is based on marketing expenses year-over-year comparison, and we don't expect it to grow above. Also, Manuel already mentioned on the Neha's question, that right now we don't feel comfortable doubling or increasing our marketing expense. All the transactional expense that is related to the Hey Pago and credit card and debit cards, because we sold the card transactions, the expense is reported under the expense and the incoming commissions. In terms of other in employees and benefits, all the lines are growing around 14%-15%. You asked specifically what proportion of inflation is impacting. It is around 7% directly to the payroll. The other 7% to the average of 14%-15% in increase of employees are new employees, mainly on the call center and collections. Due to the increase of customers, we increased that teams. In terms of loan growth, we still between the 8%-12%, we feel comfortable. We believe the two-digit growth is achievable. As you well said, even though we have some shades of recession, also we see some opportunities in terms of nearshoring and the growth that the foreign investment is increasing in the north and in the center, mainly in the north and industrial parks, growth that is part of our business. We feel comfortable that we can manage to grow 8%-10% and to maintaining the smaller portfolios, but with better margins, like auto, mortgage, and small and medium businesses, more than 10% of growth. Our challenge is to grow the wholesale business. Yes. We feel comfortable with the official guidance is 8%-12%. Yes. Right now, we don't have an official guidance for 2023, but we believe we can maintain the same pace for the next year if you mix all these different macro situations. Perfect. Very clear. Thank you, Enrique. Thank you to you. Our next question comes from Gilberto García. Please go ahead. Hello, good morning, and thank you for the call. I had a couple of questions on Hey's loan growth. You have been growing at about MXN 1 billion per quarter over the past few quarters. Is this a pace that you're comfortable with or do you expect to accelerate in the coming quarters? Also, the expansion in HEY has been faster than the overall consumer books, which implies that you are decreasing the consumer portfolio at the legacy bank. Have you stopped origination there? Are you transferring clients from the legacy bank to HEY, or what can you comment on that trend? Thank you. Yes. I will be by parts, answering by parts. By the last question, we transferred one business, but not a customer. A channel. One channel. We transferred the channel of auto dealerships that used to be in Banregio brand, but we didn't transfer a single customer. It's just the new origination on that channel that was transferred. As Manuel mentioned, we are improving the whole process. I will shift to the second part of the question. Right now, we are growing, as you mentioned, at MXN 1 billion per quarter, and we expect to continue that rate and that pace for this year. For the next year, once we finish to improve these processes for mortgage and for auto, we expect to grow at MXN 2 billion per quarter. You are right. It's a little bit of offsetting. We didn't close the product in Banregio. In fact, we are doing a lot of campaigns with cross-selling to our current base on Banregio. Again, the channel was moved to Hey. It's only that channel that was changed. Okay. I don't know if both questions were answered. Yes. Okay. Very good. Thank you to you, Gilberto. Next question comes from Carlos de Lag arreta. Please go ahead. Hi, good morning. Thanks for taking the question. Within Hey, I mean, obviously, growth is going very well, but I was surprised to see a decline in NPS. I was wondering if you'd talk about what is behind this. Secondly, about Hey Tech, who are your potential customers and what more or less is the size of your addressable market? Thank you. For the first question, as I said, the NPS decreased this quarter because we identified a vulnerability in some processes, and we changed them abruptly. The result, sadly, in customer service that we didn't expect. We changed things rapidly again, but sadly, the effect was already there. That's part of the explanation, what we still are investing in the experience to be as good as we want it to be. I think we're pretty close, and I think we're pretty much there. I think this year, this following two quarters, we are focusing on customer service and customer experience. Being able to do an app which is much more intuitive and much more easy to use. That's gonna be, I think pretty well received. Going forward, I think, we're gonna be able to increase our marketing spends with much more confidence and being able to attract much more customers. As we said, the customer acquisition is pretty good. The lifetime value is pretty good. It's expanding. We have 14.3x our lifetime value over CAC, so definitely we could hike right now, but we just don't wanna at the moment we have in terms of experience that we are having. That said, when customers have only the digital channels, they are more, not more responsive, but more aggressive in their comments and their in. More aggressive in their comments and their reviews. We see that when they have a branch that they can go to, we see that the NPS is much better. Definitely, the NPS is something that we think we're gonna be able to hike again to the levels that we are aiming for. And that will resolve easily. In terms of the Banking as a Service platform, we cannot say how big is it, is it gonna be because we don't know the full scope. We see a lot of demand in non-financial players, but a lot of demand, like, there's 20 prospects that are knocking on our doors. We cannot serve 20 at the same time, for sure we're gonna be... We have to be very selective. For the financial institutions, the addressable market, again, is pretty big. I mean, at first, we're selling it to Banregio because Banregio has the same core business. Next year, we're gonna be able to do so for other core solutions like Temenos or SAP, which we have already talked to both of them and have received good feedback on being able to connect our solution to their core and being able to sell that solution for others that run in their core banking solutions. Definitely, I cannot tell you the addressable market at the moment, but for sure, I think it's gonna be pretty well received. I think we are pretty well ahead on being able to produce a experience of auto service completely productive and paperless and producing pretty good results. I think, I mean, it's pretty early to for me to say how big the market is. I don't wanna say how many objectives or any comments about it. I think the demand will be pretty big next year and onward. Your vision is to have, I guess, to become a provider, not just the financial services, but as a platform, no? Including, of course, payments, but software. I mean, I imagine that's the vision that you guys have for this product, no? For this service. Yes. Software as a service and business process outsourcing services. Right. Thank you, Manuel, for the comments. For example, we have one prospect right now that is, they want us to process and outsource their credit for SME customers. The only thing they're looking for is our solution to assess the risk that they're taking, and they want for us to give service to that portfolio for collections and wholesale customer service. But the loans are in their book. This is an institution that is one of the 500 biggest in U.S. Definitely, there's a lot of good clients out there. They're looking for good services. They know that we have the technology. We are still developing it, we are investing on it, and we think we're gonna be the ones that are gonna be able to gather and profit from the regulation that it's underway at this moment. I think the regulation for Banking as a Service will provide a huge opportunity growth for those who are ready. I think Hey Banco is at the forefront, for sure. Thank you for that. Our next question comes from Brian Flores. Please go ahead. Hi, Manuel. Thank you for the opportunity to ask questions to the team. Just expanding on Gilberto's question here. So the potential clients for the technology segment, are they more on the front end, meaning, you know, the application? Or are they on the back end, as you said, maybe the risk engine, et cetera? Just because I think his question was very good, and I just didn't capture the profile of the client that you're looking for. If you could give like, maybe a short definition of what a client is looking for would be really helpful. Also complementing this, where would you book this revenue? Is it in fees? Where is it booked going forward? Thank you. Yes. In Hey Controladora and in Hey Tech. Hey Tech is gonna be a subsidiary of Hey Controladora, and Hey Controladora is a subsidiary of Regional, which is a sister of Banregio. My brother, whatever. The software. There's two parts, there's software as a service and then banking business process outsourcing. Right? The service, the software as a service is the mobile app, the web electronic banking, the desktop service, the onboarding service, the cross-selling, and in terms of the processes, we're talking about business intelligence outsourcing, the credit risk assessment, fraud mitigation. Much more on the side of value-added, right? In terms of the front part of the equation and in terms of high-value processes. The thing is that the pricing will depend on our cross-selling capabilities, right? We are aiming to charge a fee to have the platform, and then our fees will depend on our ability to cross-sell more products. In a sense, we're aligning with any institution, so we have both the same drivers. In terms of where we are doing that business, as I said, is completely out of the financial group. It is a fee service business wholly, right? Understood. Thank you very much. The owner of the technology is still. It's gonna be still Hey Banco, but Hey Tech is gonna be has a- The rights. The rights to sell and exploit, the technology for others. Very useful. Thank you. What Hey Banco will have is that technology for free, right? Hey Banco is the owner of the technology. Hey Banco has no charge for that technology. Hey Tech has the ability to have a profit from exploiting and selling and executing those transactions. Hey Banco will have the best cost because they don't have a cost, right? Hey Banco doesn't have any cost whatsoever. That obviously permits Hey Banco to continue to do a full digital attraction for customers. Because when you have a charge on what you do, you cannot. I mean, if one bank comes here and wants to buy the solution and wants to do so for a digital bank, they're gonna have to put a lot of money on the table because that's not gonna be it for them, right? It's not gonna be easy for those to achieve profitability, having a cost per account and having to pay for every product that the customers buy. In terms of pricing, obviously, Hey Banco will remain with the best edge. For those who buy the technology, they will have it at a very good price. But they will. They need a good customer base, as Banregio has, to be able to profit from this technology investment. Yes. 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. If additional questions arise, please do not hesitate to reach out to Alejandro on our Investor Relations team. Thank you for your interest in Regional, and have a good day. Thank you very much. I appreciate everyone's participation. Any further questions, please let us know. Thank you.