Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Regional S.A.B. 2024 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 Strategy and Planning and Investor Relations. At this moment, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I will now hand the conference over to your speaker today, Manuel Rivero Zambrano. Thank you, and please go ahead. Good morning, everyone. I hope you're in your families and healthy and well. We're pleased with our second-quarter performance, our loan portfolio consistently outpacing industry standards, and our profitability on a steady rise. Our approach keeps delivering solid results as we seize opportunities represented by Mexico's economic expansion, nearshoring trends, robust labor market, and favorable demographic conditions. These factors present a distinct opportunity for sustainable growth, enhancing operational efficiency and driving profitability to new heights. Regional has experienced a significant surge in our loan portfolio while maintaining an exceptional asset quality. We keep optimizing our balance sheet through the reduction in our securities investment portfolio. Concurrently, non-financial revenues continue to grow at double-digit rates. Regional's quarterly earnings have continued to demonstrate robust growth. Our net income for the quarter reached MXN 1,608 million, showing solid growth, 24% year-on-year, and the ROE expanded 161 basis points, reaching 21.4% year-on-year. Regional has reported a strong 12% year-on-year loan growth, outperforming the banking sector at 9% as of April. Meanwhile, core deposits increased 10% overall year-on-year, while the system saw a 7% expansion. The financial margin expanded 20% year-on-year and 3% quarter-on-quarter, reflecting our consistent progress in profitability. Our cross-selling strategies have effectively enhanced our non-interest income, which has been a significant double-digit growth rate, showing a remarkable year-on-year increase of 13%. Our FX fees have risen 35% year-on-year, card services margin 27%, insurance 20%, and trade 17%. Our efficiency ratio remains below 40% threshold, standing at 39.9%, with a year-on-year contraction of 200 basis points. This contraction in the efficiency ratio was driven by solid growth in revenues that keep outpacing operating expenses. Banregio's loan portfolio had an increase of 13% year-on-year. Core deposits have surged 10% year-on-year, and the efficiency ratio last 12 months contracted 330 basis points to reach 36.8%, demonstrating our commitment to operational excellence. Our branch expansion will allow us to capitalize on the opportunities arising from the favorable economic dynamics and our robust labor market. We keep intensifying our efforts to broaden our sales force and enhance capabilities, ensuring we maintain a competitive edge and to capture a greater share of the market. In our retail banking segment, the preferred banking portfolio, as well as the SME portfolio, grew 13% year-on-year. These figures underscore our commitment to supporting both individuals and small businesses. Banregio continues to uphold its outstanding trajectory of delivering exceptional service and quality, as evidenced by the consistently industry-leading NPS that stood at 76% as of March. The bank maintains an outstanding asset quality, with the NPL ratio improving 4 basis points year-on-year to 1.2% and a cost of risk of 0.5%. As of Hey Banco show remarkable growth and resilience in the second quarter, solidifying our position as a leading fintech in the Mexican market. Our focus on customer acquisition, product innovation, and operational efficiency has led us to significant milestones that underscore potential for sustainable long-term success. Hey Banco's emphasis on profitability and customer engagement has paid off handsomely. Our active user base for Hey Banco grew to 16%, showcasing our platform's growing appeal. Even impressively, our premium Hey Pro segment maintains a 98.9% monthly active user rate, demonstrating the unparalleled user engagement and satisfaction. Our diversified revenue streams have yielded exceptional results, with non-financial income surging 80% year-on-year. This growth is driven by the phenomenal success of Hey Pago, our innovative payment solution, which registered a 31% year-on-year increase. This performance not only validates our product strategy but also positions us favorably in the competitive digital payments landscape. We have made significant strides in optimizing our operations, as evidenced by our efficiency ratio improving dramatically from 85%- 66% year-on-year. This 19% improvement translates to significant cost savings and demonstrates our commitment to lean, agile operations that drive profitability. Our focus on building lasting customer relationships paid dividends. The last 12 months' lifetime value per customer stands at impressive $5,092, highlighting the long-term profitability potential of our growing customer base. This figure not only justifies our customer acquisition costs but also underscores the effectiveness of our engagement and retention strategies. Our product ecosystem continues to resonate with users, as reflected in our cross-selling index. Hey Individuals boast a solid 1.79% cross-selling ratio, while Hey Pro leads at an astounding 2.38%. These figures demonstrate our success in creating a comprehensive financial platform that meets diverse customer needs. Diverse customer needs. Hey Pago has emerged as a true game changer in the digital payment system space, with monthly billing growing at 8% year-on-year and a remarkable 2.4 times growth in payment facilitators. We are rapidly gaining market share, surpassing $12 billion in total billing as of May 2024. This marks a significant milestone in our journey to gain market share in the digital payment landscape. Our unwavering commitment to our customer experience is reflected by our impressive NPS. Hey Negocios maintains a world-class NPS of 75, while individuals stands at 62. This score is not only outperforming any traditional banks but also underscores our ability to deliver a superior digital banking experience. Despite the challenges in the broader market, our time deposits grew 10% year-on-year. This growth demonstrates customer trust in the platform and provides a stable funding base for future expansion. Hey Banco's well-positioned to capitalize the growing demand for digital financial service in Mexico. Our strong performance across key metrics, from user growth and engagement to operational efficiency and customer satisfaction, provides a solid foundation for future success. With our cutting-edge technology, customer-centric approach, and proven ability to execute, Hey Banco is not just participating in the digital banking revolution. We're leading it. As we look into the future, we remain committed to delivering exceptional value in our customers and shareholders alike, driving financial inclusion and reshaping the landscape of the digital banking in Mexico. The growth outlook for coming years remains promising, and already noticeable increase in loan demand that will allow us to accelerate and escalate further across various sectors, including agribusiness, manufacturing, logistics, and commerce. We are committed to continuously enhancing shareholder value by consistently delivering results that outpace industry averages. We are dedicated to maintaining our positions as a profitable leader, demonstrating consistent results through various economic cycles. We thank you for your continued trust and support as we strive to achieve greater heights and deliver sustainable value to our shareholders. Our objectives from January remain unchanged, as we firmly believe in our strategies and initiatives to continue increasing our shareholder value. Thank you. We appreciate any questions. Ladies and gentlemen, we will start now our Q&A session. To ask a question, you will need to press the right-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. Thank you. Hi, good morning, Manuel, Enrique, and Alex. Thanks for the opportunity. I have three questions from my side. The first one will be on loan growth. Just wondering, how are you expecting loan growth to behave during this new administration? Do you expect it could remain at the double digit? And on the corporate side, can you share with us in which sectors are you detecting stronger lending activity? And on the other hand, we saw that the consumer segment showed a slower pace of growth, mainly or likely explained by a stricter lending at Hey. So just wanted to hear from you if this can revert in the coming quarters. As you mentioned in your remarks, this could be explained by strong labor market, higher salary, social programs. So any color on that will be helpful. My second question will be on asset quality. We know this cost of risk stood at 1% of average gross loans in the second quarter. This is modestly, I think, above your guidance between 0.7% and 0.9%. Just wondering if we should expect cost of risk at these levels or it should be returning to your guidance range. Finally, my last question will be on your earnings growth expectations for the year. When analyzing the first half, it implies a net income growth of roughly 14%. This is, I think, at the midpoint of your guidance range. Assuming that the second half tends to have a stronger seasonality, would it be reasonable to expect the earnings growth at the high end of your range, or do you think still too soon to tell as we still have to pass the U.S. elections? Thank you. Thank you, Ernesto. I will start with the asset quality. Yes, as you can see, we have had an increase on Stage 2 loans that has been requiring more provisions from the corporate side, and as well as in the consumer on the Stage 3, mainly for Hey Banco, but also for Banregio. Then the short answer is we expect to go back to guidance, but in the higher end, around 0.9. Perfect. Then in terms of earnings, we envision in general very similar quarters for the next two quarters, but with an improvement in the last quarter. As you mentioned, there are some seasonality and some adjustment of rates also in the margins moving forward that will offset the increase on the potential increase of the rate, decrease, sorry, of the rate in August or September. Okay, perfect. Third quarter, we expect a very similar quarter, and fourth quarter, we expect a better one. Then we will be between the mid and the high range on the expected growth or the guidance for earnings, total earnings. In terms of growth, basically, we continue very open on the corporate side. We are, as we mentioned or Manuel mentioned in the summary about growing in agribusiness, tourism, manufacturing, and still growing a little bit in construction related to real estate. We maintain our guidance. Obviously, we will stay around the lower range. In terms of consumer, as you can see in the Hey section, we are growing only 1%, and in credit cards, we decreased as we are calibrating and testing our credit scoring models. As we talked in the first quarter, we went all the way down to less than 5% of approval. Right now, we are around 5%, and we will continue increasing the approval rate and taking back the growth. But right now, it's very flourishing Hey credit card. In general, consumer credit in Hey. That's what drives the 7.2% mixing with auto plus credit cards. Perfect. In the Banregio's consumer or retail portfolio, what should we expect? We expect to continue above high teens. This quarter was year-on-year, 21% on credit card and 7% or 6% in auto. We expect to maintain similar growth, even better in auto for the second quarter. Credit card, similar. Perfect. Perfect. No, thank you very much, Enrique. Thank you, Ernesto. Our next question comes from Tito Labarta. Please go ahead. Hi, good afternoon. Thanks for taking my question. Two questions, actually. One to follow up on the Hey Banco loan growth there. Just to understand why the relatively slow loan growth. Is it just some asset quality concerns that you're seeing? Are you seeing just increased competition making you more cautious in general? What's sort of driving the sort of more cautious stance on Hey Banco? And then second question, we did see a bit of a pickup in expenses growing mid-teens for the full year, I think more in line with what you were saying. But just how do you think about expense growth from here? What drove the jump in the quarter? If you could give a little more color on that. Thank you. Well, in terms of the growth of loans, specifically in consumer, as we have mentioned, we had an asset quality deterioration during the first semester of last year. We decided to be more selective starting July. Then, since July onwards, we have been recalibrating our credit scoring models. We started lending faster in April of this year. We will see a growth, but a small growth in the next quarters. That's the main reason: asset quality more than competition. In auto and all the other products and small businesses, we are adjusting our rates. We are improving the mix or changing because it was not a bad mix. It's a different mix with higher rates, adjusting for the higher cost funding that we have from January in Hey Banco. Great. Thank you. And on the expenses? Yes. Yes. Sorry, sorry. I will open. Well, we expect this level of expenses to be the peak. Basically, we saw two effects. I will go by the four lines that we disclose in the quarterly report that is basically sorry, let me just put myself there. Compensation and benefits, that level should be maintained. It should increase a little bit more, the MXN 1.066 billion per quarter. We had a great increase for our employees in March. Then it was fully reflected in the second quarter, April to June, of more than 6.5%. The average was around 7%. Then it's already reflected there. The growth should not be significant as we are continuing expanding our branches through the country. We have already opened 6 branches. We expect to reach September with 200 branches. As you know, we are celebrating our 30th anniversary, 30 years. We expect to achieve 500 ATMs and 200 branches for that moment. In terms of administrative expenses, the level, if you see, it's not seasonal, but it's got up and goes down if you see different quarters. Back, we expect to go back because some of the expenses that are well paid in second quarter are annual expenses or should have been paid in the first quarter. But we'll be in that range between MXN 350-MXN 400 for the next quarters. Finally, while rents should continue growing, not fast, but as we are increasing ATMs and branches, we'll move up, but at that pace. We are not worried about rents. Tax basically is VAT. The explanation is kind of simple. We provision at the end of the month, and then we have to pay on the 17th day. We over-provision in the first quarter, and we under-provision in the second quarter. An average between the two is what we should expect. All in all, if you adopt, it will be similar to the second quarter, a little bit lower next quarter. Then as in earnings and income, a little bit higher in the last quarter. Okay. That's very clear. Thank you. Thank you to you, Tito. Our next question comes from Eric Ito. Please go ahead. Hi, guys. Good morning. Thanks for taking my questions. I have a couple of questions regarding your NIMs, your margins. So first half of the year, your guys have reported 6.6% NIMs in the first quarter, 6.7% in the second quarter. I think the guidance for the year is 6%-6.4%. So I just want you to, if you could recall us, what's the sensitivity of your NIMs to the interest rates and if it's reasonable to assume to finish this year above the guidance, and what can we work with NIMs for next year? Thank you. Yes, we can expect to finish above guidance as we were expecting a lower rate when we made the budget and also the guidance. Our sensitivity is around 3 basis points, between 3basis points- 4 basis points per 25. It's around 12 basis points- 16 basis points per 100. That's the expectation for the next year. We haven't really made a budget, and I cannot give a color or guidance for next year as we will wait to see how the central bank reduces the rate and at what pace. Remember, we always publish the net interest margin and the total loans NIM because the official one, I don't know how to call it, the net interest margin includes the securities and the repo business. We have decreased the securities portfolio from a peak of MXN 60 billion- MXN 40 billion. That led to an improvement in the margin. We are not proactively looking to reduce it more. Okay. Thank you. Our next question comes from Ricardo Buchpiguel. Please go ahead. Hi, everyone. Thank you for the opportunity of making questions. I have a couple here on my side. First, we observe a slowdown in the income growth during the quarter was growing at around high teens and now is more towards mid-single digits, mainly pressured by current account service fees and online banking fees. Could you please explain what was the drivers for this weaker performance on these lines? Also related to the fee income space, how do you see the future for this revenue line considering that probably the banking world will be more digitalized and we might see more competition with fintechs? In Brazil, we saw more and more banks doing exemptions for these types of fees. From trying to figure out, we could see something similar potentially happening in Mexico. How would you prepare for that? For my second question, an important profit pool that we see for Regional and Mexican banks in general comes from the spreads you have on deposits since the returns on your deposits are lower than the reference rates. Right now, we see that Nubank and other fintechs are right now too small to make a difference, but they are growing a lot on their deposits and offering much higher rates with a linear cost structure. So in the next five years, do you believe this is a dynamic that could be a risk for Regional? And if so, how the bank is preparing for that? Thank you. Well, and thanks, Ricardo. On the first question, we expect, I guess you are seeing page, just to be exactly in the same page, page 7 of the quarterly report. We don't see a reduction or a flattening in the cards and merchant. In general, for the merchant acquiring business, we are increasing around 30% year-on-year. And cards, it will grow as we recover growth. If you see the number of customers in Hey Banco that has been reducing and this quarter turned up and we increased 2.6 versus last quarter, that will bring more transactionality. This is purely related to transactions. And it depends also what happens during the quarter. Last quarter, we had the in Hey Banco specifically, the Pa'l Norte festival that we sponsor. And it's an increase on transactionality. As we mentioned on the merchant acquiring business, it is the quarter with more transactions than we see, let's call it a recovery. On the other lines, it has been flourished, let's say current account services or online banking costs that is mainly for companies. We don't charge for individuals. Then we don't expect a change, a radical change in there. How are we preparing? We have been in terms of fees. We have in Mexico, as you know, a similar fee for all the acquirers and issuers. And what we have been doing is paying rewards or cashback. And in some cases, some banks have decided to stop paying or to move to a more profitable or a higher margins in the loan side. Then that's what we are doing in Hey. Banregio has maintained their profitability. Then Banregio maintained the same fee income structure up to now. In terms of deposits, we, as you know, and we have talked in the previous quarter, up to now, and we have increased our cost of funding in Hey to maintain our offer competitive in terms of we are paying 12.5% in our Hey Account, Hey Pro at 28 days, a term deposit. And with a difference with Nubank that is unlimited, we pay that amount, that rate to any amount without limit. And most of the other fintechs have smaller limits. Even Mercado Pago has a MXN 25,000 limit. Then the offers are different and attract different segments. We don't know once the rate starts going down if the offer will be maintained by other competitors. Thank you. Thank you very much. But just one quick follow-up. When we compare, for instance, your returns on Banregio, which is much lower than Hey, and assuming that Nubank eventually could charge, I don't know, 90% of the reference rate or 85% of the reference rate, wouldn't that be a concern for your bigger business, which is Banregio? No. No, not really. We believe that we are one of the banks that pay more in time deposits in Banregio, not only in Hey. Then maybe BBVA or Citi or the larger ones to respect a higher migration. But in Banregio, we pay very close to TIIE. In fact, we pay CETES, basically CETES in time deposits. That is 25 basis points below TIIE. Then maybe we should move to TIIE, but it will be not a huge impact. Very clear. Thank you. Thank you to you. Our next question comes from Yuri Fernandes. Please go ahead. Hey, guys. Thank you for the opportunity of asking questions. I have one somewhat related to fees, but on insurance and FX. On FX fees, it was a little bit higher this quarter. So just checking if this is driven by FX seasonality in June or not, and how should we think about this line? And just asking if more volatility in the peso should continue to boost this line, or if this line should return if peso volatility kind of dissipates. That's the one. And if you can comment also on the FX exposure as a whole for Regional as an entity, we see the breakdown of deposits in pesos and dollars, but not sure if dollar a weaker peso is somehow relevant for you for loan book or for NII or anything like this. So kind of FX is the first question. Then a second question I have is regarding your wholesale book, the growth we are seeing. Correct me if I'm wrong, but I guess part of the thesis is that you should grow, especially in Mexico City and some other regions. In Nuevo León, we are not seeing a lot of growth lately, but this quarter, when you go to a quarter-over-quarter, Nuevo León is reaccelerating. Nuevo León is also growing like 3%-4% quarter-over-quarter. Trying to address where the growth in the wholesale will come from by region. If you continue to see Mexico City, Jalisco, I don't know, other regions growing faster than Nuevo León, or if you are seeing a better growth in your home state. Thank you very much. Thank you, Judy. In terms of FX in the line of fees, we expect a similar level for the next quarters as long as the volatility maintains. That's mainly the explanation. Also, there is a higher volume. It's a mix of the spread opens plus there are more demand for US dollars. Talking with our team of markets team, they expect similar next quarters. We expect volatility will be maintained until the United States election happens or until the new president in Mexico, the new term starts. That should happen. In terms of impacts to the balance or to revenues, we have around MXN 900 million in US dollars. The impact is that basically when we revaluate them or valuate them to put in the financial statements in the balance, that part of the deposits increase or decrease. We have less than half of loans denominated in dollars. Then we don't have that much impact. And basically, we request either the customers that we grant loans in dollars to export or import, or to have an account, no, but a cap or a swap or some type of protection. Then the short transfer should be not besides the valuation of both, but as we have more deposits, is the side that valuates faster. Super clear. Just making sure I got correctly, Enrique. So loans are about half of the size of you have in US dollars. That's it, right? Yes. It's like $400 million. Okay. No. Regarding the growth by region, where should the growth come from? Yes. You mentioned 4%. I seen. Yeah. I think Nuevo León was 3%. It was 3% It was 3% quarter-over-quarter, but last quarter was also very good for Nuevo León. So we are seeing two quarters in a row that Nuevo León is doing pretty good on a quarter-over-quarter basis. Yes. Well, wrong group. Well, we expect and we maintain our expectations very high, mainly in Mexico City and Jalisco. And here in Nuevo León, we continue being one of the 3 largest lenders for medium and what we call large companies differentiating from corporates or international. Then we expect also growth from Nuevo León, but as the base is higher and it's difficult to maintain the double digit, but we expect to go back to very close to double digit, 9, 10, 11, something around that. Perfect. Thank you. Thank you, Enrique. Our next question comes from Neha Alarguala. Please go ahead. Hi. Thank you for taking my question. I just wanted to clarify on the deposits. You mentioned that you're paying about 12.5% for the Hey Pro account for the term deposits, and which has no limit, unlike those for the fintechs. Why wouldn't you see some flow of deposits coming from the Regional's account to Hey Pro? What are the rates that you offer for the Regional time deposits? Because they have been growing quite strongly. So if we can start with that one. Yes. It's basically a service in, as I mentioned, right now in Banregio, above MXN 500,000, we are paying a rate that is basically CETES. And CETES right now is around 10.75%, something like that. And for most of our customers, that rate plus all the service, all the advice that they receive from the bankers has been attractive to stay at Banregio. There is not any limitation. There is not any restriction. That's the word. Thank you. There is no restriction from moving from one side to the other side. And they know the offers. The only drawback to move to Hey is that it's self-service. And in the deposit side, it's fully digital, mainly through the app. Also, we have the web, but mainly through the app. Then the customer chooses if they prefer to maintain the service and the advice from the bankers. In Banregio, we have for that segment, for the segment that we call the preferred segment and above, also the private one, we have even three different levels of service. We have the concierge plus the banker and plus the call center. Then we believe is that. Understood. Very clear. If I can ask about how you reached the Hey Banco clients, right? Previously, you mentioned that you were doing a lot of performance marketing and that attracted customers that you did not like or did not want in the Hey Banco segment. So how have you modified your approach towards getting the customers for Hey Banco to get the right kind of customers? And how does that impact your CAC? That's my first question. And second is on asset quality. And this is in general, not related to Hey Banco as such. Are there any pockets where you're seeing stress because of the higher-than-expected rates coming through? Should we be concerned on monitoring any specific sector or segment or region where we could see a bit of worsening in asset quality? Thank you. Well, in terms of what we changed to start attracting new customers in Hey Banco, if you remember, we used to do a lot of digital advertising through you name it any social network, any Google or any web page, even through the local media. We decided to reduce costs. You can see how it's improving the efficiency ratio, mainly because we reduced this part of the expenses. Right now, what we started doing is focusing more on businesses and sole proprietors. We started back to doing some digital advertising, but very focused on specialized media pages. We started a new referral program within individuals where we pay the customer and the new customer also to the referral and to the referee. Both of them, we pay, and we pay a higher amount if they verify the account or if they open a credit card. That has worked very well, at least for the initial three months in terms of new accounts. As you can see, now the challenge is to make profitable that accounts because to motivate them to continue using the account and bring their deposits and acquire a credit card and all the full life cycle. That will be the main way to attract customers both in businesses as well as individuals. With the, as I mentioned, we have still some events. We sponsor three different music festivals. We are sponsoring right now a school gathering sports competition focusing on promoting our minors account. We are the only digital bank with a minors account, and we are making noise in that type of events, mainly through schools or parents' associations or related events. It's more focused. That will be the short answer, more focused and based on referrals. A lot of, what do you say, gaming. We have also a lot of rewards every weekend that are any different promotion or activation, we call it in Spanish. In terms of asset quality, can you repeat your question, Neha, in terms of asset quality? Sure. Just wanted to check if you're seeing any pockets of stress in terms of asset quality, any sectors or any regions which specifically are you more concerned about given that rates have been higher than average? No, no, not really. As we have mentioned in previous calls, the largest customers have been specific cases in different sectors, in different regions. In the consumer side, it has been mainly in Hey. Banregio is controlled right now. Some pressure for rates is general in small businesses, but there is not yet any concern about NPLs. It's more that it's getting difficult to get new financing at these rates. Understood. Mexico City has been growing extremely well. A few years back, we had some asset quality issues in Mexico City. You still remain very comfortable with the growth that you're seeing around 25%? Yes. Well, you know us from a long time. The portfolio went down when we did all the changes on the structure. Right now, we feel very comfortable with the three heads that we have there, and we are opening new branches. It's still a very small branch network, but we doubled the size from 9 to 18. Almost doubled. It's 16 right now. It will be 18 for the end of the year. And we have more not only bankers, but also more credit analysts located in Mexico City that have been helping, that they know the market. Their cases for medium and large companies are evaluated and graded in Mexico City. Then we will continue growing. Yes. We have said that since the IPO, Mexico City is half of the market. If we want to continue growing, we have to grow in Mexico City. Right now, we are confident that we have the team and the asset quality has improved a lot. Also, we have changed, as I mentioned, most of the people in all of the areas. Super. Very clear. Thank you so much, Enrique, Manuel, Alejandro. Have a good day. Thank you, Neha. Since there are no more questions on behalf of our senior management, I would like to thank everyone for joining the call. Thank you, everyone. Thank you for speaking with many of you in the coming weeks. 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. Thank you very much. Thank you.