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Edited Transcript of CREAL*.MX earnings conference call or presentation 26-Jul-19 3:00pm GMT

Q2 2019 Credito Real SAB de CV Sofom ER Earnings Call

Mexico D.F. Jul 31, 2019 (Thomson StreetEvents) -- Edited Transcript of Credito Real SAB de CV Sofom ER earnings conference call or presentation Friday, July 26, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Ángel Francisco Romanos Berrondo

Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Chairman & CEO

* Carlos Enrique Ochoa Valdés

Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO

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Conference Call Participants

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* Carlos Rivera Zermeno

Barclays Bank PLC, Research Division - Research Analyst

* Ivan Fernandez

Pictet Asset Management Limited - Analyst

* Joshua Raizin

Cedar Street Asset Management LLC - Research Analyst

* Manuel Gonzalez

Signum Research - Senior Securities Analyst

* Natalia Corfield De Melo Monteiro

JP Morgan Chase & Co, Research Division - Head of Latin America Corporate Research

* Nicolas Alejandro Riva

BofA Merrill Lynch, Research Division - Research Analyst

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Presentation

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Operator [1]

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Good morning, and welcome, everyone to Crédito Real Second Quarter 2019 Earnings Conference Call. Crédito Real issued its quarterly report on Thursday, July 25, 2019. If you did not receive a copy via e-mail, please do not hesitate to contact us in Mexico City at +52 (55) 5228 9753. It is important to note that the presentation and the MP3 recording referred to at this call will be available at www.creal.mx.

Before we begin the call today, I would like to remind you that the information discussed in today's call may include forward-looking statements on Crédito Real's future financial performance and prospects, which are subject to risks and uncertainties. Actual results may differ materially, and the company cautions not to rely unduly on these forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements.

With us this morning from Crédito Real, we have Mr. Ángel Romanos, Chairman and CEO; and Mr. Carlos Ochoa, Deputy CEO. They will discuss on the more important strategic, financial and operating aspects of the second quarter 2019.

I will now turn the call over to Mr. Romanos.

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Ángel Francisco Romanos Berrondo, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Chairman & CEO [2]

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Thank you, operator. Good morning, everyone, and thank you for joining us today. Crédito Real posted another quarter of positive results, reaffirming the performance achieved during the first quarter of 2019, and working through the accomplishment of its guidance. With our resilient commercial operation and metrics, despite the subpar behavior of the Mexican economy. Domestically, the effects attached to the changing federal administration are momentarily lowering GDP growth. Although we remain optimistic on the prospects of the second half of the year as key macroeconomic variable such as inflation, exchange and interest rates remain stable. Separately, we are also enthusiastic about the government support and credit origination for SMEs and expansion of the country's financial inclusion as these endeavors laid down a solid base for the medium- and long-term development of our sector. Especially noteworthy this period was the double-digit increase in the consolidated loan book portfolio, boosted by our articulated strategy of sustainable and flexible growth that arise as a clear fundamental behind our good numbers, which this quarter was greatly supported by the performance recorded in our international operations. Additionally, the continuous upscaling of our leasing and SMEs credit products bring forward a substantial support for the P&L and balance sheet as we kept the pace in the addition of lower-risk assets with attractive yields.

Turning now to our results breakdown. In Mexico, payroll origination was certainly affected by the economic slowdown, although key metrics as the portfolio quality growth and average loan behaved steady and better than expected. And as it has been over the last quarters, we kept focused on the incorporation of credit-worthy clients who meaningfully contribute to our industry-leading nonperforming loan ratio of just 1.5% as of quarter end. Moreover, it is important to get that we are undertaking a crusade for efficiency at all operating levels as we are [ingeniously] seeking to offset higher cost of financing towards the consolidation of a more lean and effective structure.

We will remain, in relation to small- and medium-sized enterprises segment, loan origination continued strong, posting a 99% annual growth with enough room for further market penetration as we foresee further integral industry dynamics along the year. Meanwhile used cars in Mexico posted a similar performance to payroll with a lower loan origination but showing a stable customer base and average loans.

Moving on to our business segments outside Mexico. Used Cars USA regained traction mostly in the operation of CRUSAFin. Despite the adverse regulatory environment, our loan origination solidly increased 99% with a very stable NPL ratio of only 0.6%. In this regard, it is also important to note that we expect further momentum, as the ongoing generation of better economies from the new operating and commercial structure ramps up, thus providing us improved margins and wider brand visibility.

Lastly, against a persistent weakness in the economic activity in Nicaragua and Costa Rica, Instacredit recovery moved forward with loan origination increasing 14% versus the same period last year, reaching MXN 841 million. In addition, portfolio quality greatly improved as the NPL ratio dropped from 6.4% in the second quarter of 2018 to 4.8% this quarter. With that, our adjustments performed to our collection standards. Before these numbers, we also anticipate positive prospects for our performance in Central America as we plan to endure resiliency, growing on the further consolidation of an efficient and flexible institutional design, able to be adapted and succeed amid different challenges.

Now sharing broader color on recent developments over the quarter. We kept advancing with the operation of our share buyback program, delivery of our company's Q2 and stock value by acquiring 2.3 million shares, equivalent to MXN 52 million. Secondly, as part of our commitment to deliver attractive returns to our investors, we settled a record-high dividend payment in our history, MXN 0.70 per share for an aggregated amount of MXN 268 million. As for the financing front, during the quarter, we drew down MXN 1.6 billion from 3 credit lines appointed to working capital needs and which extend our banking creditors base. These operations coupled with the credit-limiting pressures and coupled with debt placements carried out in previous quarters, strongly contribute to widen our financial flexibility to pursue our strategic and operating targets. Wrapping up and complete with the results of things so far this year, we will continue with the hard work to enhance our business platform and contribute to a financial inclusion in Mexico, while offering competitive and differentiated products of credit with international markets where we operate.

Finally, I want to take the opportunity to congratulate Carlos Ochoa, our Deputy CEO, for being recognized by second year in a row in the 2 top-ranked CFOs in the practice by Institutional Investor Magazine as well as the Investor Relations team that has been also well-run in different activities of its function, which constitutes an instrumental piece of our operations since the first day of our inception into our target markets. Now Carlos will discuss in greater detail our financial performance for the quarter.

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Carlos Enrique Ochoa Valdés, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO [3]

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Thank you, Ángel, and good morning, everyone, and thank you all for being part of our quarterly conference call. As of quarter end, interest income reached MXN 2.9 billion compared to the MXN 2.6 billion recorded in the same period last year, following the growth achieved at the consolidated portfolio. During this quarter, interest expense totaled MXN 1.1 billion, increasing 28% when compared to the MXN 856 million in the same period last year. This variation was mainly derived from financing the growth of the period at higher funding costs. Consequently, the financial margin amounted to MXN 1.8 billion in the reporting quarter, an annual increase of MXN 22 million was the resiliency of our operations in Mexico and improved performance of our international businesses, especially the Instacredit, helped to offset higher funding costs. Provision for loan losses this quarter totaled MXN 335 million, down 26% when compared to the MXN 455 million recorded in the second quarter of 2018 as a result of the continued addition of high-quality assets. The coverage ratio increased from 180% in the second quarter of 2018 to 205%, a 25 percent points expansion. This variation is primarily explained by our enhanced management of credit, including origination, supervision and collection.

Meanwhile, administrative and promotion expenses of the quarter decreased MXN 55 million when compared to the same period last year, reaching MXN 852 million due to the implementation of different strategies such as the synergies achieved in Crédito Real USA and the consolidation of better operating controls in Instacredit.

Net income rose MXN 33 million, up 7% year-over-year. The deceleration of growth rates is a result of higher funding costs associated with the issuing of our senior notes earlier this year, which was more than offset by our strict risk-related strategies along with the pursuit of operational improvement. Meanwhile, our return on average equity was 12.3% as of June 30, 2019. Excluding the perpetual notes effect, the return on average equity was 16.7%. The return on average assets as of the end of second Q '19 stood at 3.8%. Regarding the capitalization ratio, it reached 38.8% as of June 30, 2019. The funding cost recorded 180 basis point increase, from 11.4% at the second quarter of 2018 to 13.2% as of June 30, 2019, reflecting the rising rate environment that has prevailing international and domestic markets over the last 12 months.

Nevertheless, the funding cost decreased 50 basis points in a sequential basis. It is important to note that resource withdrawal made from 3 credit facilities this quarter in line with our strategy of constantly diversified and improved our funding sources. In this regard, we remain optimistic to find an attractive funding opportunity as local interest rates have shown a stabilization trend over the last 6 months.

Turning to our portfolio performance. At quarter end, the consolidated loan portfolio was MXN 41.1 billion, posting a 22% annual growth. Each of our business segments contributed to this achievement, outstanding Mexico's SMEs and payroll, without minimizing the recovery theme in the U.S. and Central America.

Moving this greater detail into our credit portfolio, SMEs loan portfolio rose to MXN 5.2 billion, up 82% when compared to the figure recorded in the same period last year largely driven by the increasingly positive customer response to our commercial offer in this segment. It is worth noting that the contribution of SMEs loan portfolio continued to rise, reaching 12.8% of the consolidated portfolio as of June 30, 2019, from an 8.6% in the second quarter 2018. Next in order, payroll portfolio totaled MXN 26.7 billion increasing 17% year-over-year each quarter as lower sales to the previous quarter but above the average growth rate of the last 3 years that reflects the stabilization of the portfolio after the addition of the pensioners' segment years ago. Used Cars portfolio rose 31% when compared to the second quarter of 2018, amounting to MXN 3.7 billion. This positive performance was mainly fueled by the commercial synergies generated by our new operational structure in both countries. In the coming quarters, we expect to continue gaining traction among our target market, hand-in-hand with the ongoing consolidation of the recognition of our brands in these businesses.

Lastly, Instacredit's loan portfolio expanded 0.3% or MXN 14 million at quarter end of -- to MXN 4.7 billion supported by the initiatives launched in the previous month to stabilize its performance. In this end, we keep vigilant and ready to recalibrate operation if circumstances make it necessary. Separately, our consolidated nonperforming loan ratio decreased to 1.5% this quarter from 1.9% at the end of the second quarter of 2018, mainly driven by the pursuit of continuous improvement in our loan origination and collection standards.

Turning to the balance sheet. As of June 30, 2019, total assets increased 18% or MXN 8.3 billion compared to the same period of 2018 amounting to MXN 54 billion, reflecting the organic growth achieved in the consolidated portfolio and debt issuances conducted in the last 12 months. As of quarter end, the company's outstanding debt totaled MXN 35 billion, up 28% or MXN 7.5 billion more in an annual basis, mostly explained by the replacement of our senior notes at the beginning of the year and the second debt issuance under our securitization program conducted in the 4Q of '18, and to a lesser extent, the incremental balance recorded in bank loans.

To conclude, as of quarter end, the stockholders' equity totaled MXN 15.9 billion, an annual increase of 6% or MXN 918 million, results of the already explained factors. With this, I conclude my remarks. And now let me turn back the call to the operator to open the line for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question will come from Carlos Rivera with Barclays.

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Carlos Rivera Zermeno, Barclays Bank PLC, Research Division - Research Analyst [2]

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My first question is regarding the NIM. We continue to see a decline there, so I just wanted to get your thoughts about the expectations probably for this year and mid-term. I know part of that has been the funding costs, which improved actually quarter-over-quarter in the second quarter. But as long as you continue growing fast in SMEs, I think it's going to be difficult to stabilize that NIM. So if you could share short term and long term your expectations there?

And my second question is going to be on asset quality. The NPL ratio is actually pretty low based on your historical levels. So how much room do you think you have there, especially considering that economic activity continues to remain pretty slow in Mexico? So how much lower can you get there? Or what levels we should start to expect?

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Carlos Enrique Ochoa Valdés, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO [3]

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Carlos, regarding your first question, when it comes to NIM, yes, the factor that affected the most the increases in the NIM this quarter was the -- and actually it wasn't during this quarter. Actually, it was the pay -- when we paid down the 2019 senior notes earlier this year. And also we have another amortization of a [grade 2] facility this year. And these 2 amortizations consolidated amounted for roughly, I don't know, probably 10% of the liabilities of the company. The significant thing about that -- about those amortization is that those were the cheapest debt that the company had at the time. So basically, we substitute something paying in pesos around 7%, with debt-paying around 14% or something.

So basically, that's what explains it the most. However, when it comes to the trend for the NIM as of the end of the year, we -- I mean, for starters, we are not expecting more interest rate hikes. And probably -- to tell you the truth, our best case scenario here in the company, we want to be more -- we intend to be more conservative on that end. And we don't expect interest rate cut. But if at some point we get 100 basis cut, we could be talking again to NIM around the 20% which is our benchmark line, all right? So we don't think that the NIM is going to continue to deteriorate, but on the other hand, it could be positively affected if they decide to cut rates over here in Mexico. I don't know if that answers your first question.

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Carlos Rivera Zermeno, Barclays Bank PLC, Research Division - Research Analyst [4]

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Yes. I'm just a little bit surprised. I mean if we only look at the yield of the loan portfolio regardless of what's happened on the funding costs, that continues to come down over the last few quarters, and it's probably a combined effect of a lower growth in Instacredit in the past, but also higher growth of SMEs, which is the product that has the lowest yield. So I'm just trying to think about how the effect of the SME, which is the fastest-growing segment now impacts your NIM.

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Carlos Enrique Ochoa Valdés, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO [5]

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Yes. Definitely the NIM, I mean, if you think in those terms with the NIM, you are correct. I mean the interest rate that we charge overall for the SME business here in Mexico, it's something around the 25%, 27%. So that is -- when you compare that one to whatever we charge in the Payroll business, it's consistently lower. However, I mean if you think about the good thing about the SMEs on the other hand, is that's the main --- that's been the main driver in the improvement of the cost of risk, especially because they have way larger average ticket size. And that helps us a lot in terms of the cost of risk. So basically, the way we are addressing the pressures over the NIM, is what can we do both in terms of the efficiency ratio and also in terms of the cost of risk in order to minimize whatever effects we have on the cost of funds.

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Carlos Rivera Zermeno, Barclays Bank PLC, Research Division - Research Analyst [6]

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Okay. All understood. Let's move on to the asset quality question, please.

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Carlos Enrique Ochoa Valdés, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO [7]

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I mean we are very pleased about the asset quality. I mean, for starters, I mean, think about that, we're SMEs business model. I mean if you think about SMEs business model, we are just -- we are relying on a relatively small customer base, and we keep adding new products to customers that have been with us for a number of years. So we are not concerned about asset quality. And if you think about this business model with higher average cost of -- with average higher -- with higher average ticket sizes that helps us in terms of the cost of risk. So that's mainly the main driver that you've been seeing when it comes to the cost of risk. Well, it's also worth mentioning the improvements that we are seeing in Instacredit. I mean the efforts of the -- our team based there in terms of collecting and in the improving the origination standard, I mean we believe that they are paying at this point. And today, it's really hard to say, I mean how much lower this can be brought down because we're already way down, 1.5% as of this quarter. It was a -- we feel comfortable with that number. And I believe that it could be around that figure for the remaining of the year.

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Ángel Francisco Romanos Berrondo, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Chairman & CEO [8]

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I'm sorry. Answering your second question, this is Ángel Romanos. We still see a huge opportunity in the SME sector even though the economy might be decelerating in the near future because the need for money is so big, and we're working a lot with the development banks in Mexico to get the customers through them. And we have such a big pipeline for that, that we are cherry-picking all of our customers. We have very strict rules of who we lend to and who we don't. But we do expect to keep growing on that, as banks go away from that segment, another company will compete there. We see a great opportunity to pick up the best customers and remain with a good and well performing portfolio still growing with us.

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Carlos Rivera Zermeno, Barclays Bank PLC, Research Division - Research Analyst [9]

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Okay. So just to make sure I understood clear about asset quality. So you are not concerned about asset equality in Mexico despite the country going to very slow rates of growth?

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Ángel Francisco Romanos Berrondo, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Chairman & CEO [10]

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Not for now because we are very cautious of who we lend to. I mean our payroll business has always been countercyclical. And on the SMEs, as I told you, our pipeline is so big. We are operating less than 20% of what we get. So we really cherry-pick our customers.

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Operator [11]

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Our next question comes from Ivan Fernandez with Pictet.

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Ivan Fernandez, Pictet Asset Management Limited - Analyst [12]

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Ivan Fernandez from Pictet. A few questions for you guys, please. The first one is expanding on this NIM question from the previous caller. Can you be more detailed and tell us where do you think your cost of debt will be in the third quarter and the fourth quarter, approximately?

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Carlos Enrique Ochoa Valdés, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO [13]

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It should be around 13.2%, 13.5% that you are seeing right now. If you look -- if you compare the cost of funds as of the first Q, which was around 13.7%, it was explained by the negative carry that we used to have at the time. At this point, now that we have most of the old resources deployed, it came down to the 13.2%. But as conservative as we are on our hedging strategies here in the company, I don't see it going -- coming down further than the 13.2% or 13.5% that you're seeing.

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Ivan Fernandez, Pictet Asset Management Limited - Analyst [14]

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Okay. Second question is on net income guidance for the year. Since the beginning of the year, you guys have been guiding for a double-digit growth in net income. I don't know if you are reiterating that guidance at this point in the year. And also if you could clarify whether that minimum 10% growth in net income is including the exceptional gain, the one-off gain you had at derivatives in the first quarter of MXN 150 million? Or excluding it?

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Ángel Francisco Romanos Berrondo, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Chairman & CEO [15]

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No. It's excluding the one-time item. We do believe that we can make that number by the end of the year.

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Ivan Fernandez, Pictet Asset Management Limited - Analyst [16]

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Okay. The other question is when I look at the trend of origination amounts, I can see that the payroll line you have been originating a smaller amount than your previous trend. I think you're originating MXN 1.6 billion to MXN 1.8 billion per quarter the last, say, 5 quarters or so. And now for the last couple of quarters, it fell to something like MXN 1.35 billion. So I was wondering if that's intentional or if you're struggling to originate assets in the payroll, which is your core business?

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Ángel Francisco Romanos Berrondo, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Chairman & CEO [17]

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In part, it has been intentional as we get used to the new government, and we evaluate again all of the contracts we have and whether we want to lend and where don't want to lend. And the lower part is just market-wise that the government is also installing itself and they don't know how things work yet perfectly. But we are, in the last 2 months, you see in the third quarter, we're going back to the amounts we were originating in the -- last year. And for us, it's good to be having a better mix of origination with other products.

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Carlos Enrique Ochoa Valdés, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO [18]

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In addition to that, if you think about the origination rate that we experienced over the last couple of years, that's was mostly driven by the pensioners, which was a new product at the time. Right now, that's a more mature product and that also explains the decline in the origination of the Payroll business overall.

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Ivan Fernandez, Pictet Asset Management Limited - Analyst [19]

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And last question is I noticed you guys have stopped the buyback in the last few weeks. I guess that was because of the blackout leading up to the earnings result. Do you intend to restart the buybacks right away? Or what is the plan for that for the coming months, please?

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Carlos Enrique Ochoa Valdés, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO [20]

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Yes. I mean we are convinced that the price doesn't reflect the value that we are creating. And we want to be very emphatic about how confident we are with the future and our business model. So we will continue to be more in -- probably more in the form of market-making. But yes, we definitely will continue with the buyback.

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Operator [21]

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(Operator Instructions) And our next question comes from Nicolas Riva with Bank of America Merrill Lynch.

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Nicolas Alejandro Riva, BofA Merrill Lynch, Research Division - Research Analyst [22]

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Just one follow-up on asset quality. So your NPL ratio came down in the quarter 10 basis point. It's very low, below 2%. But we saw some of your peers, the NPL ratio increased, and I mean the peers in the 9-month financial space. And I don't have a right space, some players more in unsecured personal lending, leasing for SMEs. But given that you are kind of branching out into other segments like SME lend, what's your view in terms of where Mexico is in the grade cycle right now?

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Carlos Enrique Ochoa Valdés, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO [23]

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Well, I mean, as I was telling, it's hard to -- how to -- we -- as I was telling you at the beginning, what's driving the cost of risk lower during this year, is very high year average ticket size with the SMEs product. As Ángel has stated earlier, we are being very selective in terms of credit origination and that coupled with our business model of adding new product, that helps us a lot. It's hard to say how things can be, I mean, how things can evolve in the country due to the changes in the macro aspect. However, as long as we remain being very selective, we do not anticipate major changes over here. And finally, it's also worth noting that if you look at the NPL trend that we've experienced over the last couple of years, especially the last year -- comparing to last year, mostly as explained to the improvement that we've made in Instacredit in terms of America and all the effort that our team based there has made.

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Operator [24]

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Our next question comes from Natalia Corfield with JPMorgan.

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Natalia Corfield De Melo Monteiro, JP Morgan Chase & Co, Research Division - Head of Latin America Corporate Research [25]

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My question is with regards to the credit lines that you took this quarter. I'm curious to know the tenor of those credit lines. And I'm asking because I notice a likely deterioration in the debt maturity profile of Crédito Real. There is now more debt maturing next year. So if you could clarify that for me, it would be great.

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Carlos Enrique Ochoa Valdés, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO [26]

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No. I mean if you think about the maturities that we -- if you think about the guidelines that we passed this -- earlier this quarter, I mean the duration of those normally is 3 to 5 years. On the average, they are like 3 years. And I don't see a particular deterioration on the liquidity, on the debt profile of our liabilities. Actually, it's quite the opposite when you think about how the debt profile was at the beginning of the year. Because most of the -- what you are seeing right now, most of them are revolving credit lines with banks that we've been working for a number of years. So basically, we roll them over. I mean we are confident that that's not going to change.

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Natalia Corfield De Melo Monteiro, JP Morgan Chase & Co, Research Division - Head of Latin America Corporate Research [27]

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All right. So just to confirm. So those are 3 to 5 years. I'm asking just to...

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Carlos Enrique Ochoa Valdés, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO [28]

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Yes. On the average, let's say, it's 3 years because we don't get much longer than that outside Mexico. And the bank lines that we draw, they work on facilities from Mexican banks.

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Natalia Corfield De Melo Monteiro, JP Morgan Chase & Co, Research Division - Head of Latin America Corporate Research [29]

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Right. Okay. I'm asking because, in the press release, I see about MXN 6.1 billion maturing in 2Q in 2020. And looking at the press release of 1Q '19, this number was MXN 3.4 billion. So there was an increase of around MXN 3 billion.

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Carlos Enrique Ochoa Valdés, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO [30]

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Yes. I mean as for 2019, we have just 2 amortization, a $30 million facility from BNP and whatever we have over 3-year facility was $40 million. So that's -- the combination of those 2 amount for roughly $80 million, and that's the most visible part in terms of amortizations. As for the rest is, as I was telling you, mostly those are revolving credit lines with banks that we have been working for a number of years already.

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Natalia Corfield De Melo Monteiro, JP Morgan Chase & Co, Research Division - Head of Latin America Corporate Research [31]

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All right. And that's your amortization for 2020?

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Carlos Enrique Ochoa Valdés, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO [32]

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That's correct.

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Natalia Corfield De Melo Monteiro, JP Morgan Chase & Co, Research Division - Head of Latin America Corporate Research [33]

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But like how much is it?

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Carlos Enrique Ochoa Valdés, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO [34]

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As I was telling you is the BNP it was $30 million plus another amortization worth $44 million of the 3-year facility and those are the most visible ones.

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Natalia Corfield De Melo Monteiro, JP Morgan Chase & Co, Research Division - Head of Latin America Corporate Research [35]

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Okay. And those -- you had those before in the previous quarter?

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Ángel Francisco Romanos Berrondo, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Chairman & CEO [36]

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No. Because those are due in 2020.

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Operator [37]

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Our next question comes from Joshua Raizin with Cedar Street Asset Management.

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Joshua Raizin, Cedar Street Asset Management LLC - Research Analyst [38]

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We are seeing a number of new U.S. institutional investors and a new shareholder ledger, and the share price still has not really responded. Looking around the world, will you not see similar names trading anywhere near this valuation? And it continues to trade substantially below fundamental value. How does management think about the share price? And at what point would you consider doing further buybacks as opposed to capital allocations and whatnot?

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Ángel Francisco Romanos Berrondo, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Chairman & CEO [39]

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I don't know if I understood your question perfectly, but we are buying back shares, not only as a company but as employees and as the original owners. And we're not on the quiet period. And we've been accumulating shares and we love the -- we think it's so cheap at this price. And we don't understand the divergence between our bond crisis and the stock price. Our 2026 bonds are trading at $112. Our 2023 bonds are trading at $105, $106 with a yield of 5.30%. So we really don't understand the divergence, and we'll keep buying shares as long as they're as cheap as they are.

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Joshua Raizin, Cedar Street Asset Management LLC - Research Analyst [40]

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Do you think that the equity market does not understand about the name that allows them to valuate at such a cheap level?

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Ángel Francisco Romanos Berrondo, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Chairman & CEO [41]

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Excuse me?

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Joshua Raizin, Cedar Street Asset Management LLC - Research Analyst [42]

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Why is it that you believe the equity market does not seem to understand the name in the same way as the credit market? And what can the company do in terms of either investor outreach or dialogue with the market in order to improve the valuation?

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Ángel Francisco Romanos Berrondo, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Chairman & CEO [43]

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We go to a lot of non-deal roadshows all year around to try to explain the company to investors. And we don't know if it's a matter of liquidity on the stock, if it's a matter of not understanding the stock. But I mean we've been a public company since 2012, and the company has never been understood. And we're making better numbers every year and still growing our business. And as long as we still create value, we think someday the stock market will recognize that. And meanwhile, we have more shares for ourselves at these prices, which is not bad for us.

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Operator [44]

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(Operator Instructions) Our next question comes from Manuel González with Signum Research.

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Manuel Gonzalez, Signum Research - Senior Securities Analyst [45]

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Congratulations on the solid results. I just had a quick question. I was wondering if you had some kind of strategy to raise your credit rating or do you guys think it's fine? I mean I don't know if you have something to add some strategy due to looking forward to 2 weeks investment level or something.

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Carlos Enrique Ochoa Valdés, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO [46]

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Well, that's a good one. I mean that's definitely a good one. I mean we've been in very close touch with the rating agencies and especially because we don't want surprises over there. I mean we clearly -- we are certain that there's a -- that our rating, it's a differentiator between other nonbanking financial institutions. And in that sense, I mean, we would love -- clearly we would love to be upgraded. I mean probably we are on the -- if you look at our rating trends over the last 4, 5 years, I mean probably that's something doable. According to our view, it is. According to their view, it isn't. But let's say, over there, we cannot confront their methodology but just wait and see. At some point, that's bound to happen, I say.

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Operator [47]

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At this time, there are no more questions in the queue, and the Q&A session has concluded. Thank you for being on today's conference call, and you may now disconnect. Enjoy the rest of your day.

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Carlos Enrique Ochoa Valdés, Crédito Real, S.A.B. de C.V., Sociedad Financiera de Objeto Múltiple, Entidad No Regulada - Deputy Director General & CFO [48]

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Thank you.