• Net Income: MXN1,604 million, a 3% increase year-on-year.
• Return on Average Equity: Expanded by 83 basis points year-on-year to 21.7%.
• Loan Growth: 30% year-on-year, outperforming the banking sector's 12% growth.
• Core Deposits: Increased 11% year-on-year compared to the sector's 9% expansion.
• Financial Margin: Expanded by 12% year-on-year and 4% quarter-on-quarter.
• Nonfinancial Income: Increased by 40% year-on-year.
• FX Fees: Rose 37% year-on-year.
• Card and Merchant Fees: Increased by 15% year-on-year.
• Insurance Fees: Increased by 11% year-on-year.
• Efficiency Ratio: 39.5%, a year-on-year contraction of 223 basis points.
• Branch Expansion: 22 new locations in the last 12 months, with plans for 20 additional branches in 2025.
• Operating Expenses: Grew 19% year-on-year.
• Preferred Banking Portfolio: Decreased by 3% year-on-year.
• SME Portfolio: Expanded by 40% year-on-year.
• Nonperforming Loans Ratio: Improved by 11 basis points year-on-year to 1.2%.
• Cost of Risk: Consolidated cost of risk at 1%, above the guidance range of 0.7% to 0.9%.
• Hey Banco Loan Portfolio: Net interest margin over the last 12 months of 7.2%.
• Hey Banco Efficiency Ratio: Increased to 69.3%, a 12% year-on-year improvement.
• Hey Pago Monthly Billing: Expanded by 21% year-on-year, reaching MXN12,027 million.

• Warning! GuruFocus has detected 1 Warning Sign with MEX:RA.

Release Date: October 29, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Regional SA de Cv (MEX:RA) reported a strong 30% year-on-year loan growth, significantly outperforming the banking sector's 12% growth.
• The company's net income for the quarter reached MXN1,604 million, marking a 3% increase year-on-year.
• Return on average equity expanded by 83 basis points year-on-year, reaching 21.7%.
• Nonfinancial income saw a notable 40% year-on-year increase, driven by effective cross-selling strategies.
• The efficiency ratio improved, standing at 39.5%, reflecting strong revenue growth outpacing operating expenses.

Negative Points

• Operating expenses grew 19% year-on-year, attributed to strategic investments in expansion and digital capabilities.
• The preferred banking portfolio decreased by 3% year-on-year, indicating challenges in the retail segment.
• Consolidated cost of risk stands at 1%, slightly above the guidance range of 0.7% to 0.9%, due to specific commercial cases.
• Hey Banco's active customer base decreased to 528,000, reflecting a strategic shift from rapid growth to profitability.
• The CASA ratio was temporarily impacted by a 4.5% decrease due to a strategic focus on optimizing funding costs.

Q & A Highlights

Q: Can you explain the dynamics of Hey Banco's active customers and loan portfolio, given the recent decrease in customer base and flat loan book? Is this related to portfolio risk or competition? A: Enrique Navarro Ramirez, Director - Finance and Planning, explained that Hey Banco is focusing on higher-quality customers and has improved credit policies and collections. The bank is not currently pursuing aggressive growth but is preparing for independent operations in 2025, with plans to resume marketing and grow the customer base in the second half of next year.

Q: Given the economic outlook, do you still see strong growth opportunities for 2025? A: Manuel Gerardo Rivero Zambrano, CEO, affirmed that despite potential economic slowdowns, Regional sees strong growth opportunities due to its geographic and segment focus. The bank plans to leverage cross-selling and new product offerings, such as payroll lending, to continue growing.

Q: What are the midterm plans for Hey Banco, and is there a potential for a spin-off? A: Manuel Gerardo Rivero Zambrano stated that the focus is on making Hey Banco profitable and operationally independent. While a spin-off is a possibility, the current priority is to ensure quality growth and operational efficiency.

Q: How should we think about loan growth and asset quality for next year, especially with a potential GDP growth of around 1%? A: Enrique Navarro Ramirez expects double-digit loan growth, particularly in small businesses and consumer segments, with a focus on maintaining asset quality. The cost of risk is expected to return to 0.7%-0.9% in 2025, with no significant increase in provisions anticipated.

Q: With the current capital levels, is there room to increase dividends or consider buybacks? A: Enrique Navarro Ramirez mentioned that the bank plans to maintain a dividend payout of 40%-50% and feels comfortable with its capital levels. While buybacks are not currently planned, the bank is open to opportunities that may arise.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.