• Net Income: MXN1,683 million, a 4% year-on-year increase.
• Return on Average Equity: Increased by 20 basis points year-on-year to 21.3%.
• Loan Growth: 14% year-on-year, outpacing the banking sector's 12%.
• Core Deposits: Rose 12% year-on-year compared to the sector's 9% expansion.
• Financial Margin: Increased by 12% year-on-year and 3% quarter-on-quarter.
• Non-Financial Income: Increased by 20% year-on-year.
• Operating Expenses: Grew 13% year-on-year.
• Efficiency Ratio: 39.7%, a year-on-year reduction of 124 basis points.
• NPL Ratio: Increased to 1.1% from 0.88% in the previous quarter.
• Coverage Ratio: 163%.
• Branch Openings: 20 new branches opened in the year.
• CASA Ratio: Reduced to 47.5%.
• Preferred Banking Portfolio: Increased 21% year-on-year.
• SME Portfolio: Expanded 19% year-on-year.
• Hey Banco Active Customer Base: 523,000.
• Hey Banco Efficiency Ratio: 72.6%.
• Dividend Distribution: MXN3,000 million in two installments, representing a 46% payout.

• Warning! GuruFocus has detected 2 Warning Signs with MEX:RA.

Release Date: January 28, 2025

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 4% year-on-year increase in net income for the fourth quarter, reaching MXN1,683 million.
• The company achieved a 14% year-on-year loan growth, outpacing the banking sector's 12% growth.
• Core deposits rose 12% year-on-year, compared to the sector's 9% expansion.
• Non-financial income saw a notable 20% year-on-year increase, driven by cross-selling strategies.
• The efficiency ratio improved, contracting by 150 basis points to 36.5%, underscoring operational excellence.

Negative Points

• Operating expenses grew 13% year-on-year, primarily due to strategic investments in geographic expansion.
• The NPL ratio increased to 1.1% from 0.88% in the previous quarter, indicating a rise in non-performing loans.
• The CASA ratio declined to 47.5%, reflecting a strategic exit from high-cost checking accounts.
• There is a potential risk of NIM pressure if interest rates decrease more than expected.
• Hey Banco's efficiency ratio remains high at 72.6%, indicating room for improvement in operational efficiency.

Q & A Highlights

Q: How should we think about NIMs given the potential interest rate changes in 2025? A: Enrique Navarro Ramirez, CFO, explained that they expect interest rates to end at 8.5% by the end of the year, down from 10%. They anticipate a NIM impact of 16 to 20 basis points due to rate changes, but improvements in loan mix and spreads should help mitigate this. The NIM guidance is between 6.2% and 6.7%, with the lower end reflecting a scenario of more significant rate reductions.

Q: What are Hey Banco's key products for 2025, and will it be profitable? A: Enrique Navarro Ramirez stated that Hey Banco will focus on business loans, credit cards, and personal loans, targeting higher-quality customers. They aim to double the business loan portfolio and expect a 20% growth in credit cards. Hey Banco is expected to be profitable this year, with improvements in cost efficiency and credit quality.

Q: How should we think about OpEx growth in 2025 given your expansion plans? A: Enrique Navarro Ramirez mentioned that OpEx is expected to grow in the low teens, driven by strategic investments in branch expansion and digital capabilities. They aim to maintain cost efficiencies despite these investments.

Q: What is driving the increase in deposits, and is this trend sustainable? A: Enrique Navarro Ramirez explained that deposit growth is driven by new branch openings, better customer segmentation, and enhanced digital offerings. They expect this trend to continue, supported by cross-selling strategies and improved customer relationships.

Q: What are the expectations for non-interest income growth in 2025? A: Enrique Navarro Ramirez indicated that non-interest income is expected to grow, albeit not at the same rate as the previous year. Key drivers include FX fees, insurance, and acquiring business growth, supported by cross-selling and strategic partnerships.

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