Banco de Crédito e Inversiones (BCI) Earnings Call Transcript & Summary

All right. Good morning, everyone, and welcome to our second quarter 2026 conference call. I'm Andres Atala, Head of Investor Relations and it's a pleasure to have you all back with us today to review our results during the first half of this year. Joining me today are Roberto Pulido, BCI CFO; Sergio Lehmann, our Chief Economist; and Jose Marina, City National Bank's CFO. We are proud to share the financial achievements and the strategic advancements that have defined this quarter. Let me briefly walk you through today's agenda. We will start with Sergio, providing a macroeconomic overview of the key markets where we operate, which is essential context for our numbers. Following that, Roberto will review our financial results, breaking down our performance and indicators at both the consolidated and local levels. Next, Jose will provide an update on the positive momentum at CMBS in Florida as well as the progress made in project win. We will then conclude with our closing remarks and updated guidance before opening the floor for your questions. Now I will hand the call over to Sergio.

Good morning, everybody. Welcome. Thank you, Andres. I will provide you, as Andre said, an update of the macro comic environment for the U.S. Peru and Chile. Volatility and uncertainty regarding the conflict in the Middle East has reappeared even though more recently, we have received news suggesting that negotiation between the U.S. and Iran have been reassumed. To this complex scenario, we had a slight concern associated with the enormous amounts behind AI bets. This has led to a slightly lower global growth prospects and upward pressures on headline inflation driven mainly by energy prices. Consequently, central banks are expected to maintain caution for the remainder of the year until there is greater clarity regarding the Middle East conflict. The U.S. economy remained resilient during the first half of 2026. This was driven fundamentally by investment linked to artificial intelligence and private consumption. Looking at the labor market as showing some sign of weakness, it has regained traction in job creation, even though the participation rate has remained a downward trend due to demographic factors, reaching 61.5% in the second quarter. Now let's see cash inflation and the evolution of U.S. monetary policy. Regarding inflation, headline CPI accelerated as a consequence of higher fuel costs, reaching 3.9% year-over-year in the second quarter. Furthermore, Core inflation has shown renewed upward pressures remaining above the Central Bank target. Looking ahead, we expect inflation to finish the year around 3.2%. This dynamic is from the federal reserve to maintain a restrictive sense. Given that inflation came in slightly lower than anticipated last June, combined with labor market that has dispel signs of deterioration, we anticipate that the Fed will keep its reference rate unchanged. This is supported by the the Fed governance, Kevin Warsh, who is not guidance to the multi policy in the U.S. Now let's transition to Peru. The Peruvian economy has continued to show solid performance, with an average expansion of 2.4% over the last 4 quarters. supported by firm domestic demand. However, headline inflation experienced a market assassination in June, reaching 4% year-over-year due to climate shocks, international tension and energy supply disruptions. While we anticipate this game to be temporary and easy by year-end, the Central Bank of Peru has currently maintained its model rate at 4.25%. Nevertheless, the recent inflation spike suggests a potential 25 basis point upward adjustment before the year concludes. Finally, turning to the political landscape well, Koumouris Victor anticipates policy and economic uncertainty anchored by her agenda of fiscal discipline, private investment promotion and a hard line stance on public security any lingering political noise should remain secondary to the market fundamentals. Turning to Chile. During the first half of this year, the economy showed a market loss of momentum, accumulating 5 consecutive months of annual contraction. However, starting from June reading, an inflection point in this [indiscernible] has emerged, pointing to a greater dynamism ahead. The behavior responds mainly to supply factors as well as domestic demand losing traction due to weakening in the labor market with unemployment rate reaching 9.4% in the second quarter. As a result, we expect the economy to grow below its potential this year, though we project a recovery towards the end of the year. As I mentioned, the most recent data regarding economic activity suggests that the economy reached an inflection point in June after excluding weak performance in the initial months of the year. This more positive view is supported by the national reconstruction government initiative already approved at the Congress, which includes tax reduction and incentive for new investments. Moving on, the inflation in Chile and rates -- we observed that inflation peak due to higher full prices, though the increase was smaller than expected, and the core inflation remained well controlled in line with historical levels. However, the current scenario poses a dual challenge for the Central Bank. On one hand, economic deacceleration and iterating labor market till risk to the down sound. On the other hand, the Chilean peso depreciation reaching recently close to MXN 920 per dollar, combined with middle tensions create short-term upside inflation pressures. In late to this, We expect the Central Bank to keep the multiply rate unchanged at 4.4%, maintaining a cautious view data-dependent approach alongside a slight dubbish bias until there is a greater clarity. With that, I will now hand over to Roberto, who will continue with this presentation. Roberto?

Thank you, Sergio, and good morning, everyone. It is a pleasure to be with you, half of 2020, Besi delivered strong fundamentals. As the slide highlights, our net income increased by 21% year-over-year to $699 million. This performance reflects the strength of our diversified business model and our prudent balance sheet management, which allow us to successfully navigate the macroeconomic environment. Starting with our income statement, our consolidated NIM stood at 3.7% and driven by higher-than-expected inflation and growth in our loan portfolio. We complemented this with a 10% increase in fee income, both in retail and wholesale banking at 52 basis points year-over-year as one of our key priorities with cost control efforts reflected in operating expenses decreasing by 2.5% year-over-year. Furthermore, our asset quality remains strong with credit loss expenses decreasing by 14%. Second, in our balance sheet, total loans grew by 6.1% year-over-year anchored by our continued leadership in the commercial segment and a strong momentum in our consumer portfolio, reflected in a market share increase of 31 basis points. On the funding side, demand deposits surged 1.2%, ensuring some liquidity. Combined with these trends, our CET1 ratio increased by 16 basis points to 11.3%, and driven by strong internal capital generation that leave us with a 226 basis points regulatory buffer. Moving on to our key initiatives. The corporate evolution to Base Group is progressing according to plan. Our international platform is delivering sound financial results across City National Bank Besse Miami, Besse Securities and celebrating its fourth year of operations, Besse Peru. The execution of our customer experience strategy is delivering top-tier metrics with Net Promoter Score reaching 77 points as of June. This is underpinned by investments we've made in the past years in robust digital channels the integration of artificial intelligence and the successful rollout of our new branch model. Let's take a closer look at the consolidated figures for the second quarter specifically. During this period, our operating income expanded 19.7% year-over-year, reaching $985.6 million. This top line growth is primarily explained by. Net interest income increased by 14.8% year-over-year, largely driven by higher indexation income, reflecting a US variation of 2.5% in the second quarter of 2026, compared to the 1% in the same period last year. Net fees amounted to $14.7 million, fueled by higher transactionality in credit cards, which expanded 6.8% year-over-year. and private and retail segments. On the fee expenses side, they declined roughly by 0.4% due to a change in the recognition methodology of the loyalty program in 2026. Our financial results surged 110.4%. This performance was favored by the capture of market opportunities in available-for-sale instruments as well as directional positions. Moving down the P&L. We continue to see a positive asset quality trend. Our loan loss expenses decreased 1.6% and reflecting a proactive risk management and origination policies in line with our strategy. Regarding operating expenses, the stand-alone quarter showed a 9.9% increase compared to the same period last year, mainly because of a symmetric comparison in the other expenses line and specific initiatives. Despite that, on a year-to-date basis, our operating expenses have decreased 2.5%. Our tax expenses increased by 34.1% year-over-year, driven by higher income before taxes and higher FX impacts on the tax valuation of our investments in the United States. All this factor led to a remarkable bottom line. We registered a quarterly all-time high net income of $386.8 million representing a 37.5% search compared to the second quarter of 2025. This allow us to grow our total equity base by 10.1% and to $8.5 billion, further fortifying our solid capital position. Let's now dive into our operation and performance in Chile. During the second quarter, total loans grew by 5.5% year-over-year to $42.7 billion, while the banking system advanced by 4.2%. The anchor of this expansion remains our commercial portfolio, which grew 4.7% year-over-year and 5.9% excluding FX depreciation effect. We are proud to note that we continue to lead the industry in this segment, having increased our market share by 45 basis points over the last 12 months to reach 17.6% as of June. We are successfully regaining volume in our consumer portfolio, which grew at 8.8% year-over-year. We highlight our value proposition to offer segment based on our renewed and personalized loyalty program. We also registered significant progress in [ Leiters, ] which contributed about 1/3 of the volume. Rounding out the portfolio, mortgage loans delivered 6% growth, reaching EUR 13.2 billion, mainly driven by inflation as these loans are denominated in U.S. The dynamics between our NIM and fee generation highlights the strength of our business model. Net interest margin reached 4.1%, a 13 basis point compression when compared to the same period last year. Despite a higher indexation income, this last period, net interest income was impacted by accounting hedges due to the liquidity conditions stemming from the geopolitical environment. Still NIM level as of June remains above the 2025 year-end. Support by increasing consumer loans and solid expansion in noninterest-bearing deposits. Furthermore, net fees reached $120.3 million, a robust 7.6% year-over-year increase driven by a strong performance in our insurance brokerage, higher credit card transaction volumes and a significant contribution from these Asset Management, which expanded its AUM by 14%. Let's now turn to our operating expenses. For the second quarter of 2026, the 10.7% year-over-year valuation in local expenses was driven by our focus on accelerating key strategic initiatives, which primarily impacted the other expenses line. Despite this nonrecurring effect, we are pleased to report that our local efficiency ratio closed the quarter at 46.5%, representing a 400 basis point improvement compared to the second quarter of last year. On a year-to-date basis, our local operating expenses actually decreased by 4%. This trajectory reflects ongoing efforts across the bank and its subsidiaries to bring our efficiency levels into our target range. This has been driven by investment in technology, a structural simplification and the integration of artificial intelligence, which have optimized our business performance and transform our customer service models. For us, efficiency is not just about cost reduction. It is about serving our clients better. Every process we simplify and every point of friction we remove translates into a faster, more seamless experience for our customers, keeping us firmly on track towards our target of 40% efficiency ratio for 2028. We remain fully committed on this front as it represents while single most important driver of value creation. Our balance sheet remains a source of strength. Total local deposits reached $29.9 billion, up 2.9% year-over-year, anchored by a 10.1% search in demand deposits. This provides a stable funding base as reflected in our strong local net stable funding ratio of 113.5%, up points compared to the June 2025. In terms of capital, our consolidated CET1 ratio increased by 16 basis points year-over-year to 11.3%. These positive trends indicate that our internal capital generation from strong earnings is outpacing growth in risk-weighted assets. even after absorbing higher regulatory reductions from the full phasing of Basel III, our capital adequacy ratio, BIS reached 15%, leaving us with a comfortable regulatory buffer to continue executing our growth strategy without constraints. Now let's turn to our asset quality. When we look into our portfolio indicators, we continue to evidence very healthy trends through proactive risk management and prudent origination appetite our 90-day NPL ratio for the total loans in the local portfolio decreased to 1.8%. When we include our additional provisions, our nonperforming loan coverage ratio stands at 13% in June. This translates into a 2.3% stock of provisions over loans that you see on the slide. This ensures we are prepared to absorb any potential future macro volatility. Looking at the commercial portfolio, our risk profile remains stable, with the NPL ratio standing at 1.5%. The recent decrease in commercial volume was driven by a single name charge-off. This isolated event reflect a proactive risk management framework and keeps our underlying asset quality sound. In addition, our provision for credit risk on total loans stand at 1.5%, rising to 2% when including additional provisions. This asset quality reflects our focus on collateralized SMEs lending and long-term relationships with top-tier corporate clients. In the mortgage portfolio, the NPL ratio closed at 2.2%, consistent with broader industry trends. We remain comfortable with this exposure, maintaining a credit risk provision over loans ratio of 0.8%, which rises to 1% with additional buffers. Importantly, this is a fully collateralized portfolio, backed by conservative loan-to-value ratio at origination. In this slide, you can see our consumer 90-day NPL ratio stood at 2.3%. Our commercial and risk strategies have driven across the board improvement in both growth and delinquency, backed by some loan coverage levels, with a total provision ratio of 7.6%, reaching 9.7% with additional buffers. We maintain a highly resilient foundation to support prudent and selective growth moving forward. Regarding advancement in our international platform and starting with Besse Peru, total assets grew 43.7% year-over-year to $1.6 billion, while net income reached $11.4 million as of June 2026. This was driven by a strong commercial expansion with total loans reaching $2.3 billion when we include bookings outside Peru. This allow us to expand our market share in corporate segment, reflecting our ability to capture demand through the high-value solution such as treasury, catch management and cross-border financing that our platform enables. Further stringing this corridor, BCI Miami continued its positive trend, which translate into a net income of $37.3 million for the quarter, representing a 17% year-over-year increase, with total assets expanding to $6.7 billion. Meanwhile, BCI Securities continued to enhance our capital markets capabilities, managing $2.4 billion in AUMs. To summarize our local operations, despite navigating a period of high volatility, we closed the first half of 2026 with very sound results. Our net income reached roughly $510 million, up 15% year-over-year, translating into a strong return on average equity of 17.5%. We achieved this while growing our loan portfolio by 5.5%, keeping our cost of risk strictly controlled at only 0.66% and improving our efficiency ratio by 400 basis points. This financial and operational disciplines goes hand-in-hand with our customer experience approach, which is reflected in our NPS, reaching a remarkable 77 points by June. I will now hand the call over to Jose Marina, to discuss the performance of City National Bank in Florida.

Thank you, Roberto. Good morning, everyone. My name is Jose Marina, and I'm the CFO of City National Bank. I am pleased to be here in Santiago this morning with my BCI colleagues to share highlights of our strong performance during the first half of the year. As I will discuss in more detail, our earnings continue their upward trajectory, reflecting disciplined execution of our strategy, including solid loan growth, fully funded by robust deposit growth. In particular, I would like to point out the following highlights. Our loan balances increased by $223 million or 1.1% quarter-over-quarter and $1.5 billion or nearly 8% year-over-year. We continue to focus on high-quality loans with strong spreads and solid depository relationships. Our client deposits grew by $816 million or 4% quarter-over-quarter and $2 billion or about 10.6% year-over-year. DDA is decreased by $198 million or 3.7% compared to the previous quarter, primarily driven by a $255 million temporary inflow in Q1, as we pointed out in our last call. Importantly, deposit growth outpaced loan growth this quarter, reinforcing our strategy to position City National Bank as the leading deposit gathering bank in the state of Florida. Our net interest income and margin continued to expand for the tenth consecutive quarter, and in Q2, our NIM reached a 3% mark. NIM increased by 41 basis points year-over-year and by 3 basis points quarter-over-quarter. Our earnings continued to strong trend, growing $56 million or 46% year-over-year and by $9 million or 11% quarter-over-quarter. Our ROE, excluding goodwill amortization, improved to 12.6% in Q2. These results demonstrate our market reputation built over the last 8 years our relationship-centric model, strong culture and continued success in executing our key strategic vision. Our client deposits increased by $1.5 billion or 8% in the first half of the year, including a $302 million or 6% increase in DDA balances. It is important to highlight that deposit growth surpassed loan growth. Additionally, our client deposit growth outperformed the banking industry by nearly 2 times. Our strong line deposit growth enabled us to reduce broker deposits by $783 million quarter-over-quarter and by $1.4 billion year-over-year, reducing reliance on wholesale funding sources. Furthermore, our quarterly cost of client deposits increased by 6 basis points compared to the prior quarter, primarily as a result of increases in interest-bearing deposits. Noninterest-bearing deposits represent a healthy 24% of total deposits. Our assets surpassed a $29 billion mark in the second quarter with a strong loan-to-deposit ratio of 92%. We remain very well capitalized as evidenced by our total risk capital ratio and Tier 1 leverage ratio, which were 15.6% and 11.4% as of June 30, respectively. Additionally, the unrealized losses on our investment portfolio remained virtually flat the last 3 quarters despite the approximate 50 basis point increase in the 5-year U.S. treasury rates year-to-date. Total loans increased by $745 million or 4% in the first half of the year and by $223 million or 1% quarter-over-quarter. I've shown on the right-hand side of the slide, we have been highly selective when it comes to lending, not only from a credit risk and spread perspective, but also prioritizing deals with full relationships, which enhances long-term client value and earning sustainability. This quarter, our NPL ratio declined by 5 basis points to 0.81% of total loans. More importantly, our strong credit culture and low-risk appetite are reflected in our minimal net charge-offs of only 9 basis points for the quarter. significantly lower than the 21 basis point average among peer banks. ACL coverage remained virtually flat, representing 1.09% of total loans. Overall, our already strong asset quality ratios continued to improve in the same quarter. Turning now to our profitability. I would like to emphasize a positive trend in our net income after taxes, which increased by $9.3 million or 11% quarter-over-quarter and by $56.3 million or 46% year-over-year. This growth has driven -- was driven primarily by an expansion in net interest margin which we will expand upon in the upcoming slides. Fee income also increased by $8.3 million or 14% year-over-year, reflecting continued progress in our efforts to diversify and enhance our fee base. These factors contributed to operating income increasing by $81.6 million or 21% year-over-year. This all resulted in an ROA, excluding goodwill amortization of 1.35% for the quarter, an improvement of 35 basis points year-over-year, and an ROE also excluding goodwill amortization of 12.66%, which is 247 basis points higher year-over-year. As we have shared with you over the past few calls, we have implemented several strategic actions through Project Win to further strengthen our balance sheet and accelerate earnings growth. Additionally, we are focused on expanding our product offering to increase relationship expansion and augment our fee generation. Lastly, we continue to drive organic net interest income expansion through disciplined pricing across both loans and deposits. On the left side of the slide, you can see our net income increased by $9 million, 11% quarter-over-quarter. This improvement was primarily driven by a $7 million increase in net interest income reflecting a 3 basis point expansion in our margin as we continue to maintain discipline on both loan and deposit pricing. Fee income increased by $4 million quarter-over-quarter, reflecting continued progress in our fee strategy, which we'll discuss further shortly. On the right-hand side, we show how our net income improved by $56 million or 46% year-over-year. This increase was primarily driven by a $73 million of additional net interest income as our margin expanded by 41 basis points. Fee income also contributed positively, increasing by $8 million. Loan loss provisions were $11 million lower, reflecting the continued strong performance of our loan portfolio. This was partially offset by a $13 million of additional expenses, particularly driven by investment in personnel as we continue to execute Project win. This slide illustrates the expansion of our net interest income and margin over the last 10 consecutive quarters. Our net interest income increased by $7 million or 4% quarter-over-quarter with our NIM expanding by 3 basis points. This growth was driven by an increase in yield on earning assets of 4 basis points while cost of funds remained stable. This NIM expansion is a result of several strategic strategies executed during the last couple of years, which includes obtaining strong spreads on new loan originations and renewals with the commercial spreads on new loans originating, averaging close to 300 basis points in the last 2 years. It is also a result of our strong deposit growth coupled with prudent deposit cost management in this uncertain rate environment. This strong core deposit growth enabled us to reduce our wholesale funding ratio to 16% as of June 30, down from 19% at the beginning of the year. One of our key strategic priorities is the expansion and diversification of fee income. This slide demonstrates the strong results we have already delivered in this regard. Non treasury management fees have grown meaningfully as a share of total fee income increasing from 41% in 2022 to 56% in 2026, reducing reliance on any single category. Nontreasury management fees include services recently launched or currently being implemented, such as insurance commissions, our treasury distribution debt, capital markets capabilities, wealth management, and the sale of residential SBA loans. With non-TM fees, the largest contributors are treasury distribution desk at 26% as well as the sale of residential SBA loans at 13% and wealth management fees 11%. This improved mix is further evidenced by fees as a percentage of average assets rising from 0.3% to 0.4%. Overall, these trends demonstrate the successful execution of our strategy to build a larger and more diversified fee income base. As a reminder, Project Win is our 5-year strategic plan designed to deliver profitable, scalable and diversified growth. As this slide highlights, we are now in year 2 of execution, and our results demonstrate strong progress across all 5 strategic objectives. Starting with moderate growth and diversification, we continue to make deposits the centerpiece of our relationship-based strategy. In the first half of the year, client deposits grew by 16% on an annualized basis, outpacing the industry growth rate of 8%. This performance continues to position us as a leading deposit gathering bank in the state of Florida. Loans are growing at an annualized rate of 8% and fully funded by client deposit growth with an improved portfolio diversification as C&I loans now represent 31% of total loans compared to 20% a year ago. Turning to enhanced profitability. Our performance reflects meaningful progress. ROE reached 12% year-to-date, with NIM expanding to 41 basis points year-over-year. Strong DDA growth continued discipline on deposit pricing and execution of new fee initiatives have further enhanced earnings diversification and overall profitability. From a scalability and digital experience standpoint, we are working on our enterprise-wide AI strategy. This includes credit delivery optimization, process automation, deployment of agent enabled solutions to support pre and post client engagement meetings and continued investment in data and analytics. Culture remains a strong strength as we execute Project win. We are seeing high levels of engagement and disciplined execution across the bank, supported by strong leadership. Finally, as we grow, we continue to strengthen our regulatory and risk management framework. Our 3 lines of defense ensures robust internal control that supports sustainable growth. In summary, these results demonstrate the continued momentum and scalability project win in its second year of execution with our first half performance, reinforcing confidence in our ability to deliver sustainable, profitable and diversified growth in 2026 and beyond. With that, I will turn it back to the BCI team for closing remarks. Thank you for joining this morning.

Thank you, Jose. Moving on, I would like to recap the key takeaways from what has been a very strong first half of the year. First, -- our diversified model is delivering. Consolidated net income reached EUR 700 million, up 21% year-over-year. supported by City National Bank's 47 bottom line growth and our resilient operation in Chile and our subsidiaries. Second, we are improving our efficiency while our margin expanded and fee income grew 10%. Our disciplined cost initiatives led to a 452 basis point improvement in our efficiency ratio reaching 45.6% as of June. Third, we are growing responsible. We consolidated our position as Chile's #1 bank in total loans with a 6.1% growth all while keeping sounds NPLs levels at 1.36% and maintaining a robust CET1 ratio of 11.3%. Finally, our corporate evolution into BCI Group remains fully on track. Before we close this call, we are pleased to share our updated guidance. Looking ahead, the strong first half of the year allow us to rise our full year 2026 outlook naturally factoring in the macroeconomic variables as well as the political response being discussed. In Chile, we project the end of this year with loan growth between 6% and 7% and a lower double-digit growth in fee income. -- underscoring our strict commitment to efficiency we project a 1% decrease in core operating expenses while keeping net interest margin and cost of risk flat. For City National Bank, we anticipate loan growth of 8% to 10% and maintained a 3% NIM target, which will drive a 35% increase in net income. On a consolidated basis, our estimations are for net income to grow in the 17% to 19% range driven on an improvement on our return on average equity to 15%. Thank you all very much for joining us today. I will now pass it back to Andres to open the floor for your questions.

Thank you, Roberto, Sergio and Jose. Now we are ready for the Q&A session. And the first question is coming from Ernesto Gabilondo from Bank of America.

Congrats on your results. My first question will be on the tax reform. Just wondering if we assume normalized inflation of 3% over the next years. How should we think about the evolution of your effective tax rate with the new tax reform? So that's my first question. Then my second question is on your sustainable ROE. You are already expecting an ROE of around 15% and on a consolidated basis. So just wondering how should we think about it in the next years? And how should we think about the evolution of the ROE for BCI in Chile and for the Banc of Florida? And then for my last question is if you have any update on the approval and the implementation of the new holding, we saw the appointment of Jose Luis as the new CFO. So please, congrats him. But I don't know if there's anything else, what should we be following during the next quarters in terms of this new structure.

Thank you. so nice to see you, and thank you for your question. Okay. Regarding tax reform, for us, we are optimistic about the impacts that this tax reform will have in the growth and investments in the country and also the impact that it will have in the tax rate -- the effective tax rate that the bank will have for the next year. For this year, we expect a negative impact due to the deferred taxes that are estimated with a tax rate of 27%. Given that the tax rates are decreasing for next year, our deferred taxes will impact in a loss expense this year that we are estimating with our accounting and tax team to have the number that is not included in the guidance that we just gave you. But for the future, we are optimistic and we expect a positive impact in our P&L. Regarding ROE, -- the main drivers of the improvement that we have seen in our ROE are, first, the increase in the NIM of City National Bank. -- that, as Jose mentioned, we expect that is structural given the discipline that they put in along with the wind project Second 1 is our efficiency gains. As we highlighted in the presentation, we have achieved a 452 basin point improvement in our consolidated efficiency ratio. And as we said, we are fully committed to our long-term efficiency ratio of 40% to 2028. So yes, we expect that this also will be structural. And then we have our fee income growth at its outpacing margin. So we are improving our cross-selling effectiveness. And with that, we have improving our ROE. This is the results of our strategy, putting in place in all the segments in retail with our insurance brokerage, we are leading the market. In Wealth Management, as we said, we increased our asset management by 14% and in wholesale with accessories and sales and trading. So with all of that, yes, we think for the long term, we -- this 15% is structural. And if we break it down, we will expect an 18% ROE for Chile and 12% for City National Banks for the coming years. And the last question was an update regarding the BCI group project in -- the first half of this year, we have the legal incorporation of the BCI Group in April. As you mentioned, Jose Luis was appointed as the CFO of the holdings. So we are very pleased with that news. On the ongoing step, we are securing quite regulatory approvals in Chile, in Peru, and the United States in order to launch the invitation to minority shareholders and proceed with the corporate spinoff of Base. So we are progressing with these changes in as scheduled.

Roberto, just a follow-up in terms of the effective tax rate. So as you were mentioning, because of deferred tax, your effective tax rate for this year could be, if I'm not mistaken, around 27%, right? -- for this year?

But for this year, Nest, we are still estimating the impact of this reform. So I can't give you a number right now.

Okay. And then for the next years, considering your historical effective tax rate, how should we think about as a base? And then I think the gradual implementation implies like 1.5% lower every year. So how should we think about like a starting point for the effective tax rate next year? I don't know if it was historically '20, if we can expect next year to be around '19, and then in 2018, just the trend so we can kind of forecast already that in our models.

As you know, Ernesto, our effective tax rate is not only affected because of the legal tax rate but also because of the investment in City National Bank and the U.S. variation. So if everything is still -- is the same or is you should expect a reduce in the effective staff rate in the same level that the legal effect rate is changing. So with that, you can estimate the more or less how much the impact will be.

Perfect. Perfect. And then on your new holding structure, as you were saying, you are waiting for the approval, of the authorities in the different geographies. Do you think that could be for this year and then we can have the holding next year? Any color on that?

I can't give you any specific day Ernesto, but we are on track in the -- according to our original schedule.

Congrats again on your results.

Next one is coming from Juliana Ohara from Goldman Sachs.

Congratulations on the results. I was just wondering if you could share some of your sensitivity to inflation and given that it should normalize going forward. And also, if you could share more on your expectations for noninflation linked NII because it was a bit weaker in the quarter, but it was mostly from interest rate hedges. I was wondering how much of this pressure can continue going forward as well.

Thank you, Juliana. Regarding inflation, our sensitivity is more or less every 10 basis basis point of variation, the impact of -- in our NIM is of $5 million. As you said, the NIM for the other interest, this semester was a little bit lower than expected. And the reason for that was some macro hedge in our balance sheet that impacted negatively because of the volatility of the rates. We expect, as Sergio said, that for the second semester, this will be a little bit less volatile. So we expect the NIM will be flat for total year consolidated.